ISSUER FREE WRITING PROSPECTUS
Filed Pursuant to Rule 433
Registration Statement No. 333-259205
Dated November 30, 2021
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Investment Description
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Features
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Key Dates
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❑ |
Enhanced Growth Potential Up to the Maximum Gain — At maturity, if the Underlying Return is positive, we will pay you the principal amount plus a return equal to the
Upside Gearing times the Underlying Return up to the Maximum Gain. If the Underlying Return is negative, investors may be exposed to the negative Underlying Return at maturity.
|
❑ |
Contingent Repayment of Principal — If the Underlying Return is negative, but the Final Underlying Level is not below the Downside Threshold, we will repay your
principal amount. However, if the Final Underlying Level is less than the Downside Threshold, investors will be exposed to the full downside performance of the Underlying and we will pay less than the principal amount, resulting in a
loss of principal amount that is proportionate to the percentage decline in the Underlying. Accordingly, you may lose some or all of the principal amount of the Securities. The contingent repayment of principal applies only at
maturity. Any payment on the Securities, including any repayment of principal, is subject to our creditworthiness.
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Trade Date1
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December 2, 2021
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Settlement Date1
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December 7, 2021
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Final Valuation Date2
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December 2, 2025
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Maturity Date2
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December 5, 2025
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1 |
Expected. If we make any change to the expected Trade Date and Settlement Date, the Final Valuation Date and Maturity Date will be changed so that the stated term of the Securities remains approximately
the same.
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2
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Subject to postponement if a market disruption event occurs, as described under “General Terms of the Securities — Payment at Maturity” in the accompanying product
prospectus supplement UBS-IND-1.
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NOTICE TO INVESTORS: THE SECURITIES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. WE ARE NOT NECESSARILY OBLIGATED TO REPAY THE FULL PRINCIPAL AMOUNT AT MATURITY, AND THE
SECURITIES CAN HAVE THE FULL DOWNSIDE MARKET RISK OF THE UNDERLYING. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING OUR DEBT OBLIGATION. YOU SHOULD NOT PURCHASE THE SECURITIES IF YOU DO NOT UNDERSTAND OR ARE NOT
COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE SECURITIES.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “KEY RISKS” BEGINNING ON PAGE 5 OF THIS FREE WRITING PROSPECTUS AND UNDER ‘‘RISK FACTORS’’ BEGINNING ON PAGE PS-4 OF THE ACCOMPANYING
PRODUCT PROSPECTUS SUPPLEMENT UBS-IND-1 BEFORE PURCHASING ANY SECURITIES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR SECURITIES. YOU COULD
LOSE SOME OR ALL OF THE PRINCIPAL AMOUNT OF THE SECURITIES.
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Security Offering
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We are offering Capped Trigger GEARS Linked to the MSCI Emerging Markets Index. The return on the principal amount is subject to, and will not exceed, the predetermined Maximum Gain. The
Securities are offered at a minimum investment of 100 Securities at the Price to Public described below. The Maximum Gain, Initial Underlying Level and Downside Threshold will be determined on the Trade Date.
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Underlying
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Upside
Gearing
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Maximum Gain
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Initial Underlying
Level
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Downside Threshold
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CUSIP
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ISIN
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MSCI Emerging Markets Index (the
“MXEF”)
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2.0
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At least 80.30%
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•
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80% of the Initial
Underlying Level
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78014U830
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US78014U8302
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Price to Public
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Fees and Commissions (1)
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Proceeds to Us
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|||||
Offering of Securities
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Total
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Per Security
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Total
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Per Security
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Total
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Per Security
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Securities Linked to the MSCI Emerging Markets Index (the “MXEF”)
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•
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$10.00
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$0.00
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$0.00
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•
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$10.00
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Additional Information About Royal Bank of Canada and the Securities
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♦ |
Product prospectus supplement UBS-IND-1 dated September 14, 2021:
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♦ |
Prospectus supplement dated September 14, 2021:
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♦ |
Prospectus dated September 14, 2021:
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Investor Suitability
|
♦ |
You fully understand the risks inherent in an investment in the Securities, 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 the principal amount of the Securities and are willing to make an investment that may have the full downside market risk as a hypothetical
investment in the Underlying.
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♦ |
You believe that the level of the Underlying will appreciate over the term of the Securities and that the appreciation is unlikely to exceed the Maximum Gain.
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♦ |
You understand and accept that your potential return is limited by the Maximum Gain.
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♦ |
You would be willing to invest in the Securities if the Maximum Gain is set to the minimum amount set forth on the cover page of this free writing prospectus (the actual Maximum Gain will be determined on the
Trade Date).
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♦ |
You can tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the downside fluctuations in the level of the Underlying.
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♦ |
You do not seek current income from your investment and are willing to forgo dividends paid on the securities represented by the Underlying.
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♦ |
You are willing to hold the Securities to maturity and accept that there may be little or no secondary market for the Securities.
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♦ |
You are willing to assume our credit risk for all payments under the Securities, 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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♦
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You fully understand and accept the risks associated with the Underlying.
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♦ |
You do not fully understand the risks inherent in an investment in the Securities, 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 the principal amount of the Securities, and you are not willing to make an investment that may have the full downside market risk as a
hypothetical investment in the Underlying.
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♦ |
You believe that the level of the Underlying will decline over the term of the Securities, or you believe the level of the Underlying will appreciate over the term of the Securities by a percentage that
exceeds the Maximum Gain.
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♦ |
You seek an investment that has unlimited return potential without a cap on appreciation.
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♦ |
You would be unwilling to invest in the Securities if the Maximum Gain is set to the minimum amount set forth on the cover page of this free writing prospectus (the actual Maximum Gain will be determined on
the Trade Date).
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♦ |
You cannot tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the downside fluctuations in the level of the Underlying.
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♦ |
You seek current income from this investment or prefer to receive the dividends paid on the securities represented by the Underlying.
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♦ |
You are unable or unwilling to hold the Securities to maturity or you seek an investment for which there will be an active secondary market.
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♦ |
You are not willing to assume our credit risk for all payments under the Securities, including any repayment of principal.
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♦
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You do not fully understand and accept the risks associated with the Underlying.
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The suitability considerations identified above are not exhaustive. Whether or not the Securities 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 Securities in light of your particular circumstances. You should also review carefully the “Key Risks” in this free writing prospectus and “Risk Factors” in the accompanying product prospectus supplement UBS-IND-1 for risks related to an investment in the Securities. In addition, you should review carefully the section below, “Information About the Underlying,” for more information about the Underlying. |
Indicative Terms of the Securities
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Issuer:
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Royal Bank of Canada
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Issue Price:
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$10 per Security (subject to a minimum purchase of 100 Securities).
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Principal Amount:
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$10 per Security.
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Term:
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Approximately 4 years
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Underlying:
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MSCI Emerging Markets Index
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Upside Gearing:
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2.0
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Maximum Gain:
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At least 80.30% (to be determined on the Trade Date).
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Payment at Maturity
(per $10.00
Security):
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If the Underlying Return is positive, we will pay you:
$10 + ($10 x the lesser of (i) Upside Gearing x Underlying Return and (ii) Maximum Gain)
If the Underlying Return is zero or negative and the Final Underlying Level is greater than or equal to the Downside Threshold, we will pay you:
$10
If the Final Underlying Level is less than the Downside Threshold, we will pay you:
$10 + ($10 x the Underlying Return)
In this scenario, you will lose some or all of the principal amount of the Securities in an amount proportionate to the negative Underlying Return.
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Underlying Return:
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Final Underlying Level – Initial Underlying
Level
Initial Underlying Level
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Initial Underlying
Level:
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The closing level of the Underlying on the Trade Date.
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Final Underlying
Level:
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The closing level of the Underlying on the Final Valuation Date.
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Downside Threshold:
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80% of the Initial Underlying Level.
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Investment Timeline
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Trade Date:
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The Maximum Gain is set. The Initial Underlying Level and Downside Threshold are determined.
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||
Maturity Date:
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The Final Underlying Level and Underlying Return are determined.
If the Underlying Return is positive, we will pay you a cash payment per $10.00 Security that provides you with your principal amount plus a return equal to the Underlying Return multiplied by the Upside Gearing, subject to the
Maximum Gain. Your payment at maturity per $10.00 Security will be equal to:
$10 + ($10 x the lesser of (i) Upside Gearing x the Underlying Return and (ii) the Maximum Gain)
If the Underlying Return is zero or negative and the Final Underlying Level is greater than or equal to the Downside Threshold, we will pay you a cash payment of $10.00 per $10.00 Security.
If the Final Underlying Level is less than the Downside Threshold, we will pay you a cash payment that is less than the principal amount of $10.00 per Security, resulting in a loss of principal that is proportionate to the percentage
decline in the Underlying, and equal to:
$10.00 + ($10.00 x Underlying Return)
In this scenario, you will lose some or all of the principal amount of the Securities, in an amount proportionate to the negative Underlying Return.
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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 |
If we make any change to the expected Trade Date and Settlement Date, the Final Valuation Date and Maturity Date will be changed to ensure that the stated term of the Securities remains approximately the same.
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Key Risks
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♦ |
Your Investment in the Securities May Result in a Loss of Principal — The Securities differ from ordinary debt securities in that we are not necessarily obligated to repay
the full principal amount of the Securities at maturity. The return on the Securities at maturity is linked to the performance of the Underlying and will depend on whether, and the extent to which, the Underlying Return is positive or
negative. If the Final Underlying Level is less than the Downside Threshold, you will be fully exposed to any negative Underlying Return and we will pay you less than your principal amount at maturity, resulting in a loss of principal of
your Securities that is proportionate to the percentage decline in the Underlying. Accordingly, you could lose the entire principal amount of the Securities.
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♦ |
The Contingent Repayment of Principal Applies Only if You Hold the Securities to Maturity — You should be willing to hold your Securities to maturity. If you are able to
sell your Securities prior to maturity in the secondary market, you may have to sell them at a loss even if the level of the Underlying is above the Downside Threshold at the time of sale.
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♦ |
The Upside Gearing Applies Only if You Hold the Securities to Maturity — The application of the Upside Gearing only applies at maturity. If you are able to sell your
Securities prior to maturity in the secondary market, the price you receive will likely not reflect the full effect of the Upside Gearing and the return you realize may be less than the Upside Gearing times the return of the Underlying at
the time of sale, even if that return is positive and does not exceed the Maximum Gain.
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♦ |
The Appreciation Potential of the Securities Is Limited by the Maximum Gain — If the Underlying Return is positive, we will pay you
$10 per Security at maturity plus an additional return that will not exceed the Maximum Gain, regardless of the appreciation in the Underlying, which may be significant. Therefore, you will not benefit from any appreciation of the
Underlying in excess of an amount that, when multiplied by the Upside Gearing, exceeds the Maximum Gain and your return on the Securities may be less than your return would be on a hypothetical direct investment in the component stocks of
the Underlying.
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♦ |
The Securities Do Not Pay Interest — We will not pay any interest with respect to the Securities. You will not receive any payments on the Securities prior to maturity.
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♦ |
An Investment in the Securities Is Subject to Our Credit Risk — The Securities are our unsubordinated, unsecured debt obligations, and are not, either directly or
indirectly, an obligation of any third party. Any payment to be made on the Securities, including any repayment of principal at maturity, 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 Securities and, if we were to default on our obligations, you may not receive any amounts owed to you under the terms of the Securities and you could lose your entire initial
investment.
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♦ |
The Securities 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. 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, holders of the Securities could be exposed to losses.
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♦ |
Your Return on the Securities May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity — The return that you will receive on the Securities,
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 could earn if you bought a conventional senior interest bearing debt
security of ours with the same maturity date or if you were able to invest directly in the Underlying or the securities included in the Underlying. Your investment may not reflect the full opportunity cost to you when you take into account
factors that affect the time value of money.
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♦ |
Holders of the Securities Will Not Receive any Dividend Payments or Have any Voting Rights — Investing in the Securities is not equivalent to investing directly in any of
the component securities of the Underlying. As a holder of the Securities, you will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of the equity
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♦ |
The Tax Treatment of the Securities Is Uncertain — Significant aspects of the tax treatment of an investment in the Securities are uncertain. You should consult your tax
adviser about your tax situation.
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♦ |
The Initial Estimated Value of the Securities Will Be Less than the Price to the Public — The initial estimated value that will be set forth in the final pricing
supplement for the Securities, will be less than the public offering price you pay for the Securities, does not represent a minimum price at which we, RBCCM or any of our other affiliates would be willing to purchase the Securities in any
secondary market (if any exists) at any time. If you attempt to sell the Securities prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things,
changes in the level of the Underlying, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to the public of our estimated profit and the costs relating to our hedging of the Securities. These factors,
together with various credit, market and economic factors over the term of the Securities, are expected to reduce the price at which you may be able to sell the Securities in any secondary market and will affect the value of the Securities
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 Securities prior to maturity may be less than the price to public, as any
such sale price would not be expected to include our estimated profit and the costs relating to our hedging of the Securities. In addition, any price at which you may sell the Securities is likely to reflect customary bid-ask spreads for
similar trades. In addition to bid-ask spreads, the value of the Securities 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 Securities
and determine the initial estimated value. As a result, the secondary price will be less than if the internal borrowing rate was used. The Securities are not designed to be short-term trading instruments. Accordingly, you should be able and
willing to hold your Securities to maturity.
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♦ |
Our Initial Estimated Value of the Securities Is an Estimate Only, Calculated as of the Time the Terms of the Securities Are Set — The initial estimated value of the
Securities is based on the value of our obligation to make the payments on the Securities, together with the mid-market value of the derivative embedded in the terms of the Securities. See “Structuring the Securities” 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 Securities. These assumptions are based on certain forecasts about future events,
which may prove to be incorrect. Other entities may value the Securities or similar securities at a price that is significantly different than we do.
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♦ |
The Securities Are Expected to Have a Limited Trading Market — The Securities will not be listed on any securities exchange. RBC Capital Markets, LLC (“RBCCM”) intends to
offer to purchase the Securities 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 Securities easily. Because other dealers are
not likely to make a secondary market for the Securities, the price at which you may be able to trade your Securities is likely to depend on the price, if any, at which RBCCM is willing to buy the Securities.
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♦ |
The Terms of the Securities 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 Securities at issuance and will affect 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 Securities, including a combination of a bond with one or more options or other derivative instruments. For the market value of the Securities, we expect that, generally, the level of the
Underlying on any day will affect the value of the Securities more than any other single factor. However, you should not expect the value of the Securities in the secondary market to vary in proportion to changes in the level of the
Underlying. The value of the Securities will be affected by a number of other factors that may either offset or magnify each other, including:
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♦ |
the actual or expected volatility of the Underlying;
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♦ |
the time remaining to maturity of the Securities;
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♦ |
the dividend rates on the equity securities included in the Underlying;
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♦ |
interest and yield rates in the market generally, as well as in each of the markets of the equity securities included in the Underlying;
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♦ |
a variety of economic, financial, political, regulatory or judicial events; and
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♦ |
our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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♦ |
Changes Affecting the Underlying May Adversely Impact the Payment on the Securities — The policies of the index sponsor concerning additions, deletions and substitutions
of the stocks included in the Underlying and the manner in which the index sponsor takes account of certain changes affecting those stocks included in the Underlying may adversely affect its level. The policies of the index sponsor with
respect to the calculation of the Underlying could also adversely affect its level. The index sponsor may discontinue or suspend calculation or dissemination of the Underlying and has no obligation to consider your interests in the
Securities when taking any action regarding the Underlying. Any such actions could have an adverse effect on the value of the Securities and the amount that may be paid at maturity.
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♦ |
The Probability That the Underlying Will Fall Below the Downside Threshold on the Final Valuation Date Will Depend on the Volatility of the Underlying — “Volatility”
refers to the frequency and magnitude of changes in the level of the Underlying. Greater expected volatility with respect to the Underlying reflects a higher expectation as of the Trade Date that the Underlying could close below its
Downside Threshold on the Final Valuation Date, resulting in the loss of some or all of your investment. However, an Underlying’s volatility can change significantly over the term of the Securities. The level of the Underlying could fall
sharply, which could result in a significant loss of principal.
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♦ |
An Investment in the Securities Is Subject to Risks Relating to Non-U.S. Securities Markets – Because foreign companies or foreign equity securities included in the
Underlying are publicly traded in the applicable foreign countries and are denominated in non-U.S. currencies, an investment in the Securities involves particular risks. For example, the non-U.S. securities markets may be more volatile than
the U.S. securities markets, and market developments may affect these markets differently from the U.S. or other securities markets. Direct or indirect government intervention to stabilize the securities markets outside the U.S., as well as
cross-shareholdings in certain companies, may affect trading prices and trading volumes in those markets. Also, the public availability of information concerning the foreign issuers may vary depending on their home jurisdiction and the
reporting requirements imposed by their respective regulators. In addition, the foreign issuers may be subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting
companies.
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♦ |
An Investment in the Securities Is Subject to Risks Associated with Emerging Markets — Investments in securities linked directly or indirectly to emerging market equity
securities, such as the securities included in the MXEF, involve many risks, including, but not limited to: economic, social, political, financial and military conditions in the emerging market; regulation by national, provincial, and local
governments; less liquidity and smaller market capitalizations than exist in the case of many large U.S. companies; different accounting and disclosure standards; and political uncertainties. Stock prices of emerging market companies may be
more volatile and may be affected by market developments differently than U.S. companies. Government intervention to stabilize securities markets and cross-shareholdings may affect prices and volume of trading of the securities of emerging
market companies. Economic, social, political, financial and military factors could, in turn, negatively affect such companies’ value. These factors could include changes in the emerging market government’s economic and fiscal policies,
possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to the emerging market companies or investments in their securities, and the possibility of fluctuations in the rate of exchange between
currencies. Moreover, emerging market economies may differ favorably or unfavorably from the U.S. economy in a variety of ways, including growth of gross national product, rate of inflation, capital reinvestment, resources and
self-sufficiency. You should carefully consider the risks related to emerging markets, to which the Securities are susceptible, before making a decision to invest in the Securities.
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♦ |
Securities Linked to the Underlying Are Subject to Foreign Currency Exchange Rate Risk — The payment amount on the Securities will
be calculated based on the Underlying, and the prices of the applicable stocks are converted into U.S. dollars for purposes of calculating the level of the Underlying. As a result, investors in the Securities will be exposed to currency
exchange rate risk with respect to each of the currencies represented by the Underlying. An investor’s net exposure will depend on the extent to which the currencies represented by the Underlying strengthen or weaken against the U.S. dollar
and the relative weight of each relevant currency represented by the Underlying. If, taking into account such weight, the dollar strengthens
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♦ |
Government Regulatory Action, Including Legislative Acts and Executive Orders, Could Result in Material Changes to the Composition of the Underlying and Could Negatively Affect
Your Return on the Securities — Government regulatory action, including legislative acts and executive orders, could cause material changes to the composition of the Underlying, depending on the nature of such government regulatory
action and the stocks that are affected. For example, under recent executive orders, U.S. persons are prohibited from engaging in transactions in publicly traded securities of certain companies that are determined to be linked to the
People’s Republic of China (the “PRC”) military, intelligence and security apparatus, or securities that are derivative of, or are designed to provide investment exposure to those securities. If government regulatory action results in the
removal of securities from the Underlying that have (or historically have had) significant weight in the Underlying, such removal could have a material and negative effect on the level of the Underlying and, therefore, your return on the
Securities.
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♦ |
We and Our Affiliates Will Have Potential Conflicts of Interest in Connection with the Securities — We and our respective affiliates play a variety of roles in connection
with the issuance of the Securities, including hedging our obligations under the Securities. In performing these duties, the economic interests of the calculation agent and other affiliates of ours and those of UBS are potentially adverse
to your interests as an investor in the Securities.
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♦ |
Our Activities and Those of UBS May Adversely Affect the Value of the Securities — Trading or other transactions by us, UBS and our respective affiliates in the equity
securities included in the Underlying or in futures, options, exchange-traded funds or other derivative products on the equity securities included in the Underlying may adversely affect the market value of those equity securities, the level
of the Underlying and therefore, the market value of the Securities.
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♦ |
Potentially Inconsistent Research, Opinions or Recommendations by RBCCM, UBS or Their Affiliates — RBCCM, UBS or their respective affiliates may publish research, express
opinions or provide recommendations that are inconsistent with investing in or holding the Securities, and which may be revised at any time. Any such research, opinions or recommendations could affect the level of the Underlying or the
equity securities included in the Underlying, and therefore, the market value of the Securities.
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Hypothetical Examples and Return Table at Maturity
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Hypothetical Final Underlying
Level
|
Hypothetical Underlying
Return1
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Hypothetical Payment at
Maturity
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Hypothetical Total Return on
Securities2
|
2,000.00
|
100.00%
|
$18.03
|
80.30%
|
1,750.00
|
75.00%
|
$18.03
|
80.30%
|
1,500.00
|
50.00%
|
$18.03
|
80.30%
|
1,401.50
|
40.15%
|
$18.03
|
80.30%
|
1,400.00
|
40.00%
|
$18.00
|
80.00%
|
1,300.00
|
30.00%
|
$16.00
|
60.00%
|
1,200.00
|
20.00%
|
$14.00
|
40.00%
|
1,100.00
|
10.00%
|
$12.00
|
20.00%
|
1,050.00
|
5.00%
|
$11.00
|
10.00%
|
1,020.00
|
2.00%
|
$10.40
|
4.00%
|
1,000.00
|
0.00%
|
$10.00
|
0.00%
|
950.00
|
-5.00%
|
$10.00
|
0.00%
|
900.00 |
-10.00% | $10.00 | 0.00% |
800.00
|
-20.00%
|
$10.00
|
0.00%
|
750.00
|
-25.00%
|
$7.50
|
-25.00%
|
750.00
|
-25.00%
|
$7.50
|
-25.00%
|
700.00
|
-30.00%
|
$7.00
|
-30.00%
|
650.00
|
-35.00%
|
$6.50
|
-35.00%
|
600.00
|
-40.00%
|
$6.00
|
-40.00%
|
500.00
|
-50.00%
|
$5.00
|
-50.00%
|
250.00
|
-75.00%
|
$2.50
|
-75.00%
|
0.00
|
-100.00%
|
$0.00
|
-100.00%
|
What Are the Tax Consequences of the Securities?
|
Information About the Underlying
|
◾ |
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”).
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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, including Real Estate Investment Trusts and certain income trusts in Canada, are eligible for inclusion in the equity universe. Conversely, mutual funds, ETFs, equity derivatives,
and most investment trusts, are not eligible for inclusion, are eligible for inclusion in the equity universe. Conversely, mutual funds, ETFs, equity derivatives, and most investment trusts, are not.
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Classifying Eligible Securities into the Appropriate Country: each company and its securities (i.e., share classes) are classified in only one country.
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The security is classified in a country that meets the Foreign Listing Materiality Requirement, and
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The security’s foreign listing is traded on an eligible stock exchange of: a DM country if the security is classified in a DM country, a DM or an EM country if the security is classified in an EM country, or a
DM or an EM or a FM country if the security is classified in a FM country. Securities in that country may not be represented by a foreign listing in the global investable equity universe if a country does not meet
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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. The size requirement also applies to companies in all developed and emerging markets.
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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.
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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. 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.
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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.
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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 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.
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Minimum Foreign Room Requirement: this investability screen is applied at the individual security level. For a security that is subject to a foreign ownership limit to be
eligible for inclusion in a market investable equity universe, the proportion of shares still available to foreign investors relative to the maximum allowed (referred to as “foreign room”) must be at least 15%.
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Investable Market Index (Large + Mid + Small);
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Standard Index (Large + Mid);
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Large Cap Index;
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Mid Cap Index; or
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Small Cap Index.
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defining the market coverage target range for each size segment;
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determining the global minimum size range for each size segment;
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determining the market size-segment cutoffs and associated segment number of companies;
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assigning companies to the size segments; and
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applying final size-segment investability requirements.
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updating the indices on the basis of a fully refreshed equity universe;
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taking buffer rules into consideration for migration of securities across size and style segments; and
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updating FIFs and Number of Shares (“NOS”).
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including significant new eligible securities (such as IPOs that were not eligible for earlier inclusion) in the Index;
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allowing for significant moves of companies within the Size Segment Indices, using wider buffers than in the SAIR; and
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reflecting the impact of significant market events on FIFs and updating NOS.
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■ Downside Threshold = 80% of the Initial Underlying Level
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Supplemental Plan of Distribution (Conflicts of Interest)
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Structuring the Securities
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Terms Incorporated in Master Note
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