Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-275898
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Pricing Supplement
Dated April 16, 2024
To the Product Prospectus Supplement ERN-ETF-1, the Prospectus Supplement and the Prospectus, each Dated December 20, 2023
|
$ 2,334,000
Buffered Enhanced Return Notes Linked to a
Basket of Two Indices and Three Exchange
Traded Funds, Due April 21, 2027
Royal Bank of Canada
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||
Basket Component
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Component Weight
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Initial Level*
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S&P 500® Index (“SPX”)
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38%
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5,051.41
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iShares® MSCI EAFE ETF (“EFA”)
|
25%
|
$76.25
|
SPDR® S&P MidCap 400® ETF Trust (the “MDY”)
|
15%
|
$521.63
|
iShares® MSCI Emerging Markets ETF (“EEM”)
|
12%
|
$39.74
|
Russell 2000® Index (“RTY”)
|
10%
|
1,967.475
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• |
If the Final Basket Level is greater than the Initial Basket Level, the Notes will pay at maturity a return equal to 150% of the Percentage Change of the Basket, subject to the Maximum Redemption Amount of
145% of the principal amount.
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• |
If the Final Basket Level is less than or equal to the Initial Basket Level, but is greater than or equal to its Buffer Level of 95% of the Initial Basket Level, then the investor will receive the principal
amount.
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• |
If the Final Basket Level is less than the Buffer Level, investors will lose 1% of the principal amount for each 1% that the Final Basket Level has decreased below the Buffer Level.
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• |
All payments on the Notes are subject to our credit risk.
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• |
The Notes do not pay interest.
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• |
The Notes will not be listed on any securities exchange.
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Per Note
|
Total
|
||
Price to public
|
100.00%
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$2,334,000
|
|
Underwriting discounts and commissions(1)
|
0.00%
|
$0
|
|
Proceeds to Royal Bank of Canada
|
100.00%
|
$2,334,000
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
Issuer:
|
Royal Bank of Canada (the “Bank”)
|
Underwriter:
|
RBC Capital Markets, LLC (“RBCCM”)
|
Reference
Assets:
|
The Notes are linked to the value of a basket (the “Basket”) consisting of two indices (each, an “Index,” and collectively, the “Indices”) and three exchange traded
funds (each, an “ETF,” and collectively, the “ETFs,” and together with the Indices, the “Basket Components”). The Basket Components and their respective Component Weights are indicated in the table on the cover page of this document.
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Minimum
Investment:
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$1,000 and minimum denominations of $1,000 in excess thereof
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Trade Date
(Pricing Date):
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April 16, 2024
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Issue Date:
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April 19, 2024
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Valuation Date:
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April 16, 2027
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Maturity Date:
|
April 21, 2027, subject to extension for market and other disruptions, as described in the product prospectus supplement dated December 20, 2023.
|
Payment at
Maturity (if held
to maturity):
|
If the Final Basket Level is greater than the Initial Basket Level (that is, the
Percentage Change is positive), then the investor will receive, for each $1,000 in principal amount, the lesser of:
1. $1,000 + [$1,000 x (Percentage Change x Participation Rate)] and
2. The Maximum Redemption Amount
If the Final Basket Level is less than or equal to the Initial Basket Level, but is greater than or equal to the Buffer Level (that is, the Percentage Change is between 0% and -5%), the investor will receive the principal amount, and no additional return.
If the Final Basket Level is less than the Buffer Level (that is,
the Percentage Change is less than -5%), then the investor will receive, for each $1,000 in principal amount:
$1,000 + [$1,000 x (Percentage Change + Buffer Percentage)]
In this case, the payment on the Notes will be less than the principal amount, and you could lose some or a significant portion
of the principal amount.
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Initial Basket
Level:
|
The Initial Basket Level was set to 100 on the Trade Date.
|
Buffer Level:
|
The Buffer Level was set to 95 on the Trade Date.
|
Buffer
Percentage:
|
5%
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
Final Basket
Level:
|
The Final Basket Level will be calculated as follows:
100 × [1 + (the sum of, for each Basket Component, the Basket Component return multiplied by its Component Weight)]
Each of the Basket Component returns set forth above refers to the percentage change from the applicable Initial Level to the applicable Final
Level, calculated as follows:
Final Level – Initial Level
Initial Level
|
Percentage
Change:
|
The Percentage Change of the Basket, expressed as a percentage and rounded to two decimal places, will be equal to:
Final Basket Level – Initial Basket Level
Initial Basket Level
|
Maximum
Redemption
Amount:
|
$1,450.00 per $1,000 in principal amount (145% multiplied by the principal amount)
|
Participation
Rate:
|
150% (subject to the Maximum Redemption Amount)
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Initial Level:
|
With respect to each Basket Component, its closing level (in the case of an Index) or its closing price (in the case of an ETF) on the Trade Date,
as set forth on the cover page of this document.
|
Final Level:
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With respect to each Basket Component, its closing level (in the case of an Index) or its closing price (in the case of an ETF) on the Valuation
Date.
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Market
Disruption
Events:
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If a market disruption event occurs on the Valuation Date as to a Basket Component, the determination of the Final Level of that Basket Component
will be postponed. However, the determination of the Final Level of any Basket Component that is not affected by that market disruption event will not be postponed.
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Principal at
Risk:
|
The Notes are NOT principal protected. You could lose some or a substantial portion of your principal amount at maturity if the
Final Basket Level is less than the Buffer Level.
|
Calculation
Agent:
|
RBCCM
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U.S. Tax
Treatment:
|
By purchasing a Note, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary)
to treat the Note as a pre-paid cash-settled derivative contract in respect of the Basket for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the Notes are uncertain and the
Internal Revenue Service could assert that the Notes should be taxed in a manner that is different from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of U.S. Federal Income Tax
Consequences,” and the discussion (including the opinion of our special U.S. tax counsel, Ashurst LLP) in the product prospectus supplement dated December 20, 2023 under “Supplemental Discussion of U.S. Federal Income Tax
Consequences,” which apply to the Notes.
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
Secondary
Market:
|
RBCCM (or one of its affiliates), though not obligated to do so, may maintain a secondary market in the Notes after the issue date. The amount that you may receive upon sale of your Notes prior to maturity may be substantially less than the principal amount of your Notes.
|
Listing:
|
The Notes will not be listed on any securities exchange.
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Clearance and
Settlement:
|
DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Ownership and Book-Entry Issuance”
in the prospectus dated December 20, 2023).
|
Terms
Incorporated in
the Master
Note:
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All of the terms appearing on the cover page and above the item captioned “Secondary Market” in this section, the section “Additional Terms Relating to the Indices”
set forth below, and the terms appearing under the caption “General Terms of the Notes” in the product prospectus supplement dated December 20, 2023, as modified by this pricing supplement.
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
Initial Basket Level:
|
100.00
|
Buffer Level:
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95.00, which is 95.00% of the Initial Basket Level
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Participation Rate:
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150%
|
Maximum Redemption Amount:
|
145% of the principal amount
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Principal Amount:
|
$1,000 per Note
|
Hypothetical Percentage
Change
|
Payment at Maturity as
Percentage of Principal Amount
|
Payment at Maturity per $1,000
in Principal Amount
|
50.00%
|
145.00%
|
$1,450.00
|
40.00%
|
145.00%
|
$1,450.00
|
30.00%
|
145.00%
|
$1,450.00
|
20.00%
|
130.00%
|
$1,300.00
|
10.00%
|
115.00%
|
$1,150.00
|
5.00%
|
107.50%
|
$1,075.00
|
2.00%
|
103.00%
|
$1,030.00
|
0.00%
|
100.00%
|
$1,000.00
|
-2.00%
|
100.00%
|
$1,000.00
|
-5.00%
|
100.00%
|
$1,000.00
|
-10.00%
|
95.00%
|
$950.00
|
-20.00%
|
85.00%
|
$850.00
|
-30.00%
|
75.00%
|
$750.00
|
-40.00%
|
65.00%
|
$650.00
|
-50.00%
|
55.00%
|
$550.00
|
-60.00%
|
45.00%
|
$450.00
|
-70.00%
|
35.00%
|
$350.00
|
-80.00%
|
25.00%
|
$250.00
|
-90.00%
|
15.00%
|
$150.00
|
-100.00%
|
5.00%
|
$50.00
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
Example 1 —
|
Calculation of the Payment at Maturity where the Percentage Change is positive.
|
|
Percentage Change:
|
5%
|
|
Payment at Maturity:
|
$1,000 + ($1,000 x 5% x 150%) = $1,075.00
|
|
On a $1,000 investment, a Percentage Change of 5% results in a Payment at Maturity of $1,075.00, a return of 7.50% on the Notes.
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Example 2 —
|
Calculation of the Payment at Maturity where the Percentage Change is positive (and the Payment at Maturity is subject to the Maximum Redemption Amount).
|
|
Percentage Change:
|
50%
|
|
Payment at Maturity:
|
$1,000 + [$1,000 x (50% x 150%)] = $1,000 + $750 = $1,750.00
However, the Maximum Redemption Amount is $1,450. Accordingly, you will receive a Payment at Maturity equal to $1,450 per $1,000 in principal amount of the Notes.
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|
On a $1,000 investment, a Percentage Change of 50% would result in a Payment at Maturity of $1,450, a return of 45% on the Notes.
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Example 3 —
|
Calculation of the Payment at Maturity where the Percentage Change is negative, but the Final Basket Level is greater than the Buffer Level.
|
|
Percentage Change:
|
-2%
|
|
Payment at Maturity:
|
$1,000
|
|
In this case, on a $1,000 investment, a Percentage Change of -2% results in a Payment at Maturity of $1,000, a return of 0% on the Notes.
|
Example 4 —
|
Calculation of the Payment at Maturity where the Percentage Change is negative, and the Final Basket Level is less than the Buffer Level.
|
|
Percentage Change:
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-50%
|
|
Payment at Maturity:
|
$1,000 + [$1,000 x (-50% + 5%)] = $1,000 - $450 = $550
|
|
In this case, on a $1,000 investment, a Percentage Change of -50% results in a Payment at Maturity of $550, a return of -45% on the Notes.
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
• |
You May Lose Some or a Significant Portion of the Principal Amount at Maturity — Investors in the Notes will lose some or a substantial portion of their principal
amount if the Final Basket Level is less than the Buffer Level. In such a case, you will lose 1% of the principal amount of your Notes for each 1% that the Percentage Change is less than the Buffer Level.
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• |
The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity — There will be no periodic
interest payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which could be negative, may be less than the return
you could earn on other investments. Even if your return is positive, your return may be less than the return you would earn if you purchased one of our conventional senior interest bearing debt securities.
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• |
Your Potential Payment at Maturity Is Limited — The Notes will provide less opportunity to participate in the appreciation of the Basket Components than an
investment in a security linked to the Basket Components providing full participation in the appreciation, because the Payment at Maturity will not exceed the Maximum Redemption Amount. Accordingly, your return on the Notes may be
less than your return would be if you made an investment in a security directly linked to the positive performance of the Basket.
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• |
You Will Not Have Any Rights to the Securities Represented by the Basket Components — As a holder of the Notes, you will not have voting rights or rights to receive
cash dividends or other distributions or other rights that holders of an ETF or of the securities included in an Index would have. The Final Level of an Index will not reflect any dividends paid on the securities included in that
Basket Component, and you will not be entitled to receive any dividends or distributions paid on an ETF; accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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• |
Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market Value of the Notes — The Notes are our
senior unsecured debt securities. As a result, your receipt of the amount due on the maturity date is dependent upon our ability to repay our obligations at that time. This will be the case even if the value of the Basket increases or
decreases after the Trade Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
|
• |
Changes in the Value of One Basket Component May Be Offset by Changes in the Value of the Other Basket Components — A change
in the value of one Basket Component may not correlate with changes in the value of the other Basket Components. The value of one Basket Component may increase, while the values of the other Basket Components may not increase as much,
or may even decrease. Therefore, in determining the value of the Basket as of any time, increases in the value of one Basket Component may be moderated, or wholly offset, by lesser increases or decreases in the value of the other
Basket Components. Because of their larger weights in the Basket, any decreases in the value of the SPX or the EFA will have a greater adverse impact on the payments on the Notes as compared to similar decreases in the values of the
other Basket Components.
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
• |
There May Not Be an Active Trading Market for the Notes—Sales in the Secondary Market May Result in Significant Losses — There may be little or no secondary market
for the Notes. The Notes will not be listed on any securities exchange. RBCCM or any of our other affiliates may make a market for the Notes; however, they are not required to do so. RBCCM or any of our other affiliates may stop any
market-making activities at any time. Even if a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices advantageous to you. We expect that transaction costs in any secondary market would
be high. As a result, the difference between bid and ask prices for your Notes in any secondary market could be substantial.
|
• |
The Initial Estimated Value of the Notes Is Less than the Price to the Public — The
initial estimated value that is set forth on the cover page of this pricing supplement does not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if
any exists) at any time. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the value of
the Basket, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to the public of the referral fee and the estimated costs relating to our hedging of the Notes. These factors, together with
various credit, market and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and
unpredictable ways. Assuming no change in market conditions or any other relevant factors, the price, if any, at which you may be able to sell your Notes prior to maturity may be less than your original purchase price, as any such
sale price would not be expected to include the referral fee or the hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined by RBCCM for any secondary market price is expected to be based
on the secondary rate rather than the internal funding rate used to price the Notes and determine the initial estimated value. As a result, the secondary price will be less than if the internal funding rate was used. The Notes are not
designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
|
• |
The Initial Estimated Value of the Notes that Is Set Forth on the Cover Page of this Pricing Supplement Is an Estimate Only, Calculated as of the Time the Terms of the Notes
Were Set — The initial estimated value of the Notes is based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See
“Structuring the Notes” below. Our estimate is based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are
based on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
|
• |
Our Business Activities and Those of Our Affiliates May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the
Basket Components or to the securities included in or held by the Basket Components that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’
interests in the Notes and the interests we and our affiliates will have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under
their management. These trading activities, if they influence the value of a Basket Component, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
• |
The ETFs and Their Underlying Indices Are Different — The performance of each ETF may not exactly replicate the performance of its respective underlying index,
because these ETFs will reflect transaction costs and fees that are not included in the calculation of its underlying index. It is also possible that the performance of these ETFs may not fully replicate or may in certain
circumstances diverge significantly from the performance of their underlying indices due to the temporary unavailability of certain securities in the secondary market, the performance of any derivative instruments contained in the
ETFs, or due to other circumstances. These ETFs may use a variety of instruments, including futures contracts, options, swap agreements, repurchase agreements and other instruments, in seeking performance that corresponds to their
underlying indices and in managing cash flows.
|
• |
An Investment in the Notes Is Subject to Risks Relating to Non-U.S. Securities Markets — Because foreign companies or foreign
equity securities held by the EFA and the EEM are publicly traded in the applicable foreign countries and are denominated in non-U.S. currencies, an investment in the Notes involves particular risks. For example, the non-U.S.
securities markets may be more volatile than the U.S. securities markets, and market developments may affect these markets differently from the U.S. or other securities markets. Direct or indirect government intervention to stabilize
the securities markets outside the U.S., 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 U.S. reporting companies.
|
• |
An Investment in the Notes Is Subject to Risks Associated with Emerging Markets — Investments in securities linked directly or indirectly to emerging market equity
securities, such as the securities held by the EEM, involve many risks, including, but not limited to: economic, social, political, financial and military conditions in the emerging market; regulation by national, provincial, and
local governments; less liquidity and smaller market capitalizations than exist in the case of many large U.S. companies; different accounting and disclosure standards; and political uncertainties. Stock prices of emerging market
companies may be more volatile and may be affected by market developments differently than U.S. companies. Government intervention to stabilize securities markets and cross-shareholdings may affect prices and volume of trading of the
securities of emerging market companies. Economic, social, political, financial and military factors could, in turn, negatively affect such companies’ value. These factors could include changes in the emerging market government’s
economic and fiscal policies, possible imposition of, or changes in,
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
• |
The Notes Are Subject to Exchange Rate Risks — The prices of the
EFA and the EEM 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 and the EEM 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 and the EEM 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 and the EEM will be adversely affected and the price of the EFA and the EEM, and
consequently, the market value of the Notes may decrease.
|
• |
Each ETF Is Subject to Management Risks — Each ETF is subject to management risk, which is the risk that the investment
strategy of its investment advisor (the “advisor”), the implementation of which is subject to a number of constraints, may not produce the intended results. For example, the advisor may invest a portion of each ETF’s assets in
securities not included in its underlying index but which the advisor believes will help each ETF track its underlying index.
|
• |
Adjustments to Each ETF Could Adversely Affect the Notes — The advisor is responsible for calculating and maintaining each
ETF. The advisor can add, delete or substitute the stocks comprising each ETF. The advisor may make other methodological changes that could change the price of each ETF at any time. Consequently, any of these actions could adversely
affect the amount payable at maturity and/or the market value of the Notes.
|
• |
We Cannot Control Actions by the Sponsor of Any Index — The policies of the sponsor of each Index, and the sponsor of the
underlying index for each of the ETFs, may adjust that index in a way that may adversely impact the payments on the Notes. A sponsor may change the composition of that index, or the methodology used to calculate that index. We are not
affiliated with any of these sponsors, and have no control over their actions.
|
• |
The Payment at Maturity Is Subject to Anti-dilution Adjustments — For certain corporate or organizational events affecting
each ETF, the calculation agent may make adjustments to the terms of the Notes. However, the calculation agent will not make such adjustments in response to all events that could affect each ETF. If an event occurs that does not
require the calculation agent to make such adjustments, the value of the Notes may be materially and adversely affected. In addition, all determinations and calculations concerning any such adjustments will be made in the sole
discretion of the calculation agent, which will be binding on you absent manifest error. You should be aware that the calculation agent may make any such adjustment, determination or calculation in a manner that differs from that
discussed in this document or the product prospectus supplement as necessary to achieve an equitable result.
|
• |
An Investment in the Notes Linked to the RTY Is Subject to Risks Associated in Investing in Stocks With a Small Market Capitalization —
The RTY consists of 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 level of the RTY 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 generally 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
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
• |
The Payment at Maturity on the Notes Is Subject to Postponement Due to Market Disruption Events and Adjustments — The Payment at Maturity and the Valuation Date are
subject to adjustment as to each Basket Component as described in the product prospectus supplement. For a description of what constitutes a market disruption event as well as the consequences of that market disruption event, see
“General Terms of the Notes—Market Disruption Events” in the product prospectus supplement and the section below, “Additional Terms Relating to the Indices.”
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
• |
defining the equity universe;
|
• |
determining the market investable equity universe for each market;
|
• |
defining market capitalization size segments for each market;
|
• |
applying index continuity rules for the MSCI Standard Index;
|
• |
creating style segments within each size segment within each market; and
|
• |
classifying securities under the Global Industry Classification Standard (the “GICS”).
|
• |
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
|
|
|
Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
• |
Classifying Eligible Securities into the Appropriate Country: each company and its securities (i.e., share classes) is classified in only one country. All securities in the Equity Universe classified into a
Developed Market make up the DM Equity Universe, while all securities in the Equity Universe classified into an Emerging Market make up the EM Equity Universe. Additionally, all securities in the Equity Universe classified into a
Frontier Market make up the FM Equity Universe.
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• |
The security is classified in a country that meets the Foreign Listing Materiality Requirement, and
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The security’s foreign listing is traded on an eligible stock exchange of: a DM country if the security is classified in a DM country, a DM or an EM country if the security is classified in an EM country,
or a DM or an EM or a FM country if the security is classified in a FM country. If a country does not meet the Foreign Listing Materiality Requirement set forth in the index methodology, then securities in that country may not be
represented by a foreign listing in the global investable equity.
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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. This minimum full market capitalization is referred to as the Equity Universe Minimum Size Requirement. The Equity Universe Minimum Size Requirement applies to all
companies in all markets, Developed and Emerging, and is derived as follows: first, the companies in the DM Equity Universe are sorted in descending order of full market capitalization and the cumulative coverage of free
float-adjusted market capitalization of the DM Equity Universe is calculated at each company; second, when the free float-adjusted market capitalization coverage of 99% of the sorted Equity Universe is achieved, the full market
capitalization of the company at that point defines the Equity Universe Minimum Size Requirement. The rank of each company by descending order of full market capitalization within the DM Equity Universe is noted, and will be used in
determining the Equity Universe Minimum Size Requirement at the next rebalance.
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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
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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
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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 mitigates the impact of extreme daily trading volumes and takes into account the free
float-adjusted market capitalization of securities, together with the three-month frequency of trading, are used to select securities with a sound long and short-term 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 is required for inclusion of a security in a market investable equity universe of a Developed Market, 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 is required for inclusion of a security in a market investable equity universe of an Emerging Market. Certain
securities in the MSCI China Equity Universe are not eligible for inclusion in the market investable equity universe unless they meet additional requirements as described further in the index methodology Only one listing per security
may be included in the market investable equity universe and priority rules described in the index methodology will be applied in instances when a security has two or more eligible listings that meet the above liquidity requirements.
A stock-price limit of $10,000 has been set, thus securities with stock prices above $10,000 fail the liquidity screening. The stock-price limit applies only for non-constituents of the MSCI Global Investable Markets Indexes and does
not apply to constituents of the MSCI Global Investable Market Indexes if the stock price surpasses the $10,000 threshold.
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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. MSCI may make exceptions to this general rule in the limited cases where the exclusion of securities of a very large company would compromise the
Standard Index’s ability to fully and fairly represent the characteristics of the underlying market.
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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 an index review (as described below). This requirement is applicable to small new issues
in all markets. Large IPOs are not subject to the minimum length of trading requirement and may be included in a market investable equity universe and the Standard Index outside of an index review.
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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%. The index
methodology applies an adjustment to securities within the market investable equity universe that have foreign room less than 25%.
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Financial Reporting Requirement: this investability screen is applied at the company level.
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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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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
• |
defining the market coverage target range for each size segment;
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• |
determining the global minimum size range for each size segment;
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determining the market size−segment cutoffs and associated segment number of companies;
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assigning companies to the size segments; and
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applying final size−segment investability requirements.
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(i) |
Semi−Annual Index Reviews (“SAIRs”) in May and November of the Size Segment and Global Value and Growth Indices which include:
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• |
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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(ii) |
Quarterly Index Reviews (“QIRs”) in February and August of the Size Segment Indices aimed at:
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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
• |
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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(iii) |
Ongoing Event−Related Changes: changes of this type are generally implemented in the indices as they occur. Significantly large IPOs are included in the indices after the close of the company’s tenth day of
trading.
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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
• |
a suspension, absence or limitation of trading in index components constituting 20% or more, by weight, of that Index;
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• |
a suspension, absence or limitation of trading in futures or options contracts relating to that Index on their respective markets;
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• |
any event that disrupts or impairs, as determined by the Calculation Agent, the ability of market participants to (i) effect transactions in, or obtain market values for, index components constituting 20%
or more, by weight, of that Index, or (ii) effect transactions in, or obtain market values for, futures or options contracts relating to that Index on their respective markets;
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• |
the closure on any day of the primary market for futures or options contracts relating to that Index or index components constituting 20% or more, by weight, of that Index on a scheduled trading day prior
to the scheduled weekday closing time of that market (without regard to after hours or any other trading outside of the regular trading session hours) unless such earlier closing time is announced by the primary market at least one
hour prior to the earlier of (i) the actual closing time for the regular trading session on such primary market on such scheduled trading day for such primary market and (ii) the submission deadline for orders to be entered into the
relevant exchange system for execution at the close of trading on such scheduled trading day for such primary market;
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• |
any scheduled trading day on which (i) the primary markets for index components constituting 20% or more, by weight, of that Index or (ii) the exchanges or quotation systems, if any, on which futures or
options contracts on that Index are traded, fails to open for trading during its regular trading session; or
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• |
any other event, if the Calculation Agent determines that the event interferes with our ability or the ability of any of our affiliates to unwind all or a portion of a hedge with respect to the Notes that
we or our affiliates have effected or may effect.
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|
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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|
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Buffered Enhanced Return Notes Linked to
a Basket of Two Indices and Three
Exchange Traded Funds
Royal Bank of Canada
|