Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-275898
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The information in this preliminary terms supplement is not complete and may be changed.
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Preliminary Terms Supplement
Subject to Completion:
Dated April 24, 2024
Pricing Supplement Dated April __, 2024 to the Product Prospectus Supplement ERN-EI-1, the Prospectus
Supplement and the Prospectus, Each Dated December 20, 2023
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$
Buffered Return Notes
Linked to the S&P 500® Index,
Due May 5, 2025
Royal Bank of Canada
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Reference Asset
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Initial Level*
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Buffer Level
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S&P 500® Index (“SPX”)
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85.00% of the Initial Level
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If the Final Level of the Reference Asset is greater than the Initial Level, the Notes will pay at maturity a return equal to 100.00% of the Percentage Change, subject to the Maximum
Redemption Amount of 112.15% of the principal amount of the Notes.
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If the Final Level is less than or equal to the Initial Level, but is greater than or equal to the Buffer Level, the Notes will pay the principal amount at maturity.
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If the Final Level is less than the Buffer Level, investors will lose 1% of the principal amount for each 1% that the Final Level has decreased by more than 15% from the Initial Level.
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Any payments on the Notes are subject to our credit risk.
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The Notes do not pay interest.
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The Notes will not be listed on any securities exchange.
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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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$
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Underwriting discounts and commissions(1)
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0.25%
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$
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Proceeds to Royal Bank of Canada
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99.75%
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$
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Buffered Return Notes Linked to the S&P 500®
Index
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Issuer:
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Royal Bank of Canada (the “Bank”)
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Underwriter:
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RBC Capital Markets, LLC (“RBCCM”)
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Reference Asset:
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S&P 500® Index (“SPX”)
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Minimum Investment:
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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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April 29, 2024
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Issue Date:
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May 2, 2024
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Valuation Date:
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April 30, 2025
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Maturity Date:
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May 5, 2025, subject to extension for market and other disruptions, as described in the product prospectus supplement dated December 20, 2023.
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Payment at Maturity (if
held to maturity):
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If the Final Level is greater than the Initial Level (that is, the Percentage Change is positive), then
the investor will receive an amount per $1,000 principal amount per Note equal to the lesser of:
1. Principal
Amount + [Principal Amount x (Percentage Change x Participation Rate)] and
2. the
Maximum Redemption Amount
If the Final Level is less than or equal to the Initial Level but is greater than or equal to the Buffer Level (that is, the Percentage Change is between 0% and ‑15.00%), then the investor will receive the principal amount only.
If the Final Level is less than the Buffer Level (that is, the Percentage Change is less than ‑15.00%),
then the investor will receive a cash payment equal to:
Principal Amount + [Principal Amount x
(Percentage Change + Buffer Percentage)]
In this case, you could lose a substantial portion of the principal amount.
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Percentage Change:
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The Percentage Change, expressed as a percentage, is calculated using the following formula:
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Initial Level:
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The closing level of the Reference Asset on the Trade Date.
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Final Level:
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The closing level of the Reference Asset on the Valuation Date.
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Participation Rate:
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100.00% (subject to the Maximum Redemption Amount).
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Maximum Redemption
Amount:
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112.15% multiplied by the principal amount.
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Buffer Percentage:
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15.00%
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Buffer Level:
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85.00% of the Initial Level
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Principal at Risk:
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The Notes are NOT principal protected. You may lose a substantial portion of your principal amount at
maturity if the Final Level is less than the Buffer Level.
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Calculation Agent:
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RBCCM
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U.S. Tax Treatment: | 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 Notes as a pre-paid cash-settled derivative contract 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, |
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Buffered Return Notes Linked to the S&P 500®
Index
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“Supplemental Discussion of U.S. Federal Income Tax Consequences,” and the discussion (including the opinion of Ashurst LLP, our special U.S. tax counsel) in the
product prospectus supplement dated December 20, 2023 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 less than the principal amount.
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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 December 20, 2023).
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Terms Incorporated in
the Master Note:
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All of the terms appearing on the cover page and above the item captioned “Secondary Market” in this section and the terms appearing under the caption “General Terms of
the Notes” in the product prospectus supplement, as modified by this terms supplement.
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Buffered Return Notes Linked to the S&P 500®
Index
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Buffered Return Notes Linked to the S&P 500®
Index
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Example 1 —
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Calculation of the Payment at Maturity where the Percentage Change is positive.
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Percentage Change:
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2%
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Payment at Maturity:
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$1,000 + [$1,000 x (2% x 100.00%)] = $1,000 + $20 = $1,020
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On a $1,000 investment, a Percentage Change of 2% results in a Payment at Maturity of $1,020, a return of 2.00% 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 (and the Payment at Maturity is subject to the Maximum Redemption
Amount).
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Percentage Change:
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20%
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Payment at Maturity:
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$1,000 + [$1,000 x (20% x 100.00%)] = $1,000 + $200 = $1,200
However, the Maximum Redemption Amount is $1,121.50. Accordingly, you will receive a payment at maturity equal to $1,121.50 per $1,000 in principal
amount of the Notes.
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On a $1,000 investment, a Percentage Change of 20% results in a Payment at Maturity of $1,121.50, a return of 12.15% on the Notes.
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Example 3 —
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Calculation of the Payment at Maturity where the Percentage Change is negative (but not by more than 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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At maturity, if the Percentage Change is negative BUT not by more than the Buffer Percentage, then the Payment at Maturity will equal the principal
amount.
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On a $1,000 investment, a Percentage Change of -10% results in a Payment at Maturity of $1,000, a return of 0% on the Notes.
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Example 4 —
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Calculation of the Payment at Maturity where the Percentage Change is negative (by more than the Buffer Percentage).
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Percentage Change:
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-20%
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Payment at Maturity:
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$1,000 + [$1,000 x (-20% + 15%)] = $1,000 - $50 = $950
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In this case, on a $1,000 investment, a Percentage Change of -20% results in a Payment at Maturity of $950, a return of -5% on the Notes.
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Buffered Return Notes Linked to the S&P 500®
Index
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Hypothetical Percentage
Change
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Payment at Maturity as
Percentage of Principal Amount
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Payment at Maturity per $1,000
in Principal Amount
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50.00%
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112.15%
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$1,121.50
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40.00%
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112.15%
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$1,121.50
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30.00%
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112.15%
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$1,121.50
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20.00%
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112.15%
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$1,121.50
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12.15%
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112.15%
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$1,121.50
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10.00%
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110.00%
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$1,100.00
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5.00%
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105.00%
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$1,050.00
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2.00%
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102.00%
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$1,020.00
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0.00%
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100.00%
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$1,000.00
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-10.00%
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100.00%
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$1,000.00
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-15.00%
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100.00%
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$1,000.00
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-20.00%
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95.00%
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$950.00
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-30.00%
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85.00%
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$850.00
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-40.00%
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75.00%
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$750.00
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-50.00%
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65.00%
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$650.00
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-60.00%
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55.00%
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$550.00
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-70.00%
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45.00%
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$450.00
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-80.00%
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35.00%
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$350.00
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-90.00%
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25.00%
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$250.00
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-100.00%
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15.00%
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$150.00
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Buffered Return Notes Linked to the S&P 500®
Index
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You May Lose Some or a Significant Portion of the Principal Amount at Maturity – Investors in the
Notes could lose a substantial portion of their principal amount if there is a decline in the level of the Reference Asset. You will lose 1% of the principal amount of the Notes for each 1% that the Final Level is less than the
Initial Level by more than 15%.
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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 return
represented by the Maximum Redemption Amount if the Reference Asset increases in value. 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 level of the Reference Asset increases after the Trade 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 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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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 secondary market would be high. As a result, the difference between bid and asked prices for your Notes in any secondary market could be substantial.
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The Initial Estimated Value of the Notes Will Be Less than the Price to the Public — The initial estimated value of the Notes that will be set
forth on the cover page of the final pricing supplement for the Notes will not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary
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Buffered Return Notes Linked to the S&P 500®
Index
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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 Time the Terms of the Notes Are Set — The initial estimated value of the Notes will be 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 will be 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 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 level 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 companies
included in 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 by us or one or more of our
affiliates may affect the level of the Reference Asset, and, therefore, the market value of the Notes.
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You Will Not Have Any Rights to the Securities Included in the Reference Asset — 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 the Reference Asset would have. The Final Level will not reflect any
dividends paid on the securities included in the Reference Asset, and accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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Buffered Return Notes Linked to the S&P 500®
Index
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Buffered Return Notes Linked to the S&P 500®
Index
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Buffered Return Notes Linked to the S&P 500®
Index
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Buffered Return Notes Linked to the S&P 500®
Index
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Buffered Return Notes Linked to the S&P 500®
Index
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Buffered Return Notes Linked to the S&P 500®
Index
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Buffered Return Notes Linked to the S&P 500®
Index
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Buffered Return Notes Linked to the S&P 500®
Index
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