F-4/A 1 d875226df4a.htm FORM F-4/A Form F-4/A
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As filed with the Securities and Exchange Commission on April 20, 2015

Registration No. 333-202632

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM F-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

ROYAL BANK OF CANADA

(Exact name of registrant as specified in its Charter)

 

 

Not Applicable

(Translation of Registrant’s name into English)

 

Canada   6029   13-5357855
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

200 Bay Street

Royal Bank Plaza

Toronto, Ontario

Canada, M5J 2J5

Tel: 416-955-7806

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Daniel L. Torbenson

Royal Bank of Canada

3 World Financial Center

200 Vesey Street

New York, New York, USA 10281-8098

Tel: +1 212-437-9264

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all communications to:

 

Donald J. Toumey
C. Andrew Gerlach
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
+1 212-558-4000
 

Paul Guthrie

Royal Bank of Canada
200 Bay Street

Royal Bank Plaza

Toronto, Ontario

Canada, M5J 2J5

Tel: 416-974-6516

 

Michael B. Cahill
City National Corporation

City National Plaza

555 South Flower Street,

Los Angeles, California 90071
+1 213-673-7700

   Nicholas G. Demmo

Edward D. Herlihy
Wachtell, Lipton,
Rosen & Katz
51 West 52nd Street
New York, New York 10019
+1 212-403-1000

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this registration statement and upon completion of the merger.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨


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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.

 

 

Subject to Completion

Preliminary Prospectus, dated April 20, 2015


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The information contained in this proxy statement/prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This proxy statement/prospectus is not an offer to sell these securities, and is not soliciting an offer to buy these securities, nor shall there be any sale of these securities, in any jurisdiction where such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

 

Subject to Completion

Preliminary Prospectus, dated April 20, 2015

 

LOGO

 

 

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

 

 

Dear Stockholder of City National Corporation:

On January 22, 2015, City National Corporation (“City National”), Royal Bank of Canada (“RBC”) and RBC USA Holdco Corporation (“Holdco”), entered into an Agreement and Plan of Merger (the “merger agreement”), pursuant to which RBC has agreed to acquire City National in a stock and cash transaction. Under the terms of the merger agreement, City National will merge with and into Holdco (the “merger”), with Holdco surviving the merger as a wholly owned subsidiary of RBC. City National is sending this document to ask common stockholders to vote in favor of adoption of the merger agreement and to provide information about the merger to preferred stockholders, whose vote is not required, and is not being solicited, in connection with the merger.

If the merger is completed, if you are a common stockholder, you will be entitled to receive for each share of City National common stock owned by you, at your election and subject to proration and certain other limitations as set forth in the merger agreement, either cash or common shares of RBC.

Each City National share of common stock that is converted into the right to receive the cash consideration will receive an amount in cash equal to the “Per Share Amount”, which will be calculated by dividing the “Closing Transaction Value” by the number of shares of City National common stock outstanding at the completion of the merger. The “Closing Transaction Value” will be calculated by adding the aggregate cash included in the merger consideration ($94.50 multiplied by 50% of the number of shares of City National common stock outstanding at completion of the merger (subject to certain adjustments)) and the aggregate number of RBC common shares included in the merger consideration (41,358,212, as increased based on increases in City National shares permitted to be issued following execution of the merger agreement and decreased by shares of City National, if any, cancelled in connection with the merger), multiplied by the volume weighted average RBC common share price for the ten trading days prior to closing (the “VWAP”) which is calculated using both the New York Stock Exchange (the “NYSE”) and the Toronto Stock Exchange (the “TSX”) volumes and the Bank of Canada daily noon Canada/U.S. exchange rate on each applicable day. Each City National share that is converted into the right to receive the share consideration will receive a number of RBC common shares equal to the Per Share Amount divided by the VWAP.

Assuming a hypothetical VWAP of $62.16 (which amount is the closing price of an RBC common share on the NYSE on January 21, 2015, the last trading day before public announcement of the merger), the value of the Per Share Amount would be approximately $93.80 assuming the merger closed on January 22, 2015. Using this Per Share Amount, the cash consideration per City National share of common stock converted into the cash consideration would be approximately $93.80 and the share consideration per City National share of common stock converted into the share consideration would be approximately 1.509 RBC common shares, which, based on the closing stock price of RBC common shares on the NYSE on January 21, 2015, the last day before public announcement of the transaction, would have had a market value of approximately $93.80.

The market prices of both RBC common shares and City National common stock will fluctuate before the completion of the merger, and the market price of RBC common shares may also fluctuate between the completion of the merger and the time you receive any RBC common shares. Accordingly, the actual VWAP, amount of cash consideration per City National share of common stock exchangeable for cash consideration and amount of share consideration per City National share of common stock exchangeable for share consideration will fluctuate, and those amounts as of the completion of the merger will likely vary from the sample numbers provided above (which are based on the above stated assumptions and provided for illustrative purposes). You should obtain current stock price quotations for RBC common shares and City National common stock before you vote. RBC common shares are quoted on the NYSE and the TSX under the symbol “RY”. City National common stock is quoted on the NYSE under the symbol “CYN”.


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The merger cannot be completed unless City National common stockholders holding at least a majority of the shares outstanding as of the close of business on April 22, 2015, the record date for the special meeting, vote in favor of the adoption of the merger agreement at the special meeting.

The special meeting of City National common stockholders will be held on May 27, 2015, at City National Plaza, 555 South Flower Street, Thirteenth Floor, Los Angeles, California 90071, at 4:00 p.m. local time.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF CITY NATIONAL COMMON STOCK YOU OWN. TO ENSURE YOUR REPRESENTATION AT THE CITY NATIONAL SPECIAL MEETING, PLEASE TAKE TIME TO VOTE BY FOLLOWING THE INSTRUCTIONS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND ON YOUR PROXY CARD. Please vote promptly whether or not you expect to attend the City National special meeting. Submitting a proxy now will not prevent you from being able to vote in person at the City National special meeting.

CITY NATIONAL’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CITY NATIONAL COMMON STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AND “FOR” THE OTHER MATTERS TO BE CONSIDERED AT THE CITY NATIONAL SPECIAL MEETING.

The accompanying proxy statement/prospectus describes the special meeting of City National common stockholders, the merger, the documents relating to the merger and other related matters. Please read carefully the entire proxy statement/prospectus, including the section entitled “Risk Factors” beginning on page [], and the appendices and documents incorporated by reference into the proxy statement/prospectus.

If you have any questions regarding the accompanying proxy statement/prospectus, you may contact Innisfree M&A Inc, City National’s proxy solicitor, by calling toll-free at (888) 750-5834.

Sincerely,

Russell Goldsmith

Chairman of the Board and Chief Executive Officer

NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION, NOR ANY U.S. STATE OR CANADIAN PROVINCIAL OR TERRITORIAL SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The securities to be issued in connection with the merger are not savings or deposit accounts and are not insured by the Federal Deposit Insurance Corporation, the Canada Deposit Insurance Corporation or any other governmental agency.

The date of this proxy statement/prospectus is April [], 2015, and it is first being mailed or otherwise delivered to City National common stockholders on or about April [], 2015.


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REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Royal Bank of Canada, or RBC, and City National Corporation, or City National, from documents filed with or furnished to the U.S. Securities and Exchange Commission, or SEC, that is not included in or delivered with this proxy statement/prospectus.

You can obtain any of the documents filed with or furnished to the SEC by RBC or City National, as the case may be, at no cost from the SEC’s website at www.sec.gov. You may also request copies of these documents, including documents incorporated by reference in this proxy statement/prospectus, at no cost by contacting either RBC or City National, as the case may be, at the following addresses:

 

ROYAL BANK OF CANADA CITY NATIONAL CORPORATION
200 Bay Street City National Plaza
Royal Bank Plaza 555 South Flower Street,
Toronto, Ontario Los Angeles, California 90071
Canada, M5J 2J5 Attention: Corporate Secretary
Attention: Corporate Secretary Telephone: (213) 673-7700
Telephone: (416) 955-7806

In addition, if you have questions about the merger or the City National special meeting, need additional copies of this document or need to obtain proxy cards or other information related to the proxy solicitation, you may contact Innisfree M&A Inc, City National’s proxy solicitor, at the following address and telephone numbers:

Innisfree M&A Inc

Toll free telephone: (888) 750-5834

Brokers and banks, please call: (212) 750-5833

You will not be charged for any of these documents that you request. In order to receive timely delivery of the documents in advance of the City National special meeting, you should make your request to RBC or City National, as the case may be, no later than May 19, 2015, or five trading days prior to the City National special meeting.

See “Where You Can Find More Information” beginning on page [] of this proxy statement/prospectus for more details.


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LOGO

 

 

NOTICE OF SPECIAL MEETING OF COMMON STOCKHOLDERS TO BE HELD ON MAY 27, 2015

 

 

Dear Common Stockholder of City National Corporation:

You are cordially invited to attend a special meeting of City National Corporation (“City National”) common stockholders. The special meeting will be held on May 27, 2015, at 4:00 p.m. local time, at City National Plaza, 555 South Flower Street, Thirteenth Floor, Los Angeles, California 90071, to consider and vote upon the following matters:

1. a proposal to adopt the agreement and plan of merger (the “merger agreement”), dated as of January 22, 2015, as it may be amended from time to time, by and among City National Corporation, Royal Bank of Canada (“RBC”) and RBC USA Holdco Corporation (“Holdco”) (the “merger agreement proposal”);

2. a proposal to approve, by advisory (non-binding) vote, certain compensation that may be paid or become payable to City National’s named executive officers in connection with the merger (the “merger-related compensation proposal”); and

3. a proposal for adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement (the “adjournment proposal”).

These proposals and the special meeting are described in further detail in the accompanying proxy statement/prospectus, which you should read carefully and in its entirety before you vote, including the appendices and documents incorporated by reference. A copy of the merger agreement is attached as Appendix A to the accompanying proxy statement/prospectus.

The record date for the special meeting has been set as April 22, 2015. Only City National common stockholders of record as of the close of business on such record date are entitled to notice of, and to vote at, the special meeting or any adjournments and postponements thereof.

Approval of the merger agreement proposal requires the affirmative vote of the holders of at least a majority of the outstanding shares of City National common stock entitled to vote thereon. Approval of the merger-related compensation proposal requires the affirmative vote of the holders of a majority of shares of City National common stock present in person or represented by proxy and entitled to vote thereon; however, such vote is advisory (non-binding) only. Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of shares of City National common stock present in person or represented by proxy and entitled to vote thereon, whether or not a quorum is present.

CITY NATIONAL’S BOARD OF DIRECTORS UNANIMOUSLY ADOPTED AND APPROVED THE MERGER AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED THEREBY, AND DETERMINED THAT THE MERGER AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED THEREBY ARE ADVISABLE, FAIR TO AND IN THE BEST INTERESTS OF CITY NATIONAL AND ITS STOCKHOLDERS. CITY NATIONAL’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CITY NATIONAL COMMON STOCKHOLDERS VOTE “FOR” THE MERGER AGREEMENT PROPOSAL, “FOR” THE MERGER-RELATED COMPENSATION PROPOSAL AND “FOR” THE ADJOURNMENT PROPOSAL.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF CITY NATIONAL COMMON STOCK THAT YOU OWN. WE CANNOT COMPLETE THE MERGER UNLESS CITY NATIONAL’S COMMON STOCKHOLDERS ADOPT THE MERGER AGREEMENT.


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Even if you plan to attend the special meeting in person, City National requests that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or submit your proxy by telephone or Internet prior to the special meeting to ensure that your shares of City National common stock will be represented at the special meeting if you are unable to attend. If you hold your shares in “street name” through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee to vote your shares. If you fail to submit a proxy or to attend the special meeting in person or do not provide your bank, brokerage firm or other nominee with instructions as to how to vote your shares, as applicable, your shares of City National common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” the approval of the merger agreement proposal.

If you have any questions regarding the accompanying proxy statement/prospectus, you may contact Innisfree M&A Inc, City National’s proxy solicitor, by calling toll-free at (888) 750-5834.

Sincerely,

Russell Goldsmith

Chairman of the Board and Chief Executive Officer

Los Angeles, California

Dated: April [], 2015


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE CITY NATIONAL SPECIAL MEETING

     iv   

SUMMARY

     1   

Information about the Companies

     1   

Risk Factors

     2   

The Merger and the Merger Agreement

     2   

Merger Consideration

     2   

Treatment of City National Preferred Stock

     4   

City National’s Board of Directors Unanimously Recommends that You Vote “FOR” the Merger Agreement Proposal, “FOR” the Merger-Related Compensation Proposal and “FOR” the Adjournment Proposal

     5   

Comparative Per Share Market Price and Dividend Information

     5   

Opinions of City National’s Financial Advisors

     5   

The City National Special Meeting

     6   

No RBC Shareholder Approval

     6   

Material United States Federal Income Tax Consequences

     6   

Material Canadian Federal Income Tax Consequences

     8   

Accounting Treatment

     8   

Treatment of City National Options and Other Equity Based Awards

     8   

Regulatory Approvals Required for the Completion of the Merger

     8   

Holders of City National Common Stock are Entitled to Dissenters’ Rights of Appraisal

     9   

Holders of City National Preferred Stock are Not Entitled to Dissenters’ Rights of Appraisal

     9   

Your Rights as a Holder of City National Common Stock Will Be Different from Your Rights as a Holder of RBC Common Shares

     9   

City National’s Directors and Executive Officers Have Certain Interests in the Merger

     10   

Conditions That Must Be Satisfied or Waived for the Merger to Occur

     10   

The Merger Agreement May be Terminated Under Certain Circumstances

     11   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF RBC

     12   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CITY NATIONAL

     14   

UNAUDITED COMPARATIVE PER COMMON SHARE DATA

     15   

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     17   

CURRENCY EXCHANGE RATE DATA

     19   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     20   

RISK FACTORS

     22   

THE CITY NATIONAL SPECIAL MEETING

     30   

Time, Place and Purpose of the Special Meeting

     30   

Recommendations of the City National Board of Directors

     31   

Record Date

     31   

Quorum Required

     32   

Vote Required

     32   

How to Vote

     33   

Revocations

     34   

Inspector of Election

     35   

Results of the Special Meeting

     35   

Solicitation of Proxies; Payment of Solicitation Expenses

     35   

Questions and Additional Information

     36   

INFORMATION ABOUT THE COMPANIES

     37   

THE MERGER

     39   

Terms of the Merger

     39   

 

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     Page  

Conversion of City National Common Stock; Exchange of Certificates; Elections as to Form of Consideration

     44   

Treatment of City National Preferred Stock

     46   

Background of the Merger

     47   

City National’s Reasons for the Merger; Board Recommendation of the City National Board of Directors

     50   

Opinions of City National’s Financial Advisors

     52   

RBC’s Reasons for the Merger

     61   

Management and Board of Directors of RBC After the Merger

     62   

Interests of City National’s Directors and Executive Officers in the Merger

     62   

Material United States Federal Income Tax Consequences

     70   

Material Canadian Federal Income Tax Consequences

     77   

Accounting Treatment

     80   

Stock Exchange Listings

     80   

Regulatory Matters Related to the Merger

     80   

Dissenters’ Rights of Appraisal for Holders of City National Common Stock

     82   

No Dissenters’ Rights of Appraisal for Holders of City National Preferred Stock

     86   

Resale of RBC common shares

     86   

THE MERGER AGREEMENT

     88   

Effects of the Merger

     88   

Effective Time of the Merger

     88   

Treatment of City National Options and Other Equity Based Awards

     88   

Representations and Warranties

     90   

Covenants and Agreements

     92   

Conditions to the Merger

     99   

Termination

     100   

Effect of Termination and Termination Fee

     100   

Amendments, Extensions and Waivers

     101   

Fees and Expenses

     101   

THE VOTING AGREEMENT

     102   

BENEFICIAL OWNERSHIP OF CITY NATIONAL COMMON STOCK

     104   

DESCRIPTION OF RBC SHARE CAPITAL

     108   

RBC Share Capital

     108   

RBC Common Shares

     108   

RBC Preferred Shares

     108   

Limitations Affecting Holders of RBC Shares

     113   

Amendments to the Rights, Privileges, Restrictions and Conditions of RBC’s Share Capital

     113   

COMPARISON OF RIGHTS OF RBC SHAREHOLDERS AND CITY NATIONAL STOCKHOLDERS

     115   

Authorized Capital Stock

     115   

Number, Classification and Election of Directors

     116   

Filling Vacancies on the Board of Directors and Removing Directors

     116   

Voting Rights Generally; Voting on Mergers, Share Exchanges, Conversions, and Sales of Assets

     117   

Exculpation of Liability

     118   

Director and Officer Indemnification

     119   

Special Meetings of Shareholders

     119   

Quorum Requirements

     120   

Shareholder Proposal and Director Nominations

     121   

Shareholder Action Without a Meeting

     121   

Amendments of Governing Instruments

     122   

Anti-Takeover and Ownership Provisions

     123   

 

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     Page  

Appraisal and Dissenters’ Rights

     125   

Rights of Inspection

     126   

Dividends and Other Distributions and Liquidation

     127   

Consideration of Other Constituencies

     127   

Shareholder Suits

     128   

Rights of Holders of City National Preferred Stock and New RBC Preferred Shares

     128   

ABOUT THIS PROXY STATEMENT/PROSPECTUS

     129   

RBC MARKET ACTIVITIES INVOLVING RBC COMMON SHARES

     129   

VALIDITY OF RBC COMMON SHARES AND PREFERRED SHARES

     130   

EXPERTS

     130   

OTHER MATTERS

     130   

SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING

     130   

WHERE YOU CAN FIND MORE INFORMATION

     132   

Incorporation of Certain Documents by Reference

     132   

Appendix A

 

Merger Agreement

     A-1   

Appendix B

 

Voting Agreement

     B-1   

Appendix C

 

Opinion of BofA Merrill Lynch, Financial Advisor to City National

     C-1   

Appendix D

 

Opinion of Sandler O’Neill, Financial Advisor to City National

     D-1   

Appendix E

 

Section 262 of the General Corporation Law of the State of Delaware

     E-1   

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE CITY NATIONAL SPECIAL MEETING

The following are some questions that you may have regarding the merger and the City National special meeting, and brief answers to those questions. We urge you to read carefully the remainder of this document because the information in this section does not provide all the information that might be important to you with respect to the merger and the City National special meeting. Additional important information is also contained in the documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page [] and “Where You Can Find More Information—Incorporation of Certain Documents by Reference” beginning on page [].

References in this proxy statement/prospectus to “City National” refer to City National Corporation, a Delaware corporation, and, unless the context otherwise requires, to its affiliates (which does not include RBC). References in this proxy statement/prospectus to “RBC” refer to Royal Bank of Canada, a Schedule I Bank under the Bank Act (Canada), and, unless the context otherwise requires, to its affiliates (which does not include City National).

 

Q: What is the merger and the merger agreement?

 

A: RBC and City National have entered into an Agreement and Plan of Merger, dated as of January 22, 2015, referred to as the “merger agreement”, pursuant to which RBC has agreed to acquire City National upon certain terms and conditions. A copy of the merger agreement is attached as Appendix A to this proxy statement/prospectus. Under the terms of the merger agreement, City National will merge with and into RBC USA Holdco Corporation, which is a direct wholly-owned United States subsidiary of RBC referred to as “Holdco”, with Holdco continuing as the surviving entity, which transaction is referred to as the “merger”. The completion of the merger is subject to a number of conditions described in more detail in this document, including approval by the City National common stockholders.

 

Q: What am I being asked to vote on at the City National special meeting as a holder of City National common stock?

 

A: City National common stockholders are being asked to approve the merger agreement and the transactions it contemplates, including the merger, which is referred to as the “merger agreement proposal”.

 

   City National common stockholders also are being asked to approve (i) a proposal to approve, by advisory (non-binding) vote, certain compensation that may be paid or become payable to City National’s named executive officers in connection with the merger, referred to as the “merger-related compensation proposal”, and (ii) the adjournment of the City National special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the merger agreement proposal, which is referred to as the “adjournment proposal”.

 

Q: Are holders of City National preferred stock entitled to vote at the City National special meeting?

 

A: No. Holders of City National preferred stock and the corresponding City National depositary shares are not entitled to and are not being requested to vote on the merger agreement proposal, the merger-related compensation proposal or the adjournment proposal, or otherwise at the City National special meeting.

 

Q: How does City National’s board of directors recommend that common stockholders vote on the three proposals?

 

A: City National’s board of directors unanimously recommends that common stockholders vote FOR the merger agreement proposal, “FOR” the merger-related compensation proposal and FOR the adjournment proposal.

 

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Q: What will I receive as a holder of City National common stock if the merger is completed?

 

A: Under the terms and subject to the conditions of the merger agreement, at the effective time of the merger, each share of common stock, par value $1.00 per share, of City National will be converted into the right to receive an amount of cash (referred to as “cash consideration”) or an amount of RBC common shares (referred to as “share consideration”) at the election of the holder, subject to proration and certain other adjustments and limitations as provided for in the merger agreement.

 

   Each share of City National common stock that is converted into the right to receive cash consideration will receive an amount in cash equal to the “Per Share Amount”. The Per Share Amount will be calculated by dividing the “Closing Transaction Value” by the number of shares of City National common stock outstanding at completion of the merger. Subject to certain adjustments and limitations as set forth in the merger agreement, the Closing Transaction Value represents an aggregate value, calculated by adding (1) the aggregate cash included in the merger consideration ($94.50 multiplied by 50% of the number of shares of City National common stock outstanding at completion of the merger (subject to certain adjustments)) and (2) the aggregate number of RBC common shares included in the merger consideration (41,358,212, as increased based on increases in City National shares permitted to be issued following execution of the merger agreement and decreased by shares of City National, if any, cancelled in connection with the merger) multiplied by the volume weighted average RBC common share price for the ten trading days preceding the day of completion of the merger (the “VWAP”) (calculated using both the New York Stock Exchange (“NYSE”) and the Toronto Stock Exchange (the “TSX”) volumes and the Bank of Canada daily noon Canada/U.S. exchange rate on each applicable day).

 

   Each share of City National common stock that is converted into the right to receive share consideration will receive a number of RBC common shares equal to the Per Share Amount divided by the VWAP.

 

   It is not possible until the completion of the merger to determine the exact amount of cash consideration or share consideration that a share of City National common stock will be converted into the right to receive. For more information about these calculations see the section entitled “The Merger—Terms of the Merger” beginning on page [].

 

   RBC common shareholders will continue to own their existing common shares, the ownership of which will not be affected by the merger.

 

Q: Will I receive the form of consideration I elect as a holder of City National common stock?

 

A: Each holder of City National common stock may not receive the form of consideration that such stockholder elects in the merger, due to the proration and adjustment procedures in the merger agreement.

 

   The merger agreement specifies the aggregate amounts of cash consideration and share consideration to be issued to holders of City National common stock in the merger, which exact amounts cannot be determined until the day of completion of the merger. Based on the comparative value of the aggregate share consideration (valued based on the VWAP) and the aggregate cash consideration, the merger agreement will specify the number of shares of City National common stock that will be converted into the right to receive cash consideration, referred to as the “Cash Conversion Number”, and the number of shares of City National common stock that will be converted into the right to receive share consideration, referred to as the “Stock Conversion Number”. The merger agreement does not take into account the elections made by City National common stockholders in determining these numbers, and as a result the elections of some City National common stockholders will be prorated in the event either form of consideration is oversubscribed. In the event the number of City National cash election shares exceeds the Cash Conversion Number, the applicable pro rata portion of such cash election shares held by each City National common stockholder will instead be converted into the right to receive share consideration. Similarly, in the event the number of City National stock election shares exceeds the Stock Conversion Number, the applicable pro rata portion of such stock election shares held by each City National common stockholder will instead be converted into the right to receive cash consideration.

 

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   In each of the above cases, shares of City National common stock with respect to which no valid election will be made will be converted to the undersubscribed form of consideration first. The allocation of the mix of consideration payable to City National common stockholders in the merger will not be known until the completion of the merger or until a time after completion.

 

Q: How do I make an election to receive cash, RBC common shares or a combination of both?

 

A: Unless agreed otherwise by City National and RBC, an election form will be mailed 35 days prior to the anticipated closing date of the merger to each holder of record of City National common stock as of the close of business on the fifth business day prior to the date of mailing. Each City National common stockholder should complete and return the election form, along with City National stock certificate(s) (or a properly completed notice of guaranteed delivery) according to the instructions included with the form. The election form will be provided to City National common stockholders under separate cover and is not being provided with this document. The election deadline will be 3:00 p.m., New York time, on the date specified in the election form, which is expected to be 30 days following the mailing day of the election form.

 

   If your shares of City National common stock are held in “street name”, through a broker, bank or other nominee and you wish to make an election, you should seek instructions from the broker, bank or other nominee holding your shares concerning how to make an election. If you do not send in the election form with your stock certificate(s) by the election deadline, you will be treated as though you had not made an election.

 

   If you hold shares of City National common stock through your account under the City National Corporation Profit Sharing Plan (the “Profit Sharing Plan”), you will receive separate instructions on how to make an election with respect to such shares.

 

Q: What happens if I do not make a valid election to receive cash or RBC common shares?

 

A: If a City National common stockholder does not return a properly completed election form by the election deadline specified in the election form, such stockholder’s shares of City National common stock will be considered “non-election” shares and will be converted into the right to receive the share consideration or the cash consideration according to the allocation procedures specified in the merger agreement. Generally, in the event one form of consideration (cash or RBC common shares) is undersubscribed in the merger, shares of City National common stock for which no election has been validly made will be allocated to that form of consideration before shares of City National common stock electing the oversubscribed form will be switched to it pursuant to the proration and adjustment procedures. Accordingly, while electing one form of consideration will not guarantee you will receive that form for all of your shares of City National common stock, in the event proration is necessary electing shares will have a priority over non-election shares.

 

Q: What will I receive as a holder of City National preferred stock or as a holder of City National depositary shares representing an interest in City National preferred stock if the merger is completed?

 

A:

Each outstanding share of City National’s 5.50% Non-Cumulative Perpetual Preferred Stock, Series C and City National’s 6.750% Fixed Rate/Floating Rate Non-Cumulative Preferred Stock, Series D is presently represented by depositary shares, referred to as “City National Depositary Shares”, which are listed on the NYSE and represent a one-fortieth interest in a share of the corresponding series of City National preferred stock. Upon completion of the merger RBC will issue shares of two new series of RBC preferred shares, referred to as the “New RBC Preferred Shares”, each of which will correspond to a series of City National preferred stock and will have powers, preferences and special rights that are substantially similar to and not materially less favorable to the holder than the powers, preferences and special rights set out in the certificate of designations of such series of City National preferred stock. Upon completion of the merger, each share of City National preferred stock will be cancelled and RBC will issue to the former holder a New

 

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  RBC Preferred Share of the corresponding series. The City National Depositary Shares will thereafter represent a one-fortieth interest in the relevant series of New RBC Preferred Shares. Such depositary shares will continue to be listed on the NYSE upon completion of the merger under a new name and will be traded under a new symbol.

 

   Where appropriate, references in this proxy statement/prospectus to City National preferred stock and New RBC Preferred Shares shall also be considered to be references to the applicable depositary shares representing a one-fortieth interest in such City National preferred stock or such New RBC Preferred Shares, respectively.

 

Q: When is the merger expected to be completed?

 

A: We expect the merger will be completed when all of the conditions to completion contained in the merger agreement are satisfied or waived, including the receipt of required regulatory approvals and the approval of the merger agreement proposal at the City National special meeting. We currently expect to complete the merger during the fourth calendar quarter of 2015. However, because fulfillment of some of the conditions to completion of the merger, such as the receipt of required regulatory approvals, are not entirely within our control, we cannot predict the actual timing or provide any assurances as to when or if the merger will occur. See the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page [].

 

Q: What happens if the merger is not completed?

 

A: If the merger is not completed, holders of City National common stock will not receive any consideration for their shares in connection with the merger and the City National preferred stock will not be converted into New RBC Preferred Shares. Instead, City National will remain an independent public company and its common stock and preferred stock will continue to be listed and traded on the New York Stock Exchange, referred to as the “NYSE”.

 

Q: When and where is the City National special meeting?

 

A: The City National special meeting will be held at City National Plaza, 555 South Flower Street, Thirteenth Floor, Los Angeles, California 90071, on May 27, 2015 at 4:00 p.m. local time.

 

Q: Who can vote at the City National special meeting?

 

A: Holders of City National common stock, including holders of City National restricted stock awards, as of the close of business on April 22, 2015, referred to as the “record date”, are entitled to vote at the City National special meeting. Beneficial owners of shares of City National common stock as of the record date should receive instructions from their bank, brokerage firm or other nominee describing how to vote their shares. Holders of City National preferred stock or the corresponding City National Depositary Shares are not entitled to and are not being requested to vote at the City National special meeting.

 

Q: What is the quorum requirement for the City National special meeting?

 

A: The presence, in person or represented by proxy, of holders of a majority of the aggregate voting power of the issued and outstanding shares of City National common stock entitled to vote at the special meeting constitutes a quorum for the purposes of the special meeting. All shares of City National common stock that are present in person or represented by proxy, including abstentions and broker non-votes, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the City National special meeting.

 

Q: What vote is required to approve each proposal at the City National special meeting?

 

A:

Approval of the merger agreement proposal requires the affirmative vote of a majority of the outstanding shares of City National common stock entitled to vote thereon. Approval of the merger-related

 

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  compensation proposal requires the affirmative vote of the holders of a majority of shares of City National common stock present in person at the City National special meeting or represented by proxy and entitled to vote thereon. Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of shares of City National common stock present in person or represented by proxy and entitled to vote thereon, whether or not a quorum is present.

 

Q: What do I need to do now?

 

A: After carefully reading and considering the information contained in this proxy statement/prospectus, please vote your shares of City National common stock as soon as possible so that your shares will be represented at the City National special meeting. Please follow the instructions set forth on the proxy card or on the voting instruction provided by the record holder if your shares are held in the name of your broker, bank or other nominee.

 

Q: How do I vote?

 

A: If you are a City National common stockholder of record as of the record date, you may submit your proxy before the City National special meeting in one of the following ways:

 

    use the toll-free number shown on your proxy card;

 

    visit the website shown on your proxy card to vote via the Internet; or

 

    complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

You may also cast your vote in person at the City National special meeting.

If your shares of City National common stock are held in “street name”, through a bank, brokerage firm or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. “Street name” stockholders who wish to vote at the meeting will need to obtain a proxy form from their bank, brokerage firm or other nominee.

If you are an employee participant that holds your shares of City National common stock through the Profit Sharing Plan, you will receive directions on how to submit your voting instructions from the trustee of such Profit Sharing Plan.

 

Q: What does it mean if I get more than one proxy card?

 

A: It means you have multiple accounts at the transfer agent and/or with brokers. Please sign and return all proxy cards or vote all your shares online or by telephone to ensure that all your shares are voted.

 

Q: If my shares of City National common stock are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee vote my shares for me?

 

A: You should instruct your bank, brokerage firm or other nominee to vote your shares of City National common stock. If you do not instruct your bank, brokerage firm or other nominee, your bank, brokerage firm or other nominee will not be able to vote your shares. Please check with your bank, brokerage firm or other nominee and follow the voting procedures your bank, brokerage firm or other nominee provides.

Under the rules of the NYSE, banks, brokerage firms and other nominees who hold shares of City National common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms and other nominees are not allowed to exercise their voting discretion with respect to the approval of matters that the NYSE determines to be “non-routine”, such as approval of the merger agreement proposal, without specific instructions from the beneficial owner. Broker non-votes are

 

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shares held by a bank, brokerage firm or other nominee that are represented at the City National special meeting, but with respect to which the bank, broker or other nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the bank, broker or other nominee does not have discretionary voting power on such proposal. It is expected that banks, brokerage firms or other nominees will not have discretionary authority to vote on any proposal and, as a result, City National anticipates that there will not be any broker non-votes cast in connection with any of the proposals.

 

Q: What happens if I submit my proxy or voting instruction card without indicating how to vote?

 

A: If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the shares of City National common stock represented by your proxy will be voted as recommended by City National’s board of directors with respect to that proposal. Unless you check the box on your proxy card to withhold discretionary authority, the proxy holders may use their discretion to vote on other matters relating to the City National special meeting.

 

Q: What happens if I abstain from voting or do not vote at all?

 

A: For purposes of the City National special meeting, an abstention occurs when a City National common stockholder attends the City National special meeting in person and does not vote or returns a proxy with an “abstain” vote. If you respond with an “abstain” vote on any of the proposals to be considered at the City National special meeting, your proxy will have the same effect as a vote cast AGAINSTthe merger agreement proposal, the merger-related compensation proposal and the adjournment proposal.

If you fail to vote or fail to instruct your bank, brokerage firm or other nominee how to vote on the proposals to be considered at the City National special meeting, it will have the same effect as a vote cast AGAINST the approval of the merger agreement proposal, and, assuming a quorum is present, will have no effect on the merger-related compensation proposal or the adjournment proposal.

 

Q: May I change my vote after I have submitted a proxy?

 

A: Yes. If you have not voted through your bank, brokerage firm or other nominee, there are four ways you can change your vote after you have submitted your proxy (whether by mail, telephone or the Internet):

 

    by sending a notice of revocation to City National’s Corporate Secretary at City National Plaza, 555 South Flower Street, Los Angeles, California 90071 stating that you would like to revoke your proxy;

 

    by logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case if you are eligible to do so and following the instructions on the proxy card;

 

    by sending a completed proxy card bearing a later date than your original proxy card; or

 

    by attending the City National special meeting and voting in person.

If you choose either of the first two methods, you must take the described action no later than the beginning of the City National special meeting. If you choose to send a completed proxy card bearing a later date than your original proxy card, the new proxy card must be received before the beginning of the City National special meeting.

If you have instructed a bank, brokerage firm or other nominee to vote your shares of City National common stock, you must follow the directions you receive from your bank, brokerage firm or other nominee in order to change or revoke your vote.

If you are an employee participant that holds your shares of City National common stock through the Profit Sharing Plan, you must follow the directions you receive from the trustee of such Profit Sharing Plan in order to change or revoke your vote.

 

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Q: If I want to attend the City National special meeting, what do I do?

 

A: You should come to City National Plaza, 555 South Flower Street, Thirteenth Floor, Los Angeles, California 90071 at 3:45 p.m., local time, on May 27, 2015 to register for the meeting, which begins at 4:00 p.m. local time. If you hold your shares of City National common stock in “street name”, you will need to bring proof of ownership (by means of a recent brokerage statement or letter from your bank, brokerage firm or other nominee) to be admitted to the City National special meeting. Stockholders of record as of the record date can vote in person at the City National special meeting. If your shares of City National common stock are held in “street name”, then you are not the stockholder of record and you must ask your bank, brokerage firm or other nominee how you can vote at the City National special meeting.

 

Q: What are the material U.S. federal and Canadian income tax consequences of the merger to holders of City National stock?

 

A: The merger has been structured to qualify as a reorganization for United States federal income tax purposes, and it is a condition to our respective obligations to complete the merger that each of RBC and City National receive a legal opinion from Sullivan & Cromwell LLP and Wachtell, Lipton, Rosen & Katz, respectively, to the effect that (i) the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and (ii) the merger will not result in gain recognition to the holders of City National common stock pursuant to Section 367(a) of the Code (assuming that, in the case of any such holder who would be treated as a “five-percent transferee shareholder” within the meaning of Treasury Regulations Section 1.367(a)-3(c)(5)(ii), such holder enters into a five-year gain recognition agreement in the form provided in Treasury Regulations Section 1.367(a)-8, as provided for in Treasury Regulations Section 1.367(a)-3(c)(1)(iii)(B), and complies with the requirements of that agreement and Treasury Regulations Section 1.367(a)-8 for avoiding the recognition of gain).

Assuming that the opinions as to (i) and (ii) above are correct, then, for U.S. holders of City National common stock:

 

    U.S. holders of City National common stock receiving solely RBC common shares in exchange for City National common stock will not recognize any gain or loss upon the merger, except for any gain or loss that may result from the receipt by such holders of cash instead of fractional shares of RBC common shares.

 

    U.S. holders of City National common stock receiving solely cash for City National common stock pursuant to the merger will recognize gain or loss equal to the difference between the amount of cash received by a holder of City National common stock and such holder’s cost basis in such stock. A U.S. holder receiving solely RBC common shares (or receiving RBC common shares and cash solely in lieu of fractional shares) in exchange for City National common stock will not recognize any gain or loss upon the merger, except with respect to cash received in lieu of fractional shares of RBC common shares.

 

    U.S. holders of City National common stock receiving RBC common shares and cash (other than solely in lieu of fractional shares) in exchange for shares of City National common stock pursuant to the merger, will recognize gain (but not loss) in an amount equal to the lesser of (1) the amount by which the sum of the fair market value of the RBC common shares and cash received by a holder of City National common stock exceeds such holder’s cost basis in its City National common stock, and (2) the amount of cash received by such holder of City National common stock (except with respect to any cash received instead of fractional share interests in RBC common shares).

 

    A U.S. holder of City National common stock who receives cash in lieu of a fractional share of an RBC common share in the merger generally will be treated as having received such fractional share in the merger and then as having received cash in redemption of such fractional share. Gain or loss generally will be recognized based on the difference between the amount of cash received in lieu of the fractional share and the portion of the U.S. holder’s aggregate tax basis in the City National common stock surrendered which is allocable to the fractional share.

 

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Assuming that the opinions as to (i) above are correct, then, for U.S. holders of City National preferred stock:

 

    A U.S. holder whose shares of City National 6.750% Fixed Rate/Floating Rate Non-Cumulative Preferred Stock, Series D are exchanged for RBC Series C-2 Preferred Shares should not recognize any gain or loss upon the merger.

 

    A U.S. holder whose shares of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C are exchanged for RBC Series C-1 Preferred Shares should recognize gain or loss equal to the difference between the value of the RBC Series C-1 Preferred Shares received and the U.S. holder’s tax basis in its shares of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C. RBC intends to treat the exchange of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C for RBC Series C-1 Preferred Shares as an exchange for which gain or loss must be recognized.

It is important to note that the U.S. federal income tax consequences described above may not apply to some holders of City National common stock or City National preferred stock, as applicable, including certain holders specifically referred to under “The Merger—Material United States Federal Income Tax Consequences” beginning on page []. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the tax consequences of the merger in your particular circumstances, as well as any tax consequences that may arise from the laws of any other taxing jurisdiction.

Generally, a holder of City National stock who is not, and who is not deemed to be, resident in Canada for purposes of the Canadian Tax Act will not be subject to tax under the Canadian Tax Act in respect of any capital gain realized on the disposition of City National common stock or City National preferred stock pursuant to the merger. See “The Merger—Material Canadian Federal Income Tax Consequences” beginning on page [].

 

Q: Do I have appraisal rights in connection with the merger?

 

A: The holders of City National common stock are entitled to dissenters’ rights of appraisal in connection with the merger under Section 262 of the General Corporation Law of the State of Delaware, which is sometimes referred to as “Delaware law”, provided they satisfy the special criteria and conditions set forth in Section 262 of Delaware law. More information regarding these appraisal rights are described in this document, and the provisions of Delaware law that grant appraisal rights and govern such procedures are attached as Appendix E to this document. You should read these provisions carefully and in their entirety. A detailed description of the appraisal rights available to holders of City National common stock and procedures required to exercise statutory appraisal rights is included in the section entitled “The Merger—Dissenters’ Rights of Appraisal for Holders of City National Common Stock” beginning on page [].

Under Delaware law the holders of City National preferred stock are not entitled to any dissenters’ rights of appraisal in connection with the merger.

 

Q: Should I send in my stock certificates now?

 

A: No. City National stockholders SHOULD NOT send in any stock certificates now. If the merger is approved, an election form and transmittal materials, with instructions for their completion, will be provided to City National stockholders under separate cover and the stock certificates should be sent at that time.

 

Q: Who can help answer my additional questions about the City National special meeting or the merger?

 

A: If you have questions about the City National special meeting or the merger, you should contact Innisfree M&A Inc, City National’s proxy solicitor, toll-free at (888) 750-5834 (banks and brokers call collect at (212) 750-5833).

 

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SUMMARY

This summary highlights selected information from this proxy statement/prospectus and may not contain all the information that is important to you. You should carefully read this entire document, including the appendices and the other documents to which this document refers you, for a more complete understanding of the matters being considered at the City National special meeting. In addition, we incorporate by reference into this document important business and financial information about RBC and City National. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page []. Where applicable, each item in this summary includes a page reference directing you to a more complete description of that item.

Information about the Companies (page [])

Royal Bank of Canada

Executive Offices

200 Bay Street

Royal Bank Plaza

Toronto, Ontario, Canada M5J 2J5

Telephone: (416) 955-7806

Royal Bank of Canada and its subsidiaries operate under the master brand name of RBC. RBC is Canada’s largest bank, and one of the largest banks in the world, based on market capitalization. RBC is one of North America’s leading diversified financial services companies, and provides personal and commercial banking, wealth management, insurance, investor services and capital markets products and services on a global basis. RBC employs approximately 78,000 full- and part-time employees who serve more than 16 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 39 other countries. RBC operates through six reporting segments: Personal & Commercial Banking, Wealth Management, Insurance, Investor & Treasury Services, Capital Markets and Corporate Support.

RBC common shares trade under the symbol “RY” on the Toronto Stock Exchange, or TSX, and on the New York Stock Exchange, or NYSE.

Additional information about RBC can be found on its website at www.rbc.com. The information provided on RBC’s website (or any other website referenced herein) is not part of this proxy statement/prospectus and is not incorporated herein by reference.

RBC USA Holdco Corporation

200 Vesey Street

New York, NY 10281

Telephone: (212) 858-7216

RBC USA Holdco Corporation (“Holdco”) is a Delaware corporation and a direct wholly-owned subsidiary of RBC. Holdco is RBC’s top-level holding company in the United States and the direct or indirect owner of the majority of RBC’s U.S. business operations, including RBC Capital Markets, LLC and RBC Global Asset Management (U.S.) Inc.

 

 

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City National Corporation

Executive Offices

City National Plaza

555 South Flower Street

Los Angeles, California 90071

Telephone: (213) 673-7700

City National Corporation (“City National”), a Delaware corporation organized in 1968, provides a wide range of banking, investment and trust services to its clients through its wholly-owned banking subsidiary, City National Bank, which has conducted business since 1954. City National provides comprehensive financial solutions and a premier banking and financial experience to affluent individuals, entrepreneurs, professionals, their businesses and their families. City National is headquartered in Los Angeles, California and operates through 75 offices, including 16 full-service regional centers in Southern California, the San Francisco Bay area, Nevada, New York City, Nashville, Tennessee and Atlanta, Georgia. City National employs approximately 3,600 full-time employees. At December 31, 2014, City National had consolidated total assets of $32.61 billion, total loan balances of $20.85 billion, total deposits of $28.11 billion, and assets under management or administration of $60.82 billion.

City National common stock trades under the symbol “CYN” on the NYSE.

Additional information about City National can be found on its website at www.cnb.com. The information provided on City National’s website is not part of this proxy statement/prospectus and is not incorporated herein by reference.

Risk Factors (page [])

An investment in RBC common shares involves risks, some of which are related to the merger. In considering the merger, you should carefully consider the information about these risks set forth under “Risk Factors” beginning on page [], together with the other information included or incorporated by reference or in this proxy statement/prospectus.

An investment in RBC preferred shares involves risks. You should carefully consider the information about these risks set forth under “Risk Factors” beginning on page [] including as set forth under “Risk Factors—Additional Risks Relating to New RBC Preferred Shares” beginning on page [], together with the other information included or incorporated by reference or in this proxy statement/prospectus.

The Merger and the Merger Agreement (page [])

The terms and conditions of the merger are contained in the merger agreement, which is attached to this document as Appendix A. We encourage you to read the merger agreement carefully, as it is the legal document that governs the merger. All descriptions in this summary and elsewhere in this proxy statement/prospectus of the terms and conditions of the merger are qualified by reference to the merger agreement.

Under the terms of the merger agreement, City National will merge with and into Holdco, a direct wholly-owned subsidiary of RBC, with Holdco surviving the merger.

Merger Consideration (page [])

Each share of City National common stock that is converted into the right to receive cash consideration will receive an amount in cash equal to the “Per Share Amount”. The Per Share Amount will be calculated by

 

 

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dividing the “Closing Transaction Value” by the number of shares of City National common stock outstanding at completion of the merger. Subject to certain adjustments and limitations as set forth in the merger agreement, the Closing Transaction Value represents an aggregate value, calculated by adding (1) the aggregate cash included in the merger consideration ($94.50 multiplied by 50% of the number of shares of City National common stock outstanding at completion of the merger (subject to certain adjustments)) and (2) the aggregate number of RBC common shares included in the merger consideration (41,358,212, as increased based on increases in City National shares permitted to be issued following execution of the merger agreement and decreased by shares of City National, if any, cancelled in connection with the merger) multiplied by the volume weighted average RBC common share price for the ten trading days preceding the day of completion of the merger (the “VWAP”) (calculated using both NYSE and TSX volumes and the Bank of Canada daily noon Canada/U.S. exchange rate on each applicable day).

Each share of City National common stock that is converted into the right to receive share consideration will receive a number of RBC common shares equal to the Per Share Amount divided by the VWAP.

Set forth below is a table showing a range of hypothetical VWAP amounts, and for each such VWAP (i) the corresponding amount of cash consideration that a City National common stockholder would receive per share of common stock converted into the right to receive the cash consideration and (ii) the corresponding amount of share consideration that a City National common stockholder would receive per City National share of common stock converted into the right to receive the share consideration. The table does not reflect the fact that cash will be paid instead of fractional shares or the effects of proration.

 

Hypothetical VWAP

(US$)

  

Share of City National
Common Stock Receiving
Cash Consideration

(cash in US$)

  

Share of City National
Common Stock Receiving
Share Consideration
(RBC common shares)

  

Value of Share
Consideration
(value based on VWAP)(2)

(US$)

$67.11    $97.51    1.4530    $97.51
$66.11    $96.76    1.4636    $96.76
$65.11    $96.01    1.4746    $96.01
   $64.11(1)    $95.26    1.4859    $95.26
$63.11    $94.51    1.4976    $94.51
$62.11    $93.76    1.5096    $93.76
$61.11    $93.02    1.5221    $93.02

 

(1) Reflects the VWAP assuming completion of the merger on April 20, 2015, which amount is calculated (in accordance with the merger agreement) based on the volume weighted average RBC common share price for the ten trading days prior to April 20, 2015, which is calculated using both NYSE and TSX volumes and the Bank of Canada daily noon Canada/U.S. exchange rate on each applicable day.
(2) The value of the share consideration received per share of City National common stock is based on the corresponding VWAP. The value of the share consideration at the time it is received will depend on the market price of RBC common shares at the time those RBC common shares are received (following completion of the merger), which market price will likely differ from the VWAP.

The examples above are illustrative only. The market prices of both RBC common shares and City National common stock will fluctuate before the completion of the merger, and the market price of RBC common shares may also fluctuate between the completion of the merger and the time you receive any RBC common shares. Accordingly, the actual VWAP, amount of cash consideration per City National share of common stock exchangeable for cash consideration and amount of share consideration per City National share of common stock exchangeable for share consideration will fluctuate, and those amounts as of the completion of the merger will likely vary from the illustrative examples provided above. You should obtain current stock price quotations for RBC common shares and City National common stock before you vote and before you make an election.

 

 

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Elections by City National stockholders will be prorated and adjusted in accordance with the merger agreement, with the aggregate number of shares of City National common stock converted into the right to receive cash consideration and the aggregate number of shares of City National common stock converted into the right to receive share consideration determined in accordance with the formula and other provisions set forth in the merger agreement. The formula and other provisions set forth in the merger will be based on amounts that cannot be known until completion of the merger and will not take into account the elections made by City National stockholders. City National stockholders may specify different elections with respect to different shares of City National common stock that they hold (if, for example, you own 100 shares of City National common stock, you could make a cash election with respect to 50 shares and a stock election with respect to the other 50 shares).

Treatment of City National Preferred Stock (page [])

Under the terms and subject to the conditions of the merger agreement, upon completion of the merger (i) each share of City National’s 5.50% Non-Cumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, issued and outstanding immediately prior to completion of the merger will be cancelled and RBC will issue to the former holder one RBC 5.50% Non-Cumulative Perpetual Preferred Share, Series C-1 (the “RBC Series C-1 Preferred Shares”), and (ii) each share of City National’s 6.750% Fixed Rate/Floating Rate Non-Cumulative Preferred Stock, Series D, par value $1.00 per share, issued and outstanding immediately prior to completion of the merger will be cancelled and RBC will issue to the former holder one RBC 6.75% Fixed Rate/Floating Rate Non-Cumulative Preferred Share, Series C-2 (the “RBC Series C-2 Preferred Shares”). The terms of the RBC Series C-1 Preferred Shares and the RBC Series C-2 Preferred Shares, referred to as the “New RBC Preferred Shares”, will have powers, preferences and special rights that are substantially similar to and not materially less favorable to the holder than the powers, preferences and special rights set out in the certificate of designations of the corresponding series of City National preferred stock.

Each outstanding share of City National preferred stock is presently represented by depositary shares, referred to as “City National Depositary Shares”, that are listed on the NYSE and represent a one-fortieth interest in a share of the corresponding series of City National preferred stock. Upon completion of the merger, RBC will assume the obligations of City National under (i) the Deposit Agreement, dated November 13, 2012 (as it may be amended from time to time), among City National, Computershare Trust Company, N.A. as depositary, Computershare Inc. and the holders from time to time of the Depositary Receipts (relating to the City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C) and (ii) the Deposit Agreement, dated November 7, 2013 (as it may be amended from time to time), among City National, Computershare Trust Company, N.A. as depositary, Computershare Inc. and the holders from time to time of the Depositary Receipts (relating to the City National 6.750% Fixed Rate/Floating Rate Non-Cumulative Preferred Stock, Series D). RBC will instruct Computershare Trust Company, N.A., referred to as the “Depositary”, as the depositary of the deposit agreements, referred to as the “Deposit Agreements”, to treat New RBC Preferred Shares received by the Depositary upon the cancellation of the shares of City National preferred stock as newly deposited securities under the applicable Deposit Agreement. In accordance with the terms of the relevant Deposit Agreement, the City National Depositary Shares will thereafter represent a one-fortieth interest in the relevant series of New RBC Preferred Shares. Such depositary shares will continue to be listed on the NYSE upon completion of the merger under a new name and will be traded under a new symbol.

Where appropriate, references in this proxy statement/prospectus to City National preferred stock and New RBC Preferred Shares shall also be considered to be references to the applicable depositary shares representing a one-fortieth interest in such City National preferred stock or such New RBC Preferred Shares, respectively.

Existing holders of RBC preferred shares will continue to own their existing preferred shares, which will not be affected by the merger.

 

 

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City National’s Board of Directors Unanimously Recommends that You Vote “FOR” the Merger Agreement Proposal, “FOR” the Merger-Related Compensation Proposal and “FOR” the Adjournment Proposal (page [])

City National’s board of directors determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of City National and its stockholders, and has unanimously adopted and approved the merger agreement. For the factors considered by City National’s board of directors in reaching its decision to adopt and approve the merger agreement, see the section entitled “The Merger—City National’s Board Recommendation and Reasons for the Merger” beginning on page []. City National’s board of directors unanimously recommends that City National common stockholders vote “FOR” the approval of the merger agreement proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.

Comparative Per Share Market Price and Dividend Information (page [])

The following table presents the last reported closing sale price per share of RBC common shares on the TSX and the NYSE and of City National common stock on the NYSE on (a) January 21, 2015, the last full trading day prior to the public announcement by RBC and City National of the transaction and execution of the merger agreement, and (b) April [], 2015, the last trading day for which this information could be calculated prior to the date of this proxy statement/prospectus. The table also sets forth the equivalent pro forma sale price of City National common stock on each of these dates, which assumes share consideration is received for a share of City National common stock. The equivalent pro forma sale price is determined based on (i) an assumed exchange ratio of 1.509 RBC common shares per share of City National common stock, which assumes that the merger was completed on January 22, 2015 and that the applicable VWAP was $62.16 (which amount is the closing price of RBC common shares on the NYSE on January 21, 2015, the last trading day before announcement of the merger), and (ii) the value of 1.509 RBC common shares based on the closing price of RBC common shares on the NYSE on the applicable date listed in the table below.

 

     RBC common
shares
TSX
  RBC common
shares
NYSE
   City National
common stock
NYSE
   City National common stock 
Equivalent Pro Forma
     (C$)   ($)    ($)    ($)

January 21, 2015

   76.61   62.16    74.57    93.80

April [], 2015

   []   []    []    []

Opinions of City National’s Financial Advisors (page [])

In connection with the merger, each of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofA Merrill Lynch”) and Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”), City National’s financial advisors (collectively, the “financial advisors”), delivered to City National’s board of directors a separate written opinion, dated January 21, 2015, as to the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration to be received by holders of City National common stock. The full text of the written opinions of BofA Merrill Lynch and Sandler O’Neill, which describe, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, are attached as Appendix C and Appendix D, respectively, to this document and are incorporated by reference herein in their entirety. Each of BofA Merrill Lynch and Sandler O’Neill provided its respective opinion to City National’s board of directors (in its capacity as such) for the benefit and use of City National’s board of directors in connection with and for purposes of its evaluation of the merger consideration from a financial point of view. Neither the BofA Merrill Lynch opinion nor the Sandler O’Neill opinion addresses any other aspect of the merger and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to City National or in which City National might engage or as to the underlying business decision of City National to proceed with or effect the merger. Neither the

 

 

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BofA Merrill Lynch opinion nor the Sandler O’Neill opinion addresses any other aspect of the merger and neither opinion constitutes a recommendation to any stockholder as to how to vote or act in connection with the proposed merger or any related matter.

The City National Special Meeting (page [])

The City National special meeting will be held at 4:00 p.m. local time, on May 27, 2015, at City National Plaza, 555 South Flower Street, Thirteenth Floor, Los Angeles, California 90071. At the City National special meeting, City National stockholders will be asked to approve the merger agreement proposal, the merger-related compensation proposal and the adjournment proposal.

City National’s board of directors has set the close of business on April 22, 2015 as the record date for determining the holders of City National common stock entitled to receive notice of and to vote at the City National special meeting. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of City National common stock, including shares in respect of City National restricted stock awards, as of the close of business on the record date. You will have one vote on all matters properly coming before the special meeting for each share of City National common stock that you owned as of the close of business on the record date.

The approval of the merger agreement proposal requires the affirmative vote of a majority of the outstanding shares of City National common stock entitled to vote thereon. Failures to vote, abstentions and broker non-votes will have the same effect as votes “AGAINST” the approval of the merger agreement.

As of the most recent practicable date, April 17, 2015, there were 55,605,013 shares of City National common stock outstanding and entitled to vote, held by 1,511 holders of record. As of April 13, 2015, the directors and executive officers of City National and their affiliates beneficially owned and were entitled to vote approximately 7,485,779 shares of City National common stock representing approximately 13.5% of the shares of City National common stock outstanding on that date. In connection with the merger agreement and the merger, Russell Goldsmith, Bram Goldsmith and certain trusts and other entities owned or otherwise controlled by Russell Goldsmith and Bram Goldsmith, referred to as the “Goldsmith Parties”, have agreed to vote approximately 7,125,310 shares “FOR” the merger agreement proposal. As of the most recent practicable date, April 17, 2015, RBC did not beneficially own any shares of City National’s common stock.

Holders of City National preferred stock are not entitled to and are not being requested to vote at the City National special meeting.

No RBC Shareholder Approval

RBC shareholders are not required to approve the merger agreement or the issuance of RBC common shares or New RBC Preferred Shares in connection with the merger.

Material United States Federal Income Tax Consequences (page [])

The merger has been structured to qualify as a reorganization for United States federal income tax purposes, and it is a condition to our respective obligations to complete the merger that each of RBC and City National receive a legal opinion from Sullivan & Cromwell LLP and Wachtell, Lipton, Rosen & Katz, respectively, to the effect that (i) the merger, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and (ii) the merger will not result in gain recognition to the holders of City National common stock pursuant to Section 367(a) of the Code (assuming that, in the case of any such holder who would be treated as a “five-percent transferee shareholder” within the meaning of Treasury Regulations Section 1.367(a)-3(c)(5)(ii), such holder enters into a

 

 

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five-year gain recognition agreement in the form provided in Treasury Regulations Section 1.367(a)-8, as provided for in Treasury Regulations Section 1.367(a)-3(c)(1)(iii)(B), and complies with the requirements of that agreement and Treasury Regulations Section 1.367(a)-8 for avoiding the recognition of gain).

Assuming that the opinions as to (i) and (ii) above are correct, then, for U.S. holders of City National common stock:

 

    U.S. holders of City National common stock receiving solely cash for City National common stock pursuant to the merger will recognize gain or loss equal to the difference between the amount of cash received by a holder of City National common stock and such holder’s tax basis in such stock.

 

    A U.S. holder receiving solely RBC common shares (or receiving RBC common shares and cash solely in lieu of fractional shares) in exchange for City National common stock will not recognize any gain or loss upon the merger, except with respect to cash received in lieu of fractional shares of RBC common shares.

 

    U.S. holders of City National common stock receiving RBC common shares and cash (other than solely in lieu of fractional shares) in exchange for shares of City National common stock pursuant to the merger, will recognize gain (but not loss) in an amount equal to the lesser of (1) the amount by which the sum of the fair market value of the RBC common shares and cash received by a holder of City National common stock exceeds such holder’s tax basis in its City National common stock, and (2) the amount of cash received by such holder of City National common stock (except with respect to any cash received instead of fractional share interests in RBC common shares).

 

    A U.S. holder of City National common stock who receives cash in lieu of a fractional share of RBC common shares in the merger generally will be treated as having received such fractional share in the merger and then as having received cash in redemption of such fractional share. Gain or loss generally will be recognized based on the difference between the amount of cash received in lieu of the fractional share and the portion of the U.S. holder’s aggregate tax basis in the City National common stock surrendered which is allocable to the fractional share.

Assuming that the opinions as to (i) above are correct, then, for U.S. holders of City National preferred stock:

 

    A U.S. holder whose shares of City National 6.750% Fixed Rate/Floating Rate Non-Cumulative Preferred Stock, Series D are exchanged for RBC Series C-2 Preferred Shares should not recognize any gain or loss upon the merger.

 

    A U.S. holder whose shares of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C are exchanged for RBC Series C-1 Preferred Shares should recognize gain or loss equal to the difference between the value of the RBC Series C-1 Preferred Shares received and the U.S. holder’s tax basis in its shares of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C. RBC intends to treat the exchange of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C for RBC Series C-1 Preferred Shares as an exchange for which gain or loss must be recognized.

It is important to note that the U.S. federal income tax consequences described above may not apply to some holders of City National common stock or City National preferred stock, as applicable, including certain holders specifically referred to under “The Merger—Material United States Federal Income Tax Consequences” beginning on page []. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the tax consequences of the merger in your particular circumstances, as well as any tax consequences that may arise from the laws of any other taxing jurisdiction.

 

 

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Material Canadian Federal Income Tax Consequences (page [])

Generally, a holder of City National stock who is not, and who is not deemed to be, resident in Canada for purposes of the Canadian Tax Act will not be subject to tax under the Canadian Tax Act in respect of any capital gain realized on the disposition of City National common stock or City National preferred stock pursuant to the merger. See “The Merger—Material Canadian Federal Income Tax Consequences” beginning on page [].

Accounting Treatment (page [])

The merger will be accounted for as a business combination applying the acquisition method of accounting for both International Financial Reporting Standards, or IFRS, and U.S. financial accounting purposes.

Treatment of City National Options and Other Equity Based Awards (page [])

 

    Stock Options. At the effective time of the merger, each City National stock option, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time of the merger shall (i) if granted prior to the date of the merger agreement, become vested in full and (ii) whether granted prior to or after the date of the merger agreement, be converted automatically into an option to purchase RBC common shares on the terms specified in the merger agreement.

 

    Restricted Stock. At the effective time of the merger, each award of restricted shares of City National common stock that is outstanding immediately prior to the effective time of the merger shall (i) if granted prior to the date of the merger agreement, fully vest and shall be cancelled and converted automatically, in accordance with the procedures set forth in the merger agreement, into the right to receive merger consideration or (ii) if granted after the date of the merger agreement, be converted into a restricted stock award of RBC common shares on the terms specified in the merger agreement.

 

    Restricted Stock Units. At the effective time of the merger, each City National restricted stock unit award that is outstanding immediately prior to the effective time of the merger shall (i) if granted prior to the date of the merger agreement (other than certain vested awards that provide for payment upon separation from service), vest and shall be cancelled and converted automatically into the right to receive (as provided in the merger agreement) either cash consideration or share consideration, plus an amount in cash equal to all accrued but unpaid dividend equivalents with respect to such City National restricted stock unit award, or (ii) if granted after the date of the merger agreement (or if granted prior to the date of the merger agreement on terms that provide for payment solely on a separation from service), be converted into a restricted stock unit award relating to RBC common shares on the terms specified in the merger agreement.

 

    Deferred Units. At the effective time of the merger, each stock unit credited to an account that is deemed invested in City National common stock as of immediately prior to the effective time under certain deferred compensation plans and in connection with a retirement benefit plan applicable to Russell Goldsmith shall be deemed to be invested in RBC common shares (on the terms specified in the merger agreement).

Regulatory Approvals Required for the Completion of the Merger (page [])

Completion of the merger is subject to the receipt of all regulatory approvals from the Board of Governors of the U.S. Federal Reserve System, referred to as the “Federal Reserve Board”, and the Superintendent of Financial Institutions (Canada), the receipt of all other required approvals or consents the failure of which to obtain would reasonably be expected to have a material adverse effect on RBC or City National, and the expiration of any applicable statutory waiting period, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, referred to as the “HSR Act”. RBC and City National have made or will in the near future make filings for such approvals.

 

 

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Federal Reserve Board. RBC is required to obtain the approval of the Federal Reserve Board under the Bank Holding Company Act for the acquisition of control of City National as a result of the merger. The U.S. Department of Justice, referred to as the “DOJ”, will have an opportunity to comment during this approval process and is expected to have at least 15 days (but no more than 30 days) following the approval of the Federal Reserve Board to challenge the approval on antitrust grounds.

Bank Act. Under the Bank Act, the approval of the Superintendent of Financial Institutions (Canada) is required in order for RBC to complete the acquisition.

Other Regulatory Approvals. Filings will also be made with the Financial Industry Regulatory Authority, referred to as “FINRA”, and the Securities and Exchange Commission, referred to as the “SEC”, in connection with the merger. Each of RBC and City National will also file with the DOJ and the U.S. Federal Trade Commission, referred to as the “FTC”, the Notification and Report Form and any other supplemental information required in connection with the termination or expiration of applicable waiting periods under the HSR Act. In addition, RBC will make filings with the Delaware Secretary pursuant to Delaware law.

RBC and City National believe that they will be able to obtain all required regulatory approvals on a timely basis. However, there can be no assurances as to whether or when the required regulatory approvals will be obtained, or whether any such approval will contain a material adverse condition.

Holders of City National Common Stock are Entitled to Dissenters’ Rights of Appraisal (page [])

Section 262 of Delaware law provides holders of City National common stock with the ability to dissent from the merger and seek appraisal of their shares. A holder of City National common stock who properly seeks appraisal and complies with the applicable requirements under Delaware law, referred to as a “dissenting stockholder”, will forego the merger consideration and instead receive a cash payment equal to the fair value of his, her or its shares of City National common stock in connection with the merger. Fair value will be determined by a court following an appraisal proceeding. Dissenting stockholders will not know the appraised fair value at the time such holders must elect whether to seek appraisal. The ultimate amount dissenting stockholders receive in an appraisal proceeding may be more or less than, or the same as, the amount such holders would have received under the merger agreement. A detailed description of the appraisal rights available to holders of City National common stock and procedures required to exercise statutory appraisal rights is included in the section entitled “The Merger—Dissenters’ Rights of Appraisal for Holders of City National Common Stock” beginning on page [].

To seek appraisal, a City National common stockholder must deliver a written demand for appraisal to City National before the vote on the merger agreement at the City National special meeting, and the City National common stockholder must not vote in favor of the merger agreement proposal. Failure to follow exactly the procedures specified under Delaware law will result in the loss of appraisal rights.

Holders of City National Preferred Stock are Not Entitled to Dissenters’ Rights of Appraisal (page [])

Appraisal rights are not available in all circumstances, and exceptions to these rights are provided under Delaware law. As a result of one of these exceptions, the holders of City National preferred stock are not entitled to appraisal rights in the merger.

Your Rights as a Holder of City National Common Stock Will Be Different from Your Rights as a Holder of RBC Common Shares (page [])

The conversion of your shares of City National common stock into RBC common shares in the merger will result in changes from your current rights as a holder of City National common stock, which generally are

 

 

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governed by Delaware law and by City National’s organizational documents. These rights differ from the rights you will have as a holder of RBC common shares, which generally will be governed by the Bank Act and RBC’s organizational documents.

City National’s Directors and Executive Officers Have Certain Interests in the Merger (page [])

The non-employee directors and executive officers of City National have certain interests in the merger that are different from, or in addition to, the interests of City National stockholders generally. These interests include, among others, potential severance benefits and other payments, the treatment of outstanding equity awards pursuant to the merger agreement, and rights to ongoing indemnification and insurance coverage. City National’s board of directors was aware of these interests and considered them, among other matters, in reaching its decisions to (i) approve the merger agreement and the transactions contemplated thereby and (ii) recommend that the stockholders of City National approve the merger agreement proposal. See the section entitled “The Merger—Interests of City National’s Directors and Executive Officers in the Merger” beginning on page [] of this proxy statement/prospectus for a more detailed description of these interests.

Conditions That Must Be Satisfied or Waived for the Merger to Occur (page [])

The respective obligations of each of RBC and City National to complete the merger are conditioned upon the satisfaction, or waiver by both RBC and City National, of the following conditions:

 

    approval of the merger agreement proposal by the City National common stockholders;

 

    approval for the listing on the TSX and NYSE of the RBC common shares to be issued in the merger, and approval for the listing on the NYSE of the New RBC Preferred Shares (which New RBC Preferred Shares will be represented by depositary shares listed on the NYSE as discussed in this proxy statement/prospectus);

 

    the effectiveness of the registration statement on Form F-4 of which this proxy statement/prospectus is a part and the absence of a stop order or proceedings initiated or threatened by the SEC for the purpose of suspending the effectiveness of the Form F-4; and

 

    receipt of required regulatory approvals and the absence of any injunction or other legal prohibition or restraint against the merger.

The obligation of RBC to complete the merger is subject to the satisfaction, or waiver by RBC, of the following conditions:

 

    the accuracy of the representations and warranties of City National as of the date of signing the merger agreement and as of the closing date of the merger, subject to applicable materiality qualifiers;

 

    performance in all material respects by City National of the obligations required to be performed by it at or prior to the closing date of the merger; and

 

    receipt by RBC of an opinion of Sullivan & Cromwell LLP as to certain tax matters.

The obligation of City National to complete the merger is also subject to the satisfaction, or waiver by City National, of the following conditions:

 

    the accuracy of the representations and warranties of RBC as of the date of signing the merger agreement and as of the closing date of the merger, subject to applicable materiality qualifiers;

 

    performance in all material respects by RBC of the obligations required to be performed by it at or prior to the closing date of the merger; and

 

    receipt by City National of an opinion of Wachtell, Lipton, Rosen & Katz as to certain tax matters.

 

 

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The Merger Agreement May be Terminated Under Certain Circumstances (page [])

The merger agreement may be terminated at any time before the completion of the merger, whether before or after approval of the merger agreement proposal by City National’s common stockholders, in any of the following circumstances:

 

    by mutual consent of City National and RBC;

 

    by either City National or RBC, if any of the required regulatory approvals are denied or completion of the merger has been prohibited or made illegal by a governmental entity (and the denial or prohibition is final and nonappealable);

 

    by either City National or RBC, if the merger has not been consummated by January 22, 2016, unless the failure to complete the merger by that date is due to the terminating party’s failure to abide by the merger agreement;

 

    by either City National or RBC, if there is a breach by the other party that would result in the failure of the conditions of the terminating party’s obligation to complete the merger, unless the breach is capable of being, and is, cured within 60 days of written notice of the breach (provided that the terminating party is not then in material breach of the merger agreement);

 

    by RBC, if City National or City National’s board of directors (1) submits the merger agreement to its stockholders without a recommendation for approval, or otherwise withdraws or materially and adversely modifies its recommendation for approval (or discloses such intention), or recommends to its stockholders certain business combination proposals other than the merger agreement, or (2) materially breaches its obligations to call a stockholder meeting or prepare and mail the proxy statement/prospectus to its stockholders pursuant to the merger agreement or its obligations regarding the facilitation of certain types of business combinations other than as contemplated by the merger agreement;

 

    by RBC if a tender offer or exchange offer for 20% or more of the outstanding shares of City National common stock is commenced (other than by RBC or its subsidiaries), and the City National board of directors recommends that the stockholders of City National tender their shares in such tender or exchange offer or otherwise fails to recommend that such stockholders reject such tender offer or exchange offer within the 10 business day period specified in Rule 14e-2(a) under the Securities Exchange Act of 1934, as amended.

 

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF RBC

Set forth below is selected historical financial information of RBC prepared in accordance with International Financial Reporting Standards, referred to as “IFRS”, for the fiscal years ended October 31, 2011, 2012, 2013 and 2014, and in accordance with generally accepted accounting principles in Canada, referred to as “Canadian GAAP”, for the fiscal year ended October 31, 2010, except as otherwise indicated. The information as at and for each of the years in the five-year period ended October 31, 2014 has been derived from the audited consolidated financial statements of RBC and the notes thereto as filed with the SEC. Also set forth below is selected historical financial information of RBC as at or for the three months ended January 31, 2014 and January 31, 2015, certain of which has been derived from the unaudited interim condensed consolidated financial statements of RBC and the notes thereto as furnished to the SEC. The results of operations for the three months ended January 31, 2015 are not necessarily indicative of the results of operations for the full year or any other interim period.

You should read this information in conjunction with (i) RBC’s audited consolidated financial statements and related notes included in RBC’s Annual Report on Form 40-F for the fiscal year ended October 31, 2014 and (ii) RBC’s unaudited interim condensed consolidated financial statements and related notes included in exhibits to RBC’s Form 6-K furnished to the SEC for the fiscal quarter ended January 31, 2015, each of which is incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information”.

 

  As at or for the Quarter
Ended January 31,
  As at or for the Year Ended October 31,  
  2015
(IFRS)
  2014
(IFRS)
  2014
(IFRS)
  2013
(IFRS)
  2012
(IFRS)
  2011
(IFRS)
  2010
(Canadian
GAAP)
 
  (Canadian dollars) (in millions, except per share information)  

SUMMARY CONSOLIDATED INCOME STATEMENT DATA

Net interest income

  3,631      3,460      14,116      13,249      12,439      11,357      10,338   

Non-interest income

  6,013      5,000      19,992      17,433      16,708      16,281      15,744   

Total revenue

  9,644      8,460      34,108      30,682      29,147      27,638      26,082   

Provision for credit losses

  270      292      1,164      1,237      1,299      1,133      1,240   

Insurance policyholder benefits, claims and acquisition expense

  1,522      982      3,573      2,784      3,621      3,358      3,546   

Non-interest expense

  4,620      4,387      17,661      16,214      14,641      14,167      13,469   

Non-controlling interest

  n.a.      n.a.      n.a.      n.a.      n.a.      n.a.      99   

Net income from continuing operations

  2,456      2,092      9,004      8,342      7,558      6,970      5,732   

Net loss from discontinued operations

  0      0      0      0      (51   (526   (509

Net income

  2,456      2,092      9,004      8,342      7,507      6,444      5,223   

SELECTED INFORMATION

Diluted earnings per share

  1.65      1.38      6.00      5.49      4.91      4.19      3.46   

Return on common equity(1)

  19.3   18.1   19.0   19.7   19.6   18.7   14.9

Return on risk weighted assets(2)

  2.40   2.43   2.52   2.67   2.70   2.44   2.03

SELECTED INFORMATION FROM CONTINUING OPERATIONS

Diluted earnings per share

  1.65      1.38      6.00      5.49      4.94      4.55      3.82   

Return on common equity(1)

  19.3   18.1   19.0   19.7   19.7   20.3   16.5

Net interest margin (total average assets)

  1.39   1.56   1.56   1.56   1.55   1.52   1.59

CAPITAL RATIOS(3)

Common Equity Tier 1 capital ratio

  9.6   9.7   9.9   9.6   n.a.      n.a.      n.a.   

Tier 1 capital ratio(4)

  11.0   11.5   11.4   11.7   13.1   13.3   13.0

Total capital ratio(4)

  13.0   13.5   13.4   14.0   15.1   15.3   14.4

 

(1) These measures may not have a standardized meaning under generally accepted accounting principles (GAAP) and may not be comparable to similar measures disclosed by other financial institutions. For further details refer to the “Key performance and non-GAAP measures” section of RBC’s 2014 Annual Report on Form 40-F.

 

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(2) Return on risk weighted assets (RWA) for 2011 is based on RWA reported under Canadian GAAP and income reported under IFRS.
(3) Effective the first quarter of 2013, RBC calculates capital ratios using the Basel III framework. Capital ratios presented above are on an “all-in” basis. Capital ratios prior to 2013 were calculated using the Basel II framework. Basel III and Basel II are not directly comparable. The Common Equity Tier 1 ratio is a regulatory measure under the Basel III framework and is not applicable (n.a.) for years prior to 2013.
(4) Tier 1 capital ratio and Total capital ratio for 2011 were determined under Canadian GAAP.

 

  As at or for the Quarter
Ended January 31,
  As at or for the Year Ended October 31,  
  2015
(IFRS)
  2014
(IFRS)
  2014
(IFRS)
  2013
(IFRS)
  2012
(IFRS)
  2011
(IFRS)
  2010
(Canadian
GAAP)
 
  (Canadian dollars) (in millions, except per share information)  

SELECTED BALANCE SHEET DATA AND OTHER INFORMATION

Total assets

  1,086,695      904,717      940,550      859,745      823,954      793,833      726,206   

Securities

  230,723      189,494      199,148      182,710      161,602      167,022      183,519   

Loans, net of allowance

  448,210      415,628      435,229      408,850      378,241      347,530      273,006   

Deposits

  654,707      594,444      614,100      563,079      512,244      479,102      414,561   

Shareholder’s equity

  55,665      50,236      52,690      47,665      43,160      39,702      38,951   

Average common equity

  49,250      44,050      45,700      40,600      36,500      32,600      33,250   

Risk-weighted assets (RWA)

  407,934      341,752      372,050      318,981      280,609      267,780      260,456   

Assets under management (AUM)

  485,700      415,700      457,000      391,100      343,000      308,700      364,700   

Assets under administration (AUA)(5)

  4,729,300      4,311,900      4,647,000      4,050,900      3,653,300      3,446,400      3,463,300   

COMMON SHARE INFORMATION

Shares outstanding (000s)

—average basic

  1,442,591      1,442,434      1,442,553      1,443,735      1,442,167      1,430,722      1,420,719   

—average diluted

  1,449,419      1,458,742      1,452,003      1,466,529      1,468,287      1,471,493      1,433,754   

—end of period

  1,442,592      1,442,195      1,442,233      1,441,056      1,445,303      1,438,376      1,424,922   

Dividends declared per share (C$)

  0.75      0.67      2.84      2.53      2.28      2.08      2.00   

Dividends declared per share (US$)(6)

  0.60      0.60      2.58      2.47      2.29      2.13      1.94   

Dividend yield (TSX)

  3.9   3.8   3.8   4.0   4.5   3.9   3.6

Dividend yield (NYSE)

  3.7   3.7   3.8   4.0   4.5   4.0   3.6

Common share price (RY on TSX)

—close, end of period (C$)

  71.74      68.93      80.01      70.02      56.94      48.62      54.39   

Common share price (RY on NYSE)

—close, end of period (US$)

  56.59      61.88      71.17      67.18      57.03      48.92      53.38   

Market capitalization (TSX) (C$)

  103,492      99,411      115,393      100,903      82,296      69,934      77,502   

Market capitalization (NYSE) (US$)

  81,636      89,243      102,644      96,810      82,426      70,365      76,062   

BUSINESS INFORMATION FOR CONTINUING OPERATIONS (number of)

Employees (full time equivalent)

  73,332      74,117      73,498      74,247      74,377      68,480      67,147   

Bank branches

  1,365      1,376      1,366      1,372      1,361      1,338      1,336   

Automated banking machines

  4,913      4,979      4,929      4,973      5,065      4,626      4,557   

 

(5) Represents total AUA of RBC which includes AUA of RBC Investor Services, formerly RBC Dexia, of which RBC had a 50% ownership interest prior to July 27, 2012.
(6) Dividends per share have been translated into U.S. dollars based on the Bank of Canada exchange rate on each dividend record date.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CITY NATIONAL

The following table summarizes selected historical consolidated financial data of City National prepared in accordance with U.S. generally accepted accounting principles, referred to as “U.S. GAAP”, for the periods and as of the dates indicated. This information has been derived from City National’s consolidated financial statements filed with the SEC.

You should read this information in conjunction with City National’s consolidated financial statements and related notes thereto included in City National’s Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information”.

City National Corporation—Historical Financial Information

(U.S. dollars in millions, except per share data)

 

     As of / For the Year Ended December 31,  
     2014     2013      2012      2011      2010  

Summary of Operations:

             

Interest income

   $ 907      $ 880       $ 887       $ 843       $ 830   

Interest expense

     49        56         56         70         100   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

$ 858    $ 824    $ 831    $ 773    $ 730   

(Reversal of) provision for credit losses on loans and leases, excluding covered loans

  (14   —        10      12      103   

Provision for losses on covered loans

  4      1      45      44      76   

Noninterest income

  412      355      357      342      361   

Noninterest expense

  902      851      825      805      751   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income before taxes

$ 378    $ 327    $ 308    $ 254    $ 161   

Income taxes

  119      94      99      78      26   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income

$ 259    $ 233    $ 209    $ 176    $ 135   

Net income attributable to noncontrolling interest

  3      3      1      4      4   

Dividends and accretion on preferred stock

  17      10      —        —        6   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income available to common shareholders

$ 239    $ 220    $ 208    $ 172    $ 125   

Earnings Per Common Share:

Basic

  4.31      4.02      3.85      3.24      2.38   

Diluted

  4.26      3.99      3.83      3.21      2.36   

Dividends declared

  1.32      0.75      1.50      0.80      0.40   

Period-End Balances:

Total assets

  32,610      29,718      28,618      23,666      21,353   

Loans and leases, excluding covered loans

  20,337      17,170      14,818      12,309      11,387   

Covered loans

  511      717      1,031      1,482      1,858   

Deposits

  28,108      25,679      23,502      20,388      18,177   

Long-term debt

  639      736      706      698      705   

Shareholders’ equity

  2,956      2,741      2,505      2,145      1,960   

 

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UNAUDITED COMPARATIVE PER COMMON SHARE DATA

The following tables present, as at the dates and for the periods indicated, selected historical unaudited and pro forma unaudited consolidated per share financial information for RBC common shares and City National common stock. You should read this information in conjunction with, and the information is qualified in its entirety by, the consolidated financial statements and accompanying notes of RBC and City National incorporated into this proxy statement/prospectus by reference. See “Where You Can Find More Information”.

The following pro forma information has been prepared in accordance with the rules and regulations of the SEC and accordingly includes the effects of purchase accounting. It does not reflect cost savings, synergies or certain other adjustments that may result from the merger. This information is presented for illustrative purposes only. You should not rely on the pro forma combined or equivalent pro forma amounts as they are not necessarily indicative of the operating results or financial position that would have occurred if the merger had been completed as of the dates indicated, nor are they necessarily indicative of the future operating results or financial position of the combined company. The pro forma information, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related costs, or other factors that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results.

The following tables assume the issuance of 41,358,212 RBC common shares in connection with the merger, which is the number of shares issuable by RBC in connection with the merger assuming the merger closed on January 22, 2015 and based on the number of outstanding shares of City National common stock at that time. As discussed in this proxy statement/prospectus, the actual number of RBC common shares issuable in the merger will be adjusted based on the number of shares of City National common stock outstanding at the completion of the merger. The pro forma data in the tables assume that the merger occurred on November 1, 2013 for income statement purposes and on October 31, 2014 for balance sheet purposes, and that the merger is accounted for as a business combination.

 

     As for the Quarter Ended
January 31, 2015
   As for the Year Ended 
October 31, 2014
     (C$)    (US$)    (C$)    (US$)
RBC COMMON SHARES            

Basic earnings per common share(1)

           

Historical (IFRS)

     1.66      1.39      6.03      5.51

Pro forma combined (IFRS)

     1.63      1.37      5.93      5.42

Diluted earnings per common share(1)

           

Historical (IFRS)

     1.65      1.38      6.00      5.49

Pro forma combined (IFRS)(2)

     1.63      1.37      5.90      5.40

Dividends per common share(3)

           

Historical

     0.75      0.60      2.84      2.58

Pro forma combined

     0.75      0.60      2.84      2.58

Book value per common share at period end(4)

           

Historical (IFRS)

   35.59    27.99    33.69    29.88

Pro forma combined (IFRS)

   36.86    28.98    35.00    31.04

 

(1) Earnings per share have been translated into U.S. dollars based on the average of the Bank of Canada noon exchange rates on the last day of each month during the year.
(2)

The pro forma combined diluted earnings per share for the year ended October 31, 2014 assumes the issuance of 1,806,783 additional RBC common shares. The pro forma combined diluted earnings per share

 

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  for the quarter ended January 31, 2015 assumes the issuance of 1,652,655 additional RBC common shares. These adjustments relate to City National’s stock options and other equity-based awards outstanding at the time of the merger. The adjustments assume the merger closed on January 22, 2015, and are based on the average amount of such stock options and equity-based awards over the relevant periods.
(3) Dividends per share have been translated into U.S. dollars based on the Bank of Canada exchange rate on each dividend record date. Pro forma combined dividends per common share are based solely on dividends of RBC.
(4) Book value per common share has been translated into U.S. dollars based on the Bank of Canada noon exchange rate at the end of the period.

With respect to the table above, the RBC pro forma combined amounts were calculated by combining (i) the RBC historical amounts as at and for the year ended October 31, 2014 and the quarter ended January 31, 2015 (prepared in accordance with IFRS) with (ii) the City National historical amounts (originally prepared in accordance with U.S. GAAP), adjusted for significant differences between U.S. GAAP and IFRS, as at and for the year ended December 31, 2014 and the quarter ended December 31, 2014, respectively. For purposes of calculating the pro forma combined amounts, the City National historical amounts have been further adjusted (on an IFRS basis) for estimated purchase accounting adjustments to be recorded in connection with the acquisition (consisting of fair value adjustments for assets acquired and liabilities assumed and adjustments for other intangible assets established, and the resulting amortization of these adjustments over appropriate periods) and other adjustments that are directly attributable to the transaction and expected to have a continuing impact on RBC’s pro forma combined financial results.

The equivalent pro forma per share information for City National in the following table was obtained by multiplying the above per share pro forma amounts for RBC by 1.509, which is the number of RBC common shares that City National stockholders who receive share consideration in the merger would receive for each share of City National common stock, assuming no proration and assuming that the merger was completed on January 22, 2015 and that the VWAP was $62.16 (which amount was the closing price of RBC common shares on the NYSE on January 21, 2015, the last trading day before announcement of the merger). The number of RBC common shares that City National stockholders who receive share consideration in the merger will receive may differ depending on the proration and other adjustment procedures in the merger agreement, and the actual VWAP calculated at the completion of the merger. Because RBC and City National have different fiscal years, the equivalent pro forma data for the year ended December 31, 2014 has been compared with RBC’s fiscal year ended October 31, 2014. The City National historical data in the following table is presented in U.S. GAAP.

 

     Year Ended
December 31, 2014
     (US$)
CITY NATIONAL CORPORATION COMMON STOCK     

Basic earnings per common share:

    

Historical

     $ 4.31  

Equivalent Pro forma

     $ 8.18  

Diluted earnings per common share:

    

Historical

     $ 4.26  

Equivalent Pro forma

     $ 8.15  

Dividends per common share:

    

Historical

     $ 1.32  

Equivalent Pro forma

     $ 3.89  

Book value per common share at period end:

    

Historical

     $ 49.07  

Equivalent Pro forma

     $ 46.84  

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

RBC common shares are listed on the TSX and the NYSE under the trading symbol “RY”. Shares of City National common stock are currently listed on the NYSE under the trading symbol “CYN”.

The table below sets forth, for the periods indicated, the per share high and low closing sales prices for RBC common shares and City National common stock as reported on the NYSE and, with respect to RBC common shares, the TSX. TSX closing prices of RBC common shares are presented in Canadian dollars, and the NYSE closing prices of RBC common shares and City National common stock are presented in U.S. dollars. For comparison purposes, the following table uses calendar year end and calendar quarters, but it should be noted that RBC’s fiscal year end is October 31 and City National’s fiscal year end is December 31.

 

     RBC common shares
TSX
(in C$)
    RBC common shares
NYSE
(in US$)
    City National
common stock
NYSE
(in US$)
 
         High             Low             High             Low           High         Low    

Annual information for the past five calendar years

            

2010

     62.42        48.95        62.10        46.34        64.13        45.81   

2011

     60.79        43.40        63.17        41.43        62.90        36.01   

2012

     60.53        49.57        61.24        47.65        54.63        45.39   

2013

     71.75        58.92        68.57        56.64        79.33        51.13   

2014

     83.33        68.06        75.90        61.42        81.85        68.39   

Quarterly information for the past two years and subsequent quarters:

            

2013, quarter ended

            

March 31

     64.49        60.50        63.66        59.31        59.61        51.13   

June 30

     64.10        58.92        62.17        56.64        63.66        54.36   

September 30

     66.56        60.55        64.85        57.12        71.15        64.11   

December 31

     71.75        65.98        68.57        63.88        79.33        65.39   

2014, quarter ended

            

March 31

     73.18        68.06        67.08        61.42        81.07        68.39   

June 30

     76.28        72.13        71.43        65.37        80.49        69.04   

September 30

     83.11        77.01        75.90        71.34        79.58        72.48   

December 31

     83.33        77.26        73.70        66.52        81.85        69.76   

2015, quarter ended

            

March 31

     80.70        71.74        68.55        56.59        90.66        73.83   

June 30 (through April [], 2015)

     [     [     [     [     [     [

Monthly information for the most recent six months

            

October 2014

     80.99        77.26        72.92        68.62        78.71        69.76   

November 2014

     83.33        80.01        73.70        70.39        80.23        77.19   

December 2014

     82.78        77.41        73.05        66.52        81.85        75.65   

January 2015

     80.70        71.74        68.55        56.59        89.45        73.83   

February 2015

     78.31        72.91        62.81        58.04        90.66        87.42   

March 2015

     78.22        75.09        62.34        59.16        90.26        88.35   

Fluctuations in the exchange rate between the Canadian dollar and the U.S. dollar will affect any comparisons of RBC common shares traded on the TSX and RBC common shares traded on the NYSE.

 

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The following table presents the last reported closing sale price per share of RBC common shares on the TSX and the NYSE and of City National common stock on the NYSE on (a) January 21, 2015, the last full trading day prior to the public announcement by RBC and City National of the transaction and execution of the merger agreement, and (b) April [], 2015, the last trading day for which this information could be calculated prior to the date of this proxy statement/prospectus. The table also sets forth the equivalent pro forma sale price of City National common stock on each of these dates, which assumes share consideration is received for a share of City National common stock. The equivalent pro forma sale price is determined based on (i) an assumed exchange ratio of 1.509 RBC common shares per share of City National common stock, which assumes that the merger was completed on January 22, 2015 and that the applicable VWAP was $62.16 (the closing price of RBC common shares on the NYSE on January 21, 2015, the last trading day before announcement of the merger), and (ii) the value of 1.509 RBC common shares based on the closing price of RBC common shares on the NYSE on the applicable date listed in the table below.

 

     RBC common
shares
TSX
  RBC common
shares
NYSE
  City National
common stock
NYSE
  City National
common stock 
Equivalent Pro Forma
     (C$)   (US$)   (US$)   (US$)

January 21, 2015

       76.61         62.16         74.57         93.80  

April [], 2015

       []         []         []         []  

City National stockholders will not receive the merger consideration until the merger is completed, which may be a substantial period of time after the City National special meeting. There can be no assurance as to the trading prices of RBC common shares at the time of the closing of the merger. The market prices of RBC common shares and City National common stock and the Canadian dollar/U.S. dollar exchange rate are likely to fluctuate prior to consummation of the merger and cannot be predicted. We urge you to obtain current market quotations for both RBC common shares and City National common stock and the Canadian dollar/U.S. dollar exchange rate.

The table below sets forth the dividends declared per RBC common share and the dividends declared per share of City National common stock for the fiscal years ended 2010, 2011, 2012, 2013 and 2014. RBC’s fiscal year end is October 31 and City National’s fiscal year end is December 31.

 

     RBC
(C$)(1)
   City National
(US$)(2)

Fiscal Year Ended

         

2010

       2.00          0.40  

2011

       2.08          0.80  

2012

       2.28          1.50  

2013

       2.53          0.75  

2014

       2.84          1.32  

 

(1) RBC dividends declared during fiscal quarters ended January 31, April 30, July 31 and October 31. RBC’s dividends are declared and payable in Canadian dollars. Common shareholders with addresses in the United States receive dividends in U.S. dollars unless they elect otherwise.
(2) City National dividends declared during fiscal quarters ended March 31, June 30, September 30 and December 31.

 

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CURRENCY EXCHANGE RATE DATA

The following table shows, for the years and dates indicated, certain information regarding the Canadian dollar/U.S. dollar exchange rate. The information is based on the noon exchange rate as reported by the Bank of Canada. Such exchange rate on April [], 2015 was C$[] = US$1.00.

 

     Period End      Average(1)      Low      High  

Year ended October 31, (C$ per US$)

           

2010

     1.0188         1.0414         0.9961         1.0778   

2011

     0.9935         0.9846         0.9449         1.0604   

2012

     0.9996         1.0034         0.9710         1.0487   

2013

     1.0429         1.0233         0.9839         1.0576   

2014

     1.1275         1.0934         1.0415         1.1289   
Month end, (C$ per US$)                  Low      High  

October 2014

           1.1136         1.1289   

November 2014

           1.1236         1.1427   

December 2014

           1.1344         1.1643   

January 2015

           1.1728         1.2717   

February 2015

           1.2403         1.2635   

March 2015

           1.2440         1.2803   

 

(1) The average of the noon buying rates on the last business day of each full month during the relevant period.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

From time to time, RBC and/or City National make written or oral forward-looking statements within the meaning of certain securities laws, including the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. This proxy statement/prospectus, including information incorporated by reference into this document, may contain forward-looking statements, including, for example, but not limited to, statements about management expectations, strategic objectives, growth opportunities, business prospects, regulatory proceedings, transaction synergies and other benefits of the merger, and other similar matters. Forward-looking statements are not statements of historical facts and represent only RBC’s and/or City National’s beliefs regarding future performance, which is inherently uncertain. Forward-looking statements are typically identified by words such as “believe”, “expect”, “foresee”, “forecast”, “anticipate”, “intend”, “estimate”, “goal”, “plan”, and “project” and similar expressions of future or conditional verbs such as “will”, “may”, “should”, “could” or “would”.

By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties that give rise to the possibility that RBC’s and/or City National’s predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that RBC’s and/or City National’s assumptions may not be correct and that RBC’s and/or City National’s objectives, strategic goals and priorities will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause actual results to differ materially from the expectations expressed in such forward-looking statements. These factors include, but are not limited to, the possibility that the merger does not close when expected or at all because required regulatory, stockholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all; that RBC and City National may be required to modify the terms and conditions of the merger agreement to achieve regulatory or stockholder approval, or that the anticipated benefits of the merger are not realized as a result of such things as the strength of the economy and competitive factors in the areas where City National does business; general business and economic conditions in Canada, the United States and other countries in which we conduct business; the impact of the movement of the Canadian dollar relative to other currencies, particularly the U.S. dollar, British pound and Euro; the effects of changes in government monetary and other policies; the effects of competition in the markets in which we operate; the impact of changes in the laws and regulations regulating financial services and enforcement thereof (including broker-dealer, banking, insurance and securities); judicial or regulatory judgments and legal proceedings; RBC’s ability to complete the acquisition of City National and integrate it with RBC successfully; the risk that expected synergies and benefits of the merger will not be realized within the expected time frame or at all; the risk of attrition of financial consultants and of assets under management, increased operating costs, customer loss, employee loss and business disruption following the merger; reputational risks; the outcome of various litigation and proceedings to which City National is a party and the adequacy of reserves maintained therefor; and other factors that may affect future results of RBC and City National, including changes in trade policies, timely development and introduction of new products and services, changes in tax laws, and technological and regulatory changes.

We caution that the foregoing list of important factors is not exhaustive and other factors could also adversely affect the completion of the merger and the future results of RBC or City National. The forward-looking statements speak only as of the date of this proxy statement/prospectus, in the case of forward-looking statements contained in this proxy statement/prospectus, or the dates of the documents incorporated by reference into this proxy statement/prospectus, in the case of forward-looking statements made in those incorporated documents. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by applicable law or regulation, RBC and City National do not undertake to update any forward-looking statement, whether written or oral, to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

 

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For additional information about factors that could cause RBC’s and City National’s results to differ materially from those described in the forward-looking statements, please see the section entitled “Risk Factors” as well as in the reports that RBC and City National have filed with the SEC, described under the section entitled “Where You Can Find More Information”, including RBC’s 2014 Annual Report on Form 40-F (“2014 Annual Report”) and its Q1 2015 Report of Foreign Private Issuer on Form 6-K (“Q1 2015 Report”) and City National’s Annual Report on Form 10-K for the year ended December 31, 2014, which are available at the SEC’s Internet site (www.sec.gov). RBC’s material general economic assumptions underlying certain of the forward-looking statements in this prospectus and the documents incorporated by reference herein are set out in its 2014 Annual Report under the heading “Overview and Outlook—Economic and market review outlook” and for each business segment under the heading “Outlook and priorities”, as updated by the “Overview” section in its Q1 2015 Report.

All subsequent written or oral forward-looking statements concerning the merger or other matters addressed in this proxy statement/prospectus and attributable to RBC, City National or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

 

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RISK FACTORS

Investing in RBC common shares and the New RBC Preferred Shares involves risks, some of which are related to the merger. In addition to the other information included or incorporated by reference in this proxy statement/prospectus, you should carefully consider the matters described below relating to the merger in deciding whether to vote for the approval of the merger agreement proposal. Although RBC and City National believe that the matters described below cover the material risks related to the merger, they may not contain all of the information that is important to you in evaluating the merger. Accordingly, we urge you to read this entire proxy statement/prospectus, including the appendices and the information included or incorporated by reference in this document. Please also refer to the additional risk factors identified in the periodic reports and other documents of RBC and City National incorporated by reference into this proxy statement/prospectus and listed in the section entitled “Where You Can Find More Information”.

Because the market price of RBC common shares will fluctuate, City National common stockholders cannot be sure of the value of the merger consideration they will receive.

Upon completion of the merger, each share of City National common stock will be converted into merger consideration consisting of either cash consideration or share consideration in the form of RBC common shares, pursuant to the terms of the merger agreement.

If you are a holder of City National common stock, regardless of whether you receive cash consideration or share consideration, or a mix of both, both the amount of and value of the merger consideration that you will receive will fluctuate based on the market price of RBC common shares. The value of the merger consideration that a City National stockholder will receive for each share of City National common stock will depend, among other factors, on the volume weighted average RBC common share price for the ten trading days preceding the completion of the merger (calculated using both NYSE and TSX volumes and the Bank of Canada daily noon Canada/U.S. exchange rate on each applicable day). The value of the share consideration for City National stockholders that receive share consideration, will also be based on the price per share of RBC common shares at the time the shares are received. Both the closing price of RBC common shares on the date that the merger is completed and the volume weighted average RBC common share price for the ten trading days preceding the completion of the merger may vary from the closing price of RBC common shares on the date RBC and City National announced the merger, on the date that this document is being mailed to each of the RBC and City National stockholders, on the date of the special meeting of City National stockholders, or on any other date. Any change in the market price of RBC common shares prior to completion of the merger will affect the value of the merger consideration that City National stockholders will receive upon completion of the merger. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in our respective businesses, operations and prospects, and regulatory considerations, among other things. Many of these factors are beyond the control of RBC and City National. Accordingly, at the time of the City National special meeting, City National stockholders will not know or be able to calculate the amount of the cash consideration or share consideration they would receive or the value of the RBC common shares they would receive upon completion of the merger.

City National common stockholders may receive a form of consideration different from what they elect.

Although each holder of City National common stock may elect to receive all cash or all RBC common shares in the merger, or cash for certain shares of City National common stock and RBC common shares for other shares, the pool of the aggregate cash and RBC common shares representing the merger consideration for all City National stockholders is fixed. As a result, if either the aggregate cash elections or stock elections exceed the maximum available, and you choose the consideration election that exceeds the maximum available, some or all of your consideration may be in a form that you did not choose.

 

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City National common stockholders who make elections may be unable to sell their shares in the market pending the merger.

City National common stockholders may elect to receive cash, stock or mixed consideration in the merger by completing an election form that will be sent under separate cover and is not being provided with this document. Elections will require that stockholders making the election turn in their City National stock certificates. This means that during the time between when the election is made and the date the merger is completed, City National common stockholders will be unable to sell their City National common stock. If the merger is unexpectedly delayed, this period could extend for a significant period of time. City National common stockholders can shorten the period during which they cannot sell their shares by delivering their election shortly before the election deadline. However, elections received after the election deadline will not be accepted or honored.

Upon completion of the merger, holders of City National common stock and preferred stock will become holders of RBC common shares and New RBC Preferred Shares, respectively, and the market price for RBC common shares and RBC preferred shares may be affected by factors different from those that historically have affected City National.

Upon completion of the merger, holders of City National common stock will become holders of RBC common shares and holders of City National preferred stock will become holders of New RBC Preferred Shares. RBC’s businesses differ from those of City National, and accordingly the results of operations of RBC will be affected by some factors that are different from those currently affecting the results of operations of City National. For a discussion of the businesses of City National and RBC and of some important factors to consider in connection with those businesses, see the documents incorporated by reference in this proxy statement/prospectus and referred to under “Where You Can Find More Information”.

Combining the two companies may be more difficult, costly or time-consuming than expected.

RBC and City National have operated and, until the completion of the merger, will continue to operate, independently. The success of the merger, including anticipated benefits and cost savings, will depend, in part, on RBC’s ability to successfully integrate City National’s operations in a manner that results in various benefits, including, among other things, enhanced revenues and revenue synergies, an expanded market reach and operating efficiencies, and that does not materially disrupt existing client relationships nor result in decreased revenues due to loss of clients. This could result in a loss of key personnel or cause an interruption of, or loss of momentum in, the activities of one or more of the surviving corporation’s businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the ability of RBC or City National to maintain relationships with clients and employees. The diversion of management’s attention and any delays or difficulties encountered in connection with the merger and the integration of City National’s operations could have an adverse effect on the business, financial condition, operating results and prospects of the surviving corporation after the merger.

The success of the combined entity following the merger will depend in part on the ability of RBC to integrate the two businesses. If RBC experiences difficulties in this process, including those listed above, RBC may fail to realize the anticipated benefits of the merger in a timely manner or at all. Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could have an adverse effect on the surviving corporation’s business, financial condition, operating results and prospects.

Among the factors considered by the boards of directors of RBC and City National in connection with their respective approvals of the merger agreement were the benefits that could result from the merger. We cannot give any assurance that these benefits will be realized within the time periods contemplated or at all.

 

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Some directors and executive officers of City National have interests in the merger that may differ from the interests of City National stockholders generally, including, if the merger is completed, the receipt of financial and other benefits.

In considering the recommendation of City National’s board of directors, you should be aware that some of its directors and executive officers have interests in the merger that are different from, or in addition to, those of City National stockholders generally. These interests include, among others, potential severance benefits and other payments, the treatment of outstanding equity awards pursuant to the merger agreement, and rights to ongoing indemnification and insurance coverage. These interests are described in more detail in the section entitled “The Merger—Interests of City National’s Directors and Executive Officers in the Merger”.

The merger agreement contains provisions that may discourage other companies from trying to acquire City National for greater merger consideration.

The merger agreement contains provisions that may discourage a third party from submitting an acquisition proposal to City National that might result in greater value to City National’s common stockholders than the merger, or may result in a potential competing acquirer proposing to pay a lower per share price to acquire City National than it might otherwise have proposed to pay. These provisions include a general prohibition on City National from soliciting or, subject to certain exceptions relating to the exercise of fiduciary duties by the City National board of directors, entering into discussions with any third party regarding, any acquisition proposal or offers for competing transactions. In addition, City National may be required to pay RBC a termination fee of $220 million in certain circumstances involving acquisition proposals for competing transactions. See the sections entitled “The Merger Agreement—Termination” and “The Merger Agreement—Effect of Termination and Termination Fee”.

If the merger is not consummated by January 22, 2016, either RBC or City National may choose not to proceed with the merger.

Either RBC or City National may terminate the merger agreement if the merger has not been completed by January 22, 2016, the date of the first anniversary of the merger agreement, unless the failure of the merger to be completed has resulted from the material failure of the party seeking to terminate the merger agreement to perform its obligations. See the section entitled “The Merger Agreement—Termination”.

Termination of the merger agreement or failure to complete the merger could negatively impact the stock price and the future business and financial results of City National, and in certain circumstances could result in the payment by City National of a termination fee.

If the merger is not completed for any reason, including as a result of City National stockholders declining to approve the merger agreement, the ongoing business of City National may be adversely affected and, without realizing any of the benefits of having completed the merger, City National would be subject to a number of risks, including the following:

 

    City National may experience negative reactions from the financial markets, including negative impacts on its stock price;

 

    City National may experience negative reactions from its clients, vendors and employees;

 

    City National will have incurred substantial expenses and will be required to pay certain costs relating to the merger, whether or not the merger is completed;

 

   

the merger agreement places certain restrictions on the conduct of City National’s businesses prior to completion of the merger. Such restrictions, the waiver of which is subject to the consent of RBC (not to be unreasonably withheld), may prevent City National from making certain acquisitions or taking certain other specified actions during the pendency of the merger (see the section entitled “The Merger

 

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Agreement—Covenants and Agreements—Conduct of Businesses Prior to the Completion of the Merger” for a description of the restrictive covenants applicable to City National); and

 

    matters relating to the merger (including integration planning) will require substantial commitments of time and resources by City National management, which would otherwise have been devoted to other opportunities that may have been beneficial to City National as an independent company.

In addition to the above risks, if the merger agreement is terminated and City National’s board of directors seeks another merger or business combination, City National stockholders cannot be certain that City National will be able to find a party willing to offer equivalent or more attractive consideration than the consideration RBC has agreed to provide in the merger. If the merger agreement is terminated under certain circumstances, City National may be required to pay a termination fee of $220 million to RBC. See the section entitled “The Merger Agreement—Effect of Termination and Termination Fee”.

Also, termination of the merger agreement could increase the possibility of downgrades by City National’s credit rating agencies or adverse regulatory actions which could adversely affect City National’s businesses.

The merger is subject to the receipt of consents and approvals from government entities that may impose conditions that could have an adverse effect on RBC, or, if not obtained, could prevent or delay completion of the merger.

Before the transactions contemplated in the merger agreement may be completed, various approvals must be obtained from the Federal Reserve Board, the Superintendent of Financial Institutions (Canada), and antitrust and other governmental authorities. In determining whether to grant these approvals, the regulators consider a variety of factors, including the regulatory standing of each party and the factors described under “The Merger—Regulatory Matters Related to the Merger” and “The Merger Agreement—Conditions to the Merger”. An adverse development in either party’s regulatory standing or these factors could result in an inability to obtain one or more approvals or delay their receipt. These governmental entities may impose conditions, limitations or costs, require branch divestitures or place restrictions on the conduct of RBC or the surviving entity after the closing as a condition to the granting of such approvals or require changes to the terms of the merger. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the merger or of imposing additional costs or limitations on RBC following the merger, any of which might have an adverse effect on the surviving corporation following the merger. The regulatory approvals may not be received at any time, may not be received in a timely fashion, and may contain conditions on the completion of the merger that adversely affect the surviving corporation’s business following the closing, or which are not anticipated or cannot be met.

In addition, one of the conditions for closing is that no regulatory approval required for the merger result in the imposition of a condition or restriction that would reasonably be likely to have a material and adverse effect on RBC and its subsidiaries, taken as a whole (with such materiality measured on a scale relative to City National and its subsidiaries, taken as a whole).

Certain rights of holders of City National common stock will change as a result of the merger.

Following completion of the merger, holders of City National common stock will no longer be stockholders of City National, a Delaware corporation, but will instead be shareholders of RBC, a Canadian chartered bank. There will be certain differences between your current rights as a stockholder of City National, on the one hand, and the rights to which you will be entitled as a shareholder of RBC, on the other hand. For a more detailed discussion of the differences in the rights of stockholders of City National and RBC, see “Comparison of Rights of RBC Shareholders and City National Stockholders”.

 

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If the merger fails to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, City National stockholders may be required to recognize gain or loss on the exchange of their shares of City National common stock in the merger for U.S. federal income tax purposes.

RBC and City National have structured the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. Neither RBC nor City National intends to request any ruling from the U.S. Internal Revenue Service, referred to as the “IRS”, as to the tax consequences of the exchange of shares of City National common stock for RBC common shares in the merger. If the merger fails to qualify as a reorganization, a City National stockholder would generally recognize gain or loss for U.S. federal income tax purposes on each share of City National common stock exchanged in the merger in an amount equal to the difference between that stockholder’s tax basis in such share and the fair market value of the RBC common shares and/or cash the City National stockholder receives or may receive in exchange for each such share of City National common stock. You are urged to consult with your own tax advisor regarding the proper reporting of the amount and timing of such gain or loss. See “The Merger—Material United States Federal Income Tax Consequences”.

Holders of City National common stock will have a reduced ownership and voting interest after the merger and will exercise less influence over management of the combined organization.

Holders of City National common stock currently have the right to vote in the election of City National’s board of directors and on other matters affecting City National. Upon the completion of the merger, each holder of City National common stock that receives RBC common shares will become a shareholder of RBC with a percentage ownership of the combined organization that is much smaller than the stockholder’s percentage ownership of City National. It is expected that the former holders of City National common stock as a group will receive shares in the merger constituting less than 3% of the outstanding RBC common shares immediately after the merger. Because of this, holders of City National common stock will have significantly less influence on the management and policies of RBC than they now have on the management and policies of City National.

City National will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and clients may have an adverse effect on City National and consequently on RBC. These uncertainties may impair City National’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause clients and others that deal with City National to seek to change existing business relationships with City National. Retention of certain employees may be challenging during the pendency of the merger, as certain employees may experience uncertainty about their future roles. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, RBC’s business following the merger could be negatively impacted. In addition, until the merger occurs, the merger agreement restricts City National from making certain acquisitions and taking other specified actions without the consent of RBC. These restrictions may prevent City National from pursuing attractive business opportunities that may arise prior to the completion of the merger. See “The Merger Agreement—Covenants and Agreements” for a description of the restrictive covenants applicable to City National.

RBC’s consolidated results of operations may be negatively impacted by foreign currency fluctuations.

A portion of RBC’s consolidated revenues following the merger will be earned in non-Canadian currencies, primarily U.S. dollars. The revenues that are earned in currencies other than Canadian dollars are subject to unpredictable fluctuations if the values of non-Canadian currencies change relative to the Canadian dollar. Such fluctuations could decrease RBC’s revenues earned in non-Canadian currencies and have a material adverse impact on its business.

 

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RBC expects to maintain its status as a “foreign private issuer” in the U.S. and thus will be exempt from a number of rules under the U.S. Securities Exchange Act of 1934, as amended, and will be permitted to file less information with the SEC than a company incorporated in the U.S.

As a “foreign private issuer”, RBC is exempt from rules under the U.S. Securities Exchange Act of 1934, as amended, referred to as the “Exchange Act”, that impose disclosure requirements, as well as procedural requirements, for proxy solicitations under Section 14 of the Exchange Act. In addition, RBC’s officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act. In addition, RBC is permitted, under a multi-jurisdictional disclosure system adopted by the United States and Canada, to prepare its disclosure documents filed under the Exchange Act in accordance with Canadian disclosure requirements, including preparing its financial statements in accordance with IFRS, which differ in some respects from U.S. GAAP.

RBC is chartered under the laws of Canada and a substantial portion of its assets are, and many of its directors and officers reside, outside of the United States. As a result, it may not be possible for shareholders to enforce civil liability provisions of the securities laws of the United States in Canada.

RBC is chartered under the laws of Canada. A substantial portion of RBC’s assets are located outside the United States, and many of RBC’s directors and officers and some of the experts named in this proxy statement/prospectus are residents of jurisdictions outside of the United States. As a result, it may be difficult for investors to effect service within the United States upon RBC and those directors, officers and experts, or to realize in the United States upon judgments of courts of the United States predicated upon civil liability of RBC and such directors, officers or experts under the United States federal securities laws. There is uncertainty as to the enforceability in Canada by a court in original actions, or in actions to enforce judgments of United States courts, of the civil liabilities predicated upon the United States federal securities laws.

Certain market activities of RBC and its affiliates may affect the value of RBC common shares.

RBC and its affiliates engage in market making, derivatives and structured notes hedging, brokerage and facilitation trading, asset management, plan-related activities, banking-related activities, estates and trusts services, custody-related activities, stock borrowing and lending and taking of collateral, involving RBC common shares outside the United States (and, to a limited extent, within the United States). Please read the section entitled “RBC Market Activities Involving RBC Common Shares” for more information. Such activities could have the effect of influencing the market price of RBC common shares.

The ability of RBC to pay dividends on RBC common shares and the New RBC Preferred Shares is subject to RBC’s timely payment of distributions on outstanding RBC Trust Capital Securities.

In the event that a distribution is not paid when due on any outstanding RBC Trust Capital Securities (“RBC TruCS”) issued by RBC Capital Trust, a subsidiary of RBC, RBC is not permitted to pay dividends on its outstanding preferred shares (which would include the New RBC Preferred Shares) or common shares, for a specified period of time unless the required distribution is paid to the holders of RBC TruCS.

The opinions received by the City National board of directors from BofA Merrill Lynch and Sandler O’Neill have not been, and are not expected to be, updated to reflect any changes in circumstances that may have occurred since the dates of the opinions.

The opinions delivered to the City National board of directors by BofA Merrill Lynch and Sandler O’Neill, financial advisors to City National, as to the fairness, from a financial point of view, of the merger consideration to be received by the holders of City National common stock in the proposed merger speak only as of the date of the opinions, which is January 21, 2015. Changes in the operations and prospects of RBC or City National, general market and economic conditions and other factors which may be beyond the control of RBC and City

 

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National may have altered the value of RBC or City National or the sale prices of RBC common shares as of the date of this proxy statement/prospectus, or may alter such values and sale prices by the time the merger is completed. Neither BofA Merrill Lynch nor Sandler O’Neill has any obligation to update, revise or reaffirm its opinion to reflect subsequent developments and neither has done so. City National does not currently anticipate asking BofA Merrill Lynch or Sandler O’Neill to update its opinion to address the fairness of the merger consideration from a financial point of view at the time the merger is completed. The City National board of directors’ recommendation that City National common stockholders vote “FOR” approval of the merger agreement proposal, however, is made as of the date of this proxy statement/prospectus. See “The Merger—Opinions of City National’s Financial Advisors”, and Appendix C and Appendix D to this proxy statement/prospectus.

Additional Risks Relating to New RBC Preferred Shares

Certain rights of holders of City National preferred stock will change as a result of the merger.

Upon completion of the merger, each share of City National preferred stock issued and outstanding immediately prior to completion of the merger will be cancelled and RBC will issue to the former holder one share of the corresponding series of New Preferred Shares. As a result, following completion of the merger, holders of City National preferred stock will no longer be stockholders of City National, a Delaware corporation, but will instead be shareholders of RBC, a Canadian chartered bank. There will be certain differences between your current rights as a stockholder of City National, on the one hand, and the rights to which you will be entitled as a shareholder of RBC, on the other hand. For a more detailed discussion of the differences in the rights of stockholders of City National and RBC, see “Comparison of Rights of RBC Shareholders and City National Stockholders”.

RBC’s creditworthiness may affect the market value of the New RBC Preferred Shares.

The value of the New RBC Preferred Shares will be affected by RBC’s general creditworthiness. For discussion and analysis of known material trends and events, and risks or uncertainties that are reasonably expected to have a material effect on RBC’s business, financial condition or results of operations, you should review the RBC documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” and “Where You Can Find More Information—Incorporation of Certain Documents by Reference”.

Changes in credit ratings may affect the market value of the New RBC Preferred Shares.

Real or anticipated changes in credit ratings on RBC or the New RBC Preferred Shares may affect the market value of the New RBC Preferred Shares. In addition, real or anticipated changes in credit ratings can affect the cost at which RBC can transact or obtain funding, and thereby affect RBC’s liquidity, business, financial condition or results of operations.

In the event of RBC’s insolvency, the New RBC Preferred Shares will rank junior to other securities.

In the event of RBC’s insolvency, any New RBC Preferred Shares issued and outstanding, which are series of RBC first preferred shares, will rank equally with RBC’s other outstanding series of first preferred shares. If RBC becomes insolvent or is wound up, its assets must be used to pay its deposit liabilities and other debt, including subordinated debt, before payments may be made on the New RBC Preferred Shares and RBC’s other series of first preferred shares.

Yields on similar securities will affect the market value of the New RBC Preferred Shares.

Prevailing yields on securities similar to the New RBC Preferred Shares will affect the market value of the New RBC Preferred Shares. Assuming all other factors remain unchanged, the market value of New RBC

 

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Preferred Shares will decline as prevailing yields for similar securities rise, and will increase as prevailing yields for similar securities decline.

U.S. Holders of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C should recognize gain or loss upon the receipt of RBC Series C-1 Preferred Shares.

A U.S. holder should recognize gain or loss upon the exchange of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C for RBC Series C-1 Preferred Shares pursuant to the merger. RBC intends to treat such an exchange as one that requires the recognition of gain or loss for purposes of its information reporting obligations. U.S. holders of City National preferred stock are urged to consult their own tax advisors about the tax consequences of the exchange of City National preferred stock for New RBC Preferred Shares. For more information, see “The Merger—Material United States Federal Income Tax Consequences—The Merger—U.S. Holders of City National Preferred Stock”.

 

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THE CITY NATIONAL SPECIAL MEETING

This section contains information for holders of City National common stock about the special meeting that City National has called to allow its common stockholders to consider and approve the merger agreement. City National is mailing this proxy statement/prospectus to its common stockholders on or about April [], 2015. Together with this proxy statement/prospectus, City National is sending a notice of the City National special meeting and a form of proxy that City National’s board of directors is soliciting for use at the City National special meeting and at any adjournments or postponements of the City National special meeting.

This proxy statement/prospectus is also being furnished by RBC to common stockholders of City National as a prospectus in connection with the issuance of RBC common shares upon completion of the merger.

Time, Place and Purpose of the Special Meeting

This proxy statement/prospectus is being furnished to City National common stockholders as part of the solicitation of proxies by the City National board of directors for use at the special meeting to be held on May 27, 2015, at City National Plaza, 555 South Flower Street, Thirteenth Floor, Los Angeles, California 90071, local time, at 4:00 p.m., or at any postponement or adjournment thereof.

At the special meeting, City National stockholders will be asked to consider and vote upon the following proposals:

 

  1. a proposal to adopt the merger agreement (the “merger agreement proposal”);

 

  2. a proposal to approve, by advisory (non-binding) vote, certain compensation that may be paid or become payable to City National’s named executive officers in connection with the merger (the “merger-related compensation proposal”); and

 

  3. a proposal for adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement (the “adjournment proposal”).

Holders of City National preferred stock are not entitled to and are not being requested to vote on any of the proposals or otherwise at the City National special meeting.

Merger Agreement Proposal

City National common stockholders must adopt the merger agreement by approving the merger agreement proposal in order for the merger to occur. A copy of the merger agreement is attached as Appendix A to this proxy statement/prospectus, and you are encouraged to read the merger agreement carefully and in its entirety, as well as the other information in this proxy statement/prospectus.

Merger-Related Compensation Proposal

Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, City National is providing its common stockholders with a separate advisory (non-binding) vote to approve the merger-related compensation that may be paid or become payable to its named executive officers that is based on or otherwise relates to the merger, as described in the table in the section entitled “Interests of City National’s Directors and Executive Officers in the Merger—Quantification of Potential Payments and Benefits to City National’s Named Executive Officers in Connection with the Merger”, including the footnotes to the table and related narrative discussion.

Stockholders are being asked to approve the following resolution on an advisory (non-binding) basis:

RESOLVED, that the compensation that may be paid or become payable to City National’s named executive officers in connection with the merger, and the agreement or understandings pursuant to

 

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which such compensation may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in the table in the section entitled “Interests of City National’s Directors and Executive Officers in the Merger—Quantification of Potential Payments and Benefits to City National’s Named Executive Officers in Connection with the Merger”, including the footnotes to the table and the related narrative discussion, is hereby APPROVED.

The vote on the merger-related compensation proposal is advisory in nature and, therefore, is not binding on City National or on RBC or the boards of directors or the compensation committees of City National or RBC, regardless of whether the merger agreement proposal is approved.

Approval of this advisory (non-binding) proposal is not a condition to completion of the merger. If the merger is completed, the merger-related compensation may be paid to City National’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and arrangements, and the outcome of this advisory (non-binding) vote will not affect City National’s or RBC’s obligations to make these payments even if City National common stockholders do not approve, by advisory (non-binding) vote, this proposal.

The vote on the merger-related compensation proposal is separate from the vote to adopt the merger agreement. You may vote “AGAINST” the merger-related compensation proposal and “FOR” approval of the merger agreement proposal and vice versa. You also may abstain from this proposal and vote on the merger agreement proposal and vice versa.

Adjournment Proposal

City National common stockholders are being asked to grant authority to proxy holders to vote in favor of one or more adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement. If this proposal is approved, the special meeting could be successively adjourned to any date. In accordance with the City National by-laws, a vote on adjournment of the special meeting may be taken in the absence of a quorum. City National does not intend to call a vote on adjournment of the special meeting to solicit additional proxies if the merger agreement proposal is approved at the special meeting. Additionally, pursuant to the merger agreement, City National is only required to adjourn the special meeting to solicit additional proxies two times.

The approval of the adjournment proposal requires the affirmative vote of the holders of a majority of shares of City National common stock present in person or represented by proxy and entitled to vote thereon, whether or not a quorum is present.

Recommendations of the City National Board of Directors

The City National board of directors recommends that you vote “FOR” the merger agreement proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.

Record Date

City National has set the close of business on April 22, 2015 as the record date for the special meeting, and only holders of record of City National common stock on the record date are entitled to vote at the special meeting or any postponements or adjournments thereof. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of City National common stock, including shares in respect of City National restricted stock awards, as of the close of business on the record date. You will have one vote on all matters properly coming before the special meeting for each share of City National common stock that you owned as of the close of business on the record date.

As of the most recent practicable date, April 17, 2015, there were 55,605,013 shares of City National common stock outstanding and entitled to vote, held by 1,511 holders of record. As of April 13, 2015, the

 

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directors and executive officers of City National and their affiliates beneficially owned and were entitled to vote approximately 7,485,779 shares of City National common stock representing approximately 13.5% of the shares of City National common stock outstanding on that date. In connection with the merger agreement and the merger, the Goldsmith Parties have agreed to vote approximately 7,125,310 shares “FOR” the merger agreement proposal and “FOR” the adjournment proposal.

As of the most recent practicable date, April 17, 2015, RBC did not beneficially own any shares of City National’s common stock.

Quorum Required

The presence, in person or represented by proxy, of holders of a majority of the aggregate voting power of the issued and outstanding shares of City National common stock entitled to vote at the special meeting constitutes a quorum for the purposes of the special meeting.

Abstentions, which occur when you vote “ABSTAIN” with respect to one or more proposals, will be considered present for purposes of establishing a quorum.

Broker non-votes will also be considered present for purposes of establishing a quorum. Under the NYSE rule, banks, brokerage firms or other nominees who hold shares in “street name” for customers have the authority to vote on “routine” proposals when they have not received voting instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters such as the merger agreement proposal, the merger-related compensation proposal and the adjournment proposal. As a result, absent specific voting instructions from the beneficial owner of such shares of City National common stock, banks, brokerage firms and other nominees are not empowered to vote those shares of City National common stock on any of the proposals at the special meeting. A so-called “broker non-vote” results when banks, brokerage firms and other nominees return a valid proxy but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. Because all proposals at the City National special meeting are considered non-routine, the only way a broker non-vote would result is if you provide your bank, brokerage firm or other nominee with instructions on how to vote your shares with respect to one or more proposals but do not provide it with instructions on how to vote your shares with respect to at least one proposal.

Failures to vote will not be considered present for purposes of establishing a quorum.

Vote Required

The approval of the merger agreement proposal requires the affirmative vote of a majority of the outstanding shares of City National common stock entitled to vote thereon. Failures to vote, abstentions and broker non-votes will have the same effect as a voteAGAINSTthe approval of the merger agreement.

The approval of the merger-related compensation proposal requires the affirmative vote of the holders of a majority of shares of City National common stock present in person or represented by proxy and entitled to vote thereon; however, such vote is advisory (non-binding) only. If your shares of City National common stock are present at the special meeting but are not voted on the proposal, or if you vote to abstain on the proposal, each will have the effect of a vote “AGAINST” the merger-related compensation proposal. If you fail to submit a proxy and fail to attend the special meeting, or if you do not instruct your bank, brokerage firm or other nominee to vote your shares of City National common stock in favor of the proposal, your shares of City National common stock will not be voted, but this will not have an effect on the advisory (non-binding) vote to approve the merger-related compensation proposal except to the extent it results in there being insufficient shares present at the meeting to establish a quorum.

 

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The approval of the adjournment proposal requires the affirmative vote of the holders of a majority of shares of City National common stock present in person or represented by proxy and entitled to vote thereon, whether or not a quorum is present. If your shares of City National common stock are present at the special meeting but are not voted on the proposal, or if you vote to abstain on the proposal, each will have the effect of a vote “AGAINST” the adjournment proposal. If you fail to submit a proxy and fail to attend the special meeting or if your shares of City National common stock are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee to vote your shares of City National common stock, your shares of City National common stock will not be voted, but this will not have an effect on the approval of the adjournment proposal.

How to Vote

Stockholders of Record

If your shares of City National common stock are registered directly in your name with the transfer agent of City National, Computershare Trust Company, N.A., you are considered, with respect to those shares of City National common stock, the stockholder of record. If you are a stockholder of record, this proxy statement/prospectus and the enclosed proxy card have been sent directly to you by City National.

If you are a stockholder of record, you may have your shares of City National common stock voted on matters presented at the special meeting in the following ways:

 

    by touch-tone telephone or over the Internet, by accessing the telephone number or Internet website specified on the enclosed proxy card. The control number provided on your proxy card is designed to verify your identity when voting by telephone or by Internet. Proxies delivered over the Internet or by telephone must be submitted by 11:59 pm, Eastern Time, on the day before the special meeting. Please be aware that if you vote by telephone or over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible;

 

    by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope, which must be received before the shares are voted at the special meeting; or

 

    in person—you may attend the special meeting and cast your vote there. Attendance at the special meeting will not, in and of itself, constitute a vote or a revocation of a prior proxy, however.

Beneficial Holders

If your shares of City National common stock are held through a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares of City National common stock held in “street name”. In that case, this proxy statement/prospectus has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of City National common stock, the stockholder of record. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following their instructions for voting.

To vote your shares as a beneficial owner, you must follow the instructions received from your bank, brokerage firm or other nominee in order to have your shares of City National common stock voted. Those instructions will identify how to ensure that your shares are voted. Please note that if you are a beneficial owner and wish to vote in person at the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee at the special meeting.

Profit Sharing Plan Participants

If you are an employee participant that holds your shares of City National common stock through the City National Corporation Profit Sharing Plan (the “Profit Sharing Plan”), you will receive directions on how to submit your voting instructions from the trustee of such Profit Sharing Plan.

 

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To vote your shares as a participant in the Profit Sharing Plan, you must follow the instructions received from the trustee in order to have your shares of City National common stock held in such Profit Sharing Plan voted. For any City National shares you hold in the Profit Sharing Plan, the deadline for submitting your voting instructions is May 22, 2015, which, for administrative reasons, is earlier than the deadline for voting City National shares not held in the Profit Sharing Plan. If your voting instructions are not received by such deadline, your City National shares held in the Profit Sharing Plan will be voted in proportion to the way the other Profit Sharing Plan participants voted their shares.

Other Voting Instructions

Please refer to the instructions on your proxy or voting instruction card to determine the deadlines for voting over the Internet or by telephone. If you submit a proxy by mailing a proxy card, your proxy card should be mailed in the accompanying prepaid reply envelope, and your proxy card must be filed with the Secretary of City National by the time the special meeting begins. Please do not send in your stock certificates with your proxy card. When the merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the merger consideration in your elected form in exchange for your stock certificates.

If you vote by proxy, the individuals named on the enclosed proxy card (each of them, with full power of substitution) will vote your shares of City National common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of City National common stock should be voted “FOR” or “AGAINST” or to “ABSTAIN” from voting on all, some or none of the specific items of business to come before the special meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares of City National common stock should be voted on a matter, the shares of City National common stock represented by your properly signed proxy will be voted “FOR” the merger agreement proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.

If you hold your shares in more than one brokerage account, or if you hold your shares in multiple ways (as a record holder, beneficial holder and/or Profit Share Plan participant), you may have received more than one set of proxy materials. It is important that you return all proxy cards and voting instruction cards to make sure all your shares are voted.

If you have any questions or need assistance voting your shares, please contact Innisfree M&A Inc, City National’s proxy solicitor, at (888) 750-5834.

IT IS IMPORTANT THAT YOU VOTE YOUR SHARES OF CITY NATIONAL COMMON STOCK PROMPTLY.

Revocations

Stockholders of Record

If you are a stockholder of record, you may change your vote at any time before your shares are voted in any of the following ways:

 

    by voting via Internet or telephone at a later date (in which case only the later-submitted proxy will be counted and the earlier-submitted proxy will be revoked);

 

    by completing, signing, dating and returning a new proxy card, which must be received before the shares are voted at the special meeting (in which case only the later-submitted proxy will be counted and the earlier-submitted proxy will be revoked);

 

    by filing a timely written notice of revocation with the Corporate Secretary of City National at 555 South Flower Street, Los Angeles, California 90071; or

 

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    in person—you may attend the special meeting and cast your vote there (in which case any earlier-submitted proxy will be revoked). Attendance at the special meeting will not, in and of itself, constitute a vote or a revocation of a prior proxy.

Unless you decide to attend the meeting and vote your shares in person after you have submitted a prior proxy, we recommend that you revoke or amend your prior instructions in the same way you initially gave them—that is, by telephone, Internet or in writing. This will help to ensure that your shares are voted the way you have finally determined you wish them to be voted. If you revoke by mail or by using the telephone or Internet voting options, City National must receive the revocation before the special meeting begins. If you choose to revoke by mail, please make sure you have provided enough time for the replacement proxy to reach City National. Once the special meeting begins, you can only revoke your proxy in person. Once the polls close at the special meeting, the right to revoke ends.

Beneficial Holders

If you are a beneficial holder, you may change your vote by following the instructions provided to you by your bank, brokerage firm or other nominee and submit new voting instructions to such bank, brokerage firm or other nominee.

Profit Sharing Plan Participants

If you hold City National common stock through the Profit Sharing Plan, you must follow the instructions provided to you by the trustee of such Profit Sharing Plan and submit new voting instructions to such trustee. The deadline for such revocations is May 22, 2015. You will not be able to change your vote after this deadline.

Inspector of Election

City National has appointed Computershare Trust Company, N.A. to act as the inspector of election at the special meeting.

Results of the Special Meeting

The preliminary voting results will be announced at the City National special meeting. In addition, within four business days following certification of the final voting results, City National will file the final voting results with the SEC on Form 8-K.

Solicitation of Proxies; Payment of Solicitation Expenses

City National will pay for the proxy solicitation costs related to the City National special meeting, except that City National and RBC will share equally the costs and expenses of printing and mailing the proxy statement/prospectus and all filing and other fees paid to the SEC in connection with the merger.

City National has engaged Innisfree M&A Inc to act as its proxy solicitor and to assist in the solicitation of proxies for the special meeting. City National has agreed to pay such proxy solicitor approximately $25,000 plus reasonable out-of-pocket expenses for such services and also will indemnify it against certain claims, costs, damages, liabilities, judgments and expenses.

City National may reimburse banks, brokerage firms, other nominees or their respective agents for their expenses in forwarding proxy materials to beneficial owners of City National common stock.

City National’s directors, officers and employees also may solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

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Questions and Additional Information

If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of City National common stock or need additional copies of this proxy statement/prospectus or the enclosed proxy card, please contact Innisfree M&A Inc, City National’s proxy solicitor, by calling toll-free at (888) 750-5834.

 

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INFORMATION ABOUT THE COMPANIES

Royal Bank of Canada

Executive Offices

200 Bay Street

Royal Bank Plaza

Toronto, Ontario, M5J 2J5

Telephone: (416) 955-7806

Royal Bank of Canada and its subsidiaries operate under the master brand name of RBC. RBC is Canada’s largest bank, and one of the largest banks in the world, based on market capitalization. RBC is one of North America’s leading diversified financial services companies, and provides personal and commercial banking, wealth management, insurance, investor services and capital markets products and services on a global basis. RBC employs approximately 78,000 full- and part-time employees who serve more than 16 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 39 other countries. RBC operates through six reporting segments: Personal & Commercial Banking, Wealth Management, Insurance, Investor & Treasury Services, Capital Markets and Corporate Support.

RBC common shares trade under the symbol “RY” on the TSX and the NYSE.

Additional information about RBC can be found on its website at www.rbc.com. The information provided on RBC’s website (or any other website referenced herein) is not part of this proxy statement/prospectus and is not incorporated herein by reference.

Additional information about RBC and its subsidiaries is included in documents incorporated by reference into this document. For more information, see the section entitled “Where You Can Find More Information”.

RBC USA Holdco Corporation

200 Vesey Street

New York, New York 10281

Telephone: (212) 858-7216

RBC USA Holdco Corporation (“Holdco”), is a Delaware corporation and a direct wholly-owned subsidiary of RBC. Holdco is RBC’s top-level holding company in the United States and the direct or indirect owner of the majority of RBC’s U.S. business operations, including RBC Capital Markets, LLC and RBC Global Asset Management (U.S.) Inc.

City National Corporation

Executive Offices

City National Plaza

555 South Flower Street

Los Angeles, California 90071

Telephone: (213) 673-7700

City National Corporation (“City National”), a Delaware corporation organized in 1968, provides a wide range of banking, investment and trust services to its clients through its wholly-owned banking subsidiary, City National Bank, which has conducted business since 1954. City National provides comprehensive financial solutions and a premier banking and financial experience to affluent individuals, entrepreneurs, professionals, their businesses and their families. City National is headquartered in Los Angeles, California and operates through 75 offices, including 16 full- service regional centers in Southern California, the San Francisco Bay area,

 

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Nevada, New York City, Nashville, Tennessee and Atlanta, Georgia. City National employs approximately 3,600 full-time employees. At December 31, 2014, City National had consolidated total assets of $32.61 billion, total loan balances of $20.85 billion, total deposits of $28.11 billion, and assets under management or administration of $60.82 billion.

City National common stock trades under the symbol “CYN” on the NYSE.

Additional information about City National can be found on its website at www.cnb.com. The information provided on City National’s website is not part of this proxy statement/prospectus and is not incorporated herein by reference.

 

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THE MERGER

The following discussion contains material information about the merger and certain terms of the merger agreement. You should also read in its entirety the section entitled “The Merger Agreement” for a discussion of additional material information about the terms of the merger agreement. The discussion is subject to, and qualified in its entirety by reference to, the merger agreement, a copy of which is attached as Appendix A to this proxy statement/prospectus and incorporated herein by reference. We urge you to read carefully this entire proxy statement/prospectus, including the merger agreement, for a more complete understanding of the merger.

Terms of the Merger

Transaction Structure

RBC’s and City National’s boards of directors have approved the merger agreement. The merger agreement provides for the acquisition of City National by RBC through the merger of City National with and into Holdco, with Holdco continuing as the surviving entity. Upon completion of the merger, the separate corporate existence of City National will cease. City National Bank, which is currently a wholly-owned subsidiary of City National, will be a wholly-owned subsidiary of Holdco upon completion of the merger.

Merger Consideration

Under the terms and subject to the conditions of the merger agreement, at the effective time of the merger, each share of City National common stock, par value $1.00 per share, will be converted into the right to receive an amount of cash (referred to as “cash consideration”) or an amount of RBC common shares (referred to as “share consideration”) at the election of the holder, subject to proration and certain other adjustments and limitations as provided for in the merger agreement.

Each share of City National common stock that is converted into the right to receive cash consideration will receive an amount in cash equal to the “Per Share Amount”. The Per Share Amount will be calculated by dividing the “Closing Transaction Value” by the number of shares of City National common stock outstanding at completion of the merger. Subject to certain adjustments and limitations as set forth in the merger agreement, the Closing Transaction Value represents an aggregate value, calculated by adding (1) the aggregate cash included in the merger consideration ($94.50 multiplied by 50% of the number of shares of City National common stock outstanding at completion of the merger (subject to certain adjustments)) and (2) the aggregate number of RBC common shares included in the merger consideration (41,358,212, as increased based on increases in City National shares permitted to be issued following execution of the merger agreement and decreased by shares of City National, if any, cancelled in connection with the merger) multiplied by the volume weighted average RBC common share price for the ten trading days preceding the day of completion of the merger (the “VWAP”) (calculated using both NYSE and TSX volumes and the Bank of Canada daily noon Canada/U.S. exchange rate on each applicable day).

Each share of City National common stock that is converted into the right to receive share consideration will receive a number of RBC common shares equal to the Per Share Amount divided by the VWAP. RBC will not issue any fractional RBC common shares in the merger. Instead, a City National common stockholder who otherwise would have received a fraction of an RBC common share will receive an amount in cash, rounded to the nearest whole cent, which amount is based on the value of such fractional RBC common share valued at the VWAP.

Set forth below is a table showing a range of hypothetical VWAP amounts, and for each such VWAP (i) the corresponding amount of cash consideration that a City National common stockholder would receive per share of common stock converted into the right to receive the cash consideration and (ii) the corresponding amount of share consideration that a City National common stockholder would receive per City National share of common

 

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stock converted into the right to receive the share consideration. The table does not reflect the fact that cash will be paid instead of fractional shares or the effects of proration.

 

 

Hypothetical VWAP

(US$)

  

Share of City National
Common Stock Receiving
Cash Consideration

(cash in US$)

  

Share of City National
Common Stock Receiving
Share Consideration
(RBC common shares)

  

Value of Share
Consideration
(value based on VWAP)(2)

(US$)

$67.11

  

$97.51

  

1.4530

  

$97.51

$66.11

  

$96.76

  

1.4636

  

$96.76

$65.11

  

$96.01

  

1.4746

  

$96.01

   $64.11(1)

  

$95.26

  

1.4859

  

$95.26

$63.11

  

$94.51

  

1.4976

  

$94.51

$62.11

  

$93.76

  

1.5096

  

$93.76

$61.11

  

$93.02

  

1.5221

  

$93.02

 

(1) Reflects the VWAP assuming completion of the merger on April 20, 2015, which amount is calculated (in accordance with the merger agreement) based on the volume weighted average RBC common share price for the ten trading days prior to April 20, 2015, which is calculated using both NYSE and TSX volumes and the Bank of Canada daily noon Canada/U.S. exchange rate on each applicable day.
(2) The value of the share consideration received per share of City National common stock is based on the corresponding VWAP. The value of the share consideration at the time it is received will depend on the market price of RBC common shares at the time those RBC common shares are received (following completion of the merger), which market price will likely differ from the VWAP.

The examples above are illustrative only. The market prices of both RBC common shares and City National common stock will fluctuate before the completion of the merger, and the market price of RBC common shares may also fluctuate between the completion of the merger and the time you receive any RBC common shares. Accordingly, the actual VWAP, amount of cash consideration per City National share of common stock exchangeable for cash consideration and amount of share consideration per City National share of common stock exchangeable for share consideration will fluctuate, and those amounts as of the completion of the merger will likely vary from the illustrative examples provided above. You should obtain current stock price quotations for RBC common shares and City National common stock before you vote and before you make an election.

If you are a holder of City National common stock, regardless of whether you receive cash consideration or share consideration, or a mix of both, both the amount of and value of the merger consideration that you will receive will fluctuate based on the market price of RBC common shares. If you receive RBC common shares as all or a portion of your merger consideration, the value of such share consideration that you receive will depend on the market price of RBC common shares at the time you receive the RBC common shares (following completion of the merger). That market price will likely differ from the valuation of RBC common shares based on the VWAP, which is the value used to determine both the Per Share Amount and the amount of RBC common shares that a share of City National common stock will be converted into the right to receive if it is convertible into share consideration.

Elections by City National stockholders will be prorated and adjusted in accordance with the merger agreement, with the aggregate number of shares of City National common stock converted into the right to receive cash consideration and the aggregate number of shares of City National common stock converted into the right to receive share consideration determined in accordance with the formula and other provisions set forth in the merger agreement. The formula and other provisions set forth in the merger will be based on amounts that cannot be known until completion of the merger and will not take into account the elections made by City National stockholders. Under the merger agreement, the total number of shares of City National common stock that will be converted into the right to receive the share consideration, referred to as the “Stock Conversion

 

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Number”, is calculated by dividing (1) the aggregate number of RBC common shares included in the merger consideration (41,358,212, as increased based on increases in City National shares permitted to be issued following execution of the merger agreement and decreased by shares of City National, if any, cancelled in connection with the merger), by (2) the “Exchange Ratio”. The Exchange Ratio is determined by dividing the Per Share Amount by the VWAP. The total number of shares of City National common stock that will be converted into the right to receive the cash consideration, referred to as the “Cash Conversion Number”, is calculated by subtracting the Stock Conversion Number from the total number of shares of City National common stock converted into merger consideration upon completion of the merger.

Holders of City National common stock, even if they make a valid election, will not know or be able to calculate until after the completion of the merger whether and to what extent they will be subject to the proration and adjustment procedures described below, and consequently to what extent they will receive cash consideration and/or share consideration in accordance with their election. Any holder of City National common stock who does not make a valid election in his, her or its form of election will receive cash, RBC common shares or a mixture of cash and RBC common shares, based on what is available after giving effect to the valid elections made by other City National common stockholders, as well as the proration and adjustment described below. In addition, City National common stockholders may specify different elections with respect to different shares held by such stockholders (for example, a stockholder with 100 shares could make a cash election with respect to 50 shares and a stock election with respect to the other 50 shares).

Cash Election

The merger agreement provides that each City National common stockholder who makes a valid cash election will have the right to receive, in exchange for each share of City National common stock, subject to proration and adjustment as described below, an amount in cash equal to the Per Share Amount.

The Cash Conversion Number will be determined at completion of the merger and the calculation of the Cash Conversion Number does not take into account the elections made by City National common stockholders. The number of shares of City National common stock that will be converted into the right to receive cash consideration will be equal to, and will not exceed, the Cash Conversion Number. In the event that cash consideration is oversubscribed, which means that holders of City National common stock have made cash elections with respect to a number of their shares that in the aggregate exceeds the Cash Conversion Number, then the applicable pro rata portion of such cash election shares held by each such City National stockholder will instead be converted into the right to receive share consideration.

Even if a holder of City National common stock makes a valid cash election, such stockholder may nevertheless receive a mix of cash and share consideration. The allocation of the mix of consideration payable to City National stockholders in the merger will not be known until the completion of the merger or until a time after completion.

Stock Election

The merger agreement provides that each City National common stockholder who makes a valid stock election will have the right to receive, in exchange for each share of City National common stock, subject to proration and adjustment as described below, a number of RBC common shares equal to the Per Share Amount divided by the VWAP.

The Stock Conversion Number will be determined at completion of the merger and the calculation of the Stock Conversion Number does not take into account the elections made by City National common stockholders. The number of shares of City National common stock that will be converted into the right to receive share

 

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consideration will be equal to, and will not exceed, the Stock Conversion Number. In the event that share consideration is oversubscribed, which means that holders of City National common stock have made stock elections with respect to a number of their shares that in the aggregate exceeds the Stock Conversion Number, then the applicable pro rata portion of such stock election shares held by each such City National stockholder will instead be converted into the right to receive cash consideration.

Even if a holder of City National common stock makes a valid stock election, such stockholder may nevertheless receive a mix of cash and share consideration. The allocation of the mix of consideration payable to City National common stockholders in the merger will not be known until the completion of the merger or until a time after completion.

The shares of City National common stock held by the Goldsmith Parties, which as of April 17, 2015 represented approximately 13% of City National’s outstanding common stock, will be converted into the right to receive share consideration notwithstanding the proration and adjustment provisions in the merger agreement. The Goldsmith Parties are required under the voting agreement to, among other things, make a stock election in respect of all of their shares pursuant to the voting agreement with RBC, and (subject to certain exemptions) continue to hold 50% of the RBC common shares received for a three year period. See “The Voting Agreement”. Those stock elections will be taken into account on the same basis as valid stock elections by all other holders of City National common stock with respect to whether or not the share consideration is oversubscribed.

Non-Election

City National common stockholders who make no election to receive cash or RBC common shares in the merger, whose elections are not received by the exchange agent by the election deadline, or whose forms of election are improperly completed and/or are not signed, will be deemed not to have made an election. City National common stockholders not making an election may be paid in cash, RBC common shares or a mix of cash and RBC common shares depending on, and after giving effect to, the proration and adjustment procedures described below, the number of valid cash elections and stock elections that have been made by other City National common stockholders, and the number of shares held by City National common stockholders who have perfected and not lost their right to dissenters’ rights of appraisal in accordance with the procedures and requirements of Delaware law.

Adjustment on a Prorated Basis

The cash and stock elections are subject to proration and adjustment to ensure that the number of shares of City National common stock that are converted into the right to receive the share consideration is equal to the Stock Conversion Number, and that the number of shares of City National common stock that are converted into the right to receive the cash consideration is equal to the Cash Conversion Number. As a result, even if a City National common stockholder makes a cash election or stock election, such City National stockholder may nevertheless receive some share consideration or some cash consideration, respectively. The number of shares of City National common stock that will be converted into the right to receive cash consideration and the number of shares of City National common stock that will be converted into the right to receive share consideration in the merger are also subject to proration and adjustment to the extent necessary to enable RBC’s and City National’s respective tax counsel to render their opinions that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. The shares of City National common stock held by the Goldsmith Parties will not be entitled to elect the cash consideration and will be converted into the right to receive the share consideration without regard to the proration and adjustment provisions in the merger agreement. See “The Merger—Interests of City National’s Directors and Executive Officers in the Merger”.

 

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Proration Adjustment if Share Consideration is Oversubscribed

Cash consideration may be issued to City National common stockholders who make stock elections if the Stock Conversion Number is oversubscribed, which will occur if the number of such stock election shares exceeds the Stock Conversion Number. If the Stock Conversion Number is oversubscribed, then:

 

    a City National common stockholder making a cash election, no election or an invalid election will receive the cash consideration for each share of City National common stock as to which he, she or it made a cash election, no election or an invalid election;

 

    the Goldsmith Parties will receive share consideration for each share of City National common stock as to which they make a stock election (and the Goldsmith Parties have agreed to and are required to make a stock election for all of their shares pursuant to the voting agreement); and

 

    a City National common stockholder making a stock election, other than the Goldsmith Parties, will receive:

 

    the share consideration for a number of shares of City National common stock equal to the product obtained by multiplying (1) the number of shares of City National common stock for which such stockholder has made a stock election by (2) a fraction, the numerator of which is the Stock Conversion Number less the number of stock election shares held by the Goldsmith Parties (which will be the total number of shares held by the Goldsmith Parties at completion) and the denominator of which is the aggregate number of stock election shares less the number of stock election shares held by the Goldsmith Parties; and

 

    the cash consideration for the remaining shares of City National common stock for which such City National common stockholder made a stock election.

Proration Adjustment if Share Consideration is Undersubscribed

Share consideration (RBC common shares) may be issued to City National common stockholders who make cash elections if the Stock Conversion Number is undersubscribed, which will occur if the number of stock election shares is less than the Stock Conversion Number. The amount by which the number of stock election shares is less than the Stock Conversion Number is referred to herein as the “shortfall number”.

If the Stock Conversion Number is undersubscribed, then all City National common stockholders making a stock election will receive the share consideration for all shares of City National common stock as to which they made a stock election. City National common stockholders making a cash election, City National common stockholders who make no election and City National common stockholders who failed to make a valid election will receive cash and/or RBC common shares based in part on whether the shortfall number is less or greater than the number of the shares of City National common stock for which no elections are made or for which City National common stockholders failed to make a valid election, which are referred to as the “non-election shares”, as described below.

Scenario 1: shortfall number is less than or equal to the number of non-election shares. If the shortfall number is less than or equal to the number of non-election shares, then:

 

    a City National common stockholder making a stock election will receive the share consideration for each share of City National common stock as to which he, she or it made a stock election;

 

    a City National common stockholder making a cash election will receive the cash consideration for each share of City National common stock as to which he, she or it made a cash election; and

 

   

a City National common stockholder who made no election or who did not make a valid election with respect to any of his, her or its shares of City National common stock will receive (i) the share consideration in respect of the number of such holder’s non-election shares equal to the product of (x) the number of non-election shares held by such holder and (y) a fraction, the numerator of which is

 

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the shortfall number and the denominator of which is the total number of non-election shares, and (ii) the cash consideration in respect of such holder’s other non-election shares.

Scenario 2: shortfall number exceeds the number of non-election shares. If the shortfall number exceeds the number of non-election shares, then:

 

    a City National common stockholder making a stock election will receive the share consideration for each share of City National common stock as to which he, she or it made a stock election;

 

    a City National common stockholder who made no election or who has not made a valid election will receive the share consideration for each share of City National common stock for which he, she or it made no election or did not make a valid election; and

 

    a City National common stockholder making a cash election will receive:

 

    the cash consideration with respect to the number of shares of City National common stock equal to the product obtained by multiplying (1) the number of shares of City National common stock with respect to which such City National stockholder made a cash election by (2) a fraction, the numerator of which is equal to the amount by which the shortfall number exceeds the number of non-election shares and the denominator of which is equal to the total number of cash election shares; and

 

    share consideration with respect to the remaining shares of City National common stock held by such City National stockholder as to which he, she or it made a stock election.

Conversion of City National Common Stock; Exchange of Certificates; Elections as to Form of Consideration

The conversion of City National common stock into the right to receive the merger consideration will occur automatically upon completion of the merger. As soon as reasonably practicable after completion of the merger, an exchange agent will exchange certificates or book entry shares representing shares of City National common stock for merger consideration to be received by holders of City National common stock in the merger pursuant to the terms of the merger agreement.

Form of Election

The merger agreement provides that City National common stockholders will be provided with a form of election and other appropriate and customary transmittal materials. Each City National common stockholder will be sent an election form and transmittal materials after the City National special meeting. The mailing is expected to occur approximately 35 days prior to the anticipated closing date of the merger. Each form of election will allow the holder to make cash or stock elections or no elections. RBC and the exchange agent will also make available forms of election to each person who subsequently becomes a holder of City National common stock.

Holders of City National common stock who wish to elect the type of merger consideration they will receive in the merger should carefully review and follow the instructions set forth in the form of election. City National common stockholders who hold their shares in “street name” should follow their broker’s instructions for making an election with respect to such shares. Shares of City National common stock as to which the holder has not made a valid election prior to the election deadline set forth in the election form (currently expected to be the day that is 30 days after the mailing date described above), will be treated as though they had not made an election.

To make an election, a holder of City National common stock must submit a properly completed form of election so that it is actually received by the exchange agent at or prior to the election deadline in accordance with the instructions on the form of election. A form of election will be properly completed only if accompanied by certificates representing all certificated shares of City National common stock covered by the form of election

 

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(or appropriate evidence as to the loss, theft or destruction, appropriate evidence as to the ownership of that certificate by the claimant, and appropriate and customary indemnification, as described in the form of election), together with duly executed transmittal materials included in the form of election.

Generally, an election may be revoked or changed, but only by written notice received by the exchange agent prior to the election deadline. If an election is revoked and unless a subsequent properly executed form of election is actually received by the exchange agent at or prior to the election deadline, the holder having revoked the election will be deemed to have made no election with respect to his, her or its shares of City National common stock, and the exchange agent will return those certificates to the stockholder who submitted those certificates via first-class mail upon the holder’s request. If the merger agreement is terminated, and any certificates have been transmitted to the exchange agent, the exchange agent will return those certificates to the stockholder who submitted those certificates via first-class mail.

City National common stockholders will not be entitled to revoke or change their elections following the election deadline. As a result, City National common stockholders who have made elections will be unable to revoke their elections or sell their shares of City National common stock during the interval between the election deadline and the date of completion of the merger.

Shares of City National common stock as to which the holder has not made a valid election prior to the election deadline, including as a result of revocation, will be deemed non-election shares. If it is determined that any purported cash election or stock election was not properly made, the purported election will be deemed to be of no force or effect and the holder making the purported election will be deemed not to have made an election for these purposes, unless a proper election is subsequently made on a timely basis.

Letter of Transmittal

Soon after the completion of the merger, the exchange agent will send a letter of transmittal to only those persons who were City National common stockholders at the effective time of the merger and who have not previously submitted a form of election and properly surrendered shares of City National common stock to the exchange agent. This mailing will contain instructions on how to surrender shares of City National common stock (if these shares have not already been surrendered) in exchange for the merger consideration the holder is entitled to receive under the merger agreement. If a certificate for City National common stock has been lost, stolen or destroyed, the exchange agent will issue the consideration properly payable under the merger agreement upon receipt of appropriate evidence as to that loss, theft or destruction, appropriate evidence as to the ownership of that certificate by the claimant, and appropriate and customary indemnification.

Withholding

RBC is entitled to deduct and withhold, or cause the surviving entity (which is Holdco) or the exchange agent to deduct and withhold, from the cash portion of the aggregate merger consideration, any cash in lieu of fractional RBC common shares, cash dividends or distributions payable to any holder of City National common stock such amounts as it is required to deduct and withhold under any federal, state, local or foreign tax law. If any such amounts are withheld, these amounts will be treated for all purposes of the merger as having been paid to the City National common stockholders from whom they were withheld.

Dividends and Distributions

Until City National common stock certificates or book-entry shares are surrendered for exchange, any dividends or other distributions having a record date after the effective time of the merger with respect to the whole number of RBC common shares into which shares of City National common stock may have been converted will accrue but will not be paid. RBC will pay to former City National common stockholders any unpaid dividends or other distributions, without interest, only after they have duly surrendered their City National common stock certificates or book-entry shares. After the effective time of the merger, there will be no transfers

 

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on the stock transfer books of City National of any shares of City National common stock. If certificates representing shares of City National common stock are presented for transfer after the completion of the merger, they will be cancelled and exchanged for the merger consideration into which the shares of City National common stock represented by that certificate have been converted.

Dissenting Shares

Shares held by City National common stockholders who have perfected and not lost their right to dissenters’ rights of appraisal in accordance with the procedures and requirements of Delaware law will not be converted into the right to receive either cash consideration or share consideration, and such City National common stockholders will be entitled only to the rights granted by Delaware law. If any such City National stockholder withdraws or loses his, her or its right to dissent under Delaware law at or prior to the effective time of the merger, the shares of City National common stock held by such City National stockholder will be treated as non-election shares and converted into the right to receive the cash consideration, the share consideration or a mix of cash and share consideration.

Treatment of City National Preferred Stock

Under the terms and subject to the conditions of the merger agreement, upon completion of the merger (i) each share of City National’s 5.50% Non-Cumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, issued and outstanding immediately prior to completion of the merger will be converted into one share of RBC 5.50% Non-Cumulative Perpetual Preferred Shares, Series C-1(the “RBC Series C-1 Preferred Shares”), and (ii) each share of City National’s 6.750% Fixed Rate/Floating Rate Non-Cumulative Preferred Stock, Series D, par value $1.00 per share, issued and outstanding immediately prior to completion of the merger will be converted into one share of RBC 6.75% Fixed Rate/Floating Rate Non-Cumulative Preferred Shares, Series C-2 (the “RBC Series C-2 Preferred Shares”). The RBC Series C-1 Preferred Shares and the RBC Series C-2 Preferred Shares, referred to as the “New RBC Preferred Shares”, will have powers, preferences and special rights that are substantially similar to and not materially less favorable to the holder than the powers, preferences and special rights set out in the certificate of designations of the corresponding series of City National preferred stock.

Each outstanding share of City National preferred stock is presently represented by depositary shares, referred to as “City National Depositary Shares”, that are listed on the NYSE and represent a one-fortieth interest in a share of the corresponding series of City National preferred stock. Upon completion of the merger, RBC will assume the obligations of City National under (i) the Deposit Agreement, dated November 13, 2012 (as it may be amended from time to time), among City National, Computershare Trust Company, N.A. as depositary, Computershare Inc. and the holders from time to time of the Depositary Receipts (relating to the City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C) and (ii) the Deposit Agreement, dated November 7, 2013 (as it may be amended from time to time), among City National, Computershare Trust Company, N.A. as depositary, Computershare Inc. and the holders from time to time of the Depositary Receipts (relating to the City National 6.750% Fixed Rate/Floating Rate Non-Cumulative Preferred Stock, Series D). RBC will instruct Computershare Trust Company, N.A., referred to as the “Depositary”, as the depositary of the deposit agreements, referred to as the “Deposit Agreements”, to treat New RBC Preferred Shares received by it upon the cancellation of the shares of City National preferred stock as newly deposited securities under the applicable Deposit Agreement. In accordance with the terms of the relevant Deposit Agreement, the City National Depositary Shares will thereafter represent a one-fortieth interest in the relevant series of New RBC Preferred Shares. Such depositary shares will continue to be listed on the NYSE upon completion of the merger under a new name and will be traded under a new symbol.

Where appropriate, references in this proxy statement/prospectus to City National preferred stock and New RBC Preferred Shares shall also be considered to be references to the applicable depositary shares representing a one-fortieth interest in such City National preferred stock or such New RBC Preferred Shares, respectively.

 

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Existing holders of RBC preferred shares will continue to own their existing preferred shares, which will not be affected by the merger.

THE DEPOSITARY IS THE ONLY HOLDER OF RECORD OF SHARES OF CITY NATIONAL PREFERRED STOCK, WHICH ARE REPRESENTED BY DEPOSITARY SHARES. ALL HOLDERS OF CITY NATIONAL DEPOSITARY SHARES SHOULD FOLLOW THE INSTRUCTIONS GIVEN TO THEM BY THEIR BROKER.

CITY NATIONAL PREFERRED STOCKHOLDERS ARE NOT ENTITLED TO AND ARE NOT BEING REQUESTED TO VOTE ON THE MERGER OR ANY OTHER MATTER AT THE CITY NATIONAL SPECIAL MEETING. CITY NATIONAL PREFERRED STOCKHOLDERS DO NOT HAVE DISSENT RIGHTS IN CONNECTION WITH THE MERGER.

Background of the Merger

The board of directors of City National has periodically reviewed and discussed City National’s business, strategic direction, performance and prospects in the context of developments in the banking industry and the competitive landscape. Among other things, these discussions have included discussions about possible strategic directions available to City National, including, from time to time, hypothetical acquisitions or business combinations involving various other financial institutions.

RBC also regularly evaluates the potential acquisition of and holds discussions with various financial institutions. In the recent past, RBC has worked to expand its global wealth management footprint and invested significantly in its capital markets business, especially in the United States. As part of these efforts, in November of 2013, Dave McKay, at the time the Group Head, Personal and Commercial Banking, of RBC, arranged a meeting with Russell Goldsmith, City National’s Chief Executive Officer, at which Mr. McKay discussed RBC’s potential interest in a combination with City National. Mr. McKay and Mr. Goldsmith met and discussed their respective businesses generally. However, the meeting did not result in further discussions about a potential combination or transaction terms at that time.

In July 2014, Mr. McKay again contacted Mr. Goldsmith to arrange a meeting on July 29, 2014, at which meeting Mr. McKay—who had become the President and Chief Executive Officer elect of RBC since the prior meeting—told Mr. Goldsmith that he remained interested in a potential combination with City National. There was no discussion, however, of transaction terms. In late August, Mr. McKay followed up on this meeting by calling Mr. Goldsmith to inform him that RBC continued to consider a potential transaction, and that RBC was willing to express its potential interest in writing and would follow up with a non-binding indication of interest reflecting a cash and stock transaction with an implied value of approximately $90 per share. On September 3, 2014, Mr. McKay sent the non-binding indication to City National, together with a confidentiality agreement, and an offer to meet again in person to discuss RBC’s interest and engage in a discussion on strategy, culture, people and their respective organizations.

On September 10 and 11, 2014, Messrs. McKay and Goldsmith, together with additional representatives from each organization, met to discuss their respective organizations and the possibility of engaging in further discussions regarding a potential transaction. While Mr. Goldsmith informed Mr. McKay that he did not believe that the price indicated in the non-binding indication of interest was sufficient, Mr. Goldsmith indicated it might make sense to engage in further discussions to see if a transaction might be achievable that would be in the best interests of each organization.

As a result of these meetings and discussions, the parties and their representatives met again on September 23, 2014 to conduct limited high level due diligence. On the same day as the diligence meeting, the City National board met at a regularly scheduled dinner meeting and Mr. Goldsmith described the discussions and activities to date, and provided the board with a high level overview of RBC. On September 24, 2014, at the regularly scheduled board meeting, Mr. Goldsmith further updated the City National board on the due diligence meetings with RBC.

 

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During the month of October, representatives of City National and RBC, including Messrs. Goldsmith and McKay, continued to engage in periodic discussions. Among other things, these discussions concerned City National’s business model, compliance matters, financial position and prospects, as well as potential next steps for a potential transaction. In addition, Mr. McKay and Mr. Goldsmith discussed respective approaches to modeling the potential impact and future value contribution of City National to RBC. As a result of these discussions, Mr. McKay indicated a willingness to increase RBC’s indication of implied value to approximately $93 per share, to be paid in a combination of cash and stock, but Mr. Goldsmith responded that the price remained too low. During October and November 2014, each of Mr. McKay and Mr. Goldsmith periodically updated their respective boards of directors regarding the status of the discussions and developments, and were encouraged to continue to explore the possibility of a transaction. Diligence and valuation discussions continued through November.

On December 4, Mr. McKay proposed a further revised implied transaction value of $97 per share, with the actual value to be fixed at signing based on the volume weighted average price of RBC’s common shares for the period from December 4 through signing of a definitive agreement. Mr. McKay proposed that the merger consideration would be paid half in cash and half in stock, and the two CEOs discussed the Goldsmith Parties receiving all stock in the merger. The indicated price was subject to RBC’s completion of a comprehensive due diligence review. Mr. Goldsmith informed Mr. McKay that he would recommend the transaction to his board of directors at that price. Mr. Goldsmith and Mr. McKay also discussed the possibility of City National common stockholders having the ability to elect their preferred form of merger consideration, and the mechanism associated with such an election. Following the meeting, City National’s counsel, Wachtell, Lipton, Rosen & Katz, and RBC’s counsel, Sullivan & Cromwell LLP, discussed the mechanics of a cash/stock election mechanism, including the possibility of a “value equalization” feature designed to ensure that City National common stockholders receive comparable value as of the closing regardless of the form of consideration ultimately received. The following day, Mr. Goldsmith and Mr. McKay spoke to discuss planning next steps and coordination of diligence efforts.

Mr. Goldsmith updated the City National board at a special telephonic meeting held on December 9, and the board agreed that the parties should commence a comprehensive due diligence review and work towards a potential combination. Thereafter, each party brought in their respective diligence teams to conduct their diligence work. At about this time, RBC’s counsel provided City National’s counsel a draft merger agreement, and draft voting agreement for the Goldsmith Parties, and the parties began simultaneously to negotiate transaction documentation.

On December 17, 2014, the City National board of directors held a regular meeting attended by City National management, representatives of its financial advisors, BofA Merrill Lynch and Sandler O’Neill, and its legal counsel Wachtell Lipton. At the meeting, representatives of the financial advisors discussed with the board the potential opportunity with RBC and implied pricing; the Canadian economy and banking landscape; RBC’s businesses, performance, competitive positioning and valuation metrics, including views of analysts and rating agencies; and valuation metrics for City National. Wachtell Lipton discussed the City National board’s fiduciary duties under Delaware law, as well as the proposed terms of the transaction included in the draft merger agreement and voting agreement. The City National board agreed that management and its advisors should continue to work towards a potential transaction on the terms discussed.

Due diligence continued from late December into the first three weeks of January, 2015, and the parties worked to complete their due diligence reviews and negotiate the definitive transaction documentation. During this time, City National and RBC periodically updated their boards regarding the status of due diligence and negotiations. On January 16, Mr. McKay and Mr. Goldsmith spoke in an attempt to finalize the transaction pricing, with Mr. McKay noting that RBC would not be able to move forward at an implied valuation of $97 per share, but would be willing and able to move forward with a transaction at a lower valuation. Following further discussions, including a discussion of the recent significant decline in market prices in general and for RBC and City National specifically, as well as significant global reductions in energy prices that were affecting the U.S. and Canadian economies, Mr. McKay and Mr. Goldsmith agreed to recommend to their respective boards of

 

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directors revised pricing (based on the then current RBC trading price) of $94.50 per share, payable approximately half in cash and half in RBC common shares, with an agreed upon exchange ratio for the stock portion of the merger consideration based on that price, not subject to further adjustment for pre-announcement or post-announcement price fluctuations, other than as provided under the value equalization mechanism.

On January 20, the City National board held a special meeting. Mr. Goldsmith began the meeting with an update regarding the status of the transaction and a discussion of the revised pricing. Mr. Goldsmith noted that the pricing discussed at the December 17, 2014, board meeting had been based on a volume weighted average pricing concept that was expected to cover a fifteen-day period and that preceded full diligence. Mr. Goldsmith noted that as of January 16, the decline in RBC’s stock price meant that the original pricing concept would have yielded a price per share of $95.21, and that the new pricing of $94.50 included an agreed upon exchange ratio for the stock portion of the merger consideration that would not adjust based on pre-announcement price changes. Mr. Goldsmith further noted that the decline in RBC’s stock price meant that City National common stockholders would receive almost half a million additional RBC common shares in the transaction under the new pricing, and that the market premium on December 17 of approximately 23.22% (under the old pricing) was now 25.78% (under the new pricing). Representatives of City National’s financial advisors then discussed with the board, and answered questions regarding the impact of the recent decline in energy prices, the revised pricing, and also discussed with the board the Canadian economy, the recent market movements and RBC. Wachtell Lipton then updated the board regarding the board’s fiduciary duties and the status of legal matters. At this point in the meeting, Mr. McKay joined by telephone and spoke with the City National board about RBC and his continued enthusiasm for the potential combination of the two companies, discussed RBC’s strategic approach, and shared his perspective on the positive impact of the combination on City National’s investors, clients, colleagues and community. After Mr. McKay concluded his remarks and left the conference call, Mr. Goldsmith continued with the board meeting and noted that the Board would have the opportunity to further consider and discuss the transaction at the board’s regularly scheduled meeting the next day, and the board authorized City National management and legal advisors to prepare final draft transaction documents for the board’s consideration.

The next day, at its regularly scheduled January 21 board meeting, Mr. Goldsmith again updated the board regarding the discussions and negotiations with RBC. Mr. Goldsmith and members of senior management also described the due diligence process between the two institutions and summarized the results of City National’s due diligence of RBC. Representatives of BofA Merrill Lynch and Sandler O’Neill then reviewed with the board their financial analysis of the merger consideration, as more fully described below under the heading “—Opinions of City National’s Financial Advisors”, and each of the firms rendered to the City National board of directors its oral opinion that, as of that date and based on and subject to various assumptions, matters considered and limitations described in the opinion, the merger consideration was fair, from a financial point of view, to the holders of City National common stock. Wachtell Lipton then discussed with the City National board of directors the legal principles and standards applicable to its consideration of the proposed merger, described the material terms of the merger and voting agreements, as well as the proposed post-merger arrangements with Mr. Goldsmith and other senior executives. After discussion, and in light of the board’s review and consideration of the factors described under “—City National’s Reasons for the Merger; Recommendation of the City National Board of Directors”, the board unanimously determined that the merger and the other transactions contemplated by the merger agreement were advisable and in the best interests of City National and its common stockholders, and the board unanimously approved and adopted the merger and determined to recommend that City National common stockholders approve and adopt the merger agreement.

On January 21, RBC’s board of directors met with members of RBC’s management team and RBC’s financial and legal advisors to review and consider the proposed transaction. At the meeting, the RBC board approved the entry into a transaction with City National. The RBC board of directors then directed its management team to finalize and execute a definitive merger agreement on the terms reviewed at the board meeting.

On January 22, 2015, the parties entered into the merger agreement and the voting agreement, and publicly announced the merger the same day.

 

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City National’s Reasons for the Merger; Board Recommendation of the City National Board of Directors

After careful consideration, and in consultation with City National’s management and external financial and legal advisors, the City National board unanimously determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement were advisable, fair to and in the best interests of City National and its stockholders and approved and adopted the merger agreement, the merger and the other transactions contemplated by the merger agreement. Accordingly, the City National board unanimously recommended that its common stockholders approve and adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement.

The City National board considered a number of factors in determining to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, including the following material factors:

 

    the implied value of the merger consideration of $93.88 as of January 20, 2015 (the day prior to the board meeting at which the board approved the transaction) represented a premium of 26% to the closing price of City National common stock on the NYSE as of January 20, 2015 and was 2.57 times City National’s tangible book value per share as of January 20, 2015;

 

    the cash component of the transaction offers City National common stockholders the opportunity to realize cash for the value of their shares with immediate certainty of value;

 

    the stock component of the transaction offers City National common stockholders the opportunity to participate in the future growth and opportunities of the combined company, and the expected tax treatment of the merger as a “reorganization” for U.S. federal income tax purposes, such that receipt of share consideration (other than any cash in lieu of fractional shares) will generally be tax-free to City National’s common stockholders, as further described under “The Merger—Material United States Federal Income Tax Consequences”;

 

    the cash/stock election mechanism of the merger agreement, which offers City National common stockholders the opportunity to seek their preferred form of consideration, subject to proration, and with an equalization mechanic intended to ensure that common stockholders receive comparable value, as of the closing, regardless of the form of consideration ultimately received;

 

    the financial presentation of City National’s financial advisors, BofA Merrill Lynch and Sandler O’Neill, to the City National board on January 21, 2015, and the separate opinions of each such financial advisor delivered to the City National board, that as of such date and based on and subject to certain assumptions, procedures, qualifications and limitations, the merger consideration was fair, from a financial point of view, to City National’s common stockholders, as further described under “The Merger—Opinions of City National’s Financial Advisors”;

 

    the potential for City National’s common stockholders, as future RBC shareholders, to benefit to the extent of their interest in the combined company from the synergies of the merger and the anticipated pro forma impact of the merger discussed with the City National board, and the expectation that the merger will be accretive to RBC’s earnings per share (before amortization of intangibles) in the latter part of year three and accretive to earnings in year two;

 

    the view that the shared core values of City National and RBC, including both companies’ prudent risk culture, strong commitment to client service and focus on building solid client relationships, would assist in integration and operating the combined company post-closing to the benefit of City National common stockholders as future RBC shareholders;

 

    the belief that the merger would accelerate the accomplishment of a variety of key elements of City National’s strategic plan, promoting both continuity and growth and enabling City National’s team to maintain and even strengthen City National’s value proposition by drawing upon the combined company’s compatible competencies, talented employees and combined resources;

 

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    the City National board’s familiarity with and understanding of City National’s business, results of operations, asset quality, financial and market position and its expectations concerning City National’s future earnings and prospects;

 

    information and discussions regarding RBC’s business, results of operations, financial and market position and future earnings and prospects;

 

    the historical and current trading prices and volumes of each of City National’s common stock and RBC’s common shares, and the significantly higher current dividend yield of RBC common shares relative to City National common stock;

 

    the City National board’s familiarity with and understanding of the industries and the current and prospective environment in which each of City National and RBC operate, including foreign, domestic and local economic conditions, the interest rate environment, the competitive and regulatory environments for financial institutions generally, and the likely effect of these factors on City National both with and without the merger;

 

    the regulatory and other approvals required in connection with the merger, and the expectation that such approvals could be received in a reasonably timely manner and without the imposition of unacceptable conditions;

 

    the City National board’s ongoing evaluation, with the assistance of financial advisors, of strategic alternatives available to City National for maximizing value over the long term and the potential risks, rewards and uncertainties associated with such alternatives, and the City National board’s belief that the proposed merger with RBC was the best option available to City National common stockholders;

 

    the terms and conditions of the merger agreement and the course of negotiations of the merger agreement, including, among other things, the merger consideration election mechanic (see “The Merger—Terms of the Merger”), the ability of the City National board, under certain circumstances, to change its recommendation to City National stockholders regarding the merger (see “The Merger Agreement—Covenants and Agreements”), the conditions to closing (see “The Merger Agreement—Conditions to the Merger”), the ability of City National to terminate the merger agreement under certain circumstances (see “The Merger Agreement—Termination”), the possibility that City National would be required to pay a termination fee under certain circumstances, as well as the City National board’s belief that the termination fee is not likely to significantly deter another party from making a superior acquisition proposal (see “The Merger Agreement—Effect of Termination and Termination Fee”) and that City National’s common stockholders will have an opportunity to vote on the merger and that their approval is a condition to completion of the merger (see “The Merger Agreement—Conditions to the Merger”), and the terms of the merger agreement that restrict City National’s ability to solicit alternative transactions, as discussed under “The Merger Agreement—Covenants and Agreements”;

 

    the risk that the merger may not be consummated or that the closing may be unduly delayed, including as a result of factors outside either party’s control;

 

    the potential risk of diverting management attention and resources from the operation of City National’s business to the merger, and the possibility of employee attrition or adverse effects on client and business relationships as a result of the announcement and pendency of the merger;

 

    the potential risks and costs associated with successfully integrating City National’s business, operations and workforce with those of RBC, including the risk of not realizing all of the anticipated benefits of the merger or not realizing them in the expected timeframe; and

 

    the other risks described under the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements”.

In considering the recommendation of the City National board, you should be aware that certain directors and officers of City National may have interests in the merger that are different from, or in addition to, interests

 

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of stockholders of City National generally and may create potential conflicts of interest. The City National board was aware of these interests and considered them when evaluating and negotiating the merger agreement, the merger and the other transactions contemplated by the merger agreement, and in recommending to City National’s common stockholders that they vote in favor of the merger agreement proposal. See “The Merger—Interests of City National Directors and Executive Officers in the Merger”.

This discussion of the information and factors considered by the City National board includes the material factors considered by the City National board, but it is not intended to be exhaustive and may not include all the factors considered by the City National board. In view of the wide variety of factors considered, and the complexity of these matters, the City National board did not quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to adopt and approve the merger agreement, the merger and the other transactions contemplated by the merger agreement. Rather, the City National board viewed its position and recommendation as being based on the totality of the information presented to and factors considered by it, including discussions with, and questioning of, City National’s management and its financial and legal advisors. In addition, individual members of the City National board may have given differing weights to different factors. It should be noted that this explanation of the reasoning of the City National board and certain information presented in this section is forward-looking in nature and, therefore, that information should be read in light of the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements”.

For the reasons set forth above, the City National board of directors unanimously recommends that the City National common stockholders vote “FOR” the merger agreement proposal.

Opinions of City National’s Financial Advisors

On January 21, 2015, at a meeting of City National’s board of directors held to evaluate the merger, each of BofA Merrill Lynch and Sandler O’Neill delivered to City National’s board of directors an oral opinion, which was confirmed by delivery of separate written opinions dated January 21, 2015 from each of BofA Merrill Lynch and Sandler O’Neill, to the effect that, as of the date of such opinion and based on and subject to various assumptions and limitations described in such opinion, the merger consideration to be received by holders of City National common stock was fair, from a financial point of view, to such holders.

The full text of the written opinions of BofA Merrill Lynch and Sandler O’Neill to City National’s board of directors, which describe, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, are attached as Appendix C and Appendix D, respectively, to this document and are incorporated by reference herein in their entirety. The following summaries of the BofA Merrill Lynch opinion and the Sandler O’Neill opinion are qualified in their entirety by reference to the full text of each of the opinions. Each of BofA Merrill Lynch and Sandler O’Neill delivered its respective opinion to City National’s board of directors for the benefit and use of City National’s board of directors (in its capacity as such) in connection with and for purposes of its evaluation of the merger consideration from a financial point of view. Neither the BofA Merrill Lynch opinion nor the Sandler O’Neill opinion addresses any other aspect of the merger and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to City National or in which City National might engage or as to the underlying business decision of City National to proceed with or effect the merger. Neither the BofA Merrill Lynch opinion nor the Sandler O’Neill opinion addresses any other aspect of the merger and neither opinion constitutes a recommendation to any stockholder as to how to vote or act in connection with the proposed merger or any related matter.

Opinion of BofA Merrill Lynch

City National has retained BofA Merrill Lynch to act as a financial advisor to City National in connection with the merger. BofA Merrill Lynch is an internationally recognized investment banking firm which is regularly

 

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engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. City National selected BofA Merrill Lynch to act as a financial advisor to City National in connection with the merger on the basis of BofA Merrill Lynch’s experience in transactions similar to the merger, its reputation in the investment community and its familiarity with City National and its business.

In connection with rendering its opinion, BofA Merrill Lynch:

 

  (1) reviewed certain publicly available business, regulatory and financial information relating to City National and RBC;

 

  (2) reviewed certain internal financial and operating information with respect to the business, operations and prospects of City National furnished to or discussed with BofA Merrill Lynch by the management of City National, including certain financial forecasts relating to City National prepared by the management of City National, referred to herein as the “City National management forecasts”;

 

  (3) reviewed certain publicly available financial forecasts relating to RBC, referred to herein as the “RBC public forecasts”;

 

  (4) discussed the past and current business, operations, financial condition and prospects of City National with members of the senior managements of City National and RBC, and discussed the past and current business, operations, financial condition and prospects of RBC, including certain internal financial and operating information and financial forecasts prepared and furnished to BofA Merrill Lynch by the management of RBC, with members of the senior managements of City National and RBC;

 

  (5) reviewed the potential pro forma financial impact of the merger on the future financial performance of RBC, including the potential effect on RBC’s estimated earnings per share;

 

  (6) reviewed the trading histories for the City National common stock and the RBC common shares and a comparison of such trading histories with each other and with the trading histories of other companies BofA Merrill Lynch deemed relevant;

 

  (7) compared certain financial and stock market information of City National and RBC with similar information of other companies BofA Merrill Lynch deemed relevant;

 

  (8) compared certain financial terms of the merger to financial terms, to the extent publicly available, of other transactions BofA Merrill Lynch deemed relevant;

 

  (9) reviewed a draft, dated January 21, 2015, of the merger agreement; and

 

  (10) performed such other analyses and studies and considered such other information and factors as BofA Merrill Lynch deemed appropriate.

In arriving at its opinion, BofA Merrill Lynch assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with it and relied upon the assurances of the managements of City National and RBC that they were not aware of any facts or circumstances that would make such information or data inaccurate or misleading in any material respect. With respect to the City National management forecasts, BofA Merrill Lynch was advised by City National, and assumed, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of City National as to the future financial performance of City National. With respect to the RBC public forecasts, BofA Merrill Lynch was advised by City National management that they believed, and BofA Merrill Lynch assumed with City National’s consent, that the RBC public forecasts were a reasonable basis upon which to evaluate the future financial performance of RBC and, based on management of City National’s review and assessment of the future financial results reflected in the financial forecasts prepared and furnished to BofA Merrill Lynch by the management of RBC and the RBC public forecasts, BofA Merrill Lynch relied, at the direction of City National, on the RBC public forecasts for purposes of its opinion. BofA Merrill Lynch did not make and was not provided with any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of City National

 

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or RBC, nor did it make any physical inspection of the properties or assets of City National or RBC. BofA Merrill Lynch did not evaluate the solvency or fair value of City National or RBC under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. BofA Merrill Lynch assumed, at the direction of City National, that the merger would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the merger, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, would be imposed that would have an adverse effect on City National, RBC or the contemplated benefits of the merger. BofA Merrill Lynch also assumed, at the direction of City National, that the merger will qualify for federal income tax purposes as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. BofA Merrill Lynch also assumed, at the direction of City National, that the final executed merger agreement would not differ in any material respect from the draft merger agreement reviewed by BofA Merrill Lynch.

BofA Merrill Lynch expressed no view or opinion as to any terms or other aspects of the merger (other than the merger consideration to the extent expressly specified in its opinion), including, without limitation, the form or structure of the merger, the form of the merger consideration, the allocation of the merger consideration between the share consideration and the cash consideration, the amount or type of any consideration payable to any holder of preferred stock or other equity security of City National or any voting agreements entered into in connection with the transaction. BofA Merrill Lynch was not requested to, and it did not, solicit indications of interest or proposals from third parties regarding a possible acquisition of all or any part of City National or any alternative transaction. BofA Merrill Lynch’s opinion was limited to the fairness, from a financial point of view, of the merger consideration to be received by the holders of City National common stock and no opinion or view was expressed with respect to any consideration received in connection with the merger by the holders of any other class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any of the officers, directors or employees of any party to the merger, or class of such persons, relative to the merger consideration. Furthermore, no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to City National or in which City National might engage or as to the underlying business decision of City National to proceed with or effect the merger. BofA Merrill Lynch did not express any opinion as to what the value of RBC common shares actually would be when issued or the prices at which City National common stock or RBC common shares would trade at any time, including following announcement or consummation of the merger. In addition, BofA Merrill Lynch expressed no opinion or recommendation as to how any stockholder should vote or act in connection with the merger or any related matter. Except as described above, City National imposed no other limitations on the investigations made or procedures followed by BofA Merrill Lynch in rendering its opinion.

BofA Merrill Lynch’s opinion was necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to BofA Merrill Lynch as of, the date of its opinion. The credit, financial and stock markets have been experiencing unusual volatility and BofA Merrill Lynch expressed no opinion or view as to any potential effects of such volatility on City National, RBC or the transaction. It should be understood that subsequent developments may affect its opinion, and BofA Merrill Lynch does not have any obligation to update, revise or reaffirm its opinion. The issuance of BofA Merrill Lynch’s opinion was approved by BofA Merrill Lynch’s Americas Fairness Opinion Review Committee.

City National has agreed to pay BofA Merrill Lynch for its services in connection with the merger an aggregate fee of $12,500,000, a portion of which was payable in connection with its opinion and a significant portion of which is contingent upon the completion of the merger. City National also has agreed to reimburse BofA Merrill Lynch for its expenses incurred in connection with BofA Merrill Lynch’s engagement and to indemnify BofA Merrill Lynch, any controlling person of BofA Merrill Lynch and each of their respective directors, officers, employees, agents and affiliates against specified liabilities, including liabilities under the federal securities laws.

 

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BofA Merrill Lynch and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of their businesses, BofA Merrill Lynch and its affiliates invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in the equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of City National, RBC and certain of their respective affiliates.

BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide investment banking, commercial banking and other financial services to City National and certain of its affiliates and have received or in the future may receive compensation for the rendering of these services, including (i) having acted or acting as a lender under certain credit facilities of City National and certain of its affiliates, (ii) having acted as a book runner for a preferred stock offering of City National and (iii) having provided or providing certain equity, credit, distressed and derivatives trading services and products to City National.

In addition, BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide investment banking, commercial banking and other financial services to RBC and certain of its affiliates and have received or in the future may receive compensation for the rendering of these services, including (i) having acted or acting as a lender under certain credit facilities, letters of credit and leasing facilities of RBC and certain of its affiliates, (ii) having acted as manager for various debt offerings of RBC and certain of its affiliates, (iii) having provided or providing certain equity, credit, distressed, derivatives and foreign exchange trading services and products to RBC and (iv) having provided or providing certain treasury and management services and products to RBC.

Opinion of Sandler O’Neill

By letter dated January 21, 2015, City National retained Sandler O’Neill to act as a financial advisor to City National’s board of directors in connection with its consideration of a possible business combination involving City National and RBC. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

In connection with rendering its opinion dated January 21, 2015, Sandler O’Neill reviewed and considered, among other things:

 

    the merger agreement;

 

    certain publicly available financial statements and other historical financial information of City National that Sandler O’Neill deemed relevant;

 

    certain publicly available financial statements and other historical financial information of RBC that Sandler O’Neill deemed relevant;

 

    certain internal financial forecasts for City National for the years ending December 31, 2014 through December 31, 2016 and a long-term earnings estimate based on analysis of the impact of interest rate changes as discussed with senior management of City National;

 

    median publicly available analyst earnings estimates for RBC for the years ending December 31, 2014 through December 31, 2016 and a long-term earnings growth rate for the years thereafter as provided by senior management of RBC;

 

    certain estimated transaction costs, purchase accounting adjustments, expected cost savings and other synergies which were provided by RBC and its financial advisor;

 

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    a comparison of certain financial and other information, including stock trading information, for City National and RBC with similar publicly available information for certain other publicly traded commercial banks;

 

    the financial terms of certain other recent merger and acquisition transactions in the banking sector;

 

    the current market environment generally and the banking environment in particular; and

 

    such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler O’Neill considered relevant.

Sandler O’Neill also discussed with certain members of the senior management of City National the business, financial condition, results of operations and prospects of City National and held similar discussions with the senior management of RBC regarding the business, financial condition, results of operations and prospects of RBC.

In performing its review and analyses, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to it from public sources, that was provided to Sandler O’Neill by City National and RBC or their respective representatives or that was otherwise reviewed by Sandler O’Neill and Sandler O’Neill assumed such accuracy and completeness for purposes of preparing its opinion. Sandler O’Neill also received and used in its analyses certain projections of transaction costs, purchase accounting adjustments and expected cost savings which were prepared by and/or reviewed with senior management of RBC. Sandler O’Neill further relied on the assurances of senior management of each of City National and RBC that they were not aware of any facts or circumstances that would make any of such information inaccurate or misleading in any material respect. Sandler O’Neill was not asked to undertake, and did not undertake, an independent verification of any of such information and does not assume any responsibility or liability for the accuracy or completeness. Sandler O’Neill did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of City National or RBC or any of their respective subsidiaries, nor has it reviewed any individual credit files of City National or RBC. Sandler O’Neill also assumed that there was no material change in the respective assets, financial condition, results of operations, business or prospects of City National or RBC since the date of the most recent financial data made available to it as of the date of its opinion.

Sandler O’Neill assumed, with City National’s consent, that each of the parties to the merger agreement would comply with all material terms of the merger agreement and all related agreements, that all of the representations and warranties contained in such agreements were true and correct, that each of the parties to such agreements will perform all of the covenants required to be performed by such party under the agreements and that the conditions precedent in such agreements will not be waived. Sandler O’Neill also assumed that in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on City National and RBC. Sandler O’Neill also assumed the merger and any related transaction will be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Sandler O’Neill expressed no opinion as to any of the legal, accounting and tax matters relating to the merger and any other transactions contemplated in connection therewith.

Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O’Neill’s analyses do not necessarily reflect the value of City National’s common stock or the prices at which RBC’s common stock may be sold at any time.

City National has agreed to pay Sandler O’Neill for its services in connection with the merger an aggregate fee of $12,500,000, a portion of which was payable in connection with its opinion and a significant portion of which is contingent upon the completion of the merger. City National also has agreed to reimburse Sandler

 

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O’Neill for its expenses incurred in connection with its engagement and to indemnify Sandler O’Neill against specified liabilities, including liabilities under the federal securities laws. Within the past two years, Sandler O’Neill provided general investment banking services to City National for which Sandler O’Neill was paid approximately $65,000.

Sandler O’Neill is a full service securities firm engaged in securities and other brokerage activities. In the ordinary course of Sandler O’Neill’s business as a broker-dealer, it may purchase securities from and sell securities to City National and RBC and their affiliates. Sandler O’Neill may also actively trade the equity and debt securities of City National and RBC and their affiliates for its own account and for the accounts of its customers. In addition, Sandler O’Neill and its affiliates in the past have provided, currently are providing, and in the future may provide investment banking and other financial services to RBC and have received fees of approximately $1,800,000 in connection with these services over the previous two (2) years. Sandler O’Neill in the future may receive compensation for the rendering of these services.

Financial Analyses of City National’s Financial Advisors

The following represents a brief summary of the material financial analyses jointly presented by BofA Merrill Lynch and Sandler O’Neill to City National’s board of directors in connection with their respective opinions. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by BofA Merrill Lynch and Sandler O’Neill, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by BofA Merrill Lynch and Sandler O’Neill. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by BofA Merrill Lynch and Sandler O’Neill. For purposes of the financial analyses summarized below, (1) the term “January 20 Implied Total Consideration” refers to BofA Merrill Lynch’s and Sandler O’Neill’s calculation of the implied value of the per share merger consideration to be received by holders of City National common stock of $93.88, calculated on the basis as the sum of (i) $47.25 in cash and (ii) $46.63, the value of 1.4979 RBC common shares using the closing price of the RBC common shares on the NYSE on January 20, 2015 (the last trading day prior to the delivery of the financial advisors’ respective opinions) and (2) the term “Transaction Price” refers to BofA Merrill Lynch’s and Sandler O’Neill’s calculation of the implied value of the per share merger consideration to be received by holders of City National common stock of $94.50, calculated on the basis as the sum of (i) $47.25 in cash and (ii) $47.25, the value of 1.4979 RBC common shares using the closing price of the RBC common shares on the NYSE on January 16, 2015 (the last trading day prior to the date on which the exchange ratio was agreed to between City National and RBC).

City National Financial Analyses

Selected Publicly Traded Companies Analysis. BofA Merrill Lynch and Sandler O’Neill reviewed publicly available financial and stock market information for City National and the following 12 selected publicly traded banks and thrifts:

 

    First Niagara Financial Group, Inc.

 

    SVB Financial Group

 

    East West Bancorp, Inc.

 

    Signature Bank

 

    FirstMerit Corporation

 

    Umpqua Holdings Corporation

 

    Prosperity Bancshares, Inc.

 

    BankUnited, Inc.

 

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    UMB Financial Corp

 

    PacWest Bancorp

 

    F.N.B. Corporation

 

    IBERIABANK Corporation

BofA Merrill Lynch and Sandler O’Neill reviewed, among other things, per share equity values, based on closing stock prices on January 20, 2015, of the selected publicly traded companies as multiples of the selected companies’ tangible book value per share, commonly referred to as “TBV”, as of September 30, 2014 and estimated earnings per share, commonly referred to as “EPS”, for calendar years 2015 and 2016. BofA Merrill Lynch and Sandler O’Neill then applied September 30, 2014 TBV multiples of 1.5x to 2.0x derived from the selected publicly traded companies to City National’s September 30, 2014 TBV, applied calendar year 2015 EPS multiples of 11.1x to 15.1x derived from the selected publicly traded companies to City National’s calendar year 2015 estimated EPS and applied calendar year 2016 EPS multiples of 9.7x to 13.2x derived from the selected publicly traded companies to City National’s calendar year 2016 estimated EPS. Estimated financial data of the selected publicly traded companies were based on publicly available research analysts’ estimates, and estimated financial data of City National were based on the City National management forecasts. This analysis indicated the following approximate implied per share equity value reference ranges for City National, as compared to (i) the January 20 Implied Total Consideration and (ii) the Transaction Price:

 

Implied Per Share Equity Value Reference Ranges for

City National

  

January 20 Implied
Total Consideration

  

Transaction Price

9/30/2014 TBV

  

2015E EPS

  

2016E EPS

         
$54.10 - $73.19    $49.52 - $67.00    $56.79 - $76.83    $93.88    $94.50

No company used in this analysis is identical or directly comparable to City National. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which City National was compared.

Selected Precedent Transactions Analysis. BofA Merrill Lynch and Sandler O’Neill reviewed, to the extent publicly available, financial information relating to 63 selected transactions announced since January 1, 2000 (excluding transactions announced during 2008 and 2009) involving U.S. banks and thrifts and having announced transaction values of between $1 billion and $20 billion. Of the 63 selected transactions reviewed, the following 12 transactions announced since January 1, 2010 are referred to herein as the “post-2010 transactions”:

 

Acquiror

  

Target

•    BB&T Corporation

 

  

•    Susquehanna Bancshares, Inc.

 

•    CIT Group Inc.

 

  

•    IMB HoldCo LLC

 

•    Umpqua Holdings Corporation

 

  

•    Sterling Financial Corporation

 

•    PacWest Bancorp

 

  

•    CapitalSource Inc.

 

•    M&T Bank Corporation

 

•    Mitsubishi UFJ Financial Group, Inc.

 

•    The PNC Financial Services Group, Inc.

 

•    Capital One Financial Corporation

 

•    Comerica Incorporated

 

•    Hancock Holding Company

 

•    Bank of Montreal

 

•    First Niagara Financial Group, Inc.

  

•    Hudson City Bancorp, Inc.

 

•    Pacific Capital Bancorp

 

•    RBC Bank (USA)

 

•    ING Bank, fsb

 

•    Sterling Bancshares, Inc.

 

•    Whitney Holding Corporation

 

•    Marshall & Ilsley Corporation

 

•    NewAlliance Bancshares, Inc.

 

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BofA Merrill Lynch and Sandler O’Neill reviewed, among other things, per share transaction values, based on closing stock prices on the last trading day prior to the announcement of the transaction, of the target companies in the selected transactions as multiples of the target company’s TBV and estimated EPS for the next twelve months, commonly referred to as “NTM EPS”. BofA Merrill Lynch and Sandler O’Neill then applied TBV and NTM EPS multiples of 2.5x to 3.4x and 14.7x to 19.9x, respectively, derived from the 63 selected transactions to City National’s September 30, 2014 TBV and estimated NTM EPS. BofA Merrill Lynch and Sandler O’Neill also applied TBV and NTM EPS multiples of 1.4x to 1.9x and 16.2x to 21.9x, respectively, derived from the 12 post-2010 transactions to City National’s September 30, 2014 TBV and estimated NTM EPS. Estimated financial data of the selected transactions were based on publicly available information at the time of announcement of the relevant transaction. Estimated financial data of City National were based on the City National management forecasts. This analysis indicated the following approximate implied per share equity value reference ranges for City National, as compared to (i) the January 20 Implied Total Consideration and (ii) the Transaction Price:

 

Implied Per Share Equity Value Reference Ranges for City National

  

January 20 Implied
Total Consideration

  

Transaction Price

    

9/30/2014 TBV

  

NTM EPS

         

Overall

   $88.91 - $120.29    $59.90 - $81.05    $93.88    $94.50

Post-2010

   $50.12 - $67.81    $66.18 - $89.54      

No company, business or transaction used in this analysis is identical or directly comparable to City National or the merger. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the acquisition or other values of the companies, business segments or transactions to which City National and the merger were compared.

Dividend Discount Analysis. BofA Merrill Lynch and Sandler O’Neill performed a dividend discount analysis of City National to calculate the estimated present value of distributable cash flows City National was forecasted to generate during City National’s fiscal years 2015 through 2019 based on the City National management forecasts. BofA Merrill Lynch and Sandler O’Neill performed the dividend discount analysis using the two sets of projections included in the City National management forecasts, the first of which assumed that the forward federal funds rate would rise 170 basis points by year-end 2017 and remain flat through 2019, and the second of which assumed that the forward federal funds rate would rise 240 basis points through September 2018 and remain flat thereafter. BofA Merrill Lynch and Sandler O’Neill calculated terminal values for City National by applying terminal forward multiples of 12.5x to 14.5x to City National’s fiscal year 2020 estimated incremental earnings based on the City National management forecasts. The cash flows and terminal values were then discounted to present value as of August 1, 2015 using discount rates ranging from 9.3% to 11.8%, which were based on an estimate of City National’s cost of equity capital. This analysis indicated the following approximate implied per share equity value reference ranges for City National as compared to (i) the January 20 Implied Total Consideration and (ii) the Transaction Price:

 

Implied Per Share Equity Value

Reference Range for City National

  

January 20 Implied Total
Consideration

  

Transaction Price

+170bps Federal Funds
Assumption

  

+240bps Federal Funds
Assumption

         
$80.45 - $101.44    $89.47 - $112.78    $93.88    $94.50

RBC Financial Analysis

Selected Publicly Traded Companies Analysis. BofA Merrill Lynch and Sandler O’Neill reviewed publicly available financial and stock market information for RBC and the following five Canadian banks:

 

    Toronto-Dominion Bank

 

    Bank of Nova Scotia

 

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    Bank of Montreal

 

    Canadian Imperial Bank of Commerce

 

    National Bank of Canada

BofA Merrill Lynch and Sandler O’Neill reviewed, among other things, the closing stock prices of the selected publicly traded companies on January 20, 2015 as a multiple of TBV as of October 31, 2014 and estimated EPS for calendar years 2015 and 2016. BofA Merrill Lynch and Sandler O’Neill then compared these October 31, 2014 TBV multiples and estimated EPS multiples for calendar years 2015 and 2016 derived for the selected companies to corresponding data for RBC based on the closing price of RBC common shares on January 20, 2015. Estimated financial data of the selected publicly traded companies were based on publicly available research analysts’ estimates, and estimated financial data of RBC were based on the RBC public forecasts. This analysis indicated the following implied median multiples for the selected companies, as compared to corresponding multiples implied for RBC, based on the closing price of RBC common shares on January 20, 2015:

 

     Implied Median Multiples
for Selected Companies
     Implied Multiples for RBC Based
on Closing Stock Price on 1/20/2015
 

Equity Value as a Multiple of Estimated EPS:

     

Calendar Year 2015

     10.6x         11.0x   

Calendar Year 2016

     9.8x         10.2x   

Equity Value as a Multiple of 10/31/2014 TBV:

     2.22x         2.72x   

No company used in this analysis is identical or directly comparable to RBC. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which RBC was compared.

Other Factors

In rendering their respective opinions, BofA Merrill Lynch and Sandler O’Neill also reviewed and considered other factors, including:

 

    historical trading prices of City National common stock during the 52-week period ended January 20, 2015, which reflected low and high closing prices for City National common stock of approximately $67.35 and $82.34;

 

    the implied premium of the Transaction Price and the January 20 Implied Total Consideration to historical trading prices of City National common stock;

 

    historical trading prices of RBC common shares and the five Canadian banks listed above for the ten-year period ended January 20, 2015;

 

    historical closing prices of City National common stock and RBC common shares as multiples of their respective TBVs and NTM EPSs;

 

    the implied transaction multiples of City National’s TBV as of September 30, 2014, estimated TBV as of December 31, 2014 and estimated EPS for calendar years 2015, 2016 and 2017 based on the City National management forecasts;

 

   

the implied financial impact of the merger to the holders of City National common stock who will hold RBC common shares received as merger consideration following the merger, including the implied differences between the estimated TBV as of August 1, 2015, estimated EPS for calendar years 2015, 2016 and 2017 and estimated per-share dividend distributions (assuming the amount of such dividend

 

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distributions remain unchanged) for City National, based on the City National management forecasts, and those same financial metrics for the combined company (taking into account the pro forma financial impact of the merger), based on the City National management forecasts and the RBC public forecasts;

 

    certain operating metrics for RBC and the five Canadian banks listed above; and

 

    the relationship between movements in City National common stock and RBC common shares during the three-year period ended January 20, 2015.

Miscellaneous

As noted above, the discussion set forth above is a summary of the material financial analyses jointly presented by BofA Merrill Lynch and Sandler O’Neill to City National’s board of directors in connection with their respective opinions and is not a comprehensive description of all analyses undertaken by BofA Merrill Lynch or Sandler O’Neill in connection with their respective opinions. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. BofA Merrill Lynch and Sandler O’Neill believe that their analyses summarized above must be considered as a whole. BofA Merrill Lynch and Sandler O’Neill further believe that selecting portions of their analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying BofA Merrill Lynch’s and Sandler O’Neill’s respective analyses and opinions. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.

In performing their analyses, BofA Merrill Lynch and Sandler O’Neill considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of City National and RBC. The estimates of the future performance of City National and RBC in or underlying BofA Merrill Lynch’s and Sandler O’Neill’s analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by BofA Merrill Lynch’s and Sandler O’Neill’s analyses. These analyses were prepared solely as part of BofA Merrill Lynch’s and Sandler O’Neill’s analysis of the fairness, from a financial point of view, of the merger consideration and were provided to City National’s board of directors in connection with the delivery of the BofA Merrill Lynch opinion and the Sandler O’Neill opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be BofA Merrill Lynch’s and Sandler O’Neill’s view of the actual values of City National or RBC.

The type and amount of consideration payable in the merger was determined through negotiations between City National and RBC, rather than by any financial advisor, and was approved by City National’s board of directors. The decision to enter into the merger agreement was solely that of City National’s board of directors. As described above, BofA Merrill Lynch’s and Sandler O’Neill’s respective analyses and opinions were only one of many factors considered by City National’s board of directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of City National’s board of directors or management with respect to the merger or the merger consideration.

RBC’s Reasons for the Merger

At its meeting on January 21, 2015, the RBC board of directors approved the merger and authorized RBC management to enter into the merger agreement. In the course of making its decision to approve the merger, the

 

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RBC board of directors consulted with RBC’s management, as well as its financial advisors, RBC Capital Markets and JPMorgan, and considered a number of factors.

One of RBC’s strategic goals is to be a leading provider of wealth management solutions in key markets, including the U.S. City National brings strength in private banking and commercial banking that are complementary to RBC’s current wealth management activities in the U.S. and will enable RBC to deepen its relationships and breadth of service offering to high net worth and business owner clients and their businesses. City National operates in attractive geographies, services desirable clients, and offers products and services that are significantly aligned to RBC’s core competencies. RBC believes that City National’s proven business model and management team will provide a powerful foundation for future growth.

Management and Board of Directors of RBC After the Merger

Upon completion of the merger, the current directors and senior officers of RBC are expected to continue in their current positions, other than as may be publicly announced by RBC in the normal course.

Information about the current RBC directors and executive officers can be found in the documents listed under “Where You Can Find More Information”.

Interests of City National’s Directors and Executive Officers in the Merger

In considering the recommendation of City National’s board of directors that you vote to approve the merger agreement proposal, you should be aware that City National’s non-employee directors and executive officers have economic interests in the merger that are different from, or in addition to, those of City National’s stockholders generally. City National’s board of directors was aware of these interests and considered them, among other matters, in reaching its decisions to (i) approve the merger agreement and the transactions contemplated thereby and (ii) recommend that the stockholders of City National approve the merger agreement proposal. The transactions contemplated by the merger agreement will be a “change in control” for purposes of the City National compensation and benefit plans described below.

Certain Assumptions

Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:

 

    The relevant price per share of City National common stock is $88.82, which is the average closing price per share of City National’s common stock as quoted on the NYSE over the first five business days following the first public announcement of the merger on January 22, 2015;

 

    The effective time is March 5, 2015, which is the assumed date of the closing of the merger solely for purposes of the disclosure in this section; and

 

    Each executive officer of City National is terminated by City National without “cause” or resigns for “good reason” (as such terms are defined in the relevant City National plans and agreements as in effect on the date hereof), in either case immediately following the assumed effective time of March 5, 2015.

Equity Compensation

Treatment of Stock Options

At the effective time, each City National option, whether vested or unvested, that is outstanding immediately prior to the effective time (including any such option held by an executive officer) shall (i) if granted prior to the date of the merger agreement, become vested in full and (ii) whether granted prior to or after

 

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the date of the merger agreement, be converted automatically into an option to purchase, on the same terms and conditions as were applicable immediately prior to the effective time, the number of RBC common shares (rounded down to the nearest whole number of shares) equal to the product of (A) the number of shares of City National common stock subject to such option immediately prior to the effective time, multiplied by (B) the exchange ratio, at an exercise price per share equal to the quotient (rounded up to the nearest whole cent) obtained by dividing (1) the exercise price per share of City National common stock subject to such option immediately prior to the effective time, by (2) the exchange ratio.

Treatment of Restricted Stock

At the effective time, each award of restricted City National common stock that is outstanding immediately prior to the effective time (including any such award held by an executive officer) shall (i) if granted prior to the date of the merger agreement, fully vest and be cancelled and converted automatically into the right to receive, at the election of the holder of the award, either the stock consideration or the cash consideration, treating such award in the same manner as all other outstanding shares of City National common stock for such purposes or (ii) if granted after the date of the merger agreement, be converted into an award of restricted RBC common shares with the same terms and conditions as were applicable under such award immediately prior to the effective time, and relating to the number of RBC common shares equal to the product of the number of shares of City National common stock subject to such award immediately prior to the effective time, multiplied by the exchange ratio, with any fractional shares rounded to the next whole number of shares.

Treatment of Restricted Stock Units

At the effective time, each City National restricted stock unit award that is outstanding immediately prior to the effective time (including any such award held by an executive officer) shall (i) if granted prior to the date of the merger agreement (other than certain vested awards that provide for payment upon separation from service, as described below), vest (and with respect to any award that vests, in whole or in part, based on the achievement of a specified level of performance, the deemed value of such award will be determined in accordance with the terms of the applicable award agreement) and be cancelled and converted automatically into the right to receive, as soon as reasonably practicable after the effective time (or, if such award is subject to an irrevocable deferral election, at the time or times specified by such election), (A) if the terms of such award provide for settlement in cash, an amount in cash, without interest, equal to the cash consideration in respect of each share of City National common stock underlying such award or, if the terms of such award provide for settlement in shares of City National common stock, the stock consideration in respect of each share of City National common stock underlying such award, plus (B) an amount in cash equal to all accrued but unpaid dividend equivalents with respect to such award or (ii) if granted after the date of the merger agreement (or if granted prior to the date of the merger agreement on terms that provide for payment solely on a separation from service), be converted into a restricted stock unit award with the same terms and conditions as were applicable immediately prior to the effective time and relating to the number of RBC common shares equal to the product of the number of shares of City National common stock subject to such award immediately prior to the effective time, multiplied by the exchange ratio, with any fractional shares rounded to the next whole number of shares. With respect to the 2015 annual restricted stock unit award granted to Russell Goldsmith (whom we sometimes refer to in this section as the “CEO”), which will be converted into an RBC restricted stock unit award as described above, the applicable performance condition will be measured at the end of the 2015 calendar year except that, if the CEO’s employment is terminated without “cause” or for “good reason” after the effective time and prior to the end of the 2015 calendar year, such performance condition will be waived at the time of the termination of employment.

Treatment of Deferred Units

At the effective time, each deferred stock unit credited to an account that is deemed invested in City National common stock as of immediately prior to the effective time under City National Bank’s executive deferred compensation plan or director deferred compensation plan (together the “deferred compensation plans”)

 

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and the supplemental retirement benefit agreement with Russell Goldsmith, as amended, shall be deemed to be invested in RBC common shares, with the number of RBC common shares subject to the deferred stock units in a participant’s account as of the effective time to be equal to the product (rounded up to the nearest whole number of shares) of (i) the number of shares of City National common stock subject to such deferred stock units as of immediately prior to the effective time, and (ii) the exchange ratio. Following the effective time, the deferred compensation plans will otherwise continue to have the same terms, including payment terms and investment options, that were applicable immediately prior to the effective time, with the City National common stock fund to be replaced with an RBC common shares fund.

Cash Long-Term Incentive Awards

At the effective time, the CEO’s long-term cash incentive awards that remain outstanding as of immediately prior to the effective time shall be deemed earned at the level of performance specified in the applicable award agreements, which, (i) in the case of awards with goals based on earnings per share, is $1,500,000, (ii) in the case of awards granted prior to 2015 with goals based on total stockholder return, is $1,000,000, (iii) in the case of awards granted in 2015 with goals based on total stockholder return, is the greater of $1,000,000 (i.e., target value) and the value based on actual performance prior to effective time and (iv) in the case of awards granted in 2015 with goals based on a combination of operational metrics, is the greater of $1,325,000 (i.e., target value) and the value based on actual performance prior to the effective time.

See the section entitled “Interests of City National’s Directors and Executive Officers in the Merger—Quantification of Potential Payments and Benefits to City National’s Named Executive Officers in Connection with the Merger” for an estimate of the value of the unvested equity awards held by each of City National’s named executive officers that will become vested at the effective time and, in the case of the CEO, unvested cash long-term incentive awards that will become vested at the effective time or as a result of a qualifying termination thereafter. Based on the assumptions described above under “—Certain Assumptions”, (i) the estimated aggregate value of the unvested equity awards held by City National’s two executive officers who are not named executive officers that will become vested at the effective time is as follows: unvested City National options—$56,031; unvested City National restricted stock—$52,137; and unvested City National restricted stock units—$19,461. For more information on equity holdings of City National non-employee directors and executive officers, see the table entitled “Beneficial Ownership of City National Common Stock”.

Employment and Retention Agreements

Russell Goldsmith

In connection with the merger, the CEO entered into a new employment agreement with RBC, which will become effective, and supersede his employment agreements with City National, at the effective time.

RBC Employment Agreement with Russell Goldsmith. The new employment agreement between RBC and the CEO provides for his continued service as Chairman and Chief Executive Officer of City National Bank for a term of three years following the closing date (with an option for the CEO to serve, at his election, solely as Chairman during the third year). Under the agreement, with respect to City National’s fiscal year 2015, the CEO will be eligible to receive annual incentive compensation and long-term incentive awards in accordance with the award opportunities previously established by City National, and from and after November 1, 2015, with respect to each fiscal year of RBC, the CEO will have an annual base salary of $1,000,000 (which may be increased but not decreased) and annual variable incentive compensation with a target value of $5,300,000. The agreement provides that an amount equal to $8,085,000 (the amount of cash severance that the CEO would have been entitled to receive under his employment agreements with City National upon a termination of employment without “cause” or for “good reason” following a change in control) shall be credited to a deferred compensation account for the CEO’s benefit and shall be paid to the CEO upon his future separation from service for any reason. Further, the agreement provides that the CEO’s long-term cash incentive awards granted prior to 2015

 

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that remain outstanding as of immediately prior to the effective time, which are deemed earned as of the effective time as described above under “—Cash Long-Term Incentive Awards”, will become non-forfeitable in full as of the effective time.

If the CEO’s employment is terminated without “cause” or for “good reason” (as such terms are defined in the new employment agreement) during the term of the new employment agreement, he will be entitled to receive (i) payment of annual target variable compensation, prorated for the applicable fiscal year and paid 50% within 30 days of termination and 50% on the third anniversary of termination, (ii) subject to his execution and the effectiveness of a general release of claims, cash severance equal to the product of (x) the sum of the annual base salary and annual target variable compensation and (y) a fraction, the numerator of which is the number of days from the date of termination until the expiration of the term and the denominator of which is 365, (iii) full accelerated vesting of outstanding equity awards (with any applicable performance goals deemed to be achieved at the greater of target level and the actual level of performance through the date of termination) and long-term cash incentive awards, and (iv) certain other severance benefits. If such termination of employment occurs during the first year following the effective time, then the CEO will be entitled to receive a gross-up for any excise tax imposed on the payments and benefits to the CEO in connection with the change in control and his termination of employment by reason of Sections 4999 and 280G of the U.S. Internal Revenue Code, and, in all other cases, the provisions of the CEO employment agreements regarding the treatment of such excise tax (as described below) will continue to apply.

The CEO has also entered into a restrictive covenant agreement with RBC in his capacity as a selling stockholder of City National, and such agreement includes a 12-month post-termination employee and customer non-solicit covenant and a 4-year post-closing non-compete covenant.

Superseded City National Employment Agreements with Russell Goldsmith. The CEO is party to two employment agreements with City National which we refer to collectively as the “CEO employment agreements”. Read together, the CEO employment agreements set forth the CEO’s employment terms following a change in control. As described above the CEO employment agreements will be superseded by the new employment agreement that the CEO has entered into with RBC when it becomes effective at the effective time.

Under the CEO employment agreements, upon a termination of the CEO’s employment without “cause” or for “good reason” following a change in control, the CEO would be entitled to the following payments and benefits under the CEO employment agreements: (i) lump sum payment of his annual base salary through the date of termination to the extent not already paid and a pro rata portion of his target annual bonus based on the days remaining in the year of termination; (ii) lump sum payment equal to three times his annual base salary; (iii) lump sum payment equal to three times his target annual bonus; (iv) an amount equal to the contributions to the City National profit sharing plan that would have been made by City National had his employment continued for three more years, measured based on the greatest amount contributed by City National during the three years prior to termination; (v) healthcare benefits for three years; (vi) outplacement services; (vii) office space and secretarial support for five years (which benefit is provided to the CEO on any termination of employment other than for “cause” or due to death) and (viii) full accelerated vesting of all of his outstanding equity awards (with all stock options, including those that vest as a result of the termination of employment, remaining outstanding until the expiration of their terms) and long-term cash incentive awards.

The CEO employment agreements provide that if the payments and benefits to the CEO in connection with a change in control would be subject to an excise tax by reason of Sections 4999 and 280G of the U.S. Internal Revenue Code, the payments and benefits under the CEO employment agreements will be reduced to the extent necessary to prevent any portion of the CEO’s change in control-related payments and benefits from becoming subject to such excise tax, but only if, by reason of that reduction, the net after-tax benefit received by the CEO exceeds the net after-tax benefit that the CEO would receive if no reduction was made.

 

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Retention Arrangements with Christopher J. Warmuth, Christopher J. Carey and Brian Fitzmaurice

In connection with the merger, Christopher J. Warmuth and Brian Fitzmaurice have entered into retention arrangements with RBC, and RBC and Christopher J. Carey intend to enter into a retention arrangement, each of which will become effective, and supersede their rights under the CIC Plans (as defined below), at the effective time. These arrangements set forth the terms and conditions of employment for Messrs. Warmuth, Carey and Fitzmaurice following the effective time, including title, reporting relationship and place of performance, initial annual base salary ($650,000 for Mr. Warmuth, $615,000 for Mr. Carey and $500,000 for Mr. Fitzmaurice), annual target bonus opportunity (125% of base salary for Messrs. Warmuth and Carey and 100% of base salary for Mr. Fitzmaurice) and terms of annual bonuses, annual long-term incentive award opportunities (for City National’s fiscal year ending December 31, 2015, consistent with the opportunity previously established for Messrs. Warmuth, Carey and Fitzmaurice by City National and for subsequent fiscal years, $1,150,000 in grant date fair value at maximum for Mr. Warmuth, $1,000,000 in grant date fair value at maximum for Mr. Carey and $325,000 in grant date fair value at maximum for Mr. Fitzmaurice) and terms of annual long-term incentive awards.

The retention arrangements further provide that Messrs. Warmuth, Carey and Fitzmaurice shall waive their rights to receive cash severance pursuant to the applicable CIC Plan upon a termination without “cause” or for “good reason” (as such terms are defined under the retention arrangements) and shall instead be entitled to receive (i) a lump sum cash payment ($1 million for Mr. Warmuth, $965,000 for Mr. Carey and $450,000 for Mr. Fitzmaurice) as soon as reasonable practicable following the effective time and (ii) a cash retention award (with a grant date value of $6,000,000 for Mr. Warmuth, $5,790,000 for Mr. Carey and $2,550,000 for Mr. Fitzmaurice) which vests in three installments on the first, second and third anniversaries of the effective time, subject to continued employment through each such date. Upon a termination of Mr. Warmuth’s, Mr. Carey’s or Mr. Fitzmaurice’s employment without “cause” or for “good reason” (x) on or prior to the second anniversary of the effective time, the unvested portion of the retention award that otherwise would have vested on the first and second anniversaries of the effective time will vest in full as of the termination date or (y) after the second anniversary of the effective time but on or prior to the third anniversary of the effective time, any unvested portion of the retention award that otherwise would have vested on the third anniversary of the effective time will vest pro-rata as of the termination date based on a fraction, the numerator of which is the number of days elapsed between the effective time and the executive’s termination date, and the denominator of which is the total number of days between the effective time and the third anniversary of the effective time.

Pursuant to the retention arrangements, Messrs. Warmuth, Carey and Fitzmaurice will be bound by employee and customer non-solicit provisions which apply during employment and for one year thereafter.

Leadership Awards for Other Executive Officers

City National and RBC expect to offer a leadership award to Olga Tsokova in the form of RBC restricted share units with a grant date value equal to $155,000, which award will vest at the end of a three-year vesting period subject to continued employment. City National and/or RBC may enter into an employment arrangement and/or leadership award for Michael B. Cahill under mutually agreeable terms, but no such arrangement or award has been agreed as of the date of this proxy statement/prospectus.

Amendment to Bram Goldsmith Employment Agreement

City National has extended the term of the employment agreement with Bram Goldsmith through the second anniversary of the effective time. Such extension shall provide that the cash severance payment in the amount of $1,500,000 to which Bram Goldsmith would be entitled on a termination without cause or for good reason under the S&P Plan (as defined below) shall become fully vested at the effective time and be paid as soon as practicable thereafter.

 

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Change in Control Severance Plans

City National maintains three change in control severance plans in which its executive officers, other than the CEO, participate. The Strategy & Planning Committee Change in Control Severance Plan (“S&P Plan”) applies to Christopher J. Carey, Christopher J. Warmuth and Bram Goldsmith, the Executive Committee Change in Control Severance Plan (and together with the S&P Plan, the “CIC Plans”) applies to Brian Fitzmaurice and Michael B. Cahill and the Senior Officer Change in Control Severance Pay Plan (the “Senior Officer Plan”) applies to Olga Tsokova. As described above, with respect to each of Messrs. Warmuth, Carey and Fitzmaurice, their participation in, and rights under, the CIC Plans will be superseded by the retention arrangements that each executive has entered into with RBC, or in the case of Mr. Carey, intends to enter into with RBC, when those arrangements become effective at the effective time.

Pursuant to the CIC Plans, upon a termination of employment without “cause” or for “good reason” (including a voluntary termination of employment during the 30-day period immediately preceding the first anniversary of the effective time) within 12 months following the effective time, the participating executive officers will be entitled to receive: (i) a lump sum payment of the executive officer’s base salary through the date of termination to the extent not already paid and a pro rata portion of the highest annual bonus paid to the executive officer in the prior three years for the year in which termination occurs; (ii) a lump sum payment of three times (two times for Messrs. Cahill and Fitzmaurice) base salary and annual bonus, with the basis for the salary payout being 12 times the highest monthly base salary previously paid to the executive officer, and the basis for the bonus payout being the highest annual bonus paid to the executive officer in the prior three years; (iii) an amount equal to contributions to the City National profit sharing plan that would have been made by City National had the executive officer’s employment continued for three more years (two years for Messrs. Cahill and Fitzmaurice), measured based on the greatest amount contributed by City National during the three years prior to termination; (iv) healthcare benefits for three years (two years for Messrs. Cahill and Fitzmaurice); and (v) outplacement services. The CIC Plans provide for a gross-up of the excise tax imposed on the payments and benefits to an executive officer in connection with a change in control by reason of Sections 4999 and 280G of the U.S. Internal Revenue Code.

Pursuant to the Senior Officer Plan, upon a termination of employment without “cause” or for “good reason” within 12 months following the effective time, Ms. Tsokova will be entitled to receive: (i) a lump sum payment of base salary through the date of termination to the extent not already paid; (ii) a lump sum payment of one times base salary and annual bonus, with the basis for the salary payout being 12 times the highest monthly base salary previously paid to Ms. Tsokova in the one-year period immediately preceding the month in which the effective time occurs, and the basis for the bonus payout being the average of Ms. Tsokova’s annual bonus in the three calendar years immediately preceding the effective time; and (iii) healthcare benefits for one year. The Senior Officer Plan provides that if the payments and benefits to Ms. Tsokova in connection with a change in control would be subject to an excise tax by reason of Sections 4999 and 280G of the U.S. Internal Revenue Code, the payments and benefits under the Senior Officer Plan will be reduced to the extent necessary to prevent any portion of Ms. Tsokova’s change in control-related payments and benefits from becoming subject to such excise tax, but only if, by reason of that reduction, the net after-tax benefit received by Ms. Tsokova exceeds the net after-tax benefit that Ms. Tsokova would receive if no reduction was made.

See the section entitled “Interests of City National’s Directors and Executive Officers in the Merger—Quantification of Potential Payments and Benefits to City National’s Named Executive Officers in Connection with the Merger” for an estimate of the value of the severance benefits payable to City National’s named executive officers upon a qualifying termination following the effective time. Based on the assumptions described above under “—Certain Assumptions”, the estimated aggregate cash severance payable to City National’s two executive officers who are not named executive officers upon a qualifying termination following the effective time is $1,946,025.

Indemnification and Insurance

Pursuant to the terms of the merger agreement, City National non-employee directors and executive officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance

 

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policies following the merger. Such indemnification and insurance coverage is further described in the section entitled “The Merger Agreement—Covenants and Agreements—Indemnification and Directors’ and Officers’ Insurance”.

Quantification of Potential Payments and Benefits to City National’s Named Executive Officers in Connection with the Merger

The information set forth in the table below is intended to comply with Item 402(t) of the SEC’s Regulation S-K, which requires disclosure of information about certain compensation for each “named executive officer” of City National that is based on, or otherwise relates to, the merger (“merger-related compensation”). As described under the caption “Interests of City National’s Directors and Executive Officers in the Merger” above, the CEO and Messrs. Warmuth and Fitzmaurice have entered into new employment arrangements with RBC, and RBC and Mr. Carey intend to enter into a new employment arrangement, in each case that will become effective upon the closing of the merger. The merger-related compensation described below is based on each named executive officer’s employment arrangements with City National and does not include amounts payable under the new employment arrangements with RBC following the closing of the merger (including (i) post-closing salary, annual incentive compensation, retention awards and other compensation and benefits to be provided under the CEO’s new employment agreement with RBC and the retention arrangements between RBC and Messrs. Warmuth, Carey and Fitzmaurice, (ii) severance payable to the CEO upon a qualifying termination after the effective time pursuant to his new employment agreement with RBC, and (iii) the excise tax gross-up payable to the CEO in limited circumstances under the terms of his new employment agreement with RBC). For additional details regarding the terms of the payments and benefits that the CEO and Messrs. Warmuth, Carey and Fitzmaurice will be entitled to receive under their new employment arrangements with RBC, as well as terms of the payments and benefits described below, see the discussion under the caption “Interests of City National’s Directors and Executive Officers in the Merger” above.

The amounts shown in the table below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described below and in the footnotes to the table, and do not reflect certain compensation actions that may occur before completion of the merger. For purposes of calculating such amounts, the following assumptions were used:

 

    The relevant price per share of City National common stock is $88.82, which is the average closing price per share of City National’s common stock as quoted on the NYSE over the first five business days following the first public announcement of the merger on January 22, 2015;

 

    The effective time is March 5, 2015, which is the assumed date of the closing of the merger solely for purposes of this merger-related compensation disclosure; and

 

    Each named executive officer of City National is terminated by City National without “cause” or resigns for “good reason” (as such terms are defined in the relevant City National plans and agreements as in effect on the date hereof), in either case immediately following the assumed effective time of March 5, 2015.

 

Named Executive Officer    Cash ($)(1)      Equity($)(2)      Perquisites /
Benefits($)(3)
     Tax
Reimbursement
($)(4)
     Total ($)  

Russell Goldsmith

     16,147,664         7,161,177         53,337         N/A         23,362,178   

Christopher J. Warmuth

     5,332,883         5,674,090         77,952         3,440,652         14,525,577   

Christopher J. Carey

     5,060,253         5,343,673         63,915         3,279,722         13,747,563   

Brian Fitzmaurice

     2,307,995         1,824,473         50,889         N/A         4,183,357   

Michael B. Cahill

     2,299,680         2,449,677         42,117         N/A         4,791,474   

 

(1)

Cash. Consists of (a) with respect to the CEO, (i) payment of all outstanding long-term cash incentive awards held by the CEO (estimated amount $7,700,000); (ii) lump sum payment equal to a pro rata portion of his target annual bonus based on the days remaining in the year of termination; (iii) lump sum payment equal to three times his annual base salary; (iv) lump sum payment equal to three times his target annual bonus; and (v) an amount equal to the contributions to the City National profit sharing plan that would have

 

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  been made by City National had his employment continued for three more years, measured based on the greatest amount contributed by City National during the three years prior to termination; and (b) with respect to the named executive officers other than the CEO, (i) a lump sum payment of base salary through the date of termination to the extent not already paid and a pro rata portion of the highest annual bonus paid in the prior three years for the year in which termination occurs; (ii) a lump sum payment of three times (two times for Messrs. Cahill and Fitzmaurice) base salary and annual bonus, with the basis for the salary payout being 12 times the highest monthly base salary previously paid, and the basis for the bonus payout being the highest annual bonus paid in the prior three years; and (iii) an amount equal to contributions to the City National profit sharing plan that would have been made by City National had the named executive officer’s employment continued for three more years (two years for Messrs. Cahill and Fitzmaurice), measured based on the greatest amount contributed by City National during the three years prior to termination. All such amounts are “double trigger” and payable only upon a qualifying termination of employment following the effective time (including, with respect to all named executive officers other than the CEO, a voluntary termination of employment during the 30-day period immediately preceding the first anniversary of the effective time). The estimated amount of such payments is shown in the following table:

 

Named Executive Officer    Severance ($)      Prorated Bonus
($)
     Profit Sharing
Contributions ($)
     Total ($)  

Russell Goldsmith

     8,085,000         296,014         66,650         8,447,664   

Christopher J. Warmuth

     5,085,000         181,233         66,650         5,332,883   

Christopher J. Carey

     4,821,000         172,603         66,650         5,060,253   

Brian Fitzmaurice

     2,160,000         103,562         44,433         2,307,995   

Michael B. Cahill

     2,156,000         99,247         44,433         2,299,680   

 

(2) Equity. Consists of unvested stock options, restricted stock and unvested restricted stock units that become vested as of the effective time. For further details regarding the treatment of City National equity awards in connection with the merger, see “Interests of City National’s Directors and Executive Officers in the Merger—Equity Compensation”. All such awards are “single trigger” (other than the restricted stock unit award granted to the CEO in 2015, which is “double trigger” and payable only upon a qualifying termination of employment following the effective time). The estimated value of such awards is shown in the following table:

 

Named Executive Officer    Stock Options ($)      Restricted Stock ($)      Unvested Restricted
Stock Units ($)
     Total ($)  

Russell Goldsmith

     1,150,938         N/S         6,010,239         7,161,177   

Christopher J. Warmuth

     1,523,304         1,377,154         2,773,632         5,674,090   

Christopher J. Carey

     1,380,853         1,244,723         2,718,097         5,343,673   

Brian Fitzmaurice

     427,447         1,230,512         166,514         1,824,473   

Michael B. Cahill

     427,447         397,025         1,625,205         2,449,677   

 

(3) Perquisites/Benefits. Consists of (a) with respect to the CEO, (i) healthcare benefits for three years following termination of employment; and (ii) outplacement services; and (b) with respect to the named executive officers other than the CEO, (i) healthcare benefits for three years (two years for Messrs. Cahill and Fitzmaurice); and (ii) outplacement services. All such benefits are “double trigger” and are provided only upon a qualifying termination of employment following the effective time (including, with respect to all named executive officers other than the CEO, a voluntary termination of employment during the 30-day period immediately preceding the first anniversary of the effective time). The estimated value of the healthcare benefits and outplacement services is shown in the following table:

 

Named Executive Officer    Healthcare Benefits ($)      Outplacement Services ($)      Total ($)  

Russell Goldsmith

     53,337         N/A         53,337   

Christopher J. Warmuth

     53,952         24,000         77,952   

Christopher J. Carey

     39,915         24,000         63,915   

Brian Fitzmaurice

     34,889         16,000         50,889   

Michael B. Cahill

     26,117         16,000         42,117   

 

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(4) Tax Reimbursements. Includes the estimated amount of the gross-up payment for the excise tax imposed on the payments and benefits to the named executive officers, other than the CEO, in connection with a change in control by reason of Sections 4999 and 280G of the U.S. Internal Revenue Code.

Material United States Federal Income Tax Consequences

The following is a summary of the material United States federal income tax consequences of the merger to holders of City National common and preferred stock and the ownership of RBC common shares and New RBC Preferred Shares received in the merger. The below discussion applies to you only if you exchange your City National common stock for RBC common shares in the merger or your City National preferred stock is converted into New RBC Preferred Shares in the merger and you hold your City National common stock, City National preferred stock, RBC common shares and New RBC Preferred Shares as capital assets for tax purposes. This section does not apply to you if you are a member of a special class of holders subject to special rules, including:

 

    a holder who acquired City National common stock pursuant to the exercise of employee stock options or otherwise as compensation,

 

    a dealer in securities,

 

    a trader in securities that elects to use a mark-to-market method of accounting for securities holdings,

 

    a tax-exempt organization,

 

    a life insurance company,

 

    a person liable for alternative minimum tax,

 

    a person that actually or constructively owns 5% or more of the voting stock of City National or RBC,

 

    a person that holds shares of City National common stock, City National preferred stock, RBC common shares or New RBC Preferred Shares as part of a straddle or a hedging or conversion transaction, or

 

    a U.S. holder (as defined below) whose functional currency is not the U.S. dollar.

This section is based on the Code, its legislative history, existing and proposed regulations, and published rulings and court decisions, all as currently in effect, as well as the Canada-United States Income Tax Convention (1980) as amended, referred to as the “Treaty”. These laws are subject to change, possibly on a retroactive basis. We have not and will not seek any rulings from the United States Internal Revenue Service (“IRS”) regarding the matters discussed below. There can be no assurance that the IRS will not take positions concerning the tax consequences of the merger that are different from those discussed below.

The statements in this section as to matters of U.S. tax law are the opinion of Sullivan & Cromwell LLP and Wachtell, Lipton, Rosen and Katz.

Beneficial owners of City National Depositary Shares represented by Depositary Receipts will be treated as owners of the underlying City National preferred stock or New RBC Preferred Shares, as relevant, for U.S. federal income tax purposes.

If a partnership holds RBC common shares, New RBC Preferred Shares, City National common stock or City National preferred stock, the tax treatment of a partner will generally depend on the status of the partners and the tax treatment of the partnership. If you are a partner of a partnership holding RBC common shares, New RBC Preferred Shares, City National common stock or City National preferred stock, you should consult your tax advisors.

For purposes of this discussion, we use the term “U.S. holder” to mean a beneficial owner of City National common stock, City National preferred stock, RBC common shares or New RBC Preferred Shares, as relevant, that is:

 

    an individual citizen or resident of the United States for United States federal income tax purposes,

 

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    a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any U.S. state or the District of Columbia,

 

    an estate the income of which is subject to United States federal income taxation regardless of its source, or

 

    a trust which either (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

A “non-U.S. holder” is a beneficial owner (other than a partnership) of City National common stock, City National preferred stock, RBC common shares or New RBC Preferred Shares, as relevant, that is not a United States person for United States federal income tax purposes.

The Merger

General Tax Consequences of the Merger

The merger has been structured to qualify as a reorganization for United States federal income tax purposes, and it is a condition to the parties’ respective obligations to complete the merger that each of RBC and City National receive a legal opinion from Sullivan & Cromwell LLP and Wachtell, Lipton, Rosen & Katz, respectively, to the effect that (i) the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and (ii) the merger will not result in gain recognition to the holders of City National common stock pursuant to Section 367(a) of the Code (assuming that, in the case of any such holder who would be treated as a “five-percent transferee shareholder” within the meaning of Treasury Regulations Section 1.367(a)-3(c)(5)(ii), such holder enters into a five-year gain recognition agreement in the form provided in Treasury Regulations Section 1.367(a)-8, as provided for in Treasury Regulations Section 1.367(a)-3(c)(1)(iii)(B), and complies with the requirements of that agreement and Treasury Regulations Section 1.367(a)-8 for avoiding the recognition of gain). These opinions will be based on assumptions, representations, warranties and covenants, including those contained in the merger agreement and in tax representation letters, to be provided by RBC and City National. The accuracy of such assumptions, representations and warranties, and compliance with such covenants, could affect the conclusions set forth in such opinions.

No ruling has been or will be sought from the IRS as to the U.S. federal income tax consequences of the merger, and the opinions of counsel described above are not binding upon the IRS or any court. Accordingly, there can be no assurances that the IRS will not disagree with or challenge any of the conclusions described herein.

U.S. Holders of City National Common Stock

Assuming that the opinions as to (i) and (ii) above are correct, then:

 

    A U.S. holder receiving solely cash for City National common stock pursuant to the merger will recognize gain or loss equal to the difference between the amount of cash received by a holder of City National common stock and such holder’s tax basis in such holder’s shares of City National common stock;

 

    A U.S. holder receiving solely RBC common shares (or receiving RBC common shares and cash solely in lieu of fractional shares) in exchange for City National common stock will not recognize any gain or loss upon the merger, except with respect to cash received in lieu of fractional shares of RBC common shares (as discussed below),

 

   

A U.S. holder receiving RBC common shares and cash (other than solely in lieu of fractional shares) in exchange for shares of City National common stock pursuant to the merger, will recognize gain (but

 

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not loss) in an amount equal to the lesser of (1) the amount by which the sum of the fair market value of the RBC common shares and cash received by a holder of City National common stock exceeds such holder’s tax basis in its City National common stock, and (2) the amount of cash received by such holder of City National common stock (except with respect to any cash received instead of fractional share interests in RBC common shares, as discussed below);

 

    A U.S. holder’s aggregate tax basis in the RBC common shares received in the merger will be equal to the U.S. holder’s aggregate tax basis in the City National common stock surrendered decreased by the amount of cash received in the merger (except with respect to any cash received instead of fractional share interests in RBC common shares), decreased by any tax basis attributable to fractional share interests in RBC common shares for which cash is received, and increased by the amount of gain recognized on the exchange (regardless of whether such gain is classified as capital gain, or as ordinary dividend income, as discussed below, but excluding any gain or loss recognized with respect to fractional share interests in RBC common shares for which cash is received); and

 

    A U.S. holder’s holding period for the RBC common shares received in the merger (including any fractional shares deemed received and redeemed as described below) will include the U.S. holder’s holding period of the City National common stock surrendered.

Where different blocks of City National common stock were acquired at different times and at different prices, the tax basis and holding period of such common shares may be determined with reference to each block of common shares.

U.S. Holders of City National Preferred Stock

Assuming that the opinions as to (i) above are correct, then:

 

    A U.S. holder whose shares of City National 6.750% Fixed Rate/Floating Rate Non-Cumulative Preferred Stock, Series D are exchanged for RBC Series C-2 Preferred Shares should not recognize any gain or loss upon the merger; and

 

    A U.S. holder whose shares of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C are exchanged for RBC Series C-1 Preferred Shares should recognize gain or loss equal to the difference between the value of the RBC Series C-1 Preferred Shares received and the U.S. holder’s tax basis in its shares of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C. RBC intends to treat the exchange of City National 5.50% Non-Cumulative Perpetual Preferred Stock, Series C for RBC Series C-1 Preferred Shares as an exchange for which gain or loss must be recognized.

U.S. Holders of City National preferred stock are urged to consult their own tax advisors about the tax consequences of the exchange of City National preferred stock for New RBC Preferred Shares.

Cash in Lieu of Fractional Shares

A U.S. holder of City National common stock who receives cash in lieu of a fractional share of RBC common shares in the merger generally will be treated as having received such fractional share in the merger and then as having received cash in redemption of such fractional share. Gain or loss generally will be recognized based on the difference between the amount of cash received in lieu of the fractional share and the portion of the U.S. holder’s aggregate tax basis in the City National common stock surrendered which is allocable to the fractional share. This gain or loss generally will be capital gain or loss, and long-term capital gain or loss if the holding period for the City National common stock is more than one year at the effective time of the merger. Long-term capital gain of non-corporate U.S. holders is generally taxed at preferential rates. The deductibility of capital losses is subject to limitations.

 

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Non-U.S. Holders

If you are a non-U.S. holder, any gain realized as a result of the merger generally will not be subject to U.S. federal income tax unless (i) the gain is “effectively connected” with your conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to U.S. taxation on a net income basis, or (ii) you are an individual, you are present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist.

City National has agreed to provide RBC a certificate stating that City National is not a U.S. real property holding corporation. If for any reason City National does not provide such a certificate and City National were treated as a U.S. real property holding corporation, then, notwithstanding the above paragraph:

 

    If the City National preferred stock were not treated as regularly traded on an established securities market, it is possible that a non-U.S. holder could be treated as realizing taxable gain or loss on the exchange of City National preferred stock for New RBC Preferred Shares pursuant to the merger, in an amount equal to the difference between the value of the New RBC Preferred Shares received and the non-U.S. holder’s tax basis in the City National preferred stock, and a non-U.S. holder (or a U.S. holder that fails to establish that it is not a United States person) could be subject to withholding of 10% of the value of the New RBC Preferred Shares received in exchange for the City National preferred stock; and

 

    If a non-U.S. holder has held more than 5% of any class of City National stock (even if treated as regularly traded on an established securities market) at any time during the five-year period ending on the date of the merger, it is possible that the non-U.S. holder could be treated as realizing taxable gain or loss on the exchange of shares of City National stock of such class for RBC common shares or New RBC Preferred Shares pursuant to the merger, in an amount equal to the difference between the value of the RBC common shares or New RBC Preferred Shares received in exchange for the City National stock and the non-U.S. holder’s tax basis in the City National stock.

Backup Withholding and Information Reporting on the Merger

Payments of cash made to a U.S. holder and exchanges of shares by a U.S. holder for which gain or loss is recognized in connection with the merger may be subject to information reporting and, in the case of payments of cash, “backup withholding” unless the U.S. holder of City National common or preferred stock:

 

    provides a correct taxpayer identification number and any other required information to the exchange agent, or

 

    is a corporation or comes within certain exempt categories and otherwise complies with applicable requirements of the backup withholding rules.

Backup withholding does not constitute an additional tax, but merely an advance payment of tax, which may be refunded to the extent it results in an overpayment of tax if the required information is supplied to the IRS.

Reporting Requirements in Respect of the Merger

A U.S. holder of City National common or preferred stock who receives RBC common shares or New RBC Preferred Shares as a result of the merger will be required to retain records pertaining to the merger. Each U.S. holder of City National common or preferred stock who is required to file a U.S. tax return and who is a “significant holder” that receives RBC common shares or New RBC Preferred Shares in the merger will be required to file a statement with the holder’s U.S. federal income tax return setting forth such holder’s tax basis in the City National common stock and preferred stock surrendered and the fair market value of the RBC common shares, New RBC Preferred Shares and cash, if any, received in the merger. A “significant holder” is a

 

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holder of City National common or preferred stock who, immediately before the merger, owned at least 5% of the outstanding shares of City National or had an aggregate tax basis in securities of City National of $1,000,000 or more.

Ownership and Disposition of RBC Common Shares by U.S. Holders

Passive Foreign Investment Company

RBC does not believe that it is, for U.S. federal income tax purposes, a passive foreign investment company, or PFIC, and expects to operate in such a manner so as not to become a PFIC, but this conclusion is a factual determination that is made annually and thus may be subject to change. If RBC is or becomes a PFIC, you could be subject to additional United States federal income taxes on gains recognized with respect to RBC common shares or New RBC Preferred Shares and on certain distributions, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules. The remainder of this discussion assumes that RBC will not be treated as a PFIC for U.S. federal income tax purposes.

Taxation of Dividends to U.S. Holders

Distributions on a U.S. holder’s RBC common shares and New RBC Preferred Shares (including amounts withheld to reflect Canadian withholding taxes) will be taxable as dividends to the extent paid out of RBC’s current or accumulated earnings and profits, as determined under United States federal income tax principles. If you are a non-corporate U.S. holder, dividends paid to you that constitute qualified dividend income will be taxable to you at the preferential rates applicable to long-term capital gains provided that you meet certain holding period requirements. Dividends we pay with respect to RBC common shares and New RBC Preferred Shares generally will be qualified dividend income.

A dividend is taxable to you when you receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution that you must include in your income as a U.S. holder will be the U.S. dollar value of payments made (including amounts withheld to reflect Canadian withholding taxes). The U.S. dollar value of any Canadian dollar payments made will be determined at the spot Canadian dollar/U.S. dollar rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your tax basis in your RBC common shares or New RBC Preferred Shares and thereafter as capital gain.

Subject to certain limitations, the Canadian tax withheld in accordance with the Treaty and paid over to Canada will be creditable or deductible against your United States federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the preferential tax rates. To the extent a refund of the tax withheld is available to you under Canadian law or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against your U.S. federal income tax liability.

For foreign tax credit purposes, dividends will generally be income from sources outside the United States and will, depending on your circumstances, be either “passive” or “general” income for purposes of computing the foreign tax credit allowable to you.

 

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Taxation of Dividends to Non-U.S. Holders

If you are a non-U.S. holder, dividends paid to you in respect of RBC common shares or New RBC Preferred Shares will not be subject to United States federal income tax unless the dividends are “effectively connected” with your conduct of a trade or business within the United States, and the dividends are attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to U.S. taxation on a net income basis. In such cases you generally will be taxed in the same manner as a U.S. holder. If you are a corporate non-U.S. holder, “effectively connected” dividends may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Taxation of Capital Gains to U.S. Holders

If you are a U.S. holder and you sell or otherwise dispose of your RBC common shares or New RBC Preferred Shares, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your shares. Capital gain of a non-corporate U.S. holder is generally taxed at preferential rates where the property is held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

Taxation of Capital Gains to Non-U.S. Holders

If you are a non-U.S. holder, you will not be subject to U.S. federal income tax on gain recognized on the sale or other disposition of your RBC common shares or New RBC Preferred Shares unless (i) the gain is “effectively connected” with your conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to U.S. taxation on a net income basis, or (ii) you are an individual, you are present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist. If you are a corporate non-U.S. holder, “effectively connected” gains that you recognize may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Medicare Tax

A U.S. person that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. person’s “net investment income” (or “undistributed net investment income” in the case of an estate or trust) for the relevant taxable year and (2) the excess of the U.S. person’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on the individual’s circumstances). A holder’s net investment income will generally include its dividend income and its net gains from the disposition of RBC common shares or New RBC Preferred Shares, unless such dividend income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). If you are a U.S. holder that is an individual, estate or trust, you are urged to consult your tax advisors regarding the applicability of the Medicare tax to your income and gains in respect of your investment in RBC common shares or New RBC Preferred Shares.

Backup Withholding and Information Reporting

If you are a non-corporate U.S. holder, information reporting requirements, on IRS Form 1099, generally will apply to:

 

    dividend payments or other taxable distributions made to you within the United States, and

 

    the payment of proceeds to you from the sale of RBC common shares or New RBC Preferred Shares effected at a U.S. office of a broker.

 

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Additionally, backup withholding may apply to such payments if you are a non-corporate U.S. holder that:

 

    fails to provide an accurate taxpayer identification number,

 

    is notified by the IRS that you have failed to report all interest and dividends required to be shown on your federal income tax returns, or

 

    in certain circumstances, fails to comply with applicable certification requirements.

If you are a non-U.S. holder, you are generally exempt from backup withholding and information reporting requirements with respect to:

 

    dividend payments made to you outside the United States by us or another non-U.S. payor,

 

    other dividend payments and the payment of the proceeds from the sale of RBC common shares or New RBC Preferred Shares effected at a U.S. office of a broker, as long as the income associated with such payments is otherwise exempt from United States federal income tax, and

 

    the payor or broker does not have actual knowledge or reason to know that you are a U.S. person and you have furnished the payor or broker:

 

    an IRS Form W-8BEN or W-8BEN-E or an acceptable substitute form upon which you certify, under penalties of perjury, that you are a non-United States person,

 

    other documentation upon which it may rely to treat the payments as made to a non-United States person in accordance with U.S. Treasury regulations, or

 

    you otherwise establish an exemption.

Payment of the proceeds from the sale of RBC common shares or New RBC Preferred Shares effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale of RBC common shares or New RBC Preferred Shares that is effected at a foreign office of a broker will be subject to information reporting and backup withholding if:

 

    the proceeds are transferred to an account maintained by you in the United States,

 

    the payment of proceeds or the confirmation of the sale is mailed to you at a U.S. address, or

 

    the sale has some other specified connection with the United States as provided in U.S. Treasury regulations,

unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption.

In addition, a sale of RBC common shares or New RBC Preferred Shares effected at a foreign office of a broker will be subject to information reporting if the broker is:

 

    a U.S. person,

 

    a controlled foreign corporation for U.S. tax purposes,

 

    a foreign person 50% or more of whose gross income is effectively connected with the conduct of a U.S. trade or business for a specified three-year period, or

 

    a foreign partnership, if at any time during its tax year:

 

    one or more of its partners are “U.S. persons”, as defined in U.S. Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership, or

 

    such foreign partnership is engaged in the conduct of a U.S. trade or business,

 

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unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption. Backup withholding will apply if the sale is subject to information reporting and the broker has actual knowledge that you are a U.S. person.

You generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed your income tax liability by filing a refund claim with the IRS.

Information with Respect to Foreign Financial Assets

Owners of “specified foreign financial assets” with an aggregate value in excess of $50,000 (and in some circumstances a higher threshold) may be required to file an information report with respect to such assets with their tax returns. “Specified foreign financial assets” may include financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties, and (iii) interests in foreign entities. Holders are urged to consult their tax advisors regarding the application of this reporting requirement to their ownership of the RBC common shares or New RBC Preferred Shares.

Foreign Account Tax Compliance Withholding

Pursuant to an intergovernmental agreements with the United States, RBC and other non-U.S. financial institutions may be required to report information to our local governments regarding the holders of RBC common shares and New RBC Preferred Shares (with subsequent transmission of that information by the local government to the IRS). In the future we may be required to withhold on a portion of dividend payments to holders of RBC common shares or New RBC Preferred Shares if the indirect holders of those shares fail to comply with certain information reporting requirements. However, such withholding will not apply to payments made before January 1, 2017. The rules for implementation of this withholding have not yet been fully finalized, so it is impossible to determine at this time what impact, if any, such rules will have on holders of RBC common shares or New RBC Preferred Shares.

This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. Moreover, it only addresses U.S. federal income tax and does not address any non-income tax or any foreign, state or local tax consequences. You should consult your own tax advisors concerning the U.S. federal income tax consequences of the merger and the ownership of RBC common shares or New RBC Preferred Shares in light of your particular situation, as well as any consequences arising under the laws of any other taxing jurisdiction.

Material Canadian Federal Income Tax Consequences

The following summary describes the material Canadian federal income tax considerations under the Income Tax Act (Canada) and the Income Tax Regulations, or collectively, the Canadian Tax Act, of the disposition of City National common stock and City National preferred stock as represented by City National Depository Shares pursuant to the merger and the ownership of RBC common shares and New RBC Preferred Shares as represented by depository shares received in consideration for the disposition of City National common stock and City National preferred stock respectively pursuant to the merger, generally applicable to a beneficial owner of City National common stock and City National preferred stock who, for purposes of the Canadian Tax Act and at all relevant times, (1) is not and is not deemed to be resident in Canada; (2) deals at arm’s length with RBC and Holdco; (3) is not affiliated with RBC and Holdco; (4) will hold shares of City National common stock, City National preferred stock, RBC common shares and New RBC Preferred Shares as capital property; and (5) does not use or hold, and is not deemed to use or hold, City National common stock, City National preferred stock, RBC common shares or New RBC Preferred Shares in a business carried on in Canada, referred to as a “non-resident holder”. Special rules, which are not discussed in this summary, may apply to certain holders that are insurers carrying on an insurance business in Canada and elsewhere.

 

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Generally, City National common stock, City National preferred stock, RBC common shares and New RBC Preferred Shares will be capital property to a non-resident holder provided the non-resident holder does not hold those shares in the course of carrying on a business or as part of an adventure or concern in the nature of trade.

This summary is based on the current provisions of the Canadian Tax Act and RBC’s understanding of the current administrative policies and assessing practices of the Canada Revenue Agency published in writing prior to the date hereof. This summary takes into account all specific proposals to amend the Canadian Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof, referred to as the “Proposed Amendments”, and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policy or assessing practice whether by legislative, administrative or judicial action nor does it take into account tax legislation or considerations of any province, territory or foreign jurisdiction, which may differ from those discussed herein.

This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. This summary is not exhaustive of all Canadian federal income tax considerations. You should consult your own tax advisors concerning the Canadian federal income tax consequences of the merger and the ownership of RBC common shares and New RBC Preferred Shares in light of your particular situation, as well as any consequences arising under the laws of any other taxing jurisdiction.

For the purposes of the Canadian Tax Act, any amount relating to the acquisition, holding or disposition of RBC common shares and New RBC Preferred Shares must generally be converted into Canadian dollars using the noon exchange rate quoted by the Bank of Canada for the day on which the amount arose.

Beneficial owners of City National Depositary Shares represented by Depositary Receipts will be treated as owners of the underlying City National preferred stock or New RBC Preferred Shares, as relevant, for Canadian federal income tax purposes.

Disposition of City National Common Stock and City National Preferred Stock Pursuant to the Merger

A non-resident holder will not be subject to tax under the Canadian Tax Act on any capital gain realized on the disposition of City National common stock pursuant to the merger or on the disposition of City National preferred stock pursuant to the merger.

Dividends on RBC Common Shares and New RBC Preferred Shares

Dividends paid or credited or deemed to be paid or credited on the RBC common shares or the New RBC Preferred Shares to a non-resident holder (including any deemed dividend on the redemption or any other disposition of the New RBC Preferred Shares to RBC as described under “—Redemption or Any Other Disposition of New RBC Preferred Shares to RBC” below) will be subject to Canadian withholding tax at the rate of 25%, subject to any reduction in the rate of withholding to which the non-resident holder is entitled under any applicable income tax convention. Under the Canada-U.S. Income Tax Convention (1980), referred to as the “Treaty”, where dividends on the RBC common shares or New RBC Preferred Shares are considered to be paid to or derived by a non-resident holder that is the beneficial owner of the dividends and is a U.S. resident for the purposes of, and is entitled to benefits in accordance with, the provisions of the Treaty, the applicable rate of Canadian withholding tax is generally reduced to 15%.

Disposition of RBC Common Shares

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Canadian property” to the non-resident holder for purposes of the Canadian Tax Act at the time of the disposition and the non-resident holder is not entitled to relief under an applicable income tax convention between Canada and the country in which the non-resident holder is resident.

Generally, RBC common shares will not constitute taxable Canadian property to a non-resident holder at a particular time provided that the RBC common shares are listed at that time on a designated stock exchange (which includes the TSX), unless at any particular time during the 60-month period that ends at that time (1) one or any combination of (i) the non-resident holder, (ii) persons with whom the non-resident holder does not deal at arm’s length, and (iii) partnerships in which the non-resident holder or a person described in (ii) holds a membership interest directly or indirectly through one or more partnerships, owned 25% or more of the issued shares of any class or series of RBC, and (2) more than 50% of the fair market value of the RBC common shares was derived directly or indirectly from one or any combination of: (i) real or immovable properties situated in Canada, (ii) “Canadian resource properties” (as defined in the Canadian Tax Act), (iii) “timber resource properties” (as defined in the Canadian Tax Act), and (iv) options in respect of, or interests in, or for civil law rights in, any of the foregoing property whether or not the property exists. Notwithstanding the foregoing, in certain circumstances set out in the Canadian Tax Act, shares of RBC common shares could be deemed to be taxable Canadian property to a particular non-resident holder. Non-resident holders whose RBC common shares may constitute taxable Canadian property should consult their own tax advisors.

Even if RBC common shares are taxable Canadian property to a non-resident holder, the Treaty will generally exempt a non-resident holder that is a U.S. resident for the purposes of, and is entitled to benefits in accordance with, the provisions of the Treaty from tax under the Canadian Tax Act on any capital gain arising on the disposition of an RBC common share unless the value of the RBC at the time of disposition is derived principally from real property situated in Canada.

Disposition of New RBC Preferred Shares

A non-resident holder will not be subject to tax under the Canadian Tax Act on any capital gain realized on a disposition or deemed disposition of New RBC Preferred Shares, unless the New RBC Preferred Shares are “taxable Canadian property” to the non-resident holder for purposes of the Canadian Tax Act at the time of the disposition and the non-resident holder is not entitled to relief under an applicable income tax convention between Canada and the country in which the non-resident holder is resident.

Generally, New RBC Preferred Shares will not constitute taxable Canadian property to a non-resident holder at a particular time unless at any particular time during the 60-month period that ends at that time more than 50% of the fair market value of the New RBC Preferred Shares was derived directly or indirectly (otherwise than through a corporation, partnership or trust the shares or interest in which were not themselves taxable Canadian property at the particular time) from one or any combination of: (i) real or immovable properties situated in Canada, (ii) “Canadian resource properties” (as defined in the Canadian Tax Act), (iii) “timber resource properties” (as defined in the Canadian Tax Act), and (iv) options in respect of, or interests in, or for civil law rights in, any of the foregoing property whether or not the property exists.

Even if New RBC Preferred Shares are taxable Canadian property to a non-resident holder, the Treaty will generally exempt a non-resident holder that is a U.S. resident for the purposes of, and is entitled to benefits in accordance with, the provisions of the Treaty from tax under the Canadian Tax Act on any capital gain arising on the disposition of a New RBC Preferred Share unless the value of the RBC at the time of disposition is derived principally from real property situated in Canada.

 

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Redemption or Any Other Disposition of New RBC Preferred Shares to RBC

On the redemption or any other disposition of New RBC Preferred Shares to RBC, a non-resident holder will:

(a) be deemed to receive a dividend equal to the amount, if any, by which the amount paid by RBC for the non-resident holder’s New RBC Preferred Shares (converted into Canadian dollars on the date of payment) exceeds the paid-up capital of such holder’s New RBC Preferred Shares for purposes of the Canadian Tax Act (generally determined in Canadian dollars on the date of issuance of the New RBC Preferred Shares), and such dividend will be subject to Canadian withholding tax as described under “—Dividends on RBC Common Shares and New RBC Preferred Shares” above; and

(b) be considered to have disposed of such holder’s New RBC Preferred Shares for proceeds of disposition equal to the amount paid by RBC for the non-resident holder’s New RBC Preferred Shares (converted into Canadian dollars on the date of payment) less the amount of the deemed dividend, if any, computed in (a), and the resulting capital gain, if any, will be subject to the same treatment under the Canadian Tax Act as described under “—Disposition of New RBC Preferred Shares” above.

Accounting Treatment

The merger will be accounted for as a business combination applying the acquisition method of accounting for both IFRS and U.S. financial accounting purposes. Accordingly, the aggregate fair value of the consideration paid by RBC in connection with the merger will be allocated to City National’s net assets based on their fair values as of the close of the transaction. The excess of the total purchase consideration over the fair value of the identifiable assets acquired, liabilities assumed and any non-controlling interest in City National will be allocated to goodwill. The results of operations of City National will be included in RBC’s consolidated results of operations only for periods subsequent to the completion of the merger.

Stock Exchange Listings

RBC common shares are currently listed on the TSX and the NYSE. The RBC common shares to be issued in connection with the merger will be listed on the TSX and the NYSE upon completion of the merger. Shares of City National common stock will be delisted from the NYSE promptly following completion of the merger.

Each outstanding share of City National preferred stock is represented by City National Depositary Shares that are listed on the NYSE and represent a one-fortieth interest in a share of the applicable series of City National preferred stock. Following the exchange of New RBC Preferred Shares for City National preferred stock in the merger under the applicable Deposit Agreement, these City National Depositary shares will represent a one-fortieth interest in the relevant series of New RBC Preferred Shares and will continue to be listed on the NYSE upon completion of the merger under a new name and will be traded under a new symbol.

Regulatory Matters Related to the Merger

Completion of the merger is subject to the receipt of all required regulatory approvals from the Federal Reserve Board and the Superintendent of Financial Institutions (Canada), the receipt of all other required approvals or consents the failure of which to obtain would reasonably be expected to have a material adverse effect on RBC or City National, and the expiration of any applicable statutory waiting period. RBC and City National have agreed to use their reasonable best efforts to obtain all the required regulatory approvals. We have made or will in the near future make filings for such approvals.

We believe that we will be able to obtain all required regulatory approvals on a timely basis. However, we cannot make any assurances as to whether or when the required regulatory approvals will be obtained, or whether

 

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any such approval will contain a material adverse condition. The approval of an application means only that the regulatory criteria for approval have been satisfied or waived. It does not mean that the approving authority has determined that the consideration to be received by City National common stockholders in the merger is fair. Regulatory approval does not constitute an endorsement or recommendation of the merger.

Federal Reserve Board Approval

Completion of the merger is subject, among other things, to approval by the Federal Reserve Board pursuant to Section 3 of the Bank Holding Company Act of 1956, as amended, referred to as the “BHC Act”.

The Federal Reserve Board may not grant that approval if it determines that the merger:

 

    would result in a monopoly or be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States; or

 

    would substantially lessen competition in any part of the United States, or tend to create a monopoly or result in a restraint of trade,

unless the Federal Reserve Board finds that the anti-competitive effects of the merger are clearly outweighed in the public interest by the probable effect of the merger in meeting the convenience and needs of the communities to be served.

Additionally, the Federal Reserve Board may not grant approval if it determines that RBC is not subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in Canada.

In reviewing the merger, the Federal Reserve Board will consider

 

    the financial and managerial resources of both companies and their subsidiary banks both currently and after giving effect to the merger;

 

    the capital adequacy of RBC after the merger;

 

    the convenience and needs of the communities to be served;

 

    applicable overall capital and safety and soundness standards;

 

    the effectiveness of both companies in combating money laundering activities;

 

    each company’s regulatory status, including legal and regulatory compliance; and

 

    the extent to which the proposed acquisition would result in greater or more concentrated risks to the stability of the United States banking or financial system.

Under the Community Reinvestment Act of 1977, as amended, referred to as the “CRA”, the Federal Reserve Board will take into account RBC’s and City National’s records of performance in meeting the credit needs of their respective communities, including low-and moderate-income neighborhoods. Each of City National and RBC has one insured depository institution subsidiary required to have ratings under the CRA and each such institution has received a satisfactory CRA rating in their most recent CRA examinations by their respective federal regulators.

Furthermore, the BHC Act and Federal Reserve Board regulations require published notice of, and the opportunity for public comment on, our application, and authorize the Federal Reserve Board to hold a public hearing or meeting if the Federal Reserve Board determines that a hearing or meeting would be appropriate. Any hearing or meeting or comments provided by third parties could prolong the period during which the application is under review by the Federal Reserve Board.

 

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The BHC Act requires that we wait before completing the merger until 30 days after Federal Reserve Board approval is received, during which time the DOJ may challenge the merger on antitrust grounds. With the approval of the Federal Reserve Board and the concurrence of the DOJ, the waiting period may be reduced to no less than 15 days. The commencement of an antitrust action would stay the effectiveness of such an approval unless a court specifically ordered otherwise. In reviewing the merger, the DOJ could analyze the merger’s effect on competition differently than the Federal Reserve Board, and thus it is possible that the DOJ could reach a different conclusion than the Federal Reserve Board does regarding the merger’s effects on competition. A determination by the DOJ not to object to the merger may not prevent the filing of antitrust actions by private persons or state attorneys general.

Canadian Approvals

Under the Bank Act, the approval of the Superintendent of Financial Institutions (Canada) is required in order for RBC to complete the acquisition.

Holdco is a permitted investment under paragraph 468(2)(b) of the Bank Act. Under the Bank Act, RBC will be considered to have acquired an indirect beneficial interest in each of the subsidiaries of City National upon the merger of City National with and into Holdco. Therefore, the approval of the Minister of Finance (Canada) or the Superintendent of Financial Institutions (Canada) may be required depending on the nature of the activities of those subsidiaries.

Under subsection 65(1) of the Bank Act, no share of any class of shares of a bank shall be issued until it is fully paid for in money or, with the approval of the Superintendent of Financial Institutions (Canada), in property. Pursuant to the merger agreement, if the merger is completed, holders of City National common stock will have the right to receive the merger consideration for each share of City National common stock held immediately prior to the merger. The consideration for the issuance by RBC of its common shares as part of the merger consideration will be shares of Holdco. In addition, if the merger is completed, RBC will issue the New RBC Preferred Shares to the holders of the outstanding City National preferred stock upon the cancellation of such preferred stock in connection with the merger. The consideration to RBC for the issuance of the New RBC Preferred Shares will be additional shares of Holdco. Approval of the Superintendent of Financial Institutions (Canada) is required for RBC to issue its common shares and the New RBC Preferred Shares in consideration for additional shares of Holdco.

Antitrust Notifications

The merger may not be completed until pre-merger notification filings have been made with the FTC and the Antitrust Division of the DOJ, referred as the “Antitrust Division”, under the HSR Act and the rules and regulations thereunder and the applicable waiting period has expired or is terminated. Each of RBC and City National is in the process of filing a Notification and Report Form in connection with the merger with the FTC and the Antitrust Division and will file any other supplemental information required to be filed. Even after the waiting period expires or is terminated, the FTC and the Antitrust Division retain the authority to challenge the merger on antitrust grounds before of after the merger is completed.

Other Regulatory Approvals

Applications and notifications are being filed with other regulatory authorities, including the Financial Industry Regulatory Authority (in connection with acquisitions or changes in control of subsidiaries of City National that may be deemed to result from the merger), the SEC and the Delaware Secretary pursuant to Delaware law.

Dissenters’ Rights of Appraisal for Holders of City National Common Stock

The following discussion summarizes certain terms of the law pertaining to appraisal rights under Delaware law and is qualified in its entirety by the full text of Section 262 of Delaware law, referred to as “Section 262”, which Section 262 (in effect as of the date of this proxy statement/prospectus) is attached to this document as Appendix E. The following summary does not constitute legal or other advice, nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262.

 

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Under Section 262, record holders of shares of City National’s common stock who have neither voted in favor of, nor consented in writing to, the adoption of the merger agreement, who continuously hold such shares through the effective time of the merger and who otherwise follow the procedures set forth in Section 262 will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, as determined by the Court, together with interest, if any, to be paid upon the amount determined to be the fair value.

Under Section 262, where a merger agreement relating to a proposed merger is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders who was a stockholder on the record date set by the board of directors for such notice (or if no such record date is set, on the close of business on the day next preceding the day on which notice is given), with respect to such shares for which appraisal rights are available, that appraisal rights are so available, and must include in each such notice a copy of Section 262. This document constitutes such notice to the holders of City National’s common stock and a copy of Section 262 (in effect as of the date of this proxy statement/prospectus) is attached to this document as Appendix E.

ANY HOLDER OF CITY NATIONAL’S COMMON STOCK WHO WISHES TO EXERCISE APPRAISAL RIGHTS, OR WHO WISHES TO PRESERVE SUCH HOLDER’S RIGHT TO DO SO, SHOULD CAREFULLY REVIEW THE FOLLOWING DISCUSSION AND APPENDIX E BECAUSE FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES SPECIFIED WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS. MOREOVER, BECAUSE OF THE COMPLEXITY OF THE PROCEDURES FOR EXERCISING THE RIGHT TO SEEK APPRAISAL OF SHARES OF CITY NATIONAL COMMON STOCK, CITY NATIONAL BELIEVES THAT, IF A STOCKHOLDER CONSIDERS EXERCISING SUCH RIGHTS, SUCH STOCKHOLDER SHOULD SEEK THE ADVICE OF LEGAL COUNSEL.

Filing Written Demand

Holders of shares of City National’s common stock who decide to exercise their appraisal rights must make a demand, in writing, for appraisal of their shares of common stock prior to the taking of the vote on the merger at the stockholders meeting. A demand for appraisal will be sufficient if it reasonably informs City National of the identity of the stockholder and that such stockholder intends thereby to demand appraisal of such stockholder’s shares of common stock. If you wish to exercise your appraisal rights you must be the record holder of such shares of City National’s common stock on the date the written demand for appraisal is made and you must continue to hold such shares through the closing of the merger. Accordingly, a stockholder who is the record holder of shares of common stock on the date the written demand for appraisal is made, but who thereafter transfers such shares prior to the closing of the merger, will lose any right to appraisal in respect of such shares. A stockholder’s failure to make the written demand prior to the taking of the vote on the merger will constitute a waiver of appraisal rights.

Only a holder of record of shares of City National’s common stock is entitled to demand an appraisal of the shares registered in that holder’s name. A demand for appraisal in respect of shares of capital stock should be executed by or on behalf of the holder of record, fully and correctly, as the holder’s name appears on the holder’s stock certificates, should specify the holder’s name and mailing address and the number of shares registered in the holder’s name and must state that the person intends thereby to demand appraisal of the holder’s shares in connection with the merger. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record

 

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owner or owners. If the shares are held in “street name” by a broker, bank or nominee, the broker, bank or nominee may exercise appraisal rights with respect to the shares held for one or more beneficial owners while not exercising the rights with respect to the shares held for other beneficial owners; in such case, however, the written demand should set forth the number of shares as to which appraisal is sought and where no number of shares is expressly mentioned the demand will be presumed to cover all shares of capital stock held in the name of the record owner. If a stockholder holds shares of City National common stock through a broker who in turn holds the shares through a central securities depository nominee such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as record holder. Stockholders who hold their shares in brokerage accounts or other nominee forms and who wish to exercise appraisal rights should consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

All written demands for appraisal pursuant to Section 262 should be sent or delivered to City National at:

City National Corporation

City National Plaza

555 South Flower Street,

Los Angeles, California, 90071

Attention: Corporate Secretary

At any time within 60 days after the effective date of the merger, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the merger agreement by delivering to RBC, a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the effective date of the merger will require written approval of RBC. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Court deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the merger consideration offered pursuant to the merger agreement within 60 days after the effective date of the merger. If RBC does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s demand in accordance with the proviso in the immediately preceding sentence, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding with respect to a stockholder, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the consideration being offered pursuant to the merger agreement.

From and after the effective date of the merger, any stockholder who has duly demanded appraisal in compliance with Section 262 will not be entitled to vote for any purpose the shares of common stock subject to appraisal or to receive payment of dividends or other distributions on such shares except for dividends or distributions payable to stockholders of record at a date prior to the effective date of the merger.

Notice of the Effective Date

Within ten days after the effective date of the merger, RBC must notify each holder of City National’s common stock entitled to appraisal rights of the effective date of the merger. Such notice may also be given by RBC to each holder of City National’s common stock who is entitled to appraisal rights before the effective date of the merger.

Filing a Petition for Appraisal

Within 120 days after the effective date of the merger, but not thereafter, RBC or any holder of City National’s common stock who has complied with Section 262 and is entitled to appraisal rights under

 

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Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares held by all dissenting holders. RBC is under no obligation to and has no present intention to file a petition and holders should not assume that RBC will file a petition. Accordingly, it is the obligation of the holders of capital stock to initiate all necessary action to perfect their appraisal rights in respect of shares of capital stock within the time prescribed in Section 262. Within 120 days after the effective date of the merger, any holder of capital stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from RBC a statement setting forth the aggregate number of shares not voted in favor of the approval of the merger agreement and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed within ten days after a written request therefor has been received by RBC or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later. Notwithstanding the foregoing, a person who is the beneficial owner of shares of capital stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition or request to receive from RBC the statement described in this paragraph.

If a petition for an appraisal is timely filed by a holder of shares of City National’s common stock and a copy thereof is served upon RBC, RBC will then be obligated within 20 days to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the Court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded payment for their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceeding; and if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss the proceedings as to the stockholder.

Determination of Fair Value

After the Delaware Court of Chancery determines the holders of capital stock entitled to appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Court shall determine the “fair value” of the shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5 percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment.

In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods that are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “fair price obviously requires consideration of all relevant factors involving the value of a company”. The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger”. In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion that does not encompass known elements of value”, but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered”.

 

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Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined could be more than, the same as or less than the consideration they would receive pursuant to the merger if they did not seek appraisal of their shares and that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the merger, is not an opinion as to, and does not otherwise address, fair value under Section 262. Although City National believes that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the merger consideration. Neither RBC nor City National anticipates offering more than the applicable merger consideration to any stockholder of City National exercising appraisal rights, and each of RBC and City National reserves the right to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of capital stock is less than the applicable merger consideration.

If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The costs of the action (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Court and taxed upon the parties as the Court deems equitable under the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts utilized in the appraisal proceeding, to be charged pro rata against the value of all the shares entitled to be appraised.

If any stockholder who demands appraisal of shares of capital stock under Section 262 fails to perfect, successfully withdraws or loses such holder’s right to appraisal, the stockholder’s shares of capital stock will be deemed to have been converted at the effective date of the merger into the right to receive the merger consideration pursuant to the merger agreement. A stockholder will fail to perfect, or effectively lose, the stockholder’s right to appraisal if no petition for appraisal is filed within 120 days after the effective date of the merger. In addition, as indicated above, a stockholder may withdraw his, her or its demand for appraisal in accordance with Section 262 and accept the merger consideration offered pursuant to the merger agreement.

No Dissenters’ Rights of Appraisal for Holders of City National Preferred Stock

Unless the certificate of incorporation otherwise provides (and the restated certificate of incorporation, as amended, of City National does not so provide), Delaware law provides that no appraisal rights are available for shares of any class or series of stock, which stock, at the record date fixed to determine the stockholders entitled to receive notice of and vote at a meeting of stockholders to act upon an agreement and plan of merger, was either listed on a national securities exchange or held of record by more than 2,000 holders. Notwithstanding the foregoing, appraisal rights are available for shares of any class or series of stock if the holders thereof are required by the terms of an agreement and plan of merger to accept for such stock anything except (1) shares or depository receipts of another corporation which at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders, (2) shares of stock or depositary receipts of the surviving corporation in the merger or consolidation, (3) cash for fractional shares or (4) any combination of (1)-(3).

Consequently, because the City National preferred stock is listed on the NYSE and the New RBC Preferred Shares into which City National preferred stock will be converted pursuant to the merger will also be listed on the NYSE, City National preferred stockholders do not have dissenters’ appraisal rights in the merger with respect to any of their shares of City National preferred stock.

Resale of RBC Common Shares

U.S. Resale Restrictions

The RBC common shares issued under the terms of the merger agreement will not be subject to any restrictions on transfer arising under the Securities Act of 1933, as amended, referred to as the “Securities Act”.

 

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Canadian Resale Restrictions

The RBC common shares issued under the terms of the merger agreement will not be subject to any restrictions on transfer under applicable Canadian provincial or territorial securities laws. To the extent Canadian provincial or territorial securities laws apply, however, the first trade in the RBC common shares issued under the terms of the merger agreement must be made in accordance with customary conditions, including that such trade is not a control distribution, that no unusual effort is made to prepare the market or to create a demand for such shares and that no extraordinary commission or consideration is paid in respect of the trade. In addition, when selling the RBC common shares, holders who engage in the business of trading in securities, or hold themselves out as engaging in the business of trading in securities may also be subject to dealer registration requirements of applicable Canadian provincial or territorial securities laws. If a holder requires advice on the application of Canadian provincial or territorial securities laws to the trade of RBC common shares, the holder should consult its own legal advisor.

 

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THE MERGER AGREEMENT

The following summary discusses certain material terms of the merger agreement. You should also read in its entirety the section entitled “The Merger” for a discussion of other material information about the merger and the merger agreement. The following description of the merger agreement is subject to, and is qualified in its entirety by reference to, the merger agreement, a copy of which is attached as Appendix A to this proxy statement/prospectus and incorporated herein by reference. We urge you to read the merger agreement in its entirety, as it is the legal document governing the merger. In the event of any discrepancy between the terms of the merger agreement and the following summary, the merger agreement will control.

Effects of the Merger

At the effective time of the merger, City National will merge with and into Holdco, a direct wholly-owned subsidiary of RBC, with Holdco surviving the merger. City National Bank, which is currently a wholly-owned subsidiary of City National, will become a wholly-owned subsidiary of Holdco at the effective time of the merger.

As a result of the merger, there will no longer be any publicly held shares of City National common stock or City National preferred stock. City National stockholders will no longer have any direct interest in the surviving company. Those City National common stockholders who receive all of the merger consideration in the form of cash will not participate in RBC’s future earnings and potential growth as shareholders of RBC and will no longer bear the risk of any losses incurred in the operation of the surviving company’s business as a subsidiary of RBC or of any decreases in the value of that business. Those City National common stockholders receiving RBC common shares as merger consideration will only participate in the surviving company’s future earnings and potential growth through their ownership of RBC common shares. All of the other incidents of direct stock ownership in City National, such as the right to vote on certain corporate decisions, to elect directors and to receive dividends and distributions from City National, will be extinguished upon completion of the merger. Upon completion of the merger, shares of City National common stock will represent the right to receive the merger consideration. See the section entitled “The Merger—Merger Consideration”.

As a result of the merger, holders of City National preferred stock, or holders of City National Depositary Shares representing interests therein, will become holders of New RBC Preferred Shares, or of depositary shares representing interests therein, respectively. For a further discussion see the section entitled “The Merger—Treatment of City National Preferred Stock”.

Effective Time of the Merger

The merger will occur no later than three business days after the satisfaction or waiver of all closing conditions, unless extended by mutual agreement of the parties. The merger will be completed and become effective as of the date and time specified in the certificate of merger to be filed with the Secretary of State of the State of Delaware. The parties will file the certificate of merger after the satisfaction or waiver of the closing conditions in the merger agreement. As of the date of this document, the parties expect that the merger will be effective during the fourth calendar quarter of 2015. However, there can be no assurance as to when or if the merger will occur.

Treatment of City National Options and Other Equity Based Awards

Options

At the effective time, each City National option, whether vested or unvested, that is outstanding immediately prior to the effective time shall (i) if granted prior to the date of the merger agreement, become vested in full and (ii) whether granted prior to or after the date of the merger agreement, be converted automatically into an option to purchase, on the same terms and conditions as were applicable immediately prior

 

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to the effective time, the number of RBC common shares (rounded down to the nearest whole number of shares) equal to the product of (A) the number of shares of City National common stock subject to such option immediately prior to the effective time, multiplied by (B) the exchange ratio, at an exercise price per share equal to the quotient (rounded up to the nearest whole cent) obtained by dividing (1) the exercise price per share of City National common stock subject to such option immediately prior to the effective time, by (2) the exchange ratio.

Restricted Stock

At the effective time, each award of restricted City National common stock that is outstanding immediately prior to the effective time (including any such award held by an executive officer) shall (i) if granted prior to the date of the merger agreement, fully vest and be cancelled and converted automatically into the right to receive, at the election of the holder of the award, either the stock consideration or the cash consideration, treating such award in the same manner as all other outstanding shares of City National common stock for such purposes or (ii) if granted after the date of the merger agreement, be converted into an award of restricted RBC common shares with the same terms and conditions as were applicable under such award immediately prior to the effective time, and relating to the number of RBC common shares equal to the product of the number of shares of City National common stock subject to such award immediately prior to the effective time, multiplied by the exchange ratio, with any fractional shares rounded to the next whole number of shares.

Restricted Stock Units

At the effective time, each City National restricted stock unit award that is outstanding immediately prior to the effective time (including any such award held by an executive officer) shall (i) if granted prior to the date of the merger agreement (other than certain vested awards that provide for payment upon separation from service, as described below), vest (and with respect to any award that vests, in whole or in part, based on the achievement of a specified level of performance, the deemed value of such award will be determined in accordance with the terms of the applicable award agreement) and be cancelled and converted automatically into the right to receive, as soon as reasonably practicable after the effective time (or, if such award is subject to an irrevocable deferral election, at the time or times specified by such election), (A) if the terms of such award provide for settlement in cash, an amount in cash, without interest, equal to the cash consideration in respect of each share of City National common stock underlying such award or, if the terms of such award provide for settlement in shares of City National common stock, the stock consideration in respect of each share of City National common stock underlying such award, plus (B) an amount in cash equal to all accrued but unpaid dividend equivalents with respect to such award or (ii) if granted after the date of the merger agreement (or if granted prior to the date of the merger agreement on terms that provide for payment solely on a separation from service), be converted into a restricted stock unit award with the same terms and conditions as were applicable immediately prior to the effective time and relating to the number of RBC common shares equal to the product of the number of shares of City National common stock subject to such award immediately prior to the effective time, multiplied by the exchange ratio, with any fractional shares rounded to the next whole number of shares. With respect to the 2015 annual restricted stock unit award granted to Russell Goldsmith (whom we sometimes refer to in this section as the “CEO”), which will be converted into an RBC restricted stock unit award as described above, the applicable performance condition will be measured at the end of the 2015 calendar year except that, if the CEO’s employment is terminated without “cause” or for “good reason” after the effective time and prior to the end of the 2015 calendar year, such performance condition will be waived at the time of the termination of employment.

City National Deferred Units

At the effective time, each deferred stock unit credited to an account that is deemed invested in City National common stock as of immediately prior to the effective time under City National Bank’s executive deferred compensation plan or director deferred compensation plan (together the “deferred compensation plans”) and the supplemental retirement benefit agreement with Russell Goldsmith, as amended, shall be deemed to be

 

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invested in RBC common shares, with the number of RBC common shares subject to the deferred stock units in a participant’s account as of the effective time to be equal to the product (rounded up to the nearest whole number of shares) of (i) the number of shares of City National common stock subject to such deferred stock units as of immediately prior to the effective time, and (ii) the exchange ratio. Following the effective time, the deferred compensation plans will otherwise continue to have the same terms, including payment terms and investment options, that were applicable immediately prior to the effective time, with the City National common stock fund to be replaced with an RBC common shares fund.

Representations and Warranties

The merger agreement contains representations and warranties made by City National to RBC relating to a number of matters, including the following:

 

    corporate organization, qualification to do business, standing and power, and subsidiaries;

 

    capitalization;

 

    requisite corporate authority to enter into the merger agreement and to complete the contemplated transactions;

 

    absence of conflicts with governing documents, applicable laws or certain agreements as a result of entering into the merger agreement or completing the merger;

 

    required regulatory consents necessary in connection with the merger;

 

    proper filing of documents with regulatory agencies and the SEC and the accuracy of information contained in the documents filed with the SEC, and Sarbanes-Oxley certifications;

 

    financial statements and the conformity with U.S. GAAP and SEC requirements of City National’s financial statements filed with the SEC and the absence of undisclosed liabilities;

 

    broker’s and finder’s fees related to the merger;

 

    the absence of a material adverse effect since December 31, 2013;

 

    legal and regulatory proceedings;

 

    tax matters;

 

    employee compensation and benefits matters;

 

    compliance with applicable law;

 

    material contracts;

 

    agreements with regulatory agencies;

 

    risk management instruments;

 

    environmental matters;

 

    investment securities;

 

    properties;

 

    intellectual property;

 

    related party transactions;

 

    state takeover laws;

 

    reorganization;

 

    an opinion from financial advisors;

 

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    accuracy of City National information provided in this proxy statement/prospectus;

 

    loan portfolio;

 

    insurance;

 

    investment adviser subsidiaries;

 

    broker dealer subsidiaries; and

 

    books and records.

The merger agreement also contains representations and warranties made by RBC and Holdco to City National relating to a number of matters, including the following:

 

    corporate organization, qualification to do business, standing, power and financial holding company status;

 

    capitalization;

 

    requisite corporate authority to enter into the merger agreement and to complete the contemplated merger;

 

    absence of conflicts with governing documents, applicable laws or certain agreements as a result of entering into the merger agreement or completing the merger;

 

    required regulatory consents necessary in connection with the merger;

 

    proper filing of documents with regulatory agencies and the SEC and the accuracy of information contained in the documents filed with the SEC, and Sarbanes-Oxley certifications;

 

    financial statements and the conformity with IFRS or Canadian GAAP and SEC requirements of RBC’s financial statements filed with the SEC;

 

    broker’s and finder’s fees related to the merger;

 

    the absence of a material adverse effect since October 31, 2014;

 

    legal and regulatory proceedings;

 

    compliance with applicable law;

 

    reorganization;

 

    accuracy of RBC and its subsidiaries information provided in this proxy statement/prospectus;

 

    financing; and

 

    agreements with regulatory agencies.

This summary, and the copy of the merger agreement attached to this proxy statement/prospectus as Appendix A, are included solely to provide investors with information regarding the terms of the merger agreement. They are not intended to provide any other factual information about City National or RBC or any of their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the merger agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the merger agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the merger agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of City National or RBC, or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter

 

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of the representations and warranties may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in the periodic and current reports and statements City National and RBC file with the SEC. The representations and warranties, covenants and other provisions of the merger agreement should not be read alone, but instead should be read only in conjunction with the information provided elsewhere in this proxy statement/prospectus and in the documents incorporated by reference into this proxy statement/prospectus. For more information regarding these documents incorporated by reference, see the section entitled “Where You Can Find More Information”.

Certain of these representations and warranties are qualified as to “materiality” or “material adverse effect”. For purposes of the merger agreement, a “material adverse effect” with respect to RBC, City National or Holdco, as the case may be, means (i) a material adverse effect on the business, properties, assets, liabilities, results of operations or financial condition of that party and its subsidiaries taken as a whole or (ii) a material adverse effect on the ability to consummate the merger on a timely basis, other than, with respect to (i) above, to the extent that effect results from: (A) changes in U.S. GAAP (or, with respect to RBC, IFRS) or applicable regulatory accounting requirements, (B) changes in laws, rules or regulations of general applicability to companies in the industries in which such party and its subsidiaries operate, or interpretations thereof by courts or Governmental Entities, (C) changes in global, national or regional political conditions (including the outbreak of war or acts of terrorism) or in economic or market conditions affecting the financial services industry generally and not specifically relating to such party or its subsidiaries, including changes in prevailing interest rates, credit availability and liquidity, currency exchange rates and price levels or trading volumes in U.S. or foreign securities markets or any change in the credit markets, (D) failure, in and of itself, to meet earnings projections or internal financial forecasts, but not including the underlying causes thereof, (E) changes attributable to disclosure of the transactions contemplated hereby or to actions expressly required by the merger agreement in contemplation of the transactions contemplated hereby, or (F) actions or omissions taken pursuant to the written consent of RBC, in the case of City National, or City National, in the case of RBC; except, with respect to subclauses (A), (B), or (C), to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of such party and its subsidiaries, taken as a whole, as compared to other companies in the industry in which such party and its subsidiaries operate.

Except in limited cases, the representations and warranties in the merger agreement do not survive the effective time of the merger and, as described below under “—Termination”, if the merger agreement is validly terminated, there will be no liability under the representations and warranties of the parties, or otherwise under the merger agreement, unless a party willfully breached the merger agreement.

Covenants and Agreements

Conduct of Businesses Prior to the Completion of the Merger. City National has agreed that, prior to the effective time of the merger, it will conduct its businesses, and cause its subsidiaries to conduct its business in the ordinary course in all material respects and use reasonable best efforts to maintain and preserve intact its business organization, employees and advantageous business relationships. City National and RBC have agreed to and cause their subsidiaries to, take no action that is intended to or would reasonably be expected to adversely affect or materially delay the ability to obtain any necessary approvals required for the completion of the merger or to perform the covenants and agreements in the merger agreement or to consummate the merger.

Additionally, City National has agreed that prior to the effective time of the merger, except as expressly contemplated or permitted by the merger agreement or as required by law, it will not and will not permit any of its subsidiaries to, without the prior written consent of RBC:

 

    other than in the ordinary course of business, incur any indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other person, other than any City National subsidiary;

 

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    adjust, split, combine or reclassify any capital stock;

 

    make, declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock, except (A) regular quarterly cash dividends by City National at a rate not in excess of $0.33 per share of City National common stock, (B) dividends paid by any City National subsidiary to City National or any of its wholly owned subsidiaries, (C) any required dividends on City National preferred stock or the preferred stock of any City National subsidiary or (D) the acceptance of shares of City National common stock as payment for the exercise price of City National stock options or for withholding taxes incurred in connection with the exercise of City National stock options or the vesting or settlement of City National equity awards, in each case in accordance with past practice and the terms of the applicable award agreements;

 

    grant any stock options, stock appreciation rights, performance shares, restricted stock units, restricted shares or other equity-based awards or interests, or grant any individual, corporation or other entity any right to acquire any shares of its capital stock;

 

    issue, sell or otherwise permit to become outstanding any additional shares of capital stock or securities convertible or exchangeable into, or exercisable for, any shares of its capital stock or any options, warrants or other rights of any kind to acquire any shares of capital stock, except for the issuance of shares upon the exercise of City National stock options or the vesting or settlement of City National equity awards (and dividend equivalents thereon, if any);

 

    sell, transfer, mortgage, encumber or otherwise dispose of any of its material properties or assets to any individual, corporation or other entity other than a wholly owned subsidiary, or cancel, release or assign any indebtedness to any such person or any claims held by any such person, in each case other than in the ordinary course of business;

 

    except for transactions in the ordinary course of business, make any material investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets of any other individual, corporation or other entity, other than in a wholly owned City National subsidiary;

 

    terminate, materially amend, or waive any material provision of, any Company Contract (as defined in the merger agreement), or make any change in any instrument or agreement governing the terms of any of its securities, or (ii) enter into any contract that would constitute a Company Contract if it were in effect on the date of the merger agreement;

 

   

except as required under applicable law or the terms of any City National benefit plan existing as of the date hereof, (i) except as would not in the aggregate result in an increase in costs from the date of the merger agreement that would be material to the City National or Holdco, enter into, adopt or terminate any employee benefit or compensation plan, program, policy or arrangement for the benefit of any current or former employee, officer, director or consultant (who is a natural person), (ii) except as would not in the aggregate result in an increase in costs from the date of the merger agreement that would be material to the City National or Holdco, amend (whether in writing or through the interpretation of) any employee benefit or compensation plan, program, policy or arrangement for the benefit of any current or former employee, officer, director or consultant (who is a natural person), (iii) increase the compensation or benefits payable to any current or former employee, officer, director or consultant (who is a natural person), (iv) pay or award, or commit to pay or award, any bonuses or incentive compensation, (v) grant or accelerate the vesting of any equity-based awards or other compensation, (vi) enter into any new, or amend (whether in writing or through the interpretation of) any existing, employment, severance, change in control, retention, bonus guarantee, or collective bargaining agreement or arrangement, (vii) fund any rabbi trust, (viii) terminate the employment or

 

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services of any employee in a position of Executive Vice President or above (including, for the avoidance of doubt, any officers) or whose target annual compensation (i.e., annual base salary plus annual target bonus opportunity, excluding commission-based incentives) is greater than $750,000, other than for cause, or (ix) hire any (A) employee who will have a position of Executive Vice President or above (including, for the avoidance of doubt, any officers) or whose target annual compensation (i.e., annual base salary plus annual target bonus opportunity, excluding commission-based incentives) is greater than $750,000 or (B) consultant (who is a natural person) who has target annual compensation greater than $500,000;

 

    settle any material claim, suit, action or proceeding, except in the ordinary course of business, in an amount and for consideration not in excess of $5,000,000 individually or $10,000,000 in the aggregate or that would not impose any material restriction on the business of it or its subsidiaries or Holdco or affect the merger and the other transactions contemplated thereby;

 

    take any action or knowingly fail to take any action where such action or failure to act could reasonably be expected to prevent the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code;

 

    amend its certificate of incorporation, by-laws or comparable governing documents of its subsidiaries (as such term is defined in Rule 1-02 of Regulation S-X promulgated under the Exchange Act);

 

    merge or consolidate itself or any of its subsidiaries with any other person, or restructure, reorganize or completely or partially liquidate or dissolve itself or any of its subsidiaries;

 

    materially restructure or materially change its investment securities or derivatives portfolio or its interest rate exposure, through purchases, sales or otherwise;

 

    take any action that is intended or expected to result in any of its representations and warranties set forth in this agreement being or becoming untrue in any material respect at any time prior to the effective time of the merger or in any of the conditions to the merger set forth in Article VII of the merger agreement not being satisfied or in a violation of any provision of the merger agreement, except, in every case, as may be required by applicable law;

 

    implement or adopt any change in its accounting principles, practices or methods, other than as may be required by GAAP or by applicable laws, regulations, guidelines or policies imposed by any governmental entity;

 

    enter into any material new line of business or change in any material respect its lending, investment, underwriting, risk and asset liability management and other banking and operating, securitization and servicing policies (including any change in the maximum ratio or similar limits as a percentage of its capital exposure applicable with respect to its loan portfolio or any segment thereof), except as required by such policies or applicable law, regulation or policies imposed by any governmental entity or make any loans or extensions of credit except in the ordinary course of business consistent with past practice and in conformity with City National’s ordinary course lending policies and guidelines (including, in each case, with respect to loan amounts, security, collateral, loan terms, single name exposure limits and portfolio mix) in effect as of the date of the merger agreement;

 

    make any material changes in its policies and practices with respect to (i) underwriting, pricing, originating, acquiring, selling, servicing or buying or selling rights to service loans or (ii) its hedging practices and policies, in each case except as may be required by such policies and practices or by any applicable laws, regulations, guidelines or policies imposed by any governmental entity;

 

    make, or commit to make, any capital expenditures in excess of the amounts specified in the capital expenditure budget made available to RBC prior to the date of the merger agreement plus 10%;

 

   

other than in the ordinary course of business consistent with past practice, make, change or revoke any material tax election, change an annual tax accounting period, adopt or materially change any tax

 

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accounting method, file any amended tax return, enter into any closing agreement with respect to taxes, or settle any material tax claim, audit, assessment or dispute or surrender any right to claim a refund of a material amount of taxes;

 

    make application for the opening, relocation or closing of any, or open, relocate or close any, branch office, loan production office or other significant office or operations facility of itself or its subsidiaries;

 

    knowingly take, or, to the extent feasible, fail to prevent, any action that is intended to or would reasonably be likely to adversely affect or materially delay the ability of City National or its subsidiaries to obtain any necessary approvals of any governmental entity required for the transactions contemplated hereby or to perform its covenants and agreements under the merger agreement or to consummate the transactions contemplated in the merger agreement; or

 

    agree to take, make any commitment to take, or adopt any resolutions of its board of directors or similar governing body in support of, any of the above prohibited actions.

RBC and Holdco have agreed to a more limited set of restrictions on its business prior to the completion of the merger. Specifically, RBC and Holdco have agreed that prior to the effective time of the merger, except as expressly permitted by the merger agreement, they will not and will not permit any of their subsidiaries to, without the prior written consent of City National:

 

    amend RBC’s by-laws or the governing documents of any of its subsidiaries in a manner that would materially and adversely affect the economic benefits of the merger to the holders of City National common stock or adversely affect the holders of City National common stock relative to holders of RBC common shares or that would materially impede RBC’s ability to consummate the transactions contemplated by the merger agreement;

 

    take, or omit to take, any action that would or is reasonably likely to prevent or impede the merger from qualifying as a tax-free reorganization or to cause the stockholders of City National to recognize gain or take any action to prevent, materially impede or materially delay the consummation of the merger, or take, or omit to take, any action that is reasonably likely to result in any of the conditions to the merger not being satisfied; or

 

    agree to take, make any commitment to take, or adopt any resolutions of its board of directors in support of, any of the above prohibited actions.

Regulatory Matters. RBC and City National have agreed to promptly prepare and file with the SEC a registration statement on Form F-4, of which this proxy statement/prospectus is a part. RBC and City National have agreed to use reasonable best efforts to have the Form F-4 declared effective under the Securities Act as promptly as practicable after such filing, and to mail or deliver the proxy statement/prospectus to City National’s stockholders. RBC has also agreed to use its reasonable best efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to consummate the merger, and City National has agreed to furnish all information concerning City National and the holders of City National common stock as may be reasonably requested in connection with any such action.

RBC and City National have agreed to cooperate with each other and use their respective reasonable best efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and governmental entities that are necessary or advisable to consummate the merger.

Also, each of RBC and City National have agreed to use their reasonable best efforts to avoid the entry of, or to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that would restrain, prevent or delay the closing.

 

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Additionally, each of RBC and City National have agreed to furnish to the other all information concerning itself, its subsidiaries, directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with this proxy statement/prospectus, the Form F-4 or any other statement, filing, notice or application made by or on behalf of RBC, City National or any of their respective subsidiaries to any governmental entity in connection with the merger.

Furthermore, RBC and City National have agreed to promptly advise each other upon receiving any communication from any governmental entity whose consent or approval is required for consummation of the transactions contemplated by the merger agreement that causes such party to believe that there is a reasonable likelihood that any requisite regulatory approval will not be obtained or that the receipt of any such approval will be materially delayed.

RBC will, at or prior to the effective time of the merger, cause Holdco to enter into one or more supplemental indentures, guarantees, and other instruments required for the due assumption of City National’s outstanding debt, guarantees, securities, and other agreements to the extent required.

Stockholder Approval. City National’s board of directors has resolved to recommend to the City National common stockholders that they approve the merger agreement and the transactions contemplated thereby and to submit to the City National common stockholders the merger agreement and any other matters required to be approved by the City National common stockholders in order to carry out the intentions of the merger agreement.

TSX and NYSE Listing. RBC will cause the RBC common shares to be issued in the merger to be authorized for listing on the TSX and NYSE, and will cause the New RBC Preferred Shares to be issued in the merger to be authorized for listing on the NYSE only (the New RBC Preferred Shares will be represented by depositary shares listed on the NYSE as discussed in this proxy statement/prospectus).

Employee Matters. During the period commencing at the effective time of the merger and ending on December 31, 2016 (which we refer to as the “Continuation Period”), RBC shall cause the surviving corporation to provide (i) each employee of City National or any of its subsidiaries as of the effective time of the merger who remains employed by RBC or any of its affiliates (including the surviving corporation and its subsidiaries) following the effective time of the merger (which we refer to as a “continuing employee”) with (A) an annual base salary or base wage rate and target annual bonus opportunity that are, in each case, no less favorable than that provided to such employee by City National and its subsidiaries immediately prior to the effective time of the merger and (B) a long-term incentive opportunity (referred to by RBC as “equity-based deferred compensation”) that is substantially comparable to that provided to such employee by City National and its subsidiaries immediately prior to the effective time of the merger and (ii) the continuing employees with employee benefits that are substantially comparable in the aggregate to those provided to such employees by City National and its subsidiaries immediately prior to the effective time of the merger, it being understood that the health and welfare plans of City National as in effect immediately prior to the effective time of the merger shall remain in effect for the duration of the continuation period subject to such modifications as are required by applicable law or determined to be appropriate by the chief executive officer of the surviving corporation. During the continuation period, RBC shall continue to maintain or cause to be maintained, without amendment, City National’s severance policies and plans applicable to continuing employees immediately prior to the effective time of the merger, and shall provide, or cause to be provided, to each continuing employee whose employment is terminated during the continuation period without “cause”, as such term is defined or concept is used for purposes of the applicable City National severance plan, or who otherwise experiences a severance-qualifying termination under the applicable City National severance plan, with the severance benefits specified in the applicable City National severance plan.

With respect to any employee benefit plans of RBC or its subsidiaries in which any employees of City National or its subsidiaries become eligible to participate on or after the effective time of the merger (which we refer to as “new plans”), RBC shall or shall cause the surviving corporation to: (i) use commercially reasonable

 

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efforts to (A) waive all pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to each such employee and his or her eligible dependents under any new plans, except to the extent such pre-existing conditions, exclusions or waiting periods would apply under the analogous City National benefit plan, and (B) provide each such employee and his or her eligible dependents with credit for any co-payments or deductibles paid prior to the effective time of the merger under a City National benefit plan (to the same extent that such credit was given under the analogous City National benefit plan prior to the effective time of the merger) in satisfying any applicable deductible or out-of-pocket requirements under any new plans; and (ii) recognize all service of each such employee with City National and its subsidiaries (and their respective predecessors, if applicable) for all purposes in any new plan; provided that the foregoing service recognition shall not apply (A) to the extent it would result in duplication of benefits for the same period of services, (B) for purposes of any defined benefit pension plan or benefit plan that provides retiree welfare benefits, or (C) to any benefit plan that is a frozen plan or provides grandfathered benefits.

If requested by RBC in writing prior to the closing date of the merger, City National shall cause any 401(k) plan sponsored or maintained by City National or any of its affiliates (each of which we refer to as a “City National 401(k) plan”) to be terminated effective immediately prior to the closing date of the merger and contingent upon the occurrence of the closing of the merger. If RBC requests termination of the City National 401(k) plan prior to the effective time of the merger, the continuing employees shall be eligible to participate, effective as of the effective time of the merger, in the RBC 401(k) plan and, for the avoidance of doubt, would be eligible to receive the same employer matching contributions as provided to participants in the RBC 401(k) plan generally.

RBC and City National have agreed to the establishment of a cash retention pool which may be awarded to employees of City National and its subsidiaries, including executive officers.

Indemnification and Directors’ and Officers’ Insurance. From and after the effective time of the merger, RBC shall cause Holdco (the surviving entity in the merger) to indemnify and hold harmless each present and former director, officer or employee of City National and its subsidiaries or fiduciaries of City National or any of its subsidiaries under City National benefit plans (in each case, when acting in such capacity) (collectively, the “City National Indemnified Parties”) against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, damages or liabilities incurred in connection with any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, whether arising before or after the effective time of the merger, arising in whole or in part out of (i) the fact that such person is or was a director, officer or employee of City National or any City National subsidiary or is or was a fiduciary of City National or any of its subsidiaries under City National benefit plans or (ii) matters, acts or omissions existing or occurring at or prior to the effective time of the merger, including the transactions contemplated thereby to the same extent as such persons are indemnified as of the date of the merger agreement by City National pursuant to City National’s certificate of incorporation, by-laws, governing or organizational documents of any City National subsidiary and any indemnification agreements in existence as of the date of the merger agreement; and RBC will also cause the surviving corporation to advance expenses as incurred by such City National Indemnified Party to the same extent as such persons are entitled to advancement of expenses as of the date of the merger agreement by City National pursuant to the City National’s certificate of incorporation, by-laws, governing or organizational documents of any City National subsidiary and any indemnification agreements in existence as of the date of the merger agreement; provided that the City National Indemnified Party to whom expenses are advanced provides an undertaking (in a reasonable and customary form) to repay such advances if it is ultimately determined that such City National Indemnified Party is not entitled to indemnification.

RBC has agreed to provide directors’ and officers’ liability insurance that serves to reimburse the present and former officers and directors of City National or any of its subsidiaries with respect to claims against such directors and officers arising from facts or events occurring at or before the effective time of the merger for a period of six years following the effective time of the merger. The insurance will contain terms and conditions that are not less advantageous than the current coverage provided by City National, except that RBC is not

 

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required to incur annual premium expense greater than 300% of City National’s current aggregate annual directors’ and officers’ liability insurance premium. At or prior to the effective time of the merger and in lieu of the foregoing, City National, in consultation with RBC, may purchase and pay for a tail policy for directors’ and officers’ liability insurance on the terms described in the prior sentence.

No Solicitation. The merger agreement precludes City National and its subsidiaries and their respective officers, directors, agents, advisors and affiliates from initiating, soliciting, encouraging or knowingly facilitating inquiries or proposals with respect to, or engaging in any negotiations concerning, or providing any confidential or nonpublic information or data to, or having any discussions with, any person relating to, any Acquisition Proposal (defined below). However, if City National receives an unsolicited bona fide Acquisition Proposal and City National’s board of directors concludes in good faith that such Acquisition Proposal constitutes or is more likely than not to result in a Superior Proposal (defined below), City National may, and may permit its subsidiaries and its and its subsidiaries’ representatives to, furnish or cause to be furnished nonpublic information or data and participate in such negotiations or discussions to the extent that its board of directors concludes in good faith (after receiving the advice of its outside counsel, and with respect to financial matters, its financial advisors) that failure to take such actions would result in a violation of its fiduciary duties under applicable law. City National has also agreed to advise RBC within 24 hours following receipt of any Acquisition Proposal and of the substance of the Acquisition Proposal (including the identity of the person making such Acquisition Proposal), and will keep RBC promptly apprised of any developments.

 

    As used in the merger agreement, “Acquisition Proposal” means, other than the transactions contemplated by the merger agreement, any offer, proposal or inquiry relating to, or any third party indication of interest in, (i) any acquisition or purchase, direct or indirect, of 20% or more of the consolidated assets of City National and its subsidiaries or 20% or more of any class of voting securities of City National or its subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets of City National, (ii) any tender offer or exchange offer that, if consummated, would result in such third party beneficially owning 20% or more of any class of equity or voting securities of City National or its subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets of City National, or (iii) a merger, consolidation, share exchange, other business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving City National or its subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets of City National, except, in each case, any sale of whole loans and securitizations in the ordinary course of business and any bona fide internal reorganization.

 

    As used in the merger agreement, “Superior Proposal” means a bona fide written Acquisition Proposal that the board of directors of City National concludes in good faith to be more favorable from a financial point of view to its stockholders than the merger and the other transactions contemplated thereby, (i) after receiving the advice of its financial advisors (who must be a nationally recognized investment banking firm), (ii) after taking into account the likelihood of consummation of such transaction on the terms set forth therein and (iii) after taking into account all legal (with the advice of outside counsel), financial (including the financing terms of any such proposal), regulatory and other aspects of such proposal (including any expense reimbursement provisions and conditions to closing) and any other relevant factors permitted under applicable law; provided, that for purposes of the definition of “Superior Proposal”, the references to “20%” in the definition of Acquisition Proposal shall be deemed to be references to “a majority”.

Change of Methods. RBC may at any time change the method of effecting the transactions contemplated in the merger agreement, provided that no such change or amendment (i) alters or changes the amount or kind of the merger consideration, (ii) adversely affects the tax treatment of the merger with respect to City National’s stockholders or (iii) be reasonably likely to cause the closing to be materially delayed or the receipt of the requisite regulatory approvals to be prevented or materially delayed.

 

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Restructuring Efforts. If the City National common stockholders do not approve the merger at the City National special meeting or at any adjournment or postponement thereof, RBC and City National have agreed to use reasonable best efforts to negotiate a restructuring of the merger and/or to resubmit the merger to City National’s common stockholders for approval; however, neither RBC nor City National will be required to alter any material terms of the merger agreement or adversely affect the tax treatment of the merger with respect to City National stockholders in any such negotiations.

Conditions to the Merger

Conditions to Each Party’s Obligations. The respective obligations of each of RBC and City National to complete the merger are subject to the satisfaction of the following conditions:

 

    receipt of the requisite affirmative vote of the City National common stockholders on the merger agreement;

 

    the RBC common shares to be issued in the merger must have been authorized for listing on the TSX and NYSE, and the New RBC Preferred Shares to be issued in the merger must have been authorized for listing on the NYSE only (the New RBC Preferred Shares will be represented by depositary shares listed on the NYSE as discussed in this proxy statement/prospectus);

 

    the effectiveness of the registration statement on Form F-4, of which this proxy statement/prospectus is a part, and the absence of a stop order or proceeding initiated or threatened by the SEC for the purpose of suspending the effectiveness of the Form F-4;

 

    the absence of any injunction or other legal prohibition or restraint against the merger; and

 

    receipt of required regulatory approvals, and the requirement that no regulatory approval required for the merger result in the imposition of a condition or restriction that would reasonably be likely to have a material and adverse effect on RBC and its subsidiaries, taken as a whole (with such materiality measured on a scale relative to City National and its subsidiaries, taken as a whole).

Conditions to Obligations of RBC. The obligation of RBC and Holdco to complete the merger is also subject to the satisfaction, or waiver by RBC, of the following conditions:

 

    the accuracy of the representations and warranties of City National as of the date of the merger agreement and as of the closing date of the merger, other than, in most cases, those failures to be true and correct that would not reasonably be expected to result in a material adverse effect on City National;

 

    performance in all material respects by City National of the obligations required to be performed by it at or prior to the closing date of the merger; and

 

    receipt by RBC of an opinion of Sullivan & Cromwell LLP as to the effect that (i) the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and (ii) that the merger will not result in gain recognition to the holders of City National common stock pursuant to Section 367(a) of the Code.

Conditions to Obligations of City National. The obligation of City National to complete the merger is also subject to the satisfaction or waiver by City National of the following conditions:

 

    the accuracy of the representations and warranties of RBC as of the date of the merger agreement and as of the closing date of the merger, other than those failures to be true and correct that would not reasonably be expected to result in a material adverse effect on RBC;

 

    performance in all material respects by RBC of the obligations required to be performed by it at or prior to the closing date of the merger; and

 

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    receipt by City National of an opinion of Wachtell, Lipton, Rosen & Katz as to the effect that (i) the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and (ii) that the merger will not result in gain recognition to the holders of City National common stock pursuant to Section 367(a) of the Code.

Termination

The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after approval of the merger by City National common stockholders:

 

    by mutual written consent of RBC and City National;

 

    by either City National or RBC, if any of the required regulatory approvals are denied or completion of the merger has been prohibited or made illegal by a governmental entity (and the denial or prohibition is final and nonappealable);

 

    by either City National or RBC, if the merger has not been completed by January 22, 2016, unless the failure to complete the merger by that date is due to the terminating party’s failure to abide by the merger agreement;

 

    by either City National or RBC, if there is a breach by the other party that would result in the failure of the conditions of the terminating party’s obligation to complete the merger, unless the breach is capable of being, and is, cured within 60 days of written notice of the breach (provided that the terminating party is not then in material breach of the merger agreement);

 

    by RBC, if City National or City National’s board of directors (1) submits the merger agreement to its stockholders without a recommendation for approval, or otherwise withdraws or materially and adversely modifies (or discloses such intention) its recommendation for approval, or recommends to its stockholders an Acquisition Proposal other than the merger agreement, or (2) materially breaches its obligation to call a stockholder meeting or prepare and mail its stockholders the proxy statement/prospectus pursuant to the merger agreement; or

 

    by RBC, if a tender or exchange offer for 20% or more of the outstanding shares of City National common stock is commenced (other than by RBC), and City National’s board of directors recommends that the City National stockholders tender their shares in such tender or exchange offer or otherwise fails to recommend that such stockholders reject such tender or exchange offer within 10 business days.

Effect of Termination and Termination Fee

If the merger agreement is validly terminated, the agreement will become void without any liability on the part of any of the parties unless a party has willfully and materially breached the merger agreement. However, the provisions of the merger agreement relating to authority, fees and expenses and the confidentiality obligations of the parties will continue in effect notwithstanding termination of the merger agreement.

In the event that after the date of the merger agreement a bona fide Acquisition Proposal is made known to senior management of City National or is made directly to its stockholders generally or any person has publicly announced (and not withdrawn) an Acquisition Proposal with respect to City National and (a) (i) thereafter the merger agreement is terminated by either RBC or City National due to the lack of consummation on or before the first anniversary of the date of the merger agreement pursuant to Section 8.1(c) of the merger agreement without the requisite company vote having been obtained or (ii) thereafter the merger agreement is terminated by RBC due to a breach by City National of any of the covenants or agreements or any of the representations or warranties pursuant to Section 8.1(d) of the merger agreement, and (b) prior to the date that is 15 months after the date of such termination, City National enters into a definitive agreement or consummates a transaction with respect to an Acquisition Proposal (whether or not the same Acquisition Proposal as that referred to above), then City National will pay RBC a termination fee equal to $220,000,000; provided, that for this purpose all references in the definition of Acquisition Proposal to “20%” shall instead refer to “50%”.

 

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Amendments, Extensions and Waivers

The merger agreement may be amended by the parties, by action taken or authorized by their respective boards of directors, at any time before or after approval of the merger agreement proposal by the City National stockholders, in writing signed on behalf of each of the parties, subject to applicable law.

At any time prior to the effective time of the merger, the parties, by action taken or authorized by their respective boards of directors, may, (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained in the merger agreement or (c) waive compliance with any of the agreements or conditions contained in the merger agreement. Any agreement on the part of a party to any extension or waiver must be in writing.

Fees and Expenses

Except with respect to costs and expenses of printing and mailing this proxy statement/prospectus and all filing and other fees paid to the SEC in connection with the merger, which will be borne equally by RBC and City National, all fees and expenses incurred in connection with the merger, the merger agreement, and the transactions contemplated by the merger agreement will be paid by the party incurring such fees or expenses, whether or not the merger is consummated.

 

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THE VOTING AGREEMENT

The following is a summary of the voting agreement only and may not contain all of the information that is important to you. The following description is subject to, and is qualified in its entirety by reference to, the voting agreement, a copy of which is attached as Appendix B to this proxy statement/prospectus and incorporated herein by reference. We urge you to read the voting agreement in its entirety. In the event of any discrepancy between the terms of the voting agreement and the following summary, the voting agreement will control.

Concurrently with the execution of the merger agreement on January 22, 2015, and as a condition to RBC’s willingness to enter into the merger agreement, RBC entered into a voting agreement with Russell Goldsmith, the CEO and Chairman of City National, and with a number of trusts and other entities owned and/or controlled by Russell Goldsmith or Bram Goldsmith, who is also a director of City National. We collectively refer to those non-RBC parties to the voting agreement as the “Goldsmith Parties”. As of the date the voting agreement was executed, the Goldsmith Parties beneficially owned, collectively, 7,163,089 shares of City National common stock, or approximately 13% of the City National common stock issued and outstanding at that time.

Voting Provisions

Each of the Goldsmith Parties has granted RBC an irrevocable proxy to vote its beneficially owned shares of City National common stock, including any shares acquired after the date of the voting agreement, in favor of the adoption and approval of the merger agreement and the transactions contemplated thereby, at every meeting of the stockholders of City National at which such matters are considered and at every adjournment or postponement thereof, and to not vote its shares in favor of, or approve or otherwise support (i) any action or agreement that would compete with, or materially impede, or interfere with or that would reasonably be expected to discourage the merger agreement or the transactions contemplated thereby or inhibit the timely consummation of the merger agreement or the transactions contemplated thereby, (ii) any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any other obligation of City National under the merger agreement, or (iii) certain other business combination transactions involving parties other than RBC and its affiliates.

Each of the Goldsmith Parties has agreed that it will not, nor permit any entity under its control to, deposit any shares of City National common stock, including any shares acquired after the date of the voting agreement, in a voting trust or subject any such shares to any voting arrangements other than agreements entered into with RBC.

Each of the Goldsmith Parties has agreed that it will not, nor permit any entity under its control to:

 

    solicit proxies or become a “participant” in a “solicitation” (as such terms are defined in Regulation 14A under the Securities Exchange Act) in opposition to or competition with the consummation of the transactions under the merger agreement or otherwise encourage or assist any party in taking or planning any action which would compete with, or materially impede, or interfere with or that would reasonably be expected to discourage the transactions under the merger agreement or inhibit the timely consummation of the transactions under the merger agreement in accordance with the terms of the merger agreement;

 

    directly or indirectly encourage, initiate or cooperate in a stockholders’ vote or action by consent of City National’s stockholders in opposition to or in competition with the consummation of the transactions contemplated under the merger agreement; or

 

    become a member of a “group” (as such term is used in Section 13(d) of the Securities Exchange Act) with respect to any voting securities of City National for the purpose of opposing or competing with the consummation of the transactions contemplated under the merger agreement.

 

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Election Provisions

Each of the Goldsmith Parties has agreed that it will make a stock election (an election to receive RBC common shares as merger consideration) for all of its shares of City National common stock, including any shares acquired after the date of the voting agreement.

Transfer Restrictions

Prior to the completion of the merger, each of the Goldsmith Parties has agreed that it will not transfer any of its beneficially owned shares of City National common stock, including any shares acquired after the date of the voting agreement, other than (i) transfers among the Goldsmith Parties, (ii) transfers for estate planning or tax purposes if the transferee agrees to become bound by the voting agreement and (iii) transfers of up to 150,000 shares in the aggregate for philanthropic purposes.

For a period of three years following the completion of the merger, the Goldsmith Parties have agreed not to transfer more than one-half of the RBC common shares they collectively receive as merger consideration (excluding RBC common shares received in respect of restricted shares of City National common stock or any shares issuable upon the vesting, exercise or settlement of any employee equity awards), without the prior written consent of RBC or under certain limited conditions.

Termination

The voting agreement will terminate at the earlier to occur of (i) the completion of the merger and (ii) the termination of the merger agreement pursuant to its terms.

 

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BENEFICIAL OWNERSHIP OF CITY NATIONAL COMMON STOCK

The following table sets forth information as of April 13, 2015 regarding the beneficial owners of more than 5% of the outstanding shares of City National common stock, except as to (i) FMR LLC, whose beneficial ownership is based solely on a Schedule 13G filed with the SEC on February 13, 2015, (ii) Blackrock, Inc., whose beneficial ownership is based solely on a Schedule 13G filed with the SEC on February 2, 2015, (iii) Eaton Vance Management, whose beneficial ownership is based solely on a Schedule 13G filed with the SEC on January 13, 2015, and (iv) The Vanguard Group, whose beneficial ownership is based solely on a Schedule 13G filed with the SEC on February 11, 2015. Except as otherwise noted in the footnotes below, each of these persons or entities had sole voting and investment power with respect to the City National common stock beneficially owned by them.

 

Name and Address of Beneficial Owner

Number of
Shares of
Common Stock
Beneficially
Owned(1)
  Percent
of
Class(2)
 

Bram Goldsmith

400 North Roxbury Drive

Beverly Hills, CA 90210

Bram and Elaine Goldsmith, Trustees of the Bram and Elaine Goldsmith Family Trust

  2,611,672   

Elaine and Bram Goldsmith, Trustees of the Elaine Goldsmith Revocable Trust

  534,960   

Bram Goldsmith

  69,492 (3) 

Goldsmith Family Foundation

  233,425 (4) 

Bram Goldsmith, Trustee of Oak Trust A-2

  43,736 (5) 
  

 

 

   

Total #

  3,493,285 (20)    6.3

Russell Goldsmith

400 North Roxbury Drive

Beverly Hills, CA 90210

Goldsmith Family Partnership

  2,860,000 (6) 

The Russell Goldsmith Trust

  327,931 (7) 

ELM 2006 Charitable Annuity Lead Trust

  3,235 (8) 

Russell Goldsmith, Trustee of certain family trusts

  7,046 (9) 

B.A. Quintet LLC

  76,222 (10) 

Maple-Pine Limited Partnership

  244,930 (11) 

Goldsmith Family Foundation

  233,425 (4) 

Russell Goldsmith

  5,032 (12) 

Russell Goldsmith, Trustee of the West LA Investment Trust No. 1-R

  8   

B.N. Maltz Foundation

  47,774 (13) 

Russell Goldsmith, Special Trustee of certain family trusts

  97,702 (14) 

Grove Trust II

  82,405 (15) 

Nate Mack, L.L.C

  750 (16) 

Options Exercisable

  531,206 (17) 

CNC Stock Fund Units

  177,401 (18) 

RSUs Vested

  133,316 (19) 
  

 

 

   

Total #

  4,828,383 (20)    8.6

FMR LLC

  3,724,582 (21)    6.7

245 Summer Street

Boston, Massachusetts 02210

BLACKROCK, INC.

  3,067,144 (22)    5.5

55 East 52nd Street

New York, New York 10022

THE VANGUARD GROUP

  2,772,981 (23)    5.0

100 Vanguard Boulevard

Malvern, PA 19355

EATON VANCE MANAGEMENT

  2,960,774 (24)    5.3

2 International Place

Boston, Massachusetts 02110

 

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(1) Includes restricted stock issued pursuant to the City National Omnibus Plans which has voting rights but not dispositive power.
(2) Based on 55,604,605 shares of common stock outstanding at April 13, 2015. Additionally, for purposes of calculating the class percentage beneficially owned by a person (or group of persons), any shares of common stock issuable upon the exercise or conversion of securities exercisable or convertible currently or within 60 days of April 13, 2015 with respect to such person (or group of persons) are deemed to be outstanding, but in each case exercisable or convertible securities owned by other persons are not deemed to be outstanding for purposes of the calculation.
(3) Includes 41,239 shares allocated to Bram Goldsmith’s account under the Profit Sharing Plan and 28,253 units held in the City National Stock Fund under the Executive Deferred Compensation Plan, which stock fund units do not have voting rights and do not convert to shares until termination of employment.
(4) The Goldsmith Family Foundation is a tax-exempt charitable foundation of which Bram Goldsmith and Russell Goldsmith are directors and officers. Bram Goldsmith and Russell Goldsmith each disclaim beneficial ownership of these shares.
(5) Shares held in a trust for the benefit of a family member for which Bram Goldsmith is the sole trustee.
(6) The Goldsmith Family Partnership is a limited partnership whose general partners include the Russell Goldsmith Trust, of which Russell Goldsmith is the sole trustee, and the West LA Investment Trust No. 1-R, of which Russell Goldsmith is the sole trustee. Russell Goldsmith disclaims beneficial ownership of the shares held by the Goldsmith Family Partnership except to the extent of Russell Goldsmith’s pecuniary interest in the partnership.
(7) Excludes the 2,860,000 shares identified as being held by the Goldsmith Family Partnership which the Russell Goldsmith Trust may be deemed to beneficially own as a general partner of the Goldsmith Family Partnership.
(8) ELM 2006 Charitable Annuity Lead Trust is a charitable trust for which Russell Goldsmith is the sole trustee.
(9) Shares held in trusts for the benefit of family members for which Russell Goldsmith is the sole trustee.
(10) B.A. Quintet LLC is a limited liability company whose managing members are Russell Goldsmith and his spouse. Russell Goldsmith disclaims beneficial ownership of the shares held by B.A. Quintet LLC except to the extent of his pecuniary interest therein.
(11) Maple Pine Limited Partnership is a limited partnership of which Russell Goldsmith is the General Partner. Russell Goldsmith disclaims beneficial ownership of the shares held by Maple Pine Limited Partnership except to the extent of his pecuniary interest therein.
(12) Includes 2,038 restricted shares solely owned by Russell Goldsmith and 2,994 shares allocated to Russell Goldsmith’s account under the Profit Sharing Plan.
(13) The B.N. Maltz Foundation is a tax exempt charitable foundation of which Russell Goldsmith is a director. Russell Goldsmith disclaims beneficial ownership of these shares.
(14) Shares held in trusts for the benefit of family members for which Russell Goldsmith is the special trustee with voting power but no investment control and no pecuniary interest in any transaction involving shares of City National held by the trusts.
(15) Shares held in trust for the benefit of family members for which Russell Goldsmith is co-trustee. Russell Goldsmith has shared voting and investment power over these shares.
(16) Nate Mack, L.L.C. is a limited liability company whose managing members include Russell Goldsmith’s spouse. Russell Goldsmith disclaims beneficial ownership of these shares.
(17) Represents shares subject to employee stock options which are presently exercisable, or which will become exercisable within 60 days after April 13, 2015.
(18) Represents stock fund units issued to Russell Goldsmith as a result of the termination of his Supplemental Executive Retirement Plan Agreement, which stock fund units do not have voting rights and do not convert to shares until termination of employment.
(19) Represents vested RSUs and RSUs that will vest within 60 days of April 13, 2015, in each case issued pursuant to the City National Omnibus Plans. These units do not have voting rights and do not convert to shares until six months after termination of employment.

 

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(20) Separate beneficial ownership information is provided for Bram Goldsmith (although not required) in order to provide specific information regarding duplicate ownership. After appropriate elimination of duplicate ownership attributable to both Russell Goldsmith and Bram Goldsmith under the Goldsmith Family Foundation (see footnote 4), Bram Goldsmith and Russell Goldsmith and their related interests beneficially own 8,088,243 shares which constitutes 14.3% of the outstanding shares.
(21) Of the 3,724,582 shares beneficially owned by FMR LLC, it has sole voting power as to 106,659 shares and sole dispositive power as to 3,724,582 shares.
(22) Of the 3,067,144 shares beneficially owned by Blackrock, Inc., it has sole voting power as to 2,854,270 shares and sole dispositive power as to 3,067,144 shares.
(23) Of the 2,772,981 shares beneficially owned by The Vanguard Group, it has sole voting power as to 32,231 shares, sole dispositive power as to 2,744,850 shares and shared dispositive power as to 28,131 shares.
(24) Of the 2,960,774 shares beneficially owned by Eaton Vance Management, it has sole voting power as to 2,960,774 shares and sole dispositive power as to 2,960,774 shares.

The following table sets forth the number of outstanding shares of City National common stock beneficially owned as of April 13, 2015 by each of its current directors and named executive officers, and all current directors, and executive officers as a group. Except as otherwise noted in the footnotes below, each of these persons had sole voting and investment power with respect to the City National common stock beneficially owned by that person.

 

     (a)     (b)      (c)      (d)      (e)         

Name or Number of Persons in Group

   Number of
Shares/
Restricted
Shares
Beneficially
Owned(1)
    Options
Exercisable
within 60 days of
April 13, 2015
     RSUs Vested
and Vesting
within 60
days of
April 13,
2015(2)
     Stock
Fund
Units
(EDCP/
DDCP/CNC
Stock
Fund)(3)
     Total
Beneficial
Ownership
     Percent
of
Class*
 

Mohamad Ali

     21        —           —           457         478         *   

Richard L. Bloch

     61,455 (4)      —           —           4,473         65,928         *   

Michael B. Cahill

     27,159 (5)      74,407         —           —           101,566         *   

Christopher J. Carey

     54,544 (6)      201,517         34,846         18,238         309,145         *   

Kenneth L. Coleman

     871 (7)      —           —           4,473         5,344         *   

Brian Fitzmaurice

     49,483 (8)      94,342         —           2,044         145,869         *   

Clifford Gilbert-Lurie

     15        —           —           460         475         *   

Bram Goldsmith

     3,465,032 (9)      —           —           28,253         3,493,285         6.3