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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-227001
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Pricing Supplement
Dated February 24, 2021
To the Product Prospectus Supplement ERN-ETF-1 Dated September 11, 2018, Prospectus Supplement Dated September 7, 2018, and
Prospectus Dated September 7, 2018
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$2,000,000
Autocallable Barrier Enhanced Return Notes
Linked to the Energy Select Sector SPDR®
Fund, Due March 1, 2023
Royal Bank of Canada
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Royal Bank of Canada is offering the Autocallable Barrier Enhanced Return Notes (the “Notes”) linked to the performance of the Energy Select Sector SPDR® Fund (the “Reference Asset”).
The CUSIP number for the Notes is 78013GJ63. The Notes do not pay interest.
The Notes provide a 150% leveraged positive return if the share price of the Reference Asset increases from the Initial Level to the Final Level. If the Final Level of the Reference Asset is greater than 75% of the
Initial Level (the “Barrier Level”), but is less than the Initial Level, investors will receive the principal amount. However, investors will receive shares of the Reference Asset at maturity if its closing price on the Valuation Date is less than
the Barrier Level, and the value of these shares is expected to be significantly less than the principal amount of the Notes, as further described below. Accordingly, investors may lose all or a significant portion of their principal amount.
The Notes will be automatically called for a Call Amount of 120.50% of the principal amount if the closing price of the Reference Asset on February 25, 2022 is greater than or equal to its Initial Level.
Any payments on the Notes are subject to our credit risk.
Issue Date: February 26, 2021
Maturity Date: March 1, 2023
The Notes will not be listed on any securities exchange.
Investing in the Notes involves a number of risks. See “Selected Risk Considerations” beginning on page P-8 of this pricing supplement, “Additional Risk Factors Specific to the Notes” beginning on page PS-6 of the
product prospectus supplement dated September 11, 2018, and “Risk Factors” beginning on page S-1 of the prospectus supplement dated September 7, 2018.
The Notes will not constitute deposits insured by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation or any other Canadian or U.S. government agency or instrumentality. The Notes
are not subject to conversion into our common shares under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Notes or determined that this pricing supplement is truthful or complete. Any representation to the
contrary is a criminal offense.
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Per Note
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Total
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Price to public(1)
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100.00%
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$2,000,000
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Underwriting discounts and commissions(1)
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2.25%
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$45,000
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Proceeds to Royal Bank of Canada
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97.75%
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$1,955,000
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(1) Certain dealers who purchase the Notes for sale to certain fee-based advisory accounts may forego some or all of their underwriting discount or selling concessions. The public offering
price for investors purchasing the Notes in these accounts may be between $977.50 and $1,000 per $1,000 in principal amount.
RBC Capital Markets, LLC (“RBCCM”), acting as our agent, will receive a commission of $22.50 per $1,000 in principal amount of the Notes and will use a portion of that commission to allow selling
concessions to other dealers of up to $22.50 per $1,000 in principal amount of the Notes. The other dealers may forgo, in their sole discretion, some or all of their selling concessions. See “Supplemental Plan of Distribution (Conflicts of Interest)”
below.
The initial estimated value of the Notes as of the Trade Date was $964.36 per $1,000 in principal amount, which is less than the price to public. The actual value of the Notes at any time will reflect
many factors, cannot be predicted with accuracy, and may be less than this amount. We describe our determination of the initial estimated value in more detail below.
RBC Capital Markets, LLC
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
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SUMMARY
The information in this “Summary” section is qualified by the more detailed information set forth in this pricing supplement, the product prospectus supplement, the
prospectus supplement, and the prospectus.
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Issuer:
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Royal Bank of Canada (“Royal Bank”)
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Underwriter:
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RBC Capital Markets, LLC (“RBCCM”)
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Reference Asset:
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Energy Select Sector SPDR® Fund (“XLE”).
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Currency:
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U.S. Dollars
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Minimum Investment:
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$1,000 and minimum denominations of $1,000 in excess thereof
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Trade Date (Pricing
Date):
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February 24, 2021
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Issue Date:
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February 26, 2021
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Valuation Date:
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February 24, 2023
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Maturity Date:
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March 1, 2023, subject to extension for market and other disruptions, as described in the product prospectus supplement dated September 11, 2018.
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Automatic Call:
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If the closing price of the Reference Asset is greater than or equal to its Initial Level on the Observation Date, we will automatically redeem the Notes, and investors will
receive an amount equal to 120.50% of the principal amount on the Early Redemption Date. ($1,205 for each $1,000 in principal amount.) If the Notes are automatically called, no further payments will be made on the Notes after the Early
Redemption Date.
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Observation Date:
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February 25, 2022, subject to postponement as described in the product prospectus supplement.
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Early Redemption
Date:
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March 2, 2022, subject to postponement if not a business day, or if the Observation Date is postponed.
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Payment at Maturity
(if held to maturity
and not called prior
to maturity):
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If the Percentage Change is positive, then the investor will receive an amount per $1,000 principal amount per Note equal to:
Principal Amount + (Principal Amount x Percentage Change x Leverage Factor)
If the Percentage Change is less than or equal to 0%, but not by more than the Barrier Percentage (that is, the Percentage Change is
between 0% and –25%), then the investor will receive the principal amount only.
However, if the Final Level is less than the Barrier Level (the Percentage Change is less than -25%), then the investor will receive at maturity, for each $1,000 in principal amount, a number of
shares of the Reference Asset equal to the Physical Delivery Amount (or at our election, the Cash Delivery Amount). In this case, you will lose a significant portion, or possibly even all, of the principal
amount.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
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Percentage Change:
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The Percentage Change, expressed as a percentage, is calculated using the following formula:
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Initial Level:
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$50.29, which was the closing share price of the Reference Asset on the Trade Date.
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Final Level:
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The closing share price of the Reference Asset on the Valuation Date.
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Leverage Factor:
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150%
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Barrier Percentage:
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25%
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Barrier Level:
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$37.72, which is 75% of the Initial Level (rounded to two decimal places).
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Physical Delivery
Amount:
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For each $1,000 in principal amount, 19.88 shares of the Reference Asset (equal to the principal amount divided by the Initial Level, rounded to two decimal places), subject to
adjustment as described in the product prospectus supplement. Any fractional shares will be paid in cash.
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Cash Delivery
Amount:
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The product of the Physical Delivery Amount multiplied by the Final Level.
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Principal at Risk:
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The Notes are NOT principal protected. You may lose all or a substantial portion of your principal amount at maturity if the Final Level is less than the Barrier Level.
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Calculation Agent:
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RBCCM
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U.S. Tax Treatment:
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By purchasing a Note, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat the Notes as a
callable pre-paid derivative contract for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the Notes are uncertain and the Internal Revenue Service could assert that the Notes should be
taxed in a manner that is different from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of U.S. Federal Income Tax Consequences,” and the discussion (including the opinion of our counsel
Morrison & Foerster LLP) in the product prospectus supplement dated September 11, 2018 under “Supplemental Discussion of U.S. Federal Income Tax Consequences,” which apply to the Notes.
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Secondary Market:
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RBCCM (or one of its affiliates), though not obligated to do so, may maintain a secondary market in the Notes after the Issue Date. The amount
that you may receive upon sale of your Notes prior to maturity may be less than the principal amount of your Notes.
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Listing:
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The Notes will not be listed on any securities exchange.
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Clearance and
Settlement:
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DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Description of Debt Securities—Ownership and Book-Entry
Issuance” in the prospectus dated September 7, 2018).
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
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Terms Incorporated
in the Master Note:
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All of the terms appearing on the cover page and above the item captioned “Secondary Market” on pages P-2 and P-3 of this pricing supplement and the terms appearing under the
caption “General Terms of the Notes” in the product prospectus supplement dated September 11, 2018, as modified by this pricing supplement.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
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ADDITIONAL TERMS OF YOUR NOTES
You should read this pricing supplement together with the prospectus dated September 7, 2018, as supplemented by the prospectus supplement dated September 7, 2018 and the product prospectus supplement dated September
11, 2018, relating to our Senior Global Medium Term Notes, Series H, of which these Notes are a part. Capitalized terms used but not defined in this pricing supplement will have the meanings given to them in the product prospectus supplement. In the
event of any conflict, this pricing supplement will control. The Notes vary from the terms described in the product prospectus supplement in several important ways. In particular, please note that
the Notes are subject to an automatic call and you may receive shares of the Reference Asset at maturity. You should read this pricing supplement carefully.
This pricing supplement, together with the documents listed below, contains the terms of the Notes and supersedes all prior or contemporaneous oral statements as well as any other written materials including preliminary
or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in “Risk Factors”
in the prospectus supplement dated September 7, 2018 and “Additional Risk Factors Specific to the Notes” in the product prospectus supplement dated September 11, 2018, as the Notes involve risks not associated with conventional debt securities. We
urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the Notes. You may access these documents on the Securities and Exchange Commission (the “SEC”) website at www.sec.gov as follows (or if that address
has changed, by reviewing our filings for the relevant date on the SEC website):
Prospectus dated September 7, 2018:
Prospectus Supplement dated September 7, 2018:
Product Prospectus Supplement ERN-ETF-1 dated September 11, 2018:
Our Central Index Key, or CIK, on the SEC website is 1000275. As used in this pricing supplement, “we,” “us,” or “our” refers to Royal Bank of Canada.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
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HYPOTHETICAL RETURNS
The examples below are based on the following terms:
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Hypothetical Initial Level:
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$100.00*
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Hypothetical Share Delivery Amount:
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10 shares ($1,000 divided by $100)
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Hypothetical Barrier Level:
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$75.00 which is 75% of the hypothetical Initial Level
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Principal Amount:
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$1,000 per Note
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* The hypothetical Initial Level of $100 used in the examples below was chosen for illustrative purposes only and is not the actual Initial Level. The actual Initial
Level is set forth in the “Summary” section above. If the Notes are automatically called, the examples below will not be relevant, and you will receive the payment described in the “Summary” section above.
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Final Level
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Percentage
Change
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Payment at Maturity
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Physical
Delivery
Amount
as
Number of
Shares of
the
Reference
Asset
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Cash Delivery
Amount
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$150.00
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50.00%
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$1,750.00
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n/a
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n/a
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$140.00
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40.00%
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$1,600.00
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n/a
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n/a
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$130.00
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30.00%
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$1,450.00
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n/a
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n/a
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$120.00
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20.00%
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$1,300.00
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n/a
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n/a
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$110.00
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10.00%
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$1,150.00
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n/a
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n/a
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$100.00
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0.00%
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$1,000.00
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n/a
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n/a
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$90.00
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-10.00%
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$1,000.00
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n/a
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n/a
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$80.00
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-20.00%
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$1,000.00
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n/a
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n/a
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$75.00
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-25.00%
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$1,000.00
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n/a
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n/a
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$74.99
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-25.01%
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Physical or Cash Delivery Amount
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10
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$749.90
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$70.00
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-30.00%
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Physical or Cash Delivery Amount
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10
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$700.00
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$60.00
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-40.00%
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Physical or Cash Delivery Amount
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10
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$600.00
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$50.00
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-50.00%
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Physical or Cash Delivery Amount
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10
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$500.00
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$40.00
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-60.00%
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Physical or Cash Delivery Amount
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10
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$400.00
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$30.00
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-70.00%
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Physical or Cash Delivery Amount
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10
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$300.00
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$20.00
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-80.00%
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Physical or Cash Delivery Amount
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10
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$200.00
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$10.00
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-90.00%
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Physical or Cash Delivery Amount
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10
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$100.00
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$0.00
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-100.00%
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Physical or Cash Delivery Amount
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10
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$0.00
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
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The examples set out below are included for illustration purposes only. The hypothetical Percentage Changes of the Reference Asset used to illustrate the calculation of the Payment
at Maturity (rounded to two decimal places) are not estimates or forecasts of the Final Level or the share price of the Reference Asset on any trading day prior to the Maturity Date. All examples are based on the Barrier Percentage of 25% (the
Barrier Level is 75% of the Initial Level), the Leverage Factor of 150%, and assume that a holder purchased Notes with an aggregate principal amount of $1,000 and that no market disruption event occurs on the Valuation Date. These examples also
assume that the Notes are not called prior to maturity.
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Example 1—
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Calculation of the Payment at Maturity where the Percentage Change is positive.
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Percentage Change:
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5%
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Payment at Maturity:
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$1,000 + ($1,000 x 5% x 150%) = $1,000 + $75 = $1,075
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On a $1,000 investment, a 5% Percentage Change results in a Payment at Maturity of $1,075, a 7.5% return on the Notes.
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Example 2—
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Calculation of the Payment at Maturity where the Percentage Change is negative (but not by more than the Barrier Percentage).
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Percentage Change:
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-8%
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Payment at Maturity:
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At maturity, if the Percentage Change is negative BUT not by more than the Barrier Percentage, then the Payment at Maturity will equal the principal amount.
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On a $1,000 investment, a -8% Percentage Change results in a Payment at Maturity of $1,000, a 0% return on the Notes.
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Example 3—
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Calculation of the Payment at Maturity where the Percentage Change is negative (by more than the Barrier Percentage).
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Percentage Change:
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-40%
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Payment at Maturity:
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10 shares of the Reference Asset (or at our election, the Cash Delivery Amount). These shares will have a value of $600 on the Valuation Date, representing a loss of 40% of your investment.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
|
SELECTED RISK CONSIDERATIONS
An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the Reference Asset. These risks are explained in more detail in the section
“Additional Risk Factors Specific to the Notes” in the product prospectus supplement. In addition to the risks described in the prospectus supplement and the product prospectus supplement, you should consider the following:
Risks Relating to the Terms and Structure of the Notes
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You May Lose Some or All of the Principal Amount at Maturity — Investors in the Notes could lose all or a substantial portion of their principal amount if there is a decline
in the trading price of the Reference Asset between the Trade Date and the Valuation Date. If the Final Level is less than the Barrier Level, the value of the shares or cash that you receive at maturity will represent a loss of your principal
that is proportionate to the decline in the closing price of the Reference Asset from the Trade Date to the Valuation Date. If you receive shares of the Reference Asset, they may decrease in value between the Valuation Date and the maturity
date, further reducing your return on the Notes.
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The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity — There will be no periodic interest
payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which could be negative, may be less than the return you could earn
on other investments. Even if your return is positive, your return may be less than the return you would earn if you purchased one of our conventional senior interest bearing debt securities.
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The Notes Are Subject to an Automatic Call – If the Notes are redeemed early, you may not be able to reinvest at comparable terms or
returns. If the Notes are redeemed prior to maturity, you will receive no more further payments on the Notes, and may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns. In
addition, the maximum amount that you will receive upon an automatic call is 120.50% of the principal amount, no matter how much the value of the Reference Asset may increase.
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| • |
Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market Value of the Notes — The Notes are our senior
unsecured debt securities. As a result, your receipt of the amount due upon an automatic call or on the maturity date is dependent upon our ability to repay our obligations on the applicable payment date. This will be the case even if the
share price of the Reference Asset increases after the Trade Date. No assurance can be given as to what our financial condition will be at any time during the term of the Notes.
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| • |
You Will Not Have Any Rights to the Securities Included in the Reference Asset — As a holder of the Notes, you will not have voting rights or rights to receive cash dividends
or other distributions or other rights that holders of securities included in the Reference Asset would have. The Final Level will not reflect any dividends paid on the securities included in the Reference Asset, and accordingly, any positive
return on the Notes may be less than the potential positive return on those securities.
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| • |
Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments — The payment upon an automatic call or at maturity is subject to
adjustment as described in the product prospectus supplement. For a description of what constitutes a market disruption event as well as the consequences of that market disruption event, see “General Terms of the Notes—Market Disruption
Events” in the product prospectus supplement.
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Risks Relating to the Secondary Market for the Notes
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There May Not Be an Active Trading Market for the Notes—Sales in the Secondary Market May Result in Significant Losses — There may be little or no secondary market for the
Notes. The Notes will not be listed on any securities exchange. RBCCM and our other affiliates may make a market for the Notes; however, they are not required to do so. RBCCM or any of our other affiliates may stop any market-making
activities at any time. Even if
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
|
a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices advantageous to you. We expect that transaction costs in any
secondary market would be high. As a result, the difference between bid and asked prices for your Notes in any secondary market could be substantial.
Risks Relating to the Initial Estimated Value of the Notes
| • |
The Initial Estimated Value of the Notes Is Less than the Price to the Public — The initial estimated value of the Notes that is set forth on the cover page of this pricing
supplement does not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any time. If you attempt to sell the Notes prior to maturity, their
market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the share price of the Reference Asset, the borrowing rate we pay to issue securities of this kind, and
the inclusion in the price to the public of the underwriting discount and the estimated costs relating to our hedging of the Notes. These factors, together with various credit, market and economic factors over the term of the Notes, are
expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable ways. Assuming no change in market conditions or any other relevant factors,
the price, if any, at which you may be able to sell your Notes prior to maturity may be less than your original purchase price, as any such sale price would not be expected to include the underwriting discount and the hedging costs relating
to the Notes. In addition to bid-ask spreads, the value of the Notes determined for any secondary market price is expected to be based on the secondary rate rather than the internal funding rate used to price the Notes and determine the
initial estimated value. As a result, the secondary price will be less than if the internal funding rate was used. The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes
to maturity.
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| • |
The Initial Estimated Value of the Notes That is Set Forth on the Cover Page of this Pricing Supplement 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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The value of the Notes at any time after the Trade Date will vary based on many factors, including changes in market conditions, and cannot be predicted with accuracy. As a result,
the actual value you would receive if you sold the Notes in any secondary market, if any, should be expected to differ materially from the initial estimated value of your Notes.
Risks Relating to the Reference Asset
| • |
The Securities Composing the Underlying Index Are Concentrated in One Sector — All of the securities included in the
underlying index are issued by companies in the energy industry. As a result, the securities that will determine the performance of the Reference Asset and the value of the Notes are concentrated in one sector. Although an investment in the
Notes will not give holders any ownership or other direct interests in the securities composing the underlying index, the return on an investment in the Notes will be subject to certain risks associated with a direct equity investment in
companies in the market sector. Accordingly, by investing in the Notes, you will not benefit from the diversification which could result from an investment linked to companies that operate in multiple sectors.
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| • |
There Are Risks Associated with the Energy Industry — The stocks included in the underlying index and that are generally tracked by the Reference Asset are stocks of
companies whose primary business is directly associated with the energy sector, including two sub-sectors: oil, gas and consumable fuels; and energy equipment and services. Because the value of the Notes is linked to the performance of the
Reference Asset, an investment in the Notes exposes investors to risks associated with investments in the securities of companies in the energy sector.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
|
Energy companies develop and produce crude oil and natural gas and/or provide drilling and other energy resources production and distribution related services. Stock prices for these types of
companies are mainly affected by the business, financial and operating conditions of the particular company, as well as changes in prices for oil, gas and other types of fuels, which in turn largely depend on supply and demand for various energy
products and services. Some of the factors that may influence supply and demand for energy products and services include: general economic conditions and growth rates; weather conditions; the cost of exploring for, producing and delivering oil and
gas; technological advances affecting energy efficiency and energy consumption; the ability of the Organization of Petroleum Exporting Countries (OPEC) to establish and maintain production levels of oil; currency fluctuations; inflation; natural
disasters; civil unrest, acts of sabotage or terrorism; and other regional or global events. The profitability of energy companies may also be adversely affected by existing and future laws, regulations, government actions and other legal
requirements relating to protection of the environment, health and safety matters and others that may increase the costs of conducting their business or may reduce or delay available business opportunities. Increased supply or weak demand for energy
products and services, as well as various developments leading to higher costs of doing business or missed business opportunities, would adversely impact the performance of companies in the energy sector.
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 the energy sector or one of the
sub-sectors of the energy sector than a different investment linked to a more broadly diversified group of issuers.
As of the date of this document, two companies held by the Reference Asset represented more than 40% of the Reference Asset’s holdings. Adverse changes in the prices of the shares of these
companies would have a disproportionately adverse impact on the value of the Notes.
| • |
Changes that Affect the Underlying Index Will Affect the Market Value of the Notes and the Amount You Will Receive at Maturity — The policies of the sponsor of the Underlying
Index (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 whether the Notes are subject to an automatic call, the share price of the Reference Asset, the amount payable on the Notes at
maturity, and the market value of the Notes prior to maturity. The amount 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 sponsor discontinues or suspends the calculation or publication of the Underlying Index.
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| • |
Adjustments to the Reference Asset Could Adversely Affect the Notes — The Advisor of the Reference Asset is responsible for
calculating and maintaining the Reference Asset. The Advisor can add, delete or substitute the stocks comprising the Reference Asset. The Advisor may make other methodological changes that could change the share price of the Reference Asset
at any time. If one or more of these events occurs, the calculation of the amount payable at maturity may be adjusted to reflect such event or events. Consequently, any of these actions could adversely affect the amounts payable on the Notes
and/or 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 our affiliate and will not be involved in the offering of the Notes in any way. Consequently, we have no control over the actions of the Index Sponsor, including any actions of the type that would require the calculation agent
to adjust the payment to you at maturity. The Index Sponsor has no obligation of any sort with respect to the Notes. Thus, the Index Sponsor has no obligation to take your interests into consideration for any reason, including in taking any
actions that might affect the value of the Notes. None of our proceeds from the issuance of the Notes will be delivered to the Index Sponsor.
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We and Our Affiliates Do Not Have Any Affiliation with the Advisor and Are Not Responsible for its Public Disclosure of Information — We and our affiliates are not
affiliated with Advisor in any way and have no ability to control or predict its actions, including any errors in or discontinuance of disclosure regarding its methods or policies relating to the Reference Asset. The Advisor is not involved
in the offering of the Notes in any way and
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
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has no obligation to consider your interests as an owner of the Notes in taking any actions relating to the Reference Asset that might affect the value of the Notes.
Neither we nor any of our affiliates has independently verified the adequacy or accuracy of the information about the Advisor or the Reference Asset contained in any public disclosure of information. You, as an investor in the Notes, should make your
own investigation into the Reference Asset.
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The Correlation Between the Performance of the Reference Asset and the Performance of the Underlying Index May Be Imperfect — The
performance of the Reference Asset is linked principally to the performance of the Underlying Index. However, because of the potential discrepancies identified in more detail in the product prospectus supplement, the return on the Reference
Asset may correlate imperfectly with the return on the Underlying Index.
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The Reference Asset Is Subject to Management Risks — The Reference Asset is subject to management risk, which is the risk that the
Advisor’s investment strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. For example, the Advisor may invest a portion of the Reference Asset’s assets in securities not included
in the relevant industry or sector but which BlackRock believes will help the Reference Asset track the relevant industry or sector.
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Risks Relating to Conflicts of Interest
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Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the Reference Asset or the securities held
by the Reference Asset that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates will have in
their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the prices of the
Reference Asset, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with the issuers of the securities held by the Reference Asset,
including making loans to or providing advisory services. These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’
obligations and your interests as a holder of the Notes. Moreover, we and our affiliates may have published, and in the future expect to publish, research reports with respect to the Reference Asset. This research is modified from time to
time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. Any of these activities by us or one or more of our affiliates may affect the price of the Reference Asset,
and, therefore, the market value of the Notes.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
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INFORMATION REGARDING THE REFERENCE ASSET
Information provided to or filed with the SEC relating to the XLE under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, can be obtained through the SEC’s website at
http://www.sec.gov. In addition, information regarding the Reference Asset may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. We have not participated in the
preparation of, or verified, such publicly available information. None of the forgoing documents or filings are incorporated by reference in, and should not be considered part of, this document.
The following information regarding the Reference Asset is derived from publicly available information.
We have not independently verified the accuracy or completeness of reports filed by the Reference Asset with the SEC, information published by it on its website or in any other format, information about it obtained from
any other source or the information provided below.
The Notes are not sponsored, endorsed, sold or promoted by the investment adviser. The investment adviser makes no representations or warranties to the owners of the Notes or any member of the public regarding the
advisability of investing in the Notes. The investment adviser has no obligation or liability in connection with the operation, marketing, trading or sale of the Notes.
We obtained the information regarding the historical performance of the Reference Asset set forth below from Bloomberg Financial Markets.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg Financial Markets. The historical performance of the Reference Asset should not be taken as an indication of
its future performance, and no assurance can be given as to the market price of the Reference Asset at any time during the term of the Notes. We cannot give you assurance that the performance of the Reference Asset will not result in the loss of all
or part of your investment.
The Energy Select Sector SPDR® Fund (“XLE”)
The XLE seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Energy Select Sector Index. The Energy Select Sector Index measures the
performance of the energy sector of the U.S. equity market. The XLE is composed of companies whose primary line of business is directly associated with the energy sector. The XLE trades on the NYSE Arca under the ticker symbol “XLE.”
Eligibility Criteria for Index Components
The stocks included in each Select Sector Index are selected from the universe of companies represented by the S&P 500® Index. Standard & Poor’s Financial Services LLC (“S&P”) acts as index
calculation agent in connection with the calculation and dissemination of each Select Sector Index. Each stock in the S&P 500® Index is allocated to only one Select Sector Index, and the Select Sector Indices together comprise all of
the companies in the S&P 500® Index.
Index Maintenance
Each Select Sector Index was developed and is maintained in accordance with the following criteria:
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Each of the component stocks in a Select Sector Index (the “SPDR® Component Stocks”) is a constituent company of the S&P 500® Index.
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The Select Sector Indices together will include all of the companies represented in the S&P 500® Index and each of the stocks in the S&P 500® Index will be allocated to one and only one of the Select Sector
Indices.
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Each constituent stock of the S&P 500® Index is assigned to a Select Sector Index on the basis of that company’s sales and earnings composition and the sensitivity of the company’s stock price and business results to the
common factors that affect other companies in each Select Sector Index.
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S&P has sole control over the removal of stocks from the S&P 500® Index and the selection of replacement stocks to be added to the S&P 500® Index.
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Each Select Sector Index is calculated by S&P using a modified “market capitalization” methodology. This design ensures that each of the component stocks within a Select Sector Index is represented in a proportion consistent with its
percentage with respect to the total market capitalization of that Select Sector Index. However, under certain conditions, the number of shares of a component stock within the Select Sector Index may be adjusted to conform to certain Internal
Revenue Code requirements.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
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Calculation of the Underlying Index
Each Select Sector Index is calculated using the same methodology utilized by S&P in calculating the S&P 500® Index, using a base−weighted aggregate methodology. The daily calculation of each Select
Sector Index is computed by dividing the total market value of the companies in the Select Sector Index by a number called the index divisor.
A SPDR® Component Stock which has been assigned to one Select Sector Index may be determined to have undergone a transformation in the composition of its business, and that it should be removed from that
Select Sector Index and assigned to a different Select Sector Index. In the event that a SPDR® Component Stock’s Select Sector Index assignment should be changed, S&P will disseminate notice of the change following its standard
procedure for announcing index changes, and will implement the change in the affected Select Sector Indexes on a date no less than one week after the initial dissemination of information on the sector change to the maximum extent practicable.
SPDR® Component Stocks removed from and added to the S&P 500® Index will be deleted from and added to the appropriate Select Sector Index on the same schedule used by S&P for additions and
deletions from the S&P 500® Index insofar as practicable.
Additional information regarding the calculation and composition of the underlying index, including the index methodology, may be found on S&P’s website. Information included in that website is not included or incorporated by reference into
this document.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
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Historical Information
The graph below sets forth the information relating to the historical performance of the Reference Asset for the period from January 1, 2011 to February 24, 2021. We obtained the information in the
graph from Bloomberg Financial Markets.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg Financial Markets. The historical performance of the Reference Asset should not be taken as an
indication of its future performance, and no assurance can be given as to the Final Level of the Reference Asset. We cannot give you assurance that the performance of the Reference Asset will result in any positive return on your initial investment.
Energy Select Sector SPDR® Fund (“XLE”)
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
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SUPPLEMENTAL DISCUSSION OF
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following disclosure supplements, and to the extent inconsistent supersedes, the discussion in the product prospectus supplement dated September 11, 2018 under “Supplemental Discussion of U.S.
Federal Income Tax Consequences.”
If the Notes are settled by physical delivery of a number of shares of the Reference Asset at maturity, although no assurances can be provided in this regard, a U.S. holder may generally expect not
to recognize gain or loss upon maturity. However, a U.S. holder would generally be required to recognize loss, with respect to any cash received in lieu of a fractional share, equal to the difference between the cash received and the pro rata portion
of the tax basis allocable to a fractional share. Any such loss would be treated as capital loss, subject to the discussion in the product prospectus supplement concerning the potential application of the “constructive ownership” rules under Section
1260 of the Code. A U.S. holder’s tax basis in the shares of Reference Asset delivered would generally equal its tax basis in the Notes, other than any amount allocable to a fractional share. A U.S. holder’s holding period for the shares of the
Reference Asset delivered would begin on the day after the shares of the Reference Asset are received.
Under Section 871(m) of the Code, a “dividend equivalent” payment is treated as a dividend from sources within the United States. Such payments generally would be subject to a 30% U.S. withholding
tax if paid to a non-U.S. holder. Under U.S. Treasury Department regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”) that are “specified ELIs” may be treated as dividend equivalents if such specified
ELIs reference an interest in an “underlying security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend.
However, the IRS has issued guidance that states that the U.S. Treasury Department and the IRS intend to amend the effective dates of the U.S. Treasury Department regulations to provide that withholding on dividend equivalent payments will not apply
to specified ELIs that are not delta-one instruments and that are issued before January 1, 2023. Based on our determination that the Notes are not delta-one instruments, non-U.S. holders should not be subject to withholding on dividend equivalent
payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed reissued for U.S. federal income tax purposes upon the occurrence of certain events affecting the Reference Asset or the Notes (for example, upon a
rebalancing of the Reference Asset), and following such occurrence the Notes could be treated as subject to withholding on dividend equivalent payments. Non-U.S. holders that enter, or have entered, into other transactions in respect of the Reference
Asset or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding tax in the context of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to
withholding, we (or the applicable withholding agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect to amounts so withheld.
The accompanying product prospectus supplement notes that FATCA withholding on payments of gross proceeds from a sale or redemption of the Notes will only apply to payments made after December 31, 2018. That discussion is modified to reflect
regulations proposed by the U.S. Treasury Department that eliminate the requirement of FATCA withholding on payments of gross proceeds upon the disposition of financial instruments. The U.S. Treasury Department has indicated that taxpayers may rely
on these proposed regulations pending their finalization. Prospective investors are urged to consult with their own tax advisors regarding the possible implications of FATCA on their investment in the Notes.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
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SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
Delivery of the Notes will be made against payment for the Notes on February 26, 2021, which is the second (2nd) business day following the Trade Date (this settlement cycle being referred to as “T+2”).
For additional information as to the relationship between us and RBCCM, please see the section “Plan of Distribution—Conflicts of Interest” in the prospectus dated September 7, 2018.
In the initial offering of the Notes, they will be offered to investors at a purchase price equal to par, except with respect to certain accounts as indicated on the cover page of this document.
The value of the Notes shown on your account statement may be based on RBCCM’s estimate of the value of the Notes if RBCCM or another of our 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 RBCCM may pay for the Notes in light of then prevailing market conditions, our creditworthiness and transaction costs. For a period of approximately 6 months after the issue
date of the Notes, the value of the Notes that may be shown on your account statement may be higher than RBCCM’s estimated value of the Notes at that time. This is because the estimated value of the Notes will not include the underwriting discount
and our hedging costs and profits; however, the value of the Notes shown on your account statement during that period may initially be a higher amount, reflecting the addition of RBCCM’s underwriting discount and our estimated costs and profits from
hedging the Notes. This excess is expected to decrease over time until the end of this period. After this period, if RBCCM repurchases your Notes, it expects to do so at prices that reflect their estimated value.
We may use this pricing supplement in the initial sale of the Notes. In addition, RBCCM or another of our affiliates may use this pricing supplement in a market-making transaction in the Notes after their initial sale.
Unless we or our agent informs the purchaser otherwise in the confirmation of sale, this pricing supplement is being used in a market-making transaction.
Each of RBCCM and any other broker-dealer offering the Notes have not offered, sold or otherwise made available and will not offer, sell or otherwise make available any of the Notes to, any retail investor in the European Economic Area (“EEA”) or
in the United Kingdom. For these purposes, the expression “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to
purchase or subscribe the Notes, and a “retail investor” means a person who is one (or more) of: (a) a retail client, as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); or (b) a customer, within the meaning of
Directive (EU) 2016/97, as amended, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (c) not a qualified investor as defined in Regulation (EU) (2017/1129) (the “Prospectus
Regulation”). Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the EEA or in the
United Kingdom has been prepared, and therefore, offering or selling the Notes or otherwise making them available to any retail investor in the EEA or in the United Kingdom may be unlawful under the PRIIPs Regulation.
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Autocallable Barrier Enhanced Return
Notes Linked to the Energy Select Sector
SPDR®
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STRUCTURING THE NOTES
The Notes are our debt securities, the return on which is linked to the performance of the Reference Asset. As is the case for all of our debt securities, including our structured notes, the economic terms of the Notes
reflect our actual or perceived creditworthiness at the time of pricing. In addition, because structured 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 that we might pay for a conventional fixed or floating rate debt security of comparable maturity. Using this relatively lower implied borrowing rate rather than the secondary market rate, is a factor that
reduced the initial estimated value of the Notes at the time their terms were set. Unlike the estimated value that is included in this pricing supplement, any value of the Notes determined for purposes of a secondary market transaction may be based
on a different funding rate, which may result in a lower value for the Notes than if our initial internal funding rate were used.
In order to satisfy our payment obligations under the Notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other derivatives) on the issue
date with RBCCM or one of our other subsidiaries. The terms of these hedging arrangements take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Reference Asset, and the tenor of the
Notes. The economic terms of the Notes and their initial estimated value depend in part on the terms of these hedging arrangements.
The lower implied borrowing rate is a factor that reduces the economic terms of the Notes to you. The initial offering price of the Notes also reflects the underwriting discount and our estimated
hedging costs. These factors result in the initial estimated value for the Notes on the Trade Date being less than their public offering price. See “Selected Risk Considerations—The Initial Estimated Value of the Notes Is Less than the Price to the
Public” above.
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 the Bank in conformity with the Indenture, and when the Notes have been duly
executed, authenticated and issued in accordance with the Indenture and delivered against payment therefor, the Notes will be validly issued and, to the extent validity of the Notes is a matter governed by the laws of the Province of Ontario or
Québec, or the laws of Canada applicable therein, and will be valid obligations of the Bank, 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 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 Royal Bank’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 Royal Bank, 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 the Bank 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 the Bank’s Form 6-K dated September 7, 2018.