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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-227001 (To Prospectus dated September 7, 2018, Prospectus Supplement dated September 7, 2018 and Product Supplement EQUITY ARN-1 dated September 30, 2019)
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475,336 Units $10 principal amount per unit CUSIP No. 78014T668  |
Pricing Date
Settlement Date Maturity Date |
January 28, 2021
February 4, 2021 March 25, 2022 |
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Accelerated Return Notes® Linked to the iShares® Silver Trust
■ Maturity of approximately 14 months
■ 3-to-1 upside exposure to increases in the iShares® Silver Trust
(the “Market Measure”), subject to a capped return of 47.10%
■ 1-to-1 downside exposure to decreases in the Market Measure, with 100% of
your principal at risk
■ All payments occur at maturity and are subject to the credit risk of Royal
Bank of Canada
■ No periodic interest payments
■ In addition to the underwriting discount set forth below, the notes include
a hedging-related charge of $0.05 per unit. See “Structuring the Notes”
■ Limited secondary market liquidity, with no exchange listing
■ The notes are unsecured debt securities and are not savings accounts or
insured deposits of a bank. The notes are not insured or guaranteed by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation, or any other governmental agency of Canada or the United States
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The notes are being issued by Royal Bank of Canada (“RBC”). There are important differences between the notes and a conventional debt security, including different investment risks
and certain additional costs. See “Risk Factors” and “Additional Risk Factors” beginning on page TS-6 of this term sheet and beginning on page PS-6 of product supplement EQUITY ARN-1.
The initial estimated value of the notes as of the pricing date is $9.3971 per unit, which is less than the public offering
price listed below. See “Summary” on the following page, “Risk Factors” beginning on page TS-6 of this term sheet and “Structuring the Notes” on page TS-12 of this term sheet for additional information. The actual value of your notes at any
time will reflect many factors and cannot be predicted with accuracy.
None of the Securities and Exchange Commission (the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined if this Note Prospectus (as defined below) is truthful or
complete. Any representation to the contrary is a criminal offense.
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Per Unit
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Total
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Public offering price
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$10.000
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$4,753,360.00
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Underwriting discount
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$0.175
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$ 83,183.80
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Proceeds, before expenses, to RBC
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$9.825
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$4,670,176.20
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The notes:
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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BofA Securities
January 28, 2021
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Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
Summary
The Accelerated Return Notes® Linked to the iShares® Silver Trust, due March 25, 2022 (the “notes”) are our senior unsecured debt securities. The notes are not guaranteed or insured
by the Canada Deposit Insurance Corporation or the U.S. Federal Deposit Insurance Corporation or secured by collateral. The notes will rank equally with all of our other unsecured and unsubordinated debt. Any payments
due on the notes, including any repayment of principal, will be subject to the credit risk of RBC. The notes are not bail-inable notes (as defined in the prospectus supplement). The notes provide
you a leveraged return, subject to a cap, if the Ending Value of the Market Measure, which are shares of the iShares® Silver Trust (the “Underlying Fund”), is greater than the Starting Value. If the Ending Value is less than the Starting
Value, you will lose all or a portion of the principal amount of your notes. Any payments on the notes will be calculated based on the $10 principal amount per unit and will depend on the performance of the Market Measure, subject to our credit risk.
See “Terms of the Notes” below.
The economic terms of the notes (including the Capped Value) are based on our internal funding rate, which is the rate we would pay to borrow funds through the issuance of market-linked notes and the
economic terms of certain related hedging arrangements. Our internal funding rate is typically lower than the rate we would pay when we issue conventional fixed or floating rate debt securities. This difference in funding rate, as well as the
underwriting discount and the hedging related charge described below, reduced the economic terms of the notes to you and the initial estimated value of the notes on the pricing date. Due to these factors, the public offering price you pay to purchase
the notes is greater than the initial estimated value of the notes.
On the cover page of this term sheet, we have provided the initial estimated value for the notes. This initial estimated value was determined based on our and our affiliates’ pricing models, which take
into consideration our internal funding rate and the market prices for the hedging arrangements related to the notes. For more information about the initial estimated value and the structuring of the notes, see “Structuring the Notes” on page TS-12.
Terms of the Notes
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Issuer:
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Royal Bank of Canada (“RBC”)
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Principal Amount:
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$10.00 per unit
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Term:
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Approximately 14 months
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Market Measure:
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The iShares® Silver Trust (Bloomberg symbol: “SLV”)
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Starting Value:
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$24.72
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Ending Value:
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The average of the Closing Market Prices of the Market Measure times the Price Multiplier on each calculation day occurring during the Maturity Valuation Period. The
scheduled calculation days are subject to postponement in the event of Market Disruption Events, as described on page PS-23 of product supplement EQUITY ARN-1.
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Price Multiplier:
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1, subject to adjustment for certain events relating to the Market Measure, as described beginning on page PS-26 of product supplement EQUITY ARN-1.
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Participation Rate:
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300%
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Capped Value:
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$14.71 per unit, which represents a return of 47.10% over the principal amount.
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Maturity Valuation
Period:
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March 16, 2022, March 17, 2022, March 18, 2022, March 21, 2022 and March 22, 2022.
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Fees and Charges:
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The underwriting discount of $0.175 per unit listed on the cover page and the hedging related charge of $0.05 per unit described in “Structuring the Notes” on page TS-12.
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Calculation Agent:
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BofA Securities, Inc. (“BofAS”).
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Redemption Amount Determination
On the maturity date, you will receive a cash payment per unit determined as follows:
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Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
The terms and risks of the notes are contained in this term sheet and in the following:
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Product supplement EQUITY ARN-1 dated September 30, 2019:
https://www.sec.gov/Archives/edgar/data/1000275/000114036119017583/form424b5.htm |
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Series H MTN prospectus supplement dated September 7, 2018:
https://www.sec.gov/Archives/edgar/data/1000275/000121465918005975/f97180424b3.htm |
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Prospectus dated September 7, 2018:
https://www.sec.gov/Archives/edgar/data/1000275/000121465918005973/l96181424b3.htm |
As a result of the completion of the reorganization of Bank of America’s U.S. broker-dealer business, references to Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) in the accompanying prospectus
supplement, as such references relate to MLPF&S’s institutional services, should be read as references to BofAS.
These documents (together, the “Note Prospectus”) have been filed as part of a registration statement with the SEC, which may, without cost, be accessed on the SEC website as indicated above or obtained
from MLPF&S or BofAS by calling 1-800-294-1322. Before you invest, you should read the Note Prospectus, including this term sheet, for information about us and this offering. Any prior or contemporaneous oral statements and any other written
materials you may have received are superseded by the Note Prospectus. Capitalized terms used but not defined in this term sheet have the meanings set forth in product supplement EQUITY ARN-1. Unless otherwise indicated or unless the context requires
otherwise, all references in this document to “we,” “us,” “our,” or similar references are to RBC.
Investor Considerations
You may wish to consider an investment in the notes if:
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You anticipate that the Market Measure will increase moderately from the Starting Value to the Ending Value.
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You are willing to risk a loss of principal and return if the Market Measure decreases from the Starting Value to the Ending Value.
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You accept that the return on the notes will be capped.
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You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
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You are willing to forgo the benefits of directly owning shares of the Underlying Fund or the commodity held by the Underlying Fund.
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You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our actual and perceived creditworthiness, our
internal funding rate and fees and charges on the notes.
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You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.
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The notes may not be an appropriate investment for you if:
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You believe that the Market Measure will decrease from the Starting Value to the Ending Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return.
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You seek principal repayment or preservation of capital.
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You seek an uncapped return on your investment.
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You seek interest payments or other current income on your investment.
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You want to have the benefits of directly owning shares of the Underlying Fund or the commodity held by the Underlying Fund.
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You seek an investment for which there will be a liquid secondary market.
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You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.
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We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
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Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
Hypothetical Payout Profile and Examples of Payments at Maturity
Accelerated Return Notes®
This graph reflects the returns on the notes, based on the Participation Rate of 300% and the Capped Value of $14.71 per unit. The green line reflects the returns on the notes, while the dotted
gray line reflects the returns of a direct investment in the Market Measure.
This graph has been prepared for purposes of illustration only.
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The following table and examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical returns on the notes. They
illustrate the calculation of the Redemption Amount and total rate of return based on a hypothetical Starting Value of 100, the Participation Rate of 300%, the Capped Value of $14.71 per unit and a range of hypothetical Ending Values. The actual amount you receive and the resulting total rate of return will depend on the actual Starting Value, Ending Value, and whether you hold the notes to maturity. The following examples do not take into
account any tax consequences from investing in the notes.
For recent actual prices of the Market Measure, see “The Underlying Fund” section below. All payments on the notes are subject to issuer credit risk.
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Ending Value
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Percentage Change from the
Starting Value to the Ending
Value
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Redemption Amount per
Unit
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Total Rate of Return on the
Notes
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0.00
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-100.00%
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$0.00
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-100.00%
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50.00
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-50.00%
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$5.00
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-50.00%
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80.00
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-20.00%
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$8.00
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-20.00%
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90.00
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-10.00%
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$9.00
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-10.00%
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94.00
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-6.00%
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$9.40
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-6.00%
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97.00
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-3.00%
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$9.70
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-3.00%
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100.00(1)
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0.00%
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$10.00
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0.00%
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102.00
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2.00%
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$10.60
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6.00%
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105.00
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5.00%
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$11.50
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15.00%
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110.00
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10.00%
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$13.00
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30.00%
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115.70
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15.70%
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$14.71(2)
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47.10%
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120.00
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20.00%
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$14.71
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47.10%
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130.00
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30.00%
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$14.71
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47.10%
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140.00
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40.00%
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$14.71
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47.10%
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150.00
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50.00%
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$14.71
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47.10%
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160.00
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60.00%
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$14.71
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47.10%
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The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes only. The actual Starting Value is 24.72, which was the Closing Market Price of the Market
Measure on the pricing date.
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The Redemption Amount per unit cannot exceed the Capped Value.
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Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
Redemption Amount Calculation Examples
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Example 1
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The Ending Value is 80.00, or 80.00% of the Starting Value:
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Starting Value:
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100.00 |
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Ending Value:
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80.00 |
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= $8.00 Redemption Amount per unit
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Example 2
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The Ending Value is 103.00, or 103.00% of the Starting Value:
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Starting Value:
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100.00 |
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Ending Value:
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103.00 |
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= $10.90 Redemption Amount per unit
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Example 3
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The Ending Value is 130.00, or 130.00% of the Starting Value:
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Starting Value:
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100.00 |
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Ending Value:
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130.00 |
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= $19.00, however, because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $14.71 per unit
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Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
Risk Factors
There are important differences between the notes and a conventional debt security. An investment in the notes involves significant risks, including those listed below. You should carefully review the
more detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page PS-6 of product supplement EQUITY ARN-1, page S-1 of the MTN prospectus supplement, and page 1 of the prospectus identified above. We also urge
you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
Structure-related Risks
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Depending on the performance of the Market Measure as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
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Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
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Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your
entire investment.
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Your investment return is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the Market Measure or the commodity held by the Underlying Fund.
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Valuation and Market-related Risks
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The initial estimated value of the notes is an estimate only, determined as of a particular point in time by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including
our credit spreads, our internal funding rate on the pricing date, mid-market terms on hedging transactions, expectations on interest rates and volatility, price-sensitivity analysis, and the expected term of the notes. These pricing models
rely in part on certain forecasts about future events, which may prove to be incorrect.
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The public offering price you pay for the notes exceeds the initial estimated value. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for them and lower than the initial estimated
value. This is due to, among other things, changes in the value of the Market Measure, our internal funding rate, and the inclusion in the public offering price of the underwriting discount and the hedging related charge, all as further
described in “Structuring the Notes” on page TS-12. These factors, together with various credit, market and economic factors over the term of the notes, are expected to reduce the price at which you may be able to sell the notes in any
secondary market and will affect the value of the notes in complex and unpredictable ways.
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The initial estimated value does not represent a minimum or maximum price at which we, MLPF&S, BofAS or any of our affiliates would be willing to purchase your notes in any secondary market (if any exists) at any time. The value of
your notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Market Measure, our creditworthiness and changes in market conditions.
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A trading market is not expected to develop for the notes. None of us, MLPF&S or BofAS is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at any
price in any secondary market.
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Conflict-related Risks
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Our business, hedging and trading activities, and those of MLPF&S, BofAS and our respective affiliates (including trades in shares of the Underlying Fund or the commodity held by the Underlying Fund), and any hedging and trading
activities we, MLPF&S, BofAS or our respective affiliates engage in for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with you.
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There may be potential conflicts of interest involving the calculation agent, which is BofAS. We have the right to appoint and remove the calculation agent.
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Market Measure-related Risks
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The sponsor and trustee of the Underlying Fund may adjust the Underlying Fund in a way that could adversely affect the value of the notes and the amount payable on the notes, and these entities have no obligation to consider your
interests.
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You will have no rights of a holder of the Underlying Fund or the commodity held by the Underlying Fund, and you will not be entitled to receive shares of the Underlying Fund or any of the silver held by the Underlying Fund.
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While we, MLPF&S, BofAS or our respective affiliates may from time to time own the Market Measure or the commodity held by the Underlying Fund, we, MLPF&S, BofAS and our respective affiliates do not control the Underlying Fund, and
have not verified any disclosure made by any other company.
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There are liquidity and management risks associated with the Underlying Fund.
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The performance of the Market Measure may not correlate with the performance of the commodity held by the Underlying Fund as well as the net asset value per share of the Underlying Fund, especially during periods of market volatility when
the
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Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
liquidity and the market price of shares of the Underlying Fund and/or the commodity held by the Underlying Fund may be adversely affected, sometimes materially.
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If the liquidity of the commodity held by the Underlying Fund is limited, the value of the Market Measure and, therefore, the return on the notes would likely be impaired.
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Suspension or disruptions of market trading in the commodity held by the Underlying Fund may adversely affect the value of your notes.
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The notes will not be regulated by the U.S. Commodity Futures Trading Commission.
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The payments on the notes will not be adjusted for all corporate events that could affect the Underlying Fund. See “Description of the ARNs—Anti Dilution and Discontinuance Adjustments Relating to Underlying Funds” beginning on page PS-26
of product supplement EQUITY ARN-1.
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Tax-related Risks
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The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See “Summary of U.S. Federal Income Tax Consequences” below and “U.S. Federal Income Tax Summary” beginning on page PS-41 of
product supplement EQUITY ARN-1. For a discussion of the Canadian federal income tax consequences of investing in the notes, see “Tax Consequences—Canadian Taxation” in the prospectus dated September 7, 2018.
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Additional Risk Factors
The performance of the SLV may be adversely influenced by silver prices, which may change unpredictably and adversely affect the value of the notes in unforeseeable ways.
The SLV primarily holds silver. Although there is no direct correlation between the price of the SLV, on the one hand, and silver prices, on the other hand, and the price of the SLV is not necessarily
representative of silver price, the prices of the SLV may be adversely affected by silver prices. Those prices are subject to volatile price movements over short periods of time, represent trading in commodities markets, which are substantially
different from equities markets, and are affected by numerous factors including but not limited to the following:
| • |
a change in economic conditions, such as a recession, can adversely affect the price of silver. Silver is used in a wide range of industrial applications, and an economic downturn could have a negative impact
on its demand and, consequently, its price and the price of the SLV;
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a significant increase in silver hedging activity by silver producers;
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changes in the attitude of speculators and investors towards silver;
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global silver supply and demand, which is influenced by such factors as silver’s uses in jewelry, technology and industrial applications, purchases made by investors in the form of bars, coins and other silver
products, forward selling by silver producers, purchases made by silver producers to unwind silver hedge positions, central bank purchases and sales, and production and cost levels in major silver-producing countries such as China, Mexico and
Peru;
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global or regional political, economic or financial events and situations;
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investors’ expectations with respect to the rate of inflation;
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interest rates;
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| • |
investment and trading activities of hedge funds and commodity funds;
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other economic variables such as income growth, economic output, and monetary policies; and
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investor confidence.
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It is not possible to predict the aggregate effects of all or any combination of these factors. Any negative developments with respect to these factors may have an adverse effect on silver prices and,
as a result, on the prices of the SLV. In addition, the value of the notes may be subject to greater volatility and be more adversely affected by a single economic, political or regulatory occurrence affecting silver prices than a different
investment linked to a more broadly diversified group of commodities. All of these factors could adversely affect the price of the SLV and, therefore, the return on the notes.
There are risks associated with the LBMA Silver Price.
The Silver held by the SLV is valued based upon the “BMA Silver Price”. The LBMA Silver Price is a silver price benchmark mechanism administered by ICE Benchmark Administration (“IBA”), an independent specialist benchmark
administrator appointed by London Bullion Market Association. Once daily during London business hours, IBA hosts an electronic auction. Electronic markets are not exempt from failures. In addition, electronic trading platforms may be subject to
influence by high-frequency traders with results that are highly contested by the industry, regulators and market observers. It is possible that electronic failures or other unanticipated events may occur that could result in delays in the
announcement of, or the inability of the system to produce, an LBMA Silver Price on any given day. Furthermore, if a perception were to develop that the LBMA Silver Price is vulnerable to manipulation attempts, or if the proceedings surrounding the
determination and publication of the LBMA Silver Price were seen as unfair, biased or otherwise
|
Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
compromised by the markets, the behavior of investors and traders in silver may change, and those changes may have an effect on the price of silver (and, consequently, the value of the SLV). In any of these circumstances,
the intervention of extraneous events disruptive of the normal interaction of supply and demand of silver at any given time, may result in distorted prices and losses in value of the SLV that, but for such extraneous events, might not have occurred.
The LBMA may alter, discontinue or suspend calculation or dissemination of the LBMA silver price, which could adversely affect the value of the notes. The LBMA, or an independent service provider appointed by the LBMA, will have no obligation to
consider your interests in calculating or revising the LBMA silver price. All of these factors could adversely affect the price the SLV and, therefore, the return on the notes.
|
Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
The Underlying Fund
All disclosures contained in this term sheet regarding the Underlying Fund, including, without limitation, its make-up, method of calculation, and changes in its
components, have been derived from publicly available sources. The information reflects the policies of, and is subject to change by, iShares® Delaware Trust Sponsor LLC (“iShares Delaware”), a subsidiary of BlackRock, Inc. the sponsor of the Underlying Fund. iShares Delaware may discontinue the Underlying Fund. The consequences of iShares Delaware discontinuing publication of the Underlying Fund are discussed in the section
entitled “Description of the ARNs—Anti-Dilution and Discontinuance Adjustments Relating to Underlying Funds” beginning on page PS-26 of product supplement EQUITY ARN-1. None of us, the calculation agent, MLPF&S,
or BofAS accepts any responsibility for the calculation, maintenance or publication of the Underlying Fund or any successor Underlying Fund.
The SLV trades under the ticker symbol “SLV” on NYSE Arca, Inc. The Bank of New York Mellon is the trustee of the SLV, and JPMorgan Chase Bank, N.A., London branch is the custodian of the SLV.
The SLV seeks to reflect generally the price of silver before the payment of its expenses and liabilities. The assets of the SLV consist primarily of silver held by the custodian on behalf of the SLV. The SLV issues shares
in exchange for deposits of silver and distributes silver in connection with the redemption of shares. The shares of the SLV are intended to constitute a simple and cost-effective means of making an investment similar to an investment in silver.
The shares of the SLV represent units of fractional undivided beneficial interest in and ownership of the SLV. The SLV is a passive investment vehicle and the trustee of the SLV does not actively manage the silver held by
the SLV. The trustee of the SLV sells silver held by the SLV to pay the SLV’s expenses on an as-needed basis irrespective of then-current silver prices. Currently, the SLV’s only ordinary recurring expense is expected to be iShares Delaware’s fee,
which is accrued daily at an annualized rate equal to 0.50% of the net asset value of the SLV and is payable monthly in arrears. The trustee of the SLV will, when directed by iShares Delaware, and, in the absence of such direction, may, in its
discretion, sell silver in such quantity and at such times as may be necessary to permit payment of iShares Delaware’s fee and of SLV expenses or liabilities not assumed by iShares Delaware.
Information provided to or filed with the SEC by the SLV pursuant to the Securities Act and the Securities Exchange Act of 1934, as amended, can be located by reference to SEC file numbers 333-239613 and 001-32863,
respectively, through the SEC’s website at http://www.sec.gov. The information on that website about SLV is not included or incorporated by reference in this document. According to the SLV’s prospectus, the SLV is not a mutual fund or any other type
of investment company within the meaning of the Investment Company Act and is not subject to regulation thereunder. The SLV is not a commodity pool within the meaning of the Commodity Exchange Act, as amended, and is not subject to regulation
thereunder, and iShares Delaware is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool operator or a commodity trading advisor.
|
Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
The following graph shows the daily historical performance of the Underlying Fund on its primary exchange in the period from January 1, 2011 through January 28, 2021. We obtained
this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On the pricing date, the Closing Market Price of the Underlying Fund was $24.72. The graph below
may have been adjusted to reflect certain corporate actions such as stock splits and reverse stock splits.
This historical data on the Underlying Fund is not necessarily indicative of the future performance of the Underlying Fund or what the value of the notes may be.
Any historical upward or downward trend in the price per share of the Underlying Fund during any period set forth above is not an indication that the price per share of the Underlying Fund is more or less likely to increase or decrease at any time
over the term of the notes.
Before investing in the notes, you should consult publicly available sources for the prices and trading pattern of the Underlying Fund.
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Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
Supplement to the Plan of Distribution
Under our distribution agreement with BofAS, BofAS will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated underwriting discount.
MLPF&S will purchase the notes from BofAS for resale, and will receive a selling concession in connection with the sale of the notes in an amount up to the full amount of underwriting discount set forth on the cover of
this term sheet.
We will deliver the notes against payment therefor in New York, New York on a date that is greater than two business days following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the
secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the notes more than two business days prior to the original issue date
will be required to specify alternative settlement arrangements to prevent a failed settlement.
The notes will not be listed on any securities exchange. In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units. If you place an order to purchase the notes, you are
consenting to MLPF&S and/or one of its affiliates acting as a principal in effecting the transaction for your account.
MLPF&S and BofAS may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices, and these prices will include MLPF&S’s and
BofAS’s trading commissions and mark-ups or mark-downs. MLPF&S and BofAS may act as principal or agent in these market-making transactions; however, neither is obligated to engage in any such transactions. At their discretion, for a short,
undetermined initial period after the issuance of the notes, MLPF&S and BofAS may offer to buy the notes in the secondary market at a price that may exceed the initial estimated value of the notes. Any price offered by MLPF&S or BofAS for the
notes will be based on then-prevailing market conditions and other considerations, including the performance of the Market Measure and the remaining term of the notes. However, none of us, MLPF&S, BofAS or any of our respective affiliates is
obligated to purchase your notes at any price or at any time, and we cannot assure you that we, MLPF&S, BofAS or any of our respective affiliates will purchase your notes at a price that equals or exceeds the initial estimated value of the notes.
The value of the notes shown on your account statement will be based on BofAS’s estimate of the value of the notes if BofAS or another of its affiliates were to make a market in the notes, which it is not obligated to do.
That estimate will be based upon the price that BofAS may pay for the notes in light of then-prevailing market conditions and other considerations, as mentioned above, and will include transaction costs. At certain times, this price may be higher
than or lower than the initial estimated value of the notes.
The distribution of the Note Prospectus in connection with these offers or sales will be solely for the purpose of providing investors with the description of the terms of the notes that was made available to investors in
connection with their initial offering. Secondary market investors should not, and will not be authorized to, rely on the Note Prospectus for information regarding RBC or for any purpose other than that described in the immediately preceding
sentence.
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Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
Structuring the Notes
The notes are our debt securities, the return on which is linked to the performance of the Market Measure. As is the case for all of our debt securities, including our market-linked notes, the economic terms of the notes
reflect our actual or perceived creditworthiness at the time of pricing. In addition, because market-linked notes result in increased operational, funding and liability management costs to us, we typically borrow the funds under these notes at a
rate that is more favorable to us than the rate which we refer to as our internal funding rate, which is the rate that we might pay for a conventional fixed or floating rate debt security. This generally relatively lower internal funding rate, which
is reflected in the economic terms of the notes, along with the fees and charges associated with market-linked notes, resulted in the initial estimated value of the notes on the pricing date being less than their public offering price.
At maturity, we are required to pay the Redemption Amount to holders of the notes, which will be calculated based on the $10 per unit principal amount and will depend on the performance of the Market Measure. In order to
meet these payment obligations, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other derivatives) with BofAS or one of its affiliates. The terms of these
hedging arrangements are determined by seeking bids from market participants, including MLPF&S, BofAS and its affiliates, and take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the
Market Measure, the tenor of the notes and the tenor of the hedging arrangements. The economic terms of the notes and their initial estimated value depend in part on the terms of these hedging arrangements.
BofAS has advised us that the hedging arrangements will include a hedging related charge of approximately $0.05 per unit, reflecting an estimated profit to be credited to BofAS from these transactions. Since hedging
entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be realized by BofAS or any third party hedge providers.
For further information, see “Risk Factors—General Risks Relating to the ARNs” beginning on page PS-6 and “Use of Proceeds and Hedging” on page PS-19 of product supplement EQUITY ARN-1.
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Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
Summary of Canadian Federal Income Tax Consequences
For a discussion of the material Canadian federal income tax consequences relating to an investment in the notes, please see the section entitled “Tax Consequences—Canadian Taxation” in the prospectus dated September 7, 2018.
Summary of U.S. Federal Income Tax Consequences
You should consider the U.S. federal income tax consequences of an investment in the notes, including the following:
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There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes.
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You agree with us (in the absence of a statutory, regulatory, administrative, or judicial ruling to the contrary) to characterize and treat the notes for all tax purposes as pre-paid cash-settled derivative contracts in respect of the
Underlying Fund.
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Under this characterization and tax treatment of the notes, a U.S. holder (as defined on page 41 of the prospectus) generally will recognize capital gain or loss upon the sale or maturity of the notes. This capital gain or loss generally
will be long-term capital gain or loss if you held the notes for more than one year.
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No assurance can be given that the Internal Revenue Service or any court will agree with this characterization and tax treatment.
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Under current Internal Revenue Service guidance, withholding on “dividend equivalent” payments (as discussed in the product supplement), if any, will not apply to notes that are issued as of the date of this pricing supplement unless such
notes are “delta-one” instruments.
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You should consult your own tax advisor concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the notes, as well as any tax consequences arising under the laws of any state,
local, foreign, or other tax jurisdiction and the possible effects of changes in U.S. federal or other tax laws. You should review carefully the discussion under the section entitled “U.S. Federal Income Tax Summary” beginning on page PS-41 of
product supplement EQUITY ARN-1.
Validity of the Notes
In the opinion of Norton Rose Fulbright Canada LLP, the issue and sale of the notes has been duly authorized by all necessary corporate action of RBC in conformity with the Indenture, and when the notes have been duly
executed, authenticated and issued in accordance with the Indenture and delivered against payment therefor, the notes will be validly issued and, to the extent validity of the notes is a matter governed by the laws of the Province of Ontario or
Québec, or the laws of Canada applicable therein, and will be valid obligations of RBC, subject to equitable remedies which may only be granted at the discretion of a court of competent authority, subject to applicable bankruptcy, to rights to
indemnity and contribution under the notes or the Indenture which may be limited by applicable law, to insolvency and other laws of general application affecting creditors’ rights, to limitations under applicable limitations statutes and subject to
limitations as to the currency in which judgments in Canada may be rendered, as prescribed by the Currency Act (Canada). This opinion is given as of the date hereof and is limited to the laws of the Provinces of Ontario and Québec and the federal
laws of Canada applicable thereto. In addition, this opinion is subject to customary assumptions about the Trustee’s authorization, execution and delivery of the Indenture and the genuineness of signatures and certain factual matters, all as stated
in the letter of such counsel dated September 7, 2018, which has been filed as Exhibit 5.1 to RBC's Form 6-K filed with the SEC dated September 7, 2018.
In the opinion of Morrison & Foerster LLP, when the notes have been duly completed in accordance with the Indenture and issued and sold as contemplated by the prospectus supplement and the prospectus, the notes
will be valid, binding and enforceable obligations of RBC, entitled to the benefits of the Indenture, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable
principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith). This opinion is given as of the date hereof and is limited to the laws of the State of New York. This opinion is
subject to customary assumptions about the Trustee’s authorization, execution and delivery of the Indenture and the genuineness of signatures and to such counsel’s reliance on RBC and other sources as to certain factual matters, all as stated in the
legal opinion dated September 7, 2018, which has been filed as Exhibit 5.2 to RBC's Form 6-K dated September 7, 2018.
Terms Incorporated in Master Global Security
The terms appearing under the captions “Summary—Terms of the Notes” and “Summary—Redemption Amount Determination” on page TS-2 above, the pricing date, settlement date and maturity date appearing on the cover page, and
the applicable terms included in the documents listed under “Summary” on page TS-2 are incorporated into the master global security that represents the notes and is held by The Depository Trust Company.
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Accelerated Return Notes®
Linked to the iShares® Silver Trust, due March 25, 2022 |
Where You Can Find More Information
We have filed a registration statement (including a product supplement, a prospectus supplement, and a prospectus) with the SEC for the offering to which this term sheet relates. Before you invest, you should read the Note Prospectus, including
this term sheet, and the other documents that we have filed with the SEC, for more complete information about us and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, we, any
agent, or any dealer participating in this offering will arrange to send you these documents if you so request by calling MLPF&S or BofAS toll-free at 1-800-294-1322.
“Accelerated Return Notes®” and “ARNs®” are the registered service marks of Bank of America Corporation, the parent company of MLPF&S and BofAS.