RBC plans direct investment notes linked to EquityCompass Equity Risk Management Strategy

By Angela McDaniels

Tacoma, Wash., May 12 - Royal Bank of Canada plans to price 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.

The notes will price June 4 and settle June 9.

RBC Capital Markets Corp. is the underwriter.

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