By Marisa Wong
Morgantown, W.Va., Feb. 8 – Royal Bank of Canada priced $8.34 million of 0% direct investment notes due March 8, 2017 linked to the EquityCompass 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. On the pricing date, the index was allocated 60% to a long position in the S&P 500 Total Return and 40% to cash.
The initial investment in the hypothetical portfolio was $981 per $1,000 principal amount of notes. RBC reduced this by 0.15% on the pricing date and will reduce it by a further 0.15% 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.
| Issuer: | Royal Bank of Canada
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| Issue: | Direct investment notes
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| Underlying index: | EquityCompass Equity Risk Management Strategy
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| Amount: | $8,342,000
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| Maturity: | March 8, 2017
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| Coupon: | 0%
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| Price: | Par for notes sold to brokerage accounts and 98.6 for notes sold to fee-based advisory accounts
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| Payout at maturity: | Cash amount equal to final value of portfolio underlying strategy; initial investment is $981 per note
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| Call: | Automatically if portfolio value falls to or below 50% of initial investment on any day; payout is cash amount equal to value of portfolio on following day
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| Pricing date: | Feb. 3
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| Settlement date: | Feb. 8
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| Underwriter: | RBC Capital Markets, LLC
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| Fees: | 1.4% for notes sold to brokerage accounts and zero for notes sold to fee-based advisory accounts
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| Cusip: | 78012KKQ9
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