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Filed Pursuant
to Rule 424(b)(2)
Registration Statement No. 333-234425
(To Prospectus dated November 4, 2016,
Prospectus Supplement dated November 4, 2016 and
Product Supplement EQUITY ARN-1 dated May 20,
2020)
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2,241,055
Units
$10
principal amount per unit
CUSIP No. 06054E176
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Pricing
Date
Settlement
Date
Maturity
Date
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November
22, 2022
November
30, 2022
January
26, 2024
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BofA
Finance LLC
Accelerated
Return Notes® Linked to the S&P
500® Index
Fully
and Unconditionally Guaranteed by Bank of America
Corporation
■
Maturity
of approximately 14 months
■
3-to-1
upside exposure to increases in the Index, subject to a capped
return of 20.94%
■
1-to-1
downside exposure to decreases in the Index, with 100% of your
investment at risk
■
All
payments occur at maturity and are subject to the credit risk of
BofA Finance LLC, as issuer of the notes, and the credit risk of
Bank of America Corporation, as guarantor of the notes
■
No
periodic interest payments
■
In
addition to the underwriting discount set forth below, the notes
include a hedging-related charge of $0.05 per unit. See
“Structuring the Notes”
■
Limited
secondary market liquidity, with no exchange listing
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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
$9.754 per unit, which is less than the public offering
price listed below. See “Summary” on the following page, “Risk
Factors” beginning on page TS-6 of this term sheet and “Structuring
the Notes” on page TS-12 of this term sheet for additional
information. The actual value of your notes at any time will
reflect many factors and cannot be predicted with
accuracy.
_________________________
None
of the Securities and Exchange Commission (the “SEC”), any state
securities commission, or any other regulatory body has approved or
disapproved of these securities or determined if this Note
Prospectus (as defined below) is truthful or complete. Any
representation to the contrary is a criminal offense.
_________________________
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Per
Unit
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Total
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Public
offering
price(1)...................................................
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$
10.000
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$22,390,550.00
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Underwriting
discount(1)...................................................
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$
0.175
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$372,184.62
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Proceeds, before
expenses, to BofA Finance....................
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$
9.825
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$22,018,365.38
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(1)
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The
public offering price and the underwriting discount for an
aggregate of 400,000 units purchased by an individual investor or
in combined transactions with the investor’s household of 300,000
units or more is $9.950 per unit and $0.125 per unit, respectively.
See “Supplement to the Plan of Distribution- Conflicts of Interest”
below.
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The
notes and the related
guarantee:
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Are
Not FDIC Insured
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Are
Not Bank Guaranteed
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May
Lose Value
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BofA
Securities
November 22,
2022
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
2024
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Summary
The
Accelerated Return Notes® Linked to the S&P
500® Index, due January 26, 2024 (the “notes”) are our
senior unsecured debt securities. Payments on the notes are fully
and unconditionally guaranteed by BAC. The notes and the related
guarantee are not insured by the Federal Deposit Insurance
Corporation or secured by collateral. The notes will rank
equally in right of payment with all of BofA Finance’s other
unsecured and unsubordinated obligations, and the related guarantee
will rank equally in right of payment with all of BAC’s other
unsecured and unsubordinated obligations, in each case, except
obligations that are subject to any priorities or preferences by
law. Any payments due on the notes, including any repayment of
principal, will be subject to the credit risk of BofA Finance, as
issuer, and BAC, as guarantor.
The
notes provide you a leveraged return, subject to a cap, if the
Ending Value of the Market Measure, which is the S&P
500® Index (the “Index”), is greater than its Starting
Value. If the Ending Value is less than the Starting Value, you
will lose all or a portion of the principal amount of your notes.
Any payments on the notes will be calculated based on the $10
principal amount per unit and will depend on the performance of
the Index, subject to our and BAC’s credit risk. See “Terms of
the Notes” below.
The
economic terms of the notes (including the Capped Value) are based
on BAC's internal funding rate, which is the rate it would pay to
borrow funds through the issuance of market-linked notes and the
economic terms of certain related hedging arrangements. BAC's
internal funding rate is typically lower than the rate it would pay
when it issues conventional fixed or floating rate debt securities.
This difference in funding rate, as well as the underwriting
discount and the hedging related charge described below, 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-12.
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Terms
of the Notes
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Redemption
Amount Determination
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Issuer:
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BofA
Finance LLC (“BofA Finance”)
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On
the maturity date, you will receive a cash payment per unit
determined as follows:
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Guarantor:
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Bank
of America Corporation (“BAC”)
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Principal Amount:
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$10.00 per
unit
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Term:
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Approximately 14
months
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Market Measure:
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The
S&P 500® Index (Bloomberg symbol: “SPX”), a
price return index
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Starting Value:
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4,003.58
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Ending Value:
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The
average of the closing levels of the Market Measure on each
calculation day occurring during the Maturity Valuation Period. The
scheduled calculation days are subject to postponement in the event
of Market Disruption Events, as described on page PS-26 of product
supplement EQUITY INDICES ARN-1.
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Participation Rate:
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300%
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Capped Value:
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$12.094 per
unit, which represents a return of 20.94% over the principal
amount.
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Maturity Valuation Period:
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January 17,
2024, January 18, 2024, January 19, 2024, January 22, 2024 and
January 23, 2024
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Fees and Charges:
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The
underwriting discount of $0.175 per unit listed on the cover page
and the hedging-related charge of $0.05 per unit described in
“Structuring the Notes” on page TS-12.
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Calculation Agent:
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BofA
Securities, Inc. (“BofAS”), an affiliate of BofA
Finance.
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Accelerated
Return Notes®
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TS-2
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
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 Index will increase moderately from the Starting
Value to the Ending Value.
■
You are willing to
risk a loss of principal and return if the Index decreases
from the Starting Value to the Ending Value.
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You accept that
the return on the notes will be capped.
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You are willing to
forgo the interest payments that are paid on conventional interest
bearing debt securities.
■
You are willing to
forgo dividends or other benefits of owning the stocks included in
the Index.
■
You are willing to
accept a limited or no market for sales prior to maturity, and
understand that the market prices for the notes, if any, will be
affected by various factors, including our and BAC’s actual and
perceived creditworthiness, BAC’s internal funding rate and
fees and charges on the notes.
■
You are willing to
assume our credit risk, as issuer of the notes, and BAC’s credit
risk, as guarantor of the notes, for all payments under the notes,
including the Redemption Amount.
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■
You believe that
the Index will decrease from the Starting Value to the Ending
Value or that it will not increase sufficiently over the term of
the notes to provide you with your desired return.
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You seek 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 Index.
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You seek an
investment for which there will be a liquid secondary
market.
■
You are unwilling
or are unable to take market risk on the notes, to take our
credit risk as issuer of the notes, or to take BAC’s credit risk,
as guarantor of the notes.
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We
urge you to consult your investment, legal, tax, accounting and
other advisors before you invest in the notes.
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Accelerated
Return Notes®
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TS-3
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
2024
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Hypothetical
Payout Profile and Examples of Payments at Maturity
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Accelerated
Return Notes®
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This
graph reflects the returns on the notes, based on the Participation
Rate of 300% and the Capped Value of $12.094 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 Index, excluding dividends.
This
graph has been prepared for purposes of illustration
only.
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The
following table and examples are for purposes of illustration only.
They are based on hypothetical values and show
hypothetical returns on the notes. They illustrate the
calculation of the Redemption Amount and the total rate of return
based on a hypothetical Starting Value of 100.00, the Participation
Rate of 300%, the Capped Value of $12.094 per unit, and a range of
hypothetical Ending Values. The actual amount you receive and
the resulting total rate of return will depend on the actual
Starting Value and Ending
Value and whether you hold the notes to
maturity. The following examples do not take into account any
tax consequences from investing in the notes.
For
recent actual levels of the Market Measure, see “The Index” section
below. The Index is a price return index and as such the Ending
Value will not include any income generated by dividends paid on
the stocks included in the Index, which you would otherwise be
entitled to receive if you invested in those stocks directly. In
addition, all payments on the notes are subject to issuer and
guarantor credit risk.
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Ending
Value
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Percentage
Change from the Starting Value to the Ending Value
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Redemption
Amount per Unit
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Total Rate of
Return on the Notes
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0.00
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-100.00%
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$0.00
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-100.00%
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50.00
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-50.00%
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$5.00
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-50.00%
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80.00
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-20.00%
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$8.00
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-20.00%
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90.00
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-10.00%
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$9.00
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-10.00%
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94.00
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-6.00%
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$9.40
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-6.00%
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97.00
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-3.00%
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$9.70
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-3.00%
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100.00(1)
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0.00%
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$10.00
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0.00%
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102.00
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2.00%
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$10.60
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6.00%
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103.00
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3.00%
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$10.90
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9.00%
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106.98
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6.98%
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$12.094(2)
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20.94%
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110.00
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10.00%
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$12.094
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20.94%
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120.00
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20.00%
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$12.094
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20.94%
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150.00
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50.00%
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$12.094
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20.94%
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200.00
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100.00%
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$12.094
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20.94%
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(1)
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The
hypothetical Starting Value of 100.00 used in these examples has
been chosen for illustrative purposes only. The actual Starting
Value is 4,003.58, which was the closing level of the Market
Measure on the pricing date.
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(2)
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The
Redemption Amount per unit cannot exceed the Capped
Value.
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Accelerated
Return Notes®
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TS-4
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
2024
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Redemption
Amount Calculation Examples:
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Example
1
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The
Ending Value is 50.00, or 50.00% of the Starting
Value:
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Starting Value:
100.00
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Ending
Value: 50.00
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=
$5.00 Redemption Amount per unit
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Example
2
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The
Ending Value is 102.00, or 102.00% of the Starting
Value:
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Starting Value:
100.00
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Ending
Value: 102.00
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=
$10.60 Redemption Amount per unit
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Example
3
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The
Ending Value is 131.00, or 131.00% of the Starting
Value:
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Starting Value:
100.00
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Ending
Value: 131.00
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=
$19.30, however, because the Redemption Amount for the notes cannot
exceed the Capped Value, the Redemption Amount will be $12.094 per
unit
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Accelerated
Return Notes®
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TS-5
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
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 Index 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 return represented by the
Capped Value and may be less than a comparable investment directly
in the securities included in the Index.
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We are
a finance subsidiary and, as such, have no independent assets,
operations or revenues.
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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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The
notes issued by us will not have the benefit of any cross-default
or cross-acceleration with other indebtedness of BofA Finance or
BAC; events of bankruptcy or insolvency or resolution proceedings
relating to BAC and covenant breach by BAC will not constitute an
event of default with respect to the notes.
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Valuation-
and Market-related Risks
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■
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The
initial estimated value of the notes considers certain assumptions
and variables and relies in part on certain forecasts about future
events, which may prove to be incorrect. The initial estimated
value of the notes is an estimate only, determined as of the
pricing date by reference to our and our affiliates’ pricing
models. These pricing models consider certain assumptions and
variables, including our credit spreads and those of BAC, BAC’s
internal funding rate on the pricing date, mid-market terms on
hedging transactions, expectations on interest rates and
volatility, price-sensitivity analysis, and the expected term of
the notes. These pricing models rely in part on certain
forecasts about future events, which may prove to be
incorrect.
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■
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The
public offering price you are paying for the notes exceeds the
initial estimated value. If you attempt to sell the notes prior to
maturity, their market value may be lower than the price you paid
for them and lower than the initial estimated value. This is
due to, among other things, changes in the level of the Index,
changes in BAC’s internal funding rate, and the inclusion in the
public offering price of the underwriting discount and the
hedging-related charge, all as further described in “Structuring
the Notes” on page TS-12. 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 Index,
our and BAC’s creditworthiness and changes in market
conditions.
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A
trading market is not expected to develop for the notes. None of
us, BAC, MLPF&S or BofAS is obligated to make a market for, or
to repurchase, the notes. There is no assurance that any party will
be willing to purchase your notes at any price in any secondary
market.
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Conflict-related
Risks
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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 Index) and any
hedging and trading activities BAC or its affiliates engage in that
are not for your account or on your behalf, may affect the market
value and return of the notes and may create conflicts of interest
with you.
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■
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There
may be potential conflicts of interest involving the calculation
agent, which is an affiliate of ours. We have the right to
appoint and remove the calculation agent.
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Market
Measure-related Risks
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■
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The
Index sponsor may adjust the Index in a way that affects its level,
and has no obligation to consider your interests.
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■
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You
will have no rights of a holder of the securities represented by
the Index, and you will not be entitled to receive securities or
dividends or other distributions by the issuers of those
securities.
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Accelerated
Return Notes®
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TS-6
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
2024
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■
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While
BAC and our other affiliates may from time to time own securities
of companies included in the Index, except to the extent that BAC’s
common stock is included in the Index, we, BAC and our other
affiliates do not control any company included in the Index, and
have not verified any disclosure made by any other
company.
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Tax-related
Risks
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■
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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.
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Accelerated
Return Notes®
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TS-7
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
2024
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The Index
All
disclosures contained in this term sheet regarding the Index,
including, without limitation, its make-up, method of calculation,
and changes in its components, have been derived from publicly
available sources. The information reflects the policies of, and is
subject to change by, S&P Dow Jones Indices LLC (the “Index
sponsor”). The Index sponsor, which licenses the copyright and all
other rights to the Index, has no obligation to continue to
publish, and may discontinue publication of, the Index. The
consequences of the Index sponsor discontinuing publication of the
Index are discussed in the section of the
accompanying product supplement beginning on page
PS-28 entitled “Description of ARNs—Discontinuance of an
Index.” None of us, BAC, the calculation
agent, MLPF&S or BofAS accepts any
responsibility for the calculation, maintenance or publication of
the Index or any successor index.
The
Index is intended to provide an indication of the pattern of common
stock price movement. The calculation of the level of the Index is
based on the relative value of the aggregate market value of the
common stocks of 500 companies as of a particular time compared to
the aggregate average market value of the common stocks of 500
similar companies during the base period of the years 1941 through
1943.
The
Index includes companies from eleven main groups: Communication
Services; Consumer Discretionary; Consumer Staples; Energy;
Financials; Health Care; Industrials; Information Technology; Real
Estate; Materials; and Utilities. The Index sponsor may from time
to time, in its sole discretion, add companies to, or delete
companies from, the Index to achieve the objectives stated
above.
The
Index sponsor calculates the Index by reference to the prices of
the constituent stocks of the Index without taking account of the
value of dividends paid on those stocks. As a result, the return on
the notes will not reflect the return you would realize if you
actually owned the Index constituent stocks and received the
dividends paid on those stocks.
Computation of
the Index
While
the Index sponsor currently employs the following methodology to
calculate the Index, no assurance can be given that the Index
sponsor will not modify or change this methodology in a manner that
may affect the Redemption Amount.
Historically, the
market value of any component stock of the Index was calculated as
the product of the market price per share and the number of then
outstanding shares of such component stock. In March 2005, the
Index sponsor began shifting the Index halfway from a market
capitalization weighted formula to a float-adjusted formula, before
moving the Index to full float adjustment on September 16, 2005.
The Index sponsor’s criteria for selecting stocks for the Index did
not change with the shift to float adjustment. However, the
adjustment affects each company’s weight in the
Index.
Under
float adjustment, the share counts used in calculating the Index
reflect only those shares that are available to investors, not all
of a company’s outstanding shares. Float adjustment excludes
shares that are closely held by control groups, other publicly
traded companies or government agencies.
In
September 2012, all shareholdings representing more than 5% of a
stock’s outstanding shares, other than holdings by “block owners,”
were removed from the float for purposes of calculating the Index.
Generally, these “control holders” will include officers and
directors, private equity, venture capital and special equity
firms, other publicly traded companies that hold shares for
control, strategic partners, holders of restricted shares, ESOPs,
employee and family trusts, foundations associated with the
company, holders of unlisted share classes of stock, government
entities at all levels (other than government retirement/pension
funds) and any individual person who controls a 5% or greater stake
in a company as reported in regulatory filings. However,
holdings by block owners, such as depositary banks, pension funds,
mutual funds and ETF providers, 401(k) plans of the company,
government retirement/pension funds, investment funds of insurance
companies, asset managers and investment funds, independent
foundations and savings and investment plans, will ordinarily be
considered part of the float.
Treasury stock,
stock options, equity participation units, warrants, preferred
stock, convertible stock, and rights are not part of the float.
Shares held in a trust to allow investors in countries outside the
country of domicile, such as depositary shares and Canadian
exchangeable shares, are normally part of the float unless those
shares form a control block. If a company has multiple classes of
stock outstanding, shares in an unlisted or non-traded class are
treated as a control block.
For
each stock, an investable weight factor (“IWF”) is calculated by
dividing the available float shares by the total shares
outstanding. Available float shares are defined as the total shares
outstanding less shares held by control holders. This calculation
is subject to a 5% minimum threshold for control blocks. For
example, if a company’s officers and directors hold 3% of the
company’s shares, and no other control group holds 5% of the
company’s shares, the Index sponsor would assign that company an
IWF of 1.00, as no control group meets the 5% threshold. However,
if a company’s officers and directors hold 3% of the company’s
shares and another control group holds 20% of the company’s shares,
the Index sponsor would assign an IWF of 0.77, reflecting the fact
that 23% of the company’s outstanding shares are considered to be
held for control. As of July 31, 2017, companies with multiple
share class lines are no longer eligible for inclusion in the
Index. Constituents of the Index prior to July 31, 2017 with
multiple share class lines will be grandfathered in and continue to
be included in the Index. If a constituent company of the Index
reorganizes into a multiple share class line structure, that
company will remain in the Index at the discretion of the S&P
Index Committee in order to minimize turnover.
The
Index is calculated using a base-weighted aggregate methodology.
The level of the Index reflects the total market value of all
component stocks relative to the base period of the years 1941
through 1943. An indexed number is used to represent the results of
this calculation in order to make the level easier to work with and
track over time. The actual total market value of the component
stocks during the base period of the years 1941 through 1943 has
been set to an indexed level of 10. This is often indicated by the
notation
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Accelerated
Return Notes®
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TS-8
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
2024
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1941-
43 = 10. In practice, the daily calculation of the Index is
computed by dividing the total market value of the component stocks
by the “index divisor.” By itself, the index divisor is an
arbitrary number. However, in the context of the calculation of the
Index, it serves as a link to the original base period level of the
Index. The index divisor keeps the Index comparable over time and
is the manipulation point for all adjustments to the Index, which
is index maintenance.
Index
Maintenance
Index
maintenance includes monitoring and completing the adjustments for
company additions and deletions, share changes, stock splits, stock
dividends, and stock price adjustments due to company restructuring
or spinoffs. Some corporate actions, such as stock splits and stock
dividends, require changes in the common shares outstanding and the
stock prices of the companies in the Index, and do not require
index divisor adjustments.
To
prevent the level of the Index from changing due to corporate
actions, corporate actions which affect the total market value of
the Index require an index divisor adjustment. By adjusting the
index divisor for the change in market value, the level of the
Index remains constant and does not reflect the corporate actions
of individual companies in the Index. Index divisor adjustments are
made after the close of trading and after the calculation of the
Index closing level.
Changes in a
company’s shares outstanding of 5.00% or more due to mergers,
acquisitions, public offerings, tender offers, Dutch auctions, or
exchange offers are made as soon as reasonably possible. Share
changes due to mergers or acquisitions of publicly held companies
that trade on a major exchange are implemented when the transaction
occurs, even if both of the companies are not in the same headline
index, and regardless of the size of the change. All other changes
of 5.00% or more (due to, for example, company stock repurchases,
private placements, redemptions, exercise of options, warrants,
conversion of preferred stock, notes, debt, equity participation
units, at-the-market offerings, or other recapitalizations) are
made weekly and are announced on Fridays for implementation after
the close of trading on the following Friday. Changes of less than
5.00% are accumulated and made quarterly on the third Friday of
March, June, September, and December, and are usually announced two
to five days prior.
If a
change in a company’s shares outstanding of 5.00% or more causes a
company’s IWF to change by five percentage points or more, the IWF
is updated at the same time as the share change. IWF changes
resulting from partial tender offers are considered on a case by
case basis.
The
following graph shows the daily historical performance of
the Index in the period from
January 1, 2012 through November 22, 2022. We obtained this
historical data from Bloomberg L.P. We have not independently
verified the accuracy or completeness of the information obtained
from Bloomberg L.P. On the pricing date, the closing level of the
Market Measure was 4,003.58.
Historical
Performance of the Index
This
historical data on the Index is not necessarily indicative of the
future performance of the Index or what the value of the notes may
be. Any historical upward or downward trend in the level of the
Index during any period set forth above is not an indication that
the level of the Index is more or less likely to increase or
decrease at any time over the term of the
notes.
Before
investing in the notes, you should consult publicly available
sources for the levels of the Index.
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Accelerated
Return Notes®
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TS-9
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
2024
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License Agreement
S&P®
is a registered trademark of Standard & Poor’s Financial
Services LLC (“S&P”) and Dow Jones® is a registered
trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). These
trademarks have been licensed for use by S&P Dow Jones Indices
LLC. “Standard & Poor’s®,” “S&P 500®”
and “S&P®” are trademarks of S&P. These
trademarks have been sublicensed for certain purposes by our
affiliate, MLPF&S. The 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 S&P Dow
Jones Indices LLC, Dow Jones, S&P or any of their respective
affiliates (collectively, “S&P Dow Jones Indices”).
S&P Dow Jones Indices make no representation or warranty,
express or implied, to the holders 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 Index
to track general market performance. S&P Dow Jones
Indices’ only relationship to MLPF&S with respect to the Index
is the licensing of the Index and certain trademarks, service marks
and/or trade names of S&P Dow Jones Indices and/or its third
party licensors. The Index is determined, composed and
calculated by S&P Dow Jones Indices without regard to us, BAC,
MLPF&S, BofAS or the notes. S&P Dow Jones Indices have no
obligation to take our needs, BAC’s needs or the needs of
MLPF&S or holders of the notes into consideration in
determining, composing or calculating the Index. S&P Dow
Jones Indices are not responsible for and have not participated in
the determination of the prices and amount of the notes or the
timing of the issuance or sale of the notes or in the determination
or calculation of the equation by which the notes are to be
converted into cash. S&P Dow Jones Indices have no
obligation or liability in connection with the administration,
marketing or trading of the notes. There is no assurance that
investment products based on the Index will accurately track index
performance or provide positive investment returns. S&P
Dow Jones Indices LLC and its subsidiaries are not investment
advisors. Inclusion of a security or futures contract within
an index is not a recommendation by S&P Dow Jones Indices to
buy, sell, or hold such security or futures contract, nor is it
considered to be investment advice. Notwithstanding the
foregoing, CME Group Inc. and its affiliates may independently
issue and/or sponsor financial products unrelated to the notes
currently being issued by us, but which may be similar to and
competitive with the notes. In addition, CME Group Inc. and
its affiliates may trade financial products which are linked to the
performance of the Index. It is possible that this trading
activity will affect the value of the notes.
S&P DOW JONES
INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR
THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY
COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN
COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT
THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO
ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO
RESULTS TO BE OBTAINED BY US, BAC, MLPF&S, BOFAS, HOLDERS OF
THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX
OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW
JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO,
LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF
THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER
IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE
NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS
BETWEEN S&P DOW JONES INDICES AND MLPF&S, OTHER THAN
THE LICENSORS OF S&P DOW JONES INDICES.
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Accelerated
Return Notes®
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TS-10
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
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 Index and the
remaining term of the notes. However, neither we nor any of our
affiliates is obligated to purchase your notes at any price, or at
any time, and we cannot assure you that we or any of our affiliates
will purchase your notes at a price that equals or exceeds the
initial estimated value of the notes.
The
value of the notes shown on your account statement will be based on
BofAS’s estimate of the value of the notes if BofAS or another of
our affiliates were to make a market in the notes, which it is not
obligated to do. That estimate will be based upon the price that
BofAS may pay for the notes in light of then-prevailing market
conditions and other considerations, as mentioned above, and will
include transaction costs. At certain times, this price may be
higher than or lower than the initial estimated value of the
notes.
An
investor’s household, as referenced on the cover of this term
sheet, will generally include accounts held by any of the
following, as determined by MLPF&S in its discretion and acting
in good faith based upon information then available to
MLPF&S:
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the
investor’s spouse (including a domestic partner), siblings,
parents, grandparents, spouse’s parents, children and
grandchildren, but excluding accounts held by aunts, uncles,
cousins, nieces, nephews or any other family relationship not
directly above or below the individual investor;
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a
family investment vehicle, including foundations, limited
partnerships and personal holding companies, but only if the
beneficial owners of the vehicle consist solely of the investor or
members of the investor’s household as described
above; and
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a
trust where the grantors and/or beneficiaries of the trust consist
solely of the investor or members of the investor’s household as
described above; provided that, purchases of the notes by a trust
generally cannot be aggregated together with any purchases made by
a trustee’s personal account.
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Purchases in
retirement accounts will not be considered part of the same
household as an individual investor’s personal or other
non-retirement account, except for individual retirement accounts
(“IRAs”), simplified employee pension plans (“SEPs”), savings
incentive match plan for employees (“SIMPLEs”), and
single-participant or owners only accounts (i.e., retirement
accounts held by self-employed individuals, business owners or
partners with no employees other than their
spouses).
Please
contact your Merrill financial advisor if you have any questions
about the application of these provisions to your specific
circumstances or think you are eligible.
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Accelerated
Return Notes®
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TS-11
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Accelerated
Return Notes®
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Linked
to the S&P 500® Index, due January 26,
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 Index. The related guarantees are BAC’s
obligations. As is the case for all of our and BAC’s respective
debt securities, including our market-linked notes, the economic
terms of the notes reflect our and BAC’s actual or perceived
creditworthiness at the time of pricing. In addition, because
market-linked notes result in increased operational, funding and
liability management costs to us and BAC, BAC typically borrows the
funds under these types of notes at a rate that is more favorable
to BAC than the rate that it might pay for a conventional fixed or
floating rate debt security. This rate, which we refer to in this
term sheet as BAC’s internal funding rate, is typically lower than
the rate BAC would pay when it issues conventional fixed or
floating rate debt securities. This generally relatively lower
internal funding rate, which is reflected in the economic terms of
the notes, along with the fees and charges associated with
market-linked notes, resulted in the initial estimated value of the
notes on the pricing date being less than their public offering
price.
At
maturity, we are required to pay the Redemption Amount to holders
of the notes, which will be calculated based on the performance of
the Index and the $10 per unit principal amount. In order to meet
these payment obligations, at the time we issue the notes, we may
choose to enter into certain hedging arrangements (which may
include call options, put options or other derivatives) with BofAS
or one of our other affiliates. The terms of these hedging
arrangements are determined by seeking bids from market
participants, including MLPF&S, BofAS and its affiliates, and
take into account a number of factors, including our and BAC’s
creditworthiness, interest rate movements, the volatility of the
Index, the tenor of the notes and the tenor of the hedging
arrangements. The economic terms of the notes and their
initial estimated value depend in part on the terms of these
hedging arrangements.
BofAS
has advised us that the hedging arrangements will include a
hedging-related charge of $0.05 per unit, reflecting an estimated
profit to be credited to BofAS from these transactions. Since
hedging entails risk and may be influenced by unpredictable market
forces, additional profits and losses from these hedging
arrangements may be realized by BofAS or any third party hedge
providers.
For
further information, see “Risk Factors—General Risks Relating to
ARNs” beginning on page PS-7 and “Use of Proceeds” on page PS-22 of
the accompanying product supplement.
Validity
of the Notes
In the
opinion of McGuireWoods LLP, as counsel to BofA Finance and BAC,
when the trustee has made the appropriate entries or notations on
the applicable schedule to the master global note that represents
the notes (the “master note”) identifying the notes offered hereby
as supplemental obligations thereunder in accordance with the
instructions of BofA Finance and the provisions of the indenture
governing the notes and the related guarantee, and the notes have
been delivered against payment therefor as contemplated in this
term sheet and the related prospectus, prospectus supplement and
product supplement, such notes will be the legal, valid and binding
obligations of BofA Finance, and the related guarantee will be the
legal, valid and binding obligation of BAC, subject, in each case,
to the effects of applicable bankruptcy, insolvency (including laws
relating to preferences, fraudulent transfers and equitable
subordination), reorganization, moratorium and other similar laws
affecting creditors’ rights generally, and to general principles of
equity. This opinion is given as of the date of this term sheet and
is limited to the laws of the State of New York and the Delaware
Limited Liability Company Act and the Delaware General Corporation
Law (including the statutory provisions, all applicable provisions
of the Delaware Constitution and reported judicial decisions
interpreting the foregoing) as in effect on the date hereof. In
addition, this opinion is subject to customary assumptions about
the trustee’s authorization, execution and delivery of the
indenture governing the notes and due authentication of the master
note, the validity, binding nature and enforceability of the
indenture governing the notes and the related guarantee with
respect to the trustee, the legal capacity of individuals, the
genuineness of signatures, the authenticity of all documents
submitted to McGuireWoods LLP as originals, the conformity to
original documents of all documents submitted to McGuireWoods LLP
as copies thereof, the authenticity of the originals of such copies
and certain factual matters, all as stated in the letter of
McGuireWoods LLP dated December 30, 2019, which has been filed as
an exhibit to Pre-Effective Amendment No. 1 to the Registration
Statement (File No. 333-234425) of BofA Finance and BAC, filed with
the SEC on December 30, 2019.
Sidley
Austin LLP, New York, New York, is acting as counsel to BofAS and
MLPF&S and as special tax counsel to BofA Finance and
BAC.
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Accelerated
Return Notes®
|
TS-12
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|
Accelerated
Return Notes®
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|
Linked
to the S&P 500® Index, due January 26,
2024
|
Summary
Tax Consequences
You
should consider the U.S. federal income tax consequences of an
investment in the notes, including the
following:
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There
is no statutory, judicial, or administrative authority directly
addressing the characterization of the notes.
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You
agree with us (in the absence of an administrative determination,
or judicial ruling to the contrary) to characterize and treat the
notes for all tax purposes as a single financial contract with
respect to the Index.
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Under
this characterization and tax treatment of the notes, a U.S. Holder
(as defined beginning on page 38 of the prospectus) generally will
recognize capital gain or loss upon maturity or upon a sale or
exchange of the notes prior to maturity. This capital gain or loss
generally will be long-term capital gain or loss if you held the
notes for more than one year.
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No
assurance can be given that the Internal Revenue Service (“IRS”) or
any court will agree with this characterization and tax
treatment.
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Under
current IRS guidance, withholding on “dividend equivalent” payments
(as discussed in the product supplement), if any, will not apply to
notes that are issued as of the date of this term sheet unless such
notes are “delta-one” instruments.
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You
should consult your own tax advisor concerning the U.S. federal
income tax consequences to you of acquiring, owning, and disposing
of the notes, as well as any tax consequences arising under the
laws of any state, local, foreign, or other tax jurisdiction and
the possible effects of changes in U.S. federal or other tax laws.
You should review carefully the discussion under the section
entitled “U.S. Federal Income Tax Summary” beginning on page PS-38
of product supplement EQUITY ARN-1.
Where
You Can Find More Information
We and
BAC have filed a registration statement (including a product
supplement, a prospectus supplement, and a prospectus) with the SEC
for the offering to which this term sheet relates. Before you
invest, you should read the Note Prospectus, including this term
sheet, and the other documents relating to this offering that we
and BAC have filed with the SEC, for more complete information
about us, BAC and this offering. You may get these documents
without cost by visiting EDGAR on the SEC website at www.sec.gov.
Alternatively, we, any agent, or any dealer participating in
this offering will arrange to send you these documents if you so
request by calling MLPF&S or BofAS toll-free at
1-800-294-1322.
“Accelerated
Return Notes®” and “ARNs®” are BAC’s
registered service marks.
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Accelerated
Return Notes®
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TS-13
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