Linked Notes

Non-Principal Protected Notes

Royal Bank

Royal Bank Auto-Callable Notes, Series 12
Principal and interest

Non-principal protected notes, so that all of the $100 principal (other than $1) is at risk. Interest is payable at 3.75% for each six-month period, if on the specified "Observation Day" shortly before the end of that period, each of the applicable indices (the S&P/TSX 60, EuroSTOXX 50 and S&P 500) is at least equal to the Barrier Level (75% of the initial level).

Autocall redemption (or payment at maturity)

If on an Observation Day during each six-month term (with the 1st such term commencing on October 25, 2013), the closing level of each index is higher than its initial level, each note will then be redeemed for its $100 principal. If a note is still outstanding on its maturity date (October 25, 2017), the principal is repaid, unless the worst-performing of the indices is below the Barrier Level, in which case the payment will be based on that level (subject to the $1 minimum).

Barrier Level

75% of the initial level for each Index.

Canadian taxation

Because interest for a six-month period is contingent until the Observation Day, a disposition of a note in a six-month period prior to the Observation Day may not result in a requirement to recognize accrued interest for that quarter. Where held as capital property, redemption at maturity for less than the maturity will result in a capital loss.

No Part XIII tax.

ROC Notes

Fixed ROC notes

BNS

Bank of Nova Scotia S&P/TSX 60 Callable Contingent ROC Notes, Series 1
(SEDAR filing: 3 February 2014) Pricing Supplement No. 37 for Callable Contingent Index-Linked ROC Notes (329 K). Stikeman
ROC payments

Semi-annual principal repayments of $2.50 per Note, starting on September 14, 2014, if the closing level of the Index (the S&P/TSX 60) is at least equal to the Barrier Level (70% of the initial level) two business days before such repayment date.

Autocall redemption

If on an observation day two business days before the 2nd to 5th anniversary of the March 14, 2014 day of issue (with the 5th anniversary being the maturity date) the closing level of the Index is higher than 110% of its initial level, the Notes will automatically be redeemed.

Maturity Redemption Amount

If the closing level of the Index on the redempton date is higher than the (70%) Barrier Level, a Note's redemption amount will be its $100 initial principal plus a percentage of $100 equal to 5% of any (positive) Index return in excess of 10%. If such closing level is equal to or lower than the Barrier Level, the redemption amount will be reduced to reflect such negative return (subject to a $1 minimum).

Canadian taxation

The semi-annual principal repayents should not be included in income and should instead reduce the inital investor's ACB. Provided that the Maturity Redemption Amount is not yet determinable, a Note transfer should not result in a requirement to recognize accrued interest, and (while not free from doubt) should result in capital gain or loss treatment. Where held as capital property, redemption at maturity for less than the outstanding principal will result in a capital loss.

No Part XIII tax.

RBC

Royal Bank of CanadaFixed $6.12 RoC Notes tied to 5 senior Canadian banks
ROC distributions and Maturity

The purchaser of a Cdn.$100 note is entitled to receive monthly distributions of $0.51 as partial repayments of principal (ROC distributions), or $30.60 over the five-year term. On the Maturity Date, the holder will receive (in addition to the ROC distribution then due) for each $100 (original) principal amount of note a cash payment equal to the Outstanding Principal Amount (i.e., the original $100 principal minus ROC distributions) plus the "Aggregate Return" (which can be a negative amount).

Aggregate Return

The Aggregate Return references the Return (the percentage change between the Initial Valuation Date three days before the issue date, and the Final Valuation Date two days before the Maturity Date, multiplied by $100) of the five Underlying Securities, being the common shares of the five senior Canadian banks. The Aggregate Return is:

(a) if the Return of the worst-performing share is positive and greater than $30.60: the total ROC distributions plus 5% of any Return excess over $30.60;

(b) if the Return of the worst-performing share is positive, zero or negative but not lower (i.e., worse) than -$30.60: the total ROC distributions;

(c) if the Return of the worst-performing share is negative and lower than -$30.60: the total ROC distributions minus such Return.

Canadian taxation

ROC distributions. The Partial Principal Repayments are specified to be repayments of principal, and there is a substantial risk that no return will be received. "Accordingly, Partial Principal Repayments should not be regarded as payments as, on account of, in lieu of payment of or in satisfaction of, current or future interest on the Securities." On this basis, Partial Principal Repayments should not be included in the holder's income but, rather, should reduce the Securities' adjusted cost base.

Other

The Variable Amount (if positive) will be included in income when it becomes calculable (implicitly, in the year of maturity unless there is an early termination event based on market disruption), and will be realized as a capital loss (if the Notes are capital property to the holder) if it is negative. Appreciation in the Note value over its amortized principal amount should be realized as a capital gain if there is a sale by such a holder before maturity, although "the matter is not free from doubt."

TD Bank

Fixed ROC note offering of TD Bank tied to S&P/TSX 60
(SEDAR filing: 28 June 2012) Pricing Supplement No. 3 for TD Canadian Equity Index-Linked Barrier Fixed ROC Notes, Series 1 (215 K). McCarthy Tétrault/Fasken Martineau

The purchaser of a Cdn.$100 note is entitled to receive semi-annual partial repayments of 2.25% thereof (ROC distributions), or approximately 13.5% over the term of approximately three years. On maturity, the Note is redeemed for an amount determined as follows:

(a) if the Index Return (on the S&P/TSX 60) is in excess of 4.5%, the redemption amount is equal to the (original) principal amount ($100) plus a 10% participation in that excess;

(b) if the Index Return is equal to or less than 4.5% but better than -30%, the redemption amount is $100; or

(c) if the Index Return is negative and worse than -30%, the redemption amount is based on that negative return (i.e., the redemption amount is less than $70 if the Index Return is worse than -30%) - provided that the amount received on maturity cannot be less than $1.

Canadian taxation

The ROC distributions "should not be included in the Noteholder's income when received but rather, should reduce the Noteholder's adjusted cost base of the Notes." The excess of the redemption amount over the remaining unpaid principal amount (if positive) will be included in income in the year of maturity, and will be realized as a capital loss (if the Notes are capital property to the holder) if it is negative. Appreciation in the Note value over its amortized principal amount should be realized as a capital gain if there is a sale by such a holder before maturity, although "the matter is not free from doubt."

CIBC

Fixed Contingent ROC note offering of CIBC tied to S&P/TSX 60

The purchaser of a Cdn.$100 note is entitled to receive quarterly distributions of $1.50 as partial repayments of principal (ROC distributions), or $30 over the five-year term, provided that on the valuation date on the third business day preceding each such repayment date, the total Index Return (on the S&P/TSX 60) is not worse than -30%. On maturity, the investor receives the algebraic sum of the remaining principal amount and the "Variable Amount," which is the positive or negative amount equal to all ROC distributions previously received plus or minus the adjustments below:

(a) if the Index Return is in excess of $30 (30%): plus 10% of that excess;

(b) if the Index Return is negative but not worse than -30%: no adjustment; or

(c) if the Index Return is negative and also -$30 (-30%) or worse: minus the amount of such return (provided that the amount received on maturity cannot be less than $1).

Canadian taxation

The ROC distributions "should not be included in the Investor's income when received but rather, should reduce the Investor's adjusted cost base of the Notes." The Variable Amount (if positive) will be included in income when it becomes calculable (implicitly, in the year of maturity unless there is an early termination event based on market disruption), and will be realized as a capital loss (if the Notes are capital property to the holder) if it is negative. Appreciation in the Note value over its amortized principal amount should be realized as a capital gain if there is a sale by such a holder before maturity, although "the matter is not free from doubt."

Variable ROC Notes

CIBC

ROC note offering of CIBC tied to Alerian MLP
Terms

ROC distributions based on Index yield. Approximately $96.50 of a Note will be the starting value of the "Notional Portfolio Value," which will track Alerian MLP Infrastructure Index (the "Reference Index"), which is comprised of 25 U.S. energy infrastructure master limited partnerships. The Notional Portfolio Value will be recalculated at the end of each quarter as described below based inter alia on the Index performance. The purchaser of a Cdn.$100 note is entitled, each quarter other than the final quarter, to receive a return of principal (a "Partial Principal Repayment") equal to the Notional Portfolio Value in U.S. dollars at the previous quarter end multiplied by the difference between the total return and the price return for the Index for the quarter, provided that the total of such repayments shall not exceed $99 (with any excess amounts being factored into the Notional Portfolio Value).

FX hedging/Notional Portfolio Value computation

In order to compute the Notional Portfolio Value and hedge each quarter's starting value, such value

  • will be converted into U.S. dollars at the exchange rate at the beginning of the quarter,
  • that amount will be multiplied by the total return of the Index for the quarter (i.e., including notional MLP distributions),
  • the resulting amount will be reduced by the quarter's "USD Funding Amount" reflecting notional interest of US LIBOR (as at the quarter beginning) plus a spread of up to 1.50%,
  • the resulting amount will be converted back into Canadian dollars at the quarter end using the current exchange rate,
  • the resulting amount will be increased by the quarter's "CAD Investment Amount" reflecting notional interest at the Canadian dollar banker's acceptance rate as at the quarter beginning, and
  • the resulting amount will be reduced by the current quarter's Partial Principal Repayment and by a "Maintenance Amount" of 1.5%.
Maturity

On the Maturity Date of around February 20, 2019, the holder will receive the remaining principal amount plus the Variable Return (being the positive or negative difference between the final Notional Portfolio Value and the remaining principal amount.)

Canadian taxation

The Partial Principal Repayments "should not be included in the Investor's income when received but rather, should reduce the Investor's adjusted cost base of the Notes." The Variable Amount (if positive) will be included in income when it becomes calculable (implicitly, in the year of maturity unless there is an early termination event based on market disruption), and will be realized as a capital loss (if the Notes are capital property to the holder) if it is negative. Appreciation in the Note value over its amortized principal amount should be realized as a capital gain if there is a sale by such a holder before maturity, although "the matter is not free from doubt." Notes are not derivative forward agreements, and are not prohibited investment under Reg. 8514(1) for a registered pension plan.

US taxation

An investor in Notes, unlike an investor in the MLPs, would not be required to file US federal tax returns. Discussion of MLP rules.