 |
RBC Capital Markets®
|
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-227001
|
|
|
|
|
|
|
|
Pricing Supplement
Dated April 12, 2019
To the Product Prospectus Supplement ERN-EI-1, Prospectus Supplement, and Prospectus Each Dated September 7, 2018
|
$3,850,000
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index, Due
October 15, 2021
Royal Bank of Canada
|
||
|
|
|
||
Royal Bank of Canada is offering the Geared Buffered Enhanced Return Notes (the “Notes”) linked to the performance of the Russell 2000®
Index (the “Reference Asset”).
The CUSIP number for the Notes is 78013X5M6. The Notes do not pay interest. The Notes provide a 150% leveraged positive return if the level of the
Reference Asset increases from the Initial Level to the Final Level, up to a maximum return of $1,270 per $1,000 in Principal Amount. If the Final Level is less than the Initial Level, but not by more than 20%, investors will receive their
principal amount at maturity. However, investors will lose 1.25% of the principal amount of the Notes for each 1% decrease from the Initial Level to the Final Level of more than 20%. Any payments on the Notes are subject to our credit risk.
Issue Date: April 17, 2019
Maturity Date: October 15, 2021
The Notes will not be listed on any securities exchange.
Investing in the Notes involves a number of risks. See “Additional Risk Factors Specific to the Notes” beginning on page PS-4 of the product
prospectus supplement dated September 7, 2018, on page S-1 of the prospectus supplement dated September 7, 2018, and “Selected Risk Considerations” beginning on page P-6 of this pricing supplement.
The Notes will not constitute deposits insured by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation or any
other Canadian or U.S. government agency or instrumentality. The Notes are not subject to conversion into our common shares under subsection 39.2(2.3) of the Canada Deposit Insurance
Corporation Act.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined that
this pricing supplement is truthful or complete. Any representation to the contrary is a criminal offense.
|
Per Note
|
Total
|
||
|
Price to public
|
100.00%
|
$3,850,000
|
|
|
Underwriting discounts and commissions
|
0.00%
|
$0
|
|
|
Proceeds to Royal Bank of Canada
|
100.00%
|
$3,850,000
|
The initial estimated value of the Notes as of the Trade Date is $993.36 per $1,000 in principal amount, which is less than the price to public. The
actual value of the Notes at any time will reflect many factors, cannot be predicted with accuracy, and may be less than this amount. We describe our determination of the initial estimated value in more detail below.
RBC Capital Markets, LLC, which we refer to as RBCCM, acting as agent for Royal Bank of Canada, will not receive a commission in connection with the sale of the Notes.
See “Supplemental Plan of Distribution (Conflicts of Interest)” below.
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
SUMMARY
The information in this “Summary” section is qualified by the more detailed information set forth in this
pricing supplement, the product prospectus supplement, the prospectus supplement, and the prospectus.
|
Issuer:
|
Royal Bank of Canada (“Royal Bank”)
|
|
|
Underwriter:
|
RBC Capital Markets, LLC (“RBCCM”)
|
|
|
Reference Asset:
|
Russell 2000® Index (“RTY”)
|
|
|
Currency:
|
U.S. Dollars
|
|
|
Minimum
Investment:
|
$1,000 and minimum denominations of $1,000 in excess thereof
|
|
|
Trade Date (Pricing
Date):
|
April 12, 2019
|
|
|
Issue Date:
|
April 17, 2019
|
|
|
Valuation Date:
|
October 12, 2021
|
|
|
Maturity Date:
|
October 15, 2021, subject to extension for market and other disruptions, as described in the product prospectus supplement.
|
|
|
Payment at Maturity
(if held to maturity):
|
If, on the Valuation Date, the Percentage Change is positive,
then the investor will receive an amount per $1,000 principal amount per Note equal to the lesser of:
1. Principal Amount + (Principal Amount x Percentage Change x Leverage Factor); or
2. Maximum Redemption Amount
If, on the Valuation Date, the Percentage Change is less
than or equal to 0%, but not by more than the Buffer Percentage (that is, the Percentage Change is between zero and -20%), then the investor will receive the principal amount only.
If, on the Valuation Date, the Percentage Change is negative,
by more than the Buffer Percentage (that is, the Percentage Change is between -20.01% and -100%), then the investor will receive a cash payment equal to:
Principal Amount + [Principal Amount x (Percentage Change + Buffer Percentage) x Downside Multiplier]
In this case, you will lose all or a portion of the principal amount of the Notes.
|
|
|
Percentage Change:
|
The Percentage Change, expressed as a percentage, is calculated using the following formula:
 |
|
|
Initial Level:
|
1,584.802, which was the closing level of the Reference Asset on the Trade Date.
|
|
|
Final Level:
|
The closing level of the Reference Asset on the Valuation Date.
|
|
|
Leverage Factor:
|
150%
|
|
|
Maximum
Redemption
Amount:
|
$1,270 per $1,000 in Principal Amount.
|
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
|
Buffer Percentage:
|
20%
|
|
|
Buffer Level:
|
1,267.842, which is 80% of the Initial Level (rounded to three decimal places)
|
|
|
Downside Multiplier:
|
1.25
|
|
|
Principal at Risk:
|
The Notes are NOT principal
protected. You may lose all or a substantial portion of your principal amount at maturity if there is a percentage decrease from the Initial Level to the Final Level of more than 20%.
|
|
|
Calculation Agent:
|
RBCCM
|
|
|
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 Notes as a pre-paid cash-settled derivative contract 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 counsel Morrison & Foerster LLP) in the product prospectus supplement under “Supplemental Discussion of U.S. Federal Income Tax Consequences,” which apply to the Notes.
|
|
|
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 less than the principal amount of your Notes.
|
|
|
Listing:
|
The Notes will not be listed on any securities exchange.
|
|
|
Clearance and
Settlement:
|
DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under
“Description of Debt Securities—Ownership and Book-Entry Issuance” in the prospectus).
|
|
|
Terms Incorporated
in the Master Note:
|
All of the terms appearing above the item captioned “Secondary Market” on pages P-2 and P-3 of this pricing supplement and the terms
appearing under the caption “General Terms of the Notes” in the product prospectus supplement, as modified by this pricing supplement.
|
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
ADDITIONAL TERMS OF YOUR NOTES
You should read this pricing supplement together with the prospectus dated September 7, 2018, as supplemented by the prospectus
supplement dated September 7, 2018 and the product prospectus supplement dated September 7, 2018, relating to our Senior Global Medium-Term Notes, Series H, of which these Notes are a part. Capitalized terms used but not defined in this pricing
supplement will have the meanings given to them in the product prospectus supplement. In the event of any conflict, this pricing supplement will control. The
Notes vary from the terms described in the product prospectus supplement in several important ways. You should read this pricing supplement carefully.
This pricing supplement, together with the documents listed below, contains the terms of the Notes and supersedes all prior or
contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of
ours. You should carefully consider, among other things, the matters set forth in “Risk Factors” in the prospectus supplement dated September 7, 2018 and “Additional Risk Factors Specific to the Notes” in the product prospectus supplement dated
September 7, 2018, as the Notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the Notes. You may access these documents on
the Securities and Exchange Commission (the “SEC”) website at www.sec.gov as follows (or if that address has changed, by reviewing our filings for the relevant date on the SEC website):
Prospectus dated September 7, 2018:
Prospectus Supplement dated September 7, 2018:
Product Prospectus Supplement ERN-EI-1 dated September 7, 2018:
Our Central Index Key, or CIK, on the SEC website is 1000275. As used in this pricing supplement, “we,” “us,” or “our” refers to Royal Bank of Canada.
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
HYPOTHETICAL RETURNS
The examples set out below are included for illustration purposes only. The hypothetical
Percentage Changes of the Reference Asset used to illustrate the calculation of the Payment at Maturity (rounded to two decimal places) are not estimates or forecasts of the Final Level or the level of the Reference Asset on any trading
day prior to the Maturity Date. All examples are based on the Buffer Percentage of 20% (the Buffer Level is 80% of the Initial Level), the Leverage Factor of 150%, the Maximum Redemption Amount of $1,270 and a Downside Multiplier of 1.25, and assume that a holder purchased Notes with an aggregate principal amount of $1,000 and that no market disruption event occurs on the Valuation Date.
|
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%)] = $1,000 + $75 = $1,075
|
|
|
On a $1,000 investment, a 5% Percentage Change results in a Payment at Maturity of $1,075, a 7.50% return on the Notes.
|
||
|
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:
|
20% | |
|
Payment at Maturity:
|
$1,000 + [$1,000 x (20% x 150%)] = $1,000 + $300 = $1,300 | |
|
However, the Maximum Redemption Amount is $1,270
|
||
|
On a $1,000 investment, a 20% Percentage Change results in a Payment at Maturity of $1,270, a 27% return on the Notes.
|
||
|
Example 3—
|
Calculation of the Payment at Maturity where the Percentage Change is negative (but not by more than the Buffer Percentage).
|
|
|
Percentage Change:
|
-8%
|
|
|
Payment at Maturity:
|
At maturity, if the Percentage Change is negative BUT not by more than the Buffer Percentage, then the Payment at Maturity will equal the
principal amount.
|
|
|
On a $1,000 investment, a -8% Percentage Change results in a Payment at Maturity of $1,000, a 0% return on the Notes.
|
||
|
Example 4—
|
Calculation of the Payment at Maturity where the Percentage Change is negative (by more than the Buffer Percentage).
|
|
|
Percentage Change:
|
-35%
|
|
|
Payment at Maturity:
|
$1,000 + [$1,000 x (-35% + 20%) x 1.25] = $1,000 - $187.50 = $812.50
|
|
|
On a $1,000 investment, a -35% Percentage Change results in a Payment at Maturity of $812.50, a -18.75% return on the Notes.
|
||
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
SELECTED RISK CONSIDERATIONS
An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the Reference Asset.
These risks are explained in more detail in the section “Additional Risk Factors Specific to the Notes,” beginning on page PS-4 of the product prospectus supplement. In addition to the risks described in the prospectus supplement and the product
prospectus supplement, you should consider the following:
| • |
Principal at Risk – Investors in the Notes could lose all or a substantial portion of their principal
amount if there is a decline in the level of the Reference Asset. You will lose 1.25% of the principal amount of the Notes for each 1% that the Final Level is less than the Initial Level by more than the Buffer Percentage.
|
| • |
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 bought a conventional senior interest
bearing debt security of Royal Bank.
|
| • |
Your Potential Payment at Maturity Is Limited – The Notes will provide less opportunity to participate in the appreciation of the Reference Asset than an investment in a security linked to the Reference Asset 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 Reference Asset.
|
| • |
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 Royal Bank’s senior unsecured debt securities. As a result, your receipt of the amount due on the maturity date is dependent upon Royal Bank’s ability to repay its obligations at
that time. This will be the case even if the level of the Reference Asset increases after the Trade Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
|
| • |
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 and other affiliates of Royal Bank may make a market for the Notes; however, they are not
required to do so. RBCCM or any other affiliate of Royal Bank 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 asked prices for your Notes in any secondary market could be substantial.
|
| • |
You Will Not Have Any Rights to the Securities Included in the Reference Asset – 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 securities included in the Reference Asset would have. The Final Level will not reflect any dividends
paid on the securities included in the Reference Asset, and accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
|
| • |
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 level of the Reference
Asset, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to the public of 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 hedging costs relating to the Notes. In addition to bid-ask spreads, the value
|
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
of the Notes determined 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 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.
|
The value of the Notes at any time after the Trade Date will vary based on many factors, including changes in
market conditions, and cannot be predicted with accuracy. As a result, the actual value you would receive if you sold the Notes in any secondary market, if any, should be expected to differ materially from the initial estimated value of your
Notes.
| • |
Inconsistent Research – Royal Bank or its affiliates may issue research reports on securities that are,
or may become, components of the Reference Asset. We may also publish research from time to time on financial markets and other matters that may influence the levels of the Reference Asset or the value of the Notes, or express
opinions or provide recommendations that may be inconsistent with the purchasing or holding the Notes or with the investment view implicit in the Notes or the Reference Asset. You should make your own independent investigation of the
merits of investing in the Notes and the Reference Asset.
|
| • |
An Investment in the Notes 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
large-capitalization companies. These companies may also be more susceptible to adverse developments related to their products or services.
|
| • |
Market Disruption Events and Adjustments – The payment at maturity and the Valuation Date are subject to
adjustment 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.
|
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
INFORMATION REGARDING THE REFERENCE ASSET
All disclosures contained in this document regarding the Reference Asset, including, without limitation, its make-up, method of calculation, and
changes in its components, have been derived from publicly available sources. The information reflects the policies of, and is subject to change by, FTSE Russell. FTSE Russell, which owns the copyright and all other rights to the Reference
Asset, has no obligation to continue to publish, and may discontinue publication of, the Reference Asset. The consequences of this sponsor discontinuing publication of the Reference Asset are discussed in the section of the product prospectus
supplement entitled “General Terms of the Notes— Unavailability of the Level of the Reference Asset.” Neither we nor RBCCM accepts any responsibility for the calculation, maintenance or publication of the Reference Asset or any successor index.
The RTY was developed by Russell Investments (“Russell”) before FTSE International Limited and Russell combined in 2015 to create FTSE Russell, which
is wholly owned by London Stock Exchange Group. Russell began dissemination of the RTY (Bloomberg L.P. index symbol “RTY”) on January 1, 1984. FTSE Russell calculates and publishes the RTY. The RTY was set to 135 as of the close of business on
December 31, 1986. The RTY is designed to track the performance of the small capitalization segment of the U.S. equity market. As a subset of the Russell 3000® Index, the RTY consists of the smallest 2,000 companies included in the
Russell 3000® Index. The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies, representing approximately 98% of the investable U.S. equity market. The RTY is determined, comprised, and
calculated by FTSE Russell without regard to the Notes.
Selection of Stocks Underlying the RTY
All companies eligible for inclusion in the RTY must be classified as a U.S. company under FTSE Russell’s country-assignment methodology. If a
company is incorporated, has a stated headquarters location, and trades in the same country (American Depositary Receipts and American Depositary Shares are not eligible), then the company is assigned to its country of incorporation. If any of
the three factors are not the same, FTSE Russell defines three Home Country Indicators (“HCIs”): country of incorporation, country of headquarters, and country of the most liquid exchange (as defined by a two-year average daily dollar trading
volume) (“ADDTV”) from all exchanges within a country. Using the HCIs, FTSE Russell compares the primary location of the company’s assets with the three HCIs. If the primary location of its assets matches any of the HCIs, then the company is
assigned to the primary location of its assets. If there is insufficient information to determine the country in which the company’s assets are primarily located, FTSE Russell will use the primary country from which the company’s revenues are
primarily derived for the comparison with the three HCIs in a similar manner. FTSE Russell uses the average of two years of assets or revenues data to reduce potential turnover. If conclusive country details cannot be derived from assets or
revenues data, FTSE Russell will assign the company to the country of its headquarters, which is defined as the address of the company’s principal executive offices, unless that country is a Benefit Driven Incorporation “BDI” country, in which
case the company will be assigned to the country of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Channel
Islands, Cook Islands, Curacao, Faroe Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and Turks and Caicos Islands. For any companies incorporated or headquartered in a
U.S. territory, including countries such as Puerto Rico, Guam, and U.S. Virgin Islands, a U.S. HCI is assigned.
All securities eligible for inclusion in the RTY must trade on a major U.S. exchange. Stocks must have a closing price at or above $1.00 on their
primary exchange on the last trading day in May to be eligible for inclusion during annual reconstitution. However, in order to reduce unnecessary turnover, if an existing member’s closing price is less than $1.00 on the last day of May, it will
be considered eligible if the average of the daily closing prices (from its primary exchange) during the month of May is equal to or greater than $1.00. Initial public offerings are added each quarter and must have a closing price at or above
$1.00 on the last day of their eligibility period in order to qualify for index inclusion. If an existing stock does not trade on the “rank day” (typically the last trading day in May, but a confirmed timetable is announced each spring), but
does have a closing price at or above $1.00 on another eligible U.S. exchange, that stock will be eligible for inclusion.
An important criterion used to determine the list of securities eligible for the RTY is total market capitalization, which is defined as the market
price as of the rank day in May for those securities being considered at annual reconstitution times the total number of shares outstanding. Where applicable, common stock, non-restricted exchangeable shares and partnership units/membership
interests are used to determine market capitalization. Any other form of shares such as preferred stock, convertible preferred stock, redeemable shares, participating preferred stock, warrants, rights, installment receipts or trust receipts, are
excluded from the calculation. If multiple share classes of common stock exist, they are combined to determine total shares outstanding. In cases where the common stock share classes act independently of each other (e.g., tracking stocks), each
class is considered for inclusion separately. If multiple share classes exist, the pricing vehicle will be designated as the share class with the highest two-year trading volume as of the rank day in May.
Companies with a total market capitalization of less than $30 million are not eligible for the RTY. Similarly, companies with only 5% or less of their shares available
in the marketplace are not eligible for the RTY. Royalty trusts, limited liability companies, closed-end
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
investment companies (companies that are required to report Acquired Fund Fees and Expenses, as defined by the SEC, including business development
companies), blank check companies, special purpose acquisition companies, and limited partnerships are also ineligible for inclusion. Exchange traded funds and mutual funds are also excluded. Bulletin board, pink sheets, and over-the-counter
(“OTC”) traded securities are not eligible for inclusion.
Annual reconstitution is a process by which the RTY is completely rebuilt. Based on closing levels of the company’s common stock on its primary
exchange on the rank day of May of each year, FTSE Russell reconstitutes the composition of the RTY using the then existing market capitalizations of eligible companies. Reconstitution of the RTY occurs on the last Friday in June or, when the
last Friday in June is the 29th or 30th, reconstitution occurs on the prior Friday. In addition, FTSE Russell adds initial public offerings to the RTY on a quarterly basis based on total market capitalization ranking within the market-adjusted
capitalization breaks established during the most recent reconstitution.
After membership is determined, a security’s shares are adjusted to include only those shares available to the public. This is often referred to as
“free float.” The purpose of the adjustment is to exclude from market calculations the capitalization that is not available for purchase and is not part of the investable opportunity set.
License Agreement
FTSE Russell and Royal Bank have entered into a non-exclusive license agreement providing for the license to Royal Bank, and certain of its
affiliates, in exchange for a fee, of the right to use indices owned and published by FTSE Russell in connection with some securities, including the Notes.
FTSE Russell does not guarantee the accuracy and/or the completeness of the RTY or any data included in the RTY and has no liability for any errors,
omissions, or interruptions in the RTY. FTSE Russell makes no warranty, express or implied, as to results to be obtained by the calculation agent, holders of the Notes, or any other person or entity from the use of the RTY or any data included in
the RTY in connection with the rights licensed under the license agreement described in this document or for any other use. FTSE Russell makes no express or implied warranties, and hereby expressly disclaims all warranties of merchantability or
fitness for a particular purpose with respect to the RTY or any data included in the RTY. Without limiting any of the above information, in no event will FTSE Russell have any liability for any special, punitive, indirect or consequential
damages, including lost profits, even if notified of the possibility of these damages.
The Notes are not sponsored, endorsed, sold or promoted by FTSE Russell. FTSE Russell makes no representation or warranty, express or implied, to
the owners of the Notes or any member of the public regarding the advisability of investing in securities generally or in the Notes particularly or the ability of the RTY to track general stock market performance or a segment of the same. FTSE
Russell’s publication of the RTY in no way suggests or implies an opinion by FTSE Russell as to the advisability of investment in any or all of the stocks upon which the RTY is based. FTSE Russell's only relationship to Royal Bank is the
licensing of certain trademarks and trade names of FTSE Russell and of the RTY, which is determined, composed and calculated by FTSE Russell without regard to Royal Bank or the Notes. FTSE Russell is not responsible for and has not reviewed the
Notes nor any associated literature or publications and FTSE Russell makes no representation or warranty express or implied as to their accuracy or completeness, or otherwise. FTSE Russell reserves the right, at any time and without notice, to
alter, amend, terminate or in any way change the RTY. FTSE Russell has no obligation or liability in connection with the administration, marketing or trading of the Notes.
“Russell 2000®” and “Russell 3000®” are registered trademarks of FTSE Russell in the U.S. and other countries.
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
Historical Information
The graph below sets forth the information relating to the historical performance of the Reference Asset for the period from January 1, 2009 through
April 12, 2019.
We obtained the information regarding the historical performance of the Reference Asset in the graph below from Bloomberg Financial Markets.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg Financial Markets. The historical
performance of the Reference Asset should not be taken as an indication of its future performance, and no assurance can be given as to the Final Level of the Reference Asset. We cannot give you assurance that the performance of the Reference
Asset will result in any positive return on your initial investment.
Russell 2000® Index (“RTY”)
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
SUPPLEMENTAL DISCUSSION OF
U.S. FEDERAL INCOME TAX CONSEQUENCES
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following disclosure supplements, and to the extent inconsistent supersedes, the discussion
in the product prospectus supplement dated September 7, 2018 under “Supplemental Discussion of U.S. Federal Income Tax Consequences.”
Under Section 871(m) of the Code, a “dividend equivalent” payment is treated as a dividend from
sources within the United States. Such payments generally would be subject to a 30% U.S. withholding tax if paid to a non-U.S. holder. Under U.S. Treasury Department regulations, payments (including deemed payments) with respect to
equity-linked instruments (“ELIs”) that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an “underlying security,” which is generally any interest in an entity taxable as a corporation
for U.S. federal income tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend. However, the IRS has issued guidance that states that the U.S. Treasury Department and the IRS intend to amend the
effective dates of the U.S. Treasury Department regulations to provide that withholding on dividend equivalent payments will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2021. Based on our
determination that the Notes are not delta-one instruments, non-U.S. holders should not be subject to withholding on dividend equivalent payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed
reissued for U.S. federal income tax purposes upon the occurrence of certain events affecting the Reference Asset or the Notes(for example, upon the Reference Asset rebalancing), and following such occurrence the Notes could be treated as
subject to withholding on dividend equivalent payments. Non-U.S. holders that enter, or have entered, into other transactions in respect of the Reference Asset or the Notes should consult their tax advisors as to the application of the dividend
equivalent withholding tax in the context of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding, we (or the applicable withholding agent) would be entitled to withhold taxes
without being required to pay any additional amounts with respect to amounts so withheld.
The accompanying product prospectus supplement notes that FATCA withholding on payments of gross proceeds from a sale or redemption of Notes will only apply to payments
made after December 31, 2018. That discussion is modified to reflect regulations proposed by the U.S. Treasury Department in December 2018 indicating an intent to eliminate the requirement under FATCA of withholding on gross proceeds of the
disposition of financial instruments. The U.S. Treasury Department has indicated that taxpayers may rely on these proposed regulations pending their finalization. Prospective investors are urged to consult with their own tax advisors regarding
the possible implications of FATCA on their investment in the Notes.
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
Delivery of the Notes will be made against payment for the Notes on April 17, 2019, which is the third (3rd) business day following
the Trade Date (this settlement cycle being referred to as “T+3”). See “Plan of Distribution” in the prospectus dated September 7, 2018. For additional information as to the relationship between us and RBCCM, please see the section “Plan of
Distribution—Conflicts of Interest” in the prospectus dated September 7, 2018.
We expect to deliver the Notes on a date that is greater than two business days following the Trade Date. Under Rule 15c6-1 of the
Exchange Act, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes more than two business days
prior to the original Issue Date will be required to specify alternative arrangements to prevent a failed settlement.
The value of the Notes shown on your account statement may be based on RBCCM’s estimate of the
value of the Notes if RBCCM or another of our affiliates were to make a market in the Notes (which it is not obligated to do). That estimate will be based upon the price that RBCCM may pay for the Notes in light of then prevailing market
conditions, our creditworthiness and transaction costs. For a period of approximately 6 months after the issue date of the Notes, the value of the Notes that may be shown on your account statement may be higher than RBCCM’s estimated value of
the Notes at that time. This is because the estimated value of the Notes will not include our hedging costs and profits; however, the value of the Notes shown on your account statement during that period may initially be a higher amount,
reflecting the addition of our estimated costs and profits from hedging the Notes. This excess is expected to decrease over time until the end of this period. After this period, if RBCCM repurchases your Notes, it expects to do so at prices
that reflect their estimated value.
We may use this pricing supplement in the initial sale of the Notes. In addition, RBCCM or another of our affiliates may use this pricing
supplement in a market-making transaction in the Notes after their initial sale. Unless we or our agent informs the purchaser otherwise in the
confirmation of sale, this pricing supplement is being used in a market-making transaction.
STRUCTURING THE NOTES
The Notes are our debt securities, the return on which is linked to the performance of the Reference
Asset. As is the case for all of our debt securities, including our structured notes, the economic terms of the Notes reflect our actual or perceived creditworthiness at the time of pricing. In addition, because structured notes result in
increased operational, funding and liability management costs to us, we typically borrow the funds under these Notes at a rate that is more favorable to us than the rate that we might pay for a conventional fixed or floating rate debt security
of comparable maturity. Using this relatively lower implied borrowing rate rather than the secondary market rate, is a factor that reduced the initial estimated value of the Notes at the time their terms were set. Unlike the estimated value
that is included on the cover page of this pricing supplement, any value of the Notes determined for purposes of a secondary market transaction may be based on a different funding rate, which may result in a lower value for the Notes than if
our initial internal funding rate were used.
In order to satisfy our payment obligations under the Notes, we may choose to enter into certain
hedging arrangements (which may include call options, put options or other derivatives) on the issue date with RBCCM or one of our other subsidiaries. The terms of these hedging arrangements take into account a number of factors, including our
creditworthiness, interest rate movements, the volatility of the Reference Asset, and the tenor of the Notes. The economic terms of the Notes and their initial estimated value depend in part on the terms of these hedging arrangements.
The lower implied borrowing rate is a factor that reduced the economic terms of the Notes to you.
The initial offering price of the Notes also reflects our estimated hedging costs. These factors resulted in the initial estimated value for the Notes on the Trade Date being less than their public offering price. See “Selected Risk
Considerations—The Initial Estimated Value of the Notes Is Less than the Price to the Public” above.
|
|
|
|
Geared Buffered Enhanced Return Notes
Linked to the Russell 2000® Index
|
VALIDITY OF THE NOTES
In the opinion of Norton Rose Fulbright Canada LLP, the issue and sale of the Notes has been duly authorized by all necessary
corporate action of the Bank in conformity with the Indenture, and when the Notes have been duly executed, authenticated and issued in accordance with the Indenture and delivered against payment therefor, the Notes will be validly issued and, to
the extent validity of the Notes is a matter governed by the laws of the Province of Ontario or Québec, or the laws of Canada applicable therein, and will be valid obligations of the Bank, subject to equitable remedies which may only be granted
at the discretion of a court of competent authority, subject to applicable bankruptcy, to rights to indemnity and contribution under the Notes or the Indenture which may be limited by applicable law; to insolvency and other laws of general
application affecting creditors’ rights, to limitations under applicable limitations statutes, and to limitations as to the currency in which judgments in Canada may be rendered, as prescribed by the Currency Act (Canada). This opinion is given
as of the date hereof and is limited to the laws of the Provinces of Ontario and Québec and the federal laws of Canada applicable thereto. In addition, this opinion is subject to customary assumptions about the Trustee’s authorization, execution
and delivery of the Indenture and the genuineness of signatures and certain factual matters, all as stated in the letter of such counsel dated September 7, 2018, which has been filed as Exhibit 5.1 to Royal Bank’s Form 6-K filed with the SEC
dated September 7, 2018.
In the opinion of Morrison & Foerster LLP, when the Notes have been duly completed in accordance with the Indenture and issued and sold as
contemplated by the prospectus supplement and the prospectus, the Notes will be valid, binding and enforceable obligations of Royal Bank, entitled to the benefits of the Indenture, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith). This opinion is given as of the
date hereof and is limited to the laws of the State of New York. This opinion is subject to customary assumptions about the Trustee’s authorization, execution and delivery of the Indenture and the genuineness of signatures and to such counsel’s
reliance on the Bank and other sources as to certain factual matters, all as stated in the legal opinion dated September 7, 2018, which has been filed as Exhibit 5.2 to the Bank’s Form 6-K dated September 7, 2018.