Investment Description
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Features
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Key Dates1
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❑ |
Enhanced Growth Potential — 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. If the Underlying Return is negative, investors may be exposed to the negative Underlying Return at maturity.
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❑ |
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 |
June 27, 2022
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Settlement Date1 |
June 30, 2022
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Final Valuation Date2 |
June 25, 2027
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Maturity Date2 |
June 30, 2027
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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 |
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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Underlying
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Upside Gearing
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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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S&P 500® Index
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[1.13 to 1.16]
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•
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60% of the Initial Underlying Level
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78016D240
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US78016D2403
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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 S&P 500® Index
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•
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$10.00
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•
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$0.35
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•
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$9.65
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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 Securities
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♦ |
Product prospectus supplement UBS-IND-1 dated September 14, 2021:
https://www.sec.gov/Archives/edgar/data/1000275/000114036121031147/brhc10028903_424b5.htm |
♦ |
Prospectus supplement dated September 14, 2021:
https://www.sec.gov/Archives/edgar/data/1000275/000121465921009472/rbcsupp911210424b3.htm |
♦ |
Prospectus dated September 14, 2021:
https://www.sec.gov/Archives/edgar/data/1000275/000121465921009470/rbc911212424b3.htm |
Investor Suitability
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♦ |
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.
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♦ |
You would be willing to invest in the Securities if the Upside Gearing was set to the low end of the range set forth on the cover page of this free writing prospectus. (The actual Upside
Gearing 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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♦ |
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.
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♦ |
You would be unwilling to invest in the Securities if the Upside Gearing was set to the low end of the range set forth on the cover page of this free writing prospectus. (The actual Upside
Gearing 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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♦ |
You do not fully understand and accept the risks associated with the Underlying.
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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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Term2:
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Approximately 5 years
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Underlying:
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S&P 500® Index
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Upside Gearing:
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1.13 to 1.16 (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 Underlying Return x the Upside Gearing)]
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 |
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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60% of the Initial Underlying Level
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Investment Timeline
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Trade Date:
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The Upside Gearing 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. Your payment at maturity per $10.00 Security will be equal to:
$10 + [$10 x (the Underlying Return x the Upside Gearing)]
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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INVESTING IN THE SECURITIES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE SECURITIES, 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 SECURITIES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
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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
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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.
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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 securities represented by the Underlying would have. The Underlying is a price return index, and the Underlying Return excludes any cash dividend payments paid on its component stocks.
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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 the underwriting discount, 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 the underwriting discount, our estimated profit or 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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♦ |
We, UBS and Our Respective Affiliates Will Have Potential Conflicts of Interest in Connection with the Securities —
We and our 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
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Hypothetical Underlying
Return1
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Hypothetical Payment at
Maturity ($)
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Hypothetical Total Return on
Securities2 (%)
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2,000.00
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100.00%
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$21.300
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113.00%
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1,750.00
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75.00%
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$18.475
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84.75%
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1,500.00
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50.00%
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$15.650
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56.50%
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1,400.00
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40.00%
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$14.520
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45.20%
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1,300.00
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30.00%
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$13.390
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33.90%
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1,200.00
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20.00%
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$12.260
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22.60%
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1,100.00
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10.00%
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$11.130
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11.30%
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1,050.00
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5.00%
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$10.565
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5.65%
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1,000.00
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0.00%
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$10.000
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0.00%
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950.00
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-5.00%
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$10.000
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0.00%
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900.00
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-10.00%
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$10.000
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0.00%
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800.00
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-20.00%
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$10.000
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0.00%
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700.00
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-30.00%
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$10.000
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0.00%
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600.00
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-40.00%
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$10.000
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0.00%
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550.00
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-45.00%
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$5.500
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-45.00%
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600.00
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-40.00%
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$6.000
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-40.00%
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500.00
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-50.00%
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$5.000
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-50.00%
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250.00
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-75.00%
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$2.500
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-75.00%
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0.00
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-100.00%
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$0.000
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-100.00%
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What Are the Tax Consequences of the Securities?
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Information About the Underlying
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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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