PRICING SUPPLEMENT
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-227001
Dated January 27, 2021
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Investment Description
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Features
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Key Dates
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❑ |
Contingent Coupon — We will pay a quarterly Contingent Coupon payment if the closing level of the Underlying Index on the applicable Coupon Observation Date is
greater than or equal to the Coupon Barrier. Otherwise, no coupon will be paid for the quarter.
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❑ |
Automatically Callable — We will automatically call the Notes and pay you the principal amount of your Notes plus the Contingent Coupon otherwise due for the
applicable quarter if the closing level of the Underlying Index on any quarterly Call Observation Date (beginning six months after the Trade Date) is greater than or equal to the Initial Level. If the Notes are not called, investors
will have the potential for downside equity market risk at maturity.
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❑
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Contingent Repayment of Principal at Maturity — If by maturity the Notes have not been called and the Underlying Index does not
close below the Downside Threshold on the Final Valuation Date, we will repay your principal amount per Note at maturity. However, if the closing level of the Underlying Index is less than the Downside Threshold on the Final
Valuation Date, we will pay less than the principal amount, if anything, resulting in a loss on your initial investment that is proportionate to the decline in the level of the Underlying Index from the Trade Date to the Final
Valuation Date. The contingent repayment of principal only applies if you hold the Notes until maturity. Any payment on the Notes, including any repayment of principal, is subject to our creditworthiness.
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Trade Date |
January 27, 2021
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Settlement Date |
January 29, 2021
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Coupon Observation Dates1 |
Quarterly (see page 6)
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Call Observation Dates1 |
Quarterly (callable after six months)
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Final Valuation Date1 |
January 27, 2023
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Maturity Date1 |
January 31, 2023
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1
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Subject to postponement if a market disruption event occurs, as described under “General Terms of the Notes—Payment at Maturity” below.
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NOTICE TO INVESTORS: THE NOTES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. WE ARE NOT NECESSARILY OBLIGATED TO REPAY THE FULL PRINCIPAL AMOUNT OF THE
NOTES AT MATURITY, AND THE NOTES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE UNDERLYING INDEX. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING ONE OF OUR DEBT OBLIGATIONS. YOU SHOULD NOT PURCHASE THE NOTES IF
YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE NOTES.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “KEY RISKS” BEGINNING ON PAGE 7 OF THIS PRICING SUPPLEMENT AND UNDER “RISK FACTORS” BEGINNING ON PAGE S-1 OF THE
PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY NOTES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR NOTES. YOU MAY LOSE SOME OR ALL OF YOUR
INITIAL INVESTMENT IN THE NOTES.
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Note Offering
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Underlying
Index
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Ticker
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Contingent
Coupon Rate
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Initial Level
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Downside Threshold
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Coupon Barrier
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CUSIP
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ISIN
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S&P 500® Index
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SPX
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9.18% per annum
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3,750.77
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2,813.08, which is 75% of the Initial Level*
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2,813.08, which is 75% of the Initial Level*
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78014M606
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US78014M6066
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Price to Public
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Fees and Commissions (1)
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Proceeds to Us
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Offering of the Notes
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Total
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Per Note
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Total
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Per Note
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Total
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Per Note
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Notes linked to the S&P 500® Index
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$24,719,500
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$10.00
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$0.00
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$0.00
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$24,719,500
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$10.00
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UBS Financial Services Inc.
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RBC Capital Markets, LLC
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Additional Information About Royal Bank of Canada and the Notes
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♦
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Prospectus supplement dated September 7, 2018:
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♦
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Prospectus dated September 7, 2018:
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Investor Suitability
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♦ |
You fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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♦ |
You can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that may have the same downside market risk as an investment in the securities composing the
Underlying Index.
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♦ |
You believe the closing level of the Underlying Index will be greater than or equal to the Coupon Barrier on most or all of the Coupon Observation Dates (including the Final Valuation Date).
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♦ |
You are willing to make an investment whose return is limited to the applicable Contingent Coupon payments, regardless of any potential appreciation of the Underlying Index, which could be significant.
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♦ |
You do not seek guaranteed current income from this investment and are willing to forgo the dividends paid on the equity securities composing the Underlying Index.
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♦ |
You can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations of the Underlying Index.
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♦ |
You are willing to invest in Notes for which there may be little or no secondary market, and you accept that the secondary market will depend in large part on the price, if any, at which RBC Capital Markets,
LLC, which we refer to as “RBCCM,” is willing to purchase the Notes.
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♦ |
You are willing to invest in the Notes based on the Contingent Coupon Rate set forth on the cover page of this pricing supplement.
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♦ |
You understand and accept the risks associated with the Underlying Index.
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♦ |
You are willing to invest in securities that may be called early and you are otherwise willing to hold such securities to maturity.
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♦
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You are willing to assume our credit risk for all payments under the Notes, and understand that if we default on our obligations, you may not receive any
amounts due to you, including any repayment of principal.
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♦ |
You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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♦ |
You cannot tolerate a loss on your investment and require an investment designed to provide a full return of principal at maturity.
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♦ |
You are not willing to make an investment that may have the same downside market risk as an investment in the equity securities composing the Underlying Index.
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♦ |
You believe that the level of the Underlying Index will decline during the term of the Notes and is likely to close below the Coupon Barrier on most or all of the Coupon Observation Dates and below the
Downside Threshold on the Final Valuation Date.
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♦ |
You seek an investment that participates in the full appreciation in the level of the Underlying Index or that has unlimited return potential.
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♦ |
You seek guaranteed current income from this investment or prefer to receive the dividends paid on the securities composing the Underlying Index.
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♦ |
You cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations of the Underlying Index.
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♦ |
You are unwilling to invest in the Notes based on the Contingent Coupon Rate set forth on the cover page of this pricing supplement.
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♦ |
You do not understand or accept the risks associated with the Underlying Index.
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♦ |
You are unable or unwilling to hold securities that may be called early, or you are otherwise unable or unwilling to hold such securities to maturity, or you seek an investment for which there will be an
active secondary market for the Notes.
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♦
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You are not willing to assume our credit risk for all payments under the Notes, including any repayment of principal.
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The suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable investment for you will depend on your individual circumstances, and you should reach an
investment decision only after you and your investment, legal, tax, accounting, and other advisers have carefully considered the suitability of an investment in the Notes in light of your particular circumstances. You should also review
carefully the “Key Risks” below for risks related to an investment in the Notes. In addition, you should review carefully the section below, “Information About the Underlying Index,” for more information about that index.
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Final Terms of the Notes1
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Issuer:
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Royal Bank of Canada
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Principal Amount per
Note:
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$10.00 per Note (subject to a minimum purchase of 100 Notes ($1,000))
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Term:
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Approximately two years, if not previously called
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Underlying Index:
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The S&P 500® Index (“SPX”)
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Contingent Coupon:
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If the closing level of the Underlying Index is greater than or equal to the Coupon Barrier on any Coupon Observation Date, we
will pay you the Contingent Coupon applicable to that Coupon Observation Date.
If the closing level of the Underlying Index is less than the Coupon Barrier on any Coupon Observation Date, the Contingent
Coupon applicable to that Coupon Observation Date will not accrue or be payable, and we will not make any payment to you on the relevant Contingent Coupon Payment Date.
The Contingent Coupon will be a fixed amount based upon equal quarterly installments at the Contingent Coupon Rate set forth below.
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Contingent Coupon payments on the Notes are not guaranteed. We will not pay you the Contingent Coupon for any Coupon Observation Date on which the
closing level of the Underlying Index is less than the Coupon Barrier.
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Contingent Coupon
Rate:
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9.18% per annum (2.295% per quarter)
Each Contingent Coupon will be paid to the holders of record of the Notes at the close of business on the date that is one business day prior to that Coupon Payment Date.
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Automatic Call
Feature:
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The Notes will be called automatically if the closing level of the Underlying Index on any Call Observation Date (beginning six months after the Trade Date and set forth
on page 6) is greater than or equal to the Initial Level.
If the Notes are called, we will pay you on the corresponding Coupon Payment Date (which will be the “Call Settlement Date”) a cash payment per Note equal to the
principal amount plus the applicable Contingent Coupon payment otherwise due on that day (the “Call Settlement Amount”). No further amounts will be owed to you under the Notes.
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Payment at Maturity:
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If the Notes are not called and the Final Level is greater than or equal to the Downside Threshold and the Coupon Barrier, we will pay you a cash payment
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1
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Terms used in this pricing supplement, but not defined herein, shall have the meanings ascribed to them in the prospectus or the prospectus supplement.
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per Note on the maturity date equal to $10.00 plus the Contingent Coupon otherwise due on the maturity date.
If the Notes are not called and the Final Level is less than the Downside Threshold, we will pay you a cash payment on the maturity date of less than the principal
amount, if anything, resulting in a loss on your initial investment that is proportionate to the negative Underlying Index Return, equal to:
$10.00 + ($10.00 × Underlying Index Return)
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Underlying Index
Return:
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Final Level – Initial Level
Initial Level
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Downside Threshold:
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75% of the Initial Level, as set forth on the cover page of this pricing supplement. The Downside Threshold is equal to the Coupon Barrier.
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Coupon Barrier:
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75% of the Initial Level, as set forth on the cover page of this pricing supplement. The Coupon Barrier is equal to the Downside Threshold.
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Initial Level:
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The closing level of the Underlying Index on the Trade Date, as set forth on the cover page of this pricing supplement.
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Final Level:
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The closing level of the Underlying Index on the Final Valuation Date.
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Investment Timeline
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Trade Date:
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The Initial Level, Downside Threshold and Coupon Barrier were determined. The Contingent Coupon Rate was set.
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Quarterly:
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If the closing level of the Underlying Index is greater than or equal to the Coupon Barrier on any Coupon Observation Date, we will pay you a Contingent Coupon payment on the applicable Coupon Payment Date.
The Notes will be called if the closing level of the Underlying Index on any Call Observation Date (beginning six months after the Trade Date) is greater than or equal to the Initial Level. If the Notes are called, we will pay you a
cash payment per Note equal to $10.00 plus the Contingent Coupon otherwise due on that date.
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Maturity Date:
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The Final Level is observed on the Final Valuation Date.
If the Notes have not been called and the Final Level is greater than or equal to the Downside Threshold (and the Coupon Barrier), we will repay the principal amount equal to $10 per Note plus the Contingent Coupon otherwise due on
the maturity date.
If the Notes have not been called and the Final Level is less than the Downside Threshold, we will pay less than the principal amount, if anything, resulting in a loss on your initial investment proportionate to the decline of the
Underlying Index, for an amount equal to:
$10 + ($10 × Underlying Index Return) per Note
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Coupon Observation Dates and
Coupon Payment Dates*
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Coupon Observation Dates
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Coupon Payment Dates
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April 27, 2021
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April 29, 2021
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July 27, 2021(1)
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July 29, 2021(2)
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October 27, 2021(1)
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October 29, 2021(2)
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January 27, 2022(1)
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January 31, 2022(2)
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April 27, 2022(1)
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April 29, 2022(2)
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July 27, 2022(1)
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July 29, 2022(2)
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October 27, 2022(1)
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October 31, 2022(2)
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January 27, 2023(3)
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January 31, 2023(4)
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(1)
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These Coupon Observation Dates are also Call Observation Dates.
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(2)
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These Coupon Payment Dates are also Call Settlement Dates.
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(3)
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This is also the Final Valuation Date.
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(4)
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This is also the maturity date.
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Key Risks
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♦ |
Your investment in the Notes may result in a loss of principal — The Notes differ from ordinary debt securities in that we will not necessarily repay the full principal
amount of the Notes at maturity. If the Notes are not called, we will repay you the principal amount of your Notes in cash only if the Final Level is greater than or equal to the Downside Threshold, and we will only make that payment at
maturity. If the Notes are not called and the Final Level is less than the Downside Threshold, you will lose some or all of your initial investment in an amount proportionate to the decline in the level of the Underlying Index.
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♦ |
The contingent repayment of principal applies only at maturity — If the Notes are not automatically called, you should be willing to hold your Notes to maturity. If you are
able to sell your Notes prior to maturity in the secondary market, if any, you may have to do so at a loss relative to your initial investment, even if the level of the Underlying Index is above the Downside Threshold.
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♦ |
You may not receive any Contingent Coupons — We will not necessarily make periodic Contingent Coupon payments on the Notes. If the closing level of the Underlying Index on
a Coupon Observation Date is less than the Coupon Barrier, we will not pay you the Contingent Coupon applicable to that Coupon Observation Date. If the closing level of the Underlying Index is less than the Coupon Barrier on each of the
Coupon Observation Dates, we will not pay you any Contingent Coupons during the term of, and you will not receive a positive return on, your Notes. Generally, this non-payment of the Contingent Coupon coincides with a greater risk of
principal loss on your Notes. Accordingly, if we do not pay the Contingent Coupon on the maturity date, you will incur a loss of principal, because the Final Level will be less than the Downside Threshold.
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♦ |
The Call Feature and the Contingent Coupon Feature limit your potential return — The return potential of the Notes is limited to the pre-specified Contingent Coupon Rate,
regardless of the appreciation of the Underlying Index. In addition, the total return on the Notes will vary based on the number of Coupon Observation Dates on which the Contingent Coupon becomes payable prior to maturity or an automatic
call. Further, if the Notes are called due to the automatic call feature, you will not receive any Contingent Coupons or any other payment in respect of any Coupon Observation Dates after the applicable Call Settlement Date. Since the Notes
could be called as early as July 27, 2021, the total return on the Notes could be minimal. If the Notes are not called, you may be subject to the full downside performance of the Underlying Index, even though your potential return is
limited to the Contingent Coupon Rate. Generally, the longer the Notes are outstanding, the less likely it is that they will be automatically called due to the decline in the level of the Underlying Index and the shorter time remaining for
the level of the Underlying Index to recover. As a result, the return on an investment in the Notes could be less than the return on a direct investment in the equity securities composing the Underlying Index or on a similar security that
allows you to participate in the appreciation of the level of the Underlying Index.
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♦ |
The Contingent Coupon Rate reflects in part the volatility of the Underlying Index and may not be sufficient to compensate you for the risk of loss at maturity —
“Volatility” refers to the frequency and magnitude of changes in the level of the Underlying Index. The greater the volatility of the Underlying Index, the more likely it is that the level of the Underlying Index could close below the
Downside Threshold on the Final Valuation Date. This risk is generally reflected in a higher Contingent Coupon Rate for the Notes than the interest rate payable on our conventional debt securities with a comparable term. However, while the
Contingent Coupon is a fixed amount, the Underlying Index’s volatility can change significantly over the term of the Notes. The level of the Underlying Index could fall sharply as of the Final Valuation Date, which could result in missed
Contingent Coupon payments and a significant loss of your principal amount.
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♦ |
The Notes may be called early and are subject to reinvestment risk — The Notes will be called automatically if the closing level of the Underlying Index is greater than or
equal to the Initial Level on any Call Observation Date (beginning 6 months after the Trade Date). In the event that the Notes are called prior to maturity, there is no guarantee that you will be able to reinvest the proceeds from an
investment in the Notes at a comparable rate of return for a similar level of risk. To the extent you are able to reinvest your proceeds in an investment comparable to the Notes, you will incur transaction costs and the original issue price
for such an investment is likely to include certain built in costs such as dealer discounts and hedging costs.
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♦ |
You will not participate in any appreciation of the Underlying Index, and any potential return on the Notes is limited. — The return on the Notes is limited to the
pre-specified Contingent Coupon Rate, regardless of the appreciation of the Underlying Index. As a result, the return on an investment in the Notes could be less than the return on a direct investment in the Underlying Index. In addition,
the total return on the Notes will vary based on the number of Coupon Observation Dates on which the Contingent Coupon becomes payable prior to maturity or an automatic call. Further, if the Notes are called due to the automatic call
feature, you will not receive any Contingent Coupons or any other payment in respect of any Coupon Observation Dates after the applicable Call Settlement Date. Since the Notes could be called as early as the second Coupon Observation Date,
the total return on the Notes could be minimal. On the other hand, if the Notes have not been previously called and if the level of the Underlying Index is less than the Initial Level, as the maturity date approaches and the remaining
number of Coupon Observation Dates decreases, the Notes are less likely to be automatically called, as there will be a shorter period of time remaining for the level of the Underlying Index to increase to the Initial Level. If the Notes are
not called, you will be subject to the Underlying Index’ risk of decline.
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♦ |
Your return on the Notes may be lower than the return on a conventional debt security of comparable 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. Your investment may not reflect the full opportunity cost to you when you take into account factors that affect the time value of money, such as inflation.
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♦ |
Your return on the Notes will not reflect dividends on the equity securities composing the Underlying Index. — The return on the Notes will not reflect the return you would
realize if you actually owned the equity securities composing the Underlying Index and received the dividends paid on those equity securities. The Final Level and the determination of the amount to be paid at maturity or upon an automatic
call will not take into consideration the value of those dividends.
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♦ |
The determination of the payments on the Notes, and whether they are subject to an automatic call, does not take into account all developments in the level of the Underlying Index
— Changes in the level of the Underlying Index during the periods between each Coupon Observation Date may not be reflected in the determination as to whether the Contingent Coupon is payable to you on any Coupon Payment Date or whether the
Notes are subject to an automatic call, or the calculation of the amount payable, if any, at maturity. The calculation agent will determine whether (i) the Contingent Coupon is payable to you on any quarterly Coupon Payment Date or (ii) the
Notes are automatically called on any quarterly Call Observation Date by observing only the closing level of the Underlying Index on each Coupon Observation Date. The calculation agent will calculate the payment at maturity by comparing
only the closing level of the Underlying Index on the Final Valuation Date relative to the Initial Level. No other levels will be taken into account. As a result, you may lose some or all of your principal amount even if the level of the
Underlying Index has risen at certain times during the term of the Notes before falling to a level below the Downside Threshold on the Final Valuation Date.
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♦ |
The Notes are subject to our credit risk — The Notes are subject to our credit risk, and our credit ratings and credit spreads may adversely affect the market value of the
Notes. Investors are dependent on our ability to pay all amounts due on the Notes, and therefore investors are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or
increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the Notes. If we were to default on our payment obligations, you may not receive any amounts owed to you under the
Notes and you could lose your entire investment.
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♦ |
The Notes will be subject to risks, including non-payment in full, under Canadian bank resolution powers — Under Canadian bank resolution powers, the Canada Deposit
Insurance Corporation (“CDIC”) may, in circumstances where we have ceased, or are about to cease, to be viable, assume temporary control or ownership over us and may be granted broad powers by one or more orders of the Governor in Council
(Canada), including the power to sell or dispose of all or a part of our assets, and the power to carry out or cause us to carry out a transaction or a series of transactions the purpose of which is to restructure our business. See
“Description of Debt Securities - Canadian Bank Resolution Powers” in the accompanying prospectus for a description of the Canadian bank resolution powers, including the bail-in regime. If the CDIC were to take action under the Canadian
bank resolution powers with respect to us, holders of the Notes could be exposed to losses.
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♦ |
Non-U.S. investors may be subject to certain additional risks — This document contains a general description of certain U.S. tax considerations relating to the Notes. In
the event you are a non-U.S. investor, you should consult your tax advisors as to the consequences, under the tax laws of the country where you are a resident for tax purposes, of acquiring, holding and disposing of the Notes and receiving
the payments that might be due under the Notes.
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♦ |
Significant aspects of the income tax treatment of an investment in the Notes may be uncertain — The tax treatment of an investment in the Notes is uncertain. We do not
plan to request a ruling from the Internal Revenue Service (the “IRS”) or the Canada Revenue Agency regarding the tax treatment of an investment in the Notes, and the IRS, the Canada Revenue Agency or a court may not agree with the tax
treatment described in this document.
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♦ |
The initial estimated value of the Notes is less than the price to the public — The initial estimated value for the Notes that is set forth on the cover page of this
pricing supplement is less than the public offering price you pay for the Notes, and does not represent a minimum price at which we, RBCCM or any of our other affiliates would be willing to purchase the Notes in any secondary market (if any
exists) at any time. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the level of the
Underlying Index, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to public of our estimated profit and the costs relating to our hedging of the Notes. These factors, together with various credit,
market and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable ways. Assuming
no change in market conditions or any other relevant factors, the price, if any, at which you may be able to sell your Notes prior to maturity may be less than the price to public, as any such sale price would not be expected to include our
estimated profit and the costs relating to our hedging of the Notes. In addition, any price at which you may sell the Notes is likely to reflect customary bid-ask spreads for similar trades. In addition to bid-ask spreads, the value of the
Notes determined for any secondary market price is expected to be based on a secondary market rate rather than the internal borrowing rate used to price the Notes and determine the initial estimated value. As a result, the secondary market
price will be less than if the internal borrowing rate was used. The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
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♦ |
Our initial estimated value of the Notes is an estimate only, calculated as of the time the terms of the Notes were set — The initial estimated value of the Notes is based
on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See “Structuring the Notes” below. Our estimate is based on a variety of assumptions,
including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are based on certain forecasts about future events, which may prove to be incorrect. Other
entities may value the Notes or similar securities at a price that is significantly different than we do.
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♦ |
If you sell the Notes prior to maturity, you may receive less than the principal amount. — If the Notes are not automatically called, you should be willing to hold the
Notes until maturity. If you are able to sell the Notes in the secondary market prior to maturity, you may have to sell them for a loss relative to the principal amount, even if the level of the Underlying Index is above the Downside
Threshold. In addition, you will not receive the benefit of any contingent repayment of principal associated with the Downside Threshold if you sell the Notes before the maturity date. The potential returns described in this document assume
that the Notes, which are not designed to be short-term trading instruments, are held to maturity.
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♦ |
If the level of the Underlying Index changes, the market value of the Notes may not change in the same manner. — Owning the Notes is not the same as owning the securities
composing the Underlying Index. Accordingly, changes in the level of the Underlying Index may not result in a comparable change of the market value of the Notes. If the level of the Underlying Index on any trading day increases above the
Initial Level or Coupon
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♦ |
The Notes are not designed to be short-term trading instruments — The price at which you will be able to sell the Notes to us or our affiliates prior to maturity, if at
all, may be at a substantial discount from the principal amount of the Notes, even in cases where the closing level of the Underlying Index has appreciated since the Trade Date. In addition, you will not receive the benefit of any
contingent repayment of principal associated with the Downside Threshold if you sell the Notes before the maturity date. The potential returns described in this document assume that the Notes, which are not designed to be short-term trading
instruments, are held to maturity.
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♦ |
Secondary trading in the Notes may be limited — The Notes will not be listed on any securities exchange. RBCCM intends to offer to purchase the Notes in the secondary
market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Notes easily. Because other dealers are not likely to make a secondary market for the Notes,
the price at which you may be able to trade your Notes is likely to depend on the price, if any, at which RBCCM is willing to buy the Notes.
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♦ |
The terms of the Notes were influenced at issuance and their market value prior to maturity will be influenced by many unpredictable factors — Many economic and market
factors influenced the terms of the Notes at issuance and will influence their value prior to maturity or an automatic call. These factors are similar in some ways to those that could affect the value of a combination of instruments that
might be used to replicate the payments on the Notes, including a combination of a bond with one or more options or other derivative instruments. For the market value of the Notes, we expect that, generally, the level of the Underlying
Index on any day will affect the value of the Notes more than any other single factor. However, you should not expect the value of the Notes in the secondary market to vary in proportion to changes in the level of the Underlying Index. The
value of the Notes will be affected by a number of economic and market factors that may either offset or magnify each other, including:
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♦ |
the level of the Underlying Index;
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♦ |
whether the level of the Underlying Index is below the Coupon Barrier or the Downside Threshold;
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♦ |
the actual and expected volatility of the Underlying Index;
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♦ |
the time remaining to maturity of the Notes;
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♦ |
the dividend rates on the securities composing the Underlying Index;
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♦ |
interest and yield rates in the market generally, as well as in the markets of the equity securities composing the Underlying Index;
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♦ |
a variety of economic, financial, political, regulatory or judicial events;
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♦ |
the occurrence of certain events with respect to the Underlying Index that may or may not require an adjustment to the terms of the Notes; and
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♦ |
our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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♦ |
Changes that affect the Underlying Index will affect the market value of the Notes and the payments on the Notes — The policies of the index sponsor concerning the
calculation of the Underlying Index, additions, deletions or substitutions of the components of the Underlying Index and the manner in which changes affecting those components, such as stock dividends, reorganizations or mergers, may be
reflected in the Underlying Index and, therefore, could affect the amounts payable on the Notes, and the market value of the Notes prior to maturity. The amounts payable on the Notes and their market value could also be affected if the
index sponsor changes these policies, for example, by changing the manner in which it calculates the Underlying Index, or if the index sponsor discontinues or suspends calculation or publication of the Underlying Index, in which case it may
become difficult to determine the market value of the Notes.
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♦ |
We have no affiliation with the index sponsor and will not be responsible for any actions taken by the index sponsor — The index sponsor is not an affiliate of ours and
will not be involved in the offering of the Notes in
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♦ |
The historical performance of the Underlying Index should not be taken as an indication of its future performance — The level of the Underlying Index will determine the
amount to be paid on the Notes. The historical performance of the Underlying Index does not give an indication of its future performance. As a result, it is impossible to predict whether the level of the Underlying Index will rise or fall
during the term of the Notes. The level of the Underlying Index will be influenced by complex and interrelated political, economic, financial and other factors. The level of the Underlying Index may decrease such that you may not receive
any return on your investment or any Contingent Coupon payments. There can be no assurance that the level of the Underlying Index will not decrease so that at maturity you will not lose some or all of your investment.
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♦ |
You must rely on your own evaluation of the merits of an investment linked to the Underlying Index — In the ordinary course of their business, our affiliates, or UBS or its
affiliates, may have expressed views on expected movements in the Underlying Index or the securities included in the Underlying Index, and may do so in the future. These views or reports may be communicated to our respective clients and
clients of our respective affiliates. However, these views are subject to change from time to time. Moreover, other professionals who transact business in markets relating to the Underlying Index, may at any time have significantly
different views from those of ours, and those of UBS and its affiliates. For these reasons, you are encouraged to derive information concerning the Underlying Index from multiple sources, and you should not rely solely on views expressed by
us, UBS or our respective affiliates.
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♦ |
We, UBS or our respective affiliates may have adverse economic interests to the holders of the Notes — RBCCM, UBS and our respective affiliates trade the securities
represented by the Underlying Index, and other financial instruments related to the Underlying Index, on a regular basis, for their accounts and for other accounts under our or their management. UBS, RBCCM and these affiliates may also
issue or underwrite or assist unaffiliated entities in the issuance or underwriting of other securities or financial instruments that relate to the Underlying Index. To the extent that we, UBS or any of our respective affiliates serves as
issuer, agent or underwriter for such securities or financial instruments, our or their interests with respect to such products may be adverse to those of the holders of the Notes. Any of these trading activities could potentially affect
the performance of the Underlying Index and, accordingly, could affect the value of the Notes, and the amounts, if any, payable on the Notes.
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♦ |
The calculation agent will have significant discretion with respect to the Notes, which may be exercised in a manner that is adverse to your interests — Our wholly-owned
subsidiary, RBCCM, will act as the calculation agent. The calculation agent will determine, among other things, the closing level of the Underlying Index on each Coupon Observation Date, if any; whether the Notes are subject to an automatic
call; the Final Level; the Underlying Index Return, and the amounts, if any, that we will pay to you on the Notes. The calculation agent will also be responsible for determining whether a market disruption event has occurred. The
calculation agent may exercise its discretion in a manner which reduces your return on the Notes. Since these determinations by the calculation agent may affect the payments on the Notes, the calculation agent may have a conflict of
interest if it needs to make a determination of this kind.
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♦ |
Market disruptions may adversely affect your return — The calculation agent may, in its sole discretion, determine that the markets have been affected in a manner that
prevents it from properly determining the closing level of the Underlying Index on any Coupon Observation Date or calculating the Underlying Index Return and the amount, if any, that we are required to pay you. These events may include
disruptions or suspensions of trading in the markets as a whole. If the calculation agent, in its sole discretion, determines that any of these events prevents us or any of our affiliates from properly hedging our obligations under the
Notes, it is possible that one or more of the Coupon Observation Dates and the maturity date will be postponed, and your return will be adversely affected. See “General Terms of the Notes—Market Disruption Events.”
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Use of Proceeds and Hedging
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♦
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acquire or dispose of investments relating to the Underlying Index;
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♦
|
acquire or dispose of long or short positions in listed or over-the-counter derivative instruments related to
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♦
|
the Underlying Index; or
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♦
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any combination of the above two.
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Hypothetical Examples
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Principal Amount:
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$10
|
Term:
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Approximately two years
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Contingent Coupon Rate:
|
9.18% per annum (or 2.295% per quarter)
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Contingent Coupon*:
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$0.2295 per quarter
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Coupon Observation Dates:
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Quarterly
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Call Observation Dates:
|
Quarterly (callable after 6 months)
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Hypothetical Initial Level**:
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1,000.00
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Hypothetical Coupon Barrier**:
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750.00 (which is 75% of the Initial Level)
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Hypothetical Downside Threshold**:
|
750.00 (which is 75% of the Initial Level)
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Date
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Closing Level
|
Payment (per Note)
|
First Coupon Observation Date
|
1,100.00 (at or above Initial Level)
|
$0.2295 (Contingent Coupon – Not callable)
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Second Coupon Observation Date
|
1,200.00 (at or above Initial Level)
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$10.2295 (Call Settlement Amount)
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Total Payment:
|
$10.459 (4.59% return)
|
Date
|
Closing Level
|
Payment (per Note)
|
First Coupon Observation Date
|
850.00 (at or above Coupon Barrier; below Initial Level)
|
$0.2295 (Contingent Coupon – Not callable)
|
Second Coupon Observation Date
|
860.00 (at or above Coupon Barrier; below Initial Level)
|
$0.2295 (Contingent Coupon – not called)
|
Third Coupon Observation Date
|
1,005.00 (at or above Initial Level)
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$10.2295 (Call Settlement Amount)
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Total Payment:
|
$10.6885 (6.885% return)
|
Date
|
Closing Level
|
Payment (per Note)
|
First Coupon Observation Date
|
900.00 (at or above Coupon Barrier; below Initial Level)
|
$0.2295 (Contingent Coupon – Not callable)
|
Second Coupon Observation Date
|
650.00 (below Coupon Barrier)
|
$0.00 (Notes are not called)
|
Third Coupon Observation Date
|
900.00 (at or above Coupon Barrier; below Initial Level)
|
$0.2295 (Contingent Coupon – Notes are not called)
|
Fourth Coupon Observation Date
|
900.00 (at or above Coupon Barrier; below Initial Level)
|
$0.2295 (Contingent Coupon – Notes are not called)
|
Fifth through Seventh Coupon Observation Dates
|
Various (below Coupon Barrier)
|
$0.00 (Notes are not called)
|
Final Valuation Date
|
850.00 (at or above Downside Threshold and Coupon Barrier; below Initial Level)
|
$10.2295 (Payment at Maturity)
|
Total Payment:
|
$10.918 (9.18% return)
|
Date
|
Closing Level
|
Payment (per Note)
|
First Coupon Observation Date
|
900.00 (at or above Coupon Barrier; below Initial Level)
|
$0.2295 (Contingent Coupon – Not callable)
|
Second Coupon Observation Date
|
900.00 (at or above Coupon Barrier; below Initial Level)
|
$0.2295 (Contingent Coupon – Notes are not called)
|
Third Coupon Observation Date
|
950.00 (at or above Coupon Barrier; below Initial Level)
|
$0.2295 (Contingent Coupon – Notes are not called)
|
Fourth through Seventh Coupon Observation Dates
|
Various (below Coupon Barrier)
|
$0.00 (Notes are not called)
|
Final Valuation Date
|
350.00 (below Downside Threshold and Coupon Barrier)
|
$10.00 + [$10.00 × Underlying Return] =
$10.00 + [$10.00 × -65%] =
$10.00 - $6.50 =
$3.50 (Payment at Maturity)
|
Total Payment:
|
$4.1885 (-58.115% return)
|
What Are the Tax Consequences of the Notes?
|
The S&P 500® Index
|
![]() ■ Coupon Barrier / Downside Threshold = 75% of the Initial Level
|
General Terms of the Notes
|
• |
a suspension, absence or material limitation of trading of equity securities then constituting 20% or more of the level of the Underlying Index (or the relevant successor index) on the relevant exchanges (as
defined below) for such securities for more than two hours of trading during, or during the one hour period preceding the close of, the principal trading session on such relevant exchange; or
|
• |
a breakdown or failure in the price and trade reporting systems of any relevant exchange as a result of which the reported trading prices for equity securities then constituting 20% or more of the level of the
Underlying Index (or the relevant successor index) during the one hour preceding the close of the principal trading session on such relevant exchange are materially inaccurate; or
|
• |
a suspension, absence or material limitation of trading on the primary exchange or market for trading in futures or options contracts related to the Underlying Index (or the relevant successor index) for more
than two hours of trading during, or during the one hour period preceding the close of, the principal trading session on such exchange or market; or
|
• |
a decision to permanently discontinue trading in the relevant futures or options contracts;
|
• |
a determination by the calculation agent in its sole discretion that the event described above materially interfered with our ability or the ability of any of our affiliates to adjust or unwind all or a material
portion of any hedge with respect to the Notes.
|
• |
the portion of the level of the Underlying Index (or the relevant successor index) attributable to that security relative to
|
• |
the overall level of the Underlying Index (or the relevant successor index),
|
◾ |
a limitation on the hours or number of days of trading will not constitute a market disruption event if it results from an announced change in the regular business hours of the relevant exchange, or the primary
exchange or market for trading in futures or options contracts related to the Underlying Index (or the relevant successor index);
|
◾ |
limitations pursuant to the rules of any relevant exchange similar to NYSE Rule 80B (or any applicable rule or regulation enacted or promulgated by any other self-regulatory organization or any government agency
of scope similar to NYSE Rule 80B as determined by the calculation agent) on trading during significant market fluctuations will constitute a suspension, absence or material limitation of trading;
|
◾ |
a suspension of trading in futures or options contracts on the Underlying Index (or the relevant successor index) by the primary exchange or market trading in such contracts by reason of
|
• |
a price change exceeding limits set by such exchange or market,
|
• |
an imbalance of orders relating to such contracts, or
|
• |
a disparity in bid and ask quotes relating to such contracts
|
• |
a “suspension, absence or material limitation of trading” on any relevant exchange or on the primary exchange or market on which futures or options contracts related to the Underlying Index (or the relevant
successor index) are traded will not include any time when such exchange or market is itself closed for trading under ordinary circumstances.
|
(i)
|
with whom we do not deal at arm’s length (within the meaning of the Income Tax Act (Canada)) at the time of making such payment;
|
(ii)
|
who is subject to such taxes by reason of the holder being connected presently or formerly with Canada or any province or territory thereof otherwise than by reason of the holder’s activity in connection with
purchasing the Notes, the holding of Notes or the receipt of payments thereunder;
|
(iii)
|
who is, or who does not deal at arm’s length with a person who is, a “specified shareholder” (within the meaning of subsection 18(5) of the Income Tax Act (Canada)) of Royal Bank of Canada
(generally a person will be a “specified
|
(iv)
|
who presents such Note for payment (where presentation is required, such as if a Note is issued in definitive form) more than 30 days after the relevant date; for this purpose, the “relevant date” in relation
to any payments on any Note means:
|
a.
|
the due date for payment thereof (whether at maturity or upon an earlier acceleration), or
|
b.
|
if the full amount of the monies payable on such date has not been received by the trustee on or prior to such due date, the date on which the full amount of such monies has been received and notice to that
effect is given to holders of the Notes in accordance with the indenture;
|
(v)
|
who could lawfully avoid (but has not so avoided) such withholding or deduction by complying, or procuring that any third party comply with, any statutory requirements necessary to establish qualification for
an exemption from withholding or by making, or procuring that any third party make, a declaration of non-residence or other similar claim for exemption to any relevant tax authority; or
|
(vi)
|
who is subject to deduction or withholding on account of any tax, assessment, or other governmental charge that is imposed or withheld by reason of the application of Section 1471 through 1474 of the United
States Internal Revenue Code of 1986, as amended (the “Code”) (or any successor provisions), any regulation, pronouncement, or agreement thereunder, official interpretations thereof, or any law implementing an intergovernmental approach
thereto, whether currently in effect or as published and amended from time to time.
|
Supplemental Plan of Distribution (Conflicts of Interest)
|
Structuring the Notes
|
Employee Retirement Income Security Act
|
Terms Incorporated in Master Note
|
Validity of the Notes
|