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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-227001
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Pricing Supplement
Dated February 19, 2021
to the Product Prospectus Supplement No. ERN-ES-1 Dated October 18,
2018, the Prospectus Supplement Dated September 7, 2018 and the
Prospectus, Dated September 7, 2018
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$880,000
Notes Linked to Raymond James
Securities Selections, due August 24, 2022
Royal Bank of Canada
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Royal Bank
of Canada is offering notes (the “Notes”) linked to an
equally-weighted basket (the “Basket”) of 20 common stocks (each, a
“Reference Stock”) selected by Raymond James & Associates, Inc.
(“Raymond James”). The Reference Stocks are listed in the “Summary”
section below.
The CUSIP number
for the Notes is 78013GH32. The ISIN for the Notes is
US78013GH325.
The Notes do not
pay interest. Any payments on the Notes are subject to our credit
risk. The Notes will not be listed on any securities
exchange.
On the maturity
date, the amount that we will pay to you for each $1,000 in
principal amount of the Notes (the “Redemption Amount”) will depend
upon the performance of the Basket and the dividends paid on the
Reference Stocks over the term of the Notes. The Participation Rate
is 98.85%. You may lose all or a portion of the principal amount of
your Notes at maturity if the “Basket Level Percentage” (as defined
below) is not at least approximately 101.17%, as described in more
detail below. Please see the discussion below for more complete
information about how the payment at maturity will be
determined.
Issue Date:
February 24, 2021
Maturity
Date: August 24, 2022
Investing in the
Notes involves a number of risks. See “Selected Risk
Considerations” beginning on page P-7 of this pricing supplement,
and “Risk Factors” beginning on page PS-4 of the product prospectus
supplement and on page S-1 of the prospectus supplement.
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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Price to
public(1)
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100.00%
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$880,000
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Underwriting
discounts and commissions(1)
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Proceeds to
Royal Bank of Canada
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100.00%
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$880,000
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(1) RBC Capital Markets, LLC, which we refer to as RBCCM,
acting as agent for Royal Bank of Canada, will receive a commission
in connection with this offering. In connection with its
distribution of the Notes, RBCCM will pay to Raymond James a
structuring fee of up to 0.55% of the principal amount of the
Notes. Please see “Supplemental Plan of Distribution (Conflicts of
Interest)” in this pricing supplement.
The initial
estimated value of the Notes as of the Trade Date was $987.76 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.
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
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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 19, 2021
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Issue Date:
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February 24, 2021
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Valuation Date:
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August 19, 2022
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Maturity Date:
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August 24, 2022, subject to extension for market and other
disruptions, as described below and in the product prospectus
supplement.
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Interest
Payments:
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None. No payments on the Notes will be made prior to the
maturity date.
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Reference
Asset:
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A Basket consisting of the following 20 Reference Stocks set forth
in the table below.
We refer to the issuer of each Reference Stock as a “Reference
Stock Issuer.”
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Payment at
Maturity (if held
to
maturity):
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The amount that you will receive at maturity for each $1,000 in
principal amount of the Notes (the “Redemption Amount”) will depend
upon the performance of the Basket and the dividends paid on the
Reference Stocks. The Redemption Amount will equal the product of
(a) $1,000, (b) the Basket Level Percentage and (c) the
Participation Rate.
As discussed in more detail below, the Basket Level Percentage must
exceed approximately 101.17% in order for you to receive a
Redemption Amount per $1,000 in principal amount of the Notes that
exceeds the principal amount. In addition, the Redemption
Amount could be substantially less than the principal amount of the
Notes.
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Reference
Stock
Weighting:
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For each Reference Stock, 1/20th
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Reference
Stock
Performance:
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The Reference Stock Performance will measure the change in value of
each Reference Stock over the term of the Notes, including the
payment of certain dividends.
For each Reference Stock, the Reference Stock Performance will
equal (a) the applicable Final Share Price divided by (b) the
applicable Initial Share Price, expressed as a percentage.
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Weighted
Reference Stock
Performance:
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For each Reference Stock, the product of (a) its Reference Stock
Performance and (b) the Reference Stock Weighting.
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Participation
Rate:
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98.85%. Because the Participation Rate is less than 100%, the
Basket Level Percentage must exceed approximately 101.17% in order
for you to receive a Redemption Amount per $1,000 in principal
amount of the Notes that exceeds the principal amount. See
“Hypothetical Returns” below.
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Basket Level
Percentage:
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The sum of the Weighted Reference Stock Performances.
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Initial Share
Price:
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For each Reference Stock, its closing price on the Trade Date, as
determined by the Calculation Agent, as set forth in the following
table:
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Reference Stock
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Ticker
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Initial Share Price
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Alaska Air Group,
Inc.
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ALK
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62.28
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Avnet, Inc.
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AVT
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38.53
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AutoZone,
Inc.
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AZO
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1205.73
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Cadence
Bancorporation
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CADE
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20.70
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Cigna
Corporation
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CI
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204.26
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Eagle Materials
Inc.
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EXP
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125.46
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Healthcare Realty
Trust Incorporated
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HR
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29.26
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Jabil Inc.
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JBL
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44.55
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KB Home
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KBH
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42.37
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M.D.C. Holdings,
Inc.
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MDC
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57.57
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Mohawk
Industries, Inc.
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MHK
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171.90
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Maximus,
Inc.
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MMS
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82.14
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National Retail
Properties, Inc.
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NNN
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42.25
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Old Republic
International Corporation
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ORI
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19.78
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Dave &
Buster's Entertainment, Inc.
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PLAY
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38.89
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PROG Holdings,
Inc.
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PRG
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48.51
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Construction
Partners, Inc.
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ROAD
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27.39
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SYNNEX
Corporation
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SNX
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88.41
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WESCO
International, Inc.
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WCC
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81.53
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Wintrust
Financial Corporation
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WTFC
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68.84
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Final Share
Price:
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For each Reference Stock, the sum of (a) the closing price on the
Valuation Date and (b) the Dividend Amount for that Reference
Stock.
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Dividend
Amount:
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An amount in U.S. dollars equal to 100% of the gross cash
distributions (including ordinary and extraordinary dividends) per
share of Reference Stock declared by the applicable Reference Stock
Issuer where the date that the applicable Reference Stock has
commenced trading ex-dividend on its primary U.S. securities
exchange as to each relevant distribution occurs from the trading
day after the Trade Date to the Valuation Date. The positive effect
of the Dividend Amount on the Redemption Amount will be reduced as
a result of the Participation Rate, as set forth in “—Payment at
Maturity” above.
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Calculation
Agent:
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RBC Capital Markets, LLC, our wholly-owned subsidiary
(“RBCCM”)
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U.S. Tax
Treatment:
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By purchasing a Note, each holder agrees (in the absence of a
change in law, an administrative determination or a judicial ruling
to the contrary) to treat the Note as a pre-paid cash-settled
derivative contract 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 discussion
in this pricing supplement under “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 under “Supplemental Discussion of U.S.
Federal Income Tax Consequences,” which apply to the Notes.
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Distribution:
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The Notes are not intended for purchase by any investor that is not
a United States person, as that term is defined for U.S. federal
income tax purposes, and no dealer may make offers of the Notes to
any such investor.
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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).
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Terms
Incorporated in
the Master
Note:
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All of the terms appearing above the item captioned “Secondary
Market” on pages P-2 and P-3 of this pricing supplement and the
terms appearing under the captions “Description of the Notes” below
and “General Terms of the Notes” in the product prospectus
supplement.
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The Valuation Date for any Reference Stock, as well as the maturity
date, are subject to postponement if a market disruption event
occurs with respect to an applicable Reference Stock, as described
in the product prospectus supplement.
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 October 18, 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.
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 and in the
product prospectus supplement, 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 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-ES-1 dated October 18, 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.
HYPOTHETICAL RETURNS
The following hypothetical examples are provided for illustration
purposes only and are hypothetical; they do not purport to be
representative of every possible scenario concerning increases or
decreases in the value of the Basket and the related effect on the
Redemption Amount. The following hypothetical examples illustrate
the payment you would receive on the maturity date if you purchased
$1,000 in principal amount of the Notes. Numbers appearing in the
examples below have been rounded for ease of analysis. The examples
below are based on the Participation Rate of 98.85%.
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Basket
Level
Percentage
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Redemption Amount per $1,000 in
Principal
Amount
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Percentage Gain (or Loss) per
$1,000 in
Principal Amount
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140.00%
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$1,383.90
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38.39%
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130.00%
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$1,285.05
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28.51%
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120.00%
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$1,186.20
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18.62%
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110.00%
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$1,087.35
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8.73%
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101.17%(1)
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$1,000.00
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0.00%
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100.00%(2)
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$988.50
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-1.15%
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90.00%
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$889.65
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-11.04%
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80.00%
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$790.80
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-20.92%
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70.00%
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$691.95
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-30.81%
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60.00%
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$593.10
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-40.69%
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30.00%
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$296.55
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-70.35%
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0.00%
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$0.00
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-100.00%
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(1) For
you to receive a Redemption Amount greater than the principal
amount of the Notes, the Basket Level Percentage must be greater
than approximately 101.17% due to the effect of the Participation
Rate being only 98.85%.
(2) If the Basket Level Percentage is not at least approximately
101.17%, you will lose some or all of the principal amount of the
Notes.
Please see the sections below, “Additional Risk Factors—General
Risks Relating to the Terms of the Notes—You May Lose Some or All
of the Principal Amount at Maturity” and “—The Notes Will Not
Reflect the Full Performance of the Reference Stocks, Which May
Negatively Impact Your Return on the Notes.”
SELECTED RISK CONSIDERATIONS
An investment in the Notes involves significant risks. Investing in
the Notes is not equivalent to investing directly in any of the
Reference Stocks. These risks are explained in more detail in the
section “Risk Factors” in the product prospectus supplement and the
prospectus supplement. In addition to the risks described in the
product prospectus supplement and the prospectus supplement, you
should consider the following:
Risks
Relating to the Terms of the Notes
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You
May Lose Some or All of the Principal Amount at Maturity ––
The Notes do not guarantee any return of principal. The amount
payable on the Notes at maturity will depend on the performance of
each of the Reference Stocks and the applicable Dividend Amount,
and may be less, and possibly significantly less, than your initial
investment. If the prices of some or all of the Reference Stocks
decrease, the payment at maturity may be less than the principal
amount. In addition, because the Participation Rate is only 98.85%,
the Basket Level Percentage must exceed approximately 101.17% in
order for you to receive a Redemption Amount that exceeds the
principal amount. You may lose all or a substantial portion of the
amount that you invested to purchase the Notes. You may incur a
loss, even if the Basket Level Percentage is greater than 100% (but
less than approximately 101.17%). Please also see “—The Notes Will
Not Reflect the Full Performance of the Reference Stocks, Which May
Negatively Impact 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. 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 Will Not Reflect the Full Performance of the Reference
Stocks, Which May Negatively Impact Your Return on the Notes
–– Because the
calculation of the Redemption Amount includes a Participation Rate
of less than 100%, the return, if any, on the Notes will not
reflect the full performance of the Reference Stocks. Therefore,
the yield to maturity based on the methodology for calculating the
Redemption Amount will be less than the yield that would be
produced if the Reference Stocks were purchased and held for a
similar period. The Basket Level Percentage must be at least
approximately 101.17% for the Redemption Amount to exceed the
principal amount.
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Any
Increase in the Price of One or More Reference Stocks May Be Offset
by Decreases in the Price of One or More Other Reference
Stocks –– The price of one or more of the Reference Stocks
may increase while the price of one or more of the other Reference
Stocks decreases. Therefore, in determining the value of the
Basket at any time, including on the Valuation Date, increases in
the price of one Reference Stock may be moderated, or wholly
offset, by decreases in the price of one or more other Reference
Stocks.
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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
unsecured debt securities. As a result, your receipt of any amounts
due on the Notes is dependent upon our ability to repay our
obligations on the applicable payment date. This will be the case
even if the value of the Basket increases after the Trade Date. No
assurance can be given as to what our financial condition will be
at maturity of the Notes.
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Owning the Notes Is Not the Same as Owning the
Reference Stocks –– The return on your Notes is
unlikely to reflect the return you would realize if you actually
owned the Reference Stocks. For example, although certain dividends
paid by the Reference Stock Issuers will be included in the
Redemption Amount paid at maturity, you will have no right to
receive these dividends at the time they are paid on the Reference
Stocks; accordingly, an investment in the Notes may return less
than an actual investment in the Reference Stocks. As an owner of
the Notes, you will not have voting rights or any other rights that
holders of the Reference Stocks may have. Furthermore, one or
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more of
the Reference Stocks may appreciate during the term of the Notes,
and, due to the Participation Rate, you will not fully participate
in such appreciation.
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The
Payments on the Notes Are Subject to Postponement Due to Market
Disruption Events and Adjustments –– The payments on the
Notes are subject to adjustment as described in this document. For
a description of what constitutes a market disruption event as well
as the consequences of that market disruption event, see
“Description of the Notes—Market Disruption Events” below.
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Significant Aspects of the Tax Treatment of
the Notes Are Uncertain and Certain Aspects May Make the Notes Less
Suitable for Certain Non-U.S. Investors –– The tax treatment
of the Notes is uncertain. We do not plan to request a ruling
from the Internal Revenue Service or from any Canadian authorities
regarding the tax treatment of the Notes, and the Internal Revenue
Service or a court may not agree with the tax treatment described
in this pricing supplement.
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The
Internal Revenue Service has issued a notice indicating that it and
the Treasury Department are actively considering whether, among
other issues, a holder should be required to accrue interest over
the term of an instrument such as the Notes even though that holder
will not receive any payments with respect to the Notes until
maturity and whether all or part of the gain a holder may recognize
upon sale or maturity of an instrument such as the Notes could be
treated as ordinary income. The outcome of this process is
uncertain and could apply on a retroactive basis.
Moreover,
the Notes are not intended for purchase by any investor that is not
a United States person, as that term is defined for U.S. federal
income tax purposes, and no dealer may make offers of the Notes to
any such investor. If investors that are not “United States
persons” for U.S. federal income tax purposes acquire any Notes,
such investors may incur U.S. tax obligations as a result of owning
such Notes.
Please
read carefully the section entitled “Supplemental Discussion of
U.S. Federal Income Tax Consequences” in this pricing supplement,
the section entitled “Tax Consequences” in the accompanying
prospectus, the section entitled “Certain Income Tax Consequences”
in the accompanying prospectus supplement, and the section entitled
“Supplemental Discussion of U.S. Federal Income Tax Consequences in
the accompanying product prospectus supplement. You should
consult your tax advisor about your own tax situation.
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 other
affiliate of ours may stop any market-making activities at any
time. Even if a secondary market for the Notes develops, it may not
provide significant liquidity or trade at prices advantageous to
you. We expect that transaction costs in any secondary market would
be high. As a result, the difference between bid and asked prices
for your Notes in any secondary market could be substantial.
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The
Market Value of the Notes May Be Influenced by Many Unpredictable
Factors –– The following factors, many of which are beyond
our control, may influence the market value of the Notes:
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the market prices of the Reference
Stocks;
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the dividend yields of the Reference
Stocks;
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economic, financial, political,
military, regulatory, legal and other events that affect the
securities markets generally, and which may affect the values of
the Reference Stocks; and
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interest rates in the market.
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These factors may influence the market value of your Notes if you
sell your Notes before maturity. Our creditworthiness, as
represented by our credit ratings or as otherwise perceived in the
market will also affect the market value of your Notes. If
you sell your Notes prior to maturity, you may receive less than
your initial investment.
Risks Relating to the Initial Estimated Value of the Notes
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The
Initial Estimated Value of the Notes Is Less than the Price to the
Public –– The initial estimated value 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 prices of the Reference Stocks, the
borrowing rate we pay to issue securities of this kind, and the
inclusion in the price to the public of the structuring fee 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
structuring fee and the hedging costs relating to the Notes. In
addition to bid-ask spreads, the value of the Notes determined by
RBCCM for any secondary market price is expected to be based on the
secondary rate rather than the internal funding rate used to price
the Notes and determine the initial estimated value. As a result,
the secondary price will be less than if the internal funding rate
was used. The Notes are not designed to be short-term trading
instruments. Accordingly, you should be able and willing to hold
your Notes to maturity.
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The
Initial Estimated Value of the Notes 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.
Additional Risks Relating to the Reference Stocks
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The
Inclusion of the Reference Stocks in the Basket Does Not Guarantee
a Positive Return –– The performance of the Reference Stocks
may be less than the performance of the equities markets generally,
and less than the performance of the economic sectors represented
by the Reference Stocks, or other securities in which you may
choose to invest. Although Raymond James may have expressed a
positive view as to one or more of the Reference Stocks prior to
the Trade Date, its views may have changed significantly prior to
the Trade Date or may change significantly during the term of the
Notes. In addition, any positive views of Raymond James’
research division is separate and apart from the offering of these
Notes, and does not constitute investment advice. Our
offering of the Notes does not constitute our recommendation or the
recommendation of ours, Raymond James, or our respective affiliates
to invest in the Notes or in the Reference Stocks.
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You
Will Not Have Any Shareholder Rights and Will Have No Right to
Receive Any Reference Stocks at Maturity –– Investing in the
Notes will not make you a holder of any of the Reference
Stocks. Neither you nor any other holder or owner of the
Notes will have any voting rights, any right to receive dividends
or other distributions (except to the extent that the Dividend
Amounts are reflected in the Redemption Amount) or any other rights
with respect to any of these securities.
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Changes That Affect a Reference Stock May
Affect the Market Value of the Notes and the Amount You Will
Receive at Maturity –– Changes affecting a Reference Stock
or a Reference Stock Issuer, such as reorganizations or mergers,
will be reflected in the price of that Reference Stock and
therefore could affect the amount payable on your Notes at maturity
and the market value of the Notes prior to maturity. If these
events occur, the Calculation Agent may, for example, adjust the
applicable Initial Share Price. See “Description of the
Notes—Anti-Dilution Adjustments.”
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No
Reference Stock Issuer Will Have any Role or Responsibilities with
Respect to the Notes –– None of the Reference Stock Issuers
will have authorized or approved the Notes, or will be involved in
this offering. No such company will have any financial or
legal obligation with respect to the Notes or the amounts to be
paid to you, including any obligation to take our needs or your
needs into consideration for any reason, including taking any
corporate actions that might affect the value of the Reference
Stocks or the Notes. No such company will receive any of the
proceeds from any offering of the Notes. No Reference Stock
Issuer or any other company will be responsible for, or participate
in, the determination or calculation of the Redemption
Amount.
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Neither We Nor Raymond James Control Any
Reference Stock Issuer and Neither We Nor Raymond James Are
Responsible for Any Disclosure Made by Any Other Company ––
Neither we nor Raymond James nor any of our respective affiliates
have the ability to control the actions of any Reference Stock
Issuer, nor do we assume any responsibility for the adequacy or
accuracy of any publicly available information about any of these
companies, unless (and only to the extent that) our securities or
the securities of our affiliates are represented by that Reference
Stock. Neither we nor Raymond James are responsible for any
other issuer’s public disclosure of information on itself or any
Reference Stock, whether contained in SEC filings or
otherwise. Neither we nor Raymond James will perform any due
diligence procedures with respect to the Reference Stock
Issuers. You should make your own investigation into the
Reference Stock Issuers.
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The
Historical Performance of the Reference Stocks Should Not Be Taken
as an Indication of Their Future Performance –– The Final
Share Prices of the Reference Stocks will be used to determine the
Redemption Amount. The historical performance of the
Reference Stocks does not necessarily give an indication of their
future performance. As a result, it is impossible to predict
whether the prices of the Reference Stocks will rise or fall during
the term of the Notes. The prices of the Reference Stocks
will be influenced by complex and interrelated political, economic,
financial and other factors.
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Holders
of the Reference Stocks are only entitled to receive those
dividends as each issuer’s board of directors may declare out of
funds legally available. Any such dividends will be reflected
in the determination of the Redemption Amount, as set forth in the
“Summary” section above. Although dividends and distributions on
one or more of the Reference Stocks may have historically been
declared by the applicable board of directors, they are not
required to do so and may reduce or eliminate those dividends in
the future. The Dividend Amount of one or more of the
Reference Stocks during the term of the Notes may be zero.
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Some
of the Reference Stocks Have a Limited Trading History —
CADE and ROAD commenced trading in April 2017 and May 2018,
respectively. Because these Reference Stocks have a limited
trading history, your investment in the Notes may involve a greater
risk than investing in securities linked to only securities that
have a more established record of performance.
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You
Will Have Limited Anti-Dilution Protection with Respect to the
Reference Stocks –– The Calculation Agent will adjust the
Initial Share Price of a Reference Stock for stock splits, reverse
stock splits, stock dividends and other events that affect the
applicable issuer’s capital structure, but only in the situations
we describe in “Description of the Notes—Anti-Dilution Adjustments”
below, and in the product prospectus supplement. The
Calculation Agent will not be required to make an adjustment for
every corporate event that may affect a Reference Stock. For
example, the Calculation Agent will not make any adjustments for
events such as an offering by a Reference Stock Issuer of equity
securities or a tender or exchange offer for less than all
outstanding shares of that issuer by a third party. Those
events or other actions by the applicable issuer or a third party
may nevertheless adversely affect the price of the Reference Stock,
and adversely affect the value of the Notes.
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Risks Relating to Conflicts of Interest
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You
Must Rely on Your Own Evaluation of the Merits of an Investment
Linked to the Reference Stocks –– In the ordinary course of
their business, RBCCM, Raymond James and our respective affiliates
may have expressed views on expected movements in any Reference
Stock, and may do so in the future. These views or reports
may be communicated to our clients, Raymond James’ clients, and
clients of our respective affiliates. However, these views
are subject to change from time to time. Moreover, other
professionals who transact business in markets relating to any
Reference Stock may at any time have significantly different views
from those of our respective affiliates. For these reasons,
you are encouraged to derive information concerning the Reference
Stocks from multiple sources, and you should not rely solely on
views expressed by us, Raymond James or our respective
affiliates.
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Our
Trading and Other Transactions Relating to the Reference Stocks,
Futures, Options or Other Derivative Products May Adversely Affect
the Market Value of the Notes –– As described below under
“Use of Proceeds and Hedging” in the product prospectus supplement,
we or our affiliates may hedge our obligations under the Notes by
purchasing or selling the Reference Stocks, futures or options
relating to the Reference Stocks, or other derivative instruments
with returns linked or related to changes in the performance of the
Reference Stocks. We may adjust these hedges by, among other
things, purchasing or selling those assets at any time.
Although they are not expected to do so, any of these hedging
activities may adversely affect the prices of the Reference Stocks,
and therefore, the market value of the Notes, and the amount
payable at maturity. It is possible that we or one or more of
our affiliates could receive substantial returns from these hedging
activities, even though the market value of the Notes
decreases.
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We,
Raymond James, or one or more of our respective affiliates may also
engage in trading relating to the Reference Stocks on a regular
basis as part of our general broker-dealer and other businesses,
for proprietary accounts, for other accounts under management or to
facilitate transactions for our customers, including block
trades. Any of these activities could adversely affect the
prices of the Reference Stocks and, therefore, the market value of
the Notes. We, Raymond James, or one or more of our
respective affiliates may also issue or underwrite other securities
or financial or derivative instruments with returns linked or
related to changes in the performance of the Reference
Stocks. By introducing competing products into the
marketplace in this manner, we, Raymond James or one or more of our
respective affiliates could adversely affect the market value of
the Notes.
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Our
Business Activities and the Business Activities of Our Affiliates
May Create Conflicts of Interest –– As noted above, we,
Raymond James, or one or more of our respective affiliates expect
to engage in trading activities related to the Reference Stocks
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,
Raymond James and our respective 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 Stocks, could be
adverse to the interests of the holders of the Notes. We,
Raymond James, or one or more of our respective affiliates may, at
present or in the future, engage in business with the Reference
Stock Issuers, including making loans to or providing advisory
services to those companies. These services could include
investment banking and merger and acquisition advisory
services. In providing these services, we or Raymond James
may obtain confidential information about the Reference Stock
Issuers, and we will be under no obligation to share this
information with you. These activities may present a conflict
between our, Raymond James or one or more of our affiliates’
obligations and your interests as a holder of the Notes.
Moreover, we, Raymond James and our respective affiliates have
published, and in the future expect to publish, research reports
and other materials with respect to most or even all of the
Reference Stocks. Our views are modified from time to time
without notice and may express opinions or provide recommendations
that are inconsistent with purchasing or holding the Notes.
Even if one of our affiliates or Raymond James expresses a negative
opinion about one or more of the Reference Stocks, or if market
conditions change, the composition of the Basket will not change
during the term of the Notes (except under the limited
circumstances described below). Any of these activities by
us, Raymond James or one or more of our respective affiliates may
affect the prices of the Reference Stocks and, therefore, the
market value of the Notes.
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As
Calculation Agent, RBCCM Will Have the Authority to Make
Determinations That Could Affect the Value of the Notes and the
Payment at Maturity –– As Calculation Agent for your Notes,
RBCCM will have discretion in
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making
various determinations that affect your Notes, including
determining the Initial Share Prices, the Final Share Prices, the
Dividend Amounts, the Basket Level Percentage, the Redemption
Amount and whether any market disruption event has occurred.
The Calculation Agent also has discretion in making certain
adjustments relating to mergers and certain other corporate
transactions that a Reference Stock Issuer may undertake. The
exercise of this discretion by RBCCM could adversely affect the
value of your Notes and may present RBCCM, which is our
wholly-owned subsidiary, with a conflict of interest.
DESCRIPTION OF THE NOTES
Composition of the Basket
Each Reference Stock was assigned a weighting (each, a “Reference
Stock Weighting”) so that each Reference Stock represents a
specified portion of the value of the Basket on the Trade
Date. The Reference Stock Weighting for each Reference Stock
is 1/20th.
Payment at Maturity
The amount that you will receive at maturity for each $1,000 in
principal amount of the Notes (the “Redemption Amount”) will depend
upon the performance of the Basket and the dividends paid on the
Reference Stocks. The Redemption Amount will equal:
($1,000 × the Basket Level Percentage x the Participation
Rate)
Basket Level Percentage.
The Basket Level Percentage will equal the sum of the Weighted
Reference Stock Performances.
Weighted Reference Stock
Performance. For each Reference Stock, the product of (a)
its Reference Stock Performance and (b) its Reference Stock
Weighting.
Reference Stock
Performance. The Reference Stock Performance will measure
the change in value of each Reference Stock over the term of the
Notes, including the payment of certain dividends. For each
Reference Stock, the Reference Stock Performance will equal (a) the
applicable Final Share Price divided by (b) the applicable Initial
Share Price, expressed as a percentage.
Initial Share Price. For
each Reference Stock, the “Initial Share Price” is its closing
price on the Trade Date, as determined by the Calculation
Agent.
Final Share Price. For
each Reference Stock, the sum of (a) its closing price on the
Valuation Date and (b) the Dividend Amount for that Reference
Stock, as determined by the Calculation Agent.
Dividend Amount. An
amount in U.S. dollars equal to 100% of the gross cash
distributions (including ordinary and extraordinary dividends) per
share of Reference Stock declared by the applicable Reference Stock
Issuer where the date that the applicable Reference Stock has
commenced trading ex-dividend on its primary U.S. securities
exchange as to each relevant distribution occurs from (and
including) the first trading day after the Trade Date, as
determined by the Calculation Agent, and until the Valuation Date.
The Calculation Agent may adjust the applicable Dividend Amount in
its commercially reasonable judgment if a dividend that is actually
paid to holders of the applicable Reference Stock differs from the
amount declared, whether in amount or as to the date of
payment.
Trading Day. When we refer
to a trading day with respect to any Reference Stock, we mean a day
on which the principal trading market for that Reference Stock is
open for trading, as determined by the Calculation Agent.
Valuation Date
The scheduled
Valuation Date is set forth above. If the Valuation Date is
not a trading day as to any Reference Stock, that Valuation Date
will be postponed as to that Reference Stock to the next trading
day. If the Calculation Agent determines that a market
disruption event occurs or is continuing on the Valuation Date, the
Final Share Price of the
applicable Reference Stock or Reference Stocks will be determined
according to the calculation in “— Market Disruption Events”
below.
Maturity Date
The maturity date will be August 24, 2022, unless that date is not
a business day, in which case the maturity date will be the next
following business day. The maturity date will be postponed
by the same number of business days as the Valuation Date may be
postponed, as provided in the prior paragraph. However, no interest
will be payable as a result of that postponement.
Market Disruption Events
If a market disruption event occurs or is continuing on the
Valuation Date as to any Reference Stock, its Final Share Price
will equal its closing price on the first trading day following the
Valuation Date on which the Calculation Agent determines that a
market disruption event is not continuing. If a market
disruption event as to that Reference Stock occurs or is continuing
on each trading day to and including the tenth trading day
following the Valuation Date, its Final Share Price will be
determined (or, if not determinable, estimated by the Calculation
Agent in a manner which is considered commercially reasonable under
the circumstances) by the Calculation Agent on that tenth trading
day, regardless of the occurrence or continuation of a market
disruption event on that day. In such an event, the
Calculation Agent will make a good faith estimate in its sole
discretion of the Final Share Price that would have prevailed in
the absence of the market disruption event. If the Valuation
Date is postponed as a result of a market disruption event, the
maturity date of the Notes will be postponed by the same number of
business days.
Anti-Dilution Adjustments
For any Reference Stock, the Calculation Agent will adjust the
Initial Share Price if certain events occur with respect to that
Reference Stock, as described in the product prospectus
supplement. However, no adjustments will be made as a result
of an “extraordinary dividend,” as such dividends will be reflected
in the applicable “Dividend Amount,” as described above.
Default Amount on Acceleration
If an event of default with respect to the Notes shall have
occurred and be continuing, the amount declared due and payable on
the Notes upon any acceleration of the Notes will be determined by
the Calculation Agent and will be an amount in cash per $1,000 in
principal amount of the Notes equal to the Redemption Amount,
calculated as if the date of acceleration were the Valuation
Date.
Role of Calculation Agent
The Calculation
Agent will make all determinations regarding the prices of the
Reference Stocks, the Redemption Amount, the Dividend Amounts of
the Reference Stocks, trading days, business days, market
disruption events, any required anti-dilution adjustments, the
default amount, and the amounts payable on your Notes. Absent
manifest error, all determinations of the Calculation Agent will be
final and binding on you and us, without any liability on the part
of the Calculation Agent. You will not be entitled to any
compensation from us for any loss suffered as a result of any of
the above determinations or calculations by the Calculation
Agent.
THE REFERENCE STOCKS
Companies with securities registered under the Exchange Act, such
as the Reference Stock Issuers, are required to file periodically
financial and other information specified by the SEC. Information
filed with the SEC can be obtained through the SEC’s website at
http://www.sec.gov. Information on that website is not
included or incorporated by reference in this pricing
supplement.
This pricing
supplement relates only to the Notes offered hereby and does not
relate to any Reference Stocks or other securities of any Reference
Stock Issuer. We derived all disclosures in this pricing
supplement regarding the Reference Stock Issuers from publicly
available documents described in the preceding paragraph. In
connection with the offering of the Notes, none of us, Raymond
James, or our respective affiliates have participated in the
preparation of such documents or made any due diligence inquiry
with respect to any Reference Stock Issuer. None of us,
Raymond James, or any of our respective affiliates makes any
representation that such publicly available documents or any other
publicly available information regarding any Reference Stock Issuer
is current, accurate or complete. None of those documents
shall be deemed to be incorporated by reference into this pricing
supplement.
The composition
of the Basket and the identity of the Reference Stocks were
selected by Raymond James. None of us, Raymond James or any
of our respective affiliates endorses those stocks in connection
with this offering, and none of those entities makes any
representation as to the performance of any Reference Stock or the
Basket.
Investors should
review recent prices of the Reference Stocks prior to making an
investment decision with respect to the Notes.
Alaska
Air Group, Inc. (ALK)
Alaska Air Group,
Inc. is an airline holding company. The company, through its
subsidiaries, provides air services to passengers in multiple
destinations. The company also provide freight and mail services,
primarily to and within the state of Alaska and on the West
Coast.
The company’s
common stock is listed on the New York Stock Exchange (the “NYSE”)
under the ticker symbol “ALK.”
Avnet,
Inc. (AVT)
Avnet, Inc.
distributes computer products and semiconductors, as well as
interconnect, passive, and electromechanical components. The
company markets and distributes these products and provides
supply-chain integration, engineering design, and technical
services.
The company’s
common stock is listed on the Nasdaq Global Select Market (the
“Nasdaq”) under the ticker symbol “AVT.”
AutoZone,
Inc. (AZO)
AutoZone, Inc. is
a specialty retailer of automotive replacement parts and
accessories. The company offers an extensive product line for cars,
sport utility vehicles, vans, and light trucks, including new and
remanufactured automotive parts, maintenance items, accessories,
and non-automotive products. The company operates in the United
States, Puerto Rico, and Mexico.
The company’s common stock is listed
on the NYSE under the ticker symbol “AZO.”
Cadence
Bancorporation (CADE)
Cadence
Bancorporation, through its subsidiaries, offers financial products
and services such as savings accounts, personal and business loans,
debit and credit cards, letter of credit, certificates of deposits,
mortgages, equipment financing, cash management, and online
banking.
The company’s
common stock is listed on the NYSE under the ticker symbol
“CADE.”
Cigna
Corporation (CI)
Cigna Corporation
operates as an insurance company. The company offers life,
accident, disability, supplemental, Medicare, and dental insurance
products and services.
The company’s
common stock is listed on the NYSE under the ticker symbol
“CI.”
Eagle
Materials Inc. (EXP)
Eagle Materials
Inc. manufactures and distributes cement, gypsum wallboard,
recycled paperboard, and concrete and aggregates. The company's
products are used in the construction of homes, commercial and
industrial buildings, and governmental buildings across the United
States.
The company’s
common stock is listed on the NYSE under the ticker symbol
“EXP.”
Healthcare Realty Trust Incorporated (HR)
Healthcare Realty
Trust Incorporated is a real estate investment trust (REIT) that
owns, manages, finances, and develops properties associated with
the delivery of clinical and outpatient healthcare services
throughout the United States.
The company’s
common stock is listed on the NYSE under the ticker symbol
“HR.”
Jabil
Inc. (JBL)
Jabil Inc. is a
manufacturing services company. The company offers digital
prototyping, printed electronics, device integration, circuit
designing, and volume board assembly services.
The company’s
common stock is listed on the NYSE under the ticker symbol
“JBL.”
KB Home
(KBH)
KB Home builds
single-family homes in the United States, primarily targeting
first-time and first move-up homebuyers. The company also derives
income from mortgage banking, title, and insurance services.
The company’s
common stock is listed on the NYSE under the ticker symbol
“KBH.”
M.D.C.
Holdings, Inc. (MDC)
M.D.C. Holdings,
Inc., through its subsidiaries, builds and sells homes under the
name Richmond American Homes. The company also originates mortgage
loans primarily for its homebuyers. The company builds its
single-family homes in a variety of states.
The company’s
common stock is listed on the NYSE under the ticker symbol
“MDC.”
Mohawk
Industries, Inc. (MHK)
Mohawk
Industries, Inc. designs, manufactures, sources, distributes, and
markets flooring for residential and commercial applications. The
company offers carpet, ceramic tile, laminate, wood, stone, vinyl,
and rugs. The company markets residential and commercial flooring
in the United States, and residential flooring in Europe.
The company’s common stock is listed
on the NYSE under the ticker symbol “MHK.”
Maximus,
Inc. (MMS)
Maximus, Inc.
provides program management and consulting services to state and
local governments throughout the United States. The company's
services are designed to make government operations more efficient
and cost effective, while improving the quality of the services
provided to program beneficiaries.
The company’s
common stock is listed on the NYSE under the ticker symbol
“MMS.”
National
Retail Properties, Inc. (NNN)
National Retail
Properties, Inc. is a real estate investment trust. The company
acquires, develops, and manages retail properties. The company
serves customers in the State of Florida.
The company’s
common stock is listed on the NYSE under the ticker symbol
“NNN.”
Old
Republic International Corporation (ORI)
Old Republic
International Corporation is an insurance holding company; its
subsidiaries market, underwrite, and provide risk management
services. The company provides services for a variety of coverages
in the property and liability, mortgage guaranty, title, and life
and health insurance fields.
The company’s
common stock is listed on the NYSE under the ticker symbol
“ORI.”
Dave
& Buster’s Entertainment, Inc. (PLAY)
Dave &
Buster’s Entertainment, Inc. owns and operates high-volume venues
that combine dining and entertainment in North America for both
adults and families. The company operates entertainment centers
that offer a full menu of food and beverage items combined with a
wide assortment of entertainment attractions, including skill and
sports-oriented redemption games.
The company’s
common stock is listed on the Nasdaq under the ticker symbol
“PLAY.”
PROG
Holdings, Inc. (PRG)
PROG Holdings,
Inc., through its subsidiaries, provides commercial equipment
finance and leasing services.
The company’s
common stock is listed on the NYSE under the ticker symbol
“PRG.”
Construction Partners, Inc. (ROAD)
Construction
Partners, Inc. provides infrastructure construction services. The
company offers services to public and private infrastructure
projects, including highways, roads, bridges, airports, and
commercial and residential sites. The company serves customers in
the United States.
The company’s
common stock are listed on the Nasdaq under the ticker symbol
“ROAD.”
SYNNEX
Corporation (SNX)
SYNNEX
Corporation provides information technology supply chain services.
The company offers services to original equipment manufacturers and
software publishers worldwide. The company offers product
distribution, related logistics, and contract assembly
services.
The company’s
common stock is listed on the NYSE under the ticker symbol
“SNX.”
WESCO
International, Inc. (WCC)
WESCO
International, Inc. distributes electrical products and other
industrial maintenance, repair, and operating supplies. The company
also provides supply services. The company operates branches and
distribution centers in the United States, Canada, Puerto Rico,
Guam, Mexico, the United Kingdom, and Singapore.
The company’s common stock is listed
on the NYSE under the ticker symbol “WCC.”
Wintrust
Financial Corporation (WTFC)
Wintrust
Financial Corporation is a multi-bank holding company providing
community-based banking services in various suburbs of Chicago,
Illinois. The company provide a variety of commercial and personal
financial services to individuals, businesses, local governmental
units, and institutions. The company also has a financing services
subsidiary and a trust subsidiary.
The company’s common stock is listed
on the Nasdaq under the ticker symbol “WTFC.”
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 October
18, 2018 under “Supplemental Discussion of U.S. Federal Income Tax
Consequences.”
Under current
Internal Revenue Service guidance, withholding on “dividend
equivalent” payments (as discussed in the product supplement), if
any, will apply to Notes that are issued as of the date of this
pricing supplement if such Notes are “delta-one” instruments. Based
on our determination that the Notes are delta-one instruments,
non-U.S. holders will be subject to withholding on dividend
equivalent payments, if any, under the Notes. We will not pay
additional amounts in respect of any dividend equivalent
withholding.
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.
SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
We, either ourselves or through RBCCM as agent, have entered into
an arrangement with Raymond James, in which Raymond James will act
as an agent in connection with the distribution of the Notes.
Such distribution may occur on or subsequent to the issue
date. The Notes sold by Raymond James to investors will be
offered at the issue price of $1,000 per Note. Raymond James
will receive the compensation set forth on the cover page of this
pricing supplement.
Delivery of the Notes will be made against payment for the Notes on
February 24, 2021, which is the third (3rd) business day following
the Trade Date (this settlement cycle being referred to as
“T+3”). See “Plan of Distribution” in the prospectus dated
September 7, 2018. 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.
We will deliver the Notes on a date that is greater than two
business days following the Trade Date. Under Rule 15c6-1 of the
Exchange Act, 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
arrangements to prevent a failed settlement.
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”) and the U.K. 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 and the U.K. has been
prepared, and therefore, offering or selling the Notes or otherwise
making them available to any retail investor in the EEA and the
U.K. may be unlawful under the PRIIPs Regulation.
STRUCTURING THE NOTES
The Notes are our debt securities, the return on which is linked to
the performance of the Basket. 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
on the cover page of 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 Stocks,
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 reduced the
economic terms of the Notes to you. The initial offering
price of the Notes also reflects our costs to structure the Notes,
and our estimated hedging costs. These factors resulted in
the initial estimated value for the Notes on the Trade Date being
less than their public offering price. See “Selected Risk
Considerations—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” 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.
