Investment Description
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Features
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Key Dates
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£ |
Call Return Feature — We will automatically call the Notes for a Call Price equal to the principal
amount plus the applicable Call Return based on the Call Return Rate if the closing price of each Underlying on any Observation Date is greater than or equal to (a) its Initial Underlying Price (in the case of any Observation Date
except the final Observation Date) or (b) its Downside Threshold (in the case of the final Observation Date). The Call Return increases the longer the Notes are outstanding.
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£
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Downside Exposure at Maturity — If the Notes are not called and, therefore,
the Least Performing Underlying closes below its Downside Threshold on the final Observation Date, we will pay less than your principal amount, if anything, resulting in a loss of your principal amount that will be proportionate to
its full negative Underlying Return. Any contingent repayment of principal only applies if you hold the Notes to maturity. Any payment on the Notes, including any repayment of principal, is subject to our creditworthiness.
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Trade Date
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March 25, 2019
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Settlement Date
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March 28, 2019
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Observation Dates1
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Quarterly (beginning after one year) (see page 4)
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Final Observation Date1
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March 27, 2023
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Maturity Date1
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March 30, 2023
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1
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Subject to postponement if a market disruption event occurs, as described in the product
prospectus supplement under “General Terms of the Securities—Payment at Maturity.”
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THE NOTES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. WE ARE NOT NECESSARILY
OBLIGATED TO REPAY THE FULL PRINCIPAL AMOUNT OF THE NOTES AT MATURITY, AND THE NOTES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE LEAST PERFORMING UNDERLYING. YOU WILL BE EXPOSED TO THE MARKET RISK OF EACH UNDERLYING ON EACH OBSERVATION
DATE, AND ANY DECLINE IN THE PRICE OF ANY UNDERLYING MAY NEGATIVELY AFFECT YOUR RETURN AND WILL NOT BE OFFSET OR MITIGATED BY A LESSER DECLINE OR ANY POTENTIAL INCREASE IN THE PRICE OF THE OTHER UNDERLYING. THIS MARKET RISK IS IN
ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING ONE OF OUR DEBT OBLIGATIONS. YOU SHOULD NOT PURCHASE THE NOTES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE NOTES.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “KEY RISKS” BEGINNING ON PAGE 6 OF THIS PRICING
SUPPLEMENT AND UNDER “RISK FACTORS” BEGINNING ON P-4 OF THE PRODUCT PROSPECTUS SUPPLEMENT AND PAGE S-1 OF THE PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY NOTES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES,
COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR NOTES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL INVESTMENT.
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Note Offering
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Underlyings
(Least Performing of)
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Tickers
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Call Return Rate
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Initial
Underlying
Prices
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Downside Thresholds(1)
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CUSIP
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ISIN
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iShares® MSCI EAFE ETF (EFA)
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EFA
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9.00% per annum
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$64.31
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$45.02, which is 70% of its Initial Underlying Price
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78014H458
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US78014H4589
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iShares® Russell 2000 ETF (IWM)
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IWM
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$149.62
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$104.73, which is 70% of its Initial Underlying Price
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Price to Public
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Fees and Commissions(1)
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Proceeds to Us
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Offering of the Notes
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Total
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Per Note
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Total
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Per Note
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Total
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Per Note
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Notes linked to the Least Performing Underlying of the iShares® MSCI EAFE ETF and the iShares® Russell 2000 ETF
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$5,030,860
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$10.00
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$0.00
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$0.00
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$5,030,860
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$10.00
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UBS Financial Services Inc.
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RBC Capital Markets, LLC
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Additional Information About Royal Bank of Canada and the Notes
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Product prospectus supplement TAS-2 dated September 7, 2018:
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Prospectus supplement dated September 7, 2018:
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Prospectus dated September 7, 2018:
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Investor Suitability
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You fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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You can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that may have the same downside market risk as the Least
Performing Underlying.
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You believe each Underlying will close at or above its Initial Underlying Price on any of the first 12 Observation Dates, or you believe each Underlying will not close below its
Downside Threshold on the final Observation Date.
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You are willing to make an investment whose return is limited to the Call Return Rate, regardless of any potential appreciation of the Underlyings, which could be significant.
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You can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations of the Underlyings.
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You are willing to invest in Notes for which there may be little or no secondary market, and you accept that the secondary market will depend in large part on the price, if any,
at which RBC Capital Markets, LLC, which we refer to as “RBCCM,” is willing to purchase the Notes.
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You are willing to invest in the Notes based on the Call Return Rate specified on the cover page of this pricing supplement.
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You are willing to accept individual exposure to each Underlying and that the performance of the Least Performing Underlying will not be offset or mitigated by the performance of
the other Underlying.
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You do not seek guaranteed current income from this investment and are willing to forgo the dividends paid on the equity securities held by the Underlyings.
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You understand and accept the risks associated with the Underlyings.
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You are willing to invest in securities that may be called early and you are otherwise willing to hold such securities to maturity.
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¨
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You are willing to assume our credit risk for all payments under the Notes, and understand that if we default on our obligations, you may not receive any amounts due to you,
including any repayment of principal.
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You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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You cannot tolerate a loss on your investment and require an investment designed to provide a full return of principal at maturity.
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You are not willing to make an investment that may have the same downside market risk as the Least Performing Underlying.
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You do not believe either Underlying will close at or above its Initial Underlying Price on any one of the first 12 Observation Dates, or you believe an Underlying will close
below its Downside Threshold on the final Observation Date, exposing you to the full downside performance of the Least Performing Underlying.
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You seek an investment that participates in the full appreciation in the prices of the Underlyings, and whose positive return is not limited to the applicable Call Return Rate.
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You cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations of the Least Performing Underlying.
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You are unwilling to invest in the Notes based on Call Return Rate specified on the cover page of this pricing supplement.
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You are unwilling to accept individual exposure to each Underlying and that the performance of the Least Performing Underlying will not be offset or mitigated by the performance
of the other Underlying.
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You seek guaranteed current income from this investment or prefer to receive the dividends paid on the securities held by the Underlyings.
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You do not understand or accept the risks associated with the Underlyings.
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You are unable or unwilling to hold securities that may be called early, or you are otherwise unable or unwilling to hold such securities to maturity, or you seek an investment
for which there will be an active secondary market for the Notes.
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You are not willing to assume our credit risk for all payments under the Notes, including any repayment of principal.
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The suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable
investment for you will depend on your individual circumstances, and you should reach an investment decision only after you and your investment, legal, tax, accounting, and other advisers have carefully considered the suitability of an
investment in the Notes in light of your particular circumstances. You should also review carefully the “Key Risks” below and “Risk Factors” in the product prospectus supplement for risks related to an investment in the Notes. In
addition, you should review carefully the section below, “Information About the Underlyings” for more information about these assets.
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Final Terms of the Notes1
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Issuer:
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Royal Bank of Canada
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Principal
Amount per
Note:
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$10 per Note
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Term:
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Approximately 4 years, if not previously called
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Underlyings:
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The iShares® MSCI EAFE ETF (“EFA”) and the iShares® Russell 2000 ETF (“IWM”)
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Automatic Call
Feature:
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The Notes will be called if the closing price of each Underlying (a) on any of the first 12 Observation Dates is at or above its
Initial Underlying Price or (b) on the final Observation Date is at or above its Downside Threshold.
If the Notes are called, we will pay you on the applicable Call Settlement Date a cash payment per $10 principal amount equal to the
Call Price for the applicable Observation Date.
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Observation
Dates:
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The first Observation Date will occur on March 27, 2020; Observation Dates will occur quarterly thereafter on the dates indicated in
the table below.
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Call Settlement
Dates:
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As set forth in the table below.
The Call Settlement Date for the final Observation Date is the Maturity Date.
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Call Price:
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The Call Price is calculated based on the following formula:
$10 + ($10 x Call Return)
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Call Return /
Call Return
Rate:
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The Call Price is based upon the Call Return. The Call Return increases the longer the Notes are outstanding, and is based on the Call Return Rate of 9.00% per annum.
The Call Return is a fixed amount based upon equal quarterly installments at the Call Return Rate, which is a per annum rate. The
following table sets forth each Observation Date, each Call Settlement Date and the corresponding Call Price for the Notes.
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Observation
Dates
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Call Settlement
Dates
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Call Price
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Call
Return
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March 27, 2020
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March 31, 2020
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$10.90
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9.00%
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June 25, 2020
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June 29, 2020
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$11.125
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11.25%
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September 25, 2020
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September 29, 2020
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$11.35
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13.50%
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December 28, 2020
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December 30, 2020
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$11.575
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15.75%
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March 25, 2021
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March 29, 2021
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$11.80
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18.00%
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June 25, 2021
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June 29, 2021
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$12.025
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20.25%
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September 27, 2021
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September 29, 2021
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$12.25
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22.50%
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December 27, 2021
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December 29, 2021
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$12.475
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24.75%
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March 25, 2022
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March 29, 2022
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$12.70
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27.00%
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June 27, 2022
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June 29, 2022
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$12.925
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29.25%
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September 26, 2022
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September 28, 2022
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$13.15
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31.50%
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December 27, 2022
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December 29, 2022
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$13.375
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33.75%
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March 27, 2023
(the “final
Observation
Date”)
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March 30, 2023 (Maturity Date)
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$13.60
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36.00%
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Payment at
Maturity:
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If the Notes are not called and, therefore, the Final Underlying Price of the Least Performing Underlying is less than its Downside
Threshold, we will pay you a cash payment on the maturity date of less than the principal amount, if anything, resulting in a loss on your initial investment that is proportionate to the negative Underlying Return of the Least
Performing Underlying, equal to:
$10 + ($10 × Underlying Return of the Least Performing Underlying)
You may lose a significant portion or all of your principal at maturity that is proportionate to the decline in the
Least Performing Underlying, regardless of the performance of the other Underlying.
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Least
Performing
Underlying:
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The Underlying with the lowest Underlying Return.
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Underlying Returns:
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With respect to each Underlying,
Final Underlying Price — Initial Underlying Price
Initial Underlying Price
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Downside
Thresholds:
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With respect to each Underlying, 70% of its Initial Underlying Price, as set forth on the cover page.
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Initial
Underlying
Prices:
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With respect to each Underlying, its closing price on March 22, 2019, as set forth on the cover page.
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Final Underlying
Prices:
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With respect to each Underlying, its closing price on the final Observation Date, as determined by the calculation agent.
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Investment Timeline
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March 22, 2019:
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The Initial Underlying Price and Downside Threshold of each Underlying were determined.
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Quarterly
(beginning
after one year):
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The Notes will be called if the closing price of each Underlying
(a) on any of the first 12 Observation Dates is equal to or greater than its Initial Underlying Price or (b) on the final Observation Date is greater than or equal to its Downside Threshold.
If the Notes are called, we will pay the Call Price for the applicable Observation Date, equal to the principal amount plus the applicable Call Return.
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Maturity Date:
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The Final Underlying Price of each Underlying is
observed on the final Observation Date.
If the Notes have not been called, and therefore, the Final Underlying Price of the Least Performing Underlying is less than its Downside
Threshold, we will pay less than the principal amount, if anything, resulting in a loss on your initial investment proportionate to the decline of the Least Performing Underlying, for an amount equal to:
$10 + ($10 × Underlying Return of the Least Performing Underlying) per Note
You may lose a significant portion or all of your principal at maturity that is proportionate to the decline in the Least Performing
Underlying, regardless of the performance of the other Underlying.
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INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. YOU WILL BE EXPOSED TO THE MARKET
RISK OF EACH UNDERLYING ON EACH OBSERVATION DATE, AND ANY DECLINE IN THE PRICE OF ONE UNDERLYING MAY NEGATIVELY AFFECT YOUR RETURN AND WILL NOT BE OFFSET OR MITIGATED BY A LESSER DECLINE OR ANY POTENTIAL INCREASE IN THE PRICE OF THE
OTHER UNDERLYING. ANY PAYMENT ON THE NOTES, INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO OUR CREDITWORTHINESS. IF WE DEFAULT ON OUR PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE NOTES AND YOU COULD
LOSE YOUR ENTIRE INVESTMENT.
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Key Risks
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Risk of Loss at Maturity — The Notes differ from ordinary debt securities in that we will not
necessarily repay the full principal amount of the Notes at maturity. If the Notes are not called prior to the final Observation Date, we will repay you the principal amount of your Notes in cash only if the Final Underlying Price of
each Underlying is greater than or equal to its Downside Threshold, and we will only make that payment at maturity. If the Notes are not called and, therefore, the Final Underlying Price of the Least Performing Underlying is less than
its Downside Threshold, you will lose some or all of your initial investment in an amount proportionate to the decline in the price of the Least Performing Underlying.
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The Contingent Repayment of Principal Applies Only at Maturity — If the Notes are not automatically
called, you should be willing to hold your Notes to maturity. If you are able to sell your Notes prior to maturity in the secondary market, if any, you may have to do so at a loss relative to your initial investment, even if the
prices of both Underlyings are above their respective Downside Thresholds.
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No Periodic Interest Payments — We will not pay any interest with respect to the Notes. We will make
any payments on the Notes only at maturity or upon an automatic call.
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The Call Feature Limits Your Potential Return — The return potential of the Notes if they are called as
of any Observation Date is limited to the applicable Call Return, regardless of the appreciation of either Underlying, which may be significant. Therefore, you may receive a lower payment if the Notes are automatically called or at
maturity, as the case may be, than you would have if you had invested directly in one or both of the Underlyings. In addition, because the Call Return increases the longer the Notes are outstanding, the Call Prices payable on the
initial Observation Dates are less than the Call Price payable on later Observation Dates.
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Reinvestment Risk — If your Notes are called early, the holding period over which you would receive the
per annum Call Return Rate could be as little as one year. There is no guarantee that you would be able to reinvest the proceeds from an investment in the Notes in a comparable investment with a similar level of risk if the Notes are
called prior to the Maturity Date. To the extent you are able to reinvest your proceeds in an investment comparable to the Notes, you will likely incur transaction costs, and the original issue price for such an investment is likely
to include certain built-in costs such as dealer discounts and hedging costs.
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The Call Return Rate Reflects in Part the Volatility and Correlation of the Underlyings
and May Not Be Sufficient to Compensate You for the Risk of Loss at Maturity — “Volatility” refers to the frequency and magnitude of changes in the
prices of the Underlyings. The greater the volatility of the Underlyings, the more likely it is that the price of either Underlying could close below its Downside Threshold on the final Observation Date. This risk will generally be
reflected in a higher Call Return Rate for the Notes than the interest rate payable on our conventional debt securities with a comparable term. In addition, lower correlation between the Underlyings can also indicate a greater
likelihood of one Underlying closing below its Initial Underlying Price or Downside Threshold on an Observation Date. This greater risk will also be reflected in a higher Call Return Rate than on a security linked to Underlyings
with a greater degree of correlation. However, while the Call Return Rate is a fixed amount, the Underlyings’ volatility and correlation can change significantly over the term of the Notes. The prices of one or both of the
Underlyings could fall sharply as of the final Observation Date, which could result in the Notes not being called and a significant loss of your principal amount.
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The Notes Are Subject to Our Credit Risk — The Notes are subject to our credit risk, and our credit ratings and credit spreads may adversely affect the market value of the Notes. Investors are dependent on our ability to pay all
amounts due on the Notes, and therefore investors are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or increase in the credit spreads charged by the market
for taking our credit risk is likely to adversely affect the value of the Notes. If we were to default on our payment obligations, you may not receive any amounts owed to you under the Notes and you could lose your entire
investment.
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The Notes Are Subject to Risks, Including Non-Payment in Full, Under Canadian Bank Resolution Powers —
Under Canadian bank resolution powers, the Canada Deposit Insurance Corporation (“CDIC”) may, in circumstances where we have ceased, or are about to cease, to be viable, assume temporary control or ownership over us and may be granted
broad powers by one or more orders of the Governor in Council (Canada), including the power to sell or dispose of all or a part of our assets, and the power to carry out or cause us to carry out a transaction or a series of
transactions the purpose of which is to restructure our business. See “Description of Debt Securities—Canadian Bank Resolution Powers” in the accompanying prospectus for a
description of the Canadian bank resolution powers, including the bail-in regime. If the CDIC were to take action under the Canadian bank resolution powers with respect to us, holders of the Notes could be exposed to losses.
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The Initial Estimated Value of the Notes Is Less than the Price to the Public — The initial estimated
value for the Notes that is set forth on the cover page of this pricing supplement, which is less than the public offering price you pay for the Notes, does not represent a minimum price at which we, RBCCM or any of our other
affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any time. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the
initial estimated value. This is due to, among other things, changes in the prices of the Underlyings, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to public of our estimated profit and
the costs relating to our hedging of the Notes. These factors, together with various credit, market and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any
secondary market and will affect the value of the Notes in complex and unpredictable ways. Assuming no change in market conditions or any other relevant factors, the price, if any, at which you may be able to sell your Notes prior to
maturity may be less than the price to public, as any such sale price would not be expected to include our estimated profit and the costs relating to our hedging of the Notes. In addition, any price at which you may sell the Notes is
likely to reflect customary bid-ask spreads for similar trades. In addition to bid-ask spreads, the value of the Notes determined for any secondary market price is expected to
be based on a secondary market rate rather than the internal borrowing rate used to price the Notes and determine the initial estimated value. As a result, the secondary
market price will be less than if the internal borrowing rate was used. The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
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Our Initial Estimated Value of the Notes Is an Estimate Only, Calculated as of the Time the Terms of the Notes
Were Set — The initial estimated value of the Notes is based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See
“Structuring the Notes” below. Our estimate is based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are
based on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
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Owning the Notes Is Not the Same as Owning an Underlying or the Stocks Comprising an Underlying’s Underlying
Index — The return on your Notes may not reflect the return you would realize if you actually owned an Underlying or stocks included in an Underlying’s underlying index. As a holder of the Notes, you will not have voting
rights or rights to receive dividends or other distributions or other rights that holders of an Underlying or these stocks would have, and any such dividends will not be incorporated in the determination of the Underlying Return for
either Underlying.
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You Will Not Have Any Shareholder Rights and Will Have No Right to Receive Any Shares of
the Underlyings at Maturity — Investing in the Notes will not make you a holder of any shares of the Underlyings or any securities held by the
Underlyings. Neither you nor any other holder or owner of the Notes will have any voting rights, any right to receive dividends or other distributions, or any other rights with respect to the Underlyings or such other securities.
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Changes That Affect the Underlying Indices Will Affect the Market Value of the Notes and
the Amount You Will Receive at Maturity — The policies of the index sponsors concerning the calculation of the underlying indices, additions, deletions
or substitutions of the components of the underlying indices and the manner in which changes affecting those components, such as stock dividends, reorganizations or mergers, may be reflected in the underlying indices and, therefore,
could affect the share prices of the Underlyings, the amount payable on the Notes, and the market value of the Notes prior to maturity. The amount payable on the Notes and their market value could also be affected if an index
sponsor changes these policies, for example, by changing the manner in which it calculates the applicable underlying index, or if an index sponsor discontinues or suspends the calculation or publication of the applicable underlying
index.
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¨ |
We Have No Affiliation with Any Index Sponsor and Will Not Be Responsible for Its Actions — The index sponsors are not affiliates of ours and will not be involved in the offering of the Notes in any way. Consequently, we have no control over the actions
of the index sponsors, including any actions of the type that would require the calculation agent to adjust the payment to you at maturity. The index sponsors have no obligation of any sort with respect to the Notes. Thus, the index
sponsors have no obligation to take your interests into consideration for any reason, including in taking any actions that might affect the value of the Notes. None of our proceeds from the issuance of the Notes will be delivered to
the index sponsors.
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Adjustments to an Underlying Could Adversely Affect the Notes — Blackrock, Inc. (“Blackrock”), in its role as the sponsor of the Underlyings, is responsible for calculating and maintaining the Underlyings. Blackrock can add,
delete or substitute the stocks comprising the Underlyings or make other methodological changes that could change the share prices of the Underlyings at any time. Consequently, any of these actions could adversely affect the
amounts payable on the Notes and/or the market value of the Notes.
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¨ |
We and Our Affiliates Do Not Have Any Affiliation With the Investment Advisor of the
Underlyings and Are Not Responsible for Its Public Disclosure of Information — We and our affiliates are not affiliated with Blackrock in any way
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The Correlation Between the Performance of Each Underlying and the Performance of its
Respective Underlying Index May Be Imperfect — The performance of an Underlying is linked principally to the performance of its underlying index.
However, because of the potential discrepancies identified in more detail in the product prospectus supplement, the return on each Underlying may correlate imperfectly with the return on its underlying index. Further, the
performance of an Underlying may not exactly replicate the performance of its underlying index, because an Underlying will reflect transaction costs and fees that are not included in the calculation of its underlying index.
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Historical Prices of any Underlying Should Not Be Taken as an Indication of its Future Price During the Term
of the Notes — The trading prices of the Underlyings will determine the value of the Notes at any given time. As it is impossible to predict whether the price of any Underlying will rise or fall, and trading prices of the
common stocks held by the Underlyings will be influenced by complex and interrelated political, economic, financial and other factors that can affect the issuers of those stocks, and therefore, the value of the Underlyings.
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Management Risk — The Underlyings are not managed according to traditional methods of ‘‘active’’
investment management, which involve the buying and selling of securities based on economic, financial and market analysis and investment judgment. Instead, these Underlyings, utilizing a ‘‘passive’’ or indexing investment approach,
attempt to approximate the investment performance of its respective underlying index by investing in a portfolio of securities that generally replicate its underlying index. Therefore, unless a specific security is removed from its
underlying index, these Underlyings generally would not sell a security because the security’s issuer was in financial trouble. In addition, the Underlyings are subject to the risk that the investment strategy of their respective
investment advisors may not produce the intended results.
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Your Return on the Notes Is Not Linked to a Basket Consisting of the Underlyings. Rather, It Will Be
Contingent Upon the Performance of Each Individual Underlying — Unlike an instrument with a return linked to a basket of Underlyings or other underlying assets, in which risk is mitigated and diversified among all of the
components of the basket, you will be exposed equally to the risks related to both of the Underlyings. Poor performance by either one of the Underlyings over the term of the Notes may negatively affect your return and will not be
offset or mitigated by a positive performance by the other Underlying. For the Notes to be automatically called, both Underlyings must close above their Initial Underlying Prices or Downside Thresholds, as applicable, on the
applicable Observation Date. In addition, if not called prior to maturity, you may incur a loss proportionate to the negative return of the Least Performing Underlying. Accordingly, your investment is subject to the market risk of
each Underlying, which results in a higher risk of you incurring a loss at maturity.
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¨ |
Because the Notes Are Linked to the Individual Performance of More than One Underlying, It Is More Likely that
One of the Underlyings Will Decrease in Value Below Its Initial Underlying Price or Its Downside Threshold, Increasing the Probability That the Notes Will Not Be Called and that You Will Lose Some or All of Your Initial Investment — The risk that the Notes will not be automatically called and that you will lose some or all of your initial investment in the Notes is greater if you invest in
the Notes as opposed to securities that are linked to the performance of a single Underlying if their terms are otherwise substantially similar. With a greater total number of Underlyings, it is more likely that an Underlying will be
below its Initial Underlying Price or Downside Threshold, as applicable, on an Observation Date, and therefore it is more likely that the Notes will not be automatically called and that at maturity you will receive a payment at
maturity that is less than your principal amount. In addition, the performances of a pair of Underlyings may be positively or negatively correlated, or may not be correlated at all. If the Underlyings are not correlated to each other
or are negatively correlated, there is a greater potential for one of those Underlyings to close below its Initial Underlying Price or Downside Threshold, as applicable.
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An Investment in the Notes is Subject to Risks Associated with Foreign Securities Markets — Because foreign companies or foreign equity securities held by the EFA are publicly traded in the applicable foreign countries and trade in currencies other
than U.S. dollars, investments in the Notes involve particular risks. For example, the foreign securities markets may be more volatile than the U.S. securities markets, and market developments may affect these markets differently from
the United States or other securities markets. Direct or indirect government intervention to stabilize the securities markets outside the United States, as well as cross-shareholdings in certain companies, may affect trading prices
and trading volumes in those markets. Also, the public availability of information concerning the foreign issuers may vary depending on their home jurisdiction and the reporting requirements imposed by their respective regulators. In
addition, the foreign issuers may be subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to United States reporting companies.
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Exchange Rate Risk — The
share price of the EFA will fluctuate based in large part upon its net asset value, which will in turn depend in part upon changes in the value of the currencies in which the stocks held by the EFA are traded. Accordingly, investors
in the Notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the stocks held by the EFA are traded. An investor’s net exposure will depend on the extent to which these currencies
strengthen or weaken against the U.S. dollar. If the dollar strengthens against these currencies, the net asset value of the EFA will be adversely affected and the price of the EFA, and consequently, the market value of the Notes may
decrease.
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An Investment in Notes Linked to IWM Is Subject to Risks Associated with an Investment in Stocks with a Small
Market Capitalization — The IWM is linked to stocks issued by companies with relatively small market capitalizations. These companies often have greater stock price volatility, lower trading volume and less liquidity than
large-capitalization companies. As a result, the share price of the IWM may be more volatile than that of a market measure that does not track solely small-capitalization stocks. Stock prices of small-capitalization companies are also
often more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive to many investors if they
do not pay dividends. In addition, small capitalization companies are often less well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more
vulnerable to loss of those individuals. Small capitalization companies tend to have lower revenues, less diverse product lines, smaller shares of their target markets, fewer financial resources and fewer competitive strengths than
large-capitalization companies. These companies may also be more susceptible to adverse developments related to their products or services.
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No Assurance that the Investment View Implicit in the Notes Will Be Successful — It is impossible to
predict whether and the extent to which the prices of the Underlyings will rise or fall. The closing prices of the Underlyings will be influenced by complex and interrelated political, economic, financial and other factors that affect the Underlyings. You should be willing to accept the downside risks of owning equities in general and the Underlyings in particular,
and the risk of losing some or all of your initial investment.
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Lack of Liquidity — The Notes will not be listed on any securities exchange. RBCCM intends to offer to
purchase the Notes in the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Notes easily. Because other dealers are not likely
to make a secondary market for the Notes, the price at which you may be able to trade your Notes is likely to depend on the price, if any, at which RBCCM is willing to buy the Notes.
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Potential Conflicts — We and our affiliates play a variety of roles in connection with the issuance of
the Notes, including hedging our obligations under the Notes. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the
Notes.
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Potentially Inconsistent Research, Opinions or Recommendations by RBCCM, UBS or Their Affiliates — RBCCM, UBS or their affiliates may publish research, express opinions or provide recommendations as to the Underlyings that are inconsistent with investing in or holding the Notes, and which may be revised at any time. Any such research, opinions or recommendations could affect the value of the Underlyings,
and therefore the market value of the Notes.
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Uncertain Tax Treatment — Significant aspects of the tax treatment of an investment in the Notes are
uncertain. You should consult your tax adviser about your tax situation.
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Potential Royal Bank of Canada and UBS Impact on Price — Trading or transactions by Royal Bank of
Canada, UBS or our respective affiliates in one or both of the Underlyings or the securities included in an Underlying’s underlying index, or in futures, options, exchange-traded funds or other derivative products on the Underlyings
or those securities may adversely affect the market value of the Underlyings or the closing prices of the Underlyings, and, therefore, the market value of the Notes.
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The Terms of the Notes at Issuance Were Influenced, and Their Market Value Prior to Maturity Will Be
Influenced, by Many Unpredictable Factors — Many economic and market factors influenced the terms of the Notes at issuance, and will influence their value prior to maturity. These factors are similar in some ways to those
that could affect the value of a combination of instruments that might be used to replicate the payments on the Notes, including a combination of a bond with one or more options or other derivative instruments. For the market value of
the Notes, we expect that, generally, the price of the Underlyings on any day will affect the value of the Notes more than any other single factor. However, you should not expect the value of the Notes in the secondary market to vary
in proportion to changes in the prices of the Underlyings. The value of the Notes will be affected by a number of economic and market factors that may either offset or magnify each other, including:
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the price of each Underlying;
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the actual and expected volatility of the price of each Underlying;
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the expected correlation of the Underlyings;
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the time remaining to maturity of the Notes;
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the dividend rates on the securities held by the Underlyings;
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interest and yield rates in the market generally, as well as in each of the markets of the securities held by the Underlyings;
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a variety of economic, financial, political, regulatory or judicial events;
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the occurrence of certain events with respect to the Underlyings that may or may not require an adjustment to the terms of the Notes; and
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our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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The Anti-Dilution Protection for Each Underlying Is Limited — The calculation agent will make
adjustments to the Initial Underlying Price and Downside Threshold of each Underlying for certain events affecting the shares of the Underlyings. However, the calculation agent will not be required to make an adjustment in response to
all events that could affect an Underlying. If an event occurs that does not require the calculation agent to make an adjustment, the value of the Notes and the payments on the Notes may be materially and adversely affected.
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Hypothetical Examples
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Principal Amount:
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$10
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Term:
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4 years (unless earlier called)
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Hypothetical Initial Underlying Prices of Each Underlying:
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$100
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Call Return Rate:
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9.00% per annum
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Observation Dates:
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Quarterly (beginning one year after the Settlement Date).
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Hypothetical Downside Thresholds of Each Underlying:
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$70.00 (which is 70% of its Initial Underlying Price)
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Closing prices on the first Observation Date:
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EFA: $105.00 (at or above its Initial Underlying Price)
IWM: $105.00 (at or above its Initial Underlying Price)
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Call Price (per $10.00):
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$10.90
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Closing price at 1st Observation Date:
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EFA: $95.00 (less than its Initial Underlying Price)
IWM: $95.00 (less than its Initial Underlying Price)
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Highest closing price at 2nd through 12th Observation Date:
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EFA: $90.00 (less than its Initial Underlying Price)
IWM: $85.00 (less than its Initial Underlying Price)
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Closing price at final Observation Date (Final Underlying Price):
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EFA: $105.00 (at or above its Downside Threshold)
IWM: $80.00 (at or above its Downside Threshold)
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Call Price (per $10.00):
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$13.60
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Closing price at 1st Observation Date:
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EFA: $95.00 (less than its Initial Underlying Price)
IWM: $95.00 (less than its Initial Underlying Price)
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Highest closing price at 2nd through 12th Observation Date:
|
EFA: $90.00 (less than its Initial Underlying Price)
IWM: $85.00 (less than its Initial Underlying Price)
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Closing price at final Observation Date (Final Underlying Price):
|
EFA: $101.00 (at or above its Downside Threshold)
IWM: $50.00 (below its Downside Threshold)
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Payment at Maturity (per $10.00):
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$10.00 × (1 + Underlying Return of the Least Performing Underlying)
$10.00 × (1 - 50%)
$5.00
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What Are the Tax Consequences of the Notes?
|
Information About the Underlyings
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· |
defining the equity universe;
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· |
determining the market investable equity universe for each market;
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· |
determining market capitalization size segments for each market;
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· |
applying index continuity rules for the MSCI Standard Index;
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creating style segments within each size segment within each market; and
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classifying securities under the Global Industry Classification Standard (the “GICS”).
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Identifying Eligible Equity Securities: the equity universe initially looks at securities listed in any of the countries in the MSCI Global Index Series, which will be classified as
either Developed Markets (“DM”) or Emerging Markets (“EM”). All listed equity securities, including Real Estate Investment Trusts, are eligible for inclusion in the equity universe. Conversely, mutual funds, ETFs, equity derivatives
and most investment trusts are not eligible for inclusion in the equity universe.
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Classifying Eligible Securities into the Appropriate Country: each company and its securities (i.e., share classes) are classified in only one country.
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Equity Universe Minimum Size Requirement: this investability screen is applied at the company level. In
order to be included in a market investable equity universe, a company must have the required minimum full market capitalization.
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Equity Universe Minimum Free Float−Adjusted Market Capitalization Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market
investable equity universe, a security must have a free float−adjusted market capitalization equal to or higher than 50% of the equity universe minimum size requirement.
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DM and EM Minimum Liquidity Requirement: This investability screen is applied at the individual security
level. To be eligible for inclusion in a market investable equity universe, a security must have adequate liquidity. The twelve-month and three-month Annual Traded Value Ratio (“ATVR”), a measure that screens out extreme daily trading
volumes and takes into account the free float−adjusted market capitalization size of securities, together with the three-month frequency of trading are used to measure
liquidity. A minimum liquidity level of 20% of three- and twelve-month ATVR and 90% of three-month frequency of trading over the last four consecutive quarters are required for inclusion of a security in a market investable equity
universe of a DM, and a minimum liquidity level of 15% of three- and twelve-month ATVR and 80% of three-month frequency of trading over the last four consecutive quarters are required for inclusion of a security in a market investable
equity universe of an EM.
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Global Minimum Foreign Inclusion Factor Requirement: this investability screen is applied at the
individual security level. To be eligible for inclusion in a market investable equity universe, a security’s Foreign Inclusion Factor (“FIF”) must reach a certain threshold. The FIF of a security is defined as the proportion of shares
outstanding that is available for purchase in the public equity markets by international investors. This proportion accounts for the available free float of and/or the foreign ownership limits applicable to a specific security (or
company). In general, a security must have an FIF equal to or larger than 0.15 to be eligible for inclusion in a market investable equity universe.
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Minimum Length of Trading Requirement: this investability screen is applied at the individual security
level. For an initial public offering (“IPO”) to be eligible for inclusion in a market investable equity universe, the new issue must have started trading at least three months before the implementation of a semi−annual index review (as described below). This requirement is
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Minimum Foreign Room Requirement: this
investability screen is applied at the individual security level. For a security that is subject to a foreign ownership limit to be eligible for inclusion in a market investable equity universe, the proportion of shares still
available to foreign investors relative to the maximum allowed (referred to as “foreign room”) must be at least 15%.
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Investable Market Index (Large + Mid + Small);
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Standard Index (Large + Mid);
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· |
Large Cap Index;
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· |
Mid Cap Index; or
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· |
Small Cap Index.
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· |
defining the market coverage target range for each size segment;
|
· |
determining the global minimum size range for each size segment;
|
· |
determining the market size segment cutoffs and associated segment number of companies;
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· |
assigning companies to the size segments; and
|
· |
applying final size−segment investability requirements.
|
· |
updating the indices on the basis of a fully refreshed equity universe;
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· |
taking buffer rules into consideration for migration of securities across size and style segments; and
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· |
updating FIFs and Number of Shares (“NOS”).
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· |
including significant new eligible securities (such as IPOs that were not eligible for earlier inclusion) in the index;
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· |
allowing for significant moves of companies within the Size Segment Indices, using wider buffers than in the SAIR; and
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· |
reflecting the impact of significant market events on FIFs and updating NOS.
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Correlation of the Underlyings
|
Supplemental Plan of Distribution (Conflicts of Interest)
|
Structuring the Notes
|
Terms Incorporated in Master Note
|
Validity of the Notes
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