Form FWP ROYAL BANK OF CANADA Filed by: ROYAL BANK OF CANADA
 |
Filed Pursuant to Rule 433
Registration Statement No. 333-227001
|
||
|
The information in this preliminary terms supplement is not complete and may be changed.
|
|||
|
Preliminary Terms Supplement
Subject to Completion:
Dated March 9, 2021 Pricing Supplement Dated March __, 2021 to the Product Prospectus Supplement ERN-ES-1 Dated October 18, 2018, the Prospectus Supplement September 7, 2018,
and the Prospectus Dated September 7, 2018
|
$_________
Buffered Enhanced Return Notes Linked to
a Basket of Four Common Stocks,
Due September 22, 2023
Royal Bank of Canada
|
||
The information in this preliminary terms supplement is not complete and may be changed
Royal Bank of Canada is offering Buffered Enhanced Return Notes Linked to a Basket of Four Common Stocks (the “Notes”) linked to an equally-weighted basket (the “Basket”) of four equity securities (each, a “Basket
Component,” and collectively, the “Basket Components”).
The Basket Components and their ticker symbols are: Bank of America Corporation (“BAC”), Citigroup Inc. (“C”), JPMorgan Chase & Co. (“JPM”) and Wells Fargo & Company (“WFC”).
The CUSIP number for the Notes is 78016ELQ8. The Notes do not pay interest.
The Notes provide a 125% leveraged positive return if the Percentage Change of the Basket is positive, subject to the Maximum Redemption Amount of [140% - 145%] of the principal amount of the Notes (to be determined on
the Trade Date). If the Percentage Change is negative, but not less than -10%, we will pay the principal amount of the Notes. However, if the Percentage Change is less than -10%, investors will lose 1% of the principal amount for each 1% that the
Percentage Change is less than -10%. Any payments on the Notes are subject to our credit risk.
Issue Date: March 24, 2021. Maturity Date: September 22, 2023
The Notes will not be listed on any securities exchange.
Investing in the Notes involves a number of risks. See “Selected Risk Considerations” beginning on page P-6 of this terms supplement, and “Risk Factors” beginning on page PS-4 of the product prospectus supplement, on
page S-1 of the prospectus supplement and on page 1 of the prospectus.
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 terms supplement is truthful or complete. Any representation to the contrary is a criminal offense.
|
Per Note
|
Total
|
|||
|
Price to public(1)
|
100.00%
|
$
|
||
|
Underwriting discounts and commissions(1)
|
2.25%
|
$
|
||
|
Proceeds to Royal Bank of Canada
|
97.75%
|
$
|
(1) We or one of our affiliates may pay varying selling concessions of up to $22.50 per $1,000 in principal amount in connection with the
distribution of the Notes to other broker-dealers. See “Supplemental Plan of Distribution (Conflicts of Interest)” below. Certain dealers who purchase the Notes for sale to certain fee-based advisory accounts may forego some or all of their
underwriting discount or selling concessions. The public offering price for investors purchasing the Notes in these accounts may be between $977.50 and $1,000 per $1,000 in principal amount.
The initial estimated value of the Notes as of the Trade Date is expected to be at least $898 per $1,000 in principal amount, and will be less than the price to public. The final pricing supplement relating to the Notes
will set forth our estimate of the initial value of the Notes as of the Trade Date. The actual value of the Notes at any time will reflect many factors, cannot be predicted with accuracy, and may be less than this amount. We describe our
determination of the initial estimated value in more detail below.
RBC Capital Markets, LLC
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
SUMMARY
The information in this “Summary” section is qualified by the more detailed information set forth in this terms supplement, the product prospectus supplement, the
prospectus supplement, and the prospectus.
|
General:
|
This terms supplement relates to an offering of Buffered Enhanced Return Notes (the “Notes”) linked to a basket (the “Basket”) of four equity securities (the “Basket
Components”). The Basket Components, their respective Component Weights and their Initial Prices are indicated in the table below.
|
|
Issuer:
|
Royal Bank of Canada (“Royal Bank”)
|
|
Underwriter:
|
RBC Capital Markets, LLC (“RBCCM”)
|
|
Currency:
|
U.S. Dollars
|
|
Denominations:
|
$1,000 and minimum denominations of $1,000 in excess thereof
|
|
Trade Date (Pricing Date):
|
March 19, 2021
|
|
Issue Date:
|
March 24, 2021
|
|
Valuation Date:
|
September 19, 2023
|
|
Maturity Date:
|
September 22, 2023, subject to extension for market and other disruptions, as described in the product prospectus supplement dated October 18, 2018.
|
|
Interest Payments:
|
None. No payments will be made on the Notes prior to the maturity date.
|
|
Payment at Maturity
(if held to maturity):
|
If the Percentage Change is positive, then the investor will receive an amount per $1,000 principal amount per Note equal to the lesser of:
1. Principal Amount +
(Principal Amount x Percentage Change x Leverage Factor); and
2. Maximum Redemption
Amount
|
|
If the Percentage Change is 0% or negative, but is not less than -10%, the investor will receive the principal amount of the Notes.
If the Percentage Change is less than -10%, then the investor will receive a cash payment equal to:
Principal Amount + [Principal Amount x (Percentage Change + Buffer Percentage)]
In this case, an investor may lose up to 90% of the principal amount.
|
|
|
Percentage
Change:
|
The Percentage Change will equal an amount, expressed as a percentage and rounded to two decimal places, equal to the sum of the Weighted
Component Changes for the Basket Components. The Weighted Component Change for each Basket Component will be determined as follows:
 |
|
Buffer Percentage:
|
10%
|
|
Initial Price:
|
The closing price per share of a Basket Component on the Trade Date.
|
|
Leverage Factor:
|
125% (subject to the Maximum Redemption Amount)
|
|
Final Price:
|
The closing price per share of a Basket Component on the Valuation Date.
|
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
|
Maximum
Redemption
Amount:
|
[140% - 145%] multiplied by the principal amount. The actual Maximum Redemption Amount will be determined on the Trade Date.
|
|||
|
The Basket:
|
Basket Component
|
Bloomberg Ticker
|
Component Weight
|
Initial Price
|
|
Bank of America Corporation
|
BAC
|
1/4
|
$[●]
|
|
|
Citigroup Inc.
|
C
|
1/4
|
$[●]
|
|
|
JPMorgan Chase & Co.
|
JPM
|
1/4
|
$[●]
|
|
|
Wells Fargo & Company
|
WFC
|
1/4
|
$[●]
|
|
|
Principal at Risk:
|
The Notes are NOT principal protected. You may lose a substantial portion of your principal amount at maturity if the
Percentage Change is negative.
|
|||
|
Calculation Agent:
|
RBCCM
|
|||
|
U.S. Tax Treatment:
|
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 terms 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.
|
|||
|
Secondary Market:
|
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.
|
|||
|
Listing:
|
The Notes will not be listed on any securities exchange.
|
|||
|
Clearance and
Settlement:
|
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).
|
|||
|
Terms Incorporated
in the Master Note:
|
All of the terms appearing on the cover page and above the item captioned “Secondary Market” on pages P-2 and P-3 of this terms supplement and the terms appearing under the
caption “General Terms of the Notes” in the product prospectus supplement.
|
|||
The Trade Date and the issue date of the Notes are subject to change. The actual Trade Date, issue date, and other dates for the Notes set forth above will be set forth in the final
pricing supplement.
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
ADDITIONAL TERMS OF YOUR NOTES
You should read this terms 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 terms supplement will have the meanings given to them in the product
prospectus supplement. In the event of any conflict, this terms supplement will control. The Notes vary from the terms described in the product prospectus supplement in several important ways. You should read this terms supplement carefully.
This terms 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 terms supplement, “we,” “us,” or “our” refers to Royal Bank of Canada.
Royal Bank of Canada has filed a registration statement (including a product prospectus supplement, a prospectus supplement, and a prospectus) with the SEC for the offering to which this
terms supplement relates. Before you invest, you should read those documents and the other documents relating to this offering that we have filed with the SEC for more complete information about us and this offering. You may obtain these documents
without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, Royal Bank of Canada, any agent or any dealer participating in this offering will arrange to send you the product prospectus
supplement, the prospectus supplement and the prospectus if you so request by calling toll-free at 1-877-688-2301.
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
HYPOTHETICAL RETURNS
The examples set out below are included for illustration purposes only. The hypothetical Percentage Changes of the Basket used to illustrate the calculation of the
Payment at Maturity (rounded to two decimal places) are not estimates or forecasts of the price of any Basket Component, or the value of the Basket, on any trading day prior to the Maturity Date. All examples are based on the Leverage Factor of 125%, a
hypothetical Maximum Redemption Amount of 142.50% of the principal amount (the midpoint of the range specified above) and the Buffer Percentage of 10%, and assume that a holder purchased Notes with an aggregate principal amount of $1,000 and that no
market disruption event occurs on the Valuation Date.
|
Example 1—
|
Calculation of the Payment at Maturity where the Percentage Change is positive.
|
|
|
Percentage Change:
|
10%
|
|
|
Payment at Maturity:
|
$1,000 + ($1,000 x 10% x 125%) = $1,000 + $125 = $1,125
|
|
|
On a $1,000 investment, a 10% Percentage Change results in a Payment at Maturity of $1,125, a 12.50% return on the Notes.
|
||
|
Example 2—
|
Calculation of the Payment at Maturity where the Percentage Change is positive and the Payment at Maturity is subject to the Maximum Redemption Amount.
|
|
|
Percentage Change:
|
40%
|
|
|
Payment at Maturity:
|
$1,000 + ($1,000 x 40% x 125%) = $1,000 + $500 = $1,500
However, the Maximum Redemption Amount is $1,425
|
|
|
On a $1,000 investment, a 40% Percentage Change results in a Payment at Maturity of $1,425, a 42.50% return on the Notes.
|
||
|
Example 3—
|
Calculation of the Payment at Maturity where the Percentage Change is negative, but is not less than -10%.
|
|
|
Percentage Change:
|
-5%
|
|
|
In this case, on a $1,000 investment, a -5% Percentage Change results in a Payment at Maturity of $1,000, a 0% return on the Notes.
|
||
|
Example 4—
|
Calculation of the Payment at Maturity where the Percentage Change is less than -10%.
|
|
|
Percentage Change:
|
-35%
|
|
|
Payment at Maturity:
|
$1,000 + [$1,000 x (-35% + 10%)] = $1,000 - $250 = $750
|
|
|
In this case, on a $1,000 investment, a -35% Percentage Change results in a Payment at Maturity of $750, a -25% return on the Notes.
|
||
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
SELECTED RISK CONSIDERATIONS
An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the Basket Components. These risks are explained in more detail in the section
“Risk Factors” beginning on page PS-4 of the product prospectus supplement. In addition to the risks described in the prospectus supplement and the product prospectus supplement, you should consider the following:
Risks Relating to the Terms of the Notes
| • |
You May Receive Less than the Principal Amount at Maturity – Investors in the Notes could lose a substantial portion of their principal amount if there is a decline in the
value of the Basket. If the Percentage Change is less than -10%, you will lose 1% of the principal amount of your Notes for each 1% that the Percentage Change is less than -10%. You could lose up to 90% of the principal amount.
|
| • |
The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity – There will be no periodic interest payments
on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which could be negative, may be less than the return you could earn on other
investments. Even if your return is positive, your return may be less than the return you would earn if you bought one of our conventional senior interest bearing debt securities.
|
| • |
Your Potential Payment at Maturity Is Limited – The Notes will provide less opportunity to participate in the appreciation of the Basket than an investment in a security linked
to the Basket providing full participation in the appreciation, because the payment at maturity will not exceed the Maximum Redemption Amount. Accordingly, your return on the Notes may be less than your return would be if you made an investment
in the Basket Components or in a security directly linked to the positive performance of the Basket.
|
| • |
Owning the Notes Is Not the Same as Owning the Basket Components — The return on your Notes is unlikely to reflect the return you would realize if you actually owned shares of
the Basket Components. For example, you will not receive or be entitled to receive any dividend payments or other distributions on these securities during the term of your Notes. As an owner of the Notes, you will not have voting rights or any
other rights that holders of these securities may have.
|
| • |
Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market Value of the Notes – The Notes are our senior
unsecured debt securities. As a result, your receipt of the amount due on the maturity date is dependent upon our ability to repay our obligations at that time. 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 the maturity of the Notes.
|
| • |
Changes in the Value of One Basket Component May Be Offset by Changes in the Value of the Other Basket Components – A change in the value of one Basket Component may not
correlate with changes in the value of the other Basket Components. The value of one Basket Component may increase, while the value of the other Basket Components may not increase as much, or may even decrease. Therefore, in determining the
value of the Basket as of any time, increases in the value of one Basket Component may be moderated, or wholly offset, by lesser increases or decreases in the value of the other Basket Components.
|
Risks Relating to the Secondary Market for the Notes
| • |
There May Not Be an Active Trading Market for the Notes-Sales in the Secondary Market May Result in Significant Losses — There may be little or no secondary market for the
Notes. The Notes will not be listed on any securities exchange. RBCCM and our other affiliates may make a market for the Notes; however, they are not required to do so. RBCCM or any of our other affiliates may stop any market-making activities
at any time. Even if a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices advantageous
|
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
to you. We expect that transaction costs in any secondary market would be high. As a result, the difference between bid and asked prices for your Notes in any secondary market could be
substantial.
Risks Relating to the Initial Estimated Value of the Notes
| • |
The Initial Estimated Value of the Notes Will Be Less than the Price to the Public — The initial estimated value that will be set forth on the cover page of the final pricing
supplement for the Notes 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 Basket Components, the borrowing rate we pay to issue securities of
this kind, and the inclusion in the price to the public of the underwriting discount and the estimated costs relating to our hedging of the Notes. These factors, together with various credit, market and economic factors over the term of the
Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable ways. Assuming no change in market conditions or any other relevant
factors, the price, if any, at which you may be able to sell your Notes prior to maturity may be less than your original purchase price, as any such sale price would not be expected to include the underwriting discount and the hedging costs
relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined 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.
|
| • |
The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only, Calculated as of the Time the Terms of the Notes Are Set
— The initial estimated value of the Notes will be 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 will be 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.
|
The value of the Notes at any time after the Trade Date will vary based on many factors, including changes in market conditions, and cannot be predicted with accuracy. As a result, the
actual value you would receive if you sold the Notes in any secondary market, if any, should be expected to differ materially from the initial estimated value of your Notes.
Risks Relating to Conflicts of Interest
| • |
Our Business Activities and Those of Our Affiliates May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the Basket
Components that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates will have in their
proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the share prices of the Basket
Components, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with the issuers of the Basket Components (the “Basket Component Issuers”),
including making loans to or providing advisory services. These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’
obligations and your interests as a holder of the Notes. Moreover, we, and our affiliates may have published, and in the future expect to publish, research reports with respect to the Basket Components. This research is modified from time to
time without notice and may express opinions or provide recommendations that are inconsistent with purchasing
|
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
or holding the Notes. Any of these activities by us or one or more of our affiliates may affect the share prices of the Basket Components, and therefore, the market value of the Notes.
| • |
You Must Rely on Your Own Evaluation of the Merits of an Investment Linked to the Basket Components — In the ordinary course of their business, our affiliates may have
expressed views on expected movements in the Basket Components, and may do so in the future. These views or reports may be communicated to our clients and clients of our affiliates. However, these views are subject to change from time to time.
Moreover, other professionals who transact business in markets relating to any Basket Component may at any time have significantly different views from those of our affiliates. For these reasons, you are encouraged to derive information
concerning the Basket Components from multiple sources, and you should not rely solely on views expressed by our affiliates.
|
Risks Relating to the Basket Components
| • |
There Is No Affiliation Between the Basket Component Issuers and RBCCM, and RBCCM Is Not Responsible for any Disclosure by the Basket Component Issuers — We are not affiliated
with the Basket Component Issuers. However, we and our affiliates may currently, or from time to time in the future engage, in business with any Basket Component Issuer. Nevertheless, neither we nor our affiliates assume any responsibilities
for the accuracy or the completeness of any information that any other company prepares. You, as an investor in the Notes, should make your own investigation into the Basket Components.
|
| • |
The Stocks Included in the Basket are Concentrated in a Single Sector — All of the stocks included in the Basket are issued by companies in the financial sector. Although an
investment in the Notes will not give holders any ownership or other direct interests in the Basket Components, the return on an investment in the Notes will be subject to certain risks associated with a direct equity investment in companies in
this sector. Accordingly, by investing in the Notes, you will not benefit from the diversification which could result from an investment linked to companies that operate in multiple sectors.
|
| • |
The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments — The payment at maturity and the Valuation Date are subject to
adjustment as described in the product prospectus supplement. For a description of what constitutes a market disruption event as well as the consequences of that market disruption event, see “General Terms of the Notes—Market Disruption Events”
in the product prospectus supplement.
|
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
INFORMATION REGARDING THE BASKET COMPONENT ISSUERS
The Basket Components are registered under the Securities Exchange Act of 1934 (the “Exchange Act”). Companies with securities registered under that Act are required to file periodically certain financial
and other information specified by the SEC. Information filed with the SEC can be obtained through the SEC’s website at www.sec.gov. In addition, information regarding the Basket Components may be obtained from other sources including, but not limited
to, press releases, newspaper articles and other publicly disseminated documents.
The following information regarding the Basket Component Issuers is derived from publicly available information.
We have not independently verified the accuracy or completeness of reports filed by the Basket Component Issuers with the SEC, information published by it on its website or in any other format,
information about it obtained from any other source or the information provided below.
Bank of America Corporation (“BAC”)
Bank of America Corporation offers saving accounts, deposits, mortgage and construction loans, cash and wealth management, certificates of deposit, investment funds, credit and debit cards, insurance, and
mobile and online banking services.
The company’s common stock is listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “BAC.”
Citigroup Inc. (“C”)
Citigroup Inc. is a diversified financial services holding company that provides a broad range of financial services to consumer and corporate customers. The company’s services include investment banking,
retail brokerage, corporate banking, and cash management products and services.
The company’s common stock is listed on the NYSE under the ticker symbol “C.”
JPMorgan Chase & Co. (“JPM”)
JPMorgan Chase & Co. is a bank which provides services such as investment banking, treasury and securities services, asset management, private banking, card member services, commercial banking and
home finance.
The company’s common stock is listed on the NYSE under the ticker symbol “JPM.”
Wells Fargo & Company (“WFC”)
Wells Fargo & Company operates as a diversified financial services. The company provides banking, insurance, investments, mortgage, leasing, credit cards and consumer finance. The
company serves physical stores, internet and other distribution channels.
The company’s common stock is listed on the NYSE under the ticker symbol “WFC.”
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
HISTORICAL INFORMATION
The graphs below set forth the information relating to the historical performance of the Basket Components. We obtained the information in the graphs from Bloomberg Financial Markets.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg Financial Markets. The historical performance of any Basket Component should not be taken as an
indication of its future performance, and no assurance can be given as to the prices of the Basket Components, or the value of the Basket, at any time. We cannot give you assurance that the performance of the Basket Components will not result in the
loss of a substantial portion of your investment.
Historical Information for Bank of America Corporation (“BAC”)
The graph below illustrates the performance of this Basket Component from January 1, 2011 to March 5, 2021.
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
Historical Information for Citigroup Inc. (“C”)
The graph below illustrates the performance of this Basket Component from January 1, 2011 to March 5, 2021.
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
Historical Information for JPMorgan Chase & Co. (“JPM”)
The graph below illustrates the performance of this Basket Component from January 1, 2011 to March 5, 2021.
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
Historical Information for Wells Fargo & Company (“WFC”)
The graph below illustrates the performance of this Basket Component from January 1, 2011 to March 5, 2021.
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
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 Section 871(m) of the Code, a “dividend equivalent” payment is treated as a dividend from sources within the United States. Such payments generally would be subject to a 30% U.S. withholding tax if
paid to a non-U.S. holder. Under U.S. Treasury Department regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”) that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs
reference an interest in an “underlying security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend. However,
the IRS has issued guidance that states that the U.S. Treasury Department and the IRS intend to amend the effective dates of the U.S. Treasury Department regulations to provide that withholding on dividend equivalent payments will not apply to
specified ELIs that are not delta-one instruments and that are issued before January 1, 2023. Based on our determination that the Notes are not delta-one instruments, non-U.S. holders should not be subject to withholding on dividend equivalent
payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed reissued for U.S. federal income tax purposes upon the occurrence of certain events affecting the Reference Asset or the Notes, and following such
occurrence the Notes could be treated as subject to withholding on dividend equivalent payments. Non-U.S. holders that enter, or have entered, into other transactions in respect of the Reference Asset or the Notes should consult their tax advisors as
to the application of the dividend equivalent withholding tax in the context of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding, we (or the applicable withholding agent) would be
entitled to withhold taxes without being required to pay any additional amounts with respect to amounts so withheld.
The accompanying product prospectus supplement notes that FATCA withholding on payments of gross proceeds from a sale or redemption of the Notes will only apply to payments made after December 31, 2018. That
discussion is modified to reflect regulations proposed by the U.S. Treasury Department that eliminate the requirement of FATCA withholding on payments of gross proceeds upon the disposition of financial instruments. The U.S. Treasury Department has
indicated that taxpayers may rely on these proposed regulations pending their finalization. Prospective investors are urged to consult with their own tax advisors regarding the possible implications of FATCA on their investment in the Notes.
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
Delivery of the Notes will be made against payment for the Notes on March 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 expect to 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 settlement arrangements to prevent a failed settlement.
In the initial offering of the Notes, they will be offered to investors at a purchase price equal to par, except with respect to certain accounts as indicated on the cover page of this
document.
The value of the Notes shown on your account statement may be based on RBCCM’s estimate of the value of the Notes if RBCCM or another of our affiliates were to make a market in the Notes
(which it is not obligated to do). That estimate will be based upon the price that RBCCM may pay for the Notes in light of then prevailing market conditions, our creditworthiness and transaction costs. For a period of approximately six months after
the issue date of the Notes, the value of the Notes that may be shown on your account statement may be higher than RBCCM’s estimated value of the Notes at that time. This is because the estimated value of the Notes will not include the underwriting
discount and our hedging costs and profits; however, the value of the Notes shown on your account statement during that period may initially be a higher amount, reflecting the addition of RBCCM’s underwriting discount and our estimated costs and
profits from hedging the Notes. This excess is expected to decrease over time until the end of this period. After this period, if RBCCM repurchases your Notes, it expects to do so at prices that reflect their estimated value.
We may use this terms supplement in the initial sale of the Notes. In addition, RBCCM or another of our affiliates may use this terms 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 terms supplement is being used in a market-making transaction.
Each of RBCCM and any other broker-dealer offering the Notes have not offered, sold or otherwise made available and will not offer, sell or otherwise make available any of the Notes to, any retail
investor in the European Economic Area (“EEA”) or in the United Kingdom. For these purposes, the expression “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered
so as to enable an investor to decide to purchase or subscribe the Notes, and a “retail investor” means a person who is one (or more) of: (a) a retail client, as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); or
(b) a customer, within the meaning of Directive (EU) 2016/97, as amended, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (c) not a qualified investor as defined in Regulation (EU)
2017/1129 (the “Prospectus Regulation”). Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors
in the EEA or in the United Kingdom has been prepared, and therefore, offering or selling the Notes or otherwise making them available to any retail investor in the EEA or in the United Kingdom may be unlawful under the PRIIPs Regulation.
|
|
|
|
|
Buffered Enhanced Return Notes
Linked to a Basket of Four Common Stocks |
STRUCTURING THE NOTES
The Notes are our debt securities, the return on which is linked to the performance of the Basket Components. 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 is likely to reduce the initial estimated value of the Notes at the time their terms are set. Unlike the estimated value that will be included in the final 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 any Basket Component, and the tenor
of the Notes. The economic terms of the Notes and their initial estimated value depend in part on the terms of these hedging arrangements.
The lower implied borrowing rate is a factor that reduces the economic terms of the Notes to you. The initial offering price of the Notes also reflects the underwriting commission and our estimated
hedging costs. These factors result in the initial estimated value for the Notes on the Trade Date being less than their public offering price. See “Selected Risk Considerations—The Initial Estimated Value of the Notes Will Be Less than the Price to
the Public” above.