PRICING SUPPLEMENT
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-227001
Dated April 24, 2019
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Investment Description
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Features
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Key Dates1
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❑
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Contingent Coupon — We will pay a quarterly Contingent
Coupon payment if the closing price of the Underlying on the applicable Coupon Observation Date is equal to or greater than the Coupon Barrier. Otherwise, no coupon will be paid for the quarter.
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❑
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Automatically Callable — We will automatically call the
Notes and pay you the principal amount of your Notes plus the Contingent Coupon otherwise due for that quarter if the closing price of the Underlying on any quarterly Call Observation Date is greater than or equal to the Initial
Price. If the Notes are not called, investors will have the potential for downside equity market risk at maturity.
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❑
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Contingent Repayment of Principal at Maturity — If by
maturity the Notes have not been called and the price of the Underlying does not close below the Downside Threshold on the Final Valuation Date, we will repay your principal amount per Note at maturity. If the price of the Underlying
closes below the Downside Threshold on the Final Valuation Date, we will pay less than the principal amount, if anything, resulting in a loss on your initial investment that is proportionate to the decline in the price of the
Underlying from the Trade Date to the Final Valuation Date. The contingent repayment of principal only applies if you hold the Notes until maturity. Any payment on the Notes, including any repayment of principal, is subject to our
creditworthiness.
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Trade Date
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April 24, 2019
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Settlement Date
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April 29, 2019
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Coupon Observation Dates1
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Quarterly (see page 6)
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Call Observation Dates1
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Quarterly (see page 6)
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Final Valuation Date1
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April 24, 2020
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Maturity Date1
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April 29, 2020
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1
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Subject to postponement if a market disruption event occurs, as described under “General Terms of the
Securities—Payment at Maturity” in the accompanying product prospectus supplement no. UBS-TACYN-1.
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NOTICE TO INVESTORS: THE NOTES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. WE ARE NOT NECESSARILY OBLIGATED
TO REPAY THE FULL PRINCIPAL AMOUNT OF THE NOTES AT MATURITY, AND THE NOTES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE UNDERLYING. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING OUR DEBT OBLIGATION. YOU SHOULD
NOT PURCHASE THE NOTES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE NOTES.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “KEY RISKS” BEGINNING ON PAGE 7 OF THIS PRICING SUPPLEMENT, UNDER
“RISK FACTORS” BEGINNING ON PAGE PS-5 OF THE PRODUCT PROSPECTUS SUPPLEMENT NO. UBS-TACYN-1 AND UNDER ‘‘RISK FACTORS’’ BEGINNING ON PAGE S-1 OF THE PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY NOTES. EVENTS RELATING TO ANY OF THOSE RISKS,
OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR NOTES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL INVESTMENT IN THE NOTES.
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Note Offering
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Underlying
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Contingent Coupon
Rate
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Initial Price
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Downside Threshold
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Coupon Barrier
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CUSIP
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ISIN
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Common stock of International Paper Company (IP)
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8.70%
per annum
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$44.29
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$33.22, which is 75% of the Initial Price (rounded to two decimal places)
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$33.22, which is 75% of the Initial Price (rounded to two decimal places)
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78014H649
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US78014H6493
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Price to Public
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Fees and Commissions(1)
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Proceeds to Us
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||||
Offering of the Notes
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Total
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Per Note
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Total
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Per Note
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Total
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Per Note
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Notes linked to the common stock of International Paper Company (IP)
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$2,214,000
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$10.00
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$33,210
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$0.15
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$2,180,790
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$9.85
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UBS Financial Services Inc.
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RBC Capital Markets, LLC
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Additional Information About Royal Bank of Canada and the Notes
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♦ |
Product prospectus supplement no. UBS-TACYN-1 dated October 3, 2018:
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♦ |
Prospectus supplement dated September 7, 2018:
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♦ |
Prospectus dated September 7, 2018:
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Investor Suitability
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♦ |
You fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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♦ |
You can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that may have the same downside market risk as an investment in
the Underlying.
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♦ |
You believe the closing price of the Underlying will be equal to or greater than the Coupon Barrier on most or all of the Coupon Observation Dates (including the Final Valuation
Date).
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♦ |
You are willing to make an investment whose return is limited to the Contingent Coupon payments, regardless of any potential appreciation of the Underlying, which could be
significant.
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♦ |
You can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside price fluctuations of the Underlying.
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♦ |
You are willing to invest in Notes for which there may be little or no secondary market and you accept that the secondary market will depend in large part on the price, if any, at
which RBC Capital Markets, LLC, which we refer to as “RBCCM,” is willing to purchase the Notes.
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♦ |
You are willing to invest in the Notes based on the Contingent Coupon Rate set forth on the cover page of this pricing supplement.
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♦ |
You do not seek guaranteed current income from this investment and are willing to forgo dividends paid on the Underlying.
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♦ |
You are willing to invest in securities that may be called early and you are otherwise willing to hold such securities to maturity.
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♦
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You are willing to assume our credit risk for all payments under the Notes, and understand that if we default on our obligations, you
may not receive any amounts due to you, including any repayment of principal.
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♦ |
You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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♦ |
You cannot tolerate a loss on your investment and require an investment designed to provide a full return of principal at maturity.
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♦ |
You are not willing to make an investment that may have the same downside market risk as an investment in the Underlying.
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♦ |
You believe that the price of the Underlying will decline during the term of the Notes and is likely to close below the Coupon Barrier on most or all of the Coupon Observation Dates
and below the Downside Threshold on the Final Valuation Date.
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♦ |
You seek an investment that participates in the full appreciation in the price of the Underlying or that has unlimited return potential.
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♦ |
You cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside price fluctuations of the Underlying.
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♦ |
You are unwilling to invest in the Notes based on the Contingent Coupon Rate set forth on the cover page of this pricing supplement.
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♦ |
You seek guaranteed current income from this investment or prefer to receive the dividends paid on the Underlying.
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♦ |
You are unable or unwilling to hold securities that may be called early, or you are otherwise unable or unwilling to hold such securities to maturity or you seek an investment for
which there will be an active secondary market for the Notes.
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♦
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You are not willing to assume our credit risk for all payments under the Notes, including any repayment of principal.
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The suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable investment for you will depend on your individual circumstances, and you should reach an investment decision only after you and your investment, legal, tax, accounting, and other advisers have carefully considered the suitability of an investment in the Notes in light of your particular circumstances. You should also review carefully the “Key Risks” below and “Risk Factors” in the accompanying product prospectus supplement no. UBS-TACYN-1 for risks related to an investment in the Notes. In addition, you should review carefully the section below, “Information About the Underlying,” for more information about the Underlying. |
Final Terms of the Notes1
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Issuer:
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Royal Bank of Canada
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Principal
Amount
per Note:
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$10.00 per Note
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Term:2
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Approximately 1 year, if not previously called
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Underlying:
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The common stock of International Paper Company.
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Closing Price:
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On any trading day, the last reported sale price of the Underlying on the principal national
securities exchange in the U.S. on which it is listed for trading, as determined by the calculation agent.
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Initial Price:
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The closing price of the Underlying on the Trade Date, as set forth on the cover page of this
pricing supplement.
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Final Price:
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The closing price of the Underlying on the Final Valuation Date.
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Contingent
Coupon:
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If the closing price of the Underlying is equal to or greater than the Coupon Barrier on any Coupon Observation
Date, we will pay you the Contingent Coupon applicable to that Coupon Observation Date.
If the closing price of the Underlying is less than the Coupon Barrier on any Coupon Observation Date, the Contingent Coupon
applicable to that Coupon Observation Date will not accrue or be payable and we will not make any payment to you on the relevant Contingent Coupon Payment Date.
The Contingent Coupon will be a fixed amount based upon equal quarterly installments at the Contingent Coupon Rate, which is the per
annum rate set forth below.
Each Contingent Coupon will be paid to the holders of record of the Notes at the close of business one business day
prior to that Coupon Payment Date whether or not such business day is a business day.
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Contingent Coupon payments on the Notes are not guaranteed. We will not pay
you the Contingent Coupon for any Coupon Observation Date on which the closing price of the Underlying is less than the Coupon Barrier.
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Contingent
Coupon Rate:
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8.70% per annum (or 2.175% per quarter)
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Coupon Barrier:
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75% of the Initial Price, as set forth on the cover page (as may be adjusted in the case of certain adjustment events as described under “General Terms of the Securities—Anti-dilution Adjustments” in the product prospectus supplement). The Coupon Barrier equals the Downside Threshold. | |
Downside Threshold: | 75% of the Initial Price, as set forth on the cover page (as may be adjusted in the case of certain adjustment events as |
described under “General Terms of the Securities—Anti-dilution Adjustments” in the product prospectus supplement). The
Downside Threshold equals the Coupon Barrier.
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Automatic Call
Feature:
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The Notes will be called automatically if the closing price of the Underlying on any Call
Observation Date (set forth on page 6) is greater than or equal to the Initial Price.
If the Notes are called, we will pay you on the corresponding coupon payment date (which will be
the “Call Settlement Date”) a cash payment per Note equal to the principal amount per Note plus the applicable Contingent Coupon payment otherwise due on that day (the “Call Settlement Amount”). No further amounts will be owed to you
under the Notes.
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Payment at
Maturity:
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If the Notes are not called and the Final Price is equal to or greater than the
Downside Threshold and the Coupon Barrier, we will pay you a cash payment per Note on the maturity date equal to $10.00 plus the Contingent Coupon otherwise due on the maturity date.
If the Notes are not called and the Final Price is less than the Downside
Threshold, we will pay you a cash payment on the maturity date of less than the principal amount, if anything, resulting in a loss on your initial investment that is proportionate to the negative underlying return, equal to:
$10.00 + ($10.00 × underlying return)
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Underlying
Return:
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Final Price – Initial Price
Initial Price
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Investment Timeline
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Trade Date:
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The Initial Price of the Underlying was observed. The Downside Threshold and Coupon Barrier were determined.
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Quarterly:
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If the closing price of the Underlying is equal to or greater than the Coupon Barrier on any Coupon Observation Date,
we will pay you a Contingent Coupon payment on the applicable coupon payment date.
The Notes will be called if the closing price of the Underlying on any Call Observation Date is equal to or greater
than the Initial Price. If the Notes are called, we will pay you a cash payment per Note equal to $10 plus the Contingent Coupon otherwise due on that date.
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Maturity
Date:
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The Final Price of the Underlying is observed on the Final Valuation Date.
If the Notes have not been called and the Final Price is equal to or greater than the Downside Threshold (and the
Coupon Barrier), we will repay the principal amount equal to $10 per Note plus the Contingent Coupon otherwise due on the maturity date.
If the Notes have not been called and the Final Price is less than the Downside Threshold, we will pay less than the
principal amount, if anything, resulting in a loss on your initial investment proportionate to the decline of the Underlying, for an amount equal to:
$10 + ($10 × underlying return) per Note
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INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE NOTES, INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO OUR CREDITWORTHINESS. IF WE WERE TO DEFAULT ON OUR PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT. |
Coupon Observation Dates and Coupon Payment Dates*
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Coupon Observation Dates(1)
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Coupon Payment Dates(2)
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July 24, 2019
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July 29, 2019
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October 24, 2019
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October 29, 2019
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January 24, 2020
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January 29, 2020
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April 24, 2020(3)
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April 29, 2020(4)
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(1)
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These Coupon Observation Dates are also Call Observation Dates.
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(2)
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These Coupon Payment Dates are also Call Settlement Dates.
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(3)
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This is also the Final Valuation Date.
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(4)
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This is also the maturity date.
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Key Risks
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♦ |
Risk of Loss at Maturity — The Notes differ from ordinary debt securities in that we will not necessarily
repay the full principal amount of the Notes at maturity. If the Notes are not called, we will repay you the principal amount of your Notes in cash only if the Final Price of the Underlying is greater than or equal to the Downside
Threshold, and will only make that payment at maturity. If the Notes are not called and the Final Price is less than the Downside Threshold, you will lose some or all of your initial investment in an amount proportionate to the
decline in the price of the Underlying.
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♦ |
The Contingent Repayment of Principal Applies Only at Maturity — If the Notes are not automatically
called, you should be willing to hold your Notes to maturity. If you are able to sell your Notes prior to maturity in the secondary market, if any, you may have to do so at a loss relative to your initial investment, even if the
price of the Underlying is above the Downside Threshold.
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♦ |
You May Not Receive any Contingent Coupons — We will not necessarily make periodic Contingent Coupon
payments on the Notes. If the closing price of the Underlying on a Coupon Observation Date is less than the Coupon Barrier, we will not pay you the Contingent Coupon applicable to that Coupon Observation Date. If the closing price
of the Underlying is less than the Coupon Barrier on each of the Coupon Observation Dates, we will not pay you any Contingent Coupons during the term of, and you will not receive a positive return on, your Notes. Generally, this
non-payment of the Contingent Coupon coincides with a period of greater risk of principal loss on your Notes. Accordingly, if we do not pay the Contingent Coupon on the maturity date, you will incur a loss of principal, because the
Final Price will be less than the Downside Threshold.
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♦ |
The Call Feature and the Contingent Coupon Feature Limit Your Potential Return — The return potential of
the Notes is limited to the pre-specified Contingent Coupon Rate, regardless of the appreciation of the Underlying. In addition, the total return on the Notes will vary based on the number of Call Observation Dates on which the
Contingent Coupon becomes payable prior to maturity or an automatic call. Further, if the Notes are called due to the automatic call feature, you will not receive any Contingent Coupons or any other payment in respect of any Call
Observation Dates after the applicable Call Settlement Date. Since the Notes could be called as early as the first Call Observation Date, the total return on the Notes could be minimal. If the Notes are not called, you may be
subject to the full downside performance of the Underlying even though your potential return is limited to the Contingent Coupon Rate. Generally, the longer the Notes are outstanding, the less likely it is that they will be
automatically called due to the decline in the price of the Underlying and the shorter time remaining for the price of the Underlying to recover. As a result, the return on an investment in the Notes could be less than the return on
a direct investment in the Underlying or on a similar security that allows you to participate in the appreciation of the price of the Underlying.
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♦ |
The Contingent Coupon Rate Per Annum Payable on the Notes Will Reflect in Part the Volatility of the Underlying,
and May Not Be Sufficient to Compensate You for the Risk of Loss at Maturity — “Volatility” refers to the frequency and magnitude of changes in the price of the Underlying. The greater the volatility of the Underlying, the
more likely it is that the price of that equity could close below the Downside Threshold on the Final Valuation Date. This risk will generally be reflected in a higher Contingent Coupon Rate for the Notes than the rate payable on
our conventional debt securities with a comparable term. However, while the Contingent Coupon Rate was set on the Trade Date, the Underlying’s volatility can change significantly over the term of the Notes, and may increase. The
price of the Underlying could fall sharply as of the Final Valuation Date, which could result in a significant loss of your principal.
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♦ |
The Notes Are Subject to Reinvestment Risk — The Notes will be called automatically if the closing price
of the Underlying is equal to or greater than the Initial Price on any Call Observation Date. In the event that the Notes are called prior to maturity, there is no guarantee that you will be able to reinvest the proceeds from an
investment in the Notes at a comparable rate of return for a similar level of risk. To the extent you are able to reinvest your proceeds in an investment comparable to the Notes, you will incur transaction costs and the original
issue price for such an investment is likely to include certain built in costs such as dealer discounts and hedging costs.
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♦ |
The Notes Are Subject to Our Credit Risk — The Notes are subject to our credit risk, and our credit ratings and credit spreads may adversely affect the market value of the Notes. Investors are dependent on our ability to pay all amounts due on the Notes, and
therefore investors are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is
likely to adversely affect the value of the Notes. If we were to default on our payment obligations, you may not receive any amounts owed to you under the Notes and you could lose your entire investment.
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♦ |
The Notes Will Be Subject to Risks, Including Non-Payment in Full, Under Canadian Bank Resolution Powers
— Under Canadian bank resolution powers, the Canada Deposit Insurance Corporation (“CDIC”) may, in circumstances where we have ceased, or are about to cease, to be viable, assume temporary control or ownership over us and may be
granted broad powers by one or more orders of the Governor in Council (Canada), including the power to sell or dispose of all or a part of our assets, and the power to carry out or cause us to carry out a transaction or a series of
transactions the purpose of which is to restructure our business. See “Description of Debt Securities — Canadian Bank Resolution Powers” in the accompanying
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♦ |
An Investment in the Notes Is Subject to Single Stock Risk – The price of the Underlying can rise or fall
sharply due to factors specific to that Underlying and its issuer, such as stock price volatility, earnings, financial conditions, corporate, industry and regulatory developments, management changes and decisions and other events,
as well as general market factors, such as general stock market volatility and levels, interest rates and economic and political conditions. You, as an investor in the Notes, should make your own investigation into the Underlying
and its issuer. For additional information about the Underlying and its issuer, please see “Information about the Underlying” in this pricing supplement and the Underlying
issuer’s SEC filings referred to in those sections. We urge you to review financial and other information filed periodically by the Underlying issuer with the
SEC.
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♦ |
The Initial Estimated Value of the Notes Is Less than the Price to the Public — The initial estimated
value for the Notes that is set forth on the cover page of this document is less than the public offering price you pay for the Notes and does not represent a minimum price at which we, RBCCM or any of our other affiliates would be
willing to purchase the Notes in any secondary market (if any exists) at any time. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value.
This is due to, among other things, changes in the price of the Underlying, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to public of the underwriting discount, and our estimated profit
and the costs relating to our hedging of the Notes. These factors, together with various credit, market and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in
any secondary market and will affect the value of the Notes in complex and unpredictable ways. Assuming no change in market conditions or any other relevant factors, the price, if any, at which you may be able to sell your Notes
prior to maturity may be less than the price to public, as any such sale price would not be expected to include the underwriting discount and our estimated profit and the costs relating to our hedging of the Notes. In addition, any
price at which you may sell the Notes is likely to reflect customary bid-ask spreads for similar trades. In addition to bid-ask spreads, the value of the Notes determined for any secondary market price is expected to be based on a
secondary market rate rather than the internal borrowing rate used to price the Notes and determine the initial estimated value. As a result, the secondary market price will be less than if the internal borrowing rate was used. The
Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
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♦ |
Our Initial Estimated Value of the Notes Is an Estimate Only, Calculated as of the Time the Terms of the Notes
Were Set — The initial estimated value of the Notes is based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See
“Structuring the Notes” below. Our estimate is based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are
based on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
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♦ |
Owning the Notes Is Not the Same as Owning the Underlying — The return on your Notes may not reflect the
return you would realize if you actually owned the Underlying. As a holder of the Notes, you will not have voting rights or rights to receive dividends or other distributions or other rights that holders of the Underlying, and any
such dividends will not be incorporated in the determination of the underlying return.
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♦ |
You Will Not Have Any Shareholder Rights and Will Have No Right to Receive Any Shares of
the Underlying at Maturity — Investing in the Notes will not make you a holder of any shares of the Underlying. Neither you nor any other holder or
owner of the Notes will have any voting rights, any right to receive dividends or other distributions, or any other rights with respect to the Underlying or such other securities.
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♦ |
There Is No Affiliation Between the Underlying Issuer and Us, UBS and Our Respective
Affiliates, and We Are Not Responsible for Any Disclosure by that Issuer — We, UBS and our respective affiliates are not affiliated with the
Underlying issuer. However, we, UBS and our respective affiliates may currently, or from time to time in the future engage in business with the Underlying issuer. Nevertheless, neither we nor our affiliates assume any
responsibilities for the accuracy or the completeness of any information about the Reference Stock and the Underlying issuer. You, as an investor in the Notes, should make your own investigation into the Underlying and the
Underlying issuer for your Notes. The Underlying issuer is not involved in this offering and has no obligation of any sort with respect to your Notes. The Underlying issuer has no obligation to take your interests into consideration
for any reason, including when taking any corporate actions that might affect the value of your Notes.
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♦ |
Historical Prices of the Underlying Should Not Be Taken as an Indication of its Future Prices During the Term of
the Notes — The trading prices of the Underlying will determine the value of the Notes at any given time. However, it is impossible to predict whether the price of the Underlying will rise or fall, trading prices of the
Underlying will be influenced by complex and interrelated political, economic, financial and other factors that can affect the Underlying issuer, and therefore, the price of the Underlying.
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♦ |
There Can Be No Assurance that the Investment View Implicit in the Notes Will Be Successful — It is
impossible to predict whether and the extent to which the price of the Underlying will rise or fall. The closing price of the Underlying will be
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♦ |
Lack of Liquidity — The Notes will not be listed on any securities exchange. RBCCM intends to offer to
purchase the Notes in the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Notes easily. Because other dealers are not likely
to make a secondary market for the Notes, the price at which you may be able to trade your Notes is likely to depend on the price, if any, at which RBCCM is willing to buy the Notes.
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♦ |
Potential Conflicts — We and our affiliates play a variety of roles in connection with the issuance of
the Notes, including hedging our obligations under the Notes. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the
Notes.
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♦ |
Potentially Inconsistent Research, Opinions or Recommendations by RBCCM, UBS or Their Affiliates — RBCCM,
UBS, and our respective affiliates may publish research, express opinions or provide recommendations as to the Underlying that are inconsistent with investing in or holding the Notes, and which may be revised at any time. Any such
research, opinions or recommendations could affect the value of the Underlying, and therefore, the market value of the Notes.
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♦ |
Uncertain Tax Treatment — Significant aspects of the tax treatment of an investment in the Notes are
uncertain. You should consult your tax adviser about your tax situation.
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♦ |
Potential Royal Bank of Canada and UBS Impact on Price — Trading or transactions by us, UBS or our
respective affiliates in the Underlying, or in futures, options, exchange-traded funds or other derivative products on the Underlying may adversely affect the market value of the Underlying, the closing price of the Underlying, and,
therefore, the market value of the Notes.
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♦ |
The Terms of the Notes Were Influenced at Issuance and Their Market Value Prior to Maturity Will Be Influenced
by Many Unpredictable Factors —
|
♦ |
the price of the Underlying;
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♦ |
the actual and expected volatility of the price of the Underlying;
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♦ |
the time remaining to maturity of the Notes;
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♦ |
the dividend rates on the Underlying;
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♦ |
interest and yield rates in the market generally;
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♦ |
a variety of economic, financial, political, regulatory or judicial events;
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♦ |
the occurrence of certain events with respect to the Underlying that may or may not require an adjustment to the terms of the Notes; and
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♦ |
our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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♦ |
The Anti-Dilution Protection for the Underlying Is Limited — The calculation agent will make adjustments
to the Initial Price, Downside Threshold and Coupon Barrier for certain events affecting the shares of the Underlying. However, the calculation agent will not be required to make an adjustment in response to all events that could
affect the Underlying. If an event occurs that does not require the calculation agent to make an adjustment, the value of the Notes and the payments on the Notes may be materially and adversely affected.
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Hypothetical Examples
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Principal Amount:
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$10.00
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Term:
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Approximately 1 year
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Hypothetical Initial Price*:
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$100.00
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Contingent Coupon Rate:
|
8.70% per annum (or 2.175% per quarter)
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Contingent Coupon**:
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$0.2175 per quarter
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Coupon Observation Dates:
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Quarterly
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Call Observation Dates:
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Quarterly
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Hypothetical Downside Threshold*:
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$75.00 (which is 75% of the Initial Price)
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Hypothetical Coupon Barrier*:
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$75.00 (which is 75% of the Initial Price)
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Date
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Closing Price
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Payment (per Note)
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First Coupon Observation Date
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$105.00 (at or above Coupon Barrier and Initial Price)
|
$10.2175 (Call Settlement Amount)
|
Total Payment:
|
$10.2175 (2.175% return)
|
Date
|
Closing Price
|
Payment (per Note)
|
First Coupon Observation Date
|
$75.00 (at or above Coupon Barrier; below Initial Price)
|
$0.2175 (Contingent Coupon – not called)
|
Second Coupon Observation Date
|
$76.00 (at or above Coupon Barrier; below Initial Price)
|
$0.2175 (Contingent Coupon – not called)
|
Third Coupon Observation Date
|
$105.00 (at or above Initial Price)
|
$10.2175 (Call Settlement Amount)
|
Total Payment:
|
$10.6525 (6.525% return)
|
Date
|
Closing Price
|
Payment (per Note)
|
First Coupon Observation Date
|
$95.00 (at or above Coupon Barrier; below Initial Price)
|
$0.2175 (Contingent Coupon – not called)
|
Second Coupon Observation Date
|
$60.00 (below Coupon Barrier)
|
$0.00 (Contingent Coupon not payable – not called)
|
Third Coupon Observation Date
|
$65.00 (below Coupon Barrier; below Initial Price)
|
$0.00 (Contingent Coupon not payable – not called)
|
Final Valuation Date
|
$77.00 (at or above Downside Threshold and Coupon Barrier; below Initial Price)
|
$10.2175 (Payment at Maturity)
|
Total Payment:
|
$10.435 (4.35% return)
|
Date
|
Closing Price
|
Payment (per Note)
|
First Coupon Observation Date
|
$95.00 (at or above Coupon Barrier; below Initial Price)
|
$0.2175 (Contingent Coupon – not called)
|
Second Coupon Observation Date
|
$85.00 (at or above Coupon Barrier; below Initial Price)
|
$0.2175 (Contingent Coupon – not called)
|
Third Coupon Observation Date
|
$50.00 (below Coupon Barrier; below Initial Price)
|
$0.00 (Contingent Coupon not payable – Notes not called)
|
Final Valuation Date
|
$25.00 (below Downside Threshold and Coupon Barrier)
|
$10.00 + [$10.00 × underlying return] =
$10.00 + [$10.00 × -75%] =
$10.00 - $7.50 =
$2.50 (Payment at Maturity)
|
Total Payment:
|
$2.935 (-70.65% return)
|
What Are the Tax Consequences of the Notes?
|
Information About the Underlying
|
International Paper Company
|
■ Hypothetical Coupon Barrier /
Downside Threshold = 75%
|
Supplemental Plan of Distribution (Conflicts of Interest)
|
Structuring the Notes
|
Terms Incorporated in Master Note
|
Validity of the Notes
|