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|
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-275898
(To Prospectus and Prospectus Supplement,
each dated December 20, 2023 and Product Supplement EQUITY ARN-1 dated December 27, 2023) |
10,161,986 Units
$10 principal amount per unit
CUSIP No. 78016U242 |
Pricing Date
Settlement Date
Maturity Date
|
July 25, 2024
August 1, 2024
September 26, 2025 |
![](https://www.sec.gov/Archives/edgar/data/1000275/000095010324010990/image_002.jpg) |
|
Accelerated Return
Notes® Linked to the Energy Select Sector SPDR® Fund
§
Maturity of approximately 14 months
§
3-to-1 upside exposure to increases in the Energy Select Sector SPDR® Fund (the “Market Measure”), subject
to a capped return of 23.52%
§
1-to-1 downside exposure to decreases in the Market Measure, 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 by
the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation, or any other governmental agency of Canada or
the United States.
|
|
The notes are being issued by Royal Bank of Canada (“RBC”).
There are important differences between the notes and a conventional debt security, including different investment risks and certain additional
costs. See “Risk Factors” and “Additional Risk Factors” beginning on page TS-6 of this term sheet and “Risk
Factors” beginning on page PS-7 of product supplement EQUITY ARN-1.
The initial estimated value of the notes as of the pricing date is
$9.69 per unit, which is less than the public offering price listed below. See “Summary” on the following page, “Risk
Factors” beginning on page TS-6 of this term sheet and “Structuring the Notes” below for additional information. The
actual value of your notes at any time will reflect many factors and cannot be predicted with accuracy.
_________________________
None of the Securities and Exchange Commission (the “SEC”),
any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined if this Note
Prospectus (as defined below) is truthful or complete. Any representation to the contrary is a criminal offense.
_________________________
|
Per Unit |
Total |
Public offering price(1) |
$ 10.000 |
$101,574,485.65 |
Underwriting discount(1) |
$ 0.175 |
$1,732,973.20 |
Proceeds, before expenses, to RBC |
$ 9.825 |
$99,841,512.45 |
| (1) | The public offering price and the underwriting discount for an aggregate of 907,487 units purchased by an individual investor or in
combined transactions with the investor's household of 300,000 units or more is $9.95 per unit and $0.125 per unit, respectively. See
“Supplement to the Plan of Distribution” below. |
The notes:
Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
BofA Securities
July 25, 2024
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
Summary
The Accelerated Return Notes® Linked to the Energy Select
Sector SPDR® Fund, due September 26, 2025 (the “notes”) are our senior unsecured debt securities. The notes
are not insured by the Canada Deposit Insurance Corporation or the U.S. Federal Deposit Insurance Corporation or secured by collateral.
The notes will rank equally with all of our other unsecured and unsubordinated debt. Any payments due on the notes, including any repayment
of principal, will be subject to the credit risk of RBC.
The notes are not bail-inable notes (as defined in the prospectus supplement).
The notes provide you a leveraged return, subject to a cap, if the Ending Value of the Market Measure, which is the Energy Select Sector
SPDR® Fund (the “Market Measure”), is greater than the Starting Value. If the Ending Value is less than the
Starting Value, you will lose all or a portion of the principal amount of your notes. Any payments on the notes will be calculated based
on the $10 principal amount per unit and will depend on the performance of the Market Measure, subject to our credit risk. See “Terms
of the Notes” below.
The economic terms of the notes (including the Capped Value) are based
on our internal funding rate, which is the rate we pay to borrow funds through the issuance of market-linked notes and the economic terms
of certain related hedging arrangements. Our internal funding rate is typically lower than the rate we would pay when we issue conventional
fixed or floating rate debt securities. This difference in funding rate, as well as the underwriting discount and the hedging-related
charge described below, will reduce the economic terms of the notes to you and the price at which you may be able to sell the notes in
any secondary market. Due to these factors, the public offering price you pay to purchase the notes is greater than the initial estimated
value of the notes.
On the cover page of this term sheet, we have provided the initial estimated
value for the notes. This initial estimated value was determined based on our and our affiliates’ pricing models, which take into
consideration our internal funding rate and the market prices for the hedging arrangements related to the notes. For more information
about the initial estimated value and the structuring of the notes, see “Structuring the Notes” below.
Terms of the Notes |
|
Redemption Amount Determination |
Issuer: |
Royal Bank of Canada (“RBC”) |
|
On the maturity date, you will receive a cash payment per unit determined as follows: |
Principal Amount: |
$10.00 per unit |
|
![](https://www.sec.gov/Archives/edgar/data/1000275/000095010324010990/image_003.jpg) |
Term: |
Approximately 14 months |
|
Market Measure: |
The Energy Select Sector SPDR® Fund (Bloomberg symbol: “XLE”) |
|
Starting Value: |
$91.90 |
|
Ending Value: |
The average of the Closing Market Prices of the Market Measure times the Price Multiplier 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 beginning on page PS-24 of product supplement EQUITY ARN-1. |
|
Price Multiplier: |
1, subject to adjustment for certain corporate events relating to the Market Measure described beginning on page PS-27 in product supplement EQUITY ARN-1 |
|
Participation Rate: |
300% |
|
Capped Value: |
$12.352 per unit, which represents a return of 23.52% over the principal amount |
|
Maturity Valuation Period: |
September 17, 2025, September 18, 2025, September 19, 2025, September 22, 2025 and September 23, 2025 |
|
Fees and Charges: |
The underwriting discount of $0.175 per unit listed on the cover page and a hedging-related charge of $0.05 per unit described in “Structuring the Notes” below. |
|
Calculation Agent: |
BofA Securities, Inc. (“BofAS”) |
|
Accelerated Return Notes® | TS-2 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
The terms and risks of the notes are contained in this term sheet and
in the following:
These documents (together, the “Note Prospectus”) have been
filed as part of a registration statement with the SEC, which may, without cost, be accessed on the SEC website as indicated above or
obtained from us, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) or BofAS by calling 1-800-294-1322.
Before you invest, you should read the Note Prospectus, including this term sheet, and the other documents that we have filed with the
SEC for information about us and this offering. Any prior or contemporaneous oral statements and any other written materials you may have
received are superseded by the Note Prospectus. Capitalized terms used but not defined in this term sheet have the meanings set forth
in product supplement EQUITY ARN-1. Unless otherwise indicated or unless the context requires otherwise, all references in this term sheet
to “Royal Bank of Canada,” the “Bank,” “we,” “us,” “our” or similar references
mean only RBC.
“Accelerated Return Notes®” and “ARNs®”
are the registered service marks of Bank of America Corporation, the parent company of MLPF&S and BofAS.
Investor Considerations
You may wish to consider an investment in the notes if: |
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The notes may not be an appropriate investment for you if: |
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|
§
You anticipate that the Market Measure will increase moderately from the Starting Value to the Ending Value.
§
You are willing to risk a loss of principal and return if the Market Measure 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 and other benefits of directly owning shares of the Market Measure or the securities held by
the Market Measure.
§
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 Market Measure 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 have the other benefits of directly owning shares of the Market Measure or the securities held
by the Market Measure.
§
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.
|
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|
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We urge you to consult your investment, legal, tax, accounting and other
advisors before you invest in the notes.
Accelerated Return Notes® | TS-3 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
Hypothetical Payout Profile and Examples of Payments
at Maturity
Accelerated Return Notes®
![](https://www.sec.gov/Archives/edgar/data/1000275/000095010324010990/image_004.jpg)
|
This graph reflects the returns on the notes,
based on the Participation Rate of 300% and the Capped Value of $12.352 per unit. The green line reflects the returns on the notes, while
the dotted gray line reflects the returns of a direct investment in the Market Measure, excluding dividends.
This graph has been prepared for purposes
of illustration only.
|
The following table and examples are for purposes of illustration only.
They are based on hypothetical values and show hypothetical returns on the notes. They illustrate the calculation of the
Redemption Amount and total rate of return based on a hypothetical Starting Value of 100, the Participation Rate of 300%, the Capped Value
of $12.352 per unit and a range of hypothetical Ending Values. The actual amount you receive and the resulting total rate of return
will depend on the actual Starting Value, Ending Value and Capped Value, and whether you hold the notes to maturity. The following
examples do not take into account any tax consequences from investing in the notes.
For recent actual levels of the Market Measure, see “The Market
Measure” section below. The Ending Value will not include any income generated by dividends paid on the Market Measure, which you
would otherwise be entitled to receive if you invested in the Market Measure directly. In addition, all payments on the notes are subject
to issuer credit risk.
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% |
107.84 |
|
7.84% |
|
$12.352(2) |
|
23.52% |
110.00 |
|
10.00% |
|
$12.352 |
|
23.52% |
120.00 |
|
20.00% |
|
$12.352 |
|
23.52% |
130.00 |
|
30.00% |
|
$12.352 |
|
23.52% |
150.00 |
|
50.00% |
|
$12.352 |
|
23.52% |
| (1) | The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes only, and does not
represent the actual Starting Value for the Market Measure. |
| (2) | The Redemption Amount per unit cannot exceed the Capped Value. |
Accelerated Return Notes® | TS-4 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
| | 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 |
|
![](https://www.sec.gov/Archives/edgar/data/1000275/000095010324010990/image_005.jpg)
|
= $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 |
|
![](https://www.sec.gov/Archives/edgar/data/1000275/000095010324010990/image_006.jpg)
|
= $10.60 Redemption Amount per unit |
Example 3 |
|
The Ending Value is 130.00, or 130.00% of the Starting Value: |
Starting Value: 100.00 |
|
Ending Value: 130.00 |
|
![](https://www.sec.gov/Archives/edgar/data/1000275/000095010324010990/image_007.jpg)
|
= $19.00, however, because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $12.352 per unit |
Accelerated Return Notes® | TS-5 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
Risk Factors
There are important differences between the notes and a conventional
debt security. An investment in the notes involves significant risks, including those listed below. You should carefully review the more
detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page PS-7 of product supplement
EQUITY ARN-1, page S-3 of the MTN prospectus supplement, and page 1 of the prospectus identified above. We also urge you to consult your
investment, legal, tax, accounting, and other advisors before you invest in the notes.
Structure-related Risks
| § | Depending on the performance of the Market Measure 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 shares of the Market Measure or the securities held by the Market Measure. |
Valuation- and Market-related Risks
| § | The initial estimated value of the notes is only an estimate, 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, mid-market terms on hedging transactions, expectations on dividends, 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 value of the Market Measure, 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 Market Measure, 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. |
Conflict-related Risks
| § | Our business, hedging and trading activities, and those of MLPF&S, BofAS and our respective affiliates (including trades in shares
of the Market Measure or the securities held by the Market Measure), 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. |
Market Measure-related Risks
| § | The sponsor and advisor of the Market Measure may adjust the Market Measure in a way that could adversely affect the value of the
notes and the amount payable on the notes, and these entities have no obligation to consider your interests. |
| § | You will have no rights of a holder of shares of the Market Measure or the securities held by the Market Measure, 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 shares of the Market Measure or the securities
held by the Market Measure, we, MLPF&S, BofAS and our respective affiliates do not control the Market Measure or the issuers of those
securities, and have not verified any disclosure made by any other company. |
| § | There are liquidity and management risks associated with the Market Measure. |
| § | The performance of the Market Measure may not correlate with the performance of the securities held by the Market Measure as well
as the net asset value per share of the Market Measure, especially during periods of market volatility when the liquidity and the market
price of shares of the Market Measure and/or the securities held by the Market Measure may be adversely affected, sometimes materially. |
Accelerated Return Notes® | TS-6 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
| § | The payments on the notes will not be adjusted for all corporate events that could affect the Market Measure. See “Description
of ARNs—Anti Dilution and Discontinuance Adjustments Relating to Underlying Funds” in product supplement EQUITY ARN-1. |
Tax-related Risks
| § | The U.S. federal income tax consequences of an investment in the notes are uncertain. There is no direct legal authority regarding
the proper U.S. federal income tax treatment of the notes, and significant aspects of the tax treatment of the notes are uncertain. Moreover,
the notes may be subject to the “constructive ownership” regime, in which case certain adverse tax consequences may apply
upon your disposition of a note. You should review carefully the section entitled “United States Federal Income Tax Considerations”
herein, in combination with the section entitled “U.S. Federal Income Tax Summary” in the accompanying product supplement,
and consult your tax adviser regarding the U.S. federal income tax consequences of an investment in the notes. |
Additional Risk Factors
The securities held by the Market Measure are concentrated in one
sector. As a result, the securities that will determine the performance of the notes are concentrated in one sector. Although an investment
in the notes will not give holders any ownership or other direct interests in the securities held by the Market Measure, the return on
the notes will be subject to certain risks associated with a direct investment in the energy 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.
A limited
number of stocks held by the Market Measure may affect its price, and the stocks held by the Market Measure are not necessarily representative
of the energy sector. While the securities held by the Market Measure are common stocks of companies generally considered to
be involved in various segments of the energy sector, the securities held by the Market Measure may not follow the price movements of
the entire energy sector generally. As of the date of this document, less than five securities accounted for more than half of the Market
Measure’s holdings. If these securities decline in value, the Market Measure will likely decline in value even if security prices
in the energy sector generally increase in value.
Adverse conditions in the energy sector may reduce your return on
the notes. The issuers of the stocks held by the Market Measure develop and produce, among other things, crude oil and natural gas,
and provide, among other things, drilling services and other services related to energy resources production and distribution. Stock prices
for these types of companies are affected by supply and demand both for their specific product or service and for energy products in general.
The price of oil and gas, exploration and production spending, government regulation, world events and economic conditions will likewise
affect the performance of these companies. Correspondingly, the stocks of companies in the energy sector are subject to swift price fluctuations
caused by events relating to international politics, energy conservation, the success of exploration projects and tax and other governmental
regulatory policies. Weak demand for the companies’ products or services or for energy products and services in general, as well
as negative developments in these other areas, would adversely impact the value of the securities held by the Market Measure and, therefore,
the price of the Market Measure and the value of the notes.
Accelerated Return Notes® | TS-7 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
The Market Measure
All information contained in this term sheet regarding the Energy Select
Sector SPDR® Fund (the “XLE”) set forth below has been derived from publicly available information,
without independent verification. This information reflects the policies of, and is subject to change by, the Select Sector SPDR®
Trust (the “Select Sector Trust”) and SSGA Funds Management, Inc. (“SSGA FM”). The consequences
of any discontinuance of the XLE are discussed in the section entitled “Description of ARNs—Anti-Dilution and Discontinuance
Adjustments Relating to Underlying Funds” in product supplement EQUITY ARN-1. None of us, the calculation agent, MLPF&S, or
BofAS accepts any responsibility for the calculation, maintenance or publication of the XLE or any successor. Neither we nor any agent
has independently verified the accuracy or completeness of any information with respect to the XLE in connection with the offer and sale
of securities. The XLE is an investment portfolio maintained and managed by SSGA FM, the investment adviser to the XLE. The XLE is an
exchange-traded fund (“ETF”) that trades on the NYSE Arca, Inc. under the ticker symbol “XLE.”
The XLE seeks to provide investment results that, before expenses, correspond
generally to the price and yield performance of publicly traded equity securities of companies included in the Energy Select Sector Index.
The companies included in the Energy Select Sector Index are selected on the basis of general industry classifications from a universe
of companies defined by the S&P 500® Index. For more information about the Energy Select Sector Index, please see “The
S&P Select Sector Indices” below.
In seeking to track the performance of the Energy Select Sector Index,
the XLE employs a replication strategy, which means that the XLE typically invests in substantially all of the securities represented
in the Energy Select Sector Index in approximately the same proportions as the Energy Select Sector Index. However, under various circumstances,
it may not be possible or practical to purchase all of the securities in the Energy Select Sector Index, or amounts of those securities
in proportion to their weighting in the Energy Select Sector Index. Under these circumstances, SSGA FM intends to employ a sampling strategy
in managing the XLE. Sampling means that SSGA FM will use quantitative analysis to select securities, including securities in the Energy
Select Sector Index, outside of the Energy Select Sector Index and derivatives that have a similar investment profile as the Energy Select
Sector Index in terms of key risk factors, performance attributes and other economic characteristics. These include industry weightings,
market capitalization and other financial characteristics of securities.
While SSGA FM seeks to track the performance of the Energy Select Sector
Index (i.e., achieve a high degree of correlation with the Energy Select Sector Index), the XLE’s return may not match the
return of the Energy Select Sector Index. The XLE incurs a number of operating expenses not applicable to the Energy Select Sector Index
and incurs costs in buying and selling securities. In addition, the XLE may not be fully invested at times, generally as a result of cash
flows into or out of the XLE or reserves of cash held by the XLE to meet redemptions.
The Select Sector Trust is a registered investment company that consists
of a separate investment portfolio for each of the Select Sector SPDR® Funds. Information provided to or filed with the
SEC by the Select Sector Trust pursuant to the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended,
can be located by reference to SEC file numbers 333-57791 and 811-08837, respectively, through the SEC’s website at http://www.sec.gov.
The S&P Select Sector Indices
All information contained in this document regarding the Energy Select
Sector Index (a “Select Sector Index” and along with other S&P Select Sector Indices not described here, the “Select
Sector Indices”), including, without limitation, their make-up, method of calculation and changes in their components, has been
derived from publicly available information, without independent verification. This information reflects the policies of, and is subject
to change by, S&P Dow Jones Indices LLC (“S&P Dow Jones”). The Select Sector Indices are calculated, maintained
and published by S&P Dow Jones. S&P Dow Jones has no obligation to continue to publish, and may discontinue publication of, any
of the Select Sector Indices.
The constituents included in each Select Sector Index at each moment
in time are members of the S&P 500® Index. For additional information about the S&P 500® Index,
please see “The S&P 500® Index” below. S&P Dow Jones assigns constituents to a Select Sector Index
based on the constituent’s classification under the Global Industry Classification Standard (“GICS®”).
The Energy Select Sector Index
The Energy Select Sector Index is a capped modified market capitalization-based
index that measures the performance of the GICS® energy sector, which currently includes companies in the following industries:
oil, gas & consumable fuels; and energy equipment & services. The Energy Select Sector Index is reported by Bloomberg L.P. under
the ticker symbol “IXE.”
Select Sector Index Capping Methodology
For capping purposes, the Select Sector Indices are rebalanced quarterly
after the close of business on the third Friday of March, June, September and December using the following procedures:
| 1. | The rebalancing reference date is the second Friday of March, June, September and December. |
| 2. | With prices reflected on the rebalancing reference date, adjusted for any applicable corporate actions, and membership, shares outstanding
and investable weight factors (“IWFs”) as of the rebalancing effective date, each company is weighted by float-adjusted
market capitalization (“FMC”). Modifications are made as defined below. |
Accelerated Return Notes® | TS-8 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
| 3. | If any company has an FMC weight greater than 24%, the company’s weight is capped at 23%, which allows for a 2% buffer. This
buffer is meant to mitigate against any company exceeding 25% as of the quarter-end diversification requirement date. |
| 4. | All excess weight is proportionally redistributed to all uncapped companies within the relevant Select Sector Index. |
| 5. | After this redistribution, if the FMC weight of any other company breaches 23%, the process is repeated iteratively until no company
breaches the 23% weight cap. |
| 6. | The sum of the companies with weights greater than 4.8% cannot exceed 50% of the total index weight. These caps are set to allow for
a buffer below the 5% limit. |
| 7. | If the rule in paragraph 6 is breached, all companies are ranked in descending order by FMC weight, and the smallest company whose
weight is greater than 4.8% that causes the paragraph 6 breach has its weight reduced to 4.5%. |
| 8. | This process continues iteratively until paragraph 6 is satisfied. |
| 9. | Index share amounts are assigned to each constituent to arrive at the weights calculated above. Since index shares are assigned based
on prices one week prior to rebalancing, the actual weight of each constituent at the rebalancing differs somewhat from these weights
due to market movements. |
| 10. | If, on the second to last business day of March, June, September or December, a company has a weight greater than 24% or the sum of
the companies with weights greater than 4.8% exceeds 50%, a secondary rebalancing will be triggered with the rebalancing effective date
being after the close of the last business day of the month. This secondary rebalancing will use the closing prices as of the second to
last business day of March, June, September or December, and membership, shares outstanding and IWFs as of the rebalancing effective date. |
When companies represented in the Select Sector Indices are represented
by multiple share classes, maximum weight capping is based on company FMC, with the weight of multiple-class companies allocated proportionally
to each share class based on its FMC as of the rebalancing reference date. If no capping is required, both share classes remain in the
relevant Select Sector Index at their natural FMC.
Calculation, Maintenance and Governance of the Select Sector Indices
The Select Sector Indices are calculated, maintained and governed using
the same methodology as the S&P 500® Index, subject to the capping methodology described above. For additional information
about the calculation, maintenance and governance of the S&P 500® Index, please see “The S&P 500®
Index” below.
The S&P 500® Index
We obtained all information contained in this document regarding the
S&P 500® Index, including, without limitation, its make-up, method of calculation and changes in its components, from
publicly available information. This information reflects the policies of, and is subject to change by, S&P Dow Jones Indices LLC
(“S&P Dow Jones”), the index sponsor. S&P Dow Jones has no obligation to continue to publish, and may discontinue
publication of, the S&P 500® Index at any time. Neither we nor any agent has independently verified the accuracy or
completeness of any information with respect to the S&P 500® Index in connection with the offer and sale of securities.
In addition, information about the S&P 500® Index
may be obtained from other sources including, but not limited to, the S&P 500® Index sponsor’s website (including
information regarding the S&P 500® Index’s sector weightings). We are not incorporating by reference into this
document the website or any material it includes. Neither we nor any agent makes any representation that such publicly available information
regarding the S&P 500® Index is accurate or complete.
The S&P 500® Index is published by S&P Dow Jones
and is intended to provide an indication of the pattern of common stock price movement in the large capitalization segment of the United
States equity market. The S&P 500® Index covers approximately 80% of the United States equity market. As of the date
of this document, to be added to the S&P 500® Index, a company must have a market capitalization of $18.0 billion or
more. The S&P 500® Index is reported by Bloomberg L.P. under the ticker symbol “SPX.”
The S&P 500® Index, the S&P MidCap 400®
Index and the S&P SmallCap 600® Index (each, an “S&P Index” and collectively, the “S&P
Indices”) utilize the same methodology, which is detailed below.
Composition of the S&P Indices
Changes to the S&P Indices are made on an as needed basis, with
no annual or semi-annual reconstitution. Constituent changes are typically announced with at least three business days’ advance
notice. Less than three business days’ notice may be given at the discretion of the S&P Dow Jones’ U.S. index committee.
Eligibility Criteria
For each S&P Index, additions to such S&P Index are evaluated
based on the following eligibility criteria. These criteria are for additions to an S&P Index, not for continued membership. A stock
may be removed from an S&P Index if it violates the eligibility criteria and if ongoing conditions warrant its removal as described
below under “Maintenance of the S&P Indices—Deletion from an S&P Index.”
| · | Domicile. The company must be a U.S.-domiciled company. The incorporation and/or registration, operational headquarters location,
and primary stock exchange listing are the principal factors determining country of domicile. Other factors considered |
Accelerated Return Notes® | TS-9 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
include the geographic breakdown of revenue and assets,
ownership information, location of officers, directors and employees, investor perception, and other factors deemed to be relevant by
the S&P Dow Jones’ U.S. index committee.
| · | Security Filing Type. The company issuing the security satisfies the U.S. Securities Exchange Act of 1934’s periodic
reporting obligations by filing certain required forms for domestic issuers, such as but not limited Form 10-K annual reports, Form 10-Q
quarterly reports, and Form 8-K current reports. |
| · | Exchange Listing. A primary listing on one of the following U.S. exchanges is required: NYSE, NYSE Arca, NYSE American, Nasdaq
Global Select Market, Nasdaq Select Market, Nasdaq Capital Market, Cboe BZX, Cboe BYX, Cboe EDGA or Cboe EDGX exchanges. Ineligible exchanges
include the Over-the-counter (OTC) Markets, including the Pink Open Market. |
| · | Organizational Structure and Share Type. Eligible organizational structures and share types are corporations (including equity
and mortgage real estate investment trusts) and common stock (i.e., shares). Ineligible organizational structures and share types include,
but are not limited to, business development companies, limited partnerships, master limited partnerships, limited liability companies,
closed-end funds, exchange-traded funds, exchange-traded notes, royalty trusts, special purpose acquisition companies, tracking stocks,
preferred and convertible preferred stock, unit trusts, equity warrants, convertible bonds, investment trusts, rights and American depositary
receipts. In addition, the securities of companies with multiple share class structures (including companies with listed and unlisted
share classes) are no longer eligible to be added to an S&P Index, but securities already included in an S&P Index have been grandfathered
and are not affected by this change. |
| · | Market Capitalization. The total company market capitalization should be within the specified range applicable to the S&P
Index, as noted above. This range is reviewed at the beginning of each calendar quarter and updated as needed to ensure they reflect current
market conditions. Companies passing the total company level market capitalization criteria are also required to have a security level
float-adjusted market capitalization (“FMC”) that is at least 50% of the applicable S&P Index’s total company
level minimum market capitalization threshold. |
| · | IWF. For each stock, an investable weight factor (“IWF”) is calculated, which is equal to the percentage
of such stock’s shares that are freely available for trading in the public market. A stock must have a minimum IWF of 0.1 as of
the rebalancing effective date to be eligible for inclusion in an S&P Index. |
| · | Liquidity. A float-adjusted liquidity ratio (“FALR”), defined as the annual dollar value traded divided
by the FMC, is used to measure liquidity. Using composite pricing and consolidated volume (excluding dark pools), annual dollar value
traded is defined as the average closing price multiplied by the historical volume over the 365 calendar days prior to the evaluation
date. This is reduced to the available trading period for initial public offerings (“IPOs”), spin-offs or public companies
considered to be U.S. domiciled for index purposes that do not have 365 calendar days of trading history on a U.S. exchange. In these
cases, the dollar value traded available as of the evaluation date is annualized. The price, shares outstanding and IWF as of the evaluation
date are used to calculate the FMC. The evaluation date is the open of trading on the day prior to the announcement date. The stock should
trade a minimum of 250,000 shares in each of the six months leading up to the evaluation date. The FALR must be greater than or equal
to 0.75 at the time of addition to an S&P U.S. Index. Current index constituents have no minimum requirement. |
| · | Financial Viability. The sum of the most recent four consecutive quarters’ Generally Accepted Accounting Principles (“GAAP”)
earnings (net income excluding discontinued operations) should be positive as should the most recent quarter. For equity real estate investment
trusts, financial viability is based on GAAP earnings and/or funds from operations, if reported. |
| · | Treatment of IPOs. IPOs should be traded on an eligible exchange for at least 12 months before being considered for addition
to an S&P Index. For former special purpose acquisition companies (“SPACs”), S&P Dow Jones considers the de-SPAC
transaction to be an event equivalent to an IPO, and 12 months of trading post the de-SPAC event are required before a former SPAC can
be considered for inclusion in an S&P Index. Spin-offs or in-specie distributions from existing constituents do not need to be seasoned
for 12 months prior to their inclusion in an S&P Index. |
Companies that migrate from an ineligible exchange, emerge from bankruptcy,
are newly designated to be domiciled in the U.S. for index purposes by S&P Dow Jones or convert from an ineligible share or organizational
type to an eligible type do not need to trade on an eligible U.S. exchange for 12 months before being considered for addition.
| · | Sector Classification. Sector balance, as measured by a comparison of each GICS® sector’s weight in the
applicable S&P Index with its weight in the S&P Total Market Index, in the relevant market capitalization range, is also considered
in the selection of companies for the S&P Indices. The S&P Total Market Index is a float-adjusted, market-capitalization weighted
index designed to track the broad equity market, including large-, mid-, small- and micro-cap stocks. |
Calculation of the S&P Indices
The S&P Indices are float-adjusted market capitalization-weighted
indices. On any given day, the value of an S&P Index is the total FMC of that S&P Index’s constituents divided by
that S&P Index’s divisor. The FMC reflects the price of each stock in an S&P Index multiplied by the number of shares
used in such S&P Index’s value calculation.
Float Adjustment. A stock’s weight in an S&P Index
is determined by the FMC of the stock. Under float adjustment, the share counts in calculating the S&P Indices reflect only those
shares available to investors rather than all of a company’s outstanding shares. Float
Accelerated Return Notes® | TS-10 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
adjustment excludes shares that are closely held by control groups,
other publicly traded companies, government agencies or other long-term strategic holders given such shares are not available to investors
in the public markets.
Divisor. Continuity in index values of an S&P Index is maintained
by adjusting its divisor for all changes in its constituents’ share capital after its base date. This includes additions and deletions
to the relevant S&P Index, rights issues, share buybacks and issuances and non-zero price spin-offs. The value of an S&P Index’s
divisor over time is, in effect, a chronological summary of all changes affecting the base capital of such S&P Index. The divisor
of an S&P Index is adjusted such that the index value of such S&P Index at an instant just prior to a change in base capital equals
the index value of such S&P Index at an instant immediately following that change.
Maintenance of the S&P Indices
Changes to index composition are made on an as-needed basis. There is
no scheduled reconstitution. Rather, changes in response to corporate actions and market developments can be made at any time. Index additions
and deletions are typically announced with at least three business days’ advance notice. Less than three business days’ notice
may be given at the discretion of the S&P Dow Jones’ U.S. index committee.
Deletion from an S&P Index. For each S&P Index, deletions
from such S&P Index occur as follows:
| · | A company is deleted from an S&P Index if it is involved in a merger, acquisition or significant restructuring such that it no
longer meets the eligibility criteria: |
| o | A company delisted as a result of a merger, acquisition or other corporate action is removed at a time announced by S&P Dow Jones,
normally at the close of the last day of trading or expiration of a tender offer. Constituents that are halted from trading may be kept
in the applicable S&P Index until trading resumes, at the discretion of S&P Dow Jones’ U.S. index committee. If a stock
is moved to the pink sheets or the bulletin board, the stock is removed. |
| o | A company that substantially violates one or more of the eligibility criteria may be deleted at the S&P Dow Jones’ U.S.
index committee’s discretion. |
Any company that is removed from an S&P Index (including discretionary
and bankruptcy/exchange delistings) must wait a minimum of one year from its removal date before being screened for the eligibility criteria.
S&P Dow Jones believes turnover in S&P Index membership should
be avoided when possible. At times a stock included in an S&P Index may appear to temporarily violate one or more of the addition
criteria. However, the addition criteria are for addition to an S&P Index, not for continued membership. As a result, an S&P Index
constituent that appears to violate criteria for addition to such S&P Index is not deleted unless ongoing conditions warrant an index
change. When a stock is removed from an S&P Index, S&P Dow Jones explains the basis for the removal.
Migration. Current constituents of a S&P Composite 1500®
component index (which include each S&P Index) can be migrated from one S&P Composite 1500® component index
to another provided they meet the total company level market capitalization eligibility criteria for the new index. Migrations from one
S&P Composite 1500® index to another do not need to meet the financial viability, liquidity or 50% of the respective
index’s total company level minimum market capitalization threshold criteria.
Companies that are spun-off from current index constituents do not need
to meet the outside addition criteria, but they should be considered U.S. domiciled. For spin-offs, index membership eligibility is determined
using when-issued prices, if available. At the discretion of the Index Committee, a spin-off company may be retained in the parent stock’s
index if the Committee determines it has a total market capitalization representative of the parent index. If the spin-off company’s
estimated market cap is below the minimum defined in the outside addition criteria but there are other constituent companies in the applicable
S&P Index that have a significantly lower total market cap than the spin-off company, the S&P Dow Jones’ U.S. index committee
may decide to retain the spin-off company in the applicable S&P Index.
Share Updates. Share counts are updated to the latest publicly
available filings on a quarterly basis.
Investable Weight Factor (“IWF”) Updates.
IWF changes are implemented either annually, quarterly or on an accelerated schedule following the relevant event depending on the nature
of the change as explained below.
| · | Annual Review. IWFs are reviewed annually based on the most recently available data filed with various regulators and exchanges. |
| · | Quarterly Review. IWF changes will only be made at the quarterly review if the change represents at least 5% of total current
shares outstanding and is related to a single corporate action that did not qualify for the accelerated implementation rule (as described
below). For quarterly reviews that coincide with the annual review, the annual review rules apply. |
| · | Mandatory Action. Certain mandatory actions, such as M&A driven share/IWF changes, stock splits, and mandatory distributions,
are not subject to a minimum threshold for implementation. In order to minimize index turnover, any IWF changes resulting from such mandatory
actions are implemented based on the pre-event IWFs of the securities involved. |
| · | Accelerated Implementation Rule. Material share/IWF changes resulting from certain non-mandatory corporate actions follow an
accelerated implementation rule with sufficient advance notification. The accelerated implementation rule is intended to reduce turnover
intra-quarter while also enhancing opportunities for index trackers to take advantage of non-mandatory material liquidity events. |
Accelerated Return Notes® | TS-11 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
| o | For actions qualifying for accelerated implementation but less than $1 billion, an adjustment to the company’s IWF will only
be made to the extent that such an IWF change helps the new float share total mimic the shares available in the offering. |
| o | For actions qualifying for accelerated implementation and at least $1 billion, IWF changes are implemented to reflect the shares made
available in the offering plus the latest share and ownership information publicly available at the time of the announcement. |
Share/IWF Reference Date and Freeze Period. A reference date,
after the market close five weeks prior to the third Friday in March, June, September and December, is the cutoff for publicly available
information used for quarterly shares outstanding and IWF changes. All shares outstanding and ownership information contained in public
filings and/or official sources dated on or before the reference date are included in that quarter’s update. In addition, there
is a freeze period on a quarterly basis for any changes that result from the accelerated implementation rule. The freeze period begins
after the market close on the Tuesday prior to the second Friday of each rebalancing month (i.e., March, June, September and December)
and ends after the market close on the third Friday of the rebalancing month.
Pro-forma files for float-adjusted market capitalization indices are
generally released after the market close on the first Friday, two weeks prior to the rebalancing effective date. Pro-forma files for
capped and alternatively weighted indices are generally released after the market close on the second Friday, one week prior to the rebalancing
effective date. For illustration purposes, if rebalancing pro-forma files are scheduled to be released on Friday, March 5, the share/IWF
freeze period will begin after the close of trading on Tuesday, March 9, and will end after the close of trading the following Friday,
March 19 (i.e., the third Friday of the rebalancing month).
During the share/IWF freeze period, shares and IWFs are not changed
and the accelerated implementation rule is suspended, except for mandatory corporate action events (such as merger activity, stock splits
and rights offerings). The suspension includes all changes that qualify for accelerated implementation and would typically be announced
or effective during the share/IWF freeze period. At the end of the freeze period, all suspended changes will be announced on the third
Friday of the rebalancing month and implemented five business days after the quarterly rebalancing effective date.
Companies that are the target of cash M&A events, and publicly available
guidance indicates the event is expected to close by quarter end, may have their share count frozen at their current level for rebalancing
purposes.
Corporate Action Adjustments. The table below summarizes the
types of index maintenance adjustments upon various corporate actions and indicates whether or not a divisor adjustment is required.
Type of Corporate Action |
Index Treatment |
Company addition/deletion |
Addition
Companies are added at the float market capitalization weight. The net
change to the index market capitalization causes a divisor adjustment.
Deletion
The weights of all stocks in the applicable S&P Index will proportionally
change. Relative weights will stay the same. The index divisor will change due to the net change in the index market capitalization.
|
Changes in shares outstanding |
Increasing the shares outstanding increases the market capitalization of the applicable S&P Index. Similarly, decreasing the shares outstanding decreases the market capitalization of the applicable S&P Index. The change to the index market capitalization causes a divisor adjustment. |
Split/reverse split |
Shares outstanding are adjusted by split ratio. Stock price is adjusted by split ratio. There is no change to the index market capitalization and no divisor adjustment. |
Spin-off |
The spin-off is added to the applicable S&P Index on the ex-date
at a price of zero. The spin-off index shares are based on the spin-off ratio. On the ex-date the spin-off will have the same attributes
as its parent company, and will remain in the applicable S&P Index for at least one trading day. As a result, there will be no change
to the index divisor on the ex-date.
If the spin-off is ineligible for continued inclusion, it will be removed
after the ex-date. The weight of the spin-off being removed is reinvested across all the index components proportionately such that the
relative weights of all index components are unchanged. The net change in index market capitalization will cause a divisor change.
|
Change in IWF |
Increasing the IWF increases the market capitalization of the applicable S&P Index. Similarly, decreasing the IWF decreases the market capitalization of the applicable S&P Index. A net change to the index market capitalization causes a divisor adjustment. |
Ordinary dividend |
When an index component pays an ordinary cash dividend, also referred to as a regular cash dividend, the applicable S&P Index does not make any adjustments to the price or shares of the stock. As a result, there are no divisor adjustments to such index component. |
Accelerated Return Notes® | TS-12 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
Type of Corporate Action |
Index Treatment |
Special dividend |
The stock price is adjusted by the amount of the dividend. The net change to the index market capitalization causes a divisor adjustment. |
Rights offering |
All rights offerings that are in the money on the ex-date are applied under the assumption the rights are fully subscribed. The stock price is adjusted by the value of the rights and the shares outstanding are increased by the rights ratio. The net change in market capitalization causes a divisor adjustment. |
Other Adjustments. In cases where there is no achievable market
price for a stock being deleted, it can be removed at a zero or minimal price at the S&P Dow Jones’ U.S. index committee’s
discretion.
Governance of the S&P Indices
Each S&P Index is maintained by S&P Dow Jones’ U.S. index
committee. All index committee members are full-time professional members of S&P Dow Jones’ staff. The index committee meets
monthly. At each meeting, the index committee reviews pending corporate actions that may affect constituents of the S&P Indices, statistics
comparing the composition of the S&P Indices to the market, companies that are being considered as candidates for addition to the
S&P Indices, and any significant market events. In addition, the index committee may revise an S&P Index’s policy covering
rules for selecting companies, treatment of dividends, share counts or other matters.
Accelerated Return Notes® | TS-13 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
The following graph shows the daily historical performance of
the XLE on its primary exchange in the period from January 1, 2014 through July 25, 2024. We obtained this historical data from Bloomberg
L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On July 25, 2024,
the Closing Market Price of the XLE was $91.90. The graph below may have been adjusted to reflect certain corporate actions such as stock
splits and reverse stock splits.
Historical Performance of the XLE
![](https://www.sec.gov/Archives/edgar/data/1000275/000095010324010990/image_008.jpg)
This historical data on the XLE is not necessarily indicative
of the future performance of the XLE or what the value of the notes may be. Any historical upward or downward trend in the price per share
of the XLE during any period set forth above is not an indication that the price per share of the XLE is more or less likely to increase
or decrease at any time over the term of the notes.
Before investing in the notes, you should consult
publicly available sources for the prices of the XLE.
Accelerated Return Notes® | TS-14 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
Supplement to the Plan of Distribution
Under our distribution agreement with BofAS, BofAS will purchase the
notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated underwriting discount.
MLPF&S will purchase the notes from BofAS for resale, and will receive
a selling concession in connection with the sale of the notes in an amount up to the full amount of underwriting discount set forth on
the cover of this term sheet.
We will pay a fee to LFT Securities, LLC for providing certain electronic
platform services with respect to this offering, which will reduce the economic terms of the notes to you. An affiliate of BofAS has an
ownership interest in LFT Securities, LLC.
We may deliver the notes against payment therefor in New York, New York
on a date that is greater than one business day following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934,
trades in the secondary market generally are required to settle in one business day, unless the parties to any such trade expressly agree
otherwise. Accordingly, if the initial settlement of the notes occurs more than one business day from the pricing date, purchasers who
wish to trade the notes more than one business day prior to the original issue date will be required to specify alternative settlement
arrangements to prevent a failed settlement.
The notes will not be listed on any securities exchange. In the original
offering of the notes, the notes will be sold in minimum investment amounts of 100 units. If you place an order to purchase the notes,
you are consenting to MLPF&S and/or one of its affiliates acting as a principal in effecting the transaction for your account.
MLPF&S and BofAS may repurchase and resell the notes, with repurchases
and resales being made at prices related to then-prevailing market prices or at negotiated prices, and these prices will include MLPF&S’s
and BofAS’s trading commissions and mark-ups or mark-downs. MLPF&S and BofAS may act as principal or agent in these market-making
transactions; however, neither is obligated to engage in any such transactions. At their discretion, for a short, undetermined initial
period after the issuance of the notes, MLPF&S and BofAS may offer to buy the notes in the secondary market at a price that may exceed
the initial estimated value of the notes. Any price offered by MLPF&S or BofAS for the notes will be based on then-prevailing market
conditions and other considerations, including the performance of the Market Measure and the remaining term of the notes. However, none
of us, MLPF&S, BofAS or any of our respective affiliates is obligated to purchase your notes at any price or at any time, and we cannot
assure you that we, MLPF&S, BofAS or any of our respective affiliates will purchase your notes at a price that equals or exceeds the
initial estimated value of the notes.
The value of the notes shown on your account statement will be based
on BofAS’s estimate of the value of the notes if BofAS or another of its affiliates were to make a market in the notes, which it
is not obligated to do. That estimate will be based upon the price that BofAS may pay for the notes in light of then-prevailing market
conditions and other considerations, as mentioned above, and will include transaction costs. At certain times, this price may be higher
than or lower than the initial estimated value of the notes.
The distribution of the Note Prospectus in connection with these offers
or sales will be solely for the purpose of providing investors with the description of the terms of the notes that was made available
to investors in connection with their initial offering. Secondary market investors should not, and will not be authorized to, rely on
the Note Prospectus for information regarding RBC or for any purpose other than that described in the immediately preceding sentence.
Accelerated Return Notes® | TS-15 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
Structuring the Notes
The notes are our debt securities. As is the case for all of our debt
securities, including our market-linked notes, the economic terms of the notes reflect our actual or perceived creditworthiness. In addition,
because market-linked notes result in increased operational, funding and liability management costs to us, we typically borrow the funds
under market-linked notes at a rate that is lower than the rate that we might pay for a conventional fixed or floating rate debt security
of comparable maturity, which we refer to as our internal funding rate. The lower internal funding rate, along with the fees and charges
associated with market-linked notes, reduce the economic terms of the notes to you and result in the initial estimated value of the notes
on the pricing date being less than their public offering price. Unlike the initial estimated value, any value of the notes determined
for purposes of a secondary market transaction may be based on a secondary market rate, which may result in a lower value for the notes
than if our initial internal funding rate were used.
At maturity, we are required to pay the Redemption Amount to holders
of the notes, which will be calculated based on the $10 per unit principal amount and will depend on the performance of the Market Measure.
In order to meet these payment obligations, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which
may include call options, put options or other derivatives) with BofAS or one of its affiliates. The terms of these hedging arrangements
are determined by seeking bids from market participants, including MLPF&S, BofAS and their affiliates, and take into account a number
of factors, including our creditworthiness, interest rate movements, the volatility of the Market Measure, the tenor of the notes and
the tenor of the hedging arrangements. The economic terms of the notes and their initial estimated value depend in part on the terms of
these hedging arrangements.
BofAS has advised us that the hedging arrangements will include a hedging-related
charge of approximately $0.05 per unit, reflecting an estimated profit to be credited to BofAS from these transactions. Since hedging
entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be
realized by BofAS or any third party hedge providers.
For further information, see “Risk Factors—Valuation- and
Market-related Risks” beginning on page PS-7 and “Use of Proceeds and Hedging” on page PS-20 of product supplement EQUITY
ARN-1.
Accelerated Return Notes® | TS-16 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
Summary of 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
prospectus dated December 20, 2023.
United States Federal Income Tax Considerations
You should review carefully the section in the accompanying product
supplement entitled “U.S. Federal Income Tax Summary.” The following discussion, when read in combination with that section,
constitutes the full opinion of our counsel, Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences
of owning and disposing of the notes.
Generally, this discussion assumes that you purchased the notes for
cash in the original issuance at the stated issue price and does not address other circumstances specific to you, including consequences
that may arise due to any other investments relating to the Market Measure. You should consult your tax adviser regarding the effect any
such circumstances may have on the U.S. federal income tax consequences of your ownership of a note.
In the opinion of our counsel, it is reasonable to treat the notes for
U.S. federal income tax purposes as pre-paid cash settled derivative contracts, as described in the section entitled “U.S. Federal
Income Tax Summary—U.S. Holders” in the accompanying product supplement. There is uncertainty regarding this treatment, and
the Internal Revenue Service (the “IRS”) or a court might not agree with it. A different tax treatment could be adverse to
you. Generally, if this treatment is respected, subject to the potential application of the “constructive ownership” regime
discussed below, (i) you should not recognize taxable income or loss prior to the taxable disposition of your notes (including upon maturity
or an earlier redemption, if applicable) and (ii) the gain or loss on your notes should be treated as short-term capital gain or loss
unless you have held the notes for more than one year, in which case your gain or loss should be treated as long-term capital gain or
loss.
Even if the treatment of the notes as pre-paid cash settled derivative
contracts is respected, purchasing a note could be treated as entering into a “constructive ownership transaction” within
the meaning of Section 1260 of the Internal Revenue Code (“Section 1260”). In that case, all or a portion of any long-term
capital gain you would otherwise recognize upon the taxable disposition of the note would be recharacterized as ordinary income to the
extent such gain exceeded the “net underlying long-term capital gain” as defined in Section 1260. Any long-term capital gain
recharacterized as ordinary income would be treated as accruing at a constant rate over the period you held the note, and you would be
subject to a notional interest charge in respect of the deemed tax liability on the income treated as accruing in prior tax years. Due
to the lack of direct legal authority, our counsel is unable to opine as to whether or how Section 1260 applies to the notes.
We do not plan to request a ruling from the IRS regarding the treatment
of the notes. An alternative characterization of the notes could materially and adversely affect the tax consequences of ownership and
disposition of the notes, including the timing and character of income recognized. In addition, the U.S. Treasury Department and the IRS
have requested comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and
similar financial instruments and have indicated that such transactions may be the subject of future regulations or other guidance. Furthermore,
members of Congress have proposed legislative changes to the tax treatment of derivative contracts. Any legislation, Treasury regulations
or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment
in the notes, possibly with retroactive effect.
Non-U.S. holders. As discussed under “U.S. Federal Income Tax
Summary—Non-U.S. Holders” in the accompanying product supplement, Section 871(m) of the Internal Revenue Code and Treasury
regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding tax on dividend equivalents paid
or deemed paid to non-U.S. holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S.
equities. The Treasury regulations, as modified by an IRS notice, exempt financial instruments issued prior to January 1, 2027 that do
not have a “delta” of one. Based on certain determinations made by us, our counsel is of the opinion that Section 871(m) should
not apply to the notes with regard to non-U.S. holders. Our determination is not binding on the IRS, and the IRS may disagree with this
determination.
We will not be required to pay any additional amounts with respect to
U.S. federal withholding taxes.
You should consult your tax adviser regarding the U.S. federal income
tax consequences of an investment in the notes, including possible alternative treatments and the potential application of the “constructive
ownership” regime, as well as tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Supplemental Benefit Plan Investor Considerations
The notes are contractual financial instruments. The financial exposure
provided by the notes is not a substitute or proxy for, and is not intended as a substitute or proxy for, individualized investment management
or advice for the benefit of any purchaser or holder of the notes. The notes have not been designed and will not be administered in a
manner intended to reflect the individualized needs and objectives of any purchaser or holder of the notes.
Each purchaser or holder of any notes acknowledges and agrees that:
Accelerated Return Notes® | TS-17 |
Accelerated Return Notes® |
Linked to the Energy Select Sector SPDR® Fund, due September 26, 2025 |
| · | the purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or any of our affiliates to act as a fiduciary or adviser of the purchaser
or holder with respect to (i) the design and terms of the notes, (ii) the purchaser or holder’s investment in the notes, (iii) the
holding of the notes or (iv) the exercise of or failure to exercise any rights we or any of our affiliates, or the purchaser or holder,
has under or with respect to the notes; |
| · | we and our affiliates have acted and will act solely for our own account in connection with (i) all transactions relating to the notes
and (ii) all hedging transactions in connection with our or our affiliates’ obligations under the notes; |
| · | any and all assets and positions relating to hedging transactions by us or any of our affiliates are assets and positions of those
entities and are not assets and positions held for the benefit of the purchaser or holder; |
| · | our interests and the interests of our affiliates are adverse to the interests of the purchaser or holder; and |
| · | neither we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice. |
See “Benefit Plan Investor Considerations” in the accompanying
prospectus.
Validity Of The Notes
In the opinion of Norton Rose Fulbright Canada LLP, as Canadian counsel
to the Bank, the issue and sale of the notes has been duly authorized by all necessary corporate action of the Bank in conformity with
the indenture, and when the notes have been duly executed, authenticated and issued in accordance with the indenture and delivered against
payment therefor, the notes will be validly issued and, to the extent validity of the notes is a matter governed by the laws of the Province
of Ontario or Québec, or the federal laws of Canada applicable therein, will be valid obligations of the Bank, subject to the following
limitations: (i) the enforceability of the indenture may be limited by the Canada Deposit Insurance Corporation Act (Canada), the Winding-up
and Restructuring Act (Canada) and bankruptcy, insolvency, reorganization, receivership, moratorium, arrangement or winding-up laws or
other similar laws of general application affecting the enforcement of creditors’ rights generally; (ii) the enforceability of the
indenture is subject to general equitable principles, including the principle that the availability of equitable remedies, such as specific
performance and injunction, may only be granted at the discretion of a court of competent jurisdiction; (iii) under applicable limitations
statutes generally, including that the enforceability of the indenture will be subject to the limitations contained in the Limitations
Act, 2002 (Ontario), and such counsel expresses no opinion as to whether a court may find any provision of the indenture to be unenforceable
as an attempt to vary or exclude a limitation period under such applicable limitations statutes; (iv) rights to indemnity and contribution
under the notes or the indenture which may be limited by applicable law; and (v) courts in Canada are precluded from giving a judgment
in any currency other than the lawful money of Canada and such judgment may be based on a rate of exchange in existence on a day other
than the day of payment, as prescribed by the Currency Act (Canada). This opinion is given as of the date hereof and is limited to the
laws of the Provinces of Ontario and Québec and the federal laws of Canada applicable therein. In addition, this opinion is subject
to customary assumptions about the trustee’s authorization, execution and delivery of the indenture and the genuineness of signatures
and to such counsel’s reliance on the Bank and other sources as to certain factual matters, all as stated in the opinion letter
of such counsel dated December 20, 2023, which has been filed as Exhibit 5.3 to the Bank’s Form 6-K filed with the SEC dated December
20, 2023.
In the opinion of Davis Polk & Wardwell LLP, as special United States
products counsel to the Bank, when the notes offered by this term sheet have been issued by the Bank pursuant to the indenture, the trustee
has made, in accordance with the indenture, the appropriate notation to the master note evidencing such notes (the “master note”),
and such notes have been delivered against payment as contemplated herein, such notes will be valid and binding obligations of the Bank,
enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good
faith, fair dealing and the lack of bad faith) and possible judicial or regulatory actions or applications giving effect to governmental
actions or foreign laws affecting creditors’ rights, provided that such counsel expresses no opinion as to (i) the enforceability
of any waiver of rights under any usury or stay law or (ii) the effect of fraudulent conveyance, fraudulent transfer or similar provision
of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited to the laws of the State
of New York. Insofar as the foregoing opinion involves matters governed by the laws of the Provinces of Ontario and Québec and
the federal laws of Canada, you have received, and we understand that you are relying upon, the opinion of Norton Rose Fulbright Canada
LLP, Canadian counsel for the Bank, set forth above. In addition, this opinion is subject to customary assumptions about the trustee’s
authorization, execution and delivery of the indenture and the authentication of the master note and the validity, binding nature and
enforceability of the indenture with respect to the trustee, all as stated in the opinion of Davis Polk & Wardwell LLP dated May 16,
2024, which has been filed as an exhibit to the Bank’s Form 6-K filed with the SEC on May 16, 2024.
Terms Incorporated in the Master Note
All terms of the notes included in this term sheet and the relevant
terms included in the section entitled “Description of ARNs” in product supplement EQUITY ARN-1, as modified by this term
sheet, if applicable, are incorporated into the master note.
Accelerated Return Notes® | TS-18 |
424B2
EX-FILING FEES
0001000275
333-275898
0001000275
2024-07-29
2024-07-29
iso4217:USD
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Ex-Filing Fees
CALCULATION OF FILING FEE TABLES
F-3
ROYAL BANK OF CANADA
Narrative Disclosure
The maximum aggregate offering price of the securities to which the prospectus relates is $101,619,860. The
prospectus is a final prospectus for the related offering(s).
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