Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-259205 (To Prospectus dated September 14, 2021, Prospectus Supplement dated September 14, 2021 and
Product Supplement STOCK ARN-1 dated October 14, 2021)
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668,567 Units
$10 principal amount per unit
CUSIP No. 78074B508
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Pricing Date
Settlement Date
Maturity Date
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January 26, 2023
February 2, 2023
March 28, 2024
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Accelerated Return Notes® Linked to a Basket of
Three Financial Sector Stocks
◾ Maturity of approximately 14 months
◾ 3-to-1 upside exposure to increases in the Basket, subject to a capped return of 26.01%
◾ The Basket is comprised of the common stocks of each of The
Goldman Sachs Group, Inc., JPMorgan Chase & Co., and Morgan Stanley (the “Basket Stocks”). Each of the Basket Stocks was given an approximately equal weight
◾ 1-to-1 downside exposure to decreases in the Basket, with up to 100% of your investment 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
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Per Unit
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Total
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Public offering price
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$10.00
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$6,685,670.00
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Underwriting discount
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$0.175
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$116,999.22
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Proceeds, before expenses, to RBC
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$9.825
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$6,568,670.78
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Terms of the Notes
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Issuer:
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Royal Bank of Canada (“RBC”)
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Principal Amount:
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$10.00 per unit
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Term:
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Approximately 14 months
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Market Measure:
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An approximately equally weighted basket of three financial sector stocks comprised of the common stock of The Goldman Sachs Group, Inc. (NYSE symbol: “GS”),
JPMorgan Chase & Co. (NYSE symbol: “JPM”) and Morgan Stanley (NYSE symbol: “MS”) (each, an “Underlying Company”).
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Starting Value:
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100.00
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Ending Value:
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The value of the Basket on the calculation day. The scheduled calculation day is subject to postponement in the event of Market Disruption Events, as described
beginning on page PS-20 of product supplement STOCK ARN-1.
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Participation
Rate:
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300%
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Capped Value:
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$12.601 per unit, which represents a return of 26.01% over the principal amount.
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Calculation Day:
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March 21, 2024
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Price Multiplier:
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1, for each Basket Stock, subject to adjustment for certain corporate events relating to the Basket Stocks described beginning on page PS-19 of product supplement
STOCK ARN-1.
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Fees and
Charges:
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The underwriting discount of $0.175 per unit listed on the cover page and the hedging related charge of $0.05 per unit described in “Structuring the Notes” below.
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Calculation
Agent:
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BofA Securities, Inc. (“BofAS”)
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Redemption Amount Determination
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On the maturity date, you will receive a cash payment per unit determined as follows:
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Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
◾ |
Product supplement STOCK ARN-1 dated October 14, 2021:
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Series I MTN prospectus supplement dated September 14, 2021:
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Prospectus dated September 14, 2021:
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You anticipate that the value of the Basket will increase moderately from the Starting Value to the Ending Value.
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You are willing to risk a loss of principal and return if the value of the Basket decreases from the Starting Value to the Ending Value.
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You accept that the return on the notes will be capped.
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You are willing to forgo the interest payments that are paid on traditional interest bearing debt securities.
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You are willing to forgo dividends or other benefits of owning the Basket Stocks.
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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.
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You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.
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You believe that the value of the Basket will decrease from the Starting Value to the Ending Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return.
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You seek principal repayment or preservation of capital.
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You seek an uncapped return on your investment.
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You seek interest payments or other current income on your investment.
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You want to receive dividends or other distributions paid on the Basket Stocks.
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You seek an investment for which there will be a liquid secondary market.
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You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.
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We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
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Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Ending Value
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Percentage Change from the
Starting Value to the Ending
Value
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Redemption Amount per
Unit
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Total Rate of Return on the
Notes
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0.00
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-100.00%
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$0.000
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-100.00%
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50.00
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-50.00%
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$5.000
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-50.00%
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80.00
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-20.00%
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$8.000
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-20.00%
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90.00
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-10.00%
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$9.000
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-10.00%
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94.00
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-6.00%
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$9.400
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-6.00%
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97.00
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-3.00%
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$9.700
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-3.00%
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100.00(1)
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0.00%
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$10.000
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0.00%
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102.00
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2.00%
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$10.600
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6.00%
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103.00
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3.00%
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$10.900
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9.00%
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108.67
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8.67%
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$12.601(2)
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26.01%
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110.00
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10.00%
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$12.601
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26.01%
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115.00
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15.00%
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$12.601
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26.01%
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120.00
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20.00%
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$12.601
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26.01%
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130.00
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30.00%
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$12.601
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26.01%
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140.00
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40.00%
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$12.601
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26.01%
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150.00
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50.00%
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$12.601
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26.01%
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160.00
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60.00%
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$12.601
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26.01%
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(1) |
The Starting Value was set to 100.00 on the pricing date.
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(2) |
The Redemption Amount per unit cannot exceed the Capped Value.
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Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Example 1
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The Ending Value is 80.00, or 80.00% of the Starting Value:
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Starting Value:
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100.00
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Ending Value:
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80.00
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= $8.00 Redemption Amount per unit
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Example 2
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The Ending Value is 103.00, or 103.00% of the Starting Value:
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Starting Value:
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100.00
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Ending Value:
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103.00
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= $10.90 Redemption Amount per unit
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Example 3
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The Ending Value is 130.00, or 130.00% of the Starting Value:
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Starting Value:
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100.00
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Ending Value:
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130.00
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= $19.00, however, because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $12.601 per unit
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Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
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Depending on the performance of the Basket as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
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Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
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Your investment return is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the Basket Stocks.
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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.
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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.
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The public offering price you pay for the notes exceeds the initial estimated value. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for them and lower than the initial
estimated value. This is due to, among other things, changes in the value of the Basket, 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.
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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 Basket, our creditworthiness and changes in market conditions.
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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.
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Our business, hedging and trading activities, and those of MLPF&S, BofAS and our respective affiliates (including trades in shares of the Basket Stocks), 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.
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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.
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The Underlying Companies will have no obligations relating to the notes, and none of us, MLPF&S or BofAS will perform any due diligence procedures with respect to any Underlying Company in connection with this offering.
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Changes in the price of one of the Basket Stocks may be offset by changes in the prices of the other Basket Stocks.
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You will have no rights of a holder of the Basket Stocks, and you will not be entitled to receive shares of the Basket Stocks or dividends or other distributions by the Underlying Companies.
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While we, MLPF&S, BofAS or our respective affiliates may from time to time own securities of the Underlying Companies, we, MLPF&S, BofAS and our respective affiliates do not control any Underlying Company, and have not verified
any disclosures made by any Underlying Company.
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The Redemption Amount will not be adjusted for all corporate events that could affect a Basket Stock. See “Description of ARNs—Anti-Dilution Adjustments” beginning on page PS-19 of product supplement STOCK ARN-1.
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Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
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The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See “Summary of U.S. Federal Income Tax Consequences” below and “U.S. Federal Income Tax Summary” beginning on page
PS-33 of product supplement STOCK 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.
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Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Basket Stock
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Bloomberg
Symbol
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Initial
Component
Weight
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Closing
Market
Price(1)
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Component
Ratio(2)
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Initial Basket
Value
Contribution
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The Goldman Sachs Group,
Inc.
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GS
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33.34%
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$354.97
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0.09392343
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33.34
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JPMorgan Chase & Co.
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JPM
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33.33%
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$139.98
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0.23810544
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33.33
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Morgan Stanley
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MS
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33.33%
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$96.50
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0.34538860
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33.33
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Starting Value
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100.00
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(1) |
These were the Closing Market Prices of the Basket Stocks on the pricing date.
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(2) |
Each Component Ratio equals the Initial Component Weight of the relevant Basket Stock (as a percentage) multiplied by 100, and then divided by the Closing Market Price of that Basket Stock on the pricing date and rounded to eight decimal places.
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Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |
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There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes.
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You agree with us (in the absence of 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
Basket.
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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.
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No assurance can be given that the Internal Revenue Service or any court will agree with this characterization and tax treatment.
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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.
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Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks, due March 28, 2024 |