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Filed Pursuant to Rule 433
Registration Statement No. 333-259205
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Preliminary Terms Supplement
Subject to Completion:
Dated June 23, 2022
Pricing Supplement Dated June __, 2022 to the Product Prospectus Supplement ERN-EI-1, the Prospectus Supplement and the Prospectus, Each Dated September 14, 2021
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Barrier Absolute Return Notes Linked to the Lesser
Performing of Three Equity Indices, Due June 29, 2023
Royal Bank of Canada
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Reference Assets
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Initial Levels*
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Barrier Levels
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Dow Jones Industrial AverageTM (“INDU”)
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60.00% of its Initial Level
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Russell 2000® Index ("RTY")
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60.00% of its Initial Level
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Nasdaq-100 Index® (“NDX”)
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60.00% of its Initial Level
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Issuer:
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Royal Bank of Canada
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Stock Exchange Listing:
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None
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Trade Date:
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June 24, 2022
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Principal Amount:
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$1,000 per Note
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Issue Date:
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June 29, 2022
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Maturity Date:
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June 29, 2023
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Valuation Date:
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June 26, 2023
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Maximum Upside Redemption Amount:
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104% of the principal amount
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Initial Level:
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For each Reference Asset, its closing level on the Trade Date.
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Final Level:
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For each Reference Asset, its closing level on the Valuation Date.
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Payment at Maturity:
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If the Final Level of the Lesser Performing Reference Asset is greater than its Initial Level then the investor will receive a return equal to the principal amount multiplied by the Percentage Change (as defined
below) of the Lesser Performing Reference Asset, subject to the Maximum Upside Redemption Amount.
If the Final Level of the Lesser Performing Reference Asset is less than or equal to its Initial Level, but greater than or equal to its Barrier Level, then the investor will receive a positive return equal to the
absolute value of the Percentage Change of the Lesser Performing Reference Asset.
If the Final Level of the Lesser Performing Reference Asset is less than the Barrier Level, the Notes will provide a negative return that is equal to the percentage decrease of the Lesser Performing Reference Asset.
An investor could lose some or all of the principal amount of the Notes.
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Lesser Performing
Reference Asset:
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The Reference Asset with the lowest Percentage Change.
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Interest Payments:
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None.
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CUSIP/ISIN:
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78016FMU5 / US78016FMU56
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Per Note
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Total
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Price to public(1)
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100.00%
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$
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Underwriting discounts and commissions(1)
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0.65%
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$
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Proceeds to Royal Bank of Canada
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99.35%
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$
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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General:
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This terms supplement relates to an offering of Barrier Absolute Return Notes Linked to the Lesser Performing of Three Equity Indices (the “Notes”).
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Issuer:
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Royal Bank of Canada (“Royal Bank”)
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Trade Date (Pricing
Date):
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June 24, 2022
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Issue Date:
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June 29, 2022
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Valuation Date:
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June 26, 2023
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Maturity Date:
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June 29, 2023
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Denominations:
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Minimum denomination of $1,000, and integral multiples of $1,000 thereafter.
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Initial Level:
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For each Reference Asset, its closing level on the Trade Date.
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Final Level:
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For each Reference Asset, its closing level on the Valuation Date.
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Barrier Level:
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For each Reference Asset, 60.00% of its Initial Level.
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Maximum Upside
Redemption Amount:
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104%, multiplied by the principal amount.
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Payment at Maturity (if
held to maturity):
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On the Valuation Date, we will pay you at maturity an amount based on the Final Level of the Lesser Performing Reference Asset:
If the Final Level of the Lesser Performing Reference Asset is greater than its Initial Level, then the investor will receive an amount per $1,000 in
principal amount per Note equal to the lesser of:
1. Principal Amount + (Principal Amount x
Percentage Change of the Lesser Performing Reference Asset); and
2. Maximum Upside Redemption Amount
If the Final Level of the Lesser Performing Reference Asset is less than or equal to its Initial Level, but greater than or equal to its
Barrier Level, then the investor will receive an amount per $1,000 in principal amount per Note equal to:
$1,000 + [-1 x ($1,000 x Percentage Change of the Lesser Performing Reference Asset)]
If the Final Level of the Lesser Performing Reference Asset is less than its Barrier Level, then the investor will receive, for each
$1,000 in principal amount per Note, an amount equal to:
$1,000 + [$1,000 x (Percentage Change of the Lesser Performing Reference Asset)]
In this case, you will lose all or a substantial portion of the principal amount.
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Percentage Change:
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With respect to each Reference Asset:
Final Level – Initial Level
Initial Level
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Lesser Performing
Reference Asset:
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The Reference Asset which has the lowest Percentage Change.
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Market Disruption
Events:
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If a market disruption event occurs on the Valuation Date as to a Reference Asset, the determination of the Final Level of that Reference Asset will be postponed. However, the determination of the Final Level of
any Reference Asset that is not affected by that market disruption event will not be postponed.
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Calculation Agent:
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RBC Capital Markets, LLC (“RBCCM”)
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U.S. Tax Treatment:
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By purchasing a Note, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat
the Note as a pre-paid cash-settled derivative contract in respect of the Reference Assets for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the Notes are uncertain and the Internal
Revenue Service could assert that the Notes should be taxed in a manner that is different from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of U.S. Federal Income Tax Consequences,” and the
discussion (including the opinion of our special U.S. tax counsel, Ashurst LLP) in the product prospectus supplement dated September 14, 2021 under “Supplemental Discussion of U.S. Federal Income Tax Consequences,” which apply to the Notes.
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Secondary Market:
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RBCCM (or one of its affiliates), though not obligated to do so, may maintain a secondary market in the Notes after the issue date. The amount that you may
receive upon sale of your Notes prior to maturity may be less than the principal amount.
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Listing:
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The Notes will not be listed on any securities exchange.
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Settlement:
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DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Ownership and Book-Entry Issuance” in the
prospectus dated September 14, 2021).
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Terms Incorporated in
the Master Note:
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All of the terms appearing on the cover page and above the item captioned “Secondary Market” on pages P-2 and P-3 of this terms supplement and the terms
appearing under the caption “General Terms of the Notes” in the product prospectus supplement dated September 14, 2021, as modified by this terms supplement.
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Hypothetical Initial Level (for each Reference Asset):
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1,000.00*
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Hypothetical Barrier Level (for each Reference Asset):
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600.00, which is 60.00% of the hypothetical Initial Level
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Maximum Upside Redemption Amount:
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104%
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Principal Amount:
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$1,000 per Note
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Hypothetical Final Level of the Lesser
Performing Reference Asset
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Redemption Amount as
Percentage of Principal Amount
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Redemption Amount
per $1,000 in Principal
Amount
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1,500.00
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104.00%
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$1,040.00
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1,400.00
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104.00%
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$1,040.00
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1,300.00
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104.00%
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$1,040.00
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1,200.00
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104.00%
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$1,040.00
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1,100.00
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104.00%
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$1,040.00
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1,050.00
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104.00%
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$1,040.00
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1,040.00
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104.00%
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$1,040.00
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1,020.00
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102.00%
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$1,020.00
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1,000.00
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100.00%
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$1,000.00
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980.00
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102.00%
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$1,020.00
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900.00
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110.00%
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$1,100.00
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800.00
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120.00%
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$1,200.00
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700.00
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130.00%
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$1,300.00
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600.00
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140.00%
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$1,400.00
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550.00
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55.00%
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$550.00
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500.00
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50.00%
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$500.00
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400.00
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40.00%
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$400.00
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300.00
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30.00%
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$300.00
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0.00
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0.00%
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$0.00
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Example 1—
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is positive.
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Percentage Change:
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3%
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Payment at Maturity:
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$1,000 + ($1,000 x 3%) = $1,000 + $30.00 = $1,030.00
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In this case, on a $1,000 investment, a 3% Percentage Change in the Lesser Performing Reference Asset results in a Payment at Maturity of $1,030.00, a 3.00% return on the Notes.
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Example 2—
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is positive (and the Payment at Maturity is subject to the Maximum Upside Redemption
Amount).
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Percentage Change:
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10.00%
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Payment at Maturity:
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$1,000 + ($1,000 x 10.00%) = $1,000 + $100.00 = $1,100.00
However, the Maximum Upside Redemption Amount is $1,040.00
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On a $1,000 investment, a 10.00% Percentage Change for the Lesser Performing Reference Asset results in a Payment at Maturity of $1,040.00, a 4.00% return on the Notes.
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Example 3—
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is negative, but its Final Level is greater than its Barrier Level.
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Percentage Change:
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-2%
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Payment at Maturity:
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$1,000 + [-1 x ($1,000 x -2%)] = $1,000 + $20 = $1,020.00
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In this case, on a $1,000 investment, a -2% Percentage Change in the Lesser Performing Reference Asset results in a Payment at Maturity of $1,020, a 2% return on the Notes.
In this case, even though the Percentage Change of the Lesser Performing Reference Asset is negative, you will receive a positive return equal to the absolute value of the Percentage Change.
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Example 4—
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is negative, and its Final Level is less than its Barrier Level.
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Percentage Change:
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-50%
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Payment at Maturity:
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$1,000 + ($1,000 x -50%) = $1,000 - $500 = $500
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In this case, on a $1,000 investment, a -50% Percentage Change in the Lesser Performing Reference Asset results in a Payment at Maturity of $500, a -50% return on the Notes.
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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You May Lose All or a Substantial Portion of the Principal Amount at Maturity – Investors in the Notes could lose all or a substantial portion of their principal amount if
there is a decline in the level of the Lesser Performing Reference Asset between
the Trade Date and the Valuation Date of more than 40%. In such a case, you will lose 1% of the principal amount of your Notes for each 1% that the Final Level of the Lesser Performing Reference Asset is less than its Initial Level.
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Your Potential Payment at Maturity Is Limited — The Notes will provide less opportunity to participate in the appreciation of any of the Reference Assets than an investment
in a security linked to that Reference Asset providing full participation in the appreciation, because the payment at maturity will not exceed the Maximum Upside Redemption Amount if the Lesser Performing Reference Asset increases in value.
Accordingly, your return on the Notes may be less than your return would be if you made an investment in a security directly linked to the positive performance of the Lesser Performing Reference Asset. In addition, if the level of each of the
Reference Assets decreases, your maximum return on the Notes will be limited to a positive return of 40%, corresponding to the Barrier Level of the Lesser Performing Reference Asset.
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Your Redemption Amount Will Be Determined Solely by Reference to the Lesser Performing Reference Asset Even if the Other Reference Assets Perform Better – Your Redemption
Amount will be determined solely by reference to the performance of the Lesser Performing
Reference Asset. Even if the Final Level of the other Reference Assets have increased compared to its Initial Level, or has experienced a decrease that is less than that of the Lesser Performing Reference Asset, your return will only be
determined by reference to the performance of the Lesser Performing Reference Asset, regardless of the performance of the other Reference Assets. The Notes are not linked to a weighted basket, in which the risk may be mitigated and
diversified among each of the basket components. For example, in the case of notes linked to a weighted basket, the return would depend on the weighted aggregate performance of the basket components reflected as the basket return. As a
result, the depreciation of one basket component could be mitigated by the appreciation of the other basket components, as scaled by the weighting of that basket component. However, in the case of the Notes, the individual performance of
each of the Reference Assets would not be combined, and the depreciation of one Reference Asset would not be mitigated by any appreciation of the other Reference Assets. Instead your return will depend solely on the Final Level of the
Lesser Performing Reference Asset, which could be less than its respective Barrier Level. Because each Reference Asset tracks a different segment of the U.S. equities market, they may each decrease in a comparable manner.
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The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity – You will not receive any interest
payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which could be negative, may be less than the return you could earn
on other investments. Even if your return is positive, the return may be less than the return you would earn if you purchased one of our conventional senior interest bearing debt securities.
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Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market Value of the Notes – The Notes are our senior
unsecured debt securities. As a result, your receipt of the Redemption Amount is dependent upon our ability to repay our obligations at that time. This will be the case even if the levels of the Reference Assets increase after the Trade Date.
No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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There May Not Be an Active Trading Market for the Notes – Sales in the Secondary Market May Result in Significant Losses – There may
be little or no secondary market for the Notes. The Notes will not be listed on any securities exchange. RBCCM and our other affiliates may make a market for the Notes; however, they are not required to do so. RBCCM or any of our other
affiliates may stop any market-making activities at any time. Even if a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices advantageous to you. We expect that transaction costs in any
secondary market would be high. As a result, the difference between bid and asked prices for your Notes in any secondary market could be substantial.
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The Initial Estimated Value of the Notes Will Be Less than the Price to the Public — The initial estimated value that will be set
forth on the cover page of the final pricing supplement for the Notes does not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any time.
If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the levels of the Reference Assets, the
borrowing rate we pay to issue securities of this kind, and the inclusion in the price to the public of the underwriting discount and the estimated costs relating to our hedging of the Notes. These factors, together with various credit,
market and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable ways. Assuming no
change in market conditions or any other relevant factors, the price, if any, at which you may be able to sell your Notes prior to maturity may be less than your original purchase price, as any such sale price would not be expected to include
the underwriting discount and the hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined by RBCCM for any secondary market price is expected to be based on the secondary rate rather than the
internal funding rate used to price the Notes and determine the initial estimated value. As a result, the secondary price will be less than if the internal funding rate was used. The Notes are not designed to be short-term trading
instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
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The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only, Calculated as of the Time the Terms of the Notes Are Set —
The initial estimated value of the Notes will be based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See “Structuring the Notes”
below. Our estimate will be based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are based on certain forecasts
about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
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Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the Reference Assets that are not for the
account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates will have in their proprietary accounts, in facilitating
transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the levels of the Reference Assets, could be adverse to the interests
of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with companies included in the Reference Assets, including making loans to or providing advisory services. These services
could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’ obligations and your interests as a holder of the Notes. Moreover, we, and
our affiliates may have published, and in the future expect to publish, research reports with respect to the Reference
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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You Will Not Have Any Rights to the Securities Included in the Reference Assets – As a holder of the Notes, you will
not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities included in the Reference Asset would have. The Final Level will not reflect any dividends paid on the securities
included in the Reference Asset, and accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments – The Redemption Amount and the Valuation Date are subject to
adjustment as to each Reference Asset as described in the product prospectus supplement. For a description of what constitutes a market disruption event as well as the consequences of that market disruption event, see “General Terms of the
Notes—Market Disruption Events” in the product prospectus supplement.
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An Investment in the Notes Linked to the RTY Is Subject to Risks Associated in Investing in Stocks With a Small Market Capitalization — The RTY consists of stocks issued by
companies with relatively small market capitalizations. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies. As a result, the level of the RTY may be more
volatile than that of a market measure that does not track solely small-capitalization stocks. Stock prices of small-capitalization companies are also generally more vulnerable than those of large-capitalization companies to adverse business
and economic developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive to many investors if they do not pay dividends. In addition, small capitalization companies are often less
well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss of those individuals. Small capitalization companies tend to have lower
revenues, less diverse product lines, smaller shares of their target markets, fewer financial resources and fewer competitive strengths than large-capitalization companies. These companies may also be more susceptible to adverse developments
related to their products or services.
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An Investment in the Notes Linked to the NDX Is Subject to Risks Relating to Non-U.S. Securities Markets — Because certain foreign
companies included in the NDX are organized and/or publicly traded outside of the U.S., an investment in the Notes involves particular risks. For example, the non-U.S. securities markets may be more volatile than the U.S. securities markets,
and market developments may affect these markets differently from the U.S. or other securities markets.
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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the security’s U.S. listing must be exclusively on the Nasdaq Global Select Market or the Nasdaq Global Market;
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the security must be issued by a non-financial company;
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the security may not be issued by an issuer currently in bankruptcy proceedings;
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the security must generally be a common stock, ordinary share, American Depositary Receipt, or tracking stock (closed-end funds, convertible debentures, exchange traded funds, limited liability companies, limited
partnership interests, preferred stocks, rights, shares or units of beneficial interests, warrants, units and other derivative securities are not included in the NDX, nor are the securities of investment companies);
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the security must have a three-month average daily trading volume of at least 200,000 shares;
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if the security is issued by an issuer organized under the laws of a jurisdiction outside the United States, it must have listed options on a recognized market in the United States or be eligible for
listed-options trading on a recognized options market in the United States;
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the issuer of the security may not have entered into a definitive agreement or other arrangement which would likely result in the security no longer being eligible;
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the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn; and
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the security must have traded for at least three full calendar months, not including the month of initial listing, on an “eligible exchange,” as determined under the index rules.
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the security’s U.S. listing must be exclusively on the Nasdaq Global Select Market or the Nasdaq Global Market;
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the security must be issued by a non-financial company;
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the security may not be issued by an issuer currently in bankruptcy proceedings;
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the security must have an average daily trading volume of at least 200,000 shares in the previous three‑month trading period as measured annually during the ranking review process described below;
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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if the issuer of the security is organized under the laws of a jurisdiction outside the United States, then such security must have listed options on a recognized market in the United States or be eligible for
listed‑options trading on a recognized options market in the United States, as measured annually during the ranking review process;
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the issuer of the security may not have entered into a definitive agreement or other arrangement that would likely result in the security no longer being eligible;
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the security must have an adjusted market capitalization equal to or exceeding 0.10% of the aggregate adjusted market capitalization of the NDX at each month-end. In the event that a company does not meet this
criterion for two consecutive month-ends, it will be removed from the NDX effective after the close of trading on the third Friday of the following month; and
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the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn.
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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Barrier Return Notes Linked to the Lesser
Performing of Three Equity Indices
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