ISSUER FREE WRITING PROSPECTUS
Filed Pursuant to Rule 433
Registration Statement No. 333-259205
Dated September 30, 2022
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Investment Description
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Features
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Key Dates1
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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.
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☐
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Buffered Downside Market Exposure - If the Underlying Return is zero or negative, but the Final Underlying Level is greater than or
equal to the Downside Threshold, we will pay the full principal amount at maturity. However, if the Underlying Return is negative and the Final Underlying Level is less than the Downside Threshold, we will pay less than the full
principal amount, resulting in a loss of the principal amount that is proportionate to the percentage decline in the Underlying in excess of the Buffer. Accordingly, you may lose up to 85% of the principal amount of the Securities.
The downside exposure to the Underlying is buffered 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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October 14, 2022
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Settlement Date1
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October 19, 2022
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Final Valuation Date2
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October 14, 2024
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Maturity Date2
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October 17, 2024
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Security Offering
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Underlying Index
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Upside
Gearing
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Buffer
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Downside Threshold
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Maximum Gain
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Initial Underlying
Level
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CUSIP
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ISIN
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S&P 500® Index (SPX)
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2
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15%
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85% of the Initial Underlying Level
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[26.10% -
28.10%]
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•
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78016D794
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US78016D7949
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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 the 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 (SPX)
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•
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$10.00
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•
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$0.20
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•
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$9.80
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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
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You fully understand the risks inherent in an investment in the Securities, including the risk of loss of up to 85% of the principal amount.
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You can tolerate the loss of up to 85% of your initial investment and you are willing to make an investment that has similar downside market risk as a hypothetical investment in the Underlying, subject to the
Buffer at Maturity.
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You believe that the level of the Underlying will appreciate over the term of the Securities and that the appreciation, when multiplied by the Upside Gearing, 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 and you would be willing to invest in the Securities if the Maximum Gain were set to the low end of the range 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 up to 85% of your investment.
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You cannot tolerate the loss of up to 85% of the principal amount of the Securities, and you are not willing to make an investment that has similar downside market risk as a hypothetical investment in the
Underlying, subject to the Buffer at Maturity.
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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, when
multiplied by the Upside Gearing, 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 low end of the range 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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Indicative Terms of the Securities1
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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:1
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Approximately 2 years
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Underlying:
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S&P 500® Index
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Upside Gearing:
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2
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Maximum Gain:
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The Maximum Gain is expected to be between 26.10% and 28.10% (to be determined on the Trade Date).
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Buffer:
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15%
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Downside
Threshold:
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85% of the Initial Underlying Level
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Payment at
Maturity (per $10
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, but the Final Underlying Level is greater than or equal to the Downside Threshold, we will pay you:
$10
If the Underlying Return is negative and the Final Underlying Level is less than the Downside Threshold, we will pay you:
$10 + ($10 x (Underlying Return + Buffer))
In this scenario, you will lose up to 85% of the principal amount of the Securities in an amount proportionate to the percentage the Underlying has declined in excess
of the Buffer.
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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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1
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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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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 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 Security will be equal to:
$10 + ($10 x the lesser of (i) Upside Gearing x Underlying Return and (ii) Maximum Gain)
If the Underlying Return is zero or negative, but the Final Underlying Level is greater than or equal to the Downside Threshold, we will pay you a cash payment of $10 per $10 Security.
If the Final Underlying Level is negative and 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 per Security, resulting in a loss that is
proportionate to the percentage decline of the Underlying in excess of the Buffer, and equal to:
$10 + ($10 x (Underlying Return + Buffer))
In this scenario, you will lose up to 85% of the principal amount of the Securities, in an amount proportionate to the percentage that the Underlying has declined in excess of the
Buffer.
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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 Underlying Return is negative and the Final Underlying Level is less than the Downside Threshold, you will be exposed to any negative Underlying Return in excess of the Buffer 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 in excess of the Buffer. Accordingly, you could lose up to 85% of
the principal amount of the Securities.
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The Buffer Applies Only if You Hold the Securities to Maturity — The application of the Buffer only applies at maturity. If you are able to sell your Securities in the
secondary market prior to maturity, you may have to sell them at a loss even if the Underlying has not declined by more than the 15.00% Buffer 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 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
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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, and 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 or 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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$12.61
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26.10%
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1,750.00
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75.00%
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$12.61
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26.10%
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1,500.00
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50.00%
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$12.61
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26.10%
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1,400.00
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40.00%
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$12.61
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26.10%
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1,300.00
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30.00%
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$12.61
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26.10%
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1,250.00
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25.00%
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$12.61
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26.10%
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1,200.00
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20.00%
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$12.61
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26.10%
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1,150.00
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15.00%
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$12.61
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26.10%
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1,130.50
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13.05%
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$12.61
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26.10%
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1,100.00
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10.00%
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$12.00
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20.00%
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1,080.00
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8.00%
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$11.60
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16.00%
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1,050.00
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5.00%
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$11.00
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10.00%
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1,020.00
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2.00%
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$10.40
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4.00%
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1,000.00
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0.00%
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$10.00
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0.00%
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950.00
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-5.00%
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$10.00
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0.00%
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900.00
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-10.00%
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$10.00
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0.00%
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850.00
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-15.00%
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$10.00
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0.00%
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800.00
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-20.00%
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$9.50
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-5.00%
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750.00
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-25.00%
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$9.00
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-10.00%
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700.00
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-30.00%
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$8.50
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-15.00%
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600.00
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-40.00%
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$7.50
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-25.00%
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500.00
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-50.00%
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$6.50
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-35.00%
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250.00
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-75.00%
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$4.00
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-60.00%
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0.00
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-100.00%
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$1.50
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-85.00%
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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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