RBC Capital Markets®
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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-208507
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The information in this preliminary terms supplement is not complete and may be changed.
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Pricing Supplement
Dated July 20, 2018
To the Product Prospectus Supplement ERN-EI-1 Dated January 12, 2016, Prospectus Supplement Dated January 8, 2016,
and Prospectus Dated January 8, 2016
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$755,000
Buffered Enhanced Return Notes
Linked to the S&P 500® Index,
Due July 25, 2024
Royal Bank of Canada
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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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$755,000.00
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Underwriting discounts and commissions(1)
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3.25%
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$24,537.50
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Proceeds to Royal Bank of Canada
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96.75%
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$730,462.50
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RBC Capital Markets, LLC
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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Issuer:
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Royal Bank of Canada (“Royal Bank”)
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Issue:
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Senior Global Medium-Term Notes, Series G
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Underwriter:
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RBC Capital Markets, LLC (“RBCCM”)
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Reference Asset:
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S&P 500® Index
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Bloomberg Ticker:
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SPX
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Currency:
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U.S. Dollars
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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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Pricing Date:
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July 20, 2018
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Issue Date:
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July 25, 2018
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CUSIP:
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78013XPZ5
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Valuation Date:
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July 22, 2024
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Payment at Maturity
(if held to maturity):
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If, on the Valuation Date, the Percentage Change is positive, then the investor will receive an amount per $1,000 principal amount per Note equal to:
Principal Amount + (Principal Amount x Percentage Change x Leverage Factor)
If, on the Valuation Date, the Percentage Change is less than or equal to 0%, but not by more than the Buffer Percentage (that is, the Percentage Change is between zero and -20.00%), then the investor will receive the principal amount only.
If, on the Valuation Date, the Percentage Change is negative, by more than the Buffer Percentage (that is, the Percentage Change is between -20.01% and -100%), then the investor will receive a cash payment equal to:
Principal Amount + [Principal Amount x (Percentage Change + Buffer Percentage)]
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Percentage Change:
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The Percentage Change, expressed as a percentage, is calculated using the following formula:
Final Level- Initial Level
Initial Level
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Initial Level:
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2,801.83, which was the closing level of the Reference Asset on the Pricing Date.
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Final Level:
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The closing level of the Reference Asset on the Valuation Date.
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Leverage Factor:
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110.00%
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Buffer Percentage:
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20.00%
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Buffer Level:
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2,241.46, which is 80.00% of the Initial Level (rounded to two decimal places)
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Maturity Date:
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July 25, 2024, subject to extension for market and other disruptions, as described in the product prospectus supplement dated January
12, 2016.
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RBC Capital Markets, LLC
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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Term:
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Approximately (six) years
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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 Level is less than the Buffer Level.
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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 Notes as a pre-paid cash-settled derivative contract for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the Notes are uncertain and
the Internal Revenue Service could assert that the Notes should be taxed in a manner that is different from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of U.S. Federal Income Tax
Consequences,” and the discussion (including the opinion of our counsel Morrison & Foerster LLP) in the product prospectus supplement dated January 12, 2016 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
“Description of Debt Securities—Ownership and Book-Entry Issuance” in the prospectus dated January 8, 2016).
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Terms Incorporated
in the Master Note:
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All of the terms appearing above the item captioned “Secondary Market” on pages P-2 and P-3 of this pricing supplement and the terms
appearing under the caption “General Terms of the Notes” in the product prospectus supplement dated January 12, 2016, as modified by this pricing supplement. In addition to those terms, the following two sentences are also so incorporated
into the master note: RBC confirms that it fully understands and is able to calculate the effective annual rate of interest applicable to the Notes based on the methodology for calculating per annum rates provided for in the Notes. RBC
irrevocably agrees not to plead or assert Section 4 of the Interest Act (Canada), whether by way of defense or otherwise, in any proceeding relating to the Notes.
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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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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5%
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Payment at Maturity:
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$1,000 + ($1,000 x 5% x 110.00%) = $1,000 + $55.00 = $1,055.00
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On a $1,000 investment, a 5% Percentage Change results in a Payment at Maturity of $1,055.00, a 5.50% return on the Notes.
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Example 2—
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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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-8%
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Payment at Maturity:
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At maturity, if the Percentage Change is negative BUT not by more than the Buffer Percentage, then the Payment at Maturity will equal the
principal amount.
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On a $1,000 investment, a -8% Percentage Change results in a Payment at Maturity of $1,000, a 0% return 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 (by more than the Buffer Percentage).
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Percentage Change:
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-40%
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Payment at Maturity:
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$1,000 + [$1,000 x (-40% + 20.00%)] = $1,000 - $200.00 = $800.00
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On a $1,000 investment, a -40% Percentage Change results in a Payment at Maturity of $800.00, a -20.00% return on the Notes.
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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· |
Principal at Risk – Investors in the Notes could lose a substantial portion of their principal
amount if there is a decline in the level of the Reference Asset. You will lose 1% of the principal amount of the Notes for each 1% that the Final Level is less than the Initial Level by more than 20%.
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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 bought a conventional
senior interest bearing debt security of Royal Bank.
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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 Royal Bank’s senior unsecured debt securities. As a result, your receipt of the amount due on the maturity date is dependent upon Royal Bank’s ability to repay its
obligations at that time. This will be the case even if the level of the Reference Asset increases after the Pricing Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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There May Not Be an Active Trading Market for the Notes—Sales in the Secondary Market May Result in
Significant Losses – There may be little or no secondary market for the Notes. The Notes will not be listed on any securities exchange. RBCCM and other affiliates of Royal Bank may make a market for the Notes; however, they
are not required to do so. RBCCM or any other affiliate of Royal Bank may stop any market-making activities at any time. Even if a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices
advantageous to you. We expect that transaction costs in any secondary market would be high. As a result, the difference between bid and asked prices for your Notes in any secondary market could be substantial.
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You Will Not Have Any Rights to the Securities Included in the Reference Asset – As a holder
of the Notes, you will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities included in the Reference Asset would have. The Final Level will not reflect any
dividends paid on the securities included in the Reference Asset.
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The Initial Estimated Value of the Notes Is Less than the Price to the Public – The initial
estimated value set forth on the cover page of this pricing supplement does not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at
any time. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the level of the Reference
Asset, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to the public of the 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 and the hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined by RBCCM 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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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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· |
The Initial Estimated Value of the Notes on the Cover Page of this Pricing Supplement Is an Estimate
Only, Calculated as of the Time the Terms of the Notes Were Set – The initial estimated value of the Notes is based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the
derivative embedded in the terms of the Notes. See “Structuring the Notes” below. Our estimate is based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the
expected term of the Notes. These assumptions are based on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different
than we do.
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Inconsistent Research – Royal Bank or its affiliates may issue research reports on securities
that are, or may become, components of the Reference Asset. We may also publish research from time to time on financial markets and other matters that may influence the levels of the Reference Asset or the value of the Notes, or
express opinions or provide recommendations that may be inconsistent with the purchasing or holding the Notes or with the investment view implicit in the Notes or the Reference Asset. You should make your own independent investigation
of the merits of investing in the Notes and the Reference Asset.
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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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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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Period-Start Date
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Period-End Date
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High Intra-Day Level
of the Reference
Asset
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Low Intra-Day Level of
the Reference Asset
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Period-End Closing
Level of the Reference
Asset
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1/1/2008
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3/31/2008
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1,471.77
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1,256.98
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1,322.70
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4/1/2008
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6/30/2008
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1,440.24
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1,272.00
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1,280.00
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7/1/2008
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9/30/2008
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1,313.15
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1,106.39
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1,166.36
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10/1/2008
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12/31/2008
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1,167.03
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741.02
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890.64
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1/1/2009
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3/31/2009
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943.85
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666.79
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797.87
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4/1/2009
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6/30/2009
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956.23
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783.32
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919.32
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7/1/2009
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9/30/2009
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1,080.15
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869.32
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1,057.08
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10/1/2009
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12/31/2009
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1,130.38
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1,019.95
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1,126.42
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1/1/2010
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3/31/2010
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1,180.69
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1,044.50
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1,169.43
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4/1/2010
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6/30/2010
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1,219.80
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1,028.33
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1,030.71
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7/1/2010
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9/30/2010
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1,157.16
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1,010.91
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1,141.20
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10/1/2010
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12/31/2010
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1,262.60
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1,131.87
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1,257.88
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1/1/2011
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3/31/2011
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1,344.07
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1,249.05
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1,325.83
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4/1/2011
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6/30/2011
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1,370.58
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1,258.07
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1,320.64
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7/1/2011
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9/30/2011
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1,356.48
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1,101.54
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1,131.42
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10/1/2011
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12/31/2011
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1,292.66
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1,074.77
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1,257.61
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1/1/2012
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3/30/2012
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1,419.15
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1,258.86
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1,408.47
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4/1/2012
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6/30/2012
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1,422.38
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1,266.74
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1,362.16
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7/1/2012
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9/30/2012
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1,474.51
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1,325.41
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1,440.67
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10/1/2012
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12/31/2012
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1,470.96
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1,343.35
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1,426.19
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1/1/2013
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3/31/2013
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1,570.28
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1,426.19
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1,569.19
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4/1/2013
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6/30/2013
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1,687.18
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1,536.03
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1,606.28
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7/1/2013
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9/30/2013
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1,729.86
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1,604.57
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1,681.55
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10/1/2013
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12/31/2013
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1,849.44
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1,646.47
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1,848.36
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1/1/2014
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3/31/2014
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1,883.97
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1,737.92
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1,872.34
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4/1/2014
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6/30/2014
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1,968.17
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1,814.36
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1,960.23
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7/1/2014
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9/30/2014
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2,019.26
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1,904.78
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1,972.29
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10/1/2014
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12/31/2014
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2,093.55
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1,820.66
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2,058.90
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1/1/2015
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3/31/2015
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2,119.59
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1,980.90
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2,067.89
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4/1/2015
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6/30/2015
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2,134.72
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2,048.38
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2,063.11
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7/1/2015
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9/30/2015
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2,132.82
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1,867.01
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1,920.03
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10/1/2015
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12/31/2015
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2,116.48
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1,893.70
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2,043.94
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1/1/2016
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3/31/2016
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2,072.21
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1,810.10
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2,059.74
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4/1/2016
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6/30/2016
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2,120.55
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1,991.68
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2,098.86
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7/1/2016
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9/30/2016
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2,193.81
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2,074.02
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2,168.27
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10/1/2016
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12/31/2016
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2,277.53
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2,083.79
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2,238.83
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1/1/2017
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3/31/2017
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2,400.98
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2,245.13
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2,362.72
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4/1/2017
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6/30/2017
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2,453.82
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2,328.95
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2,423.41
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7/1/2017
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9/30/2017
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2,519.44
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2,407.70
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2,519.36
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10/1/2017
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12/31/2017
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2,694.97
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2,520.40
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2,673.61
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1/1/2018
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3/31/2018
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2,872.87
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2,532.69
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2,640.87
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4/1/2018
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6/30/2018
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2,791.47
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2,553.80
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2,718.37
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7/1/2018
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7/20/2018
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2,816.76
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2,698.95
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2,801.83
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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Buffered Enhanced Return Notes
Linked to the S&P 500® Index
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