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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-208507 (To Prospectus dated January 8, 2016, Prospectus Supplement dated January 8, 2016 and Product Supplement EQUITY INDICES SUN-1 dated December 21, 2016) |
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618,659 Units
$10 principal amount per unit
CUSIP No. 78014F635
 |
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Pricing Date
Settlement Date
Maturity Date |
August 30, 2018
September 7, 2018 October 24, 2019 |
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Market-Linked Step Up Notes Linked to the EURO STOXX 50® Index
§ Maturity of approximately 14 months
§
If the Index is flat or increases up to the Step Up Value, a return of 15.10%
§
If the Index increases above the Step Up Value, a return equal to the percentage increase in the Index
§
1-to-1 downside exposure to decreases in the Index, with up to 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 $0.075 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” beginning on page TS-6 of this term sheet and beginning on page PS-7 of product supplement EQUITY INDICES SUN-1.
The initial estimated value of the notes as of the pricing date
is $9.6836 per unit, which is less than the public offering price listed below. See “Summary” on the following page, “Risk
Factors” beginning on page TS-6 of this term sheet and “Structuring the Notes” on page TS-11 of this term sheet for additional information. The actual value of your notes at any time will reflect many factors and cannot be predicted with
accuracy.
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Per Unit
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Total
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Public offering price
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$ 10.00
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$6,186,590.00
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Underwriting discount
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$ 0.20
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$123,731.80
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Proceeds, before expenses, to RBC
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$ 9.80
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$6,062,858.20
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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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Merrill Lynch & Co.
August 30, 2018
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Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
Summary
The Market-Linked Step Up Notes Linked to the EURO STOXX 50® Index, due October 24, 2019 (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 provide you with a Step Up
Payment if the Ending Value of the Market Measure, which is the EURO STOXX 50® Index (the “Index”), is equal to or greater than its Starting Value, but is not greater than the Step Up Value. If the Ending Value is greater
than the Step Up Value, you will participate on a 1-for-1 basis in the increase in the level of the Index above 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 Index, subject to our credit risk. See “Terms of the Notes” below.
The economic terms of the notes (including the Step Up Payment) 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-11.
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Terms of the Notes
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Redemption Amount Determination
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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 EURO STOXX 50® Index (Bloomberg symbol: “SX5E”), a price return index
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Starting Value:
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3,430.99
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Ending Value:
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The closing level of the Market Measure on the scheduled calculation day. The calculation day is subject to
postponement in the event of Market Disruption Events, as described beginning on page PS-20 of product supplement EQUITY INDICES SUN-1.
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Step Up Value:
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3,949.07 (115.10% of the Starting Value, rounded to two decimal places).
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Step Up
Payment:
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$1.51 per unit, which represents a return of 15.10% over the principal amount.
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Threshold Value:
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3,430.99 (100% of the Starting Value).
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Calculation Day:
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October 17, 2019
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Fees and
Charges:
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The underwriting discount of $0.20 per unit listed on the cover page and the hedging related charge of $0.075 per
unit described in “Structuring the Notes” on page TS-11.
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Calculation
Agent:
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Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”).
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On the maturity date, you will receive a cash payment per unit determined as follows:
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Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
The terms and risks of the notes are contained in this term sheet and in the following:
| § |
Product supplement EQUITY INDICES SUN-1 dated December 21, 2016:
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| § |
Series G MTN prospectus supplement dated January 8, 2016:
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| § |
Prospectus dated January 8, 2016:
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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 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 INDICES SUN-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 Index will increase 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 Index decreases from the Starting Value to the Ending Value.
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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 dividends or other benefits of owning the stocks included in the Index.
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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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§
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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:
| § |
You believe that the Index will decrease from the Starting Value to the Ending Value.
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| § |
You seek principal repayment or preservation of capital.
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| § |
You seek interest payments or other current income on your investment.
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| § |
You want to receive dividends or other distributions paid on the stocks included in the Index.
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| § |
You seek an investment for which there will be a liquid secondary market.
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§
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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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Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
Hypothetical Payout Profile and Examples of Payments at Maturity
Market-Linked Step Up Notes
This graph reflects the returns on the notes, based on the Threshold Value of 100% of the Starting Value, the Step Up Payment
of $1.51 per unit and the Step Up Value of 115.10% of the Starting Value. The green line reflects the returns on the notes, while the dotted gray line reflects the returns of a direct investment in the stocks included in the Index,
excluding dividends.
This graph has been prepared for purposes of illustration only.
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For recent actual levels of the Market Measure, see “The Index” section below. The Index is a price return index and as such the Ending Value will not
include any income generated by dividends paid on the stocks included in the Index, which you would otherwise be entitled to receive if you invested in those stocks directly. In addition, 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)(2)
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0.00%
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$11.51(3)
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15.10%
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102.00
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2.00%
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$11.51
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15.10%
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105.00
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5.00%
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$11.51
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15.10%
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110.00
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10.00%
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$11.51
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15.10%
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115.10(4)
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15.10%
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$11.51
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15.10%
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120.00
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20.00%
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$12.00
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20.00%
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130.00
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30.00%
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$13.00
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30.00%
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140.00
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40.00%
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$14.00
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40.00%
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143.00
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43.00%
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$14.30
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43.00%
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150.00
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50.00%
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$15.00
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50.00%
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160.00
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60.00%
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$16.00
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60.00%
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| (1) |
The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes
only. The actual Starting Value is 3,430.99, which was the closing level of the Market Measure on the pricing date.
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| (2) |
This is the hypothetical Threshold Value.
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| (3) |
This amount represents the sum of the principal amount and the Step Up Payment of $1.51.
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| (4) |
This is the hypothetical Step Up Value.
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Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
Redemption Amount Calculation Examples
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Example 1
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The Ending Value is 90.00, or 90.00% of the Starting Value:
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Starting Value:
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100.00
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Threshold Value:
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100.00
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Ending Value:
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90.00
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 |
Redemption Amount per unit
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Example 2
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The Ending Value is 110.00, or 110.00% of the Starting Value:
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Starting Value:
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100.00
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Step Up Value:
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115.10
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Ending Value:
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110.00
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Redemption Amount per unit, the principal amount plus the Step Up
Payment, since the Ending Value is equal to or greater than the Starting Value, but less than the Step Up Value.
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Example 3
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The Ending Value is 143.00, or 143.00% of the Starting Value:
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Starting Value:
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100.00
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Step Up Value:
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115.10
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Ending Value:
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143.00
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 |
Redemption Amount per unit
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Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
Risk Factors
There are important differences between the notes and a conventional debt security. An investment in the notes involves significant
risks, including those listed below. You should carefully review the more detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page PS-7 of product supplement EQUITY INDICES SUN-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.
| § |
Depending on the performance of the Index 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 may be less than a comparable investment directly in the stocks included in the Index.
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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 level of the Index, 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-11. 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 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 Index, our creditworthiness and changes in
market conditions.
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| § |
A trading market is not expected to develop for the notes. Neither we nor MLPF&S 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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| § |
Your return on the notes may be affected by factors affecting the international securities markets, specifically changes within the Eurozone. The Eurozone is and has been undergoing
severe financial stress, and the political, legal and regulatory ramifications are impossible to predict. Changes within the Eurozone could adversely affect the performance of the Index and, consequently, the value of the notes. In
addition, you will not obtain the benefit of any increase in the value of the euro against the U.S. dollar, which you would have received if you had owned the securities in the Index during the term of your notes, although the level
of the Index may be adversely affected by general exchange rate movements in the market.
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| § |
Our business, hedging and trading activities, and those of MLPF&S and our respective affiliates (including trades in shares of companies included in the Index), and any hedging
and trading activities we, MLPF&S 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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| § |
The Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests.
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| § |
You will have no rights of a holder of the securities represented by the Index, and you will not be entitled to receive securities or dividends or other distributions by the issuers
of those securities.
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| § |
While we, MLPF&S or our respective affiliates may from time to time own securities of companies included in the Index, we, MLPF&S and our respective affiliates do not control
any company included in the Index, and have not verified any disclosure made by any other company.
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| § |
There may be potential conflicts of interest involving the calculation agent, which is MLPF&S. We have the right to appoint and remove the calculation agent.
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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-33 of product supplement EQUITY INDICES SUN-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 January 8, 2016.
|
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Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
Other Terms of the Notes
The provisions of this section supersede and replace the definition of “Market Measure Business Day” set forth in product supplement EQUITY INDICES
SUN-1.
Market Measure Business Day
A “Market Measure Business Day” means a day on which:
| (A) |
the Eurex (or any successor) is open for trading; and
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| (B) |
the Index or any successor thereto is calculated and published.
|
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Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
The Index
All disclosures contained in this term sheet regarding the Index, 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, STOXX Limited (“STOXX” or “Index sponsor”). STOXX, which owns the copyright and all other rights to the Index,
has no obligation to continue to publish, and may discontinue publication of, the Index. The consequences of STOXX discontinuing publication of the Index are discussed in the section entitled “Description of the Notes – Discontinuance of an
Index” in product supplement EQUITY INDICES SUN-1. None of us, the calculation agent, or MLPF&S accepts any responsibility for the calculation, maintenance, or
publication of the Index or any successor index.
Index Composition and Maintenance
The Index is composed of 50 component stocks of market sector leaders from within the 19 EURO STOXX®
Supersector indices, which represent the Eurozone portion of the STOXX Europe 600® Supersector indices.
Information regarding the Index (including information regarding the countries represented by the securities included in the Index
and their respective weightings, the industries represented by the securities included in the Index and their respective weightings and the top ten components of the Index and their respective weightings) may be found on STOXX’s website. That
information is updated from time to time on that website. Please note that information included in that website is not included or incorporated by reference in this pricing supplement.
The composition of the Index is reviewed annually, based on the closing stock data on the last trading day in August. The component
stocks are announced on the first trading day in September. Changes to the component stocks are implemented on the third Friday in September and are effective the following trading day. Changes in the composition of the Index are made to ensure
that the Index includes the 50 market sector leaders from within the Index.
The free float factors for each component stock used to calculate the Index, as described below, are reviewed, calculated, and
implemented on a quarterly basis and are fixed until the next quarterly review.
The Index is also reviewed on an ongoing basis. Corporate actions (including initial public offerings, mergers and takeovers,
spin-offs, delistings, and bankruptcy) that affect the Index composition are immediately reviewed. Any changes are announced, implemented, and effective in line with the type of corporate action and the magnitude of the effect.
Index Calculation
The Index is calculated with the “Laspeyres formula,” which measures the aggregate price changes in the component stocks against a
fixed base quantity weight. The formula for calculating the Index value can be expressed as follows:
|
Index =
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Free float market capitalization of the Index
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x 1,000
|
|
Adjusted base date market capitalization of the Index
|
The “free float market capitalization of the Index” is equal to the sum of the products of the closing price, market capitalization,
and free float factor for each component stock as of the time the Index is being calculated.
The Index is also subject to a divisor, which is adjusted to maintain the continuity of the Index values across changes due to corporate actions, such
as the deletion and addition of stocks, the substitution of stocks, stock dividends, and stock splits.
|
Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
The following graph shows the daily historical performance of the Index in the period from January 1, 2008
through August 30, 2018. 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 level of the Index
was 3,430.99.
Historical Performance of the Index
This historical data on the Index is not necessarily indicative of the future performance of the Index or what
the value of the notes may be. Any historical upward or downward trend in the level of the Index during any period set forth above is not an indication that the level of the Index 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 levels of the Index.
License Agreement
We have entered into a non-exclusive license agreement with STOXX, which grants us a license in exchange for a fee to use the Index in connection with
the issuance of certain securities, including the notes. The license agreement between us and STOXX requires that the following language be stated in this term sheet.
STOXX has no relationship to us, other than the licensing of the Index and its service marks for use in connection with the notes.
STOXX does not:
| § |
sponsor, endorse, sell or promote the notes.
|
| § |
recommend that any person invest in the notes or any other financial products.
|
| § |
have any responsibility or liability for or make any decisions about the timing, amount or pricing of the notes.
|
| § |
have any responsibility or liability for the administration, management or marketing of the notes.
|
| § |
consider the needs of the notes or the owners of the notes in determining, composing or calculating the Index or have any obligation to do so.
|
STOXX will not have any liability in connection with the notes. Specifically, STOXX does not make any warranty,
express or implied, and STOXX disclaims any warranty about:
| § |
the results to be obtained by the notes, the owner of the notes or any other person in connection with the use of the Index and the data included in the Index;
|
| § |
the accuracy or completeness of the Index or its data;
|
| § |
the merchantability and the fitness for a particular purpose or use of the Index or its data;
|
| § |
any errors, omissions or interruptions in the Index or its data; and
|
| § |
any lost profits or indirect, punitive, special or consequential damages or losses, even if STOXX knows that they might occur.
|
The licensing relating to the use of the Index and trademark referred to above by us is solely for our benefit, and not for any other third parties.
|
Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
Supplement to the Plan of Distribution
Under our distribution agreement with MLPF&S, MLPF&S 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.
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 acting as a principal in effecting the transaction for your account.
MLPF&S 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 will include MLPF&S’s trading commissions and mark-ups. MLPF&S may act as principal or agent in these market-making transactions; however, it is not obligated to engage in any such transactions. At
MLPF&S’s discretion, for a short, undetermined initial period after the issuance of the notes, MLPF&S 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 for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the Index and the remaining term of the notes. However, neither we nor any of our affiliates is
obligated to purchase your notes at any price or at any time, and we cannot assure you that we, MLPF&S 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 MLPF&S’s estimate of the value of the notes if MLPF&S 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 MLPF&S 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.
|
Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
Structuring the Notes
The notes are our debt securities, the return on which is linked to the performance of the Index. 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 Index. 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 MLPF&S or one of its affiliates. The terms of these hedging arrangements are determined by seeking bids from market participants, including MLPF&S and its affiliates, and take into account a number of factors, including
our creditworthiness, interest rate movements, the volatility of the Index, 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.
MLPF&S has advised us that the hedging arrangements will include a hedging related charge of approximately $0.075 per unit, reflecting an estimated
profit to be credited to MLPF&S 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 MLPF&S or any
third party hedge providers.
For further information, see “Risk Factors—General Risks Relating to the Notes” beginning on page PS-7 and “Use of Proceeds and Hedging” on page PS-17
of product supplement EQUITY INDICES SUN-1.
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Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
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 January 8, 2016.
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
derivative contracts in respect of the Index.
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Under this characterization and tax treatment of the notes, a U.S. holder (as defined beginning on page 27 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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The discussions above and in the accompanying prospectus, prospectus supplement, and product supplement do not address the tax consequences applicable
to holders subject to Section 451(b) of the Code. 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-33 of product supplement EQUITY INDICES SUN-1.
|
Market-Linked Step Up Notes
Linked to the EURO STOXX 50® Index, due October 24, 2019 |
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 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 January 8, 2016, which has been filed as Exhibit 5.1 to Royal Bank’s Form 6-K filed with the
SEC dated January 8, 2016.
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 January 8, 2016, which has been filed as Exhibit 5.2 to the Bank’s Form 6-K dated January 8, 2016.
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. In addition to those terms, the following two
sentences are also so incorporated into the master note: RBC confirms that it fully understands and is able to calculate the effective annual rate of interest applicable to the notes based on the methodology for calculating per annum rates
provided for in the notes. The RBC irrevocably agrees not to plead or assert Section 4 of the Interest Act (Canada), whether by way of defense or otherwise, in any proceeding relating to the notes.
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 toll-free at
1-800-294-1322.
Market-Linked Investments Classification
MLPF&S classifies certain market-linked investments (the
“Market-Linked Investments”) into categories, each with different investment characteristics. The following description is meant solely for informational purposes and is not intended to represent any particular Enhanced Return Market-Linked
Investment or guarantee any performance.
Enhanced Return Market-Linked Investments are short- to medium-term investments that offer you a way to enhance exposure to a particular market view
without taking on a similarly enhanced level of market downside risk. They can be especially effective in a flat to moderately positive market (or, in the case of bearish investments, a flat to moderately negative market). In exchange for the
potential to receive better-than market returns on the linked asset, you must generally accept market downside risk and capped upside potential. As these investments are not market downside protected, and do not assure full repayment of
principal at maturity, you need to be prepared for the possibility that you may lose all or part of your investment.