By Angela McDaniels
Tacoma, Wash., June 8 - Royal Bank of Canada priced $11.49 million of 0% direct investment notes due July 9, 2010 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 and uses a set of rules to construct a theoretical portfolio of different combinations of cash and/or a long or short position in the S&P 500 Total Return index.
The portfolio is reallocated monthly based on the average of (a) the directional earnings model, which is based on the monthly changes in earnings-per-share estimates for the components of the index, and (b) a calculation called the technical price model, which compares recent levels of the Dow Jones Industrial Average to its all-time highest level and its lowest level after that all-time high.
RBC will reduce the value of the portfolio by 0.15% each time it is reallocated.
The payout at maturity will be par plus 98.1% of the portfolio performance.
If the portfolio performance is less than or equal to negative 50% on any day during the life of the notes, the notes will be called and investors will receive par plus 98.1% of the portfolio performance. The portfolio performance on the first trading day following the call trigger date will be used the calculate the payout.
RBC Capital Markets Corp. is the underwriter.
| Issuer: | Royal Bank of Canada
|
| Issue: | Direct investment notes
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| Underlying strategy: | EquityCompass Equity Risk Management Strategy
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| Amount: | $11.49 million
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| Maturity: | July 9, 2010
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| Coupon: | 0%
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| Price: | Par
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| Payout at maturity: | Par plus 98.1% of the performance of the portfolio underlying the strategy
|
| Call option: | Automatically if portfolio performance is negative 50% or less on any day; payout determined in same way as at maturity
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| Pricing date: | June 4
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| Settlement date: | June 9
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| Underwriter: | RBC Capital Markets Corp.
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| Fees: | 1.4%
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