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ISSUER FREE WRITING PROSPECTUS
Filed Pursuant to Rule 433
Registration Statement No. 333-259205
Dated October 12, 2021
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Royal Bank of Canada Trigger Autocallable Contingent Yield Notes
$[●] Notes Linked to a Basket of Two Exchange Traded Funds due on or about October 19, 2023
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Investment Description
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Trigger Autocallable Contingent Yield Notes (the “Notes”) are unsecured and unsubordinated debt securities issued by Royal Bank of Canada linked to the performance of an equally weighted basket (the
“Basket”) consisting of the two exchange traded funds set forth below (the “Basket Components”). We will pay a quarterly Contingent Coupon payment if the Observation Level (as defined below) of the Basket on the applicable Coupon Observation
Date is greater than or equal to the Coupon Barrier. Otherwise, no coupon will be paid for that quarter. We will automatically call the Notes early if the Observation Level of the Basket on any quarterly Call Observation Date (beginning 6
months after the Trade Date) is greater than or equal to the Initial Basket Level. If the Notes are called, we will pay you the principal amount of your Notes plus the Contingent Coupon for that quarter, and no further amounts will be owed to
you under the Notes. If the Notes are not called prior to maturity and the Final Basket Level is greater than or equal to the Downside Threshold (which is the same level as the Coupon Barrier), we will pay you a cash payment at maturity equal
to the principal amount of your Notes plus the Contingent Coupon for the final quarter. However, if the Final Basket Level is less than the Downside Threshold, we will pay you less than the full principal amount, if anything, resulting in a
loss on your initial investment that is proportionate to the negative performance of the Basket over the term of the Notes, and you may lose up to 100% of your initial investment.
Investing in the Notes involves significant risks. You may lose some or all of your principal amount. The contingent repayment of principal only applies if you hold the Notes
until maturity. Generally, the higher the Contingent Coupon Rate on the Notes, the greater the risk of loss on the Notes. Any payment on the Notes, including any repayment of principal, is subject to our creditworthiness. If we were to default
on our payment obligations, you may not receive any amounts owed to you under the Notes and you could lose your entire investment. The Notes will not be listed on any securities exchange. The Notes are not subject to conversion into our common
shares under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act.
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Features
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❑
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Contingent Coupon — We will pay a quarterly Contingent Coupon payment if the Observation Level of the Basket on
the applicable Coupon Observation Date is greater than or equal to the Coupon Barrier. Otherwise, no coupon will be paid for the quarter.
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❑
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Automatically Callable — We will automatically call the Notes and pay you the principal amount of your Notes
plus the Contingent Coupon otherwise due for the applicable quarter if the Observation Level of the Basket on any quarterly Call Observation Date (beginning 6 months after the Trade Date) is greater than or equal to the Initial
Basket Level. If the Notes are not called, investors will have the potential for downside equity market risk at maturity.
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❑
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Contingent Repayment of Principal at Maturity — If by maturity the Notes have not been called and the Final
Basket Level is not below the Downside Threshold on the Final Valuation Date, we will repay your principal amount per Note at maturity. However, if the Final Basket Level is below the Downside Threshold on the Final Valuation
Date, we will pay less than the principal amount, if anything, resulting in a loss on your initial investment that is proportionate to the decline in the value of the Basket from the Trade Date to the Final Valuation Date. The
contingent repayment of principal only applies if you hold the Notes until maturity. Any payment on the Notes, including any repayment of principal, is subject to our creditworthiness.
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Key Dates1
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Trade Date
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October 15, 2021
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Settlement Date
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October 20, 2021
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Coupon Observation Dates2
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Quarterly (see page 6)
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Call Observation Dates2
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Quarterly (beginning in 6 months) (see page 6)
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Final Valuation Date2
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October 16, 2023
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Maturity Date2
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October 19, 2023
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1
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Expected. If we make any change to the expected Trade Date and settlement date, the Coupon Observation Dates, the Call
Observation Dates, the Final Valuation Date and/or the maturity date will be changed so that the stated term of the Notes remains approximately the same.
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2
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Subject to postponement if a market disruption event occurs, as described under “General Terms of the Notes—Payment at Maturity” in the
accompanying product prospectus supplement no. UBS-TACYN-1.
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NOTICE TO INVESTORS: THE NOTES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. WE ARE NOT NECESSARILY OBLIGATED TO
REPAY THE FULL PRINCIPAL AMOUNT OF THE NOTES AT MATURITY, AND THE NOTES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE BASKET. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING ONE OF OUR DEBT OBLIGATIONS. YOU
SHOULD NOT PURCHASE THE NOTES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE NOTES.
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YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER ‘‘KEY RISKS’’ BEGINNING ON PAGE 7, THE RISKS DESCRIBED UNDER “RISK FACTORS” BEGINNING ON PAGE PS-4 OF THE PRODUCT PROSPECTUS SUPPLEMENT NO.
UBS-TACYN-1 AND UNDER ‘‘RISK FACTORS’’ BEGINNING ON PAGE S-2 OF THE PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY NOTES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE
RETURN ON, YOUR NOTES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL INVESTMENT IN THE NOTES.
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Note Offering
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We are offering Trigger Autocallable Contingent Yield Notes linked to an equally weighted basket consisting of the Energy Select Sector SPDR® Fund and the Financial
Select Sector SPDR® Fund. The Notes will be issued in minimum denominations of $10.00, and integral multiples of $10.00 in excess thereof, with a minimum investment of $1,000.
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Underlying Basket
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Contingent Coupon Rate
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Initial Basket
Level
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Downside Threshold
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Coupon Barrier
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CUSIP
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ISIN
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A basket consisting of two exchange traded funds
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[7.00 to 7.90]% per annum (to be determined on the Trade Date)
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100
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75.00, which is 75.00% of the Initial Basket Level
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75.00, which is 75.00% of the Initial Basket Level
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78014U632
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US78014U6322
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See “Additional Information About Royal Bank of Canada and the Notes” in this free writing prospectus. The Notes will have the terms specified in the prospectus dated September 14, 2021, the prospectus supplement dated September 14, 2021,
product prospectus supplement no. UBS-TACYN-1 dated September 27, 2021 and this free writing prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Notes or passed upon the accuracy or the adequacy of this free writing prospectus or
the accompanying prospectus, prospectus supplement and product prospectus supplement no. UBS-TACYN-1. Any representation to the contrary is a criminal offense.
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Price to Public
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Fees and Commissions(1)
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Proceeds to Us
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Offering of the Notes
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Total
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Per Note
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Total
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Per Note
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Total
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Per Note
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Notes linked to an equally weighted basket consisting of
the Energy Select Sector SPDR® Fund (“XLE”) and the
Financial Select Sector SPDR® Fund (“XLF”)
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$
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$10.00
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$
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$0.15
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$
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$9.85
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(1) UBS Financial Services Inc., which we refer to as UBS, will receive a commission that will depend on market conditions on the Trade Date. In no event will the commission received by UBS exceed
$0.15 per $10 in principal amount of the Notes. See “Supplemental Plan of Distribution (Conflicts of Interest)” below.
We expect that the initial estimated value of the Notes as of the Trade Date will be between $9.29 and $9.79 per $10 in principal amount, and will be less than the price to public.
The pricing supplement relating to the Notes will set forth our estimate of the initial value of the Notes as of the Trade Date. The actual value of the Notes at any time will reflect many factors, cannot be predicted with accuracy, and may be
less than this amount. We describe our determination of the initial estimated value under “Key Risks,” “Supplemental Plan of Distribution (Conflicts of Interest)” and “Structuring the Notes” below.
The Notes will not constitute deposits insured under the Canada Deposit Insurance Corporation Act or by the United States Federal Deposit Insurance Corporation or any other Canadian or United
States government agency or instrumentality.
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UBS Financial Services Inc.
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RBC Capital Markets, LLC
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Additional Information About Royal Bank of Canada and the Notes
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Royal Bank of Canada has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or SEC, for the offering to which this free writing
prospectus relates. Before you invest, you should read the prospectus in that registration statement and the other documents relating to this offering that Royal Bank of Canada has filed with the SEC for more complete information about Royal
Bank of Canada and this offering. You may obtain these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, Royal Bank of Canada, any agent or any dealer participating in this offering will arrange
to send you the prospectus, the prospectus supplement, product prospectus supplement no. UBS-TACYN-1 and this free writing prospectus if you so request by calling toll-free 1-877-688-2301.
You may revoke your offer to purchase the Notes at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the
terms of, or reject any offer to purchase, the Notes prior to their issuance. In the event of any changes to the terms of the Notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also
choose to reject such changes, in which case we may reject your offer to purchase.
You should read this free writing prospectus together with the prospectus dated September 14, 2021, as supplemented by the prospectus supplement dated September 14, 2021,
relating to our Series I medium-term notes of which these Notes are a part, and the more detailed information contained in product prospectus supplement no. UBS-TACYN-1 dated September 27, 2021. This free writing prospectus, together with the documents listed below, contains the terms of the Notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including
preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things,
the matters set forth in “Risk Factors” in the accompanying product prospectus supplement no. UBS-TACYN-1, as the Notes involve risks not associated with conventional debt securities.
If the terms discussed in this free writing prospectus differ from those discussed in the product prospectus supplement no. UBS-TACYN-1, the prospectus supplement, or the
prospectus, the terms discussed herein will control.
You may access these on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filing for the relevant date on the SEC
website):
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♦
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Product prospectus supplement no. UBS-TACYN-1 dated September 27, 2021:
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♦
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Prospectus supplement dated September 14, 2021:
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♦
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Prospectus dated September 14, 2021:
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As used in this free writing prospectus, “we,” “us” or “our” refers to Royal Bank of Canada.
2
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Investor Suitability
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The Notes may be suitable for you if, among other considerations:
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You fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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You can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that may have the same downside market risk as an investment in the Basket Components.
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You believe the Observation Level of the Basket will be greater than or equal to the Coupon Barrier on most or all of the Coupon Observation Dates (including the Final Valuation Date).
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You are willing to make an investment whose return is limited to the applicable Contingent Coupon payments regardless of any potential appreciation of the Basket, which could be significant.
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You do not seek guaranteed current income from this investment and are willing to forgo the dividends paid on the equity securities held by the Basket Components.
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You can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations of the Basket.
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You are willing to invest in Notes for which there may be little or no secondary market and you accept that the secondary market will depend in large part on the price, if any, at which RBC Capital
Markets, LLC, which we refer to as “RBCCM,” is willing to purchase the Notes.
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You would be willing to invest in the Notes if the Contingent Coupon Rate is set to the low end of the range set forth on the cover page of this free writing prospectus. (The actual Contingent Coupon Rate
will be determined on the Trade Date.)
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You understand and accept the risks associated with the Basket Components.
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You are willing to invest in securities that may be called early and you are otherwise willing to hold such securities to maturity.
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♦
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You are willing to assume our credit risk for all payments under the Notes, and understand that if we default on our obligations, you may not receive any amounts due to
you, including any repayment of principal.
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The Notes may not be suitable for you if, among other considerations:
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You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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You cannot tolerate a loss on your investment and require an investment designed to provide a full return of principal at maturity.
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You are not willing to make an investment that may have the same downside market risk as an investment in the Basket Components.
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You believe that the value of the Basket will decline during the term of the Notes and is likely to close below the Coupon Barrier on most or all of the Coupon Observation Dates and below the Downside
Threshold on the Final Valuation Date.
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You seek an investment that participates in the full appreciation in the value of the Basket or that has unlimited return potential.
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You seek guaranteed current income from this investment or prefer to receive the dividends paid on the securities held by the Basket Components.
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You cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations of the Basket.
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You would be unwilling to invest in the Notes if the Contingent Coupon Rate is set to the low end of the range set forth on the cover page of this free writing prospectus. (The actual Contingent Coupon
Rate will be determined on the Trade Date.)
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You do not understand or accept the risks associated with the Basket Components.
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You are unable or unwilling to hold securities that may be called early, or you are otherwise unable or unwilling to hold such securities to maturity, or you seek an investment for which there will be an
active secondary market for the Notes.
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You are not willing to assume our credit risk for all payments under the Notes, including any repayment of principal.
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The suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable investment for you will depend on your individual circumstances, and you
should reach an investment decision only after you and your investment, legal, tax, accounting, and other advisers have carefully considered the suitability of an investment in the Notes in light of your particular circumstances. You should
also review carefully the “Key Risks” below for risks related to an investment in the Notes. In addition, you should review carefully the section below, “Information About the Basket,” for more information about the Basket Components.
3
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Indicative Terms of the Notes1
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Issuer:
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Royal Bank of Canada
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Principal
Amount per
Note:
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$10.00 per Note (subject to a minimum purchase of 100 Notes ($1,000))
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Term:2
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Approximately 2 years, if not previously called
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Basket:
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An equally weighted basket consisting of two exchange traded funds: the Energy Select Sector SPDR® Fund (50%) and the Financial Select Sector SPDR®
Fund (50%)
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Contingent
Coupon:
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If the Observation Level of the Basket is greater than or equal to the Coupon Barrier on any Coupon Observation Date, we will pay you the Contingent Coupon
applicable to that Coupon Observation Date.
If the Observation Level of the Basket is less than the Coupon Barrier on any Coupon Observation Date, the Contingent Coupon applicable to that Coupon Observation Date will not accrue
or be payable, and we will not make any payment to you on the relevant Coupon Payment Date.
The Contingent Coupon will be a fixed amount based upon equal quarterly installments at the Contingent Coupon Rate, which will be the per annum rate set forth below.
Contingent Coupon payments on the Notes are not guaranteed. We will not pay you the Contingent Coupon for any Coupon Observation Date on which the Observation Level
of the Basket is less than the Coupon Barrier.
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Contingent
Coupon Rate:
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[7.00 to 7.90]% per annum (to be determined on the Trade Date)
Each Contingent Coupon will be paid to the holders of record of the Notes at the close of business on the date that is one business day prior to that Coupon Payment
Date.
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Automatic Call
Feature:
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The Notes will be called automatically if the Observation Level of the Basket on any Call Observation Date (beginning 6 months after the Trade Date and set forth on
the next page) is greater than or equal to the Initial Basket Level.
If the Notes are called, we will pay you on the corresponding Coupon Payment Date (which will be the “Call Settlement Date”) a cash payment equal to the principal amount plus the applicable Contingent
Coupon payment otherwise due on that day (the “Call Settlement Amount”). No further amounts will be owed to you under the Notes.
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Payment at
Maturity:
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If the Notes are not called and the Final Basket Level is greater than or equal to the Downside Threshold and the Coupon Barrier, we will pay you a cash payment per
Note on the maturity date equal to $10.00 plus the Contingent Coupon otherwise due on the maturity date.
If the Notes are not called and the Final Basket Level is less than the Downside Threshold, we will pay you a cash payment on the maturity date that is less than the
principal amount, if anything, resulting in a loss on your initial investment that is proportionate to the negative Underlying Return, equal to:
$10.00 + ($10.00 × Underlying Return)
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Underlying
Return:
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Final Basket Level – Initial Basket Level
Initial Basket Level |
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Coupon Barrier:
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75.00, which is equal to 75.00% of the Initial Basket Level.
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Downside
Threshold:
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75.00, which is equal to 75.00% of the Initial Basket Level.
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Initial Basket
Level:
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Set to 100 on the Trade Date.
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Final Basket
Level:
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The Observation Level on the Final Valuation Date.
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Observation
Level:
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The “Observation Level” will be calculated based on the weighted returns of the Basket Components as of the applicable Coupon Observation Date, and will be equal to:
100 x [1 + (1/2 of the Reference Return for XLE) + (1/2 of the Reference Return for XLF)]
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Reference
Return:
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For each Basket Component, the Reference Return will be:
Observation Price – Initial Price
Initial Price
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Initial Price:
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The closing price of the applicable Basket Component on the Trade Date. The Initial Price of each Basket Component will be set forth in the final pricing supplement
relating to the Notes.
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Observation
Price:
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The closing price of the Basket Component on the applicable Coupon Observation Date, subject to adjustment and/or postponement as set forth in the product prospectus supplement.
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Closing Price:
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On any trading day, the last reported sale price of the applicable Basket Component on the principal national securities exchange in the U.S. on which it is listed for trading, as determined by the
calculation agent.
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1 Terms used in this free writing prospectus, but not defined herein, will have the meanings ascribed to them in the product prospectus supplement.
2 If we make any change to the expected Trade Date and settlement date, the Coupon Observation Dates and the maturity date may be changed to ensure that the stated term of the
Notes remains approximately the same.
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4
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Investment Timeline
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Trade Date:
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The Initial Basket Level is set to 100. The Contingent Coupon Rate is set.
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Quarterly:
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If the Observation Level of the Basket is greater than or equal to the Coupon Barrier on any Coupon Observation Date, we will pay you a Contingent Coupon payment on the
applicable Coupon Payment Date.
The Notes will be called if the Observation Level of the Basket on any Call Observation Date (beginning 6 months after the Trade Date) is greater than or equal to the
Initial Basket Level. If the Notes are called, we will pay you a cash payment per Note equal to $10 plus the Contingent Coupon otherwise due on that date.
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Maturity Date:
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The Final Basket Level is observed on the Final Valuation Date.
If the Notes have not been called and the Final Basket Level is greater than or equal to the Downside Threshold (and the Coupon Barrier), we will repay the principal
amount equal to $10 per Note plus the Contingent Coupon otherwise due on the maturity date.
If the Notes have not been called and the Final Basket Level is less than the Downside Threshold, we will pay less than the principal amount, if anything, resulting in
a loss on your initial investment proportionate to the decline in the value of the Basket, for an amount equal to:
$10 + ($10 × Underlying Return) per Note
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INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE NOTES, INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO OUR
CREDITWORTHINESS. IF WE WERE TO DEFAULT ON OUR PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
5
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Coupon Observation Dates and Coupon Payment Dates*
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Coupon Observation Dates
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Coupon Payment Dates
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January 18, 2022
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January 20, 2022
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April 18, 2022(1)
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April 20, 2022(2)
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July 15, 2022(1)
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July 19, 2022(2)
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October 17, 2022(1)
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October 19, 2022(2)
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January 17, 2023(1)
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January 19, 2023(2)
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April 17, 2023(1)
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April 19, 2023(2)
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July 17, 2023(1)
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July 19, 2023(2)
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October 16, 2023(3)
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October 19, 2023(4)
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These Coupon Observation Dates are also Call Observation Dates.
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These Coupon Payment Dates are also Call Settlement Dates.
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This is also the Final Valuation Date.
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This is also the maturity date.
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* Expected. Subject to postponement if a market disruption event occurs as described under “General Terms of the Notes—Payment at Maturity” in the accompanying product prospectus supplement
no. UBS-TACYN-1.
6
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Key Risks
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An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the Basket Components or the securities held by the Basket
Components. These risks are explained in more detail in the “Risk Factors” section of the accompanying product prospectus supplement no. UBS-TACYN-1. In addition, your investment in the Notes entails other risks not associated with an investment
in conventional debt securities. You should consider carefully the following discussion of risks before you decide that an investment in the Notes is suitable for you. We also urge you to consult your investment,
legal, tax, accounting and other advisors before investing in the Notes.
Risks Relating to the Terms and Structure of the Notes
| ♦ |
Your Investment in the Notes May Result in a Loss of Principal at Maturity — The Notes differ from ordinary debt securities in that we will not necessarily repay the full
principal amount of the Notes at maturity. If the Notes are not called, we will repay you the principal amount of your Notes in cash only if the Final Basket Level is greater than or equal to the Downside Threshold, and will only make
that payment at maturity. If the Notes are not called and the Final Basket Level is less than the Downside Threshold, you will lose some or all of your initial investment in an amount proportionate to the decline in the value of the
Basket from the Trade Date to the Final Valuation Date.
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| ♦ |
The Contingent Repayment of Principal Applies Only at Maturity — If the Notes are not automatically called, you should be willing to hold your Notes to maturity. If you
are able to sell your Notes prior to maturity in the secondary market, if any, you may have to do so at a loss relative to your initial investment, even if the value of the Basket is above the Downside Threshold.
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| ♦ |
You May Not Receive any Contingent Coupons —We will not necessarily make periodic Contingent Coupon payments on the Notes. If the Observation Level of the Basket on a
Coupon Observation Date is less than the Coupon Barrier, we will not pay you the Contingent Coupon applicable to that Coupon Observation Date. If the Observation Level of the Basket is less than the Coupon Barrier on each of the Coupon
Observation Dates, we will not pay you any Contingent Coupons during the term of, and you will not receive a positive return on, your Notes. Generally, this non-payment of the Contingent Coupon coincides with a period of greater risk of
principal loss on your Notes. Accordingly, if we do not pay the Contingent Coupon on the maturity date, you will incur a loss of principal, because the Final Basket Level will be less than the Downside Threshold.
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| ♦ |
The Call Feature and the Contingent Coupon Feature Limit Your Potential Return — The return potential of the Notes is limited to the pre-specified Contingent Coupon Rate,
regardless of the appreciation of the Basket. In addition, the total return on the Notes will vary based on the number of Coupon Observation Dates on which the Contingent Coupon becomes payable prior to maturity or an automatic call.
Further, if the Notes are called due to the automatic call feature, you will not receive any Contingent Coupons or any other payment in respect of any Coupon Observation Dates after the applicable Call Settlement Date. Since the Notes
could be called as early as 6 months after the issue date of the Notes, the total return on the Notes could be limited. If the Notes are not called, you may be subject to the full downside performance of the Basket even though your
potential return is limited to the Contingent Coupon Rate. Generally, the longer the Notes are outstanding, the less likely it is that they will be automatically called due to the decline in the value of the Basket and the shorter time
remaining for the value of the Basket to recover. As a result, the return on an investment in the Notes could be less than the return on a direct investment in the Basket Components or on a similar security that allows you to participate
in the appreciation of the value of the Basket.
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| ♦ |
The Contingent Coupon Rate Per Annum Payable on the Notes Will Reflect in Part the Volatility of the Basket, and May Not Be Sufficient to Compensate You for the Risk of Loss at
Maturity — “Volatility” refers to the frequency and magnitude of changes in the value of the Basket. The greater the volatility of the Basket, the more likely it is that the Observation Level of the Basket could be below the
Downside Threshold on the Final Valuation Date. This risk will generally be reflected in a higher Contingent Coupon Rate for the Notes than the rate payable on our conventional debt securities with a comparable term. However, while the
Contingent Coupon Rate will be set on the Trade Date, the Basket’s volatility can change significantly over the term of the Notes, and may increase. The value of the Basket could fall sharply as of the Final Valuation Date, which could
result in missed Contingent Coupon payments and a significant loss of your principal.
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| ♦ |
The Notes Are Subject to Reinvestment Risk — The Notes will be called automatically if the Observation Level of the Basket is greater than or equal to the Initial Basket
Level on any Call Observation Date (beginning 6 months after the Trade Date). In the event that the Notes are called prior to maturity, there is no guarantee that you will be able to reinvest the proceeds from an investment in the Notes
at a comparable rate of return for a similar level of risk. To the extent you are able to reinvest your proceeds in an investment comparable to the Notes, you will incur transaction costs
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7
and the original issue price for such an investment is likely to include certain built in costs such as dealer discounts and hedging costs.
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Owning the Notes Is Not the Same as Owning the Basket Components or the Stocks Held by the Basket Components or Included in a Basket Component’s Underlying Index — The
return on your Notes may not reflect the return you would realize if you actually owned the Basket Components or stocks that they hold or the stocks included in the applicable Underlying Indices. As a holder of the Notes, you will not
have voting rights or rights to receive dividends or other distributions or other rights that holders of these securities would have, and any such dividends will not be incorporated in the determination of the Underlying Return.
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The Notes Are Subject to Our Credit Risk — The Notes are subject to our credit risk, and our credit ratings and credit spreads
may adversely affect the market value of the Notes. Investors are dependent on our ability to pay all amounts due on the Notes, and therefore investors are subject to our credit risk and to changes in the market’s view of our
creditworthiness. Any decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the Notes. If we were to default on our payment obligations,
you may not receive any amounts owed to you under the Notes and you could lose your entire investment.
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The Notes Will Be Subject to Risks, Including Non-Payment in Full, Under Canadian Bank Resolution Powers - Under Canadian bank resolution powers, the Canada Deposit
Insurance Corporation ("CDIC") may, in circumstances where we have ceased, or are about to cease, to be viable, assume temporary control or ownership over us and may be granted broad powers by one or more orders of the Governor in Council
(Canada), including the power to sell or dispose of all or a part of our assets, and the power to carry out or cause us to carry out a transaction or a series of transactions the purpose of which is to restructure our business. See
“Description of Debt Securities—Canadian Bank Resolution Powers” in the accompanying prospectus for a description of the Canadian bank resolution powers, including the bail-in regime. If the CDIC were to take action under the Canadian
bank resolution powers with respect to us, holders of the Notes could be exposed to losses.
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The Tax Treatment of the Notes Is Uncertain — Significant aspects of the tax treatment of an investment in the Notes are uncertain. You should consult your tax adviser
about your tax situation.
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Risks Relating to the Initial Estimated Value of the Notes
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The Initial Estimated Value of the Notes Will Be Less than the Price to the Public — The initial estimated value for the Notes that will be set forth in the final pricing
supplement for the Notes, will be less than the public offering price you pay for the Notes and does not represent a minimum price at which we, RBCCM or any of our other affiliates would be willing to purchase the Notes in any secondary
market (if any exists) at any time. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the
value of the Basket, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to public of the underwriting discount and our estimated profit and the costs relating to our hedging of the Notes. 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. Assuming no change in market conditions or any other relevant factors, the price, if any, at which you may be able to sell your Notes prior to maturity may be less than the price to public, as any such sale
price would not be expected to include the underwriting discount and our estimated profit and the costs relating to our hedging of the Notes. In addition, any price at which you may sell the Notes is likely to reflect customary bid-ask
spreads for similar trades. In addition to bid-ask spreads, the value of the Notes determined for any secondary market price is expected to be based on a secondary market rate rather than the internal borrowing rate used to price the
Notes and determine the initial estimated value. As a result, the secondary market price will be less than if the internal borrowing rate was used. The Notes are not designed to be short-term trading instruments. Accordingly, you should
be able and willing to hold your Notes to maturity.
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Our Initial Estimated Value of the Notes Is an Estimate Only, Calculated as of the Time the Terms of the Notes Are Set — The initial estimated value of the Notes is based
on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See “Structuring the Notes” below. Our estimate is based on a variety of
assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are based on certain forecasts about future events, which may prove to be
incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
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8
The value of the Notes at any time after the Trade Date will vary based on many factors, including changes in market conditions, and cannot be predicted with accuracy. As a
result, the actual value you would receive if you sold the Notes in any secondary market, if any, should be expected to differ materially from the initial estimated value of your Notes and the amount that may be paid at maturity.
Risks Relating to the Secondary Market for the Securities
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The Securities Are Expected to Have a Limited Trading Market — The Notes will not be listed on any securities exchange. RBCCM intends to offer to purchase the Notes in
the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Notes easily. Because other dealers are not likely to make a secondary market
for the Notes, the price at which you may be able to trade your Notes is likely to depend on the price, if any, at which RBCCM is willing to buy the Notes.
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The Terms of the Notes at Issuance and Their Market Value Prior to Maturity Will Be Influenced by Many Unpredictable Factors — Many economic and market factors will
influence the terms of the Notes at issuance and their value prior to maturity. These factors are similar in some ways to those that could affect the value of a combination of instruments that might be used to replicate the payments on
the Notes, including a combination of a bond with one or more options or other derivative instruments. For the market value of the Notes, we expect that, generally, the value of the Basket on any day will affect the value of the Notes
more than any other single factor. However, you should not expect the value of the Notes in the secondary market to vary in proportion to changes in the value of the Basket. The value of the Notes will be affected by a number of economic
and other factors that may either offset or magnify each other, including:
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the price of each Basket Component;
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the actual and expected volatility of the price of each Basket Component;
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the time remaining to maturity of the Notes;
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the dividend rates on the securities held by the Basket Components;
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interest and yield rates in the market generally;
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a variety of economic, financial, political, regulatory or judicial events;
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the occurrence of certain events with respect to each Basket Component that may or may not require an adjustment to the terms of the Notes; and
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our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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Some or all of these factors will influence the terms of the Notes at issuance as well as the price you will receive if you choose to sell the Notes prior to maturity. The impact
of any of the factors set forth above may enhance or offset some or all of any change resulting from another factor or factors. You may have to sell the Notes at a substantial discount from the principal amount if, for example, the value of the
Basket is at, below or not sufficiently above, the Downside Threshold.
Risks Relating to the Basket and the Basket Components
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Changes in the Value of One Basket Component May Be Offset by Changes in the Value of the Other Basket Components — A change in the value of one Basket Component may not
correlate with changes in the value of the other Basket Component. The value of one Basket Component may increase, while the value of the other Basket Component may not increase as much, or may even decrease. Therefore, in determining the
value of the Basket as of any time, increases in the value of one Basket Component may be moderated, or wholly offset, by lesser increases or decreases in the value of the other Basket Component.
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The Securities Held by Each Basket Component Are Concentrated in One Sector — All of the securities included in each Basket Component are issued by companies in a single
industry. Although an investment in the Notes will not give holders any ownership or other direct interests in these securities, the return on an investment in the Notes will be subject to certain risks associated with a direct equity
investment in companies in the applicable market 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.
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The Policies of Each Basket Component’s Investment
Adviser Could Affect the Amount Payable on the Notes and Their Market Value — The policies of the Basket Components’ investment adviser concerning the management of each Basket
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9
Component, additions, deletions or substitutions of the securities held by the Basket Components could affect the market price of each Basket Component and, therefore, the
amounts payable on the Notes and the market value of the Notes prior to maturity. The amount payable on the Notes and their market value could also be affected if the Basket Components’ investment adviser changes these policies, for example, by
changing the manner in which it manages a Basket Component, or if that investment adviser discontinues or suspends maintenance of a Basket Component, in which case it may become difficult to determine the market value of the Notes. The investment
adviser has no connection to the offering of the Notes and has no obligations to you as an investor in the Notes in making its decisions regarding the Basket Components.
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The Correlation Between the Performance of a Basket Component and the Performance of Its Underlying Index May Be Imperfect — The performance of each Basket Component is
linked principally to the performance of its Underlying Index. However, because of the potential discrepancies identified in more detail in the product prospectus supplement, the return on a Basket Component may correlate imperfectly with
the return on its Underlying Index. Further, the performance of each Basket Component may not exactly replicate the performance of its Underlying Index, because the performance of each Basket Component will reflect transaction costs and
fees that are not included in the calculation of the Underlying Index.
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During periods of market volatility, securities included in the applicable Underlying Index may be unavailable in the secondary market, market participants may be
unable to calculate accurately the net asset value per share of a Basket Component and its liquidity may be adversely affected. This kind of market volatility may also disrupt the ability of market participants to create and redeem shares of that
Basket Component. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of a Basket Component. As a result, under these circumstances, the market value of
shares of each Basket Component may vary substantially from its net asset value per share. For all of the foregoing reasons, the performance of a Basket Component may not correlate with the performance of its Underlying Index or its net asset
value per share, which could materially and adversely affect the value of the Notes in the secondary market and/or reduce your payment at maturity.
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Historical Prices of Each Basket Component Should Not Be Taken as an Indication of its Future Prices During the Term of the Notes — The trading prices of each Basket
Component will determine the value of the Notes at any given time. However, it is impossible to predict whether the price of a Basket Component will rise or fall, trading prices of the common stocks held by a Basket Component will be
influenced by complex and interrelated political, economic, financial and other factors that can affect the issuers of those stocks, and therefore, the price of that Basket Component.
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There Can Be No Assurance that the Investment View Implicit in the Notes Will Be Successful — It is impossible to predict whether and the extent to which the value of the
Basket will rise or fall. The value of the Basket will be influenced by complex and interrelated political, economic, financial and other factors that affect each Basket Component. You should be willing to accept the downside risks of
owning equities in general and the Basket Components in particular, and the risk of losing some or all of your initial investment.
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An Investment in the Notes Is Subject to Management Risk — The Basket Components are not managed according to traditional methods of “active” investment management,
which involve the buying and selling of securities based on economic, financial and market analysis and investment judgment. Instead, each Basket Component, utilizing a “passive” or indexing investment approach, attempts to approximate
the investment performance of its Underlying Index by investing in a portfolio of securities that generally replicate the Underlying Index. Therefore, unless a specific security is removed from the Underlying Index, the Basket Component
generally would not sell a security because the security’s issuer was in financial trouble. In addition, each Basket Component is subject to the risk that the investment strategy of the Basket Component’s investment advisor may not
produce the intended results.
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Risks Relating to Conflicts of Interest
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We and Our Affiliates Will Have Potential Conflicts of Interest in Connection with the Notes — We and our affiliates play a variety of roles in connection with the
issuance of the Notes, including hedging our obligations under the Notes. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in
the Notes.
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Potentially Inconsistent Research, Opinions or Recommendations by RBCCM, UBS or Their Affiliates — RBCCM, UBS, or their respective affiliates may publish research,
express opinions or provide recommendations as to the Basket Components that are inconsistent with investing in or holding the Notes, and which may be revised at any time. Any
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10
such research, opinions or recommendations could affect the value of one or both Basket Components, and therefore, the market value of the Notes.
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Our Activities and Those of UBS May Adversely Affect the Value of the Notes — Trading or transactions by us, UBS or our respective affiliates in the Basket Components,
or in futures, options, exchange-traded funds or other derivative products on the Basket Components or each Underlying Index may adversely affect the market value of the Basket Components and their closing prices, and, therefore, the
market value of the Notes.
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The Anti-Dilution Protection for Each Basket Component Is Limited — The calculation agent will make adjustments to each Initial Price for certain events affecting the
shares of a Basket Component. However, the calculation agent will not be required to make an adjustment in response to all events that could affect a Basket Component. If an event occurs that does not require the calculation agent to make
an adjustment, the value of the Notes and the payments on the Notes may be materially and adversely affected.
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Hypothetical Examples
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Hypothetical terms only. Actual terms may vary. See the cover page for actual offering terms.
The following examples are hypothetical and provided for illustrative purposes only. They do not purport to be representative of every possible scenario concerning increases or decreases in the value of the Basket
relative to the Initial Basket Level. We cannot predict the Final Basket Level. You should not take these examples as an indication or assurance of the expected performance of the Basket. The numbers appearing in the examples and tables below
have been rounded for ease of analysis. The following examples and tables illustrate the Payment at Maturity or upon an automatic call per Note on a hypothetical offering of the Notes, based on the following hypothetical assumptions (the actual
terms of the Notes are set forth on the cover page of this document):
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Principal Amount:
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$10.00
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Term:
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Approximately 2 years
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Hypothetical Contingent Coupon Rate:
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7.00% per annum (or 1.75% per quarter, representing the low end of the range set forth on the cover page)
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Hypothetical Contingent Coupon*:
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$0.175 per quarter
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Coupon Observation Dates:
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Quarterly
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Call Observation Dates:
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Quarterly (callable after 6 months)
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Initial Basket Level:
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100.00
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Coupon Barrier:
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75.00 (which is 75% of the Initial Basket Level)
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Downside Threshold:
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75.00 (which is 75% of the Initial Basket Level)
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* Contingent Coupon payments, if payable, will be paid in equal quarterly installments during the term of the Notes unless earlier called.
Scenario #1: Notes Are Called on the Second Coupon Observation Date (which is the first Call Observation Date).
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Date
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Closing Price
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Payment (per Note)
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First Coupon Observation Date
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80.00 (at or above Coupon Barrier; below Initial Basket Level)
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$0.175 (Contingent Coupon – not callable)
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Second Coupon Observation Date
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105.00 (at or above Coupon Barrier and Initial Basket Level)
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$10.175 (Call Settlement Amount)
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Since the Notes are called on the second Coupon Observation Date, we will pay you on the Call Settlement Date a total of $10.175 per Note, reflecting your principal amount plus the
applicable Contingent Coupon. When added to the Contingent Coupon payment of $0.175 received in respect of the prior Coupon Observation Date, we will have paid you a total of $10.35 per Note, for a 3.50% total return on the Notes. No further
amount will be owed to you under the Notes.
Scenario #2: Notes Are NOT Called and the Final Basket Level Is at or Above the Downside Threshold.
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Date
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Closing Price
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Payment (per Note)
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First Coupon Observation Date
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95.00 (at or above Coupon Barrier; below Initial Basket Level)
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$0.175 (Contingent Coupon – not callable)
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Second Coupon Observation Date
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63.00 (below Coupon Barrier)
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$0.00 (not called)
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Third Coupon Observation Date
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60.00 (below Coupon Barrier)
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$0.00 (not called)
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Fourth Coupon Observation Date
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55.00 (below Coupon Barrier)
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$0.00 (not called)
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Fifth to Seventh Coupon Observation Dates
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Various (each at or above Coupon Barrier; below Initial Basket Level)
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$0.525 (3 Contingent Coupon payments of $0.175 – not called)
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Final Valuation Date
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85.00 (at or above Downside Threshold and Coupon Barrier; below Initial Basket Level)
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$10.175 (Payment at Maturity)
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Total Payment:
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$10.875 (8.75% return)
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At maturity, we will pay you a total of $10.175 per Note, reflecting your principal amount plus the applicable Contingent Coupon. When added to the Contingent Coupon payments received in respect of prior Coupon
Observation Dates, we will have paid you a total of $10.875 per Note, for an 8.75% total return on the Notes.
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Scenario #3: Notes Are NOT Called and the Final Basket Level Is Below the Downside Threshold
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Date
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Closing Price
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Payment (per Note)
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First Coupon Observation Date
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85.00 (at or above Coupon Barrier; below Initial Basket Level)
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$0.175 (Contingent Coupon – not callable)
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Second Coupon Observation Date
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90.00 (at or above Coupon Barrier; below Initial Basket Level)
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$0.175 (Contingent Coupon – not called)
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Third Coupon Observation Date
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95.00 (at or above Coupon Barrier; below Initial Basket Level)
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$0.175 (Contingent Coupon – not called)
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Fourth Coupon Observation Date
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50.00 (below Coupon Barrier; below Initial Basket Level)
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$0.00 (not called)
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Fifth to Seventh Coupon Observation Dates
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Various (each below Coupon Barrier; below Initial Basket Level)
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$0.00 (not called)
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Final Valuation Date
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30.00 (below Downside Threshold and Coupon Barrier)
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$10.00 + [$10.00 × Underlying Return] =
$10.00 + [$10.00 × -70%] =
$10.00 - $7.00 =
$3.00 (Payment at Maturity)
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Total Payment:
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$3.525 (-64.75% return)
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Since the Notes are not called and the Final Basket Level is below the Downside Threshold, we will pay you at maturity $3.00 per Note. When added to the Contingent Coupon payments of $0.525 received
in respect of prior Coupon Observation Dates, we will have paid you $3.525 per Note, for a loss on the Notes of 64.75%.
The Notes differ from ordinary debt securities in that, among other features, we are not necessarily obligated to repay the full amount of your initial investment. If the Notes
are not called on any Call Observation Date, you may lose some or all of your initial investment. Specifically, if the Notes are not called and the Final Basket Level is less than the Downside Threshold, you will lose 1% (or a fraction thereof)
of your principal amount for each 1% (or a fraction thereof) that the Underlying Return is less than zero.
Any payment on the Notes, including payments in respect of an automatic call, Contingent Coupon or any repayment of principal provided at maturity, is dependent on our ability to satisfy our obligations when they
come due. If we are unable to meet our obligations, you may not receive any amounts due to you under the Notes.
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What Are the Tax Consequences of the Notes?
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U.S. Federal Income Tax Consequences
The following, together with the discussion of U.S. federal income tax in the accompanying product prospectus supplement, prospectus supplement, and prospectus, is a general
description of the material U.S. federal income tax consequences relating to an investment in the Notes. The following summary is not complete and is qualified in its entirety by the discussion under the section entitled “Supplemental
Discussion of U.S. Federal Income Tax Consequences” in the accompanying product prospectus supplement no. UBS-TACYN-1, the section entitled “Certain Income Tax Consequences” in the accompanying prospectus supplement, and the section entitled
“Tax Consequences” in the accompanying prospectus, which you should carefully review prior to investing in the Notes.
In the opinion of our special U.S. tax counsel, Ashurst LLP, it would generally be reasonable to treat the Notes as callable pre-paid cash-settled contingent income-bearing
derivative contracts linked to the Basket Components for U.S. federal income tax purposes, and the terms of the Notes require a holder (in the absence of a change in law or an administrative or judicial ruling to the contrary) to treat the
Notes for all tax purposes in accordance with such characterization. Although the U.S. federal income tax treatment of the Contingent Coupons is uncertain, we intend to take the position, and the following discussion assumes, that such
Contingent Coupons (including any coupon paid on or with respect to the call or maturity date) constitute taxable ordinary income to a U.S. holder at the time received or accrued in accordance with the holder’s regular method of accounting. If
the Notes are treated as described above, subject to the potential application of the “constructive ownership” rules under Section 1260 of the Internal Revenue Code, a U.S. holder should generally recognize capital gain or loss upon the call,
sale or maturity of the Notes in an amount equal to the difference between the amount a holder receives at such time (other than amounts properly attributable to any Contingent Coupon, which would be taxed, as described above, as ordinary
income) and the holder’s tax basis in the Notes. Capital gain recognized by an individual U.S. holder is generally taxed at preferential rates where the property is held for more than one year and is generally taxed at ordinary income rates
where the property is held for one year or less. The deductibility of capital losses is subject to limitations.
Alternative tax treatments are also possible and the Internal Revenue Service (the “IRS”) might assert that a treatment other than that described above is more appropriate. In
addition, the IRS has released a notice that may affect the taxation of holders of the Notes. According to the notice, the IRS and the Treasury Department are actively considering whether the holder of an instrument such as the Notes should be
required to accrue ordinary income on a current basis. It is not possible to determine what guidance they will ultimately issue, if any. It is possible, however, that under such guidance, holders of the Notes will ultimately be required to
accrue income currently and this could be applied on a retroactive basis. The IRS and the Treasury Department are also considering other relevant issues, including whether additional gain or loss from such instruments should be treated as
ordinary or capital and whether the special "constructive ownership rules" of Section 1260 of the Internal Revenue Code might be applied to such instruments. Holders are urged to consult their tax advisors concerning the significance, and the
potential impact, of the above considerations.
Under Section 871(m) of the Internal Revenue Code, a “dividend equivalent” payment is treated as a dividend from sources within the United States. Such payments generally would be subject to a
30% U.S. withholding tax if paid to a non-U.S. holder. Under U.S. Treasury Department 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, directly or indirectly, 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, the IRS has issued guidance that states that the U.S. Treasury Department and the IRS intend to amend the effective dates of the U.S. Treasury Department regulations to
provide 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, 2023. 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 Basket Components or the Notes (for example, upon a rebalancing of a Basket Component), 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 Basket Components 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 withholding agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect
to amounts so withheld.
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Canadian Federal Income Tax Consequences
For a discussion of the material Canadian federal income tax consequences relating to an investment in the Notes, please see the section entitled "Tax Consequences—Canadian Taxation" in the accompanying prospectus,
which you should carefully review prior to investing in the Notes.
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Information About the Basket
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Information provided to or filed with the SEC relating to the XLE and the XLF under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, can be
obtained through the SEC’s website at http://www.sec.gov. In addition, information regarding the Basket Components may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly
disseminated documents. We have not participated in the preparation of, or verified, such publicly available information. None of the forgoing documents or filings are incorporated by reference in, and should not be considered part of, this
document.
The following information regarding the Basket Components is derived from publicly available information.
We have not independently verified the accuracy or completeness of reports filed by the Basket Components with the SEC, information published by it on its website or in any other format, information
about it obtained from any other source or the information provided below.
The Notes are not sponsored, endorsed, sold or promoted by the investment adviser. The investment adviser makes no representations or warranties to the owners of the Notes or any member of the
public regarding the advisability of investing in the Notes. The investment adviser has no obligation or liability in connection with the operation, marketing, trading or sale of the Notes.
We obtained the information regarding the historical performance of the Basket Components set forth below from Bloomberg Financial Markets.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg Financial Markets. The historical performance of the Basket Components should not be taken
as an indication of its future performance, and no assurance can be given as to the market price of the Basket Components at any time during the term of the Notes. We cannot give you assurance that the performance of the Basket Components will
not result in the loss of all or part of your investment.
The Energy Select Sector SPDR® Fund (“XLE”)
The XLE seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Energy Select Sector Index. The Energy Select Sector Index
measures the performance of the energy sector of the U.S. equity market. The XLE is composed of companies whose primary line of business is directly associated with the energy sector. The XLE trades on the NYSE Arca under the ticker symbol “XLE.”
The Financial Select Sector SPDR® Fund (“XLF”)
The XLF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Financial Select Sector Index. The Financial Select Sector
Index measures the performance of the financial sector of the U.S. equity market. The XLF is composed of companies whose primary line of business is directly associated with sectors that include: diversified financial services; insurance; banks;
capital markets; mortgage real estate investment trusts; consumer finance; and thrifts and mortgage finance. The XLF trades on the NYSE Arca under the ticker symbol “XLF.”
Eligibility Criteria for Index Components
The stocks included in each Select Sector Index are selected from the universe of companies represented by the S&P 500® Index. Standard & Poor’s Financial Services LLC (“S&P”)
acts as index calculation agent in connection with the calculation and dissemination of each Select Sector Index. Each stock in the S&P 500® Index is allocated to only one Select Sector Index, and the Select Sector Indices together
comprise all of the companies in the S&P 500® Index.
Index Maintenance
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 “SPDR® Component Stocks”) is a constituent company of the S&P 500® Index.
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| • |
The Select Sector Indices together will include all of the companies represented in the S&P 500® Index and each of the stocks in the S&P 500® Index will be allocated to one and
only one of the Select Sector Indices.
|
| • |
Each constituent stock of the S&P 500® Index is assigned to a Select Sector Index on the basis of that company’s sales and earnings composition and the sensitivity of the company’s stock price
and business results to the common factors that affect other companies in each Select Sector Index.
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16
| • |
S&P has sole control over the removal of stocks from the S&P 500® Index and the selection of replacement stocks to be added to the S&P 500® Index.
|
| • |
Each Select Sector Index is calculated by S&P 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. However, under certain conditions, the number of shares of a component stock within the Select Sector Index may be
adjusted.
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Calculation of Each Underlying Index
Each Select Sector Index is calculated using the same methodology utilized by S&P in calculating the S&P 500® Index, 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.
A SPDR® Component Stock which has been assigned to one Select Sector Index may be determined to have undergone a transformation in the composition of its business, and that it should be
removed from that Select Sector Index and assigned to a different Select Sector Index. In the event that a SPDR® Component Stock’s Select Sector Index assignment should be changed, S&P will disseminate notice of the change
following its standard procedure for announcing index changes, and will implement the change in the affected Select Sector Indexes after the initial dissemination of information on the sector change.
SPDR® Component Stocks removed from and added to the S&P 500® Index will be deleted from and added to the appropriate Select Sector Index on the same schedule used by
S&P for additions and deletions from the S&P 500® Index insofar as practicable.
Additional information regarding the calculation and composition of the Underlying Indices, including the index methodology, may be found on S&P’s website. Information included in that website is not included or
incorporated by reference into this document.
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Historical Information
The graph below illustrates the performance of the XLE from October 8, 2011 to October 8, 2021.
The graph below illustrates the performance of the XLE from October 8, 2011 to October 8, 2021.
HISTORICAL PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE.
Source: Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P.
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The graph below illustrates the performance of the XLF from October 8, 2011 to October 8, 2021.
HISTORICAL PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE.
Source: Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P.
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Supplemental Plan of Distribution (Conflicts of Interest)
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We have agreed to indemnify UBS and RBCCM against liabilities under the Securities Act of 1933, as amended, or to contribute payments that UBS and RBCCM may be required to make relating to these
liabilities as described in the prospectus supplement and the prospectus. We will agree that UBS may sell all or a part of the Notes that it will purchase from us to investors at the price to public listed on the cover hereof, or its affiliates
at the price indicated on the cover of the pricing supplement, the document that will be filed under Rule 424(b)(2) containing the final pricing terms of the Notes.
We expect to deliver the Notes on a date that is greater than two business days following the Trade Date. Under Rule 15c6-1 of the Exchange Act, 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.
Subject to regulatory constraints and market conditions, RBCCM intends to offer to purchase the Notes in the secondary market, but it is not required to do so.
We or our affiliates may enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the Notes and RBCCM
and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge transactions. See “Use of Proceeds and Hedging” in the accompanying product prospectus supplement no. UBS-TACYN-1.
The value of the Notes shown on your account statement may be based on RBCCM’s estimate of the value of the Notes if RBCCM or another of our affiliates were to make a market in the Notes (which it
is not obligated to do). That estimate will be based upon the price that RBCCM may pay for the Notes in light of then prevailing market conditions, our creditworthiness and transaction costs. If so specified in the pricing supplement related to
the Notes, for a period of approximately 6 months after the issue date of the Notes, the value of the Notes that may be shown on your account statement may be higher than RBCCM’s estimated value of the Notes at that time. This is because the
estimated value of the Notes will not include the underwriting discount and our hedging costs and profits; however, the value of the Notes shown on your account statement during that period may be a higher amount, potentially reflecting the
addition of the underwriting discount and our estimated costs and profits from hedging the Notes. Any such excess is expected to decrease over time until the end of this period. After this period, if RBCCM repurchases your Notes, it expects to do
so at prices that reflect their estimated value. This period may be reduced at RBCCM’s discretion based on a variety of factors, including but not limited to, the amount of the Notes that we repurchase and our negotiated arrangements from time to
time with UBS.
For additional information as to the relationship between us and RBCCM, please see the section “Plan of Distribution - Conflicts of Interest” in the prospectus dated September 14, 2021.
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Structuring the Notes
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The Notes are our debt securities, the return on which is linked to the performance of the Basket. As is the case for all of our debt securities, including our structured notes, the
economic terms of the Notes reflect our actual or perceived creditworthiness at the time of pricing. In addition, because structured notes result in increased operational, funding and liability management costs to us, we typically borrow the
funds under these Notes at a rate that is more favorable to us than the rate that we might pay for a conventional fixed or floating rate debt security of comparable maturity. Using this relatively lower implied borrowing rate rather than the secondary market rate is a factor that is likely to result in a higher initial estimated value of the Notes at the time their terms are set than if the secondary
market rate was used. Unlike the estimated value that will be set forth on the cover page of the final pricing supplement relating to the Notes, any value of the Notes determined for purposes of a secondary market transaction may be based on a
different borrowing rate, which may result in a lower value for the Notes than if our initial internal borrowing rate were used.
In order to satisfy our payment obligations under the Notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other
derivatives) on the issue date with RBCCM or one of our other subsidiaries. The terms of these hedging arrangements take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Basket, and
the tenor of the Notes. The economic terms of the Notes and their initial estimated value depend in part on the terms of these hedging arrangements.
The lower implied borrowing rate is a factor that reduces the economic terms of the Notes to you. The initial offering price of the Notes also reflects the underwriting discount and
our estimated hedging costs. These factors result in the initial estimated value for the Notes on the Trade Date being less than their public offering price. See “Key Risks—The Initial Estimated Value of the Notes Will Be Less than the Price to
the Public” above.
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Terms Incorporated in Master Note
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The terms appearing above under the caption “Indicative Terms of the Notes” and the provisions in the accompanying product prospectus supplement no. UBS-TACYN-1 dated September 27, 2021 under the
caption “General Terms of the Notes” are incorporated into the master note issued to DTC, the registered holder of the Notes.
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