Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-259205
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Pricing Supplement
Dated June 28, 2022
to the Product Prospectus Supplement ERN-EI-1, the Prospectus Supplement, and the Prospectus, each Dated September 14, 2021
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$4,000,000
Buffered Enhanced Return Notes Linked
to a Basket of Equity Indices, Due
August 1, 2023
Royal Bank of Canada
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Per Note
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Total
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Price to public(1)
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100.00%
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$4,000,000
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Underwriting discounts and commissions(1)
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0.22%
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$8,800
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Proceeds to Royal Bank of Canada
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99.78%
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$3,991,200
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(1) |
Certain dealers who purchase the Notes for sale to certain fee-based advisory accounts may forego some or all of their underwriting discount or selling concessions. The public offering price for investors
purchasing the Notes in these accounts may be between $997.80 and $1,000 per $1,000 in principal amount.
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Issuer:
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Royal Bank of Canada (“Royal Bank”)
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Underwriter:
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RBC Capital Markets, LLC (“RBCCM”)
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Reference
Assets:
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The Notes are linked to the value of an equally weighted basket (the “Basket”) of three equity indices (each, a “Basket Component,” collectively, the “Basket Components”).
The Basket Components and their respective Component Weights are indicated in the table below.
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Denominations:
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$1,000 and minimum denominations of $1,000 in excess thereof
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Trade Date
(Pricing Date):
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June 28, 2022
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Issue Date:
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July 1, 2022
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Valuation Date:
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July 27, 2023
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Maturity Date:
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August 1, 2023
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Payment at
Maturity (if held
to maturity):
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If the Percentage Change is positive, then the investor will receive, for each $1,000 in principal amount, the lesser of:
1.$1,000 + [$1,000 x (Percentage Change x Leverage Factor)] and
2. Maximum Return.
If the Percentage Change is negative but greater than or equal to the Buffer Percentage (that is, the Percentage Change is between 0% and -10%), then the investor will
receive the principal amount.
If the Percentage Change is less than the Buffer Percentage (that is, the Percentage Change is between -10.01% and -100%), then
the investor will receive, for each $1,000 in principal amount:
$1,000 + [$1,000 x (Percentage Change + 10%)]
In this case, the payment on the Notes will be less than the principal amount, and you could lose some or a substantial portion of the principal
amount.
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Maximum
Return:
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$1,165 per $1,000 in principal amount (116.50% multiplied by the principal amount)
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Leverage
Factor:
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300%
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Buffer
Percentage:
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-10%
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Percentage
Change:
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The Percentage Change, expressed as a percentage and rounded to two decimal places, will be equal to the sum of the Weighted Component Change for
each Basket Component. The Weighted Component Change for each Basket Component will be determined as follows:
Component Weight x
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Initial Level:
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With respect to each Basket Component, its closing level on June 27, 2022, as provided in the table below.
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Final Level:
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With respect to each Basket Component, its closing level on the Valuation Date.
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The Basket:
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Basket Component
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Bloomberg
Ticker
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Component
Weight
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Initial Level*
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Dow Jones Industrial AverageTM ("INDU")
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INDU
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1/3
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31,438.26
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Russell 2000® Index ("RTY")
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RTY
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1/3
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1,771.742
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Nasdaq-100 Index® ("NDX")
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NDX
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1/3
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12,008.24
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* The Initial Level for each Basket Component is its closing level on June 27, 2022.
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Principal at
Risk:
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The Notes are NOT principal protected. You could lose a substantial portion of your principal amount at maturity if the Percentage Change of the Basket
is less than the Buffer Percentage.
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Calculation
Agent:
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RBCCM
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U.S. Tax
Treatment:
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By purchasing a Note, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat the Note as a
pre-paid cash-settled derivative contract in respect of the Basket for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the Notes are uncertain and the Internal Revenue Service
could assert that the Notes should be taxed in a manner that is different from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of U.S. Federal Income Tax Consequences,” and the discussion
(including the opinion of our special U.S. tax counsel, Ashurst LLP) in the product prospectus supplement dated September 14, 2021 under “Supplemental Discussion of U.S. Federal Income Tax Consequences,” which apply to the Notes.
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Secondary
Market:
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RBCCM (or one of its affiliates), though not obligated to do so, may maintain a secondary market in the Notes after the issue date. The
amount that you may receive upon sale of your Notes prior to maturity may be substantially less than the principal amount of your Notes.
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Listing:
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The Notes will not be listed on any securities exchange.
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Clearance and
Settlement:
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DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Ownership and Book-Entry Issuance” in the prospectus dated September 14,
2021).
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Terms
Incorporated in
the Master
Note: |
All of the terms appearing on the cover page and above the item captioned “Secondary Market” on pages P-2 and P-3 of this pricing supplement and the terms appearing under the captions “General Terms of the
Notes” and “Supplemental Discussion of U.S. Federal Income Tax Consequences” in the product prospectus supplement dated September 14, 2021, as modified by this pricing supplement.
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Example 1—
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Calculation of the Payment at Maturity where the Percentage Change is positive, but the payment on the Notes is not subject to the Maximum Return.
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Percentage Change:
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5%
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Payment at Maturity:
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$1,000 + [$1,000 x (5% x 300%)] = $1,150
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On a $1,000 investment, a 5% Percentage Change results in a Payment at Maturity of $1,150, a 15% return on the Notes.
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Example 2—
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Calculation of the Payment at Maturity where the Percentage Change is positive, but the payment on the Notes is subject to the Maximum Return.
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Percentage Change:
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10%
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Payment at Maturity:
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$1,000 + [$1,000 x (10% x 300%)] = $1,300
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On a $1,000 investment, a 10% Percentage Change result would result in a Payment at Maturity of $1,300. However, the Maximum Return is $1,165. Accordingly, the payment on
the Notes will be $1,165, equal to a return of 16.50%.
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Example 3—
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Calculation of the Payment at Maturity where the Percentage Change is negative (but greater than or equal to the Buffer Percentage).
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Percentage Change:
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-10%
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Payment at Maturity:
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$1,000
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On a $1,000 investment, a -10% Percentage Change results in a Payment at Maturity of $1,000, a 0% return on the Notes.
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Example 4—
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Calculation of the Payment at Maturity where the Percentage Change is less than the Buffer Percentage.
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Percentage Change:
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-40%
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Payment at Maturity:
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$1,000 + [$1,000 x (-40% + 10%)] = $700
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On a $1,000 investment, a -40% Percentage Change results in a Payment at Maturity of $700, a -30% return on the Notes.
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Buffered Enhanced Return Notes
Royal Bank of Canada
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You May Receive Less than the Principal Amount at Maturity – Investors in the Notes will lose some or a substantial portion of their principal amount if the Percentage
Change of the Basket is less than the Buffer Percentage. In such a case, you will lose 1% of the principal amount of your Notes for each 1% that the Percentage Change is less than the Buffer Percentage. You could lose up to 90% of the
principal amount at maturity.
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The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity – There will be no periodic interest
payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which could be negative, may be less than the return you could
earn on other investments. Even if your return is positive, your return may be less than the return you would earn if you purchased one of our conventional senior interest bearing debt securities.
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Your Potential Payment at Maturity Is Limited – The Notes will provide less opportunity to participate in the appreciation of
the Reference Asset than an investment in a security linked to the Reference Asset providing full participation in the appreciation, because the payment at maturity will not exceed the Maximum Redemption Amount. Accordingly, your return
on the Notes may be less than your return would be if you made an investment in a security directly linked to the positive performance of the Reference Asset.
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You Will Not Have Any Rights to the Securities Included in the Basket Components – As a holder of the Notes, you will not have voting rights or rights to receive cash
dividends or other distributions or other rights that holders of securities included in a Basket Component would have. The Final Levels of the Basket Components will not reflect any dividends paid on the securities included in the
Basket Components; accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market Value of the Notes – The Notes are our
senior unsecured debt securities. As a result, your receipt of the amount due on the Maturity Date is dependent upon our ability to repay our obligations at that time. This will be the case even if the value of the Basket increases
after the date that the Initial Levels were determined. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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Changes in the Level of One Basket Component May Be Offset by Changes in the Level of the Other Basket Component – A change in the level of one Basket Component may
not correlate with changes in the level of the other Basket Component. The level of one Basket Component may increase, while the levels of the other Basket Component may not increase as much, or may even decrease. Therefore, in
determining the value of the Basket as of any time, increases in the level of one Basket Component may be moderated, or wholly offset, by lesser increases or decreases in the level of the other Basket Component.
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There May Not Be an Active Trading Market for the Notes—Sales in the Secondary Market May Result in Significant Losses – There may be little or no secondary market
for the Notes. The Notes will not be listed on any securities exchange. RBCCM and our other affiliates may make a market for the Notes; however, they are not required to do so. RBCCM or any of our other affiliates may stop any
market-making activities at any time. Even if a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices advantageous to you. We expect that transaction costs in any
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Buffered Enhanced Return Notes
Royal Bank of Canada
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The Initial Estimated Value of the Notes Is Less than the Price to the Public – The initial estimated value that is set forth
on the cover page of this pricing supplement does not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any time. If you attempt to
sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the value of the Basket, the borrowing rate we pay to
issue securities of this kind, and the inclusion in the price to the public of the underwriting discount and the estimated costs relating to our hedging of the Notes. These factors, together with various credit, market and economic
factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable ways. Assuming no change in
market conditions or any other relevant factors, the price, if any, at which you may be able to sell your Notes prior to maturity may be less than your original purchase price, as any such sale price would not be expected to include the
underwriting discount and the hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined by RBCCM for any secondary market price is expected to be based on the secondary rate rather than the
internal funding rate used to price the Notes and determine the initial estimated value. As a result, the secondary price will be less than if the internal funding rate was used. The Notes are not designed to be short-term trading
instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
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The Initial Estimated Value of the Notes that Is Set Forth on the Cover Page of this Pricing Supplement Is an Estimate Only, Calculated as of the Time the Terms of the Notes
Were Set – The initial estimated value of the Notes is based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See
“Structuring the Notes” below. Our estimate is based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are based
on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
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Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the Basket Components that are not
for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates will have in their proprietary accounts, in
facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the level of a Basket Component, could be adverse
to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with companies included in the Basket Components, including making loans to or providing advisory
services. These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’ obligations and your interests as a holder of
the Notes. Moreover, we, and our affiliates may have published, and in the future expect to publish, research reports with respect to the Basket Components. This research is modified from time to time without notice and may express
opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. Any of these activities by us or one or more of our affiliates may affect the level of each Basket Component, and, therefore, the market
value of the Notes.
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Buffered Enhanced Return Notes
Royal Bank of Canada
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An Investment in the Notes Linked to the RTY Is Subject to Risks Associated in Investing in Stocks With a Small Market Capitalization – The
RTY consists of stocks issued by companies with relatively small market capitalizations. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies. As a
result, the level of the RTY may be more volatile than that of a market measure that does not track solely small-capitalization stocks. Stock prices of small-capitalization companies are also generally more vulnerable than those of
large-capitalization companies to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive to many investors if they do not pay dividends. In addition,
small capitalization companies are often less well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss of those individuals.
Small capitalization companies tend to have lower revenues, less diverse product lines, smaller shares of their target markets, fewer financial resources and fewer competitive strengths than large-capitalization companies. These
companies may also be more susceptible to adverse developments related to their products or services.
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An Investment in the Notes Linked to the NDX Is Subject to Risks Relating to Non-U.S. Securities Markets — Because certain
foreign companies included in the NDX are organized and/or publicly traded outside of the U.S., an investment in the Notes 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.
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The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments – The Payment at Maturity and the Valuation Date are subject to
adjustment as described in the product prospectus supplement. For a description of what constitutes a market disruption event as well as the consequences of that market disruption event, see “General Terms of the Notes—Market Disruption
Events” in the product prospectus supplement.
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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the security’s U.S. listing must be exclusively on the Nasdaq Global Select Market or the Nasdaq Global Market;
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the security must be issued by a non-financial company;
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the security may not be issued by an issuer currently in bankruptcy proceedings;
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the security must generally be a common stock, ordinary share, American Depositary Receipt, or tracking stock (closed-end funds, convertible debentures, exchange traded funds, limited liability companies,
limited partnership interests, preferred stocks, rights, shares or units of beneficial interests, warrants, units and other derivative securities are not included in the NDX, nor are the securities of investment companies);
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the security must have a three-month average daily trading volume of at least 200,000 shares;
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if the security is issued by an issuer organized under the laws of a jurisdiction outside the United States, it must have listed options on a recognized market in the United States or be eligible for
listed-options trading on a recognized options market in the United States;
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the issuer of the security may not have entered into a definitive agreement or other arrangement which would likely result in the security no longer being eligible;
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the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn; and
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Buffered Enhanced Return Notes
Royal Bank of Canada
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the security must have traded for at least three full calendar months, not including the month of initial listing, on an “eligible exchange,” as determined under the index rules.
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the security’s U.S. listing must be exclusively on the Nasdaq Global Select Market or the Nasdaq Global Market;
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the security must be issued by a non-financial company;
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the security may not be issued by an issuer currently in bankruptcy proceedings;
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the security must have an average daily trading volume of at least 200,000 shares in the previous three‑month trading period as measured annually during the ranking review process described below;
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if the issuer of the security is organized under the laws of a jurisdiction outside the United States, then such security must have listed options on a recognized market in the United States or be eligible
for listed‑options trading on a recognized options market in the United States, as measured annually during the ranking review process;
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the issuer of the security may not have entered into a definitive agreement or other arrangement that would likely result in the security no longer being eligible;
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the security must have an adjusted market capitalization equal to or exceeding 0.10% of the aggregate adjusted market capitalization of the NDX at each month-end. In the event that a company does not meet
this criterion for two consecutive month-ends, it will be removed from the NDX effective after the close of trading on the third Friday of the following month; and
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the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn.
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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Buffered Enhanced Return Notes
Royal Bank of Canada
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