Subject to Completion
Preliminary Term Sheet dated December 1, 2022
|
Filed Pursuant to Rule 433
Registration Statement No. 333-259205 (To Prospectus dated September 14, 2021, Prospectus Supplement dated September 14, 2021 and Product Supplement EQUITY ARN-1 dated November 29, 2021 |
Units
$10 principal amount per unit
CUSIP No.
|
Pricing Date*
Settlement Date*
Maturity Date*
|
December , 2022
December , 2022
February , 2024
|
|||
*Subject to change based on the actual date the notes are priced for initial sale to the public (the “pricing date”)
|
|||||
Accelerated Return Notes® Linked to the S&P 500®
Index
■ Maturity of approximately 14 months
■ 3-to-1 upside exposure to increases in the Index, subject to a capped
return of [16.50% to 20.50%]
■ 1-to-1 downside exposure to decreases in the Index, with 100% of your
principal at risk
■ All payments occur at maturity and are subject to the credit risk of
Royal Bank of Canada
■ No periodic interest payments
■ In addition to the underwriting discount
set forth below, the notes include a hedging-related charge of $0.05 per unit. See “Structuring the Notes”
■ Limited secondary market liquidity, with no exchange listing
■ The notes are unsecured debt securities and
are not savings accounts or insured deposits of a bank. The notes are not insured or guaranteed by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation, or any other governmental agency of Canada or
the United States
|
|||||
Per Unit
|
Total
|
||
Public offering price(1)
|
$10.000
|
$
|
|
Underwriting discount(1)
|
$ 0.175
|
$
|
|
Proceeds, before expenses, to RBC
|
$ 9.825
|
$
|
(1) |
For any purchase of 300,000 units or more in a single transaction by an individual investor or in combined transactions with the investor's household in this offering, the public offering price and the underwriting discount will be
$9.950 per unit and $0.125 per unit, respectively. See “Supplement to the Plan of Distribution” below.
|
Are Not FDIC Insured
|
Are Not Bank Guaranteed
|
May Lose Value
|
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
Issuer:
|
Royal Bank of Canada (“RBC”)
|
||
Principal Amount:
|
$10.00 per unit
|
||
Term:
|
Approximately 14 months
|
||
Market Measure:
|
The S&P 500® Index (Bloomberg symbol: “SPX”), a price return index.
|
||
Starting Value:
|
The closing level of the Market Measure on the pricing date
|
||
Ending Value:
|
The average of the closing levels of the Market Measure on each calculation day occurring during the Maturity Valuation Period. The scheduled calculation days are
subject to postponement in the event of Market Disruption Events, as described on page PS-24 of product supplement EQUITY ARN-1.
|
||
Participation Rate:
|
300%
|
||
Capped Value:
|
[$11.65 to $12.05] per unit, which represents a return of [16.50% to 20.50%] over the principal amount. The actual Capped Value will be determined on the pricing
date.
|
||
Maturity Valuation
Period:
|
Five scheduled calculation days shortly before the maturity date.
|
||
Fees and Charges:
|
The underwriting discount of $0.175 per unit listed on the cover page and the hedging related charge of $0.05 per unit described in “Structuring the Notes” below.
|
||
Calculation Agent:
|
BofA Securities, Inc. (“BofAS”).
|
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
◾ |
Product supplement EQUITY ARN-1 dated November 29, 2021:
|
◾ |
Series I MTN prospectus supplement dated September 14, 2021:
|
◾ |
Prospectus dated September 14, 2021:
|
◾ |
You anticipate that the Index will increase moderately from the Starting Value to the Ending Value.
|
◾ |
You are willing to risk a loss of principal and return if the Index decreases from the Starting Value to the Ending Value.
|
◾ |
You accept that the return on the notes will be capped.
|
◾ |
You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
|
◾ |
You are willing to forgo dividends or other benefits of owning the stocks included in the Index.
|
◾ |
You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our actual and perceived creditworthiness,
our internal funding rate and fees and charges on the notes.
|
◾ |
You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.
|
◾ |
You believe that the Index will decrease from the Starting Value to the Ending Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return.
|
◾ |
You seek principal repayment or preservation of capital.
|
◾ |
You seek an uncapped return on your investment.
|
◾ |
You seek interest payments or other current income on your investment.
|
◾ |
You want to receive dividends or other distributions paid on the stocks included in the Index.
|
◾ |
You seek an investment for which there will be a liquid secondary market.
|
◾ |
You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.
|
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
|
Ending Value
|
Percentage Change
from the Starting
Value to the Ending
Value
|
Redemption Amount
per Unit
|
Total Rate of Return
on the Notes |
|||
0.00
|
-100.00%
|
$0.00
|
-100.00%
|
|||
50.00
|
-50.00%
|
$5.00
|
-50.00%
|
|||
80.00
|
-20.00%
|
$8.00
|
-20.00%
|
|||
90.00
|
-10.00%
|
$9.00
|
-10.00%
|
|||
94.00
|
-6.00%
|
$9.40
|
-6.00%
|
|||
97.00
|
-3.00%
|
$9.70
|
-3.00%
|
|||
100.00(1)
|
0.00%
|
$10.00
|
0.00%
|
|||
102.00
|
2.00%
|
$10.60
|
6.00%
|
|||
103.00
|
3.00%
|
$10.90
|
9.00%
|
|||
105.00
|
5.00%
|
$11.50
|
15.00%
|
|||
106.17
|
6.17%
|
$11.85(2)
|
18.50%
|
|||
120.00
|
20.00%
|
$11.85
|
18.50%
|
|||
150.00
|
50.00%
|
$11.85
|
18.50%
|
|||
200.00
|
100.00%
|
$11.85
|
18.50%
|
(1) |
The hypothetical Starting Value of 100.00 used in these examples has been chosen for illustrative purposes only, and does not represent a likely actual Starting Value for the Market Measure.
|
(2) |
The Redemption Amount per unit cannot exceed the hypothetical Capped Value.
|
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
(3) |
Redemption Amount Calculation Examples:
|
Example 1
|
The Ending Value is 50.00, or 50.00% of the Starting Value:
|
Starting Value: 100.00
|
Ending Value: 50.00
|
= $5.00 Redemption Amount per unit
|
Example 2
|
The Ending Value is 102.00, or 102.00% of the Starting Value:
|
Starting Value: 100.00
|
Ending Value: 102.00
|
= $10.60 Redemption Amount per unit
|
Example 3
|
The Ending Value is 131.00, or 131.00% of the Starting Value:
|
Starting Value: 100.00
|
Ending Value: 131.00
|
= $19.30, however, because the Redemption Amount for the notes cannot exceed the hypothetical Capped Value, the Redemption Amount will be $11.85 per unit
|
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
◾ |
Depending on the performance of the Index as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
|
◾ |
Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
|
◾ |
Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your
entire investment.
|
◾ |
Your investment return is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the stocks included in the Index.
|
◾ |
The initial estimated value of the notes is an estimate only, determined as of a particular point in time by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables,
including our credit spreads, our internal funding rate on the pricing date, mid-market terms on hedging transactions, expectations on interest rates and volatility, price-sensitivity analysis, and the expected term of the notes. These
pricing models rely in part on certain forecasts about future events, which may prove to be incorrect.
|
◾ |
The public offering price you pay for the notes will exceed the initial estimated value. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for them and lower than the initial
estimated value. This is due to, among other things, changes in the level of the Index, our internal funding rate, and the inclusion in the public offering price of the underwriting discount and the hedging related charge, all as further
described in “Structuring the Notes” 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, MLPF&S, BofAS or any of our affiliates would be willing to purchase your notes in any secondary market (if any exists) at any time. The value of
your notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Index, our creditworthiness and changes in market conditions.
|
◾ |
A trading market is not expected to develop for the notes. None of us, MLPF&S or BofAS is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at
any price in any secondary market.
|
◾ |
Our business, hedging and trading activities, and those of MLPF&S, BofAS and our respective affiliates (including trades in shares of companies included in the Index), and any hedging and trading activities we, MLPF&S, BofAS or
our respective affiliates engage in for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with you.
|
◾ |
There may be potential conflicts of interest involving the calculation agent, which is BofAS. We have the right to appoint and remove the calculation agent.
|
◾ |
The Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests.
|
◾ |
You will have no rights of a holder of the securities represented by the Index, and you will not be entitled to receive securities or dividends or other distributions by the issuers of those securities.
|
◾ |
While we, MLPF&S, BofAS or our respective affiliates may from time to time own securities of companies included in the Index, except to the extent that the common stock of Bank of America Corporation (the parent company of
MLPF&S and BofAS) is included in the Index, we, MLPF&S, BofAS and our respective affiliates do not control any company included in the Index, and have not verified any disclosure made by any other company.
|
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
◾ |
The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See “Summary of U.S. Federal Income Tax Consequences” below and “U.S. Federal Income Tax Summary” beginning on page
PS-39 of product supplement EQUITY ARN-1. For a discussion of the Canadian federal income tax consequences of investing in the notes, see “Tax Consequences—Canadian Taxation” in the prospectus dated September 14, 2021.
|
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
• |
the investor’s spouse (including a domestic partner), siblings, parents, grandparents, spouse’s parents, children and grandchildren, but excluding accounts held by aunts, uncles, cousins, nieces, nephews or
any other family relationship not directly above or below the individual investor;
|
• |
a family investment vehicle, including foundations, limited partnerships and personal holding companies, but only if the beneficial owners of the vehicle consist solely of the investor or members of the
investor’s household as described above; and
|
• |
a trust where the grantors and/or beneficiaries of the trust consist solely of the investor or members of the investor’s household as described above; provided that, purchases of the notes by a trust
generally cannot be aggregated together with any purchases made by a trustee’s personal account.
|
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
Accelerated Return Notes®
Linked to the S&P 500® Index, due February , 2024 |
◾ |
There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes.
|
◾ |
You agree with us (in the absence of a statutory, regulatory, administrative, or judicial ruling to the contrary) to characterize and treat the notes for all tax purposes as pre-paid cash-settled derivative contracts in respect of the
Index.
|
◾ |
Under this characterization and tax treatment of the notes, a U.S. holder (as defined on page 42 of the prospectus) generally will recognize capital gain or loss upon the sale or maturity of the notes. This capital gain or loss
generally will be long-term capital gain or loss if you held the notes for more than one year.
|
◾ |
No assurance can be given that the Internal Revenue Service or any court will agree with this characterization and tax treatment.
|
◾ |
Under current Internal Revenue Service guidance, withholding on “dividend equivalent” payments (as discussed in the product supplement), if any, will not apply to notes that are issued as of the date of this document unless such notes
are “delta-one” instruments. The discussion in the accompanying product supplement is modified to reflect Internal Revenue Service guidance, which states that the U.S. Treasury Department and the Internal Revenue Service 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 equity-linked instruments that are not delta-one instruments and that are issued
before January 1, 2025.
|