ISSUER FREE WRITING PROSPECTUS
Filed Pursuant to Rule 433
Registration Statement No. 333-227001
Dated January 24, 2019
Royal Bank of Canada Trigger Absolute Return Autocallable Notes
$• Notes Linked to the Common Stock of Intel Corporation due on or about January 28, 2021
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Investment Description
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Trigger Absolute Return Autocallable Notes (the “Notes”) are unconditional, unsecured and unsubordinated debt securities issued by Royal Bank of
Canada linked to the performance of the common stock of Intel Corporation (the “Underlying Equity”). If the Underlying Equity closes at or above its closing price on January 23, 2019 (the “Initial Underlying Price”) on any Observation Date (which
will occur first on or about April 23, 2019 and then quarterly thereafter as described on page 4 of this free writing prospectus), we will automatically call the Notes and pay you a Call Price equal to the principal amount per Note plus a Call
Return based on the Call Return Rate. The Call Return increases the longer the Notes are outstanding, as described below. If by maturity the Notes have not been called, and the closing price of one unit of the Underlying Equity closes at or above
the Downside Threshold on the final Observation Date, we will repay the principal amount plus pay you a return at maturity equal to the absolute value of the percentage decline in the price of the Underlying Equity from the Initial Underlying
Price to its closing price on the final Observation Date (the “Contingent Absolute Return”). If by maturity the Notes have not been called and the Underlying Equity closes below the Downside Threshold on the final Observation Date, the Contingent
Absolute Return will not apply, and we will repay less than the principal amount, if anything, resulting in a loss that is proportionate to the decline in the price of the Underlying Equity from the Initial Underlying Price to its closing price
on the final Observation Date, up to a 100% loss of your principal amount invested. The Notes are not subject to conversion into our common shares under subsection 39.2(2.3) of the Canada
Deposit Insurance Corporation Act.
Investing in the Notes involves significant risks. The Notes do not pay interest. You may lose some or all of your principal
amount. Generally, the higher the Call Return Rate on a Note, the greater the risk of loss on that Note. The Contingent Absolute Return and any contingent repayment of principal apply only if you hold the Notes to maturity. Any payment on the
Notes, including any repayment of principal, is subject to our creditworthiness and is not, either directly or indirectly, an obligation of any third party. If we were to default on our payment obligations, you may not receive any amounts owed to
you under the Notes and you could lose your entire principal amount. The Notes will not be listed on any securities exchange.
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Features
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Key Dates
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Call Return - We will automatically call the Notes for a
Call Price equal to the principal amount plus the applicable Call Return based on the Call Return Rate if the closing price of the Underlying Equity on any Observation Date is equal to or greater than the Initial Underlying Price. The
Call Return increases the longer the Notes are outstanding. If the Notes are not called, investors will have the potential for downside market exposure to the Underlying Equity at maturity if the Final Underlying Price is less than
the Initial Underlying Price.
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Contingent Absolute Return at Maturity -
If you hold the Notes to maturity, the Notes have not been called on any Observation Date including the final Observation Date and the Underlying Equity closes above or equal to the Downside Threshold on the final Observation Date, we
will pay your full principal amount plus the Contingent Absolute Return. If the Underlying Equity closes below the Downside Threshold on the final Observation Date, the Contingent Absolute Return will not apply and we will pay less
than your principal amount, if anything, resulting in a loss of your principal amount that will be proportionate to the full negative Underlying Return. The Contingent Absolute Return and any contingent repayment of principal only
applies if you hold the Notes to maturity. Any payment on the Notes, including any repayment of principal, is subject to our creditworthiness.
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Trade Date1
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January 24, 2019
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Settlement Date1
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January 29, 2019
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Observation Dates1
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Quarterly (see page 4 for details)
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Final Observation Date2
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January 25, 2021
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Maturity Date2
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January 28, 2021
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1 Expected. In the event we make any change to the expected Trade Date and Settlement Date, the Observation Dates, including the final
Observation Date, and/or the Maturity Date will be changed so that the stated term of the Notes remains approximately the same.
2 Subject to postponement if a market disruption event occurs, as described under “General Terms of the Securities – Market Disruption
Events” in the accompanying product prospectus supplement no. UBS-TAS-2.
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NOTICE TO INVESTORS: THE NOTES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. THE ISSUER IS NOT NECESSARILY OBLIGATED TO REPAY THE
FULL PRINCIPAL AMOUNT OF THE NOTES AT MATURITY, AND THE NOTES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE UNDERLYING EQUITY. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING OUR DEBT OBLIGATION. YOU SHOULD NOT PURCHASE
THE NOTES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE NOTES.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER ‘‘KEY RISKS’’ BEGINNING ON PAGE 6 AND UNDER ‘‘RISK FACTORS’’ BEGINNING
ON PAGE PS-4 OF THE PRODUCT PROSPECTUS SUPPLEMENT NO. UBS TAS-2 BEFORE PURCHASING ANY NOTES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR NOTES. YOU
MAY LOSE SOME OR ALL OF THE PRINCIPAL AMOUNT OF THE NOTES.
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Notes Offering
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This free writing prospectus relates to Trigger Absolute Return Autocallable Optimization Notes linked to the performance of the
common stock of Intel Corporation. The Initial Underlying Price and the Downside Threshold were determined on January 23, 2019. The Call Return Rate will be determined on the Trade Date. The range of potential Call Prices for each Observation
Date is set forth under “Indicative Terms of the Notes – Call Return/Call Return Rate” on page 4 of this free writing prospectus. The Notes are offered at a minimum investment of 100 Notes at $10.00 per Note (representing a $1,000 investment),
and integral multiples of $10.00 in excess thereof.
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Underlying
Equity
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Call Return Rate
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Initial Underlying Price
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Downside Threshold
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CUSIP
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ISIN
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Intel Corporation (INTC)
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[15%-16%] per annum (to be determined on the Trade Date)
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$47.94
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$35.96, which is 75% of the Initial Underlying Price (rounded to two decimal places)
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78014H219
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US78014H2195
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See “Additional Information About Royal Bank of Canada and the Notes” in this free writing prospectus. The Notes
will have the terms specified in the prospectus dated September 7, 2018, the prospectus supplement dated September 7, 2018, product prospectus supplement no. UBS-TAS-2 dated September 7, 2018 and this free writing prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Notes or passed upon the accuracy or the adequacy
of this free writing prospectus or the accompanying prospectus, prospectus supplement and product prospectus supplement no. UBS-TAS-2. Any representation to the contrary is a criminal offense.
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Price to Public(1)
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Fees and Commissions(1)
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Proceeds to Us
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Offering of the Notes
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Total
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Per Note
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Total
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Per Note
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Total
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Per Note
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Trigger Absolute Return Autocallable Notes Linked to the Common Stock of Intel Corporation
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•
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$10.00
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•
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$0.15
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•
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$9.85
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(1) UBS Financial Services Inc., which we refer to as UBS, will receive a commission that will depend on market
conditions on the Trade Date. In no event will the commission received by UBS exceed $0.15 per $10 principal amount. See “Supplemental Plan of Distribution (Conflicts of Interest)” below.
The initial estimated value of the Notes as of the date of this document is $9.8495 per $10 in principal amount for the Notes, which
is less than the price to public. The pricing supplement relating to the Notes will set forth our estimate of the initial value of the Notes as of the Trade Date, which will not be more than $0.20 less than this amount. 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 under “Key Risks,” “Supplemental Plan of Distribution (Conflicts of
Interest)” and “Structuring the Notes” below.
The Notes will not constitute deposits insured under the Canada Deposit Insurance Corporation Act or by the
United States Federal Deposit Insurance Corporation or any other Canadian or United States government agency or instrumentality.
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UBS Financial Services Inc.
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RBC Capital Markets, LLC
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Additional Information About Royal Bank of Canada and the Notes
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Royal Bank of Canada has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or
SEC, for the offering to which this free writing prospectus relates. Before you invest, you should read the prospectus in that registration statement and the other documents relating to this offering that Royal Bank of Canada has filed with the
SEC for more complete information about Royal Bank of Canada and this offering. You may obtain these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, Royal Bank of Canada, any agent or any dealer
participating in this offering will arrange to send you the prospectus, the prospectus supplement, product prospectus supplement no. UBS-TAS-2 and this free writing prospectus if you so request by calling toll-free 1-877-688-2301.
You may revoke your offer to purchase the Notes at any time prior to the time at which we accept such offer by notifying the
applicable agent. We reserve the right to change the terms of, or reject any offer to purchase, the Notes prior to their issuance. In the event of any changes to the terms of the Notes, we will notify you and you will be asked to accept such
changes in connection with your purchase. You may also choose to reject such changes, in which case we may reject your offer to purchase.
You should read this free writing prospectus together with the prospectus dated September 7, 2018, as supplemented by the prospectus
supplement dated September 7, 2018, relating to our Series H medium-term notes of which these Notes are a part, and the more detailed information contained in product prospectus supplement no. UBS-TAS-2 dated September 7, 2018. This free writing prospectus, together with the documents listed below, contains the terms of the Notes and supersedes all other 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, fact sheets, brochures or other educational materials of ours. You should
carefully consider, among other things, the matters set forth in “Risk Factors” in the accompanying product prospectus supplement no. UBS-TAS-2, as the Notes involve risks not associated with conventional debt securities.
If the terms discussed in this free writing prospectus differ from those discussed in the product prospectus supplement no.
UBS-TAS-2, the prospectus supplement, or the prospectus, the terms discussed herein will control.
You may access these on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing
our filing for the relevant date on the SEC website):
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Product prospectus supplement no. UBS-TAS-2 dated September 7, 2018:
https://www.sec.gov/Archives/edgar/data/1000275/000114036118038058/form424b5.htm |
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Prospectus supplement dated September 7, 2018:
https://www.sec.gov/Archives/edgar/data/1000275/000121465918005975/f97180424b3.htm |
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Prospectus dated September 7, 2018:
https://www.sec.gov/Archives/edgar/data/1000275/000121465918005973/l96181424b3.htm |
As used in this free writing prospectus, “we,” “us” or “our” refers to Royal Bank of Canada.
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Investor Suitability
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The Notes may be suitable for you if, among other considerations:
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You fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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You can tolerate the loss of all or a substantial portion of your investment and are willing to make an investment that may have similar downside market risk as the Underlying
Equity.
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You are willing to accept the risks of investing in equities in general and in the Underlying Equity in particular.
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You believe the Underlying Equity will close at or above the Initial Underlying Price on any one of the specified Observation Dates, including the final Observation Date, or you
believe the Underlying Equity will not close below the Downside Threshold on the final Observation Date.
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You can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside price fluctuations of the Underlying Equity.
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You are willing to hold Notes that will be called on the earliest Observation Date on which the Underlying Equity closes at or above the Initial Underlying Price, or you are
otherwise willing to hold such Notes to maturity.
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You are willing to make an investment whose return is limited to the Call Return, regardless of the potential appreciation of the Underlying Equity, which could be significant, or,
if the Notes have not been called, to the Contingent Absolute Return (as limited by the Downside Threshold).
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You would be willing to invest in the Notes if the Call Return Rate were set equal to the bottom of the range indicated on the cover page of this free writing prospectus (the actual
Call Return Rate will be set on the Trade Date).
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You are willing to invest in Notes for which there may be little or no secondary market and you accept that the secondary market will depend in large part on the price, if any, at
which RBC Capital Markets, LLC, which we refer to as “RBCCM,” is willing to purchase the Notes.
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You do not seek current income from this investment and are willing to forgo any dividends paid on the Underlying Equity.
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You are willing to assume our credit risk for all payments under the Notes, and understand that if we default on our obligations, you
may not receive any amounts due to you, including any repayment of principal.
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The Notes may not be suitable for you if, among other considerations:
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You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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You cannot tolerate the loss of all or a substantial portion of your investment, and you are not willing to make an investment that may have similar downside market risk as the
Underlying Equity.
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You are unwilling to accept the risks of investing in equities in general or in the Underlying Equity in particular.
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You do not believe the Underlying Equity will close at or above the Initial Underlying Price on any one of the specified Observation Dates, including the final Observation Date, or
you believe the Underlying Equity will close below the Downside Threshold on the final Observation Date exposing you to the full downside performance of the Underlying Equity.
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You seek an investment that is designed to provide a full return of principal at maturity.
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You seek an investment that participates in the full performance of the Underlying Equity and whose positive return is not limited to the applicable Call Return, or, if the Notes
have not been called, to the Contingent Absolute Return (as limited by the Downside Threshold).
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You would be unwilling to invest in the Notes if the Call Return Rate were set equal to the bottom of the range indicated on the cover page of this free writing prospectus (the
actual Call Return Rate will be set on the Trade Date).
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You are unable or unwilling to hold Notes that will be called on the earliest Observation Date on which the Underlying Equity closes at or above the Initial Underlying Price, or you
are otherwise unable or unwilling to hold such Notes to maturity.
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You seek an investment for which there will be an active secondary market.
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You seek current income from your investment, or prefer to receive any dividends paid on the Underlying Equity.
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You prefer the lower risk, and therefore accept the potentially lower returns, of conventional fixed income investments with comparable maturities and credit ratings.
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You cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside price fluctuations of the Underlying Equity.
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You are not willing to assume our credit risk for all payments under the Notes, including any repayment of principal.
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The suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable
investment for you will depend on your individual circumstances, and you should reach an investment decision only after you and your investment, legal, tax, accounting, and other advisers have carefully considered the suitability of an investment
in the Notes in light of your particular circumstances. You should also review carefully the “Key Risks” below and “Risk Factors” in the accompanying product prospectus supplement no. UBS-TAS-2 for risks related to an investment in the Notes.
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Indicative Terms of the Notes1
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Issuer:
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Royal Bank of Canada
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Principal Amount per
Note:
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$10 per Note (subject to a minimum purchase of 100 Notes or $1,000)
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Term:
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Approximately two years, unless called earlier
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Underlying Equity:2
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The common stock of Intel Corporation
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Call Feature:
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The Notes will be called if the Closing Price of the Underlying Equity on any Observation Date is at or above its Initial
Underlying Price. If the Notes are called, we will pay you on the applicable Call Settlement Date a cash payment per $10 principal amount equal to the Call Price for the applicable Observation Date.
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Observation Dates:3
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The first Observation Date will occur on or about April 23, 2019; Observation Dates will occur quarterly thereafter on or
about July 23, 2019, October 23, 2019, January 23, 2020, April 23, 2020, July 23, 2020, October 23, 2020 and January 25, 2021 (the “final Observation Date”).4
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Call Settlement Dates:
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Three (3) business days following the applicable Observation Date, except that the Call Settlement Date for the final
Observation Date is the Maturity Date.
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Call Price:
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The Call Price will be calculated based on the following formula:
$10 + ($10 x Call Return)
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Call Return / Call Return
Rate:
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The Call Price will be based upon the Call Return. The Call Return increases the longer the Notes are outstanding and will
be based on the Call Return Rate of between 15% and 16% per annum. The actual Call Return Rate will be set on the Trade Date.
The Call Return will be a fixed amount based upon equal quarterly installments at the Call Return Rate, which is a per
annum rate. The following table sets forth each Observation Date, each Call Settlement Date and the corresponding Call Price range for the Notes.
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| 1 |
Terms used in this free writing prospectus, but not defined herein, shall have the meanings ascribed to them in the product prospectus supplement.
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| 2 |
For a description of adjustments that may affect the Underlying Equity, see “General Terms of the Securities” in the product prospectus supplement no. UBS-TAS-2.
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Expected. In the event that we make any change to the expected Trade Date and Settlement Date, the Observation Dates (including the final Observation Date) and Maturity Date will be
changed to ensure that the stated term of the Notes remains approximately the same.
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4
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Subject to postponement if a market disruption event occurs, as described under “General Terms of the Securities – Market Disruption Events” in the accompanying product
prospectus supplement no. UBS-TAS-2.
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Observation Dates
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Call Settlement Dates
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Call Price
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April 23, 2019
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April 26, 2019
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[$10.375] - [$10.400]
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July 23, 2019
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July 26, 2019
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[$10.750] - [$10.800]
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October 23, 2019
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October 28, 2019
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[$11.125] - [$11.200]
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January 23, 2020
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January 28, 2020
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[$11.500] - [$11.600]
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April 23, 2020
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April 28, 2020
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[$11.875] - [$12.000]
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July 23, 2020
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July 28, 2020
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[$12.250] - [$12.400]
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October 23, 2020
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October 28, 2020
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[$12.625] - [$12.800]
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January 25, 2021
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January 28, 2021
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[$13.000] - [$13.200]
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Payment at Maturity
(per Note):
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If the Notes are not called and the Final Underlying
Price of the Underlying Equity is above or equal to the Downside Threshold on the final Observation Date, we will pay you a cash payment on the Maturity Date per Note equal to:
$10 × (1 + Contingent Absolute Return)
If the Notes are not called and the Final Underlying
Price is below the Downside Threshold on the final Observation Date, then the Contingent Absolute Return will not apply, and we will pay you a cash payment on the Maturity Date that is less than your principal amount, if
anything, resulting in a loss that is proportionate to the negative Underlying Return, equal to:
$10 × (1 + Underlying Return)
Accordingly, you may lose all or a substantial portion of your principal at
maturity, depending on how much the Underlying Equity declines.
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Underlying Return:
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Final Underlying Price - Initial Underlying Price
Initial Underlying Price |
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Downside Threshold:
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A percentage of the Initial Underlying Price of the Underlying Equity, as specified on the cover page of this free writing
prospectus.
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Contingent Absolute
Return:
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The absolute value of the Underlying Return. For example, if the Underlying Return is -5%, the Contingent Absolute Return
will equal 5%.
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Initial Underlying Price:
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The closing price of the Underlying Equity on January 23, 2019, as set forth on the cover page.
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Final Underlying Price:
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The closing price of the Underlying Equity on the final Observation Date.
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Closing Price:
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On any trading day, the last reported sale price of the Underlying Equity on the principal national securities exchange on
which it is listed for trading, as determined by the calculation agent.
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4
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Investment Timeline
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Trade
Date: |
The Call Return Rate is set.
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Quarterly:
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The Notes will be called if the closing price of the Underlying Equity on any Observation Date is equal to or greater than the Initial Underlying Price.
If the Notes are called, we will pay the Call Price for the applicable Observation Date, equal to the principal amount plus the applicable Call Return.
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Maturity
Date:
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The Final Underlying Price of the Underlying Equity is observed on the final Observation Date.
If the Notes have not been called and the Final Underlying Price is equal to or greater than the Downside Threshold, we will repay an amount in cash equal
to:
$10 × (1 + Contingent Absolute Return)
If the Notes have not been called and the Final Underlying Price is less than the Downside Threshold, then the Contingent Absolute Return will not apply,
and we will repay less than the principal amount, if anything, resulting in a loss proportionate to the decline of the Underlying Equity, equal to a return of:
$10.00 × (1 + Underlying Return) per Note
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INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE
NOTES, INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO OUR CREDITWORTHINESS. IF WE WERE TO DEFAULT ON OUR PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE NOTES AND YOU COULD LOSE YOUR ENTIRE PRINCIPAL AMOUNT.
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5
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Key Risks
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An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the
Underlying Equity. These risks are explained in more detail in the “Risk Factors” section of the accompanying product prospectus supplement no. UBS-TAS-2. We also urge you to consult your investment, legal, tax, accounting and other advisors
before investing in the Notes.
Risks Relating to the Notes Generally| ¨ |
You May Lose Some or All of Your Principal: The Notes differ from ordinary debt securities in that we will
not necessarily pay the full principal amount at maturity. The return on the Notes depends on whether the Underlying Equity closes at or above the Initial Underlying Price on an Observation Date, and if the Notes are not called, whether
the Final Underlying Price of the Underlying Equity is greater than or equal to the Downside Threshold. If the Notes are not called, we will only pay you the principal amount of your Notes, plus the Contingent Absolute Return, if the
Final Underlying Price of the Underlying Equity is greater than or equal to the Downside Threshold, and will only make such payment at maturity. If the Notes are not called and the Final Underlying Price is less than the Downside
Threshold, the Contingent Absolute Return will not apply and you will lose some or all of your principal amount in an amount proportionate to the negative Underlying Return.
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The Call Feature and the Downside Threshold Limit Your Potential Return: The return potential of the Notes if
the Notes are called as of any Observation Date is limited to the applicable Call Return, regardless of the appreciation of the Underlying Equity, which may be significant. Therefore, you may receive a lower payment if the Notes are
automatically called or at maturity, as the case may be, than you would have if you had invested directly in the Underlying Equity. In addition, because the Call Return increases the longer the Notes are outstanding, the Call Price
payable on the first Observation Date is less than the Call Price payable on later Observation Dates. As the Notes could be called as early as the first Observation Date, the total return on the Notes could be minimal.
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If the Notes are not called, and the Final Underlying Price is greater than or equal to the Downside Threshold, your return at maturity
will be limited to the absolute value of the decline in the price of the Underlying Equity up to the Downside Threshold. Accordingly, this payment will not exceed the percentage by which the Downside Threshold is less than the Initial Underlying
Price. You will not receive the Contingent Absolute Return, and will lose some or all of your principal amount, if the Notes are not called and the Final Underlying Price is less than the Downside Threshold.
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No Periodic Interest Payments: We will not pay any interest with respect to the Notes.
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Reinvestment Risk: If your Notes are called early, the holding period over which you would receive the per
annum Call Return Rate could be as little as three months. There is no guarantee that you would be able to reinvest the proceeds from an investment in the Notes in a comparable investment with a similar level of risk in the event the
Notes are called prior to the Maturity Date.
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Contingent Absolute Return Applies Only at Maturity: You should be willing to hold your Notes to maturity. If
you are able to sell your Notes prior to maturity in the secondary market, if any, you may have to sell your Notes at a loss relative to your initial investment, even if the price of the Underlying Equity is above the Downside
Threshold. If at maturity the Notes have not been called, we will repay you the full principal amount per Note plus the Contingent Absolute Return, unless the price of the Underlying Equity closes below the Downside Threshold on the
final Observation Date. Under these circumstances, the Contingent Absolute Return will not apply and we will repay less than the principal amount, if anything, resulting in a loss that is proportionate to the decline in the price of the
Underlying Equity from the date that the Initial Underlying Price was determined to the final Observation Date. The Contingent Absolute Return and any contingent repayment of principal are based on whether the Final Underlying Price is
below the Downside Threshold and apply only if you hold your Notes to maturity.
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The Call Return Rate and the Probability that the Final Underlying Price Will Fall Below the Downside Threshold on
the Final Observation Date Will Reflect in Part the Volatility of the Underlying Equity: “Volatility” refers to the frequency and magnitude of changes in the price of the Underlying Equity. The greater the volatility of the
Underlying Equity, the more likely it is that the price of that Underlying Equity could close below the Downside Threshold on the final Observation Date. This risk will generally be reflected in a higher Call Return Rate for the Notes
than the return payable on our conventional debt securities with a comparable term. However, while the Call Return Rate is set on the Trade Date, the Underlying Equity’s volatility can change significantly over the term of the Notes,
and may increase. The price of the Underlying Equity could fall sharply as of the final Observation Date, which could result in a significant loss of your initial investment.
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Credit Risk of Royal Bank of Canada: The Notes are our unsubordinated and unsecured debt obligations and are
not, either directly or indirectly, an obligation of any third party. Any payment to be made on the Notes, including payments in respect of an automatic call or any repayment of principal, depends on our ability to satisfy our
obligations as they come due. As a result, our actual and perceived creditworthiness may affect the market value of the Notes and, in the event we were to default on our obligations, you may not receive any amounts owed to you under the
terms of the Notes and you could lose your entire investment.
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The Notes Will be Subject to Risks, Including Non-Payment in Full, Under Canadian Bank Resolution Powers:
Under Canadian bank resolution powers, the Canada Deposit Insurance Corporation (“CDIC”) may, in circumstances where we have ceased, or are about to cease, to be viable, assume temporary control or ownership over us and may be granted
broad powers by one or more orders of the Governor in Council (Canada), including the power to sell or dispose of all or a part of our assets, and the power to carry out or cause us to carry out a transaction or a series of transactions
the purpose of which is to restructure our business of the Bank. As See “Description of Debt Securities ― Canadian Bank
Resolution Powers” in the accompanying prospectus for a description of the Canadian bank resolution powers, including the bail-in regime. If the CDIC were to take action under the Canadian bank resolution powers with respect to us, this
could result in holders of the Notes being exposed to losses.
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Single Stock Risk: The price of the Underlying Equity can rise or fall sharply due to factors specific to the
Underlying Equity and its issuer, such as stock price volatility, earnings, financial conditions, corporate, industry and regulatory developments, management changes and decisions and other events, as well as general market factors,
such as general stock market volatility and levels, interest rates and economic and political conditions. You, as an investor in the Notes, should make your own investigation into the issuer of the Underlying Equity and the Underlying
Equity. We urge you to review financial and other information filed periodically by the issuer with the SEC.
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Dividend Payments or Voting Rights: As a holder of the Notes, you will not have voting rights, rights to
receive cash dividends or other distributions, or any other rights that holders of the Underlying Equity would have.
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Owning the Notes Is Not the Same as Owning the Underlying Equity: The return on your Notes may not reflect
the return you would realize if you actually owned the Underlying Equity. For instance, you will not receive or be entitled to receive any dividend payments or other distributions over the term of the Notes, which could constitute
significant returns to actual owners of the Underlying Equity. Furthermore, the Underlying Equity may appreciate substantially during the term of the Notes, while your potential return, if called, will be limited to the applicable Call
Return.
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6
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There Is No Affiliation Between the Underlying Equity Issuer and RBCCM, and RBCCM Is Not Responsible for any
Disclosure by the Underlying Equity Issuer: We are not affiliated with the Underlying Equity issuer. However, we and our affiliates may currently, or from time to time in the future engage in business with the Underlying Equity
issuer. Nevertheless, neither we nor our affiliates assume any responsibility for the accuracy or the completeness of any information about the Underlying Equity and the Underlying Equity issuer. You, as an investor in the Notes, should
make your own investigation into the Underlying Equity and the Underlying Equity issuer for your Notes. The Underlying Equity issuer is not involved in this offering and has no obligation of any sort with respect to your Notes. The
Underlying Equity issuer has no obligation to take your interests into consideration for any reason, including when taking any corporate actions that might affect the value of your Notes.
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Lack of Liquidity: The Notes will not be listed on any securities exchange. RBCCM intends to offer to
purchase the Notes in the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Notes easily. Because other dealers are not likely to
make a secondary market for the Notes, the price at which you may be able to trade your Notes is likely to depend on the price, if any, at which RBCCM is willing to buy the Notes.
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The Initial Estimated Value of the Notes Will Be Less than the Price to the Public: The initial estimated
value for the Notes that is set forth on the cover page of this document, and that will be set forth in the final pricing supplement for the Notes, will be less than the public offering price you pay for the Notes, and does not
represent a minimum price at which we, RBCCM or any of our other 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 Underlying Equity, 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 our estimated profit and the 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 the price to public, as any such sale price would not be expected to include the underwriting discount and our
estimated profit and the costs relating to our hedging of the Notes. In addition, any price at which you may sell the Notes is likely to reflect customary bid-ask spreads for similar trades. In addition to bid-ask spreads, the value of
the Notes determined for any secondary market price is expected to be based on a secondary market rate rather than the internal borrowing rate used to price the Notes and determine the initial estimated value. As a result, any secondary
price will be less than if the internal borrowing 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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Our Initial Estimated Value of the Notes Is an Estimate Only, Calculated as of the Time the Terms of the Notes Are
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.
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Potential Conflicts: We and our affiliates play a variety of roles in connection with the issuance of the
Notes, including hedging our obligations under the Notes. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the Notes.
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Potentially Inconsistent Research, Opinions or Recommendations by RBCCM, UBS or Their Affiliates: RBCCM, UBS
or their affiliates may publish research, express opinions or provide recommendations as to the Underlying Equity that are inconsistent with investing in or holding the Notes, and which may be revised at any time. Any such research,
opinions or recommendations could affect the value of the Underlying Equity, and therefore the market value of the Notes.
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Uncertain Tax Treatment: Significant aspects of the tax treatment of an investment in the Notes are
uncertain. You should consult your tax adviser about your tax situation.
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Potential Royal Bank of Canada and UBS Impact on Price: Trading or other transactions by us, UBS or our
respective affiliates in the Underlying Equity, or in futures, options, exchange-traded funds or other derivative products on the Underlying Equity may adversely affect the market value of the Underlying Equity, the closing price of the
Underlying Equity, and, therefore, the market value of the Notes.
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The Terms of the Notes at Issuance and Their Market Value Prior to Maturity Will Be Influenced by Many Unpredictable
Factors: Many economic and market factors will influence the terms of the Notes at issuance and their value prior to maturity. These factors are similar in some ways to those that could affect the value of a combination of
instruments that might be used to replicate the payments on the Notes, including a combination of a bond with one or more options or other derivative instruments. For the market value of the Notes, we expect that, generally, the price
of the Underlying Equity on any trading day will affect the value of the Notes more than any other single factor. However, you should not expect the value of the Notes in the secondary market to vary in proportion to changes in the
price of the Underlying Equity. The value of the Notes will be affected by a number of other factors that may either offset or magnify each other, including:
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the actual and expected volatility of the price of the Underlying Equity;
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the time remaining to maturity of the Notes;
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the dividend rate on the Underlying Equity;
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interest and yield rates in the market generally;
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a variety of economic, financial, political, regulatory or judicial events;
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the occurrence of certain events relating to the Underlying Equity that may or may not require an adjustment to the terms of the Notes; and
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our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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Some or all of these factors will influence the terms of the Notes at issuance as well as the price you will receive if you choose to
sell the Notes prior to maturity. The impact of any of the factors set forth above may enhance or offset some or all of any change resulting from another factor or factors. You
7
may have to sell the Notes at a substantial discount from the principal amount if the price of the Underlying Equity is at, below or
not sufficiently above, the Downside Threshold.
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The Anti-Dilution Protection for the Underlying Equity Is Limited: The calculation agent will make
adjustments to the Initial Underlying Price and the Downside Threshold for certain events affecting the Underlying Equity. However, the calculation agent will not be required to make an adjustment in response to all events that could
affect the Underlying Equity. If an event occurs that does not require the calculation agent to make an adjustment, the value of the Notes and the payments on the Notes may be materially and adversely affected.
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8
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Hypothetical Examples
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Hypothetical terms only. Actual terms may vary. See the cover page for actual offering terms.
The examples below illustrate the payment upon a call or at maturity for a $10 Note in a hypothetical offering of the Notes, with
the following assumptions:*
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Principal Amount:
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$10
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Term:
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2 years
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Hypothetical Initial Underlying Price:
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$100.00
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Hypothetical Call Return Rate:
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15% per annum (or 3.75% per quarterly period), representing the low end of the Call Return Rate range set forth on the cover
page.
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Observation Dates:
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Observation Dates will occur quarterly as set forth under “Indicative Terms of the Notes” in this free writing prospectus.
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Hypothetical Downside Threshold:
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$75.00 (which is 75% of the Initial Underlying Price)
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* May not be the actual Call Return Rate per annum, Initial Underlying Price or Downside Threshold
applicable to the Notes. The actual Call Return Rate will be determined on the Trade Date.
Example 1 - Notes are Called on the First Observation Date
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Closing Price at first Observation Date:
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$105.00 (at or above Initial Underlying Price, Notes are called)
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Call Price (per $10.00):
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$10.375
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Because the Notes are called on the first Observation Date, we will pay you on the Call Settlement Date a total Call Price of $10.375
per $10.00 principal amount (a 3.75% total return on the Notes).
Example 2 - Notes are Called on the final Observation Date
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Closing Price at first Observation Date:
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$95.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at second Observation Date:
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$90.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at third Observation Date:
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$85.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at fourth Observation Date:
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$87.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at fifth Observation Date:
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$89.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at sixth Observation Date:
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$92.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at seventh Observation Date:
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$95.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at final Observation Date:
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$105.00 (at or above Initial Underlying Price, Notes are called)
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Call Price (per $10.00):
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$13.00
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Because the Notes are called on the final Observation Date, we will pay you on the Call Settlement Date (which coincides with the
Maturity Date in this example) a total Call Price of $13.00 per $10.00 principal amount (a 30% total return on the Notes).
Example 3 - Notes are NOT Called and the Final Underlying Price is above the Downside
Threshold on the final Observation Date
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Closing Price at first Observation Date:
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$95.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at second Observation Date:
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$90.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at third Observation Date:
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$85.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at fourth Observation Date:
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$87.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at fifth Observation Date:
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$89.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at sixth Observation Date:
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$92.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at seventh Observation Date:
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$95.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at final Observation Date:
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$90.00 (below Initial Underlying Price, but above Downside Threshold, Notes NOT called)
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Payment at Maturity (per $10.00):
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$10.00 × (1 + Contingent Absolute Return)
$10.00 × (1 + 10%) $11.00 |
Because the Notes are not called and the Underlying Return is -10.00%, but the Final Underlying Price is above the Downside Threshold on the final
Observation Date, we will pay you at maturity a total of $11.00 per $10.00 principal amount (a 10.00% return on the Notes). Accordingly, even though the price of the Underlying Equity has decreased, you will receive a positive return on the Notes.
9
Example 4 - Notes are NOT Called and the Final Underlying Price is below the Downside
Threshold on the final Observation Date
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Closing Price at first Observation Date:
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$95.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at second Observation Date:
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$90.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at third Observation Date:
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$85.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at fourth Observation Date:
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$87.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at fifth Observation Date:
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$89.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at sixth Observation Date:
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$92.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at seventh Observation Date:
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$95.00 (below Initial Underlying Price, Notes NOT called)
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Closing Price at final Observation Date:
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$50.00 (below Initial Underlying Price and Downside Threshold, Notes NOT called)
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Payment at Maturity (per $10):
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$10.00 × (1 + Underlying Return)
$10.00 × (1 - 50%) $5.00 |
Because the Notes are not called and the Final Underlying Price is below the Downside Threshold on the final Observation Date, we will pay you at
maturity a total of $5.00 per $10.00 principal amount (a 50.00% loss on the Notes).
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What Are the Tax Consequences of the Notes?
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U.S. Federal Income Tax Consequences
Set forth below, together with the discussion of U.S. federal income tax in the accompanying product prospectus supplement, prospectus
supplement, and prospectus, is a summary of the material U.S. federal income tax consequences relating to an investment in the Notes. The following summary is not complete and is qualified in
its entirety by the discussion under the sections entitled “Supplemental Discussion of U.S. Federal Income Tax Consequences” in the accompanying product prospectus supplement, the section “Tax Consequences” in the accompanying prospectus and the
section entitled “Certain Income Tax Consequences” in the accompanying prospectus supplement, which you should carefully review prior to investing in the Notes.
In the opinion of our counsel, Morrison & Foerster LLP, it would generally be reasonable to treat the Notes as callable pre-paid
cash-settled derivative contracts linked to the Underlying Equity for U.S. federal income tax purposes, and the terms of the Notes require a holder and us (in the absence of a change in law or an administrative or judicial ruling to the contrary)
to treat the Notes for all tax purposes in accordance with such characterization. If the Notes are so treated, a holder should generally recognize capital gain or loss upon the call, sale or maturity of the Notes in an amount equal to the
difference between the amount a holder receives at such time and the holder’s tax basis in the Notes. Capital gain recognized by an individual U.S. holder is generally taxed at preferential
rates where the property is held for more than one year and is generally taxed at ordinary income rates where the property is held for one year or less. The deductibility of capital losses is subject to limitations.
Alternative tax treatments are also possible and the Internal Revenue Service might assert that a treatment other than that described
above is more appropriate. In addition, the Internal Revenue Service has released a notice that may affect the taxation of holders of the Notes. According to the notice, the Internal Revenue
Service and the U.S. Treasury Department are actively considering whether the holder of an instrument such as the Notes should be required to accrue ordinary income on a current basis. It is not possible to determine what guidance they will
ultimately issue, if any. It is possible, however, that under such guidance, holders of the Notes will ultimately be required to accrue income currently and this could be applied on a retroactive basis. The Internal Revenue Service and the U.S.
Treasury Department are also considering other relevant issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital and whether the special "constructive ownership rules" of Section 1260 of the
Code might be applied to such instruments. Holders are urged to consult their tax advisors concerning the significance, and the potential impact, of the above considerations.
Individual holders that own “specified foreign financial assets” may be required to include certain information with respect to such
assets with their U.S. federal income tax return. You are urged to consult your own tax advisor regarding such requirements with respect to the Notes.
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 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 has issued guidance that states that the U.S. Treasury Department and the Internal Revenue Service 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, 2021. 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 Underlying Equity or the Notes, 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 Underlying Equity 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.
The accompanying product prospectus supplement notes that FATCA withholding on payments of gross proceeds from a sale or redemption of
Notes will only apply to payments made after December 31, 2018. That discussion is modified to reflect regulations proposed by the U.S. Treasury Department in December 2018 indicating an intent to eliminate the requirement under FATCA of
withholding on gross proceeds of the disposition of financial instruments. The U.S. Treasury Department has indicated that taxpayers may rely on these proposed regulations pending their finalization. Prospective investors are urged to consult with
their own tax advisors regarding the possible implications of FATCA on their investment in the Notes.
Please see the discussion under the section entitled “Supplemental Discussion of U.S. Federal Income Tax Consequences” in the
accompanying product prospectus supplement for a further discussion of the U.S. federal income tax consequences of an investment in the Notes.
Canadian Federal Income Tax Consequences
For a discussion of the material Canadian federal income tax consequences relating to an investment in the Notes, please see the section entitled “Tax
Consequences” in the accompanying prospectus, which you should carefully review prior to investing in the Notes.
11
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Information About the Underlying Equity
|
Included on the following pages is a brief description of the issuer of the Underlying Equity. This information has been obtained from
publicly available sources. Set forth below is a table that provides the quarterly high, low and period-end closing prices for the Underlying Equity. We obtained the closing price information
set forth below from the Bloomberg Professional® service (“Bloomberg”) without independent verification. You should not take the historical prices of the Underlying Equity as an indication of future performance.
The Underlying Equity is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Companies with
securities registered under the Exchange Act are required to file financial and other information specified by the SEC periodically. Information filed by the Underlying Equity issuer with the SEC can be reviewed electronically through a website
maintained by the SEC. The address of the SEC’s website is http://www.sec.gov. Information filed with the SEC by the Underlying Equity issuer under the Exchange Act can be located by reference to its SEC Central Index Key (“CIK”) number provided
below. Information from outside sources is not incorporated by reference in, and should not be considered part of, this free writing prospectus or any accompanying prospectus or prospectus supplement. We have not independently verified the accuracy
or completeness of the information contained in outside sources.
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Intel Corporation
|
According to publicly available information, Intel Corporation designs, manufactures, and sells computer components and related
products. The company major products include microprocessors, chipsets, embedded processors and microcontrollers, flash memory, graphic, network and communication, systems management software, conferencing, and digital imaging products.
Information filed by the company with the SEC under the Exchange Act can be located by reference to its SEC CIK number: 50863. The
company’s common stock is listed on the Nasdaq Global Select Market under the ticker symbol “INTC.”
Historical Information
The graph below illustrates the performance of this Underlying Equity from January 23, 2009 to January 23, 2019, based on the Initial
Underlying Price of $47.94, which was its closing price on January 23, 2019, and a Downside Threshold equal to $35.96, which was 75% of the Initial Underlying Price, rounded to two decimal
places.
 n Downside Threshold = 75.00% of the
Initial Underlying Price
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HISTORIC PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE.
Source: Bloomberg L.P. We have not independently verified the accuracy
or completeness of the information obtained from Bloomberg Financial Markets.
12
|
Supplemental Plan of Distribution (Conflicts of Interest)
|
We have agreed to indemnify UBS Financial Services Inc. and RBCCM against liabilities under the Securities Act of 1933, as amended, or
to contribute payments that UBS Financial Services Inc. and RBCCM may be required to make relating to these liabilities as described in the prospectus supplement and the prospectus. We will agree that UBS Financial Services Inc. may sell all or a
part of the Notes that it will purchase from us to investors at the price to public or to its affiliates at the price indicated on the cover of the pricing supplement, the document that will be filed under Rule 424(b)(2) containing the final
pricing terms of the Notes.
Subject to regulatory constraints and market conditions, RBCCM intends to offer to purchase the Notes in the secondary market, but it
is not required to do so.
We or our affiliates may enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated
counterparties in connection with the sale of the Notes and RBCCM and/or an affiliate may earn additional income as a result of payments pursuant to the swap or related hedge transactions. See “Use of Proceeds and Hedging” in the accompanying
product prospectus supplement no. UBS-TAS-2.
We expect to 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.
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 6 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 and our hedging costs and profits; however, the value of the Notes shown on your account statement during that period may be a higher amount, reflecting the addition of the underwriting
discount and our estimated costs and profits from hedging the Notes. Any such 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. This period may be reduced at RBCCM’s discretion based on a variety of factors, including but not limited to, the amount of the Notes that we repurchase and our negotiated arrangements from time to time with UBS.
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 September 7, 2018.
|
Structuring the Notes
|
The Notes are our debt securities, the return on which is linked to the performance of the Underlying Equity. 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 is likely to result in a higher initial estimated value of the Notes at the
time their terms are set than if the secondary market rate was used. Unlike the estimated value included on the cover of this document or in the final pricing supplement
relating to the Notes, any value of the Notes determined for purposes of a secondary market transaction may be based on a different borrowing rate, which may result in a lower value for the Notes than if our initial internal borrowing 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 Underlying Equity, 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 reduces the economic terms of the Notes to you. The initial offering price of the
Notes also reflects the underwriting commission and our estimated hedging costs. These factors result in the initial estimated value for the Notes on the Trade Date being less than their public offering price. See “Key Risks—The Initial Estimated
Value of the Notes Will Be Less than the Price to the Public” above.
|
Terms Incorporated in Master Note
|
The terms appearing above under the caption “Indicative Terms of the Notes” and the provisions in the accompanying product prospectus supplement no.
UBS-TAS-2 dated September 7, 2018 under the caption “General Terms of the Securities,” are incorporated into the master note issued to DTC, the registered holder of the Notes.
13