Free Writing Prospectus
(To the Prospectus, the Prospectus Supplement and the Product Prospectus Supplement,
each dated September 14, 2021)
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Filed Pursuant to Rule 433
Registration No. 333-259205
August 9, 2022
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Royal Bank of Canada
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$
Capped Barrier Return Enhanced Notes Due August 30, 2023
Linked to the Common Stock of PayPal Holdings, Inc.
Senior Global Medium-Term Notes, Series I
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The Notes are designed for investors who seek a return of 1.5 times the appreciation of the common stock of PayPal Holdings, Inc. (the “Reference Asset”), subject to the Maximum Return set forth below. If the price
of the Reference Asset declines by no more than 30.00%, the Notes will repay the principal amount. However, if the Final Price is less than the Barrier Price, investors will lose 1% of their principal amount for each 1% that the Percentage
Change is less than 0%. Investors should also be willing to forgo interest and dividend payments.
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Senior unsecured obligations of Royal Bank of Canada maturing August 30, 2023.(a)(b) Any payments on the Notes are subject to our credit risk.
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Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof.
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The Notes are expected to price on or about August 12, 2022(b) (the “Pricing Date”), and are expected to be issued on or about August 17, 2022(b) (the “issue date”).
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Key Terms
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Terms used in this free writing prospectus, but not defined herein, will have the meanings ascribed to them in the product prospectus supplement.
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Issuer:
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Royal Bank of Canada
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Reference Asset:
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The common stock of PayPal Holdings, Inc. (Bloomberg symbol: “PYPL”)
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Payment at Maturity:
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If the Final Price is greater than the Initial Price, you will receive a cash payment that provides you with a return equal to the Percentage Change multiplied by the Leverage
Factor, subject to the maximum return on the Notes. Accordingly, if the Percentage Change is positive, your payment per $1,000 in principal amount of the Notes will be calculated as follows, subject to the Maximum Return:
$1,000 + [$1,000 x (Percentage Change x Leverage Factor)]
If the Final Price is less than or equal to the Initial Price but is greater than or equal to the Barrier Price, resulting in a Percentage Change that is less than or equal to 0%
but greater than or equal -30.00%, you will receive the principal amount of the Notes at maturity.
If the Final Price is less than the Barrier Price, you will lose 1% of the principal amount of the Notes for every 1% that the Final Price is less than the Initial Price.
Accordingly, if the Percentage Change is less than -30.00%, your payment per $1,000 in principal amount of the Notes will be calculated as follows:
$1,000 + [$1,000 x Percentage Change]
In this case, you could lose up to 100% of the principal amount.
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Percentage Change:
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The performance of the Reference Asset from the Initial Price to the Final Price, calculated as follows:
Final Price – Initial Price
Initial Price
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Leverage Factor:
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1.5
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Maximum Return:
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37.20% ($1,372.00 per $1,000 in principal amount of the Notes)
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Initial Price:
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The closing price of the Reference Asset on the Pricing Date.
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Final Price:
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The average of the closing price of the Reference Asset on each of the Valuation Dates.
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Barrier Price:
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70% of the Initial Price.
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Valuation Dates:
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August 21, 2023, August 22, 2023, August 23, 2023, August 24, 2023 and August 25, 2023 (a)(b)
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Maturity Date:
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August 30, 2023(a)(b)
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Calculation Agent:
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RBC Capital Markets, LLC (“RBCCM”)
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CUSIP/ISIN:
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78016FRR7 / US78016FRR72
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Estimated Value:
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The initial estimated value of the Notes as of the Pricing Date is expected to be between $932.50 and $982.50 per $1,000 in principal amount, and will be less than the price to
the public. The final pricing supplement relating to the Notes will set forth our estimate of the initial value of the Notes as of the Pricing Date. The actual value of the Notes at any time will reflect many factors, cannot be predicted
with accuracy, and may be less than this amount.
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(a) |
Subject to postponement if a market disruption event occurs, as described under “General Terms of the Notes—Market Disruption Events” in the product prospectus supplement.
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(b) |
Expected. If we make any change to the expected Pricing Date and issue date, the Valuation Dates and the maturity date will be changed so that the stated term of the Notes remains the same.
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Investing in the Notes involves a number of risks. See “Selected Risk Considerations” beginning on page FWP-4 of this free writing prospectus, and “Risk Factors” beginning on page PS-4 of the
product prospectus supplement, page S-2 of the prospectus supplement and page 1 of the prospectus.
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Price to Public1
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Underwriting Commission2
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Proceeds to Royal Bank of Canada
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Per Note
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$1,000
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$10.00
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$990.00
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Total
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$
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$
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$
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1 |
Certain fiduciary accounts purchasing the Notes will pay a purchase price of $990.00 per Note, and the placement agents will forgo any fees with respect to sales made to those accounts. The price to the public for
all other purchases of the Notes is 100%.
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JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC and their affiliates will act as placement agents for the Notes, and will receive a fee from the Issuer that will not exceed $10.00 per $1,000 in principal
amount of the Notes, but will forgo any fees for sales to certain fiduciary accounts.
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Final Price
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Percentage Change
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Payment at Maturity
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Total Return on the Notes
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$160.00
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60.00%
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$1,372.00
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37.20%
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$145.00
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45.00%
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$1,372.00
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37.20%
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$130.00
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30.00%
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$1,372.00
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37.20%
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$124.80
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24.80%
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$1,372.00
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37.20%
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$120.00
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20.00%
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$1,300.00
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30.00%
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$115.00
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15.00%
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$1,225.00
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22.50%
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$110.00
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10.00%
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$1,150.00
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15.00%
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$105.00
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5.00%
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$1,075.00
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7.50%
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$100.00
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0.00%
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$1,000.00
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0.00%
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$95.00
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-5.00%
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$1,000.00
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0.00%
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$90.00
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-10.00%
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$1,000.00
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0.00%
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$85.00
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-15.00%
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$1,000.00
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0.00%
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$80.00
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-20.00%
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$1,000.00
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0.00%
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$70.00
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-30.00%
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$1,000.00
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0.00%
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$60.00
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-40.00%
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$600.00
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-40.00%
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$50.00
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-50.00%
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$500.00
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-50.00%
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$40.00
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-60.00%
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$400.00
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-60.00%
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$30.00
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-70.00%
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$300.00
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-70.00%
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$20.00
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-80.00%
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$200.00
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-80.00%
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$10.00
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-90.00%
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$100.00
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-90.00%
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$0.00
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-100.00%
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$0.00
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-100.00%
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Appreciation Potential — The Notes provide the opportunity to receive a leveraged positive return if the price of the Reference Asset increases, up to the Maximum Return.
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Limited Protection Against Loss — Payment at maturity of the principal amount of the Notes is protected against a decline in the Final Price, as compared to the Initial
Price, of up to 30.00%. If the Final Price is less than the Barrier Price, you will lose 1% of the principal amount for every 1% that the Final Price is less than the Initial Price.
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You May Lose Some or All of the Principal Amount at Maturity – Investors in the Notes could lose all or a substantial portion of their principal amount if the price of the
Reference Asset decreases by more than 30%. If the Percentage Change is less than -30%, the payment that you will receive at maturity will represent a loss of 1% of the principal amount for each 1% that the Final Price is less than the
Initial Price, and you could lose up to 100% of the principal amount.
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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 increases in the price of the Reference Asset than an investment
in a security linked to the Reference Asset providing full participation in the appreciation, because the return on the Notes will not exceed the Maximum Return. 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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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 price of the Reference Asset increases after
the Pricing Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments –The payment at maturity, the Valuation Dates and the Reference Asset
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 on a Valuation Date, see “General Terms
of the Notes—Market Disruption Events” in the product prospectus supplement.
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The Tax Treatment of the Notes Is Uncertain — Significant aspects of the tax treatment of an investment in the Notes are uncertain. You should consult your tax adviser about
your tax situation.
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The Initial Estimated Value of the Notes 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 Notes 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 price of the Reference Asset, 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 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 the Notes prior to maturity may be less than your original purchase price. The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold the Notes to
maturity.
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The Initial Estimated Value of the Notes That We Will Provide in the Final Pricing Supplement Will Be an Estimate Only, Calculated as of the Pricing Date -- The value of the Notes at any time after the Pricing Date will vary based on many factors, including changes in market conditions, and cannot be predicted with accuracy. As a result, the actual value
you would receive if you sold the Notes in any secondary market, if any, should be expected to differ materially from the initial estimated value of the Notes.
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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 other affiliate of ours may stop any market-making
activities at any time. Even if a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices advantageous to you. We expect that transaction costs in any secondary market would be high. As a
result, the difference between bid and asked prices for the Notes in any secondary market could be substantial.
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Many Economic and Market Factors Will Impact the Value of the Notes—In addition to the price of the Reference Asset on any day, the value of the Notes will be affected by a
number of economic and market factors that may either offset or magnify each other, including:
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the expected volatility of the Reference Asset;
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the time to maturity of the Notes;
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the dividend rate on the Reference Asset;
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interest and yield rates in the market generally;
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a variety of economic, financial, political, regulatory or judicial events; and
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our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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Owning the Notes Is Not the Same as Owning Shares of the Reference Asset — The return on the Notes may not reflect the return you would realize if you actually owned shares
of the Reference Asset. For instance, as a holder of the Notes, you will not have voting rights, rights to receive cash dividends or other distributions, or any other rights that holders of shares of the Reference Asset would have. Further,
you will not participate in any appreciation of the price of Reference Asset above 24.80%.
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There Is No Affiliation Between Us and the Issuer of the Reference Asset, and We Are Not Responsible for any Disclosure by that Company — We are not affiliated with the
issuer of the Reference Asset. However, we and our affiliates may currently, or from time to time in the future engage in business with the issuer of the Reference Asset. Nevertheless, neither we nor our affiliates assume any
responsibilities for the accuracy or the completeness of any information about the Reference Asset that the issuer of the Reference Asset prepares. You, as an investor in the Notes, should make your own investigation into the Reference Asset
and the issuer of the Reference Asset. The issuer of the Reference Asset is not involved in this offering and has no obligation of any sort with respect to the Notes. The issuer of the Reference Asset has no obligation to take your
interests into consideration for any reason, including when taking any corporate actions that might affect the value of the Notes.
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An Investment in the Notes Is Subject to Single Stock Risk — The price of the Reference Asset can rise or fall sharply due to factors specific to the Reference Asset and
its issuer, such as stock price volatility, earnings, financial conditions, corporate, industry and regulatory developments, management changes and decisions and other events, as well as general market factors, such as general stock market
volatility and levels, interest rates and economic and political conditions. We urge you to review financial and other information filed periodically with the SEC by the issuer of the Reference Asset.
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The Payments on the Notes Are Subject to Anti-dilution Adjustments — For certain corporate events affecting the Reference Asset, the calculation agent may make adjustments
to the terms of the Notes. However, the calculation agent will not make such adjustments in response to all events that could affect the Reference Asset. If an event occurs that does not require the calculation agent to make such adjustments,
the value of the Notes may be materially and adversely affected. In addition, all determinations and calculations concerning any such adjustments will be made in the sole discretion of the calculation agent, which will be binding on you
absent manifest error. You should be aware that the calculation agent may make any such adjustment, determination or calculation in a manner that differs from that discussed in this free writing prospectus or the product prospectus supplement
as necessary to achieve an equitable result.
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The Business Activities of Royal Bank and Our Affiliates May Create Conflicts of Interest – We and our affiliates expect to engage in trading activities related to the
Reference Asset 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 price of the Reference
Asset, 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 the issuer of the Reference Asset, 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 Reference Asset. 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 may affect the price of the Reference Asset and, therefore, the market value of the Notes.
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