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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-275898
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Pricing Supplement
Dated April 19, 2024
To the Product Prospectus Supplement ERN-ETF-1, the Prospectus Supplement and the
Prospectus, Each Dated December 20, 2023
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$358,000
Buffered Absolute Return Notes
Linked to the Invesco QQQ, Trust Series 1,
Due January 23, 2026
Royal Bank of Canada
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Royal Bank of Canada is offering Buffered Absolute Return Notes (the “Notes”) linked to the performance of the Invesco QQQ Trust, Series 1 (the “Reference
Asset”).
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Reference Asset
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Initial Price
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Buffer Price
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Invesco QQQ Trust, Series 1 (“QQQ”)
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$414.65
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$331.72, which is 80.00% of the Initial Price
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| • |
If the Final Price of the Reference Asset is greater than the Initial Price, the Notes will pay at maturity a return equal to 100.00% of the Percentage Change, subject to a Maximum Upside Return of 118.40%
of the principal amount of the Notes.
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| • |
If the Final Price is less than or equal to the Initial Price, but is greater than or equal to the Buffer Price, then the Notes will pay a one-for-one positive return equal to the absolute value of the
Percentage Change.
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| • |
If the Final Price is less than the Buffer Price, investors will lose 1% of the principal amount for each 1% decrease from the Initial Price to the Final Price beyond the Buffer Price. Accordingly, investors
may lose a substantial portion of their principal amount.
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| • |
Any payments on the Notes are subject to our credit risk.
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| • |
The Notes do not pay interest.
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| • |
The Notes will not be listed on any securities exchange.
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Issue Date: April 24, 2024
Maturity Date: January 23, 2026
CUSIP: 78017FTB9
Investing in the Notes involves a number of risks. See “Selected Risk Considerations” beginning on page P-7 of this pricing supplement, and “Risk Factors” beginning on page
PS-6 of the product prospectus supplement and on page S-3 of the prospectus supplement, each dated December 20, 2023.
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.
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Per Note
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Total
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Price to public(1)
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100.00%
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$358,000
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Underwriting discounts and commissions(1)
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0.45%
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$1,611
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Proceeds to Royal Bank of Canada
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99.55%
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$356,389
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(1) We or one of our affiliates may pay varying selling concessions of up to $4.50 per $1,000 in principal amount of the Notes in connection with the distribution of the Notes to
other registered broker-dealers. Certain dealers who purchase the Notes for sale to certain fee-based advisory accounts may forego some or all of their underwriting discount or selling concessions. The public offering price for investors
purchasing the Notes in these accounts may be between $995.50 and $1,000 per $1,000 in principal amount. See “Supplemental Plan of Distribution (Conflicts of Interest)” below.
The initial estimated value of the Notes as of the Trade Date was $979.59 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
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Buffered Absolute Return Notes Linked to
the Invesco QQQ Trust, Series 1
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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.
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Issuer:
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Royal Bank of Canada (the “Bank”)
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Underwriter:
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RBC Capital Markets, LLC (“RBCCM”)
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Reference Asset:
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Invesco QQQ Trust, Series 1 (“QQQ”)
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Minimum Investment:
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$1,000 and minimum denominations of $1,000 in excess thereof
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Trade Date (Pricing
Date):
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April 19, 2024
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Issue Date:
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April 24, 2024
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Valuation Date:
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January 20, 2026
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Maturity Date:
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January 23, 2026, subject to extension for market and other disruptions, as described in the product prospectus supplement dated December 20, 2023.
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Payment at Maturity
(if held to maturity):
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If the Final Price is greater than the Initial Price (that is, the Percentage Change is positive), then the investor will
receive an amount per $1,000 in principal amount per Note equal to the lesser of:
1. Principal Amount + [Principal Amount x
(Percentage Change x Participation Rate)] and
2. the Maximum Upside Return
If the Final Price is less than or equal to the Initial Price, but is greater
than or equal to the Buffer Price (that is, the Percentage Change is between 0% and -20.00%), the investor will receive, for each $1,000 in principal amount of the Notes, a one-for-one positive return equal to the absolute
value of the Percentage Change, calculated as follows:
Principal Amount + [-1 x (Principal Amount x Percentage Change)]
In this case, you will receive a positive return on the Notes, even if the Percentage Change is negative.
If the Final Price is less than the Buffer Price (that is, the Percentage Change is less than ‑20.00%), then the investor will
receive a cash payment equal to:
Principal Amount + [Principal Amount x (Percentage Change + Buffer Percentage)]
In this case, you will lose some or a substantial portion of the principal amount.
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Percentage Change:
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The Percentage Change, expressed as a percentage, is calculated using the following formula:
 |
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Initial Price:
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The closing price of the Reference Asset 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 Reference Asset on the Valuation Date.
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Participation Rate:
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100.00% (subject to the Maximum Upside Return).
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Maximum Upside
Return:
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118.40% multiplied by the principal amount.
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Buffered Absolute Return Notes Linked to
the Invesco QQQ Trust, Series 1
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Buffer Percentage:
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20%
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Buffer Price:
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80% of the Initial Price, as set forth on the cover page of this pricing supplement.
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Principal at Risk:
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The Notes are NOT principal protected. You may lose a substantial portion of your principal amount at maturity if the Final
Price is less than the Buffer Price.
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Calculation Agent:
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RBCCM
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U.S. Tax Treatment:
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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 Note 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 Ashurst
LLP, our special U.S. tax counsel) in the product prospectus supplement dated December 20, 2023 under “Supplemental Discussion of U.S. Federal Income Tax Consequences,” which apply to the Notes.
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Secondary Market:
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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.
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Listing:
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The Notes will not be listed on any securities exchange.
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Clearance and
Settlement:
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DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Ownership and Book-Entry Issuance” in the prospectus dated December 20,
2023).
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Terms Incorporated
in the Master Note:
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All of the terms appearing on the cover page and above the item captioned “Secondary Market” in this section and the terms appearing under the caption “General Terms of the Notes” in the product prospectus
supplement, as modified by this pricing supplement.
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Buffered Absolute Return Notes Linked to
the Invesco QQQ Trust, Series 1
|
ADDITIONAL TERMS OF YOUR NOTES
You should read this pricing supplement together with the prospectus dated December 20, 2023, as supplemented by the prospectus supplement dated December 20, 2023 and the
product prospectus supplement dated December 20, 2023, relating to our Senior Global Medium-Term Notes, Series J, 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 and in the product prospectus supplement, each dated December 20, 2023, 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 December 20, 2023:
Prospectus Supplement dated December 20, 2023:
Product Prospectus Supplement ERN-ETF-1 dated December 20, 2023:
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.
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Buffered Absolute Return Notes Linked to
the Invesco QQQ Trust, Series 1
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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 Price or the price 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 Price is 80% of the Initial Price), the Participation Rate of 100.00%, the Maximum Upside Return of 118.40% of the principal amount 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.
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Example 1 —
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Calculation of the Payment at Maturity where the Percentage Change is positive.
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Percentage Change:
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2%
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Payment at Maturity:
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$1,000 + [$1,000 x (2% x 100.00%)] = $1,000 + $20 = $1,020
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On a $1,000 investment, a Percentage Change of 2% results in a Payment at Maturity of $1,020, a return of 2.00% on the Notes.
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Example 2 —
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Calculation of the Payment at Maturity where the Percentage Change is positive (and the Payment at Maturity is subject to the Maximum Upside Return).
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Percentage Change:
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20%
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Payment at Maturity:
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$1,000 + [$1,000 x (20% x 100.00%)] = $1,000 + $200 = $1,200
However, the Maximum Upside Return is $1,184. Accordingly, you will receive a payment at maturity equal to $1,184 per $1,000 in principal amount of the Notes.
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On a $1,000 investment, a Percentage Change of 20% results in a Payment at Maturity of $1,184, a return of 18.40% on the Notes.
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Example 3 —
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Calculation of the Payment at Maturity where the Percentage Change is negative (but not by more than the Buffer Percentage).
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Percentage Change:
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-10%
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Payment at Maturity:
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$1,000 + [-1 x ($1,000 x -10%)] = $1,000 + $100 = $1,100
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On a $1,000 investment, a Percentage Change of -10% results in a Payment at Maturity of $1,100, a return of 10% on the Notes.
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In this case, even though the Percentage Change is negative, you will receive a positive return equal to the absolute value of the Percentage Change.
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Example 4 —
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Calculation of the Payment at Maturity where the Percentage Change is negative (by more than the Buffer Percentage).
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Percentage Change:
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-30%
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Payment at Maturity:
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$1,000 + [$1,000 x (-30% + 20%)] = $1,000 - $100 = $900
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On a $1,000 investment, a Percentage Change of -30% results in a Payment at Maturity of $900, a return of -10% on the Notes.
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Buffered Absolute Return Notes Linked to
the Invesco QQQ Trust, Series 1
|
The table set forth below is included for illustration purposes only. The table illustrates the hypothetical payments at maturity for a hypothetical range of performance for the Reference Asset,
based on the Buffer Percentage of 20%, the Participation Rate of 100.00% and the Maximum Upside Return of 118.40% of the principal amount.
Hypothetical Percentage Changes are shown in the first column on the left. The second column shows the corresponding payment at maturity for these Percentage
Changes, expressed as a percentage of the principal amount of the Notes. The third column shows the payment at maturity to be paid on the Notes per $1,000 in principal amount.
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Hypothetical Percentage
Change
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Payment at Maturity as
Percentage of Principal Amount
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Payment at Maturity per $1,000
in Principal Amount
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50.00%
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118.40%
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$1,184.00
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40.00%
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118.40%
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$1,184.00
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30.00%
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118.40%
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$1,184.00
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20.00%
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118.40%
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$1,184.00
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18.40%
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118.40%
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$1,184.00
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10.00%
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110.00%
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$1,100.00
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5.00%
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105.00%
|
$1,050.00
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2.00%
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102.00%
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$1,020.00
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0.00%
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100.00%
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$1,000.00
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-10.00%
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110.00%
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$1,100.00
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-20.00%
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120.00%
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$1,200.00
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-30.00%
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90.00%
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$900.00
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-40.00%
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80.00%
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$800.00
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-50.00%
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70.00%
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$700.00
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-60.00%
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60.00%
|
$600.00
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-70.00%
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50.00%
|
$500.00
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-80.00%
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40.00%
|
$400.00
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-90.00%
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30.00%
|
$300.00
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-100.00%
|
20.00%
|
$200.00
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|
Buffered Absolute Return Notes Linked to
the Invesco QQQ Trust, Series 1
|
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 “Risk Factors” in the product prospectus supplement. In addition to the risks described in the prospectus supplement and the product prospectus supplement, you should consider the following:
Risks Relating to the Terms of the Notes
| • |
You May Lose Some or a Significant Portion of the Principal Amount at Maturity – Investors in the Notes could lose
some or a substantial portion of their principal amount if the Final Price is less than the Buffer Price. In such a case, you will lose 1% of the principal amount of the Notes for each 1% that the Final Price is less than the Buffer
Price.
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| • |
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 purchased one of our conventional senior interest
bearing debt securities.
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| • |
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 Upside Return if the
Reference Asset increases in value. 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. In addition,
if the Reference Asset decreases in value, but is not less than the Buffer Price, your maximum payment at maturity will be $1,200.
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| • |
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 our senior unsecured debt securities. As a result, your receipt of the amount due on the maturity date is dependent upon our ability to repay our obligations at that time. This will be the case
even if the price of the Reference Asset increases or decreases after the Trade Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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| • |
The Payments on the Notes Are Subject to Postponement Due to 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.
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Risks Relating to the Secondary Market for 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 our other affiliates may make a market for the Notes; however, they are not required to do so. RBCCM
or any of our other affiliates 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.
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|
|
|
|
Buffered Absolute Return Notes Linked to
the Invesco QQQ Trust, Series 1
|
Risks Relating to the Initial Estimated Value of the Notes
| • |
The Initial Estimated Value of the Notes Is Less than the Price to the Public — The initial estimated value of the
Notes 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 price 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 underwriting discount and 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 underwriting discount or the hedging costs relating to the Notes. In addition to bid-ask spreads, the value 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.
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| • |
The Initial Estimated Value of the Notes that Is Set Forth 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.
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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.
Risks Relating to Conflicts of Interest and Our Trading Activities
| • |
Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading
activities related to the Reference Asset or the securities held by the Reference Asset that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’
interests in the Notes and the interests we and our affiliates will have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under
their management. These trading activities, if they influence the price of the Reference Asset, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future,
engage in business with companies included in the Reference Asset, including making loans to or providing advisory services. These services could include investment banking and merger and acquisition advisory services. These
activities may present a conflict between our or one or more of our affiliates’ obligations and your interests as a holder of the Notes. Moreover, we and our affiliates may have published, and in the future expect to publish, research
reports with respect to the Reference Asset. This research is modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. Any of these
activities by us or one or more of our affiliates may affect the price of the Reference Asset, and, therefore, the market value of the Notes.
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Risks Relating to the Reference Asset
|
|
|
|
Buffered Absolute Return Notes Linked to
the Invesco QQQ Trust, Series 1
|
| • |
The Reference Asset and its Underlying Index Are Different — The performance of the Reference Asset may not exactly
replicate the performance of its underlying index, because the Reference Asset will reflect transaction costs and fees that are not included in the calculation of its underlying index. It is also possible that the performance of the
Reference Asset may not fully replicate or may in certain circumstances diverge significantly from the performance of its underlying index due to the temporary unavailability of certain securities in the secondary market, the
performance of any derivative instruments contained in the Reference Asset, or due to other circumstances. The Reference Asset may use futures contracts, options, swap agreements, repurchase agreements, and other instruments in
seeking performance that corresponds to its underlying index and in managing cash flows.
|
During periods of market volatility, securities held by the Reference Asset may be unavailable in the secondary market, market
participants may be unable to calculate accurately the net asset value per share of the Reference Asset and the liquidity of the Reference Asset may be adversely affected. This kind of market volatility may also disrupt the ability of market
participants to create and redeem shares of the Reference Asset. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the Reference Asset. As a
result, under these circumstances, the market value of shares of the Reference Asset may vary substantially from its net asset value per share. For all of the foregoing reasons, the performance of the Reference Asset may not correlate with the
performance of its underlying index as well as its net asset value per share, which could materially and adversely affect the value of the Notes in the secondary market and/or reduce the payments on the Notes.
| • |
The Reference Asset Is Subject to Management Risk — The Reference Asset is subject to management risk, which is the
risk that the investment strategy of the Reference Asset’s trustee (the “Trustee”), the implementation of which is subject to a number of constraints, may not produce the intended results. For example, the Trustee may invest a portion
of the Reference Asset’s assets in securities not included in the relevant industry or sector but which the Trustee believes will help the Reference Asset track the relevant industry or sector.
|
| • |
Adjustments to the Reference Asset Could Adversely Affect the Notes — The Trustee is responsible for calculating and
maintaining the Reference Asset. The Trustee can add, delete or substitute the stocks comprising the Reference Asset. The Trustee may make other methodological changes that could change the price of the Reference Asset at any time.
Consequently, any of these actions could adversely affect the amount payable at maturity and/or the market value of the Notes.
|
| • |
Changes that Affect the Underlying Index Will Affect the Market Value of the Notes and the Amount You Will Receive at Maturity — The policies of the sponsor of the underlying index (the “Index Sponsor”), concerning the calculation of the underlying index, additions, deletions or substitutions of the components of the underlying index
and the manner in which changes affecting those components, such as stock dividends, reorganizations or mergers, may be reflected in the underlying index and, therefore, could affect the price of the Reference Asset, the amount
payable on the Notes at maturity, and the market value of the Notes prior to maturity. The amount payable on the Notes and their market value could also be affected if the Index Sponsor changes these policies, for example, by changing
the manner in which it calculates the underlying index, or if the sponsor discontinues or suspends the calculation or publication of the underlying index.
|
| • |
We Have No Affiliation with the Index Sponsor and Will Not Be Responsible for Any Actions Taken by the Index Sponsor — The
Index Sponsor is not our affiliate and will not be involved in the offering of the Notes in any way. Consequently, we have no control over the actions of the Index Sponsor, including any actions of the type that would require the
calculation agent to adjust the payment to you at maturity. The Index Sponsor has no obligation of any sort with respect to the Notes. Thus, the Index Sponsor has no obligation to take your interests into consideration for any reason,
including in taking any actions that might affect the value of the Notes. None of our proceeds from the issuance of the Notes will be delivered to the Index Sponsor.
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|
|
|
|
Buffered Absolute Return Notes Linked to
the Invesco QQQ Trust, Series 1
|
| • |
We and Our Affiliates Do Not Have Any Affiliation with the Trustee and Are Not Responsible for its Public Disclosure of Information — We and our affiliates are not affiliated with the Trustee in any way and have no ability to control or predict its actions, including any errors in or discontinuance of disclosure regarding its methods or
policies relating to the Reference Asset. The Trustee is not involved in the offering of the Notes in any way and has no obligation to consider your interests as an owner of the Notes in taking any actions relating to the Reference
Asset that might affect the value of the Notes. Neither we nor any of our affiliates has independently verified the adequacy or accuracy of the information about the Trustee or the Reference Asset contained in any public disclosure of
information. You, as an investor in the Notes, should make your own investigation into the Reference Asset.
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| • |
An Investment in the Notes Is Subject to Risks Relating to Non-U.S. Securities Markets — Because certain securities included in the QQQ are issued by non-U.S. issuers
and/or are traded outside of the U.S., an investment in the Notes involves particular risks. For example, the relevant non-U.S. securities markets may be more volatile than the U.S. securities markets, and market developments may affect
these markets differently from the U.S. or other securities markets. Direct or indirect government intervention to stabilize the securities markets outside the U.S., as well as cross-shareholdings in certain companies, may affect
trading prices and trading volumes in those markets.
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|
Buffered Absolute Return Notes Linked to
the Invesco QQQ Trust, Series 1
|
INFORMATION REGARDING THE REFERENCE ASSET
The Reference Asset is registered under the Securities Exchange Act of 1934 (the “Exchange Act”). Companies with securities registered under that Act are required to file
periodically certain financial and other information specified by the Securities and Exchange Commission (the “SEC”). Information filed with the SEC can be obtained through the SEC’s website at www.sec.gov. In addition, information regarding
the Reference Asset may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. None of those documents are included or incorporated by reference in this
document.
The following information regarding the Reference Asset is derived from publicly available information.
We have not independently verified the accuracy or completeness of reports filed by the Reference Asset with the SEC, information published by it on its website or in any
other format, information about it obtained from any other source or the information provided below.
The QQQ
The QQQ is a unit investment trust designed to generally correspond to the price and yield performance of the Nasdaq-100 Index® (the “NDX”). The QQQ will, under
most circumstances, consist of all of stocks in the NDX. The NDX includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The QQQ and the NDX are rebalanced
quarterly and reconstituted annually. The QQQ’s sponsor is Invesco Capital Management LLC.
Shares of the QQQ are listed on The NASDAQ Stock Market, Inc., under the symbol “QQQ.”
NASDAQ-100 Index®
The Nasdaq-100 Index® (“NDX”) is a modified market capitalization-weighted index of the 100 largest non-financial stocks that have their
primary U.S. listing on the Nasdaq Global Select Market or the Nasdaq Global Market. The NDX excludes securities of companies assigned to the Financials industry according to the Industry Classification Benchmark. The NDX was launched on
January 31, 1985, with a base index value of 250.00. On January 1, 1994, the base index value was reset to 125.00. The Nasdaq, Inc. (“index sponsor”) publishes the NDX.
Security Eligibility Criteria
To be eligible for initial inclusion in the NDX, a security must meet the following criteria:
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the security must generally be a common stock, ordinary share, American Depositary Receipt (“ADR”), or tracking stock. Companies organized as real estate investment trusts are not eligible for index
inclusion. If the security is an ADR, then references to the “issuer” are references to the underlying security and the total shares outstanding is the actual ADRs outstanding as reported by the depositary banks. If an issuer has listed
multiple security classes, all security classes are eligible, subject to meeting all other security eligibility criteria;
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the security’s primary U.S. listing must exclusively be listed on the Nasdaq Global Select Market or the Nasdaq Global Market;
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if the security is issued by an issuer organized under the laws of a jurisdiction outside the United States, it must have listed options on a registered options market in the United States or be eligible for
listed-options trading on a registered options market in the United States;
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the security must be issued by a non-financial company (any industry other than Financials) according to the Industry Classification Benchmark;
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the security must have a minimum average daily trading volume of 200,000 shares (measured over the three calendar months ending with the month that includes the reconstitution reference date);
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the security must have traded for at least three full calendar months, not including the month of initial listing, on an “eligible exchange,” which includes Nasdaq (Nasdaq Global Select Market, Nasdaq Global
Market, or Nasdaq
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Capital Market), NYSE, NYSE American or CBOE BZX. Eligibility is determined as of the constituent selection reference date, and includes that month. A security that was added to
the NDX as a result of a spin-off event will be exempt from this requirement;
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the security may not be issued by an issuer currently in bankruptcy proceedings; and
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the issuer of the security generally may not have entered into a definitive agreement or other arrangement that would make it ineligible for NDX inclusion and where the transaction is imminent as determined
by the Index Management Committee.
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There is no market capitalization eligibility or float eligibility criterion.
Constituent Selection Process
The index sponsor selects constituents once annually in December. The security eligibility criteria are applied using market data as of the end of October
and total shares outstanding as of the end of November. All eligible issuers, ranked by market capitalization, are considered for the NDX inclusion based on the following order of criteria.
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The top 75 ranked issuers will be selected for inclusion in the NDX.
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Any other issuers that were already members of the NDX as of the reconstitution reference date and are ranked within the top 100 are also selected for inclusion in the NDX.
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In the event that fewer than 100 issuers pass the first two criteria, the remaining positions will first be filled, in rank order, by issuers currently in the index ranked in positions 101-125 that were
ranked in the top 100 at the previous reconstitution or replacement-or spin-off-issuers added since the previous reconstitution. In the event that fewer than 100 issuers pass the first three criteria, the remaining positions will be
filled, in rank order, by any issuers ranked in the top 100 that were not already members of the NDX as of the reconstitution reference date.
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Index reconstitutions are announced in early December and become effective after the close of trading on the third Friday in December.
Constituent Weighting
The NDX is rebalanced on a quarterly basis in March, June, September and December and index weights are announced in early March, June, September and
December.
Quarterly weight adjustment
The NDX’s quarterly weight adjustment employs a two-stage weight adjustment scheme according to issuer-level constraints.
Index securities’ initial weights are determined using up to two calculations of market capitalization: Total shares outstanding-derived market
capitalization and index share-derived market capitalization. Total shares outstanding-derived market capitalization is defined as a security’s last sale price times its total shares outstanding. Index share-derived market capitalization is
defined as a security’s last sale price times its updated index shares as of the prior month end. Both total shares outstanding-derived market capitalization and index share-derived market capitalization can be used to calculate total shares
outstanding-derived index weights and index share-derived initial weights by dividing each index security’s total shares outstanding-derived market capitalization or index share-derived market capitalization by the aggregate total shares
outstanding-derived market capitalization or index share-derived market capitalization of all index securities.
When the rebalance coincides with the reconstitution, only total shares outstanding-derived initial weights are used. When the rebalance does not coincide with the
reconstitution, index share-derived initial weights are used when doing so results in no weight adjustment; otherwise, total shares outstanding-derived initial weights are used in both stages of the weight adjustment procedure. Issuer weights
are the aggregated weights of the issuers’ respective index securities.
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Stage 1
If no initial issuer weight exceeds 24%, initial weights are used as Stage 1 weights; otherwise, initial weights are adjusted to meet the following Stage
1 constraint, producing the Stage 1 weights:
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No issuer weight may exceed 20% of the index.
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Stage 2
If the aggregate weight of the subset of issuers whose Stage 1 weights exceed 4.5% does not exceed 48%, Stage 1 weights are used as final weights;
otherwise, Stage 1 weights are adjusted to meet the following Stage 2 constraint, producing the final weights:
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The aggregate weight of the subset of issuers whose Stage 1 weights exceed 4.5% is set to 40%.
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Annual Weight Adjustment
The NDX’s annual weight adjustment employs a two-stage weight adjustment scheme according to security-level constraints.
Index securities’ initial weights are determined via the quarterly weight adjustment procedure.
Stage 1
If no initial security weight exceeds 15%, initial weights are used as Stage 1 weights; otherwise, initial weights are adjusted to meet the following
Stage 1 constraint, producing the Stage 1 weights:
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No security weight may exceed 14% of the index.
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Stage 2
If the aggregate weight of the subset of index securities with the five largest market capitalizations is less than 40%, Stage 1 weights are used as final
weights; otherwise, Stage 1 weights are adjusted to meet the following constraints, producing the final weights:
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The aggregate weight of the subset of index securities with the five largest market capitalizations is set to 38.5%.
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No security with a market capitalization outside the largest five may have a final index weight exceeding the lesser of 4.4% or the final index weight of the index security ranked fifth
by market capitalization.
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Special rebalance schedule
A special rebalance may be conducted at any time based on the weighting restrictions described above if it is determined to be necessary to maintain the
integrity of the NDX.
Index Calculation
The NDX is a modified market capitalization-weighted index. The level of the NDX equals the index market value divided by the divisor. The index market
value is the sum of each index security’s market value, as may be adjusted for any corporate actions. An index security’s market value is determined by multiplying the last sale price by the number of shares of the index security represented in
the NDX. The NDX is a price return index, which means that the NDX reflects changes in market value of the index securities and does not reflect regular cash dividends paid on those index securities.
If an index security does not trade on the relevant Nasdaq exchange on a given day or the relevant Nasdaq exchange has not opened for trading, the previous index
calculation day’s closing price for the index security (adjusted for corporate actions occurring prior to market open on the current day, if any) is used. If an index security is halted during the trading day, the most recent last sale price is
used until trading resumes. For securities where the Nasdaq Stock Market is the relevant Nasdaq exchange, the last sale price may be the Nasdaq Official Closing Price when it is closed.
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The divisor is calculated as the ratio of (i) the start of day market value of the NDX divided by (ii) the previous day market value of the NDX. The index
divisor is adjusted to ensure that changes in an index security’s price or shares either by corporate actions or index participation which occur outside of trading hours do not affect the index level. An index divisor change occurs after the
close of the NDX.
Index Maintenance
Deletion Policy
If, at any time other than an index reconstitution, the index sponsor determines that an index security is ineligible for index inclusion, the index
security is removed as soon as practicable. This may include:
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Listing on an ineligible index exchange;
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Merger, acquisition, or other major corporate event that would adversely impact the integrity of the NDX;
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If a company is organized as a real estate investment trust;
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If an index security is classified as a financial company (Financials industry) according to the Industry Classification Benchmark;
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if the issuer has an adjusted market capitalization below 0.10% of the aggregate adjusted market capitalization of the NDX for two consecutive month ends; and
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If a security that was added to the NDX as the result of a spin-off event has an adjusted market capitalization below 0.10% of the aggregate adjusted market capitalization of the NDX at
the end of its second day of regular way trading as an index member.
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In the case of mergers and acquisitions, the effective date for the removal of an index issuer or security will be largely event-based, with the goal to
remove the issuer or security as soon as completion of the acquisition or merger has been deemed highly probable. Notable events include, but are not limited to, completion of various regulatory reviews, the conclusion of material lawsuits
and/or shareholder and board approvals.
If at the time of the removal of the index issuer or security there is not sufficient time to provide advance notification of the replacement issuer or
security so that both the removal and replacement can be effective on the same day, the index issuer or security being removed will be retained and persisted in the NDX calculations at its last sale price until the effective date of the
replacement issuer or security’s entry to the NDX.
Securities that are added as a result of a spin-off may be deleted as soon as practicable after being added to the NDX. This may occur when the index
sponsor determines that a security is ineligible for inclusion because of reasons such as ineligible exchange, security type, industry, or adjusted market capitalization. Securities that are added as a result of a spin-off may be maintained in
the NDX until a later date and then removed, for example, if a spin-off security has liquidity characteristics that diverge materially from the security eligibility criteria and could affect the integrity of the NDX.
Replacement policy
Securities may be added to the NDX outside of the index reconstitution when there is a deletion. The index security (or all index securities under the
same issuer, if appropriate) is replaced as soon as practicable if the issuer in its entirety is being deleted from the NDX. The issuer with the largest market capitalization and that meets all eligibility criteria as of the prior month end
which is not in the NDX will replace the deleted Issuer. Issuers that are added as a result of a spin-off are not replaced until after they have been included in an index reconstitution.
For pending deletions set to occur soon after an index reconstitution and/or index rebalance effective date, the index sponsor may decide to remove the
index security from the NDX in conjunction with the index reconstitution and/or index rebalance effective date.
Corporate actions
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In the periods between scheduled index reconstitution and rebalancing events, individual index securities may be the subject to a variety of corporate
actions and events that require maintenance and adjustments to the NDX, including special cash dividends, stock splits, stock dividends, bonus issues, reverse stock splits, rights offerings/issues, stock distributions of another security and
spin-offs/de-mergers. Adjustments for corporate actions are made prior to market open on the effective date, ex-date, ex-dividend date or ex-distribution date of a given corporate action/event. In absence of one of those dates, there will be no
adjustment to the NDX for such corporate action.
At the quarterly rebalancing, no changes are made to the NDX from the previous month end until the quarterly share change effective date, with the
exception of corporate actions with an ex-date.
Index share adjustments
If a change in total shares outstanding arising from other corporate events is greater than or equal to 10%, an adjustment to index shares is made as soon as practicable
after being sufficiently verified. If the change in total shares outstanding is less than 10%, then all such changes are accumulated and made effective at one time on a quarterly basis after the close of trading on the third Friday in each of
March, June, September and December. The index shares are adjusted by the same percentage amount by which the total shares outstanding has changed.
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HISTORICAL INFORMATION
The graph below sets forth the information relating to the historical performance of the Reference Asset for the period from January 1, 2014 through April 19, 2024. We
obtained the information in the graph from Bloomberg Financial Markets, without independent investigation.
Invesco QQQ Trust, Series 1 (“QQQ”)
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
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SUPPLEMENTAL DISCUSSION OF
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following disclosure supplements, and to the extent inconsistent supersedes, the discussion in the product prospectus supplement dated December 20, 2023 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, directly or indirectly, 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 Internal Revenue Service (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, 2025. 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.
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SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
Delivery of the Notes will be made against payment for the Notes on April 24, 2024, 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 December 20, 2023. 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 December 20, 2023.
We will 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 settlement arrangements to prevent a failed settlement.
In the initial offering of the Notes, they will be offered to investors at a purchase price equal to par, except with respect to certain accounts as indicated on the cover
page of this document. In addition to the underwriting discount set forth on the cover page of this document, we or one of our affiliates may also pay an expected fee to a broker-dealer that is unaffiliated with us for providing certain
electronic platform services with respect to this offering.
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
three 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 the underwriting discount or 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 RBCCM’s underwriting discount
and 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.
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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 set forth 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 the underwriting discount and 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.
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VALIDITY OF THE NOTES
In the opinion of Norton Rose Fulbright Canada LLP, as Canadian counsel to the Bank, 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 federal laws of Canada applicable therein, will be valid obligations of the Bank, subject to the following limitations: (i) the
enforceability of the Indenture may be limited by the Canada Deposit Insurance Corporation Act (Canada), the Winding-up and Restructuring Act (Canada) and bankruptcy, insolvency, reorganization, receivership, moratorium, arrangement or
winding-up laws or other similar laws of general application affecting the enforcement of creditors’ rights generally; (ii) the enforceability of the Indenture is subject to general equitable principles, including the principle that the
availability of equitable remedies, such as specific performance and injunction, may only be granted at the discretion of a court of competent jurisdiction; (iii) under applicable limitations statutes generally, including that the
enforceability of the Indenture will be subject to the limitations contained in the Limitations Act, 2002 (Ontario), and such counsel expresses no opinion as to whether a court may find any provision of the Indenture to be unenforceable as an
attempt to vary or exclude a limitation period under such applicable limitations statutes; (iv) rights to indemnity and contribution under the Notes or the Indenture which may be limited by applicable law; and (v) courts in Canada are precluded
from giving a judgment in any currency other than the lawful money of Canada and such judgment may be based on a rate of exchange in existence on a day other than the day of payment, 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 therein. 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 to such counsel’s reliance on the Bank and other sources as to certain factual matters, all as stated in the opinion letter of such counsel dated December 20, 2023,
which has been filed as Exhibit 5.3 to the Bank’s Form 6-K filed with the SEC dated December 20, 2023.
In the opinion of Ashurst 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 the Bank, entitled to the benefits of the Indenture, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and subject to general principles of equity, public policy considerations and the discretion of the court before which any suit or proceeding may be brought. 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 December 20, 2023, which has been filed as Exhibit 5.4 to the Bank’s Form 6-K dated December 20, 2023.