This amended and restated pricing supplement amends and restates in its entirety the pricing supplement dated June 5, 2023 for CUSIP 09711A3M8.
![](https://content.edgar-online.com/edgar_conv_img/2023/06/14/0001481057-23-004159_image_cover.jpg)
Linked to the Least Performing of the
Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR®
Fund
| • | Approximate
13 month term. |
| • | Payment on
the Notes will depend on the individual performance of the Russell
2000® Index, the SPDR® S&P® Bank ETF and
the Real Estate Select Sector SPDR® Fund (each an “Underlying”). |
| • | At maturity,
you will receive a payment of $1,160.00 if the closing value of each Underlying on the Valuation Date is greater than or equal
to 60% of its Starting Value. |
| • | Otherwise,
you will be exposed to any decrease in the Least Performing Underlying beyond its Starting Value, with up to 100% of the principal at
risk. |
| • | No periodic interest payments. |
| • | All payments
on the Notes are subject to the credit risk of BofA Finance LLC (“BofA Finance”)
and Bank of America Corporation (“BAC” or the “Guarantor”). |
| • | The Starting
Values of the Underlyings were determined on June 1, 2023 (the “Strike Date”). The Starting Value of each Underlying was lower
than its respective closing value on the pricing date. |
| • | The Notes
priced on June 5, 2023, will issue on June 8, 2023 and will mature on July 10, 2024. |
| • | The Notes
will not be listed on any securities exchange. |
The initial estimated value of the
Notes as of the pricing date is $994.90 per $1,000 in principal amount of Notes, which is less than the public offering price listed below.
The actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy. See “Risk Factors”
beginning on page PS-6 of this pricing supplement and “Structuring the Notes” on page PS-21 of this pricing supplement for
additional information.
Potential purchasers of the Notes should
consider the information in “Risk Factors” beginning on page PS-6 of this pricing supplement, page PS-5 of the accompanying
product supplement, page S-6 of the accompanying prospectus supplement, and page 7 of the accompanying prospectus.
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 pricing supplement and the accompanying product supplement, prospectus supplement and prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
|
Public offering price(1) |
Underwriting discount(1)(2)(3) |
Proceeds, before expenses, to BofA Finance(2) |
Per Note |
$1,000.00 |
$2.50 |
$997.50 |
Total |
$2,413,000.00 |
$6,032.50 |
$2,406,967.50 |
| (1) | Certain dealers who purchase
the Notes for sale to certain fee-based advisory accounts may forgo some or all of their selling concessions, fees or commissions. The
public offering price for investors purchasing the Notes in these fee-based advisory accounts may be as low as $997.50 per $1,000 in principal
amount of Notes. |
| (2) | The underwriting discount
per $1,000 in principal amount of Notes may be as high as $2.50, resulting in proceeds, before expenses, to BofA Finance of as low as
$997.50 per $1,000 in principal amount of Notes. The total underwriting discount and proceeds, before expenses, to BofA Finance specified
above reflect the aggregate of the underwriting discounts per $1,000 in principal amount of Notes. |
| (3) | In addition to the underwriting
discount above, if any, an affiliate of BofA Finance will pay a referral fee of up to $2.20 per $1,000 in principal amount of Notes in
connection with the distribution of the Notes to other registered broker dealers. |
The Notes and the related guarantee:
Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
![](https://content.edgar-online.com/edgar_conv_img/2023/06/14/0001481057-23-004159_image_002.jpg) |
Selling Agent |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Terms of the Notes
The Digital Return Notes Linked to the
Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate
Select Sector SPDR® Fund (the “Notes”) provide a Digital Payment of $1,160.00 per $1,000 in principal amount
of Notes if the Ending Value of each Underlying is greater than or equal to its Threshold Value. However, if the Ending Value of
any Underlying is less than its Threshold Value, you will be exposed to any decrease in the Least Performing Underlying beyond its Starting
Value, and you will lose some or all of your investment in the Notes. The Notes are not traditional
debt securities and it is possible that you may lose some or all of your principal amount at maturity. Any payments on the Notes will
be calculated based on $1,000 in principal amount of Notes and will depend on the performance of the Underlyings, subject to our and BAC’s
credit risk.
Issuer: |
BofA Finance |
Guarantor: |
BAC |
Denominations: |
The Notes will be issued in minimum denominations of $1,000 and whole multiples of $1,000 in excess thereof. |
Term: |
Approximately 13 months. |
Underlyings: |
The Russell 2000® Index (Bloomberg symbol: “RTY”), a price return index, the SPDR® S&P® Bank ETF (Bloomberg symbol: “KBE”) and the Real Estate Select Sector SPDR® Fund (Bloomberg symbol: “XLRE”). |
Strike Date: |
June 1, 2023 |
Pricing Date: |
June 5, 2023 |
Issue Date: |
June 8, 2023 |
Valuation Date: |
July 5, 2024, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Calculation Days” in the accompanying product supplement. |
Maturity Date: |
July 10, 2024 |
Starting Value: |
RTY: 1,767.940
KBE: $34.78
XLRE: $36.05
The Starting Value of each
Underlying was lower than its respective closing value on the pricing date. |
Ending Value: |
With respect to each of the KBE and XLRE: its Closing Market Price on the Valuation Date multiplied by its Price Multiplier.
With respect to the RTY, its closing value on the Valuation Date, as determined by the calculation agent. |
Price Multiplier: |
With respect to each of the KBE and XLRE, 1, subject to adjustment for certain events as described in “Description of the Notes — Anti-Dilution and Discontinuance Adjustments Relating to ETFs” beginning on page PS-28 of the accompanying product supplement. |
Threshold Value: |
RTY: 1,060.764, which is 60%
of its Starting Value.
KBE: $20.87, which is 60%
of its Starting Value (rounded to two decimal places).
XLRE: $21.63, which is 60%
of its Starting Value. |
Digital Payment: |
$1,160.00 per $1,000 in principal amount of Notes, which represents a return of 16.00% over the principal amount. |
Redemption Amount: |
At maturity, the Redemption
Amount per $1,000 in principal amount of Notes will be:
a)
If the Ending Value of the Least Performing Underlying
is greater than or equal to its Threshold Value:
The Digital Payment; or
b)
If the Ending Value of the Least Performing Underlying
is less than its Threshold Value:
![](https://content.edgar-online.com/edgar_conv_img/2023/06/14/0001481057-23-004159_image_003.jpg)
In this case, the Redemption
Amount will be less than the principal amount and could be zero. |
|
DIGITAL RETURN NOTES | PS-2 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Calculation Agent: |
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance. |
Selling Agent: |
BofAS |
CUSIP: |
09711A3M8 |
Underlying Return: |
With
respect to each Underlying, ![](https://content.edgar-online.com/edgar_conv_img/2023/06/14/0001481057-23-004159_image_004.jpg)
|
Least Performing Underlying: |
The
Underlying with the lowest Underlying Return.
|
Events of Default and Acceleration: |
If an Event of Default, as defined in the senior indenture relating to the Notes and in the section entitled “Description of Debt Securities of BofA Finance LLC—Events of Default and Rights of Acceleration; Covenant Breaches” on page 54 of the accompanying prospectus, with respect to the Notes occurs and is continuing, the amount payable to a holder of the Notes upon any acceleration permitted under the senior indenture will be equal to the amount described under the caption “—Redemption Amount” above, calculated as though the date of acceleration were the Maturity Date of the Notes and as though the Valuation Date were the third trading day prior to the date of acceleration. In case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate. |
|
Any payments on the Notes depend on the
credit risk of BofA Finance, as Issuer, and BAC, as Guarantor, and on the performance of the Underlyings. The economic terms of the Notes
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 affiliates enter into. 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, if any, the referral fee and the hedging-related charges described below (see “Risk
Factors” beginning on page PS-6), reduced the economic terms of the Notes to you and the initial estimated value of the Notes. 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
as of the pricing date.
The
initial estimated value of the Notes as of the pricing date is set forth on the cover page of this pricing supplement. For more information
about the initial estimated value and the structuring of the Notes, see “Risk Factors” beginning on page PS-6 and “Structuring
the Notes” on page PS-21.
|
DIGITAL RETURN NOTES | PS-3 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Redemption Amount Determination
On the Maturity Date, you will receive
a cash payment per $1,000 in principal amount of Notes determined as follows:
All payments described above are
subject to Issuer and Guarantor credit risk.
|
DIGITAL RETURN NOTES | PS-4 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Hypothetical Payout Profile and Examples of Payments
at Maturity
Digital Return Notes Table
The following table is for purposes
of illustration only. It is based on hypothetical values and shows hypothetical
returns on the Notes. The table illustrates the calculation of the Redemption Amount and the return on the Notes based on a hypothetical
Starting Value of 100 for the Least Performing Underlying, a hypothetical Threshold Value of 60 for the Least Performing Underlying, the
Digital Payment of $1,160.00 per $1,000 in principal amount of Notes and a range of hypothetical Ending Values of the Least Performing
Underlying. The actual amount you receive and the resulting return will depend on the actual Starting Values, Threshold Values and
Ending Values of the Underlyings 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 values of the
Underlyings, see “The Underlyings” section below. The Ending Value of each Underlying will not include any income generated
by dividends or other distributions paid with respect to shares or units of that Underlying or on the securities included in that Underlying,
as applicable. In addition, all payments on the Notes are subject to Issuer and Guarantor credit risk.
Ending Value of the
Least Performing Underlying |
Underlying Return of the
Least Performing Underlying |
Redemption
Amount per Note |
Return
on the Notes |
160.00 |
60.00% |
$1,160.00(1) |
16.00% |
150.00 |
50.00% |
$1,160.00 |
16.00% |
140.00 |
40.00% |
$1,160.00 |
16.00% |
130.00 |
30.00% |
$1,160.00 |
16.00% |
120.00 |
20.00% |
$1,160.00 |
16.00% |
110.00 |
10.00% |
$1,160.00 |
16.00% |
105.00 |
5.00% |
$1,160.00 |
16.00% |
102.00 |
2.00% |
$1,160.00 |
16.00% |
100.00(2) |
0.00% |
$1,160.00 |
16.00% |
90.00 |
-10.00% |
$1,160.00 |
16.00% |
80.00 |
-20.00% |
$1,160.00 |
16.00% |
70.00 |
-30.00% |
$1,160.00 |
16.00% |
60.00(3) |
-40.00% |
$1,160.00 |
16.00% |
59.99 |
-40.01% |
$599.90 |
-40.01% |
50.00 |
-50.00% |
$500.00 |
-50.00% |
0.00 |
-100.00% |
$0.00 |
-100.00% |
| (1) | This amount
represents the Digital Payment. |
| (2) | The hypothetical
Starting Value of 100 used in the table above has been chosen for illustrative purposes only. The actual Starting Value for each Underlying
is set forth on page PS-2 above. |
| (3) | This is the hypothetical Threshold
Value of the Least Performing Underlying. |
|
DIGITAL RETURN NOTES | PS-5 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Risk Factors
Your investment in the Notes entails significant risks,
many of which differ from those of a conventional debt security. Your decision to purchase the Notes should be made only after carefully
considering the risks of an investment in the Notes, including those discussed below, with your advisors in light of your particular circumstances.
The Notes are not an appropriate investment for you if you are not knowledgeable about significant elements of the Notes or financial
matters in general. You should carefully review the more detailed explanation of risks relating to the Notes in the “Risk Factors”
sections beginning on page PS-5 of the accompanying product supplement, page S-6 of the accompanying prospectus supplement and page 7
of the accompanying prospectus, each as identified on page PS-25 below.
Structure-related Risks
| • | Your investment may result
in a loss; there is no guaranteed return of principal. There is no fixed principal repayment amount on the Notes at maturity. If the
Ending Value of any Underlying is less than its Threshold Value, you will be exposed to declines in the Least Performing Underlying beyond
its Starting Value. In that case, you will lose some or all of your investment in the Notes. |
| • | Your return on the Notes
is limited to the return represented by the Digital Payment. Your return on the Notes is limited to the Digital Payment, regardless
of the extent to which the Ending Value of any Underlying exceeds its Starting Value. In contrast, a direct investment in an Underlying
or in the securities included in one or more of the Underlyings, as applicable, would allow you to receive the benefit of any appreciation
in their values. Thus, any return on the Notes will not reflect the return you would realize if you actually owned those securities and
received the dividends paid or distributions made on them. |
| • | Your return on the Notes may be less than
the yield on a conventional debt security of comparable maturity. Any return that you receive on the Notes may be less than the return
you would earn if you purchased a conventional debt security with the same Maturity Date. As a result, your investment in the Notes may
not reflect the full opportunity cost to you when you consider factors, such as inflation, that affect the time value of money. In addition,
if interest rates increase during the term of the Notes, the Digital Payment (if any) may be less than the yield on a conventional debt
security of comparable maturity. |
| • | The Redemption Amount will
not reflect the values of the Underlyings other than on the Valuation Date. The values of the Underlyings during the term of the Notes
other than on the Valuation Date will not affect payment on the Notes. Notwithstanding the foregoing, investors should generally be aware
of the performance of the Underlyings while holding the Notes. The calculation agent will calculate the Redemption Amount by comparing
only the Threshold Value to the Ending Value for each Underlying. No other values of the Underlyings will be taken into account. As a
result, you will receive less than the principal amount at maturity even if the value of each Underlying has increased at certain times
during the term of the Notes before the Least Performing Underlying decreases to a value that is less than its Threshold Value as of the
Valuation Date. |
| • | Because the Notes are linked
to the least performing (and not the average performance) of the Underlyings, you may not receive any return on the Notes and may lose
a significant portion or all of your principal amount even if the Ending Value of one Underlying is greater than or equal to its Threshold
Value. Your Notes are linked to the least performing of the Underlyings, and a change in the value of one Underlying may not correlate
with changes in the value of the other Underlyings. The Notes are not linked to a basket composed of the Underlyings, where the depreciation
in the value of one Underlying could be offset to some extent by the appreciation in the value of the other Underlyings. In the case of
the Notes, the individual performance of each Underlying would not be combined, and the depreciation in the value of one Underlying would
not be offset by any appreciation in the value of the other Underlyings. Even if the Ending Value of an Underlying is at or above its
Threshold Value, you will lose a significant portion or all of your principal if the Ending Value of the Least Performing Underlying is
below its Threshold Value. |
| • | Any payment on the Notes
is subject to our credit risk and the credit risk of the Guarantor, and any actual or perceived changes in our or the Guarantor’s
creditworthiness are expected to affect the value of the Notes. The Notes are our senior unsecured debt securities. Any payment on
the Notes will be fully and unconditionally guaranteed by the Guarantor. The Notes are not guaranteed by any entity other than the Guarantor.
As a result, your receipt of the Redemption Amount will be dependent upon our ability and the ability of the Guarantor to repay our respective
obligations under the Notes on the Maturity Date, regardless of the Ending Value of the Least Performing Underlying as compared to its
Starting Value. No assurance can be given as to what our financial condition or the financial condition of the Guarantor will be at any
time after the pricing date of the Notes. If we and the Guarantor become unable to meet our respective financial obligations as they become
due, you may not receive the amount(s) payable under the terms of the Notes. |
In addition, our credit ratings
and the credit ratings of the Guarantor are assessments by ratings agencies of our respective abilities to pay our obligations. Consequently,
our or the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our or the Guarantor’s credit ratings
or increases in the spread between the yield on our respective securities and the yield on U.S. Treasury securities (the “credit
spread”) prior to the Maturity Date of your Notes may adversely affect the market value of the Notes. However, because your return
on the Notes depends upon factors in addition to our ability and the ability of the Guarantor to pay our respective obligations, such
as the values of the Underlyings, an improvement in our or the Guarantor’s credit ratings will not reduce the other investment risks
related to the Notes.
|
DIGITAL RETURN NOTES | PS-6 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
| • | We are a finance subsidiary
and, as such, have no independent assets, operations, or revenues. We are a finance subsidiary of BAC, have no operations other than
those related to the issuance, administration and repayment of our debt securities that are guaranteed by the Guarantor, and are dependent
upon the Guarantor and/or its other subsidiaries to meet our obligations under the Notes in the ordinary course. Therefore, our ability
to make payments on the Notes may be limited. |
| • | The Notes do not bear interest.
Unlike a conventional debt security, no interest payments will be paid over the term of the Notes, regardless of the extent to which the
Ending Value of any Underlying exceeds its Starting Value or Threshold Value. |
Valuation- and Market-related Risks
| • | The public offering price
you are paying for the Notes exceeds their initial estimated value. The initial estimated value of the Notes that is provided on the
cover page of this pricing supplement 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 the Guarantor,
the Guarantor’s internal funding rate, mid-market terms on hedging transactions, expectations on interest rates, dividends 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. 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 their initial estimated value. This is due to, among other things, changes in the values of the
Underlyings, changes in the Guarantor’s internal funding rate, and the inclusion in the public offering price of the underwriting
discount, if any, the referral fee and the hedging-related charges, all as further described in "Structuring the Notes" below.
These factors, together with various credit, market and economic factors over the term of the Notes, are expected to reduce the price
at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable
ways. |
| • | The initial estimated value
does not represent a minimum or maximum price at which we, BAC, 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 Underlyings, our and
BAC’s creditworthiness and changes in market conditions. |
| • | We cannot assure you that
a trading market for your Notes will ever develop or be maintained. We will not list the Notes on any securities exchange. We cannot
predict how the Notes will trade in any secondary market or whether that market will be liquid or illiquid. |
Conflict-related Risks
| • | Trading and hedging activities
by us, the Guarantor and any of our other affiliates, including BofAS, may create conflicts of interest with you and may affect your return
on the Notes and their market value. We, the Guarantor or one or more of our other affiliates, including BofAS, may buy or sell shares
or units of the Underlyings or the securities held by or included in the Underlyings, as applicable, or futures or options contracts or
exchange traded instruments on the Underlyings or those securities, or other instruments whose value is derived from the Underlyings or
those securities. While we, the Guarantor or one or more of our other affiliates, including BofAS, may from time to time own shares or
units of the Underlyings or securities represented by the Underlyings, as applicable, except to the extent that BAC’s common stock
may be included in the Underlyings, we, the Guarantor and our other affiliates, including BofAS, do not control any company included in
the Underlyings, and have not verified any disclosure made by any other company. We, the Guarantor or one or more of our other affiliates,
including BofAS, may execute such purchases or sales for our own or their own accounts, for business reasons, or in connection with hedging
our obligations under the Notes. These transactions may present a conflict of interest between your interest in the Notes and the interests
we, the Guarantor and our other affiliates, including BofAS, may have in our or their proprietary accounts, in facilitating transactions,
including block trades, for our or their other customers, and in accounts under our or their management. These transactions may adversely
affect the value of the Underlyings in a manner that could be adverse to your investment in the Notes. On or before the Strike Date, any
purchases or sales by us, the Guarantor or our other affiliates, including BofAS or others on our or their behalf (including those for
the purpose of hedging some or all of our anticipated exposure in connection with the Notes), may have affected the value of the Underlyings.
Consequently, the value of the Underlyings may change subsequent to the Strike Date, which may adversely affect the market value of the
Notes.
We, the Guarantor or one or more of our other affiliates, including BofAS, also may have engaged in hedging activities that could have
affected the value of the Underlyings on the Strike Date. In addition, these hedging activities, including the unwinding of a hedge, may
decrease the market value of your Notes prior to maturity, and may affect the amounts to be paid on the Notes. We, the Guarantor or one
or more of our other affiliates, including BofAS, may purchase or otherwise acquire a long or short position in the Notes and may hold
or resell the Notes. For example, BofAS may enter into these transactions in connection with any market making activities in which it
engages. We cannot assure you that these activities will not adversely affect the value of the Underlyings, the market value of your Notes
prior to maturity or the amounts payable on the Notes. |
|
DIGITAL RETURN NOTES | PS-7 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
| • | 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. One of our affiliates will be the calculation agent for the Notes and, as such, will make a variety of determinations relating
to the Notes, including the amounts that will be paid on the Notes. Under some circumstances, these duties could result in a conflict
of interest between its status as our affiliate and its responsibilities as calculation agent. |
Underlying-related Risks
| • | The Notes are subject to risks associated with small-size
capitalization companies. The stocks comprising the RTY are issued by companies with small-sized market capitalization. The stock
prices of small-size companies may be more volatile than stock prices of large capitalization companies. Small-size capitalization companies
may be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small-size capitalization
companies may also be more susceptible to adverse developments related to their products or services. |
| • | The stocks held by the KBE are concentrated in one sector.
The KBE holds securities issued by companies in the financial services sector. As a result, the stocks that will in part determine
the performance of the Notes are concentrated in one sector. Although an investment in the Notes will not give holders any ownership or
other direct interests in the securities held by the KBE, the return on an investment in the Notes will be subject to certain risks associated
with a direct equity investment in companies in this sector. Accordingly, by investing in the Notes, you will not benefit from the diversification
which could result from an investment linked to companies that operate in multiple sectors. |
| • | The Notes are subject to risks associated with the banking
industry. All of the stocks held by the KBE are issued by companies in the banking industry. The performance of companies in the banking
industry are influenced by many complex and unpredictable factors, including industry competition, interest rates, geopolitical events,
the ability of borrowers to repay loans, government regulation, and supply and demand for the products and services offered by such companies.
Any adverse development in the banking industry may have a material adverse effect on the stocks held by the KBE, and as a result, on
the value of the Notes. The Notes may be subject to greater volatility and be more adversely affected by a single positive or negative
economic, political or regulatory occurrence affecting this industry than a different investment linked to securities of a more broadly
diversified group of issuers. |
| • | The stocks held by the XLRE are concentrated in one sector.
The XLRE holds securities issued by companies in the real estate sector. As a result, the stocks that will determine the performance
of the Notes are concentrated in one sector. Although an investment in the Notes will not give holders any ownership or other direct interests
in the securities held by the XLRE, the return on an investment in the Notes will be subject to certain risks similar to those associated
with direct equity investments in the real estate sector. The Notes may be subject to greater volatility and be more adversely affected
by a single positive or negative economic, political or regulatory occurrence affecting this sector than a different investment linked
to securities of a more broadly diversified group of issuers. |
| • | The Notes are subject to risks associated with the real
estate sector. All or substantially all of the stocks held by the XLRE are issued by companies whose primary line of business is directly
associated with the real estate sector. The XLRE is subject to the risk that companies that are in the real estate sector may be similarly
affected by particular economic or market events. The profitability of these companies is largely dependent on, among other things, general
economic and political conditions, liquidity in the real estate market, interest rates, environmental liability, zoning laws, governmental
actions and regulatory limitations on rents, property taxes, and operating expenses, and the ability of borrowers to obtain financing
for real estate development or to repay their loans. Some real property companies have limited diversification because they invest in
a limited number of properties, a narrow geographic area, or a single type of property. These factors could affect the real estate sector
and could affect the prices of the equity securities held by the XLRE and the price of the XLRE during the term of the Notes, which may
adversely affect the return on your Notes. |
| • | A limited number of securities may affect the price of
the XLRE, and its underlying index is not necessarily representative of the real estate sector. The number of securities held by the
XLRE is limited. In addition, a few top securities held by the XLRE may constitute a substantial portion of its net assets. Any reduction
in the market price of those securities is likely to have a substantial adverse impact on the price of the XLRE and the return on the
Notes. While the securities included in its underlying index are equity securities of companies generally considered to be involved in
the real estate sector, the securities included in the underlying index may not follow the price movements of the entire real estate sector
generally. If the securities included in the underlying index (and, accordingly, the securities held by the XLRE) decline in value, the
XLRE will decline in value even if security prices in the real estate sector generally increase in value. |
| • | The performance of the KBE and the XLRE may not correlate
with the performance of its underlying indices as well as the net asset values per share or unit, especially during periods of market
volatility. The performance of the KBE and the XLRE and that of their respective underlying indices generally will vary due to, for
example, transaction costs, management fees, certain corporate actions, and timing variances. Moreover, it is also possible that the performance
of the KBE and the XLRE may not fully replicate or may, in certain circumstances, diverge significantly from the performance of their
respective underlying indices. This could be due to, for example, the KBE or the XLRE not holding all or substantially all of the underlying
assets included in their respective underlying indices and/or holding assets that are not included in their respective underlying indices,
the temporary unavailability of certain securities in the secondary market, the performance of any derivative instruments held by the
KBE and the XLRE, differences in trading hours between the KBE and the XLRE (or the underlying assets held by the KBE and the XLRE) and
their respective underlying indices, or other circumstances. This variation in performance is called the “tracking error,”
and, at times, the tracking error may be significant. In addition, because the shares or units of the KBE or the XLRE are traded |
|
DIGITAL RETURN NOTES | PS-8 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
| | on a securities exchange and are subject to market supply and investor
demand, the market price of one share or unit of the KBE or the XLRE may differ from its net asset value per share or unit; shares or
units of the KBE or the XLRE may trade at, above, or below its net asset value per share or unit. During periods of market volatility,
securities held by the KBE or the XLRE may be unavailable in the secondary market, market participants may be unable to calculate accurately
the net asset value per share or unit of the KBE or the XLRE and the liquidity of the KBE or the XLRE may be adversely affected. Market
volatility may also disrupt the ability of market participants to trade shares or units of the KBE or the XLRE. Further, market volatility
may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares or units of the
KBE or the XLRE. As a result, under these circumstances, the market value of shares or units of the KBE or the XLRE may vary substantially
from the net asset values per share or unit. |
| • | The anti-dilution adjustments will be limited. The
calculation agent may adjust the Price Multiplier of the KBE and the XLRE and other terms of the Notes to reflect certain actions by the
KBE and the XLRE, as described in the section “Description of the Notes—Anti-Dilution and Discontinuance Adjustments Relating
to ETFs” in the accompanying product supplement. The calculation agent will not be required to make an adjustment for every event
that may affect the KBE and the XLRE and will have broad discretion to determine whether and to what extent an adjustment is required. |
| • | The publisher or the sponsor
or investment advisor of an Underlying may adjust that Underlying in a way that affects its values, and the publisher or the sponsor or
investment advisor has no obligation to consider your interests. The publisher or the sponsor or investment advisor of an Underlying
can add, delete, or substitute the components included in that Underlying or make other methodological changes that could change its value.
Any of these actions could adversely affect the value of your Notes. |
Tax-related Risks
| • | The U.S. federal income tax consequences of an investment
in the Notes are uncertain, and may be adverse to a holder of the Notes. No statutory, judicial, or administrative authority directly
addresses the characterization of the Notes or securities similar to the Notes for U.S. federal income tax purposes. As a result, significant
aspects of the U.S. federal income tax consequences of an investment in the Notes are not certain. Under the terms of the Notes, you will
have agreed with us to treat the Notes as single financial contracts, as described below under “U.S. Federal Income Tax Summary—General.”
If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative characterization for the Notes, the
timing and character of gain or loss with respect to the Notes may differ. No ruling will be requested from the IRS with respect to the
Notes and no assurance can be given that the IRS will agree with the statements made in the section entitled “U.S. Federal Income
Tax Summary.” You are urged to consult with your own tax advisor regarding all aspects of the U.S. federal income tax consequences
of investing in the Notes. |
|
DIGITAL RETURN NOTES | PS-9 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
The Underlyings
All disclosures contained in this
pricing supplement regarding the Underlyings, 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, the sponsor of the RTY, the investment advisor of the KBE, and the investment advisor of the XLRE (collectively,
the “Underlying Sponsors”). The Underlying Sponsors, which license the copyright and all other rights to the respective Underlyings,
have no obligation to continue to publish, and may discontinue publication of, the Underlyings. The consequences of any Underlying Sponsor
discontinuing publication of the applicable Underlying are discussed in “Description of the Notes — Discontinuance of an Index”
and “Description of the Notes — Anti-Dilution and Discontinuance Adjustments Relating to ETFs — Discontinuance of or
Material Change to an ETF” in the accompanying product supplement. None of us, the Guarantor, the calculation agent, or BofAS accepts
any responsibility for the calculation, maintenance or publication of any Underlying or any successor underlying. None of us, the Guarantor,
BofAS or any of our other affiliates makes any representation to you as to the future performance of the Underlyings. You should make
your own investigation into the Underlyings.
The Russell 2000®
Index
The RTY was developed by Russell Investments
(“Russell”) before FTSE International Limited and Russell combined in 2015 to create FTSE Russell, which is wholly owned by
London Stock Exchange Group. Additional information on the RTY
is available at the following website: http://www.ftserussell.com. No information on that website is deemed to be included or incorporated
by reference in this pricing supplement.
Russell began dissemination of the
RTY (Bloomberg L.P. index symbol “RTY”) on January 1, 1984. FTSE Russell calculates and publishes the RTY. The RTY was set
to 135 as of the close of business on December 31, 1986. The RTY is designed to track the performance of the small capitalization segment
of the U.S. equity market. As a subset of the Russell 3000®
Index, the RTY consists of the smallest 2,000 companies included in the Russell 3000®
Index. The Russell 3000® Index measures the performance of the largest 3,000 U.S.
companies, representing approximately 98% of the investable U.S. equity market. The RTY is determined, comprised, and calculated by FTSE
Russell without regard to the Notes.
Selection of Stocks Comprising the RTY
Each company eligible for inclusion
in the RTY must be classified as a U.S. company under FTSE Russell’s country-assignment methodology. If a company is incorporated,
has a stated headquarters location, and trades in the same country (American Depositary Receipts and American Depositary Shares are not
eligible), then the company is assigned to its country of incorporation. If any of the three factors are not the same, FTSE Russell defines
three Home Country Indicators (“HCIs”): country of
incorporation, country of headquarters, and country of the most liquid exchange (as defined by a two-year average daily dollar trading
volume) from all exchanges within a country. Using the HCIs, FTSE Russell compares the primary location of the company’s assets
with the three HCIs. If the primary location of its assets matches any of the HCIs, then the company is assigned to the primary location
of its assets. If there is insufficient information to determine the country in which the company’s assets are primarily located,
FTSE Russell will use the country from which the company’s revenues are primarily derived for the comparison with the three HCIs
in a similar manner. FTSE Russell uses the average of two years of assets or revenues data to reduce potential turnover. If conclusive
country details cannot be derived from assets or revenues data, FTSE Russell will assign the company to the country of its headquarters,
which is defined as the address of the company’s principal executive offices, unless that country is a Benefit Driven Incorporation
(“BDI”) country, in which case the company will be assigned to the country of its most liquid stock exchange. BDI countries
include: Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Channel Islands,
Cook Islands, Curacao, Faroe Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Marshall Islands, Panama, Saba, Sint Eustatius,
Sint Maarten, and Turks and Caicos Islands. For any companies incorporated or headquartered in a U.S. territory, including Puerto Rico,
Guam, and U.S. Virgin Islands, a U.S. HCI is assigned.
All securities eligible for inclusion
in the RTY must trade on a major U.S. exchange. Stocks must have a closing price at or above $1.00 on their primary exchange on the last
trading day in May to be eligible for inclusion during annual reconstitution. However, in order to reduce unnecessary turnover, if an
existing member’s closing price is less than $1.00 on the last day of May, it will be considered eligible if the average of the
daily closing prices (from its primary exchange) during the month of May is equal to or greater than $1.00. Initial public offerings are
added each quarter and must have a closing price at or above $1.00 on the last day of
their eligibility period in order to qualify for index inclusion. If an existing stock does not trade on the “rank day” (typically
the last trading day in May but a confirmed timetable is announced each spring) but does have a closing price at or above $1.00 on another
eligible U.S. exchange, that stock will be eligible for inclusion.
An important criterion used to determine
the list of securities eligible for the RTY is total market capitalization, which is defined as the market price as of the last trading
day in May for those securities being considered at annual reconstitution
times the total number of shares outstanding. Where applicable, common stock, non-restricted exchangeable shares and partnership units/membership
interests are used to determine market capitalization. Any other form of shares such as preferred stock, convertible preferred stock,
redeemable shares, participating preferred stock, warrants and rights, installment receipts or trust receipts, are excluded from the calculation.
If multiple share classes of common stock exist, they are combined. In cases where the common stock share classes act independently of
each other (e.g., tracking stocks), each class is considered for inclusion separately. If multiple share classes exist, the pricing vehicle
will be designated as the share class with the highest two-year trading volume as of the rank day in May.
|
DIGITAL RETURN NOTES | PS-10 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Companies with a total market capitalization
of less than $30 million are not eligible for the RTY. Similarly, companies with only 5% or less of their shares available in the marketplace
are not eligible for the RTY. Royalty trusts, limited liability companies, closed-end investment companies (companies that are required
to report Acquired Fund Fees and Expenses, as defined by the SEC, including business development companies), blank check companies, special
purpose acquisition companies, and limited partnerships are also ineligible for inclusion. Bulletin board, pink sheets, and over-the-counter
traded securities are not eligible for inclusion. Exchange traded
funds and mutual funds are also excluded.
Annual reconstitution is a process by which the
RTY is completely rebuilt. Based on closing levels of the company’s common stock on its primary exchange on the rank day of May
of each year, FTSE Russell reconstitutes the composition of the RTY using the then existing market capitalizations of eligible companies.
Reconstitution of the RTY occurs on the last Friday in June or, when the last Friday in June is the 29th or 30th, reconstitution occurs
on the prior Friday. In addition, FTSE Russell adds initial public offerings to the RTY on a quarterly basis based on total market capitalization
ranking within the market-adjusted capitalization breaks established during the most recent reconstitution. After membership is determined,
a security’s shares are adjusted to include only those shares available to the public. This is often referred to as “free
float.” The purpose of the adjustment is to exclude from market calculations the capitalization that is not available for purchase
and is not part of the investable opportunity set.
Historical Performance of the RTY
The following graph sets forth
the daily historical performance of the RTY in the period from January 2, 2018 through the Strike Date. 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. The
horizontal line in the graph represents the RTY’s Threshold
Value of 1,060.764, which is 60% of the RTY’s Starting
Value of 1,767.940, which was its closing level on the Strike
Date.
![](https://content.edgar-online.com/edgar_conv_img/2023/06/14/0001481057-23-004159_image_007.jpg)
This historical data on the RTY is not necessarily
indicative of the future performance of the RTY or what the value of the Notes may be. Any historical upward or downward trend in the
closing level of the RTY during any period set forth above is not an indication that the closing level of the RTY 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 closing levels of the RTY.
License Agreement
“Russell 2000®”
and “Russell 3000®” are trademarks of FTSE Russell and have been licensed
for use by our affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Notes are not sponsored, endorsed, sold, or promoted
by FTSE Russell, and FTSE Russell makes no representation regarding the advisability of investing in the Notes.
FTSE Russell and Merrill Lynch, Pierce,
Fenner & Smith Incorporated have entered into a non-exclusive license agreement providing for the license to Merrill Lynch, Pierce,
Fenner & Smith Incorporated and its affiliates, including us, in exchange for a fee, of the right to use indices owned and published
by FTSE Russell in connection with some securities, including
the Notes. The license agreement provides that the following language must be stated in this pricing supplement:
|
DIGITAL RETURN NOTES | PS-11 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
The Notes are not sponsored, endorsed, sold, or
promoted by FTSE Russell. FTSE Russell makes 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 RTY to
track general stock market performance or a segment of the same. FTSE Russell’s publication of the RTY in no way suggests or implies
an opinion by FTSE Russell as to the advisability of investment in any or all of the securities upon which the RTY is based. FTSE Russell’s
only relationship to Merrill Lynch, Pierce, Fenner & Smith Incorporated and to us is the licensing of certain trademarks and trade
names of FTSE Russell and of the RTY, which is determined, composed, and calculated by FTSE Russell without regard to Merrill Lynch, Pierce,
Fenner & Smith Incorporated, us, or the Notes. FTSE Russell is not responsible for and has not reviewed the Notes nor any associated
literature or publications and FTSE Russell makes no representation or warranty express or implied as to their accuracy or completeness,
or otherwise. FTSE Russell reserves the right, at any time and without notice, to alter, amend, terminate, or in any way change the RTY.
FTSE Russell has no obligation or liability in connection with the administration, marketing, or trading of the Notes.
FTSE RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR
THE COMPLETENESS OF THE RTY OR ANY DATA INCLUDED THEREIN AND FTSE RUSSELL SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. FTSE RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, US, BAC, BOFAS, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RTY OR ANY DATA INCLUDED THEREIN.
FTSE RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE RTY OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL FTSE RUSSELL
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY
OF SUCH DAMAGES.
|
DIGITAL RETURN NOTES | PS-12 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
SPDR® S&P®
Bank ETF
The SPDR® S&P® Bank ETF seeks
to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P Banks
Select Industry Index (the “underlying index”). The underlying index represents the banks industry portion of the S&P®
Total Market Index (“S&P TMI”), an index that measures the performance of the U.S. equity market. The KBE is composed
of companies that are publicly traded money centers and leading regional banks or thrifts.
The shares of the KBE are traded on the NYSE
Arca and are registered under the Securities Exchange Act of 1934, as amended (“Exchange Act”). Accordingly, information filed
with the SEC relating to the KBE, including its periodic financial reports, may be found on the SEC website.
The KBE utilizes a “sampling”
investment approach in attempting to track the performance of the underlying index. The KBE typically invests in substantially all of
the securities which comprise the underlying index in approximately the same proportions as the underlying index. The KBE will normally
invest at least 80% of its total assets in the common stocks that comprise the underlying index. The returns of the KBE may be affected
by certain management fees and other expenses, which are detailed in its prospectus.
The S&P Banks Select Industry
Index
This underlying index is an equal-weighted
index that is designed to measure the performance of the banks portion of the S&P TMI. The S&P TMI includes all U.S. common equities
listed on the NYSE (including NYSE Arca), the NYSE MKT, the NASDAQ Global Select Market, and the NASDAQ Capital Market. Each of the component
stocks in the underlying index is a constituent company within the banks industry portion of the S&P TMI.
To be eligible for inclusion in the underlying
index, companies must be in the S&P TMI and must be included in the relevant Global Industry Classification Standard (GICS) industry.
The GICS was developed to establish a global standard for categorizing companies into sectors and industries. In addition to the above,
companies must satisfy one of the two following combined size and liquidity criteria:
| · | float-adjusted market capitalization above US$2 billion and float-adjusted
liquidity ratio above 100%; or |
| · | float-adjusted market capitalization above US$1 billion and float-adjusted
liquidity ratio above 50%. |
All U.S. companies satisfying these requirements
are included in the underlying index. The total number of companies in the underlying index should be at least 35. If there are fewer
than 35 stocks, stocks from a supplementary list of highly correlated sub-industries that meet the market capitalization and liquidity
thresholds above are included in order of their float-adjusted market capitalization to reach 35 constituents. Minimum market capitalization
requirements may be relaxed to ensure there are at least 22 companies in the underlying index as of each rebalancing effective date.
Eligibility factors
include:
| · | Market Capitalization: Float-adjusted market capitalization should be at
least US$1 billion for inclusion in the underlying index. |
| · | Liquidity: The liquidity measurement used is a liquidity ratio, defined
as dollar value traded over the previous 12-months divided by the float-adjusted market capitalization as of the underlying index rebalancing
reference date. Stocks having a float-adjusted market capitalization above US$2 billion must have a liquidity ratio greater than 100%
to be eligible for addition to the underlying index. Stocks having a float-adjusted market capitalization between US$1 and US$2 billion
must have a liquidity ratio greater than 50% to be eligible for addition to the underlying index. Existing index constituents must have
a liquidity ratio greater than 50% to remain in the underlying index at the quarterly rebalancing. The length of time to evaluate liquidity
is reduced to the available trading period for IPOs or spin-offs that do not have 12 months of trading history. |
| · | Takeover Restrictions: At the discretion of Standard and Poor (“S&P®”),
constituents with shareholder ownership restrictions defined in company bylaws may be deemed ineligible for inclusion in the underlying
index. Ownership restrictions preventing entities from replicating the index weight of a company may be excluded from the eligible universe
or removed from the underlying index. |
| · | Turnover: S&P® believes turnover in index membership should be avoided
when possible. At times, a company may appear to temporarily violate one or more of the addition criteria. However, the addition criteria
are for addition to the underlying index, not for continued membership. As a result, an index constituent that appears to violate the
criteria for addition to the underlying index will not be deleted unless ongoing conditions warrant a change in the composition of the
underlying index. |
Computation of the Underlying Index
The underlying index is calculated as the
underlying index market value divided by the divisor. In an equal-weighted index like the underlying index, the market capitalization
of each stock used in the calculation of the index market value is redefined so that each stock has an equal weight in the index on each
rebalancing date. The adjusted market capitalization for each stock in the index is calculated as the product of the stock price, the
number of shares outstanding, the stock’s float factor and the adjustment factor.
A stock’s float factor refers to the
number of shares outstanding that are available to investors. S&P indices exclude shares closely held by control groups from the underlying
index calculation because such shares are not available to investors. For each stock, S&P calculates an Investable Weight Factor (IWF)
which is the percentage of total shares outstanding that are included in the underlying index calculation.
|
DIGITAL RETURN NOTES | PS-13 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
The adjustment factor for each stock is assigned
at each rebalancing date and is calculated by dividing a specific constant set for the purpose of deriving the adjustment factor (often
referred to as modified index shares) by the number of stocks in the underlying index multiplied by the float adjusted market value of
such stock on such rebalancing date.
Adjustments are also made to ensure that no
stock in the underlying index will have a weight that exceeds the value that can be traded in a single day for a theoretical portfolio
of $2 billion. Theoretical portfolio values are reviewed annually and any updates are made at the discretion of the underlying index committee,
as defined below. The maximum basket liquidity weight for each stock in the underlying index will be calculated using the ratio of its
three-month median daily value traded to the theoretical portfolio value of $2 billion. Each stock’s weight in the underlying index
is then compared to its maximum basket liquidity weight and is set to the lesser of (1) its maximum basket liquidity weight or (2) its
initial equal weight. All excess weight is redistributed across the underlying index to the uncapped stocks. If necessary, a final adjustment
is made to ensure that no stock in the underlying index has a weight greater than 4.5%. No further adjustments are made if the latter
step would force the weight of those stocks limited to their maximum basket liquidity weight to exceed that weight. If the underlying
index contains exactly 22 stocks as of the rebalancing effective date, the underlying index will be equally weighted without basket liquidity
constraints.
If a company has more than one share class
line in the S&P TMI, such company will be represented once by the designated listing (generally the share class with both (i) the
highest one-year trading liquidity as defined by median daily value traded and (ii) the largest float-adjusted market capitalization).
S&P reviews designated listings on an annual basis and any changes are implemented after the close of the third Friday in September.
The last trading day in July is used as the reference date for the liquidity and market capitalization data in such determination. Once
a listed share class line is added to the underlying index, it may be retained in the underlying index even though it may appear to violate
certain constituent addition criteria. For companies that issue a second publicly traded share class to underlying index share class holders,
the newly issued share class line will be considered for inclusion if the event is mandatory and the market capitalization of the distributed
class is not considered to be de minimis.
The underlying index is calculated by using
the divisor methodology used in all S&P equity indices. The initial divisor was set to have a base value of 1,000 on June 20, 2003.
The underlying index level is the underlying index market value divided by the underlying index divisor. In order to maintain underlying
index series continuity, it is also necessary to adjust the divisor at each rebalancing. Therefore, the divisor (after rebalancing) equals
the underlying index market value (after rebalancing) divided by the underlying index value before rebalancing. The divisor keeps the
underlying index comparable over time and is one manipulation point for adjustments to the underlying index, which we refer to as maintenance
of the underlying index.
Historical Performance of the
KBE
The following graph sets forth the daily historical
performance of the KBE in the period from January 2, 2018 through the Strike Date. 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. The horizontal line in
the graph represents the KBE’s Threshold Value of $20.87 (rounded to two decimal places), which is 60% of the KBE’s Starting
Value of $34.78, which was its Closing Market Price on the Strike Date.
![](https://content.edgar-online.com/edgar_conv_img/2023/06/14/0001481057-23-004159_image_008.jpg)
This historical data on the KBE is not necessarily
indicative of the future performance of the KBE or what the value of the Notes may be. Any historical upward or downward trend in the
level of the KBE during any period set forth above is not an indication that the level of the KBE 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 KBE.
|
DIGITAL RETURN NOTES | PS-14 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Real Estate Select
Sector SPDR® Fund
The
shares of the XLRE are issued by Select Sector SPDR® Trust, a registered
investment company. The XLRE seeks investment results that correspond generally to the price and yield performance, before fees and expenses,
of the Real Estate Sector Index, its underlying index. The Real Estate Select Sector Index measures the performance of the real estate
sector of the U.S. equity market. The XLRE is composed of equity securities of companies in real estate management and development and
REITs, excluding mortgage REITs. The XLRE trades on the NYSE Arca under the ticker symbol “XLRE.
Investment Approach
The XLRE utilizes a “passive”
or “indexing” investment approach in attempting to track the performance of the Real Estate Select Sector Index. The XLRE
will invest in substantially all of the securities which comprise the Real Estate Select Sector Index. The XLRE will normally invest at
least 95% of its total assets in common stocks that comprise the Real Estate Select Sector Index.
Investment Objective and Strategy
The XLRE seeks to provide investment results
that correspond generally to the price and yield performance, before fees and expenses, of the Real Estate Select Sector Index. The investment
manager of the XLRE uses a replication strategy to try to achieve the XLRE’s investment objective, which means that the XLRE generally
invests in substantially all of the securities represented in the Real Estate Select Sector Index in approximately the same proportions
as the Real Estate Select Sector Index. Under normal market conditions, the XLRE generally invests at least 95% of its total assets in
the securities comprising the Real Estate Select Sector Index. In certain situations or market conditions, the XLRE may temporarily depart
from its normal investment policies and strategies provided that the alternative is consistent with the XLRE’s investment objective
and is in the best interest of the XLRE. For example, if the XLRE is unable to invest directly in a component security or if a derivative
investment may provide higher liquidity than other types of investments, it may make larger than normal investments in derivatives to
maintain exposure to the Real Estate Select Sector Index that it tracks. Consequently, under such circumstances, the XLRE may invest in
a different mix of investments than it would under normal circumstances. The XLRE will provide shareholders with at least 60 days notice
prior to any material change in its investment policies. The XLRE is managed with a passive investment strategy, attempting to track the
performance of an unmanaged index of securities. This differs from an actively managed underlying, which typically seeks to outperform
a benchmark index.
Notwithstanding the XLRE’s investment
objective, the return on your Notes will not reflect any dividends paid on shares of the XLRE, on the securities purchased by the XLRE
or on the securities that comprise the Real Estate Select Sector Index.
The Select Sector Indices
The
underlying index of the XLRE is part of the Select Sector Indices. The Select Sector Indices are sub-indices of the S&P 500®
Index (“SPX”). Each stock in the SPX is allocated to at least one
Select Sector Index, and the combined companies of the eleven Select Sector Indices represent all of the companies in the SPX. The industry
indices are sub-categories within each Select Sector Index and represent a specific industry segment of the overall Select Sector Index.
The eleven Select Sector Indices seek to represent the eleven SPX sectors. The index compilation agent for these indices (the “Index
Compilation Agent”) determines the composition of the Select Sector Indices based on S&P’s sector classification methodology.
(Sector designations are determined by the index sponsor using criteria it has selected or developed. Index sponsors may use very different
standards for determining sector designations. In addition, many companies operate in a number of sectors, but are listed in only one
sector and the basis on which that sector is selected may also differ. As a result, sector comparisons between indices with different
index sponsors may reflect differences in methodology as well as actual differences in the sector composition of the indices.
Each Select Sector Index was developed and
is maintained in accordance with the following criteria:
| ● | Each of the component stocks in
a Select Sector Index (the “Component Stocks”) is a constituent company of the SPX. |
| ● | The eleven Select Sector Indices
together will include all of the companies represented in the SPX and each of the stocks in the SPX will be allocated to at least one
of the Select Sector Indices. |
| ● | The Index Compilation Agent assigns
each constituent stock of the SPX to a Select Sector Index. The Index Compilation Agent assigns a company’s stock to a particular
Select Sector Index based on S&P Dow Jones Indices’s sector classification methodology as set forth in its Global Industry Classification
Standard. |
| ● | Each Select Sector Index is calculated
by S&P Dow Jones Indices using a modified “market capitalization” methodology. This design ensures that each of the component
stocks within a Select Sector Index is represented in a proportion consistent with its percentage with respect to the total market capitalization
of that Select Sector Index. |
| ● | For reweighting purposes, each
Select Sector Index is rebalanced quarterly after the close of business on the second to last calculation day of March, June, September
and December using the following procedures: (1) The rebalancing reference date is two business days prior to the last calculation day
of each quarter; and (2) With prices reflected on the rebalancing reference date, and membership, shares outstanding, additional weight
factor (capping factor) and investable weight factors (as described in the section “Computation of the S&P 500 Index®”
below) as of the rebalancing effective date, each company is weighted using the modified market capitalization methodology. Modifications
are made as defined below. |
(i) |
The indices are first evaluated to ensure none of the indices breach the maximum allowable limits defined in rules (ii) and (v) below. If any of the allowable limits are breached, the component stocks are reweighted based on their float-adjusted market capitalization weights. |
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DIGITAL RETURN NOTES | PS-15 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
(ii) |
If any component stock has a weight greater than 24%, that component stock has its float-adjusted market capitalization weight capped at 23%. The 23% weight cap creates a 2% buffer to ensure that no component stock exceeds 25% as of the quarter-end diversification requirement date. |
(iii) |
All excess weight is equally redistributed to all uncapped component stocks within the relevant Select Sector Index. |
(iv) |
After this redistribution, if the float-adjusted market capitalization weight of any other component stock(s) then breaches 23%, the process is repeated iteratively until no component stock breaches the 23% weight cap. |
(v) |
The sum of the component stocks with weight greater than 4.8% cannot exceed 50% of the total index weight. These caps are set to allow for a buffer below the 5% limit. |
(vi) |
If the rule in step (v) is breached, all the component stocks are ranked in descending order of their float-adjusted market capitalization weights and the first component stock that causes the 50% limit to be breached has its weight reduced to 4.6%. |
(vii) |
This excess weight is equally redistributed to all component stocks with weights below 4.6%. This process is repeated iteratively until step (v) is satisfied. |
(viii) |
Index share amounts are assigned to each component stock to arrive at the weights calculated above. Since index shares are assigned based on prices one business day prior to rebalancing, the actual weight of each component stock at the rebalancing differs somewhat from these weights due to market movements. |
(ix) |
If necessary, the reweighting process may take place more than once prior to the close on the last business day of March, June, September or December to ensure conformity with all diversification requirements. |
| ● | Each Select Sector Index is calculated
using the same methodology utilized by S&P Dow Jones Indices in calculating the SPX, using a base-weighted aggregate methodology.
The daily calculation of each Select Sector Index is computed by dividing the total market value of the companies in the Select Sector
Index by a number called the index divisor. |
| ● | The Index Compilation Agent at
any time may determine that a Component Stock which has been assigned to one Select Sector Index has undergone such a transformation in
the composition of its business, and should be removed from that Select Sector Index and assigned to a different Select Sector Index.
In the event that the Index Compilation Agent notifies S&P Dow Jones Indices that a Component Stock’s Select Sector Index assignment
should be changed, S&P Dow Jones Indices will disseminate notice of the change following its standard procedure for announcing index
changes and will implement the change in the affected Select Sector Indices on a date no less than one week after the initial dissemination
of information on the sector change to the maximum extent practicable. It is not anticipated that Component Stocks will change sectors
frequently. |
| ● | Component Stocks removed from and
added to the SPX will be deleted from and added to the appropriate Select Sector Index on the same schedule used by S&P Dow Jones
Indices for additions and deletions from the SPX insofar as practicable. |
The S&P 500® Index
The SPX includes a representative sample of
500 companies in leading industries of the U.S. economy. The SPX is intended to provide an indication of the pattern of common stock price
movement. The calculation of the level of the SPX is based on the relative value of the aggregate market value of the common stocks of
500 companies as of a particular time compared to the aggregate average market value of the common stocks of 500 similar companies during
the base period of the years 1941 through 1943.
The SPX includes companies from eleven main
groups: Communication Services; Consumer Discretionary; Consumer Staples; Energy; Financials; Health Care; Industrials; Information Technology;
Real Estate; Materials; and Utilities. S&P Dow Jones Indices LLC (“SPDJI”), the sponsor of the SPX, may from time to time,
in its sole discretion, add companies to, or delete companies from, the SPX to achieve the objectives stated above.
Company additions to the SPX must have an
unadjusted company market capitalization of $14.6 billion or more (an increase from the previous requirement of an unadjusted company
market capitalization of $13.1 billion or more).
SPDJI calculates the SPX by reference to the
prices of the constituent stocks of the SPX without taking account of the value of dividends paid on those stocks. As a result, the return
on the Notes will not reflect the return you would realize if you actually owned the SPX constituent stocks and received the dividends
paid on those stocks.
Computation of the SPX
While SPDJI currently employs the following
methodology to calculate the SPX, no assurance can be given that SPDJI will not modify or change this methodology in a manner that may
affect payments on the Notes.
Historically, the market value of any component
stock of the SPX was calculated as the product of the market price per share and the number of then outstanding shares of such component
stock. In March 2005, SPDJI began shifting the SPX halfway from a market capitalization weighted formula to a float-adjusted formula,
before moving the SPX to full float adjustment on September 16, 2005. SPDJI’s criteria for selecting stocks for the SPX did not
change with the shift to float adjustment. However, the adjustment affects each company’s weight in the SPX.
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DIGITAL RETURN NOTES | PS-16 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Under float adjustment, the share counts used
in calculating the SPX reflect only those shares that are available to investors, not all of a company’s outstanding shares. Float
adjustment excludes shares that are closely held by control groups, other publicly traded companies or government agencies.
In September 2012, all shareholdings representing
more than 5% of a stock’s outstanding shares, other than holdings by “block owners,” were removed from the float for
purposes of calculating the SPX. Generally, these “control holders” will include officers and directors, private equity, venture
capital and special equity firms, other publicly traded companies that hold shares for control, strategic partners, holders of restricted
shares, ESOPs, employee and family trusts, foundations associated with the company, holders of unlisted share classes of stock, government
entities at all levels (other than government retirement/pension funds) and any individual person who controls a 5% or greater stake in
a company as reported in regulatory filings. However, holdings by block owners, such as depositary banks, pension funds, mutual funds
and ETF providers, 401(k) plans of the company, government retirement/pension funds, investment funds of insurance companies, asset managers
and investment funds, independent foundations and savings and investment plans, will ordinarily be considered part of the float.
Treasury stock, stock options, restricted
shares, equity participation units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares held in
a trust to allow investors in countries outside the country of domicile, such as depositary shares and Canadian exchangeable shares, are
normally part of the float unless those shares form a control block. If a company has multiple classes of stock outstanding, shares in
an unlisted or non-traded class are treated as a control block.
For each stock, an investable weight factor
(“IWF”) is calculated by dividing the available float shares by the total shares outstanding. Available float shares are defined
as the total shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum threshold for control
blocks. For example, if a company’s officers and directors hold 3% of the company’s shares, and no other control group holds
5% of the company’s shares, SPDJI 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, SPDJI would assign an IWF of 0.77, reflecting the fact that 23% of the company’s outstanding shares are considered to be
held for control. As of July 31, 2017, companies with multiple share class lines are no longer eligible for inclusion in the SPX. Constituents
of the SPX prior to July 31, 2017 with multiple share class lines will be grandfathered in and continue to be included in the SPX. If
a constituent company of the SPX reorganizes into a multiple share class line structure, that company will remain in the SPX at the discretion
of the S&P Index Committee in order to minimize turnover.
The SPX is calculated using a base-weighted
aggregate methodology. The level of the SPX reflects the total market value of all component stocks relative to the base period of the
years 1941 through 1943. An indexed number is used to represent the results of this calculation in order to make the level easier to work
with and track over time. The actual total market value of the component stocks during the base period of the years 1941 through 1943
has been set to an indexed level of 10. This is often indicated by the notation 1941- 43 = 10. In practice, the daily calculation of the
SPX is computed by dividing the total market value of the component stocks by the “index divisor.” By itself, the index divisor
is an arbitrary number. However, in the context of the calculation of the SPX, it serves as a link to the original base period level of
the SPX. The index divisor keeps the SPX comparable over time and is the manipulation point for all adjustments to the SPX, which is index
maintenance.
Index Maintenance
Index maintenance includes monitoring and
completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments
due to company restructuring or spinoffs. Some corporate actions, such as stock splits and stock dividends, require changes in the common
shares outstanding and the stock prices of the companies in the SPX, and do not require index divisor adjustments.
To prevent the level of the SPX from changing
due to corporate actions, corporate actions which affect the total market value of the SPX require an index divisor adjustment. By adjusting
the index divisor for the change in market value, the level of the SPX remains constant and does not reflect the corporate actions of
individual companies in the SPX. Index divisor adjustments are made after the close of trading and after the calculation of the SPX closing
level.
Changes in a company’s shares outstanding
of 5.00% or more due to mergers, acquisitions, public offerings, tender offers, Dutch auctions, or exchange offers are made as soon as
reasonably possible. Share changes due to mergers or acquisitions of publicly held companies that trade on a major exchange are implemented
when the transaction occurs, even if both of the companies are not in the same headline index, and regardless of the size of the change.
All other changes of 5.00% or more (due to, for example, company stock repurchases, private placements, redemptions, exercise of options,
warrants, conversion of preferred stock, notes, debt, equity 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.
Historical Performance of the XLRE
The following graph sets forth the daily historical
performance of the XLRE in the period from January 2, 2018 through the Strike Date. 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. The horizontal line in
the graph represents the XLRE’s Threshold Value of $21.63, which is 60% of the XLRE’s Starting Value of $36.05, which was
its Closing Market Price on the Strike Date.
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DIGITAL RETURN NOTES | PS-17 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
![](https://content.edgar-online.com/edgar_conv_img/2023/06/14/0001481057-23-004159_image_009.jpg)
This historical data on the XLRE
is not necessarily indicative of the future performance of the XLRE or what the value of the Notes may be. Any historical upward or downward
trend in the level of the XLRE during any period set forth above is not an indication that the level of the XLRE 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 XLRE.
|
DIGITAL RETURN NOTES | PS-18 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Supplement to the Plan of Distribution;
Role of BofAS and Conflicts of Interest
BofAS, a broker-dealer
affiliate of ours, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate as selling
agent in the distribution of the Notes. Accordingly, the offering of the Notes will conform to the requirements of FINRA Rule 5121. BofAS
may not make sales in this offering to any of its discretionary accounts without the prior written
approval of the account holder.
We expect to 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.
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 pricing
supplement, less the indicated underwriting discount, if any. BofAS will sell the Notes to other broker-dealers that will participate
in the offering and that are not affiliated with us, at an agreed discount to the principal amount. Each of those broker-dealers may sell
the Notes to one or more additional broker-dealers. BofAS has informed us that these discounts may vary from dealer to dealer and that
not all dealers will purchase or repurchase the Notes at the same discount. Certain dealers who purchase the Notes for sale to certain
fee-based advisory accounts may forgo some or all of their selling
concessions, fees or commissions. The public offering price for investors purchasing the Notes in these fee-based advisory accounts may
be as low as $997.50 per $1,000 in principal amount of Notes. In addition to the underwriting discount, if any, an affiliate of BofA Finance
will pay a referral fee of up to $2.20 per $1,000 in principal amount of Notes in connection with the distribution of the Notes to other
registered broker-dealers.
BofAS and any of our
other broker-dealer affiliates may use this pricing supplement and the accompanying product supplement,
prospectus supplement and prospectus for offers and sales in secondary market transactions and market-making transactions in the Notes.
However, they are not obligated to engage in such secondary market transactions and/or market-making transactions. These broker- dealer
affiliates may act as principal or agent in these transactions, and any such sales will be made at prices related to prevailing market
conditions at the time of the sale.
At BofAS’s discretion,
for a short, undetermined initial period after the issuance of the Notes, 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 BofAS for the
Notes will be based on then-prevailing market conditions and other
considerations, including the performance of the Underlyings and the remaining term of the Notes. However, none of us, the Guarantor,
BofAS or any of our other affiliates is obligated to purchase your Notes at any price or at any time, and we cannot assure you that any
party will purchase your Notes at a price that equals or exceeds the initial estimated value of the Notes.
Any price that BofAS may pay to repurchase
the Notes will depend upon then prevailing market conditions, the creditworthiness of us and the Guarantor, and transaction costs. At
certain times, this price may be higher than or lower than the initial estimated value of the Notes.
European Economic Area and United
Kingdom
None of this pricing
supplement, the accompanying product supplement, the accompanying prospectus or the accompanying prospectus supplement is a prospectus
for the purposes of the Prospectus Regulation (as defined below). This pricing supplement, the accompanying product supplement, the accompanying
prospectus and the accompanying prospectus supplement have been prepared on the basis that any offer of Notes
in any Member State of the European Economic Area (the “EEA”) or in the United Kingdom (each,
a “Relevant State”) will only be made to a legal entity which is a qualified investor under the Prospectus Regulation (“Qualified
Investors”). Accordingly any person making or intending to make an offer in that Relevant State of Notes which are the subject of
the offering contemplated in this pricing supplement, the accompanying product supplement, the accompanying prospectus and the accompanying
prospectus supplement may only do so with respect to Qualified Investors. Neither BofA Finance nor BAC has authorized, nor does it authorize,
the making of any offer of Notes other than to Qualified Investors. The expression “Prospectus Regulation” means Regulation
(EU) 2017/1129.
PROHIBITION
OF SALES TO EEA AND UNITED KINGDOM RETAIL INVESTORS – The Notes
are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any
retail investor in the EEA or in the United Kingdom. For these purposes: (a) a retail investor means a person who is one (or more) of:
(i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); or (ii) a customer
within the meaning of Directive (EU) 2016/97 (the Insurance Distribution Directive) where that customer would not qualify as a professional
client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation;
and (b) the expression “offer” includes the communication in any form and by any means of sufficient information on the terms
of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes. Consequently no
key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”) for offering or selling
the Notes or otherwise making them available to retail investors in the EEA or in the United Kingdom has been prepared and therefore offering
or selling the
|
DIGITAL RETURN NOTES | PS-19 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Notes or otherwise making them available to any retail investor in
the EEA or in the United Kingdom may be unlawful under the PRIIPs Regulation.
United
Kingdom
The communication of this pricing
supplement, the accompanying product supplement, the accompanying prospectus supplement, the accompanying prospectus and any other document
or materials relating to the issue of the Notes offered hereby is not being made, and such documents and/or materials have not been approved,
by an authorized person for the purposes of section 21 of the United Kingdom’s Financial Services and Markets Act 2000, as amended
(the “FSMA”). Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the
general public in the United Kingdom. The communication of such documents and/or materials as a financial promotion is only being made
to those persons in the United Kingdom who have professional experience in matters relating to investments and who fall within the definition
of investment professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005,
as amended (the “Financial Promotion Order”)), or who fall within Article 49(2)(a) to (d) of the Financial Promotion Order,
or who are any other persons to whom it may otherwise lawfully be made under the Financial Promotion Order (all such persons together
being referred to as “relevant persons”). In the United Kingdom, the Notes offered hereby are only available to, and any investment
or investment activity to which this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement and
the accompanying prospectus relates will be engaged in only with, relevant persons. Any person in the United Kingdom that is not a relevant
person should not act or rely on this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement
or the accompanying prospectus or any of their contents.
Any invitation or inducement to engage
in investment activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the Notes may only be communicated
or caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to BofA Finance, as Issuer, or BAC, as
Guarantor.
All applicable provisions of the FSMA
must be complied with in respect to anything done by any person in relation to the Notes in, from or otherwise involving the United Kingdom.
|
DIGITAL RETURN NOTES | PS-20 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Structuring
the Notes
The Notes are our debt securities,
the return on which is linked to the performance of the Underlyings. The related guarantee is BAC’s obligation. 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,
which we refer to in this pricing supplement as BAC’s internal funding rate, that is more favorable to BAC than the rate that it
might pay for a conventional fixed or floating rate debt security. 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.
In order to meet our payment obligations
on the Notes, 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 based
upon terms provided by 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 Underlyings, the tenor of the Notes and 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 hedging-related charges, reflecting the costs associated with, and our affiliates’ profit earned from,
these hedging arrangements. Since hedging entails risk and may be influenced by unpredictable market forces, actual profits or losses
from these hedging transactions may be more or less than any expected amounts.
For further information, see “Risk
Factors” beginning on page PS-6 above and “Supplemental Use of Proceeds” on page PS-20 of the accompanying product supplement.
Validity of the Notes
In the opinion of McGuireWoods LLP,
as counsel to BofA Finance, as issuer, and BAC, as guarantor, when the trustee has made the appropriate entries or notations on Schedule
1 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 Notes have been delivered against payment therefor
as contemplated in this pricing supplement and the related prospectus, prospectus supplement and product supplement, all in accordance
with the provisions of the indenture governing the Notes and the related guarantee, 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 pricing supplement and is limited to the Delaware General Corporation Law and the Delaware Limited Liability Company
Act (including the statutory provisions, all applicable provisions of the Delaware Constitution and reported judicial decisions interpreting
either of the foregoing) and the laws of the State of New York 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 opinion letter of McGuireWoods LLP
dated December 8, 2022, which has been filed as an exhibit to the Registration Statement (File Nos. 333-268718 and 333-268718-01)
of BAC and BofA Finance, filed with the SEC on December 8, 2022.
|
DIGITAL RETURN NOTES | PS-21 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
U.S. Federal Income Tax Summary
The following summary of the material U.S. federal
income and estate tax considerations of the acquisition, ownership, and disposition of the Notes supplements, and to the extent inconsistent
supersedes, the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus and is not exhaustive
of all possible tax considerations. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”),
regulations promulgated under the Code by the U.S. Treasury Department (“Treasury”) (including proposed and temporary regulations),
rulings, current administrative interpretations and official pronouncements of the IRS, and judicial decisions, all as currently in effect
and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that
the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. This
summary does not include any description of the tax laws of any state or local governments, or of any foreign government, that may be
applicable to a particular holder.
Although the Notes are issued by us, they will
be treated as if they were issued by BAC for U.S. federal income tax purposes. Accordingly throughout this tax discussion, references
to “we,” “our” or “us” are generally to BAC unless the context requires otherwise.
This summary is directed solely to U.S. Holders
and Non-U.S. Holders that, except as otherwise specifically noted, will purchase the Notes upon original issuance and will hold the Notes
as capital assets within the meaning of Section 1221 of the Code, which generally means property held for investment, and that are not
excluded from the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus.
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.
General
Although there is no statutory, judicial,
or administrative authority directly addressing the characterization of the Notes, in the opinion of our
counsel, Sidley Austin LLP, and based on certain
factual representations received from us, the Notes should be treated as single financial contracts with respect to the Underlyings and
under the terms of the Notes, we and every investor in the Notes agree, in the absence of an administrative determination or judicial
ruling to the contrary, to treat the Notes in accordance with such characterization. This discussion assumes that the Notes constitute
single financial contracts with respect to the Underlyings for U.S. federal income tax purposes. If the Notes did not constitute single
financial contracts, the tax consequences described below would be materially different.
This characterization of the Notes is not binding
on the IRS or the courts. No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or
any similar instruments for U.S. federal income tax purposes, and no ruling is being requested from the IRS with respect to their proper
characterization and treatment. Due to the absence of authorities on point, significant aspects of the U.S. federal income tax consequences
of an investment in the Notes are not certain, and no assurance can be given that the IRS or any court will agree with the characterization
and tax treatment described in this pricing supplement. Accordingly, you are urged to consult your tax advisor regarding all aspects of
the U.S. federal income tax consequences of an investment in the Notes, including possible alternative characterizations.
Unless otherwise stated, the following discussion
is based on the characterization described above. The discussion in this section assumes that there is a significant possibility of a
significant loss of principal on an investment in the Notes.
We will not attempt to ascertain whether the issuer
of an Underlying or the issuer of any component stock included in an Underlying that is an index would be treated as a “passive
foreign investment company” (“PFIC”), within the meaning of Section 1297 of the Code, or a United States real property
holding corporation, within the meaning of Section 897(c) of the Code. If the issuer of an Underlying or the issuer of one or more stocks
included in an Underlying that is an index were so treated, certain adverse U.S. federal income tax consequences could possibly apply
to a holder of the Notes. You should refer to information filed with the SEC by the issuer of an Underlying or the issuers of the component
stocks included in an Underlying that is an index and consult your tax advisor regarding the possible consequences to you, if any, if
the issuer of an Underlying or the issuer of any component stock included in an Underlying that is an index is or becomes a PFIC or is
or becomes a United States real property holding corporation.
U.S. Holders
Upon receipt of a cash payment at maturity or
upon a sale or exchange of the Notes prior to maturity, a U.S. Holder generally will recognize capital gain or loss equal to the difference
between the amount realized and the U.S. Holder’s tax basis in the Notes. A U.S. Holder’s tax basis in the Notes will equal
the amount paid by that holder to acquire them. Subject to the discussion below concerning the possible application of the “constructive
ownership” rules of Section 1260 of the Code, this capital gain or loss generally will be long-term capital gain or loss if the
U.S. Holder held the Notes for more than one year. The deductibility of capital losses is subject to limitations.
|
DIGITAL RETURN NOTES | PS-22 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Possible Application of Section 1260 of the Code.
Since some Underlyings are the type of financial asset described under Section 1260 of the Code (including, among others, any equity interest
in pass-through entities such as exchange traded funds, regulated investment companies, real estate investment trusts, partnerships, and
passive foreign investment companies, each a “Section 1260 Financial Asset”), while the matter is not entirely clear, there
may exist a risk that an investment in the Notes will be treated, in whole or in part, as a “constructive ownership transaction”
to which Section 1260 of the Code applies. If Section 1260 of the Code applies, all or a portion of any long-term capital gain recognized
by a U.S. Holder in respect of the Notes will be recharacterized as ordinary income (the “Excess Gain”). In addition, an interest
charge will also apply to any deemed underpayment of tax in respect of any Excess Gain to the extent such gain would have resulted in
gross income inclusion for the U.S. Holder in taxable years prior to the taxable year of the sale, exchange, or settlement (assuming such
income accrued at a constant rate equal to the applicable federal rate as of the date of sale, exchange, or settlement).
If an investment in the Notes is treated as a
constructive ownership transaction, it is not clear to what extent any long-term capital gain of a U.S. Holder in respect of the Notes
will be recharacterized as ordinary income. It is possible, for example, that the amount of the Excess Gain (if any) that would be recharacterized
as ordinary income in respect of the Notes will equal the excess of (i) any long-term capital gain recognized by the U.S. Holder in respect
of the Notes and attributable to Section 1260 Financial Assets, over (ii) the “net underlying long-term capital gain” (as
defined in Section 1260 of the Code) such U.S. Holder would have had if such U.S. Holder had acquired an amount of the corresponding Section
1260 Financial Assets at fair market value on the original issue date for an amount equal to the portion of the issue price of the Notes
attributable to the corresponding Section 1260 Financial Assets and sold such amount of Section 1260 Financial Assets at maturity or upon
sale or exchange of the Notes at fair market value. Unless otherwise established by clear and convincing evidence, the net underlying
long-term capital gain is treated as zero and therefore it is possible that all long-term capital gain recognized by a U.S. Holder in
respect of the Notes will be recharacterized as ordinary income if Section 1260 of the Code applies to an investment in the Notes. U.S.
Holders should consult their tax advisors regarding the potential application of Section 1260 of the Code to an investment in the Notes.
As described below, the IRS, as indicated in Notice
2008-2 (the “Notice”), is considering whether Section 1260 of the Code generally applies or should apply to the Notes, including
in situations where the Underlyings are not the type of financial asset described under Section 1260 of the Code.
Alternative Tax Treatments. Due to the
absence of authorities that directly address the proper tax treatment of the Notes, prospective investors are urged to consult their tax
advisors regarding all possible alternative tax treatments of an investment in the Notes. In particular, the IRS could seek to subject
the Notes to the Treasury regulations governing contingent payment debt instruments. If the IRS were successful in that regard, the timing
and character of income on the Notes would be affected significantly. Among other things, a U.S. Holder would be required to accrue original
issue discount every year at a “comparable yield” determined at the time of issuance. In addition, any gain realized by a
U.S. Holder at maturity or upon a sale or exchange of the Notes generally would be treated as ordinary income, and any loss realized at
maturity or upon a sale or exchange of the Notes generally would be treated as ordinary loss to the extent of the U.S. Holder’s
prior accruals of original issue discount, and as capital loss thereafter.
The Notice sought comments from the public on
the taxation of financial instruments currently taxed as “prepaid forward contracts.” This Notice addresses instruments such
as the Notes. According to the Notice, the IRS and Treasury are considering whether a holder of an instrument such as the Notes should
be required to accrue ordinary income on a current basis, regardless of whether any payments are made prior to maturity. It is not possible
to determine what guidance the IRS and Treasury will ultimately issue, if any. Any such future guidance may affect the amount, timing
and character of income, gain, or loss in respect of the Notes, possibly with retroactive effect.
The IRS and Treasury are also considering additional
issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether foreign holders
of such instruments should be subject to withholding tax on any deemed income accruals, whether Section 1260 of the Code, concerning certain
“constructive ownership transactions,” generally applies or should generally apply to such instruments, and whether any of
these determinations depend on the nature of the underlying asset.
In addition, proposed Treasury regulations require
the accrual of income on a current basis for contingent payments made under certain notional principal contracts. The preamble to the
regulations states that the “wait and see” method of accounting does not properly reflect the economic accrual of income on
those contracts, and requires current accrual of income for some contracts already in existence. While the proposed regulations do not
apply to prepaid forward contracts, the preamble to the proposed regulations expresses the view that similar timing issues exist in the
case of prepaid forward contracts. If the IRS or Treasury publishes future guidance requiring current economic accrual for contingent
payments on prepaid forward contracts, it is possible that you could be required to accrue income over the term of the Notes.
Because of the absence of authority regarding
the appropriate tax characterization of the Notes, it is also possible that the IRS could seek to characterize the Notes in a manner that
results in tax consequences that are different from those described above. For example, the IRS could possibly assert that any gain or
loss that a holder may recognize at maturity or upon the sale or exchange of the Notes should be treated as ordinary gain or loss.
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DIGITAL RETURN NOTES | PS-23 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Because one Underlying is an index that periodically
rebalances, it is possible that the Notes could be treated as a series of single financial contracts, each of which matures on the next
rebalancing date. If the Notes were properly characterized in such a manner, a U.S. Holder would be treated as disposing of the Notes
on each rebalancing date in return for new Notes that mature on the next rebalancing date, and a U.S. Holder would accordingly likely
recognize capital gain or loss on each rebalancing date equal to the difference between the holder’s tax basis in the Notes (which
would be adjusted to take into account any prior recognition of gain or loss) and the fair market value of the Notes on such date.
Non-U.S. Holders
Except as discussed below, a Non-U.S. Holder generally
will not be subject to U.S. federal income or withholding tax for amounts paid in respect of the Notes provided that the Non-U.S. Holder
complies with applicable certification requirements and that the payment is not effectively connected with the conduct by the Non-U.S.
Holder of a U.S. trade or business. Notwithstanding the foregoing, gain from the sale or exchange of the Notes or their settlement at
maturity may be subject to U.S. federal income tax if that Non-U.S. Holder is a non-resident alien individual and is present in the U.S.
for 183 days or more during the taxable year of the sale, exchange or settlement and certain other conditions are satisfied.
If a Non-U.S. Holder of the Notes is engaged in
the conduct of a trade or business within the U.S. and if gain realized on the settlement at maturity, or upon sale or exchange of the
Notes, is effectively connected with the conduct of such trade or business (and, if certain tax treaties apply, is attributable to a permanent
establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder, although exempt from U.S. federal withholding tax,
generally will be subject to U.S. federal income tax on such gain on a net income basis in the same manner as if it were a U.S. Holder.
Such Non-U.S. Holders should read the material under the heading “—U.S. Holders,” for a description of the U.S. federal
income tax consequences of acquiring, owning, and disposing of the Notes. In addition, if such Non-U.S. Holder is a foreign corporation,
it may also be subject to a branch profits tax equal to 30% (or such lower rate provided by any applicable tax treaty) of a portion of
its earnings and profits for the taxable year that are effectively connected with its conduct of a trade or business in the U.S., subject
to certain adjustments.
A “dividend equivalent” payment is
treated as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding tax
if paid to a Non-U.S. Holder. Under Treasury regulations, payments (including deemed payments) with respect to equity-linked instruments
(“ELIs”) that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an
interest in an “underlying security,” which is generally any interest in an entity taxable as a corporation for U.S. federal
income tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend. However, IRS guidance provides
that withholding on dividend equivalent payments will not apply to specified ELIs that are not delta-one instruments and that are issued
before January 1, 2025. Based on our determination that the Notes are not delta-one instruments, Non-U.S. Holders should not be subject
to withholding on dividend equivalent payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed
reissued for U.S. federal income tax purposes upon the occurrence of certain events affecting the Underlyings or the Notes, and following
such occurrence the Notes could be treated as subject to withholding on dividend equivalent payments. Non-U.S. Holders that enter, or
have entered, into other transactions in respect of the Underlyings or the Notes should consult their tax advisors as to the application
of the dividend equivalent withholding tax in the context of the Notes and their other transactions. If any payments are treated as dividend
equivalents subject to withholding, we (or the applicable paying agent) would be entitled to withhold taxes without being required to
pay any additional amounts with respect to amounts so withheld.
As discussed above, alternative characterizations
of the Notes for U.S. federal income tax purposes are possible. Should an alternative characterization, by reason of change or clarification
of the law, by regulation or otherwise, cause payments as to the Notes to become subject to withholding tax, tax will be withheld at the
applicable statutory rate. As discussed above, the IRS has indicated in the Notice that it is considering whether income in respect of
instruments such as the Notes should be subject to withholding tax. Prospective Non-U.S. Holders should consult their own tax advisors
regarding the tax consequences of such alternative characterizations.
U.S. Federal Estate Tax. Under current
law, while the matter is not entirely clear, individual Non-U.S. Holders, and entities whose property is potentially includible in those
individuals’ gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect
to which the individual has retained certain interests or powers), should note that, absent an applicable treaty benefit, a Note is likely
to be treated as U.S. situs property, subject to U.S. federal estate tax. These individuals and entities should consult their own tax
advisors regarding the U.S. federal estate tax consequences of investing in a Note.
Backup Withholding and Information Reporting
Please see the discussion under “U.S. Federal
Income Tax Considerations — General — Backup Withholding and Information Reporting” in the accompanying prospectus for
a description of the applicability of the backup withholding and information reporting rules to payments made on the Notes.
|
DIGITAL RETURN NOTES | PS-24 |
Digital Return Notes Linked to the Least Performing of the Russell 2000® Index, the SPDR® S&P® Bank ETF and the Real Estate Select Sector SPDR® Fund
Where You Can Find More Information
The terms and risks of the
Notes are contained in this pricing supplement and in the following related product supplement, prospectus supplement and prospectus,
which can be accessed at the following links:
This pricing supplement and the accompanying product supplement,
prospectus supplement and 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 BofAS by calling 1-800-294-1322. Before you invest, you should read this pricing supplement
and the accompanying product supplement, prospectus supplement and prospectus 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
this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus. Certain terms used but not defined
in this pricing supplement have the meanings set forth in the accompanying product supplement or prospectus 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.
The Notes are our senior debt securities. Any 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 our other unsecured and
unsubordinated obligations, except obligations that are subject to any priorities or preferences by law. The related guarantee will rank
equally in right of payment with all of BAC’s other unsecured and unsubordinated obligations, except obligations that are subject
to any priorities or preferences by law, and senior to its subordinated obligations. Any payments due on the Notes, including any repayment
of the principal amount, will be subject to the credit risk of BofA Finance, as Issuer, and BAC, as Guarantor.
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DIGITAL RETURN NOTES | PS-25 |
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