RBC plans direct investment notes tied to Equity Compass strategy

By Marisa Wong

Madison, Wis., Dec. 10 - Royal Bank of Canada plans 0% direct investment notes due Feb. 9, 2015 linked to the Equity Compass Equity Risk Management Strategy, according to a 424B2 filing with the Securities and Exchange Commission.

The strategy seeks to offer exposure to U.S. large-cap stocks while reducing the downside risk of such an investment. It uses a set of rules to construct a theoretical portfolio of different combinations of cash and a long or short position in the S&P 500 Total Return index.

The initial investment in the hypothetical portfolio is $981 per $1,000 principal amount of notes. On the pricing date, 100% of this amount was allocated to a long position in the index and none to cash. RBC will reduce the investment by 0.15% on the pricing date, each time the portfolio is reallocated, which occurs monthly, and on the final valuation date.

The payout at maturity will be the final value of the portfolio.

If the portfolio value is less than or equal to 50% of the initial investment on any day during the life of the notes, the notes will be called, and the payout will be the value of the portfolio on the first trading day following the call trigger date.

RBC Capital Markets, LLC is the underwriter.

The notes will price on Jan. 6 and settle on Jan. 9.

The Cusip number is 78010ULC9.

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