j1214120424b2.htm
     
                  RBC Capital Markets®
Filed Pursuant to Rule 424(b)(2) 
Registration Statement No. 333-171806 
     
 
 
 
   
Pricing Supplement
Dated December 13, 2012
To the Product Prospectus Supplement ERN-ETF-1 dated February
16, 2011, Prospectus Supplement dated January 28, 2011 and
Prospectus dated January 28, 2011
     
$1,107,000
 
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE
Index Fund, Due June 18, 2015
Royal Bank of Canada
 
      
 
   
 
The Notes provide a one-for-one positive return if the share price of the iShares® MSCI EAFE Index Fund (the “Reference Asset”) increases from the Initial Level to the Final Level.
 
If the share price of the Reference Asset decreases from the Initial Level to the Final Level:
 
 
·
if the Reference Asset does not have a closing share price that is less than 62.00% of the Initial Level (the “Barrier Level), between the Pricing Date to and including the Valuation Date, the Notes will provide a positive return equal to the percentage by which the share price of the Index has decreased as of the Final Valuation Date; or
 
 
·
if the Reference Asset does have a closing share price that is less than the Barrier Level during that period, the Notes will provide a negative return that is equal to the percentage decrease in the share price of the Reference Asset.
 
The Notes do not pay interest, and investors may lose all or a portion of the principal amount of the Notes.  Any payments on the Notes are subject to our credit risk.
 
The Notes will be issued on December 18, 2012, and will mature on June 18, 2015.
 
The Notes will not be listed on any U.S. securities exchange.  The CUSIP number for the Notes is 78008SSE7.
 
Investing in the Notes involves a number of risks. See “Risk Factors” beginning on page 1 of the prospectus supplement dated January 28, 2011, “Additional Risk Factors Specific to the Notes” beginning on page PS-4 of the product prospectus supplement dated February 16, 2011, and “Selected Risk Considerations” on page P-6 of this pricing supplement.
 
The Notes will not constitute deposits insured by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation (the “FDIC”) or any other Canadian or U.S. government agency or instrumentality.
 
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.
 
 
Per Note
   
Total
 
Price to public
100.00%
     
$1,107,000.00.
 
Underwriting discounts and commissions
 0.00%
     
$0.00
 
Proceeds to Royal Bank of Canada
100.00%
     
$1,107,000.00
 
 
The price at which you purchase the Notes includes hedging costs and profits that Royal Bank of Canada or its affiliates expect to incur or realize.  These costs and profits will reduce the secondary market price, if any secondary market develops, for the Notes.  As a result, you may experience an immediate and substantial decline in the market value of your Notes on the Issue Date.
 
RBC Capital Markets, LLC, which we refer to as RBCCM, acting as agent for Royal Bank of Canada, did not receive a commission in connection with the sale of the Notes. The price of the Notes included a profit of $10.00 per $1,000 in principal amount of the Notes earned by Royal Bank of Canada in hedging its exposure under the Notes.
 
We may use this pricing supplement in the initial sale of the Notes.  In addition, RBC Capital Markets, LLC 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.
 
RBC Capital Markets, LLC
 

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
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.
 
       
Issuer:
Royal Bank of Canada (“Royal Bank”)
     
 
Issue:
Senior Global Medium-Term Notes, Series E
     
 
Underwriter:
RBC Capital Markets, LLC
     
 
Reference Asset:
iShares® MSCI EAFE Index Fund
     
 
Bloomberg Ticker:
EFA
     
 
Currency:
U.S. Dollars
     
 
Minimum
Investment:
$1,000 and minimum denominations of $1,000 in excess thereof
     
 
Pricing Date:
December 13, 2012
     
 
Issue Date:
December 18, 2012
     
 
CUSIP:
78008SSE7
     
 
Valuation Date:
June 15, 2015
     
 
Payment at Maturity
(if held to maturity):
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)
     
   
If, on the Valuation Date, the Percentage Change is less than or equal to zero, and a Barrier Event has not occurred, the investor will receive an amount per $1,000 principal amount per Note equal to:
 
Principal Amount + [-1 x (Principal Amount x Percentage Change)]
 
In this case, the return on the Notes will be positive, even though the Percentage Change is negative.
     
   
If, on the Valuation Date, the Percentage Change is less than or equal to zero, and if a Barrier Event has occurred, the investor will receive an amount per $1,000 principal amount per Note equal to:
 
Principal Amount + (Principal Amount x Percentage Change)
 
In this case, the payment on the Notes will be less than the principal amount, and you may lose all or a substantial portion of the principal amount.
     
 
Percentage Change:
The Percentage Change, expressed as a percentage, is calculated using the following formula:
 
Final Level - Initial Level
Initial Level
     
 
Initial Level:
$55.88.
     
 
Final Level:
The closing share price of the Reference Asset on the Valuation Date.
 
RBC Capital Markets, LLC
P-2

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
       
Barrier Level:
$34.65 (62.00%of the Initial Level, rounded to two decimal places).
     
 
Barrier Event:
A Barrier Event will be deemed to occur if the closing share price of the Reference Asset on any day during the Monitoring Period is less than the Barrier Level.
     
 
Monitoring Period:
Each trading day from the Pricing Date to, and including, the Valuation Date.
     
 
Monitoring Method:
Close of trading day
     
 
Maturity Date:
June 18, 2015, subject to extension for market and other disruptions, as described in the product prospectus supplement dated February 16, 2011.
     
 
Term:
Two (2) years and six (6) months.
     
 
Principal at Risk:
The Notes are NOT principal protected.  You may lose all or a substantial portion of your principal amount at maturity if a Barrier Event occurs, and the Final Level is less than the Initial Level.
     
 
Calculation Agent:
RBC Capital Markets, LLC
     
 
U.S. Tax Treatment:
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 discussion in this pricing supplement under “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 February 16, 2011 under “Supplemental Discussion of U.S. Federal Income Tax Consequences,” which applies to the Notes.
     
 
Secondary Market:
RBC Capital Markets, LLC (or one of its affiliates), though not obligated to do so, plans to 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.
     
 
Listing:
The Notes will not be listed on any securities exchange.
     
 
Clearance and
Settlement:
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 28, 2011).
     
 
Terms Incorporated
in the Master Note:
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 February 16, 2011, as modified by this pricing supplement.
 
RBC Capital Markets, LLC
P-3

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
ADDITIONAL TERMS OF YOUR NOTES
 
You should read this pricing supplement together with the prospectus dated January 28, 2011, as supplemented by the prospectus supplement dated January 28, 2011 and the product prospectus supplement dated February 16, 2011, relating to our Senior Global Medium-Term Notes, Series E, 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 dated January 28, 2011 and “Additional Risk Factors Specific to the Notes” in the product prospectus supplement dated February 16, 2011, 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 January 28, 2011:
http://www.sec.gov/Archives/edgar/data/1000275/000121465911000309/f127115424b3.htm

Prospectus Supplement dated January 28, 2011:
http://www.sec.gov/Archives/edgar/data/1000275/000121465911000311/m127114424b3.htm

Product Prospectus Supplement ERN-ETF-1 dated February 16, 2011:
http://www.sec.gov/Archives/edgar/data/1000275/000121465911000547/c210112424b5.htm


Our Central Index Key, or CIK, on the SEC website is 1000275.  As used in this pricing supplement, the “Company,” “we,” “us,” or “our” refers to Royal Bank of Canada.
 
RBC Capital Markets, LLC
P-4

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
HYPOTHETICAL RETURNS
 
The examples and table set out below are included for illustration purposes only. They assume that a holder purchased Notes with an aggregate principal amount of $1,000, the Initial Level of $55.88, the Barrier Level of $34.65 (62.00% of the Initial level, rounded to two decimal points), and that there will be no anti-dilution adjustments to the Final Stock Price and no market disruption events.
 
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 Level or the share price of the Reference Asset on the Valuation Date or on any trading day prior to the Maturity Date.
 
Example 1—
Calculation of the Payment at Maturity where the Percentage Change is positive.
   
 
Percentage Change:
10%
     
 
Payment at Maturity:
$1,000 + ($1,000 x 10%) = $1,000 + $100.00 = $1,100.00
     
 
On a $1,000 investment, a 10% Percentage Change results in a Payment at Maturity of $1,100.00,
a 10.00% return on the Notes.

 
Example 2—
Calculation of the Payment at Maturity where the Percentage Change is negative, and a Barrier Event has not occurred.
   
 
Percentage Change:
-20%
     
 
Payment at Maturity:
$1,000 + [(-1 x ($1,000 x -20%)] = $1,000 + $200.00 = $1,200.00
     
 
On a $1,000 investment, if a Barrier Event has not occurred, a -20% Percentage Change results in a Payment at Maturity of $1,200.00, a 20.00% positive return on the Notes.

 
Example 3—
Calculation of the Payment at Maturity where the Percentage Change is negative, and a Barrier Event has occurred.
   
 
Percentage Change:
-20%
     
 
Payment at Maturity:
$1,000 + ($1,000 x -20%) = $1,000 - $200.00 = $800.00
     
 
On a $1,000 investment, if a Barrier Event has occurred, a -20% Percentage Change results in a Payment at Maturity of $800.00, a -20.00% return on the Notes.
 
RBC Capital Markets, LLC
P-5

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
The table below illustrates the Payment at Maturity of the Notes.  Hypothetical Final Levels are shown in the first column on the left. The second column shows the Payment at Maturity (as a percentage of the principal amount) in a case where the closing share price of the Reference Asset does not fall below the Barrier Level on any trading day during the Monitoring Period. The third column shows the Payment at Maturity (as a percentage of the principal amount) in a case where the share price of the Reference Asset does fall below the Barrier Level during the Monitoring Period.
 
 
Hypothetical
Final
Share Price
If the closing share price of the
Reference Asset does not fall
below the Barrier Level on any
day during the Monitoring Period:
Payment at Maturity as
Percentage of Principal Amount
If the closing share price of the
Reference Asset falls below the
Barrier Level on any day during
the Monitoring Period:
Payment at Maturity as
Percentage of Principal Amount
$83.82
150.00%
150.00%
$69.85
125.00%
125.00%
$61.47
110.00%
110.00%
$58.67
105.00%
105.00%
$55.88
100.00%
100.00%
$50.29
110.00%
90.00%
$44.70
120.00%
80.00%
$39.12
130.00%
70.00%
$34.65
138.00%
62.00%
$34.37
N/A
61.50%
$30.73
N/A
55.00%
$27.94
N/A
50.00%
$13.97
N/A
25.00%
$0.00
N/A
0.00%

The Payments at Maturity shown above are entirely hypothetical; they are based on share prices of the Reference Asset that may not be achieved on the Valuation Date and on assumptions that may prove to be erroneous. The actual market value of your Notes on the Maturity Date or at any other time, including any time you may wish to sell your Notes, may bear little relation to the hypothetical Payments at Maturity shown above, and those amounts should not be viewed as an indication of the financial return on an investment in the Notes or on an investment in the securities represented by the Reference Asset.  Please read “Additional Risk Factors Specific to Your Notes” and “Hypothetical Returns on Your Notes” in the accompanying product prospectus supplement.
 
RBC Capital Markets, LLC
P-6

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
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 “Additional Risk Factors Specific to the Notes,” beginning on page PS-4 of the product prospectus supplement.  In addition to the risks described in the prospectus supplement and the product prospectus supplement, you should consider the following:
 
 
·
Principal at Risk – Investors in the Notes could lose a substantial portion of their principal amount if a Barrier Event occurs.  If the closing share price of the Reference Asset on any trading day during the Monitoring Period is less than the Barrier Level, and if the Percentage Change is negative, you will lose one percent of the principal amount of your Notes for each 1% that the Final Level is less than the Initial Level.
 
 
·
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.
 
 
·
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 share price 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.
 
 
·
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.
 
 
·
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.
 
 
·
The Inclusion in the Purchase Price of the Notes of Royal Bank’s Cost of Hedging its Market Risk under the Notes Will Adversely Affect the Value of the Notes Prior to Maturity – The price at which you purchase of the Notes includes the costs that Royal Bank (or one of its affiliates) expects to incur in the hedging of its market risk under the Notes. Such hedging costs include the expected cost of undertaking this hedge, as well as the profit that Royal Bank (or its affiliates) expects to realize in consideration for assuming the risks inherent in providing such hedge.  As a result, 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. The Notes are not designed to be short-term trading instruments.  Accordingly, you should be able and willing to hold your Notes to maturity.
 
 
·
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.
 
RBC Capital Markets, LLC
P-7

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
INFORMATION REGARDING THE REFERENCE ASSET
 
We have derived the following information from publicly available documents published by iShares®, a registered investment company. We have not independently verified the accuracy or completeness of the following information. We are not affiliated with the Reference Asset, and the Reference Asset will have no obligations with respect to the Notes.
 
iShares® consists of numerous separate investment portfolios (the “iShares® Funds”), including the Reference Asset. The Reference Asset seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI EAFE Index (the “Underlying Index”). The Reference Asset typically earns income dividends from securities included in the Underlying Index. These amounts, net of expenses and taxes (if applicable), are passed along to the Reference Asset’s shareholders as “ordinary income.” In addition, the Reference Asset realizes capital gains or losses whenever it sells securities. Net long-term capital gains are distributed to shareholders as “capital gain distributions.” However, because your Notes are linked only to the share price of the Reference Asset, you will not be entitled to receive income, dividend, or capital gain distributions from the Reference Asset or any equivalent payments.
 
Information provided to or filed with the SEC by iShares® under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 can be located at the SEC’s facilities or through the SEC’s Website by reference to SEC file numbers 033-97598 and 811-09102, respectively.  We have not independently verified the accuracy or completeness of the information or reports prepared by iShares®.
 
The selection of the Reference Asset is not a recommendation to buy or sell the shares of the Reference Asset. Neither we nor any of our affiliates make any representation to you as to the performance of the shares of the Reference Asset.
 
“iShares®” and BlackRock® are registered trademarks of BlackRock®, Inc. and its affiliates (“BlackRock®”). BlackRock® has licensed certain trademarks and trade names of BlackRock® for our use. The Notes are not sponsored, endorsed, sold, or promoted by BlackRock®, or by any of the iShares® Funds. Neither BlackRock® nor the iShares® Funds make any representations or warranties to the owners of the Notes or any member of the public regarding the advisability of investing in the Notes. Neither BlackRock® nor the iShares® Funds shall have any obligation or liability in connection with the registration, operation, marketing, trading, or sale of the Notes or in connection with our use of information about the iShares® Funds.
 
The shares of the Reference Asset trade on the NYSE Arca under the symbol “EFA”.
 
The Underlying Index
 
We have derived all information contained in this pricing supplement regarding the Underlying Index, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information.  The Underlying Index is a stock index calculated, published and disseminated daily by MSCI, a majority-owned subsidiary of Morgan Stanley, through numerous data vendors, on the MSCI website and in real time on Bloomberg Financial Markets and Reuters Limited.  Neither MSCI nor Morgan Stanley has any obligation to continue to calculate and publish, and may discontinue calculation and publication of the Underlying Index.
 
The Underlying Index is intended to measure equity market performance in developed market countries, excluding the U.S. and Canada.  The Underlying Index is a free float-adjusted market capitalization equity index with a base date of December 31, 1969 and an initial value of 100.  The Underlying Index is calculated daily in U.S. dollars and published in real time every 60 seconds during market trading hours.  The Underlying Index currently consists of the following 22 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
 
RBC Capital Markets, LLC
P-8

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
General - MSCI Indices
 
MSCI provides global equity indices intended to measure equity performance in international markets and the MSCI International Equity Indices are designed to serve as global equity performance benchmarks. In constructing these indices, MSCI applies its index construction and maintenance methodology across developed, emerging, and frontier markets.
 
MSCI enhanced the methodology used in its MSCI International Equity Indices. The MSCI Standard and MSCI Small Cap Indices, along with the other MSCI equity indices based on them, transitioned to the global investable market indices methodology described below. The transition was completed at the end of May 2008. The Enhanced MSCI Standard Indices are composed of the MSCI Large Cap and Mid Cap Indices. The MSCI Global Small Cap Index transitioned to the MSCI Small Cap Index resulting from the Global Investable Market Indices methodology and contains no overlap with constituents of the transitioned MSCI Standard Indices. Together, the relevant MSCI Large Cap, Mid Cap, and Small Cap Indices will make up the MSCI investable market index for each country, composite, sector, and style index that MSCI offers.
 
Constructing the MSCI Global Investable Market Indices. MSCI undertakes an index construction process, which involves:
 
 
·
defining the equity universe;
 
 
·
determining the market investable equity universe for each market;
 
 
·
determining market capitalization size segments for each market;
 
 
·
applying index continuity rules for the MSCI Standard Index;
 
 
·
creating style segments within each size segment within each market; and
 
 
·
classifying securities under the Global Industry Classification Standard (the “GICS”).
 
Defining the Equity Universe. The equity universe is defined by:
 
 
·
Identifying Eligible Equity Securities: the equity universe initially looks at securities listed in any of the countries in the MSCI Global Index Series, which will be classified as either Developed Markets (“DM”) or Emerging Markets (“EM”). All listed equity securities, or listed securities that exhibit characteristics of equity securities, except mutual funds, ETFs, equity derivatives, limited partnerships, and most investment trusts, are eligible for inclusion in the equity universe. Real Estate Investment Trusts (“REITs”) in some countries and certain income trusts in Canada are also eligible for inclusion.
 
 
·
Classifying Eligible Securities into the Appropriate Country: each company and its securities (i.e., share classes) are classified in only one country.
 
Determining the Market Investable Equity Universes. A market investable equity universe for a market is derived by applying investability screens to individual companies and securities in the equity universe that are classified in that market. A market is equivalent to a single country, except in DM Europe, where all DM countries in Europe are aggregated into a single market for index construction purposes. Subsequently, individual DM Europe country indices within the MSCI Europe Index are derived from the constituents of the MSCI Europe Index under the global investable market indices methodology.
 
The investability screens used to determine the investable equity universe in each market are as follows:
 
 
·
Equity Universe Minimum Size Requirement: this investability screen is applied at the company level. In order to be included in a market investable equity universe, a company must have the required minimum full market capitalization.
 
 
·
Equity Universe Minimum Free Float−Adjusted Market Capitalization Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security must have a free float−adjusted market capitalization equal to or higher than 50% of the equity universe minimum size requirement.
 
RBC Capital Markets, LLC
P-9

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
 
·
DM and EM Minimum Liquidity Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security must have adequate liquidity. The twelve-month and three-month Annual Traded Value Ratio (“ATVR”), a measure that screens out extreme daily trading volumes and takes into account the free float−adjusted market capitalization size of securities, together with the three-month frequency of trading are used to measure liquidity. In the calculation of the ATVR, the trading volumes in depository receipts associated with that security, such as ADRs or GDRs, are also considered. A minimum liquidity level of 20% of three- and twelve-month ATVR and 90% of three-month frequency of trading over the last four consecutive quarters are required for inclusion of a security in a market investable equity universe of a DM, and a minimum liquidity level of 15% of three- and twelve-month ATVR and 80% of three-month frequency of trading over the last four consecutive quarters are required for inclusion of a security in a market investable equity universe of an EM.
 
 
·
Global Minimum Foreign Inclusion Factor Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security’s Foreign Inclusion Factor (“FIF”) must reach a certain threshold. The FIF of a security is defined as the proportion of shares outstanding that is available for purchase in the public equity markets by international investors. This proportion accounts for the available free float of and/or the foreign ownership limits applicable to a specific security (or company). In general, a security must have an FIF equal to or larger than 0.15 to be eligible for inclusion in a market investable equity universe.
 
 
·
Minimum Length of Trading Requirement: this investability screen is applied at the individual security level. For an initial public offering (“IPO”) to be eligible for inclusion in a market investable equity universe, the new issue must have started trading at least four months before the implementation of the initial construction of the index or at least three months before the implementation of a semi−annual index review (as described below). This requirement is applicable to small new issues in all markets. Large IPOs are not subject to the minimum length of trading requirement and may be included in a market investable equity universe and the Standard Index outside of a Quarterly or Semi−Annual Index Review.
 
Defining Market Capitalization Size Segments for Each Market. Once a market investable equity universe is defined, it is segmented into the following size−based indices:
 
 
·
Investable Market Index (Large + Mid + Small);
 
 
·
Standard Index (Large + Mid);
 
 
·
Large Cap Index;
 
 
·
Mid Cap Index; or
 
 
·
Small Cap Index.
 
Creating the size segment indices in each market involves the following steps:
 
 
·
defining the market coverage target range for each size segment;
 
 
·
determining the global minimum size range for each size segment;
 
 
·
determining the market size−segment cutoffs and associated segment number of companies;
 
 
·
assigning companies to the size segments; and
 
 
·
applying final size−segment investability requirements.
 
RBC Capital Markets, LLC
P-10

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
Index Continuity Rules for the Standard Indices. In order to achieve index continuity, as well as to provide some basic level of diversification within a market index, and notwithstanding the effect of other index construction rules described in this section, a minimum number of five constituents will be maintained for a DM Standard Index and a minimum number of three constituents will be maintained for an EM Standard Index.
 
Creating Style Indices within Each Size Segment. All securities in the investable equity universe are classified into value or growth segments using the MSCI Global Value and Growth methodology.
 
Classifying Securities under the Global Industry Classification Standard. All securities in the global investable equity universe are assigned to the industry that best describes their business activities. To this end, MSCI has designed, in conjunction with Standard & Poor’s, the GICS. Under the GICS, each company is assigned to one sub−industry according to its principal business activity. Therefore, a company can belong to only one industry grouping at each of the four levels of the GICS.
 
Index Maintenance
 
The MSCI Global Investable Market Indices are maintained with the objective of reflecting the evolution of the underlying equity markets and segments on a timely basis, while seeking to achieve index continuity, continuous investability of constituents and replicability of the indices, and index stability and low index turnover. In particular, index maintenance involves:
 
 
(i)
Semi−Annual Index Reviews (“SAIRs”) in May and November of the Size Segment and Global Value and Growth Indices which include:
 
 
·
updating the indices on the basis of a fully refreshed equity universe;
 
 
·
taking buffer rules into consideration for migration of securities across size and style segments; and
 
 
·
updating FIFs and Number of Shares (“NOS”).
 
 
(ii) Quarterly Index Reviews (“QIRs”) in February and August of the Size Segment Indices aimed at:
 
 
·
including significant new eligible securities (such as IPOs that were not eligible for earlier inclusion) in the index;
 
 
·
allowing for significant moves of companies within the Size Segment Indices, using wider buffers than in the SAIR; and
 
 
·
reflecting the impact of significant market events on FIFs and updating NOS.
 
 
(iii)
Ongoing Event−Related Changes: changes of this type are generally implemented in the indices as they occur. Significantly large IPOs are included in the indices after the close of the company’s tenth day of trading.
 
Neither we nor RBC Capital Markets, LLC accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in, the Index or any successor to the Underlying Index.
 
RBC Capital Markets, LLC
P-11

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
Historical Information
 
The graph below sets forth the information relating to the historical performance of the Reference Asset. In addition, below the graph is a table setting forth the intra-day high, intra-day low and period-end closing share prices of the Reference Asset. The information provided in this table is for the four calendar quarters of 2009, 2010, and 2011, the first, second and third calendar quarters of 2012 and for the period from October 1, 2012 to December 13, 2012.
 
We obtained the information regarding the historical performance of the Reference Asset in the chart below from Bloomberg Financial Markets.
 
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg Financial Markets. The historical performance of the Reference Asset should not be taken as an indication of its future performance, and no assurance can be given as to the Final Level of the Reference Asset. We cannot give you assurance that the performance of the Reference Asset will result in any positive return on your initial investment.
 
Period-
Start Date
 
Period-
End Date
 
High Intra-Day Price
of the Reference Asset
(in $)
 
Low Intra-Day Price
of the Reference Asset
(in $)
 
Period-End Closing Price
of the Reference Asset
(in $)
                 
1/1/2009
 
3/31/2009
 
45.61
 
31.56
 
37.59
4/1/2009
 
6/30/2009
 
49.18
 
37.28
 
45.81
7/1/2009
 
9/30/2009
 
56.31
 
43.49
 
54.70
10/1/2009
 
12/31/2009
 
57.66
 
52.42
 
55.30
                 
1/1/2010
 
3/31/2010
 
58.00
 
49.94
 
56.00
4/1/2010
 
6/30/2010
 
58.08
 
45.86
 
46.51
7/1/2010
 
9/30/2010
 
55.81
 
46.45
 
54.92
10/1/2010
 
12/31/2010
 
59.50
 
53.85
 
58.23
                 
1/1/2011
 
3/31/2011
 
61.98
 
54.69
 
60.09
4/1/2011
 
6/30/2011
 
64.35
 
56.71
 
60.14
7/1/2011
 
9/30/2011
 
60.86
 
46.09
 
47.75
10/1/2011
 
12/31/2011
 
55.86
 
45.46
 
49.53
                 
1/1/2012
 
3/30/2012
 
55.91
 
48.99
 
54.90
4/1/2012
 
6/30/2012
 
55.68
 
46.55
 
49.96
7/1/2012
 
9/28/2012
 
55.57
 
47.30
 
53.00
10/01/2012
 
12/13/2012
 
56.36
 
51.63
 
55.88
 
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
 
RBC Capital Markets, LLC
P-12

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
SUPPLEMENTAL PLAN OF DISTRIBUTION
 
We expect that delivery of the Notes will be made against payment for the Notes on or about December 18, 2012, which is the third (3rd) business day following the Pricing Date (this settlement cycle being referred to as “T+3”).  See “Supplemental Plan of Distribution” in the prospectus supplement dated February 16, 2011. For additional information as to the relationship between us and RBC Capital Markets, LLC, please see the section “Plan of Distribution—Conflicts of Interest” in the prospectus dated January 28, 2011.
 
SUPPLEMENTAL DISCUSSION OF
U.S. FEDERAL INCOME TAX CONSEQUENCES
 
The following disclosure supplements the discussion in the product prospectus supplement dated February 16, 2011 under “Supplemental Discussion of U.S. Federal Income Tax Consequences.”
 
Dividend Equivalent. A “dividend equivalent” payment is treated as a dividend from sources within the U.S. and such payments generally would be subject to a 30% U.S. withholding tax if paid to a non-U.S. holder (as defined in the product prospectus supplement).  Under recently proposed U.S. Treasury Department regulations, certain payments that are contingent upon or determined by reference to U.S. source dividends, including payments reflecting adjustments for extraordinary dividends, with respect to equity-linked instruments, including the Notes, may be treated as dividend equivalents.  If enacted in their current form, the regulations will impose a withholding tax on payments made on the Notes on or after January 1, 2014 that are treated as dividend equivalents.  In that case, we (or the applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect to amounts so withheld.  Further, non-U.S. holders may be required to provide certifications prior to, or upon the sale, redemption or maturity of the Notes in order to minimize or avoid U.S. withholding taxes.
 
Foreign Account Tax Compliance Act. The Internal Revenue Service has issued notices and the Treasury Department has issued proposed regulations affecting the legislation enacted on March 18, 2010 and discussed in the product prospectus supplement under “Supplemental Discussion of U.S. Federal Income Tax Consequences— Supplemental U.S. Tax Considerations—Legislation Affecting Taxation of Notes Held By or Through Foreign Entities.”  Pursuant to the Internal Revenue Service notices, withholding requirements with respect to payments made on the Notes will generally begin no earlier than January 1, 2014. Pursuant to the proposed regulations, if finalized in their current form, the withholding tax will not be imposed on payments pursuant to obligations outstanding on January 1, 2013.  Holders are urged to consult their own tax advisors regarding the implications of this legislation and subsequent guidance on their investment in the Notes.
 
RBC Capital Markets, LLC
P-13

 
   
 
 
 
 
 
 
   
Absolute Return Barrier Notes
Linked to the iShares® MSCI EAFE Index Fund,
Due June 18, 2015 
 
 
 
 
  
 
VALIDITY OF THE NOTES
 
In the opinion of Norton Rose Canada LLP, 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, 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 laws of Canada applicable therein, and will be valid obligations of the Bank, subject to applicable bankruptcy, insolvency and other laws of general application affecting creditors’ rights, equitable principles, and subject to limitations as to the currency in which judgments in Canada may be rendered, 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 Quebec and the federal laws of Canada applicable thereto.  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 certain factual matters, all as stated in the letter of such counsel dated March 6, 2012, which has been filed as Exhibit 5.1 to Royal Bank’s Form 6-K filed with the SEC on March 6, 2012.
 
In the opinion of Morrison & Foerster 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 Royal Bank, entitled to the benefits of the Indenture, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith).  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 March 6, 2012, which has been filed as Exhibit 5.2 to the Bank’s Form 6-K dated March 6, 2012.
 
RBC Capital Markets, LLC
P-14