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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-227001
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Pricing Supplement
Dated February 12, 2021
To the Product Prospectus Supplement ERN-ETF-1 Dated September 11, 2018, Prospectus Supplement Dated September 7, 2018, and Prospectus
Dated September 7, 2018
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$2,800,000
Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector SPDR®
Fund, Due February 16, 2023
Royal Bank of Canada
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Per Note
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Total
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Price to public(1)
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100.00%
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$2,800,000
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Underwriting discounts and commissions(1)
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2.25%
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$63,000
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Proceeds to Royal Bank of Canada
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97.75%
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$2,737,000
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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Issuer:
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Royal Bank of Canada (“Royal Bank”)
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Underwriter:
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RBC Capital Markets, LLC (“RBCCM”)
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Reference Asset:
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Energy Select Sector SPDR® Fund (“XLE”).
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Currency:
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U.S. Dollars
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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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February 12, 2021
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Issue Date:
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February 18, 2021
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Valuation Date:
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February 13, 2023
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Maturity Date:
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February 16, 2023, subject to extension for market and other disruptions, as described in the product prospectus supplement dated September 11, 2018.
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Payment at Maturity
(if held to maturity):
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If the Percentage Change is positive, then the investor will receive an amount per $1,000 principal amount per Note equal to the
lesser of:
1. Principal Amount +
(Principal Amount x Percentage Change x Leverage Factor); and
2. Maximum Redemption
Amount
If the Percentage Change is less than or equal to 0%, but not by more than the Buffer Percentage (that is, the Percentage Change is
between 0% and –15%), then the investor will receive the principal amount only.
If the Percentage Change is negative, by more than the Buffer Percentage (that is, the Percentage Change is between –15.01% and
-100%), then the investor will receive a cash payment equal to:
Principal Amount + [Principal Amount x (Percentage Change + Buffer Percentage) x Downside Multiplier]
In this case, you will lose all or a portion of the principal amount of the Notes.
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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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$44.67, which was the closing share price of the Reference Asset on the Trade Date.
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Final Level:
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The closing share price of the Reference Asset on the Valuation Date.
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Leverage Factor:
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150%
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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Maximum
Redemption
Amount:
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$1,390 per $1,000 in principal amount.
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Buffer Percentage:
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15%
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Buffer Level:
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$37.97, which is 85% of the Initial Level (rounded to two decimal places).
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Downside Multiplier:
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100/85, which is approximately 1.17647
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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
counsel Morrison & Foerster LLP) in the product prospectus supplement dated September 11, 2018 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 “Description of Debt Securities—Ownership and Book-Entry
Issuance” in the prospectus dated September 7, 2018).
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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” on pages P-2 and P-3 of this pricing supplement and the terms appearing under the
caption “General Terms of the Notes” in the product prospectus supplement dated September 11, 2018, as modified by this pricing supplement.
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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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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5%
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Payment at Maturity:
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$1,000 + ($1,000 x 5% x 150%) = $1,000 + $75 = $1,075
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On a $1,000 investment, a 5% Percentage Change results in a Payment at Maturity of $1,075, a 7.5% return on the Notes.
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Example 2—
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Calculation of the Payment at Maturity where the Percentage Change is positive (and the Payment at Maturity is subject to the Maximum Redemption Amount).
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Percentage Change:
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35%
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Payment at Maturity:
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$1,000 + ($1,000 x 35% x 150%) = $1,000 + $525 = $1,525
However, the Maximum Redemption Amount is $1,390. Accordingly, you will receive a payment at maturity equal to $1,390 per $1,000 in principal amount of the Notes.
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On a $1,000 investment, a 35% Percentage Change results in a Payment at Maturity of $1,390, a 39% return 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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-8%
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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 -8% Percentage Change results in a Payment at Maturity of $1,000, a 0% return on the Notes.
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Example 4—
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Calculation of the Payment at Maturity where the Percentage Change is negative (by more than the Buffer Percentage).
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Percentage Change:
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-40%
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Payment at Maturity:
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$1,000 + [$1,000 x (-40% + 15%) x 1.17647] = $1,000 - $294.12 = $705.88
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On a $1,000 investment, a -40% Percentage Change results in a Payment at Maturity of $705.88, a –29.41% return on the Notes.
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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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 there is a
decline in the share price of the Reference Asset. You will lose approximately 1.17647% of the principal amount of the 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 Maximum Redemption Amount. Accordingly, your return on the
Notes may be less than your return would be if you made an investment in a security directly linked to the positive performance of the Reference Asset.
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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 share price 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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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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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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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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The Initial Estimated Value of the Notes Is Less than the Price to the Public — The initial estimated value of the Notes that is set forth on the cover page of this
pricing supplement does not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any time. If you attempt to sell the Notes prior to
maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the share 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 estimated costs relating to our hedging of the Notes. These factors, together with various credit, market and economic factors over the term of
the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable ways. Assuming no change in market conditions or any other
relevant factors, the price, if any, at which you may be able to sell your Notes prior to maturity may be less than your original purchase price, as any such sale price would not be expected to include the underwriting discount and the
hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined for any secondary market price is expected to be based on the secondary rate rather than the internal funding rate used to price the
Notes and determine the initial estimated value. As a result, the secondary price will be less than if the internal funding rate was used. The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and
willing to hold your Notes to maturity.
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The Initial Estimated Value of the Notes Is an Estimate Only, Calculated as of the Time the Terms of the Notes Were Set — The initial estimated value of the Notes is based
on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See “Structuring the Notes” below. Our estimate is based on a variety of assumptions,
including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are based on certain forecasts about future events, which may prove to be incorrect. Other
entities may value the Notes or similar securities at a price that is significantly different than we do.
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The Securities Composing the Underlying Index Are Concentrated in One Sector — All of the securities included in the
underlying index are issued by companies in the energy industry. As a result, the securities that will determine the performance of the Reference Asset and the value of the Notes are concentrated in one sector. Although an investment in
the Notes will not give holders any ownership or other direct interests in the securities composing the underlying index, the return on an investment in the Notes will be subject to certain risks associated with a direct equity investment
in companies in the market sector. Accordingly, by investing in the Notes, you will not benefit from the diversification which could result from an investment linked to companies that operate in multiple sectors.
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There Are Risks Associated with the Energy Industry — The stocks included in the underlying index and that are generally tracked by the Reference Asset are stocks of
companies whose primary business is directly associated with the energy sector, including two sub-sectors: oil, gas and consumable fuels; and energy equipment and services. Because the value of the Notes is linked to the performance of the
Reference Asset, an investment in the Notes exposes investors to risks associated with investments in the securities of companies in the energy sector.
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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Changes that Affect the Underlying Index Will Affect the Market Value of the Notes and the Amount You Will Receive at Maturity — The policies of the sponsor of the
Underlying Index (the “Index Sponsor”), concerning the calculation of the Underlying Index, additions, deletions or substitutions of the components of the Underlying Index and the manner in which changes affecting those components, such as
stock dividends, reorganizations or mergers, may be reflected in the Underlying Index and, therefore, could affect the share price of the Reference Asset, the amount payable on the Notes at maturity, and the market value of the Notes prior
to maturity. The amount payable on the Notes and their market value could also be affected if the Index Sponsor changes these policies, for example, by changing the manner in which it calculates the Underlying Index, or if the sponsor
discontinues or suspends the calculation or publication of the Underlying Index.
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Adjustments to the Reference Asset Could Adversely Affect the Notes — The Advisor of the Reference Asset is responsible for
calculating and maintaining the Reference Asset. The Advisor can add, delete or substitute the stocks comprising the Reference Asset. The Advisor may make other methodological changes that could change the share price of the Reference Asset
at any time. If one or more of these events occurs, the calculation of the amount payable at maturity may be adjusted to reflect such event or events. Consequently, any of these actions could adversely affect the amount payable at maturity
and/or the market value of the Notes.
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We Have No Affiliation with the Index Sponsor and Will Not Be Responsible for Any Actions Taken by the Index Sponsor — The Index
Sponsor is not our affiliate and will not be involved in the offering of the Notes in any way. Consequently, we have no control over the actions of the Index Sponsor, including any actions of the type that would require the calculation
agent to adjust the payment to you at maturity. The Index Sponsor has no obligation of any sort with respect to the Notes. Thus, the Index Sponsor has no obligation to take your interests into consideration for any reason, including in
taking any actions that might affect the value of the Notes. None of our proceeds from the issuance of the Notes will be delivered to the Index Sponsor.
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We and Our Affiliates Do Not Have Any Affiliation with the Advisor and Are Not Responsible for its Public Disclosure of Information — We and our affiliates are not
affiliated with Advisor in any way and have no ability to control or predict its actions, including any errors in or discontinuance of disclosure regarding its methods or policies relating to the Reference Asset. The Advisor is not involved
in the offering of the Notes in any way and has no obligation to consider your interests as an owner of the Notes in taking any actions relating to the Reference Asset that might affect the value of the Notes. Neither we nor any of our
affiliates has independently verified the adequacy or accuracy of the information about the Advisor or the Reference Asset contained in any public disclosure of information. You, as an investor in the Notes, should make your own
investigation into the Reference Asset.
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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The Correlation Between the Performance of the Reference Asset and the Performance of the Underlying Index May Be Imperfect — The
performance of the Reference Asset is linked principally to the performance of the Underlying Index. However, because of the potential discrepancies identified in more detail in the product prospectus supplement, the return on the Reference
Asset may correlate imperfectly with the return on the Underlying Index.
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The Reference Asset Is Subject to Management Risks — The Reference Asset is subject to management risk, which is the risk that the
Advisor’s investment strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. For example, the Advisor may invest a portion of the Reference Asset’s assets in securities not included
in the relevant industry or sector but which BlackRock believes will help the Reference Asset track the relevant industry or sector.
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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 or the securities
held by 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 prices 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 issuers of the securities held by 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 price of the Reference Asset,
and, therefore, the market value of the Notes.
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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Each of the component stocks in a Select Sector Index (the “SPDR® Component Stocks”) is a constituent company of the S&P 500® Index.
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The Select Sector Indices together will include all of the companies represented in the S&P 500® Index and each of the stocks in the S&P 500® Index will be allocated to one and only one of the Select Sector
Indices.
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Each constituent stock of the S&P 500® Index is assigned to a Select Sector Index on the basis of that company’s sales and earnings composition and the sensitivity of the company’s stock price and business results to the
common factors that affect other companies in each Select Sector Index.
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S&P has sole control over the removal of stocks from the S&P 500® Index and the selection of replacement stocks to be added to the S&P 500® Index.
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Each Select Sector Index is calculated by S&P using a modified “market capitalization” methodology. This design ensures that each of the component stocks within a Select Sector Index is represented in a proportion consistent with its
percentage with respect to the total market capitalization of that Select Sector Index. However, under certain conditions, the number of shares of a component stock within the Select Sector Index may be adjusted to conform to certain
Internal Revenue Code requirements.
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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Geared Buffered Enhanced Return Notes
Linked to the Energy Select Sector
SPDR® Fund
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