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Filed Pursuant
to Rule 424(b)(2)
Registration Statement No. 333-234425
(To Prospectus dated December 31, 2019,
Prospectus Supplement dated December 31, 2019 and
Product Supplement EQUITY LIRN-1 dated January 7,
2020)
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394,234
Units
$10
principal amount per unit
CUSIP No. 06054B883
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Pricing
Date
Settlement Date
Maturity Date
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November 22,
2022
November 30,
2022
November 29,
2024
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BofA
Finance LLC
Capped
Leveraged Index Return Notes® Linked to
an International Equity Index
Basket
Fully
and Unconditionally Guaranteed by Bank of America
Corporation
●
Maturity
of approximately two years
●
2-to-1
upside exposure to increases in the Basket, subject to a capped
return of 35.55%
●
The
Basket is comprised of the EURO STOXX 50® Index, the
FTSE® 100 Index, the Nikkei Stock Average Index, the
Swiss Market Index, the S&P/ASX 200 Index, and the
FTSE® China 50 Index. The EURO STOXX 50®
Index was given an initial weight of 40.00%, each of the
FTSE® 100 Index and the Nikkei Stock Average Index was
given an initial weight of 20.00%, each of the Swiss Market Index
and the S&P/ASX 200 Index was given an initial weight of 7.50%,
and the FTSE® China 50 Index was given an initial
weight of 5.00%
●
1-to-1
downside exposure to decreases in the Basket beyond a 10.00%
decline, with up to 90.00% 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, 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
$9.610 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-30 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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$3,942,340.00
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Underwriting
discount………………………
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$0.20
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$78,846.80
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Proceeds, before
expenses, to BofA Finance
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$9.80
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$3,863,493.20
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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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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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Summary
The
Capped Leveraged Index Return Notes® Linked to an
International Equity Index Basket, due November 29, 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 with all of BofA Finance’s other
unsecured and unsubordinated debt, and the related guarantee will
rank equally with all of BAC’s other unsecured
and unsubordinated obligations, in each case
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 international equity index basket
described below (the “Basket”), is greater than its 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 Basket, subject to
our and BAC’s credit risk. See “Terms of the Notes”
below.
The
Basket is comprised of the EURO STOXX 50® Index, the
FTSE® 100 Index, the Nikkei Stock Average Index, the
Swiss Market Index, the S&P/ASX 200 Index, and the
FTSE® China 50 Index (each a “Basket Component”). On the
pricing date, the EURO STOXX 50® Index was given an
initial weight of 40.00%, each of the FTSE® 100 Index
and the Nikkei Stock Average Index was given an initial weight of
20.00%, each of the Swiss Market Index and the S&P/ASX 200
Index was given an initial weight of 7.50%, and the
FTSE® China 50 Index was given an initial weight of
5.00%.
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-30.
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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 two
years
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Market Measure:
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An
international equity index basket comprised of the EURO STOXX
50® Index (Bloomberg symbol: “SX5E”), the
FTSE® 100 Index (Bloomberg symbol: “UKX”), the Nikkei
Stock Average Index (Bloomberg symbol: “NKY”), the Swiss Market
Index (Bloomberg symbol: “SMI”), the S&P/ASX 200 Index
(Bloomberg symbol: “AS51”) and the FTSE® China 50
Index (Bloomberg
symbol: “XIN0I”). Each Basket Component is a price return
index.
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Starting Value:
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100.00
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Ending Value:
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The
average of the values of the Market Measure on each calculation day
occurring during the maturity valuation period. The scheduled
calculation days are subject to postponement in the event of Market
Disruption Events, as described beginning on page PS-35 of the
accompanying product supplement.
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Threshold Value:
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90 (90.00% of
the Starting Value).
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Participation Rate:
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200%
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Capped Value:
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$13.555 per unit,
which represents a return of 35.55% over the principal
amount.
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Maturity Valuation Period:
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November 20, 2024,
November 21, 2024, November 22, 2024, November 25, 2024 and
November 26, 2024
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Fees and Charges:
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The
underwriting discount of $0.20 per unit listed on the cover page
and the hedging related charge of $0.075 per unit described in
“Structuring the Notes” beginning on page TS-30.
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Calculation Agent:
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BofA
Securities Inc. (“BofAS”), an affiliate of BofA
Finance.
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Capped
Leveraged Index Return Notes®
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TS-2
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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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 value of the Basket will increase moderately from the
Starting Value to the Ending Value.
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You are willing to
risk a loss of principal and return if the value of the Basket
decreases from the Starting Value to an Ending Value that is below
the Threshold Value.
●
You accept that
the return on the notes will be capped.
●
You are willing to
forgo the interest payments that are paid on conventional interest
bearing debt securities.
●
You are willing to
forgo dividends or other benefits of owning the stocks included in
the Basket Components.
●
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 value of the Basket 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.
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You seek
100% principal repayment or preservation of
capital.
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You seek an
uncapped return on your investment.
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You seek interest
payments or other current income on your investment.
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You want to
receive dividends or other distributions paid on the stocks
included in the Basket Components.
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You seek an
investment for which there will be a liquid secondary
market.
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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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Capped
Leveraged Index Return Notes®
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TS-3
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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Hypothetical
Payout Profile and Examples of Payments at Maturity
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Capped
Leveraged Index Return Notes®
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This
graph reflects the returns on the notes, based on the Participation
Rate of 200%, the Threshold Value of 90% of the Starting Value and
the Capped Value of $13.555 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 stocks included in the Basket
Components, excluding dividends.
This
graph has been prepared for purposes of illustration
only.
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The
following table and examples are for purposes of illustration only.
They are based on hypothetical values and show
hypothetical returns on the notes. They illustrate the
calculation of the Redemption Amount and total rate of return based
on the Starting Value of 100, the Threshold Value of 90, the
Participation Rate of 200%, the Capped Value of $13.555 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 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 hypothetical values of the Basket, see “The Basket”
section below. For recent actual levels of the Basket Components,
see “The Basket Components” section below. Each Basket Component is
a price return index and as such the Ending Value will not include
any income generated by dividends paid on the stocks included in
any of the Basket Components, which you would otherwise be entitled
to receive if you invested in those stocks directly. In addition,
all payments on the notes are subject to issuer and
guarantor credit risk.
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Ending
Value
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Percentage
Change from the Starting Value to the Ending Value
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Redemption
Amount per Unit
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Total Rate of
Return on the Notes
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0.000
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-100.000%
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$1.000
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-90.00%
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50.000
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-50.000%
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$6.000
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-40.00%
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80.000
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-20.000%
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$9.000
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-10.00%
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85.000
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-15.000%
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$9.500
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-5.00%
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90.000(1)
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-10.000%
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$10.000
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0.00%
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94.000
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-6.000%
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$10.000
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0.00%
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95.000
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-5.000%
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$10.000
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0.00%
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97.000
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-3.000%
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$10.000
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0.00%
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100.000(2)
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0.000%
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$10.000
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0.00%
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105.000
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5.000%
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$11.000
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10.00%
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110.000
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10.000%
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$12.000
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20.00%
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117.775
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17.775%
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$13.555(3)
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35.55%
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120.000
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20.000%
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$13.555
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35.55%
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130.000
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30.000%
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$13.555
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35.55%
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140.000
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40.000%
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$13.555
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35.55%
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150.000
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50.000%
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$13.555
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35.55%
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160.000
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60.000%
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$13.555
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35.55%
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(1)
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This
is the Threshold Value.
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(2)
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The
Starting Value was set to 100.00 on the pricing
date.
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(3)
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The
Redemption Amount per unit cannot exceed the Capped
Value.
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Capped
Leveraged Index Return Notes®
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TS-4
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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Redemption
Amount Calculation Examples
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Example
1
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The
Ending Value is 80.00, or 80.00% of the Starting
Value:
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Starting
Value: 100.00
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Threshold
Value: 90.00
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Ending
Value: 80.00
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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: 90.00
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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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Redemption Amount
per unit
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Example 4
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The
Ending Value is 150.00, or 150.00% of the Starting
Value:
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Starting
Value: 100.00
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Ending
Value: 150.00
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=
$20.00 however, because the Redemption Amount for the
notes cannot exceed the Capped Value, the Redemption Amount will be
$13.555 per unit
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Capped
Leveraged Index Return Notes®
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TS-5
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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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 Basket 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 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.
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■
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Your
investment return is limited to the amount represented by the
Capped Value and may be less than a comparable investment directly
in the stocks included in the Basket Components.
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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; and 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 value of the Basket, 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”
beginning on page TS-30. 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 Basket,
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 in shares of companies included in the Basket Components)
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.
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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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■
|
Increases in the
level of one of the Basket Components may be offset by decreases in
the levels of the other Basket Components. Due to the different
Initial Component Weights, changes in the levels of some
Basket Components will have a more substantial impact on the value
of the Basket than similar changes in the levels of the other
Basket Components.
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|
■
|
The
index sponsors may adjust each Basket Component in a way that
affects its level, and the index sponsors have no obligation to
consider your interests.
|
|
Capped
Leveraged Index Return Notes®
|
TS-6
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
|
■
|
You
will have no rights of a holder of the securities included in the
Basket Components, 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 Basket Components, except to the
extent that BAC’s common stock is included in a Basket
Component, we, BAC and our other affiliates do not control any
company included in any Basket Component, and have not verified any
disclosure made by any other company.
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|
■
|
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, specifically changes in the countries
represented by the Basket Components. In addition, you will not
obtain the benefit of any increase in the value of the currencies
in which the securities included in the Basket Components trade
against the U.S. dollar, which you would have received if you had
owned the securities represented by the Basket Components during
the term of your notes, although the levels of the Basket
Components may be adversely affected by general exchange rate
movements in the market.
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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.
|
Tax-related
Risks
|
■
|
The
U.S. federal income tax consequences of the notes are uncertain and
may be adverse to a holder of the notes. See “Summary Tax
Consequences” below and “U.S. Federal Income Tax Summary” beginning
on page PS-38 of the accompanying product
supplement.
|
Other
Terms of the Notes
Market Measure
Business Day
The
following definition shall supersede and replace the definition of
a “Market Measure Business Day” set forth in the
accompanying product supplement.
A
“Market Measure Business Day” means a day on which:
|
(A)
|
each of the the
Eurex (as to the EURO STOXX 50® Index), the London Stock
Exchange (as to the FTSE® 100 Index), the Tokyo Stock
Exchange (as to the Nikkei Stock Average Index), the SIX Swiss
Exchange (as to the Swiss Market Index), the Australian Stock
Exchange (as to the S&P/ASX 200 Index), and the Hong Kong Stock
Exchange (as to the FTSE® China 50 Index) (or any
successor to the foregoing exchanges) are open for trading;
and
|
|
(B)
|
the Basket
Components or any successors thereto are calculated and
published.
|
|
Capped
Leveraged Index Return Notes®
|
TS-7
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
The
Basket
The
Basket is designed to allow investors to participate in
the percentage changes in the levels of the Basket Components
from the Starting Value to the Ending Value of the Basket. The
Basket Components are described in the section “The Basket
Components” below. Each Basket Component was assigned an initial
weight on the pricing date, as set forth in the table
below.
For
more information on the calculation of the value of the Basket,
please see the section entitled “Description of LIRNs—Basket Market
Measures" beginning on page PS-34 of the accompanying product
supplement.
On the
pricing date, for each Basket Component, the Initial Component
Weight, the closing level, the Component Ratio and the initial
contribution to the Basket value were as follows:
|
Basket
Component
|
|
Bloomberg
Symbol
|
|
Initial
Component Weight
|
|
Closing
Level(1)
|
|
Component
Ratio(2)
|
|
Initial Basket
Value Contribution
|
|
EURO
STOXX 50® Index
|
|
SX5E
|
|
40.00%
|
|
3,929.90
|
|
0.01017838
|
|
40.00
|
|
FTSE® 100
Index
|
|
UKX
|
|
20.00%
|
|
7,452.84
|
|
0.00268354
|
|
20.00
|
|
Nikkei
Stock Average Index
|
|
NKY
|
|
20.00%
|
|
28,115.74
|
|
0.00071135
|
|
20.00
|
|
Swiss
Market Index
|
|
SMI
|
|
7.50%
|
|
11,074.30
|
|
0.00067724
|
|
7.50
|
|
S&P/ASX
200 Index
|
|
AS51
|
|
7.50%
|
|
7,181.295
|
|
0.00104438
|
|
7.50
|
|
FTSE
China 50 Index
|
|
XIN0I
|
|
5.00%
|
|
11,227.21
|
|
0.00044535
|
|
5.00
|
|
|
|
|
|
|
|
|
|
Starting
Value
|
|
100.00
|
|
(1)
|
These
were the closing levels of the Basket Components on the pricing
date.
|
|
(2)
|
Each
Component Ratio equals the Initial Component Weight of the relevant
Basket Component (as a percentage) multiplied by 100, and then
divided by the closing level of that Basket Component on the
pricing date and rounded to eight decimal places.
|
The
Ending Value of the Basket will equal the average of the values of
the Basket on each calculation day during the Maturity Valuation
Period. The calculation agent will calculate the value of the
Basket for a calculation day by summing the products of the closing
level for each Basket Component on that calculation day and the
Component Ratio applicable to such Basket Component. If a Market
Disruption Event occurs as to any Basket Component on any scheduled
calculation day, the closing level of that Basket Component will be
determined as more fully described beginning on page PS-35 of the
accompanying product supplement in the section “Description of
LIRNs—Basket Market Measures—Ending Value of the
Basket."
|
Capped
Leveraged Index Return Notes®
|
TS-8
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
While
actual historical information on the Basket
did not exist before the pricing date, the
following graph sets forth the hypothetical historical
daily performance of the Basket from
January 1, 2012
through November 22, 2022. The
graph is based upon actual daily historical levels of the Basket
Components, hypothetical Component Ratios based on
the closing levels of the Basket Components as
of December 31, 2011, and
a Basket value of 100.00 as of that date. This hypothetical
historical data on the Basket is not necessarily indicative of the
future performance of the Basket or what the value of the notes may
be. Any hypothetical historical upward
or downward trend in the value of the Basket
during any period set forth below is not an indication that the
value of the Basket is more or less likely to increase or decrease
at any time over the term of the notes.
Hypothetical Historical
Performance of the Basket
|
Capped
Leveraged Index Return Notes®
|
TS-9
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
The
Basket Components
All
disclosures contained in this term sheet regarding the Basket
Components, including, without limitation, their make-up, method of
calculation, and changes in their components, have been derived
from publicly available sources. The information reflects the
policies of, and is subject to change by each of STOXX Limited
(“STOXX”) with respect to the EURO STOXX 50® Index (the
“SX5E”), FTSE International Limited (“FTSE”) with respect to each
of the FTSE® 100 Index and the FTSE® China 50
Index (the “UKX” and the “XIN0I”, respectively), Nikkei Inc.
(“Nikkei”) with respect to the Nikkei Stock Average Index (the
“NKY”), the Geneva, Zurich, SIX Group Ltd., certain of its
subsidiaries, and the Management Committee of the SIX Swiss
Exchange (the “SIX Exchange”), with respect to the Swiss Market
Index (the “SMI”) and S&P Dow Jones Indices, a part of McGraw
Hill Financial (“S&P”), with respect to the S&P/ASX 200
Index (the “AS51”) (STOXX, FTSE, Nikkei, S&P and Six Exchange
together, the “index sponsors”). The index sponsors have no
obligation to continue to publish, and may discontinue or suspend
the publication of any Basket Component at any time. The
consequences of any index sponsor discontinuing publication of a
Basket Component are discussed in the section entitled “Description
of LIRNs—Discontinuance of an Index” on page PS-29 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 any Basket Component or
any successor index.
The
EURO STOXX 50® Index
The
SX5E was created by STOXX, which is part of the Deutsche Börse
Group. Publication of the SX5E began in February 1998, based on an
initial SX5E level of 1,000 at December 31, 1991. On March 1, 2010,
STOXX announced the removal of the “Dow Jones” prefix from all of
its indices, including the SX5E.
SX5E
Composition and Maintenance
For
each of the 20 EURO STOXX regional supersector indices, the stocks
are ranked in terms of free-float market capitalization. The
largest stocks are added to the selection list until the coverage
is close to, but still less than, 60% of the free-float market
capitalization of the corresponding supersector index. If the next
highest-ranked stock brings the coverage closer to 60% in absolute
terms, then it is also added to the selection list. All current
stocks in the SX5E are then added to the selection list. All of the
stocks on the selection list are then ranked in terms of free-float
market capitalization to produce the final index selection list.
The largest 40 stocks on the selection list are selected; the
remaining 10 stocks are selected from the largest remaining current
stocks ranked between 41 and 60; if the number of stocks selected
is still below 50, then the largest remaining stocks are selected
until there are 50 stocks. In exceptional cases, STOXX’s management
board can add stocks to and remove them from the selection
list.
The
SX5E components are subject to a capped maximum index weight of
10%, which is applied on a quarterly basis.
The
composition of the SX5E is reviewed annually, based on the closing
stock data on the last trading day in August. Changes in the
composition of the SX5E are made to ensure that the SX5E includes
the 50 market sector leaders from within the SX5E.
The
free float factors for each component stock used to calculate the
SX5E, as described below, are reviewed, calculated, and implemented
on a quarterly basis and are fixed until the next quarterly
review.
The
SX5E is subject to a “fast exit rule.” The SX5E components are
monitored for any changes based on the monthly selection list
ranking. A stock is deleted from the SX5E if: (a) it ranks 75 or
below on the monthly selection list and (b) it has been ranked 75
or below for a consecutive period of two months in the monthly
selection list. The highest-ranked stock that is not an index
component will replace it. Changes will be implemented on the
close of the fifth trading day of the month, and are effective the
next trading day.
The
SX5E is also subject to a “fast entry rule.” All stocks on
the latest selection lists and initial public offering (IPO) stocks
are reviewed for a fast-track addition on a quarterly basis. A
stock is added, if (a) it qualifies for the latest STOXX blue-chip
selection list generated end of February, May, August or November
and (b) it ranks within the “lower buffer” on this selection
list.
The
SX5E is also reviewed on an ongoing monthly basis. Corporate
actions (including initial public offerings, mergers and takeovers,
spin-offs, delistings, and bankruptcy) that affect the SX5E
composition are announced immediately, implemented two trading days
later and become effective on the next trading day after
implementation.
SX5E
Calculation
The
SX5E is calculated with the “Laspeyres formula,” which measures the
aggregate price changes in the component stocks against a fixed
base quantity weight. The formula for calculating the SX5E
value can be expressed as follows:
The
“free float market capitalization of the SX5E” is equal to the sum
of the product of the price, the number of shares and the free
float factor and the weighting cap factor for each component stock
as of the time the SX5E is being calculated.
The
SX5E is also subject to a divisor, which is adjusted to maintain
the continuity of the SX5E values across changes due to corporate
actions, such as the deletion and addition of stocks, the
substitution of stocks, stock dividends, and stock
splits.
Neither we nor any
of our affiliates, including the selling agent, accepts any
responsibility for the calculation, maintenance, or publication of,
or for any error, omission, or disruption in, the SX5E or any
successor to the SX5E. STOXX does not guarantee the accuracy or the
completeness of the SX5E or any data included in the SX5E. STOXX
assumes no liability for any errors, omissions, or disruption in
the
|
Capped
Leveraged Index Return Notes®
|
TS-10
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
calculation and
dissemination of the SX5E. STOXX disclaims all responsibility
for any errors or omissions in the calculation and dissemination of
the SX5E or the manner in which the SX5E is applied in determining
the amount payable on the notes at maturity.
The
following graph shows the daily
historical performance of the SX5E
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 SX5E
was 3,929.90.
Historical
Performance of the SX5E
This
historical data on the SX5E is not
necessarily indicative of the future performance of the
SX5E or what the value of the notes may be. Any
historical upward or downward trend in the level of the
SX5E during any period set forth above is not
an indication that the level of the
SX5E 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 SX5E.
License
Agreement
One of
our affiliates has entered into a non-exclusive license agreement
with STOXX providing for the license to it and certain of its
affiliated companies, including us, in exchange for a fee, of the
right to use indices owned and published by STOXX (including the
SX5E) in connection with certain securities, including the notes
offered hereby.
The
license agreement requires that the following language be stated in
this document:
STOXX
and its licensors (the “Licensors”) have no relationship to us,
other than the licensing of the SX5E and the related trademarks for
use in connection with the notes. STOXX and its Licensors do
not:
|
■
|
sponsor, endorse,
sell, or promote the notes;
|
|
■
|
recommend that any
person invest in the notes offered hereby or any other
securities;
|
|
■
|
have
any responsibility or liability for or make any decisions about the
timing, amount, or pricing of the notes;
|
|
■
|
have
any responsibility or liability for the administration, management,
or marketing of the notes; or
|
|
■
|
consider the needs
of the notes or the holders of the notes in determining, composing,
or calculating the SX5E, or have any obligation to do
so.
|
STOXX and its
Licensors will not have any liability in connection with the notes.
Specifically:
|
■
|
STOXX and its
Licensors do not make any warranty, express or implied, and
disclaims any and all warranty concerning:
|
|
■
|
the
results to be obtained by the notes, the holders of the notes or
any other person in connection with the use of the SX5E and the
data included in the SX5E;
|
|
■
|
the
accuracy or completeness of the SX5E and its data;
|
|
Capped
Leveraged Index Return Notes®
|
TS-11
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
|
■
|
the
merchantability and the fitness for a particular purpose or use of
the SX5E and its data;
|
|
■
|
STOXX and its
Licensors will have no liability for any errors, omissions, or
interruptions in the SX5E or its data; and
|
|
■
|
Under no
circumstances will STOXX be liable for any lost profits or
indirect, punitive, special, or consequential damages or losses,
even if STOXX or its Licensors know that they might
occur.
|
The
licensing agreement discussed above is solely for our benefit and
that of STOXX, and not for the benefit of the holders of the notes
or any other third parties.
The
FTSE® 100 Index
The
FTSE® 100 Index (the “UKX”) is a market
capitalization-weighted index of the 100 most highly capitalized
U.K.-listed blue chip companies traded on the London Stock
Exchange. The UKX was developed with a base level of 1,000 as of
December 30, 1983. It is calculated, published and disseminated by
FTSE Russell (“FTSE”), a company owned by the London Stock Exchange
Plc (the “Exchange”).
Additional
information on the FTSE® 100 Index is available from the
following website: ftse.com/uk. We are not incorporating by
reference that website or any material it includes in this
document.
Index
Composition and Selection
Criteria
The
UKX consists of the 100 largest U.K.-listed blue chip companies,
based on full market capitalization, that pass screening tests for
price and liquidity. The UKX is reviewed on a quarterly basis in
March, June, September and December based on data from the close of
business on the Tuesday before the first Friday of the review
month. The FTSE Europe, Middle East & Africa Regional Advisory
Committee (the “Committee”), meets quarterly to approve the
constituents of the UKX. These meetings are held on the Wednesday
before the first Friday in March, June, September and December. Any
constituent changes are implemented after the close of business on
the third Friday of the review month (i.e., effective Monday),
following the expiration of the London International Financial
Futures and Options Exchange futures and options
contracts.
Eligibility
Standards
Only
“premium listed” equity shares, as defined by the Financial Conduct
Authority in its Listing Rules Sourcebook, are eligible for
inclusion in the UKX. Eligible stocks must pass price and liquidity
screens before being included in the UKX. Additionally, a stock
must have a free float (as described below) of greater than
5%.
Price
Screen — With regard to the price screen, the Committee must be
satisfied that an accurate and reliable price exists for purposes
of determining the market value of a company. To be eligible for
inclusion in the UKX, a stock must have a full listing on the
London Stock Exchange with a Sterling-denominated price on SETS
(the London Stock Exchange’s trading service for UK blue chip
securities).
Minimum Voting
Rights Screen — Companies are required to have greater
than 5% of the company’s voting rights (aggregated across all of
its equity securities, including, where identifiable, those that
are not listed or trading) in the hands of unrestricted
shareholders in order to be eligible for index inclusion. Current
constituents who do not meet this requirement will have until the
September 2022 review to meet the requirement or they will be
removed from the index.
Liquidity
Screen — With regard to liquidity, each eligible stock is
tested for liquidity annually in June by calculating its median
daily trading per month. When calculating the median of daily
trades per month of any security, a minimum of five trading days in
each month must exist, otherwise the month is excluded from the
test. Liquidity is tested from the first business day in May of the
previous year to the last business day of April. The median trade
is calculated by ranking each daily trade total and selecting the
middle-ranking day. Any period of suspension is not included in the
test. The liquidity test is applied on a pro-rata basis where the
testing period is less than 12 months. A stock not presently
included in the UKX that does not turnover at least 0.025% of its
shares in issue (after application of any investability weightings)
based on its median daily trade per month in at least ten of the
12 months prior to the annual index review in June will
not be eligible for inclusion until the next annual review. An
existing constituent failing to trade at least 0.015% of its shares
in issue (after the application of any investability weightings)
based on its median daily trade per month for at least eight of the
12 months prior to the annual index review will be removed
from the UKX and will not be eligible for inclusion until the next
annual review. New issues will become eligible for inclusion in the
UKX at the quarterly review following their issuance provided that
they have a minimum trading record of at least 20 trading days
prior to the review date and that they have turned over at least
0.025% of their shares in issue (after the application of any
investability weightings) based on their median daily trade per
month since listing.
Market
Capitalization Ranking — Eligible stocks that pass the price
and liquidity screens are ranked by the Committee according to
their market capitalization before the application of any
adjustments based on the extent to which the shares are publicly
traded. Only the quoted equity capital of a constituent company
will be included in the calculation of its market capitalization.
Where a company has two or more classes of equity, secondary lines
will be included in the calculation of the market capitalization of
the company only if those lines are significant and liquid. The
Committee will add a stock to the UKX at the quarterly review if it
has risen to 90th place or above on the full market
capitalization rankings and will delete a stock at the quarterly
review if it has fallen to 111th place or below on these
rankings. Market capitalization rankings are calculated using data
as of the close of business on the day before the
review.
100
Constituent Limitation — The UKX always contains 100
constituents. If a greater number of companies qualify to be
inserted in the UKX than qualify to be removed, the lowest ranking
constituents of the UKX will be removed so that the total number of
stocks remains at 100 following inclusion of those that qualify to
be inserted. Likewise, if a greater number of companies qualify to
be removed than to be inserted at the quarterly review, securities
of the highest ranking companies that are then not included in the
UKX will be inserted to match the number of companies being
removed, in order to maintain the total at 100.
|
Capped
Leveraged Index Return Notes®
|
TS-12
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
Index
Calculation
The
UKX is a market capitalization weighted index. This means that the
price movement of a larger company (that is, one representing
larger percentage of the UKX) will have a greater effect on the
level of the UKX than will the price movement of a smaller company
(that is, one representing a smaller percentage of the
UKX).
The
value of the UKX is represented by a fraction, (a) the
numerator of which is the sum of the product of
(i) the price of each component stock, (ii) the number of
shares issued for each such component and (iii) a free float
factor for each such component (described more fully below), and
(b) the denominator of which is a divisor. The divisor
represents the total issued share capital of the UKX on the base
date; the divisor may be adjusted as necessary to allow for changes
in issued share capital of individual securities without distorting
the UKX.
As
noted above, a free float factor is applied to each index
component. By employing this approach, FTSE uses the investable
market capitalization, not the total market capitalization, of each
constituent to determine the value of the UKX. Investable market
capitalization depends on free float. The following are excluded
from free float: shares directly owned by state, regional,
municipal and local governments (excluding shares held by
independently managed pension schemes for governments); shares held
by sovereign wealth funds where each holding is 10% or greater of
the total number of shares in issue (if the holding subsequently
decreases below 10%, the shares will be excluded from free float
until the holding falls below 7%); shares held by directors, senior
executives and managers of the company, and by their family and
direct relations, and by companies with which they are affiliated;
shares held within employee share plans; shares held by public
companies or by non-listed subsidiaries of public companies; shares
held by founders, promoters, former directors, founding venture
capital and private equity firms, private companies and individuals
(including employees) where the holding is 10% or greater of the
total number of shares in issue (if the holding subsequently
decreases below 10%, the shares will be excluded from free float
until the holding falls below 7%); all shares where the holder is
subject to a lock-in clause (for the duration of that clause, after
which free float changes resulting from the expiration of a lock-in
clause will be implemented at the next quarterly review subsequent
to there being a minimum of 20 business days between the expiration
date of such lock-in clause and the index review date); shares held
for publicly announced strategic reasons, including shares held by
several holders acting in concert; and shares that are subject to
ongoing contractual agreements (such as swaps) where they would
ordinarily be treated as restricted.
The
UKX is recalculated whenever errors or distortions occur that are
deemed to be significant. Users of the UKX are notified through
appropriate media.
Index
Maintenance
The
UKX is reviewed quarterly for changes in free float. A stock’s free
float is also reviewed and adjusted if necessary following certain
corporate events. Following a takeover or merger involving one or
more index constituents, the free float restrictions will be based
on restricted holdings in the successor company and will be
implemented when the offer has completed (or lapsed) unless it
directly reflects a corporate action independent of and not
conditional on the takeover or merger completing or lapsing. If the
corporate event includes another corporate action that affects the
UKX, a change in free float is implemented at the same time as the
corporate action. If there is no corporate action, the change in
free float will be applied at the next quarterly
review. Following the application of an initial free float
restriction, a stock’s free float will only be changed if its
rounded free float moves more than three percentage points above or
below the existing rounded free float. Companies with a free float
of above 99% and of 15% or below will not be subject to the three
percentage points threshold.
At
each quarterly review, the Committee publishes a Reserve List
containing the six highest ranking non-constituents of the UKX. The
Reserve List will be used in the event that one or more
constituents are deleted from the UKX during the period up to the
next quarterly review. If a merger or takeover results in one index
constituent being absorbed by another constituent, the resulting
company will remain a constituent and a vacancy will be created.
This vacancy will be filled by selecting the highest ranking
security in the Reserve List as at the close of the index
calculation two days prior to the deletion and related index
adjustment. If an index constituent is taken over by a
non-constituent company, the original constituent will be removed
and replaced by the highest ranking non-constituent on the Reserve
List. Any eligible company resulting from the takeover will be
eligible to become the replacement company if it is ranked higher
than any other company on the Reserve List. If a constituent
company is split to form two or more companies, then the resulting
companies will be eligible for inclusion as index constituents,
based on their respective full market capitalizations (before the
application of any investability weightings), provided that they
qualify in all other respects. Any eligible company resulting from
a split that has no available market price after 20 business days
will be removed. If a split results in the inclusion of an
ineligible non-equity security, such security will remain in the
UKX for two trading days and then be removed. If a constituent is
delisted or ceases to have a firm quotation, it will be removed
from the list of constituents and be replaced by the highest
ranking eligible company from the Reserve List as at the close of
the index calculation two days prior to the
deletion.
Capitalization
Adjustments
A
premium listed secondary line of a company will be considered for
index inclusion if its total market capitalization before the
application of any adjustments based on the extent to which the
shares are publicly traded, is greater than 25% of the total market
capitalization of the company’s principal line and the secondary
line is eligible, in its own right. Should the total market
capitalization of a secondary line fall below 20% of the total
market capitalization of the company’s principal line at an annual
review, the secondary line will be deleted from the UKX unless its
total market capitalization remains above the qualification level
for continued inclusion as a constituent of the UKX at that review.
Where a company has partly paid shares, these shares, together with
the outstanding call(s), are both included in the UKX. Warrants to
purchase ordinary shares and convertible securities are not
included in the UKX until they are exercised or
converted.
|
Capped
Leveraged Index Return Notes®
|
TS-13
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
Share Weighting
Changes — For the purposes of computing the UKX, the number of
shares in issue for each constituent security is expressed to the
nearest share and, to prevent a large number of insignificant
weighting changes, the number of shares in issue for each
constituent security is amended only when the total shares in issue
held within the index system changes by more than 1% on a
cumulative basis. Changes will be made quarterly after the close of
business on the third Friday of March, June, September and
December. The data for these changes will be taken from the close
of business on the third Wednesday of the month prior to the review
month.
If a
corporate action is applied to a constituent, which involves a
change in the number of shares in issue, the change in shares will
be applied simultaneously with the corporate action. If accumulated
changes in the number of shares in issue add up to 10% or more or
when an accumulated share change represents $2 billion of a
company’s total market capitalization, they are implemented between
quarters. If an adjustment is made, it will be applied for the
first time at the next review in March of the following year.
All adjustments are made before the start of the index calculation
on the day concerned, unless market conditions prevent
this.
Shares in Issue
Increase — When a company increases the number of shares it has
in issue, the market capitalization of that company increases and
the total market capitalization will rise accordingly. The index
divisor is adjusted to maintain a constant index
value.
Weighting
Amendments — The market capitalization of a company is adjusted
to take account of various corporate actions, in accordance with
the rules of the UKX. To prevent the value of the UKX from changing
due to such an event, all corporate actions which affect the market
capitalization of the UKX require an offsetting divisor adjustment.
By adjusting the divisor, the value of the UKX remains constant
before and after the event. Below is a summary of the more frequent
corporate actions and their resulting
adjustment.
Market
Disruption
If
there is a system problem or situation in the market that is judged
by FTSE to affect the quality of the constituent prices at any time
when the UKX is being calculated, the UKX will be declared
indicative (e.g., normally where a “fast market” exists in the
equity market). The message “IND” will be displayed against the
index value calculated by FTSE. The Committee must be satisfied
that an accurate and reliable price for the purposes of determining
the market value of a company exists. The Committee may exclude a
security from the UKX should it consider that an “accurate and
reliable” price is not available.
If any
event leads to an error in the value of the UKX that is greater
than three basis points at the local country index level, then the
UKX will generally be recalculated, subject to discovery, within
one month of the event. Where an alternative approach is available,
FTSE may, at its sole discretion, choose not to
recalculate.
|
Capped
Leveraged Index Return Notes®
|
TS-14
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
The
following graph shows the daily
historical performance of the UKX
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 UKX
was 7,452.84.
Historical
Performance of the UKX
This
historical data on the UKX is not
necessarily indicative of the future performance of the
UKX or what the value of the notes may be. Any
historical upward or downward trend in the level of the
UKX during any period set forth above is not an
indication that the level of the
UKX 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 UKX.
License
Agreement
These
notes are not in any way sponsored, endorsed, sold or promoted by
FTSE or by The London Stock Exchange Limited (the “Exchange”) or by
The Financial Times Limited (“FT”) and neither FTSE or Exchange or
FT makes any warranty or representation whatsoever, expressly or
impliedly, either as to the results to be obtained from the use of
the FTSE® 100 Index and/or the figure at which the said
index stands at any particular time on any particular day or
otherwise. The index is compiled and calculated solely by FTSE.
However, neither FTSE or Exchange or FT shall be liable (whether in
negligence or otherwise) to any person for any error in the index
and neither FTSE or Exchange or FT shall be under any obligation to
advise any person of any error therein.
“FTSETM”
and “FootsieTM” are trademarks of London Stock Exchange
Limited and The Financial Times Limited and are used by FTSE under
license.
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Capped
Leveraged Index Return Notes®
|
TS-15
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
The
Nikkei Stock Average Index
The
Nikkei Stock Average Index (the “Index”), also known as the Nikki
225 Index, is an equity index calculated, published, and
disseminated by Nikkei Inc. The Index measures the composite price
performance of selected Japanese stocks. The Index is currently
based on 225 stocks (each, an “Index Stock”) trading on the Tokyo
Stock Exchange (“TSE”) and represents a broad cross-section of
Japanese industry. All 225 of the Index Stocks are listed in the
First Section of the TSE. Index Stocks listed in the First Section
are among the most actively traded stocks on the TSE. The
Index started on September 7, 1950. However, it was retroactively
calculated back to May 16, 1949, when the TSE reopened for the
first time after World War II.
Calculation
of the Index
The
Index is a modified, price-weighted index. Each Index Stock’s
weight is based on its price per share rather than the total market
capitalization of the issuer. Nikkei Inc. calculates the Index by
multiplying the per share price of each Index Stock by the
corresponding weighting factor for that Index Stock (a “Weight
Factor”), calculating the sum of all these products and dividing
that sum by a divisor. The divisor is subject to periodic
adjustments as set forth below. Each Weight Factor is computed by
dividing 50 by the presumed par value of the relevant Index Stock,
so that the share price of each Index Stock when multiplied by its
Weight Factor corresponds to a share price based on a uniform par
value of 50. Each Weight Factor represents the number of shares of
the related Index Stock which are included in one trading unit of
the Index. The stock prices used in the calculation of the Index
are those reported by a primary market for the Index Stocks,
currently the TSE. The level of the Index is currently
calculated once per 15 seconds during TSE trading
hours.
In
order to maintain continuity in the level of the Index in the event
of certain changes due to non-market factors affecting the Index
Stocks, such as the addition or deletion of stocks, stock splits,
or increase in paid-in capital, the divisor used in calculating the
Index is adjusted in a manner designed to prevent any instantaneous
change or discontinuity in the level of the Index. The divisor
remains at the new value until a further adjustment is necessary as
the result of another change. In the event of a change
affecting any Index Stock, the divisor is adjusted in such a way
that the sum of all share prices immediately after the change
multiplied by the applicable Weight Factor and divided by the new
divisor, i.e., the level of the Index immediately after the change,
will equal the level of the Index immediately prior to the
change.
Index
Maintenance
The
Index is reviewed annually at the beginning of October. The purpose
of the review is to maintain the representative nature of the Index
Stocks. Stocks with high market liquidity are added and those with
low liquidity are deleted. At the same time, to take changes in
industry structure into account, the balance of the sectors, in
terms of the number of constituents, is considered. Liquidity of a
stock is assessed by the two measures: “trading value” and
“magnitude of price fluctuation by volume,” which is calculated as
(high price/low price) / volume. Among stocks on the TSE First
Section, the top 450 stocks in terms of liquidity are selected to
form the “high liquidity group”. Those constituents that are not in
the high liquidity group are deleted. Those non-constituent stocks
which are in the top 75 of the high liquidity group are
added.
After
the liquidity deletions and additions, constituents are deleted and
added to balance the number of constituents among sectors, and to
make the total number of the constituents equal 225. Among the 450
“high liquidity” stocks, half of those that belong to a sector are
designated as the “appropriate number of stocks” for that sector.
The actual number of constituents in a sector is then compared with
its “appropriate number,” and if the actual number is larger or
smaller than the “appropriate number,” then components are deleted
or added, as necessary. Stocks to be deleted are selected from
stocks with lower liquidity and stocks to be added are selected
from stocks with higher liquidity. Stocks selected according to the
foregoing procedures are candidates for addition or deletion, as
applicable, and the final determinations will be made by Nikkei
Inc.
The
Index is also reviewed on an ongoing basis in response to
extraordinary developments, such as bankruptcies or mergers. Any
stock becoming ineligible for listing in the TSE First Section due
to any of the following reasons will be removed from the Index: (i)
bankruptcy and liquidation events; (ii) corporate restructurings,
such as mergers, share exchanges or share transfers; (iii) excess
debt or other reasons; or (iv) transfer to the TSE Second Section.
In addition, a component stock designated as “security under
supervision” becomes a deletion candidate. However, the decision to
delete such a candidate will be made by examining the
sustainability and the probability of delisting for each individual
case. Upon deletion of a stock from the Index, Nikkei Inc. will
generally select as a replacement the most liquid stock that is
both in the “high liquidity group” and in the same sector as the
deleted stock. When deletions are known in advance, replacements
may be selected as part of the periodic review process or by using
similar procedures.
The
Tokyo Stock Exchange
The
TSE is one of the world’s largest securities exchanges in terms of
market capitalization. Trading hours for most products listed
on the TSE are currently from 9:00 A.M. to 11:00 A.M. and from
12:30 P.M. to 3:00 P.M., Tokyo time, Monday through
Friday.
Due to
the time zone difference, on any normal trading day, the TSE will
close prior to the opening of business in New York City on the same
calendar day. Therefore, the closing level of the Index on a
trading day will generally be available in the U.S. by the opening
of business on the same calendar day.
The
TSE has adopted certain measures, including daily price floors and
ceilings on individual stocks, intended to prevent any extreme
short-term price fluctuations resulting from order imbalances. In
general, any stock listed on the TSE cannot be traded at a price
lower than the applicable price floor or higher than the applicable
price ceiling. These price floors and ceilings are expressed in
absolute Japanese yen, rather than percentage limits based on the
closing price of the stock on the previous trading day. In
addition, when there is a major order imbalance in a listed stock,
the TSE posts a “special bid quote” or a “special asked quote” for
that stock at a specified higher or lower price level than the
stock’s last sale price in order to solicit counter-orders and
balance supply and demand for the stock.
|
Capped
Leveraged Index Return Notes®
|
TS-16
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
The
TSE may also suspend the trading of individual stocks in certain
limited and extraordinary circumstances, including, for example,
unusual trading activity in that stock. As a result, changes
in the Index may be limited by price limitations or special quotes,
or by suspension of trading, on individual stocks that make up the
Index, and these limitations, in turn, may adversely affect the
market value of the notes.
The
following graph shows the daily
historical performance of the NKY
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 NKY
was 28,115.74.
Historical
Performance of the NKY
This
historical data on the NKY is not
necessarily indicative of the future performance of the
NKY or what the value of the notes may be. Any
historical upward or downward trend in the level of the
NKY during any period set forth above is not an
indication that the level of the
NKY 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 NKY.
License
Agreement
One of
our affiliates has entered into an agreement with Nikkei Inc.
providing us with a non-exclusive license with the right to use the
Index in exchange for a fee. The Index is the intellectual
property of Nikkei Inc. (the “index sponsor”), formerly known as
Nihon Keizai Shimbum, Inc. “Nikkei”, “Nikkei Stock Average”, and
“Nikkei 225” are the service marks of Nikkei Inc. Nikkei Inc.
reserves all the rights, including copyright, to the
Index.
The
notes are not in any way sponsored, endorsed or promoted by the
index sponsor. The index sponsor does not make any warranty or
representation whatsoever, express or implied, either as to the
results to be obtained as to the use of the Index or the figure as
which the NKY stands at any particular day or otherwise. The NKY is
compiled and calculated solely by the index sponsor. However, the
index sponsor shall not be liable to any person for any error in
the NKY and the index sponsor shall not be under any obligation to
advise any person, including a purchaser or seller of the notes, of
any error therein.
In
addition, the index sponsor gives no assurance regarding any
modification or change in any methodology used in calculating the
Index and is under no obligation to continue the calculation,
publication and dissemination of the NKY.
|
Capped
Leveraged Index Return Notes®
|
TS-17
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
The
Swiss Market Index
The
Swiss Market Index (the “SMI”):
|
●
|
was
first launched with a base level of 1,500 as of June 30, 1988;
and
|
|
●
|
is
sponsored, calculated, published and disseminated by SIX Group
Ltd., certain of its subsidiaries, and the Management Committee of
SIX Swiss Exchange.
|
The
SMI is a price return float-adjusted market capitalization-weighted
index of the 20 largest stocks traded on the SIX Swiss Exchange.
The Management Committee of SIX Swiss Exchange is supported by an
Index Commission (advisory board) in all index-related matters,
notably in connection with changes to the index rules and
adjustments, additions and exclusions outside of the established
review and acceptance period. The Index Commission meets at least
twice annually.
Information
regarding the SMI may be found on SIX Exchange’s website.
Please note that information included in that website is not
included or incorporated by reference in this
document.
Index
Composition and Selection Criteria
The
SMI is comprised of the 20 highest ranked stocks traded on the SIX
Swiss Exchange that have a free float of 20% or more and that are
not investment companies. The equity universe is largely Swiss
domestic companies; however, in some cases, foreign issuers with a
primary listing on the SIX Swiss Exchange or investment companies
that do not hold any shares of any other eligible company and that
have a primary listing on the SIX Swiss Exchange may be
included.
The
ranking of each security is determined by a combination of the
following criteria:
|
●
|
average free-float
market capitalization (compared to the capitalization of the entire
SIX Swiss Exchange index family), and
|
|
●
|
cumulative on
order book turnover (compared to the total turnover of the SIX
Swiss Exchange index family).
|
Each
of these two factors is assigned a 50% weighting in ranking the
stocks eligible for the SMI.
The
SMI is reconstituted annually after prior notice of at least two
months on the third Friday in September after the close of
trading.
The
reconstitution is based on data from the previous July 1 through
June 30. Provisional interim selection (ranking) lists are also
published following the end of the third, fourth and first
financial quarters.
In
order to reduce turnover, an index constituent will not be replaced
unless it is ranked below 23 or, if it is ranked 21 or 22, if
another share ranks 18 or higher. If a company has primary listings
on several exchanges and less than 50% of that company’s total
turnover is generated on the SIX Swiss Exchange, it will not be
included in the SMI unless it ranks at least 18 or better on the
selection list on the basis of its turnover alone (i.e., without
considering its free float).
Maintenance
of the SMI
Constituent
Changes. In the case of major market changes as a result of
capital events such as mergers or new listings, the Management
Committee of SIX Swiss Exchange can decide at the request of the
Index Commission that a security should be admitted to the SMI
outside the annual review period as long as it clearly fulfills the
criteria for inclusion. For the same reasons, a security can also
be excluded if the requirements for admission to the SMI are no
longer fulfilled. As a general rule, extraordinary acceptances into
the SMI take place after a three-month period on a quarterly basis
after the close of trading on the third Friday of March, June,
September and December (for example, a security listed on or before
the fifth trading day prior to the end of November cannot be
included until the following March). An announced insolvency is
deemed to be an extraordinary event and the security will be
removed from the SMI with five trading days’ prior notice if the
circumstances permit such notice.
Capped
Weightings and Intra-Quarter Breaches. The weight of any index
constituent that exceeds a weight of 18% within the index is
reduced to that value at each quarterly index review by applying a
capping factor to the calculation of such constituent’s free float
market capitalization. A constituent’s number of shares and free
float market capitalization are used to determine its capping
factor. The excess weight (the difference of the original weight
minus the capped weight) is distributed proportionally across the
other index constituents. The constituents are also capped to 18%
as soon as two index constituents exceed a weight of 20% (an
“intra-quarter breach”). If an intra-quarter breach is observed
after the close of the markets, a new calculation of the capping
factors is executed immediately and communicated to the market in
order to ensure that the maximum weight per constituent is capped
at 18% for the opening on the next day. In order to achieve a
capped weighting of the index without causing market distortion, a
stepwise reduction is conducted based on the quarterly index
reviews to ensure that no change in the weight (as a result of
capping) from one review to the next exceeds 3%. The transition
period is in effect until no component has a weight larger than
18%. In the case of an intra-quarter breach, the weights are
limited to the last defined weights as of the prior
review.
Number of
Shares and Free Float. The securities included in the SMI are
weighted according to their free float. This means that shares
deemed to be in firm hands are subtracted from the total market
capitalization of that company. The free float is calculated on the
basis of outstanding shares. Issued and outstanding equity capital
is, as a rule, the total amount of equity capital that has been
fully subscribed and wholly or partially paid in and documented in
the Commercial Register. Not counting as issued and outstanding
equity capital are the approved capital and the conditional capital
of a company. The free float is calculated on the basis of listed
shares only. If a company offers several different categories of
listed participation rights, each is treated separately for
purposes of index calculation.
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Capped
Leveraged Index Return Notes®
|
TS-18
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
Shares
held deemed to be in firm hands are shareholdings that have been
acquired by one person or a group of persons in companies domiciled
in Switzerland and which, upon exceeding 5%, have been reported to
SIX Swiss Exchange. Shares of persons and groups of persons who are
subject to a shareholder agreement which is binding for more than
5% of the listed shares or who, according to publicly known facts,
have a long-term interest in a company, are also deemed to be in
firm hands.
For
the calculation of the number of shares in firm hands, SIX Swiss
Exchange may also use other sources than the reports submitted to
it. In particular, SIX Swiss Exchange may use data gained from
issuer surveys that it conducts itself.
In
general, shares held by custodian nominees, trustee companies,
investment funds, pension funds and investment companies are deemed
free-floating regardless whether a report has been made to SIX
Swiss Exchange. SIX Swiss Exchange classifies at its own discretion
persons and groups of persons who, because of their area of
activity or the absence of important information, cannot be clearly
assigned.
The
free-float rule applies only to bearer shares and registered
shares. Capital issued in the form of participation certificates
and bonus certificates is taken into full account in calculating
the SMI because it does not confer voting rights.
The
number of securities in the SMI and the free-float factors are
adjusted after the close of trading on four adjustment dates per
year, the third Friday of March, June, September and December. Such
changes are pre-announced at least one month before the adjustment
date, although the index sponsor reserves the right to take
account of recent changes before the adjustment date in the actual
adjustment, so the definite new securities are announced five
trading days before the adjustment date.
In
order to avoid frequent slight changes to the weighting and to
maintain the stability of the SMI, any extraordinary change of the
total number of outstanding securities or the free float will only
result in an extraordinary adjustment if it exceeds 10% and 5%
respectively and is in conjunction with a corporate
action.
After
a takeover, SIX Swiss Exchange may, in exceptional cases, adjust
the free float of a company upon publication of the end results
after a five-day notification period or may exclude the security
from the relevant index family. When an insolvency has been
announced, an extraordinary adjustment will be made and the
affected security will be removed from the SMI after five trading
days’ notice.
The
index sponsor reserves the right to make an extraordinary
adjustment, in exceptional cases, without observing the
notification period.
Calculation
of the SMI
The
index sponsor calculates the SMI using the “Laspeyres
formula,” with a weighted arithmetic mean of a defined number of
securities issues. The formula for calculating the index value can
be expressed as follows:
|
Index
=
|
Free Float
Market Capitalization of the index
Divisor
|
The
“free float market capitalization of the index” is equal to the sum
of the product of the last-paid price, the number of shares, the
free-float factor, the capping factor and, if a foreign stock is
included, the current CHF exchange rate as of the time the index
value is being calculated. The index value is calculated in real
time and is updated whenever a trade is made in a component stock.
Where any index component stock price is unavailable on any trading
day, SIX Swiss Exchange will use the last reported price for such
component stock. Only prices from the SIX Swiss Exchange’s
electronic order book are used in calculating the SMI.
Divisor
Value and Adjustments
The
divisor is a technical number used to calculate the SMI and is
adjusted to reflect changes in market capitalization due to
corporate events, and is adjusted by SIX Swiss Exchange to reflect
corporate events, as described in the index
rules.
|
Capped
Leveraged Index Return Notes®
|
TS-19
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
The
following graph shows the daily
historical performance of the SMI
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
SMI
was 11,074.30.
Historical
Performance of the SMI
This
historical data on the SMI is not
necessarily indicative of the future performance of the
SMI or what the value of the notes may be. Any
historical upward or downward trend in the level of the
SMI during any period set forth above is not an
indication that the level of the
SMI 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 SMI.
License
Agreement
The
notes are not in any way sponsored, endorsed, sold or promoted by
the SIX Swiss Exchange and the SIX Swiss Exchange makes no warranty
or representation whatsoever, express or implied, either as to the
results to be obtained from the use of the SMI and/or the level at
which the SMI stands at any particular time on any particular day.
However, the SIX Swiss Exchange shall not be liable (whether
through negligence or otherwise) to any person for any error in the
index and the SIX Swiss Exchange shall not be under any obligation
to disclose such errors.
SIX®,
SIX Swiss Exchange®, SPI®, Swiss Performance
Index (SPI)®, SPI EXTRA®, SMI®,
Swiss Market Index® (SMI)®, SMIM®,
SMI MID (SMIM)®, SMI Expanded®,
SXI®, SXI LIFE SCIENCES®, SXI
Bio+Medtech®, SBI®, SBI Swiss Bond
Index®, VSMI®, SIX Immobilienfonds
Index® and SIX Quotematch® are trademarks
that have been registered in Switzerland and/or abroad by the SIX
Swiss Exchange. Their use is subject to a
license.
|
Capped
Leveraged Index Return Notes®
|
TS-20
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
The
S&P/ASX 200 Index
The
S&P/ASX 200 Index (the “AS51”):
|
●
|
was
first launched in 1979 by the Australian Securities Exchange and
was acquired and re-launched by its current index sponsor on April
3, 2000; and
|
|
●
|
is
sponsored, calculated, published and disseminated by S&P Dow
Jones Indices LLC, a part of McGraw Hill Financial
(“S&P”).
|
The
AS51 includes 200 companies and covers approximately 80% of the
Australian equity market by market capitalization. As discussed
below, the AS51 is not limited solely to companies having their
primary operations or headquarters in Australia or to companies
having their primary listing on the Australian Securities Exchange
(the “ASX”). All ordinary and preferred shares (if such preferred
shares are not of a fixed income nature) listed on the ASX,
including secondary listings, are eligible for the AS51. Hybrid
stocks, bonds, warrants, preferred stock that provides a guaranteed
fixed return and listed investment companies are not eligible for
inclusion.
The
AS51 is intended to provide exposure to the largest 200 eligible
securities that are listed on the ASX by float-adjusted market
capitalization. Constituent companies for the AS51 are chosen
based on market capitalization, public float and liquidity. All
index-eligible securities that have their primary or secondary
listing on the ASX are included in the initial selection of stocks
from which the 200 index stocks may be selected.
The
float-adjusted market capitalization of companies is determined
based on the daily average market capitalization over the last six
months. The security’s price history over the last six months, the
latest available shares on issue and the investable weight factor
(the “IWF”), are the factors relevant to the calculation of daily
average market capitalization. The IWF is a variable that is
primarily used to determine the available float of a security for
ASX listed securities.
Information
regarding the S&P®/ASX 200 Index may be found on
S&P’s website. That information is updated from time to time on
that website. Please note that information included in that
website is not included or incorporated by reference in this
document.
Number of
Shares
When
considering the index eligibility of securities for inclusion or
promotion into S&P/ASX indices, the number of index securities
under consideration is based upon the latest available ASX quoted
securities. For domestic securities (companies incorporated in
Australia and traded on the ASX, companies incorporated overseas
but exclusively listed on the ASX and companies incorporated
overseas and traded on other markets but most of its trading
activity is on the ASX), this figure is purely based upon the
latest available data from the ASX.
Foreign-domiciled
securities may quote the total number of securities on the ASX that
is representative of their global equity capital; whereas other
foreign-domiciled securities may quote securities on the ASX on a
partial basis that represents their Australian equity capital. In
order to overcome this inconsistency, S&P will quote the number
of index securities that are represented by CHESS Depositary
Interests (“CDIs”) for a foreign entity. When CDIs are not issued,
S&P will use the total securities held on the Australian
register (CHESS and, where supplied, the issuer sponsored
register). This quoted number for a foreign entity is
representative of the Australian equity capital, thereby allowing
the AS51 to be increasingly reflective of the Australian
market.
The
number of CDIs or shares of a foreign entity quoted on the ASX can
experience more volatility than is typically the case for ordinary
shares on issue. Therefore, an average number on issue will be
applied over a six-month period.
Where
CDI information is not supplied to the ASX by the company or the
company’s share register, estimates for Australian equity capital
will be drawn from CHESS data and, ultimately, registry-sourced
data.
IWF
The
IWF represents the float-adjusted portion of a stock’s equity
capital. Therefore any strategic holdings that are classified as
either corporate, private or government holdings reduce the IWF
which, in turn, results in a reduction in the float-adjusted market
capital.
The
IWF ranges between 0 and 1, is calculated as 1 — Sum of the % held
by strategic shareholders who possess 5% or more of issued shares,
and is an adjustment factor that accounts for the publicly
available shares of a company. A company must have a minimum IWF of
0.3 to be eligible for index inclusion.
S&P Dow Jones
Indices identifies the following shareholders whose holdings are
considered to be control blocks and are subject to float
adjustment:
|
1.
|
Government and
government agencies;
|
|
2.
|
Controlling and
strategic shareholders/partners;
|
|
3.
|
Any
other entities or individuals which hold more than 5%, excluding
insurance companies, securities companies and investment funds;
and
|
|
4.
|
Other
restricted portions such as treasury stocks.
|
Liquidity
Test
Only
stocks that are regularly traded are eligible for inclusion.
Eligible stocks are considered for index inclusion based on their
stock median liquidity (median daily value traded divided by its
average float-adjusted market capitalization for the last six
months relative to
|
Capped
Leveraged Index Return Notes®
|
TS-21
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
|
|
the
market capitalization weighted average of the stock median
liquidities of the 500 constituents of the All Ordinaries index,
another member of the S&P/ASX index family).
Index
Maintenance
S&P rebalances
constituents quarterly to ensure adequate market capitalization and
liquidity using the previous six months’ data to determine index
eligibility. Quarterly review changes take effect the third Friday
of March, June, September and December. Eligible stocks are
considered for index inclusion based on their float-adjusted market
capitalization rank relative to the stated quota of 200 securities.
For example, a stock that is currently in the S&P/ASX 300 and
is ranked at 175, based on float-adjusted market capitalization,
within the universe of eligible securities may be considered for
inclusion into the AS51, provided that liquidity hurdles are
met.
In
order to limit the level of index turnover, eligible securities
will only be considered for index inclusion once another stock is
excluded due to a sufficiently low rank and/or liquidity, based on
the float-adjusted market capitalization. Potential index
inclusions and exclusions need to satisfy buffer requirements in
terms of the rank of the stock relative to a given index. The
buffers are established to limit the level of index turnover that
may take place at each quarterly rebalancing.
Between
rebalancing dates, an index addition is generally made only if a
vacancy is created by an index deletion. Index additions are made
according to float-adjusted market capitalization and liquidity. An
initial public offering is added to the AS51 only when an
appropriate vacancy occurs and is subject to proven liquidity for
at least two months. An exception may be made for extraordinary
large offerings where sizeable trading volumes justify index
inclusion.
Deletions can
occur between index rebalancing dates due to acquisitions, mergers
and spin-offs or due to suspension or bankruptcies. The decision to
remove a stock from the AS51 will be made once there is sufficient
evidence that the transaction will be completed. Stocks that are
removed due to mergers and acquisitions are removed from the AS51
at the cash offer price for cash-only offers. Otherwise, the best
available price in the market is used.
Share
numbers for all index constituents are updated quarterly and are
rounded to the nearest thousand. The update to the number of issued
shares will be considered if the change is at least 5% of the float
adjusted shares or $100 million in value.
Share
updates for foreign-domiciled securities will take place annually
at the March rebalancing. The update to the number of index shares
will only take place when the six-month average of CDIs or the
Total Securities held in the Australian branch of issuer sponsored
register (where supplied) and in CHESS, as of the March
rebalancing, differs from the current index shares by either 5% or
a market-cap dollar amount greater than A$100 million. Where CDI
information is not supplied to the ASX by the company or the
company’s share register, estimates for Australian equity capital
will be drawn from CHESS data and, ultimately, registry-sourced
data.
Intra-quarter
share changes are implemented at the effective date or as soon as
reliable information is available; however, they will only take
place in the following circumstances:
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changes in a
company’s float-adjusted shares of 5% or more due to market-wide
shares issuance;
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rights
issues, bonus issues and other major corporate actions;
and
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share
issues resulting from index companies merging and major off-market
buy-backs.
|
Share
changes due to mergers or acquisitions are implemented when the
transaction occurs, even if both of the companies are not in the
same index and regardless of the size of the change.
IWFs
are reviewed annually as part of the September quarterly review.
However, any event that alters the float of a security in excess of
5% will be implemented as soon as practicable by an adjustment to
the IWF.
The
function of the IWF is also to manage the index weight of
foreign-domiciled securities that quote shares on the basis of
CDIs. Due to the volatility that is displayed by CDIs, unusually
large changes in the number of CDIs on issue could result. Where
this is the case, the IWF may be used to limit the effect of
unusually large changes in the average number of CDIs (and,
thereby, limit the potential to manipulate this figure). Where the
Australian Index Committee sees fit to apply the IWF in this
manner, the rationale for the decision will be announced to the
market. This will be reviewed annually at the March-quarter index
rebalancing date.
Calculation
of the AS51
The
AS51 is calculated using a base-weighted aggregate methodology. The
value of the AS51 on any day for which an index value is published
is determined by a fraction, the numerator of which is the
aggregate of the price of each stock in the AS51 times the number
of shares of such stock included in the AS51 times that stock’s
IWF, and the denominator of which is the divisor, which is
described more fully below.
In
order to prevent the value of the AS51 from changing due to
corporate actions, all corporate actions may require S&P to
make an index or divisor adjustment, as described in S&P’s
rules. This helps maintain the value of the AS51 and ensures that
the movement of the AS51 does not reflect the corporate actions of
the individual companies that comprise the AS51.
In
situations where an exchange is forced to close early due to
unforeseen events, such as computer or electric power failures,
weather conditions or other events, S&P will calculate the
closing price of the indices based on (1) the closing prices
published by the exchange or (2) if no closing price is available,
the last regular trade reported for each security before the
exchange closed. If the exchange fails to open due to unforeseen
circumstances, S&P treats this closure as a standard market
holiday. The AS51 will use the prior day’s
closing
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Capped
Leveraged Index Return Notes®
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TS-22
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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prices
and shifts any corporate actions to the following business day. If
all exchanges fail to open or in other extreme circumstances,
S&P may determine not to publish the AS51 for that
day.
S&P reserves
the right to recalculate the AS51 under certain limited
circumstances.
The
following graph shows the daily
historical performance of the AS51
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 AS51
was 7,181.295.
Historical
Performance of the AS51
This
historical data on the AS51 is not necessarily indicative of the
future performance of the AS51 or what the value of the notes may
be. Any historical upward or downward trend in the level of the
AS51 during any period set forth above is not an indication that
the level of the AS51 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 AS51.
License
Agreement
S&P®
is a registered trademark of Standard & Poor’s Financial
Services LLC (“S&P”). These trademarks have been licensed for
use by S&P Dow Jones Indices LLC. “Standard &
Poor’s®,” “S&P®/ASX 200®” and
“S&P®” are trademarks of S&P. These trademarks
have been sublicensed for certain purposes by our affiliate,
MLPF&S. The S&P®/ASX 200 Index is a
product of S&P Dow Jones Indices LLC and/or its affiliates and
has been licensed for use by MLPF&S.
The
notes are not sponsored, endorsed, sold or promoted by Standard
& Poor’s, a division of The McGraw-Hill Companies, Inc.
(“S&P”). Neither S&P nor the Australia Stock Exchange make
any representation or warranty, express or implied, to the owners
of the notes or any member of the public regarding the advisability
of investing in securities generally or in the notes particularly
or the ability of the S&P®/ASX 200 Index to track
general stock market performance. S&P’s and the Australia Stock
Exchange’s only relationship to MLPF&S is the licensing of
certain trademarks and trade names of S&P and the Australia
Stock Exchange and of the S&P®/ASX 200 Index, which
index is determined, composed and calculated by S&P without
regard to us, MLPF&S or the notes. S&P and the Australia
Stock Exchange have no obligation to take our needs or the needs of
MLPF&S or the owners of the notes into consideration in
determining, composing or calculating the S&P®/ASX
200 Index. S&P and the Australia Stock Exchange are not
responsible for and have 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. S&P and the Australia
Stock Exchange have no obligation or liability in connection with
the administration, marketing or trading of the notes.
S&P AND THE
AUSTRALIA STOCK EXCHANGE DO NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE S&P®/ASX 200 INDEX OR ANY DATA
INCLUDED THEREIN AND S&P AND THE AUSTRALIA STOCK EXCHANGE SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. S&P AND THE AUSTRALIA STOCK EXCHANGE MAKE NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY US, MLPF&S,
OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE S&P®/ASX 200 INDEX OR ANY DATA INCLUDED THEREIN.
S&P
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Capped
Leveraged Index Return Notes®
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TS-23
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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AND
THE AUSTRALIA STOCK EXCHANGE MAKE NO EXPRESS OR IMPLIED WARRANTIES,
AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P®/ASX 200 INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P OR
THE AUSTRALIA STOCK EXCHANGE HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
The
FTSE® China 50 Index
The
XIN0I was previously known as the “FTSE China 25 index.” On
September 22, 2014, FTSE Russell expanded the XIN0I to a 50 stock
index, and changed its name from FTSE China 25 Index to
FTSE® China 50 Index. The XIN0I is a stock
index calculated, published and disseminated by FTSE Russell, and
is designed to represent the performance of the mainland Chinese
market that is available to international investors. The XIN0I is
calculated and published in Hong Kong dollars and United States
dollars and is currently based on the 50 largest and most liquid
Chinese stocks (called “H” shares, “P Chips” and “Red Chips”),
listed and trading on the Hong Kong Stock Exchange. Currently, only
“H” shares, “Red Chip” shares and “P Chip” shares are eligible for
inclusion in the XIN0I. “H” shares are securities of companies
incorporated in the People’s Republic of China and nominated by the
Chinese government for listing and trading on the Hong Kong Stock
Exchange. “Red Chip” shares are securities of companies
incorporated outside the People’s Republic of China, which are
substantially owned directly or indirectly by the Chinese
government, have the majority of their revenue or assets derived
from mainland China and are listed on the Hong Kong Stock Exchange.
“P Chip” shares are securities of companies incorporated outside
the People’s Republic of China, which are controlled by individuals
located in mainland China, have the majority of their revenue or
assets derived from mainland China and are listed on the Hong Kong
Stock Exchange.
Standards
for Listing and Maintenance
All
classes of equity in issue are eligible for inclusion in
the XIN0I, subject to certain restrictions, however, each
constituent must also be a constituent of the FTSE®
All-World Index. The FTSE® All-World Index is a
market-capitalization weighted index designed to represent the
performance of the large- and mid- capitalization stocks from the
FTSE® Global Equity Index Series and covers
approximately 90.00% to 95.00% of the world’s investable market
capitalization. Companies whose business is that of holding equity
and other investments (e.g., investment trusts) are not eligible
for inclusion. Convertible preference shares and loan stocks are
excluded until converted.
Securities must be
sufficiently liquid to be traded, therefore, the following
criteria, among others, are used to ensure that illiquid securities
are excluded:
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Price. There
must be an accurate and reliable price for the purposes of
determining the market value of a company.
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Liquidity. Each
security is tested for liquidity on a semi-annual basis in March
and September by calculation of its monthly median of daily trading
volume as part of the FTSE® All-World Index review.
When calculating the median of daily trading volume of any security
for a particular month, a minimum of 5 trading days in that month
must exist, otherwise the month will be excluded from the
test.
|
For
each month, the daily trading volume for each security is
calculated as a percentage of the shares in issue for that day
adjusted by the free float at the review cut-off date. These daily
values are then ranked in descending order and the median is taken
by selecting the value for the middle ranking day if there is an
odd number of days and the mean of the middle two if there is an
even number of days.
Daily
totals with zero trades are included in the ranking; therefore, a
security that fails to trade for more than half of the days in a
month will have a zero median trading volume for that
month.
Any
period suspension will not be included in the test.
The
liquidity test will be applied on a pro-rata basis where the
testing period is less than 12 months:
|
(i)
|
A
non-constituent which does not turnover at least 0.05% of their
shares in issue (after the application of any free float
weightings) based on their median daily trading volume per month in
ten of the twelve months prior to a full market review, will not be
eligible for inclusion in the XIN0I.
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(ii)
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An
existing constituent which does not turnover at least 0.04% of its
shares in issue (after the application of any free float
weightings) based on its median daily trading volume per month for
a least eight of the twelve months prior to a full market review
will be removed from the XIN0I.
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(iii)
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New
issues which do not have a twelve month trading record must have a
minimum three month trading record when reviewed. They must
turnover at least 0.05% of their free float adjusted shares based
on their median daily trading volume each month, on a pro-rata
basis since listing. When testing liquidity, the free float weight
as at the last date in the testing period will be used for the
calculation for the whole of that period. This rule will not apply
to new issues added under fast entry inclusion as part of the
FTSE® All-World Index review.
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Capped
Leveraged Index Return Notes®
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TS-24
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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At the
sole discretion of FTSE Russell, the above percentage figures may
be adjusted by up to 0.01% at the March and September review so
that, in FTSE Russell’s opinion, the XIN0I better reflects the
liquid investable market of the region. This discretion may only be
exercised across the whole market and may not be applied to
individual securities.
At the
March and September reviews of the FTSE® All-World
Index, newly listed companies will have their liquidity assessed on
a pro-rata basis.
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New
Issues. New issues, which do not qualify as early entrants,
will become eligible for inclusion at the March and September
reviews of the FTSE All-World Index providing they have, since the
commencement of official non-conditional trading, a minimum of at
least three trading months prior to the date of that review and
turnover of at least 0.05% of their free float adjusted shares
based in issue based on their median daily trading volume each
month, on a pro rata basis since their listing.
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The
inclusion of early entries will not require a minimum trading
record.
The
XIN0I, like other indices of FTSE Russell, is governed by an
independent advisory committee, the FTSE Russell Asia Pacific
Regional Equity Advisory Committee, that ensures that the XIN0I is
operated in accordance with its published ground rules, and that
the rules remain relevant to the XIN0I. The FTSE Russell Asia
Pacific Regional Equity Advisory Committee is responsible for
undertaking the review of the XIN0I and for approving changes of
constituents.
Computation
of the tracked index
The XIN0I is
calculated using the free float index calculation methodology of
FTSE Russell. The XIN0I is calculated using the following
formula:
Where:
“N” is
the number of securities in the XIN0I;
“p
i ” is the latest trade price of the component security
“i” (or the price at the close of the XIN0I on the previous
day);
“e
i ” is the exchange rate required to convert the
security’s currency into the XIN0I’s base
currency;
“s
i ” is the number of shares in issue used by FTSE for
the security;
“f
i ” is the investability weighting factor published by
FTSE, to be applied to such security to all amendments to its
weighting, expressed as a number between 0 and 1, where 1
represents a 100.00% free float;
“c
i ” is the capping factor published by FTSE to be
applied to a security to correctly weight that security in
the XIN0I; and
“d” is
the divisor, a figure that represents the total issued share
capital of the XIN0I at the base date, which may be adjusted to
allow for changes in the issued share capital of individual
securities to be made without distorting
the XIN0I.
The
capping factor serves to limit the weight of any individual company
to no more than 9.00% of the XIN0I and to limit the aggregate
weight of all companies that have a weight greater than 4.50% to no
more than 38.00% of the XIN0I.
The
XIN0I uses actual trade prices for securities with local stock
exchange quotations.
Free
float restrictions are calculated using available published
information. Companies with a free float of 5.00% or below are
excluded from the XIN0I. In June, a constituent’s free float will
be updated regardless of size. No buffers are applied. Quarterly
updates to free float will be applied after the close of business
on the third Friday of March, June, September and December. Free
float changes resulting from corporate events will not be subject
to the buffers as detailed above and will be implemented in line
with the event.
The
XIN0I will be periodically reviewed for changes in free float.
These reviews will coincide with the quarterly reviews of
the XIN0I. Implementation of any changes will happen at close
of trading on the third Friday in March, June, September and
December.
A
constituent’s free float will also be reviewed and adjusted if
necessary:
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By
identifying information which necessitates a change in free float
weighting;
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Following a
corporate event; or
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Expiry
of a lock-in clause.
|
If a
corporate event includes a corporate action which affects
the XIN0I, any change in free float will be implemented at the
same time as the corporate action.
Foreign ownership
limits, if any, will be applied after calculating the actual free
float restriction. FTSE’s methodology takes account of the
restrictions placed on the equity holdings of foreigners in a
company where these have been imposed by governments or
regulatory
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Capped
Leveraged Index Return Notes®
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TS-25
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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authorities, for
example on strategically sensitive industrial sectors such as
defense and telecommunications, or where they have been explicitly
set out in a company’s constitution. Where the presence of foreign
ownership restrictions creates a limit on foreign ownership that is
more restrictive than the calculated free float for a company, the
precise foreign ownership limit is used in place of the free float
for the purposes of calculating the company’s investability weight.
If the foreign ownership limit is less restrictive or equal to the
free float restriction, the free float restriction is applied,
subject to the above.
Where
a company’s shares are issued partly, or nil, paid and the call
dates are already determined and known, the market price will, for
the purposes of calculating its market capitalization, be adjusted
so as to include all such calls (i.e., the fully paid
price).
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Capped
Leveraged Index Return Notes®
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TS-26
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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Periodic
Review of Constituents
The
quarterly review of the XIN0I constituents takes place in
March, June, September and December. The constituents will be
reviewed using data from the close of business on the Monday
following the third Friday in February, May, August and November.
Where there is a market holiday in either China or Hong Kong on the
Monday following the third Friday, the close of business on the
last trading day prior to the Monday after the third Friday, where
both markets are open, will be used. Any constituent changes will
be implemented after the close of business on the third Friday of
March, June, September and December.
At the
quarterly review, the constituents of the XIN0I are capped
using prices adjusted for corporate actions as at the close of
business on the second Friday in March, June, September and
December. The capping is implemented after close of business on the
third Friday in March, June, September and December based on the
constituents, shares in issue and free float on the next trading
day following the third Friday of the review month.
Quarterly changes
are published after the close of business on the Wednesday before
the first Friday of March, June, September and December to give
users of the XIN0I sufficient notification of the changes
before their implementation.
At
review, all constituents of the XIN0I must be existing or pending
constituents to the FTSE® All-World Index, i.e.,
the review will take into consideration any constituent changes to
the FTSE® All-World Index as announced by FTSE and
will therefore be conducted before the implementation date of these
changes.
A
company will be inserted into the XIN0I at the periodic review
if it rises to 40th position or above when the eligible
companies are ranked by full market capitalization (before the
application of any investability weightings).
A
company in the XIN0I will be deleted at the periodic review if
it falls to 61st position or below when the eligible companies
are ranked by full market value (before the application of any
investability weightings).
A
constant number of constituents will be maintained for the XIN0I.
Where a greater number of companies qualify to be inserted in the
XIN0I than those qualifying to be deleted, the lowest ranking
constituents presently included in the XIN0I will be deleted to
ensure that an equal number of companies are inserted and deleted
at the periodic review. Likewise, where a greater number of
companies qualify to be deleted than those qualifying to be
inserted, the securities of the highest-ranking companies which are
presently not included in the XIN0I will be inserted to match
the number of companies being deleted at the periodic
review.
|
Capped
Leveraged Index Return Notes®
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TS-27
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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The
following graph shows the daily
historical performance of the XIN0I
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 XIN0I
was 11,227.21.
Historical
Performance of the XIN01
This
historical data on the XIN0I is not
necessarily indicative of the future performance of the
XIN0I or what the value of the notes may be.
Any historical upward or downward trend in the level of the
XIN0I during any period set forth above is not
an indication that the level of the
XIN0I 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 XIN0I.
License
Agreement
These
notes are not in any way sponsored, endorsed, sold or promoted by
FTSE or by The London Stock Exchange Limited (the “Exchange”) or by
The Financial Times Limited (“FT”) and neither FTSE or Exchange of
FT makes any warranty or representation whatsoever, expressly or
impliedly, either as to the results to be obtained from the use of
the FTSE® 100 Index and/or the figure at which the said
index stands at any particular time on any particular day or
otherwise. The index is compiled and calculated solely by FTSE.
However, neither FTSE or Exchange or FT shall be liable (whether in
negligence or otherwise) to any person for any error in the index
and neither FTSE or Exchange or FT shall be under any obligation to
advise any person of any error therein.
“FTSETM”
and “FootsieTM” are trademarks of London Stock Exchange
Limited and The Financial Times Limited and are used by FTSE under
license.
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Capped
Leveraged Index Return Notes®
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TS-28
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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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 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 Basket 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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Capped
Leveraged Index Return Notes®
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TS-29
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Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
2024
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Structuring
the Notes
The
notes are our debt securities, the return on which is linked to the
performance of the Basket. 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 Basket 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
Basket Components, 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—General Risks Relating to
the Notes” 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.
|
Capped
Leveraged Index Return Notes®
|
TS-30
|
|
Capped
Leveraged Index Return Notes®
Linked
to an International Equity Index Basket, due November 29,
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 Basket.
|
|
■
|
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 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.
|
Capped
Leveraged Index Return Notes®
|
TS-31
|
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