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 May 2, 2024
Pricing Supplement Dated May __, 2024 to the Product Prospectus Supplement ERN-EI-1, the Prospectus Supplement and the Prospectus, each Dated December
20, 2023
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$
Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index,
Due May 7, 2026
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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Russell 2000® Index (“RTY”)
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85% of the Initial Level
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If the Final Level of the Reference Asset is greater than or equal to the Initial Level, the Notes will pay at maturity a return equal to the Digital Return. The Digital Return will be 23.50% of the principal
amount. An investor's return on the Notes will not exceed the Digital Return.
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If the Final Level of the Reference Asset is less than the Initial Level, but is greater than or equal to the Buffer Level, then the Notes will pay a one-for-one positive return equal to the absolute value of
the Percentage Change.
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If the Final Level of the Reference Asset is less than the Buffer Level, investors will lose approximately 1.1765% of the principal amount of the Notes for each 1% decrease from the Initial Level to the Final
Level of more than 15%. Accordingly, investors may lose all or a substantial portion of the principal amount.
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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
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100.00%
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$
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Underwriting discounts and commissions(1)
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0.00%
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$
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Proceeds to Royal Bank of Canada
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100.00%
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$
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® 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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Russell 2000® Index (“RTY”)
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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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May 2, 2024
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Issue Date:
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May 7, 2024
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Valuation Date:
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May 4, 2026
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Maturity Date:
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May 7, 2026, 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 or equal to the Initial Level (that is, the Percentage Change is greater than or equal to 0%), then the
investor will receive, for each $1,000 in principal amount of the Notes, a cash payment equal to:
$1,000 + ($1,000 × Digital Return)
The payment on the Notes will not exceed the Digital Return.
If the Final Level is less than the Initial Level, but greater than or equal to the
Buffer Level (that is, the Percentage Change is between -0.01% and -15.00%), then the investor will receive, for each $1,000 in principal amount of the
Notes, a one-for-one positive return equal to the absolute value of the Percentage Change, calculated as follows:
$1,000 + [-1 x ($1,000 x Percentage Change)]
In this case, you will receive a positive return on the Notes, even though the Percentage Change is negative.
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, for each $1,000 in principal amount of the Notes, a cash payment equal to:
$1,000 + [$1,000 x (Percentage Change + Buffer Percentage) x Downside Multiplier]
In this case, you could lose all or 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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Digital Return:
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23.50%. An investor's return will not exceed the Digital Return.
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Buffer Percentage:
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15%
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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Buffer Level:
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85% of the Initial Level.
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Downside Multiplier:
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100/85, which is approximately 1.1765
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Principal at Risk:
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The Notes are NOT principal protected. You may lose all or 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:
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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 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, “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 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 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 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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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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Example 1 —
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Calculation of the Payment at Maturity where the Percentage Change is positive, but does not exceed the percentage represented by the Digital Return.
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Percentage Change:
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15%
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Payment at Maturity:
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$1,000 + ($1,000 x 23.50%) = $1,235.00
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On a $1,000 investment, a Percentage Change of 15% results in a Payment at Maturity of $1,235.00, a return of 23.50% on the Notes. In this case, the return on the Notes is
greater than the Percentage Change of the Reference Asset.
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Example 2 —
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Calculation of the Payment at Maturity where the Percentage Change is positive and exceeds the percentage represented by the Digital Return.
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Percentage Change:
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70%
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Payment at Maturity:
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$1,000 + ($1,000 x 23.50%) = $1,235.00
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On a $1,000 investment, a Percentage Change of 70% results in a Payment at Maturity of $1,235.00, a return of 23.50% on the Notes. In this case, the return on the Notes is
less than the Percentage Change of the Reference Asset.
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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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-8%
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Payment at Maturity:
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$1,000 + [-1 x ($1,000 x -8%)] =$1,080
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On a $1,000 investment, a Percentage Change -8% results in a Payment at Maturity of $1,080, a return of 8% on the Notes. In this case, you will receive a positive
return on the Notes, even though the Percentage Change is negative.
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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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-60%
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Payment at Maturity:
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$1,000 + [$1,000 x (-60% + 15%) x 1.1765] = $470.59
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On a $1,000 investment, a Percentage Change of -60% results in a Payment at Maturity of $470.59, a return of approximately -52.941% on the Notes.
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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Hypothetical Final Level
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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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170.00
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123.50%
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$1,235.00
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160.00
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123.50%
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$1,235.00
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150.00
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123.50%
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$1,235.00
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140.00
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123.50%
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$1,235.00
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130.00
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123.50%
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$1,235.00
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123.50
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123.50%
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$1,235.00
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120.00
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123.50%
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$1,235.00
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110.00
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123.50%
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$1,235.00
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100.00
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123.50%
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$1,235.00
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90.00
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110.00%
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$1,100.00
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85.00
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115.00%
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$1,150.00
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80.00
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94.118%
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$941.18
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70.00
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82.353%
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$823.53
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60.00
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70.588%
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$705.88
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50.00
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58.824%
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$588.24
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40.00
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47.059%
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$470.59
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30.00
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35.294%
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$352.94
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20.00
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23.529%
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$235.29
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10.00
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11.765%
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$117.65
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0.00
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0.00%
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$0.00
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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You May Not Receive the Full Principal Amount at Maturity – Investors in the Notes could lose all or a substantial portion of their principal amount if there is a
decline in the level of the Reference Asset. If the Final Level is less than the Buffer Level, you will not receive any benefit from the absolute return feature of the Notes, and you will lose approximately 1.1765% of the principal
amount of your Notes for each 1% that the Final Level is less than the Buffer Level.
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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 Digital 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. In addition, if the level of the Reference Asset decreases, the absolute return feature will only apply if the Final Level is
greater than or equal to the Buffer Level, and the maximum return on the Notes in such a case will be 15%.
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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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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 ask 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 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 level 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 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
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® 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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An Investment in the Notes 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
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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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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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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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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Geared Buffer Digital Absolute Return Notes
Linked to the Russell 2000® Index
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P-15
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RBC Capital Markets, LLC
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