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Filed Pursuant to Rule 433
Registration Statement No. 333-259205
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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 February 9, 2023
Pricing Supplement Dated February __, 2023 to the Prospectus dated September 14, 2021, the Prospectus
Supplement dated September 14, 2021, and the Product Prospectus Supplement dated March 3, 2022
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$
Auto-Callable Cumulative Barrier Notes Linked to the
VanEck® Semiconductor ETF, Due February 27, 2025
Royal Bank of Canada
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Reference Asset
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Initial Price*
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Barrier Price
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VanEck® Semiconductor ETF ("SMH")
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70% of its Initial Price
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The Notes will be automatically called at the applicable Call Amount if the Observation Price (as defined below) of the Reference Asset is greater than or equal to the Initial Price on any quarterly Observation Date, beginning in March
2024.
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The Call Amounts are based on a rate of return of approximately 13.50% per annum (the "Call Return Rate"). The Call Amounts will increase on each Observation Rate to reflect that rate of return, as set forth in the "Summary" section
below.
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If the Notes are not automatically called, and the Final Price is less than the Initial Price, but is greater than or equal to the Barrier Price, we will pay you a cash payment at maturity equal to the principal amount.
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If the Final Price is less than the Barrier Price, investors will lose 1% of the principal amount for each 1% that the Final Price has decreased from the Initial Price.
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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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2.50%
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$
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Proceeds to Royal Bank of Canada
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97.50%
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$
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
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General:
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This terms supplement relates to an offering of Auto-Callable Cumulative Barrier Notes (the “Notes”) linked to the VanEck® Semiconductor
ETF (the “Reference Asset”).
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Issuer:
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Royal Bank of Canada (“Royal Bank”)
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Trade Date (Pricing
Date):
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February 24, 2023
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Issue Date:
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March 1, 2023
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Valuation Date:
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February 24, 2025
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Maturity Date:
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February 27, 2025
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Denominations:
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Minimum denomination of $1,000, and integral multiples of $1,000 thereafter.
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Interest Payments:
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None. No payments on the Notes will be made prior to maturity or automatic call.
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Call Feature:
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If, on any Observation Date (which begin in March 2024), the Observation Price of the Reference Asset is greater than or equal to the Initial Price, then the Notes will be
automatically called and, for each $1,000 in principal amount, the applicable Call Amount will be paid on the corresponding Call Settlement Date. The Call Amounts are set forth in the table below.
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Observation Price:
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The “Observation Price” will be the closing price of the Reference Asset as of the applicable Observation Date, as determined by the Calculation Agent, subject to
adjustment as set forth in the product prospectus supplement.
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Initial Price:
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The closing price of the Reference Asset on the Trade Date, as determined by the Calculation Agent, subject to adjustment as set forth in the product prospectus
supplement.
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Call Return Rate:
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Approximately 13.50% per annum
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Observation Dates/Call
Settlement Dates/Call
Amounts:
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Observation Dates
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Call Settlement Dates
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Call Amounts(1)
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March 1, 2024
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March 6, 2024
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$1,135.00
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May 24, 2024
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May 30, 2024
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$1,168.75
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August 26, 2024
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August 29, 2024
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$1,202.50
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November 25, 2024
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November 29, 2024
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$1,236.25
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February 24, 2025
(the "Valuation Date")
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February 27, 2025
(the "Maturity Date")
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$1,270.00
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Final Price:
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The closing price of the Reference Asset on the Valuation Date.
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Barrier Price:
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70% of the Initial Price.
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
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Payment at Maturity (if
not previously called and
held to maturity):
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If the Notes are not called on any Observation Date (including the Valuation Date), we will pay you at maturity an amount based on the Final Price:
• If the Final Price is greater than or equal to the Barrier Price, we will pay you a cash payment equal to the principal amount.
• If the Final Price is less than the Barrier Price, you will receive at maturity, for each $1,000 in principal amount, a cash payment equal to:
$1,000 + ($1,000 x Percentage Change)
The amount of cash that you will receive in this case will be less than your principal amount, if anything, resulting in a loss that is proportionate to the decline in the
price of the Reference Asset from the Trade Date to the Valuation Date. Investors in the Notes could lose some or all of their investment if the Final Price is less than the Barrier
Price.
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Percentage Change:
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Final Price – Initial Price
Initial Price
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Stock Settlement:
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Not applicable. Payments on the Notes will be made solely in cash.
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Market Disruption Events:
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The occurrence of a market disruption event (or a non-trading day) as to the Reference Asset will result in the postponement of an Observation Date
or the Valuation Date, as described in the product prospectus supplement.
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Calculation Agent:
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RBC Capital Markets, LLC (“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 callable pre-paid cash-settled derivative contract linked to the Reference Asset 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 Ashurst LLP, our special U.S. tax counsel) in the product prospectus supplement dated March 3, 2022 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 September 14, 2021).
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Terms Incorporated in the
Master Note:
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All of the terms appearing above the item captioned “Secondary Market” on pages P-2 and P-3 of this terms supplement, and the applicable terms
appearing under the captions “General Terms of the Notes” and “Supplemental Discussion of U.S. Federal Income Tax Consequences” in the product prospectus supplement dated March 3, 2022, as modified by this terms supplement.
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
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Hypothetical Initial Price:
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$100.00
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Hypothetical Barrier Price:
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$70.00, which is 70% of the hypothetical Initial Price
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Principal Amount:
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$1,000 per Note
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Call Return Rate:
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Approximately 13.50% per annum
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Call Amounts:
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$1,135 if called on the first Observation Date, increasing by $33.75 on each subsequent Observation Date, as set forth in the table above.
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Summary of the Hypothetical Examples
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Notes Are Called on an Observation Date
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Notes Are Not Called on Any
Observation Date
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Example 1
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Example 2
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Example 3
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Example 4
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Example 5
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Initial Price
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$100.00
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$100.00
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$100.00
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$100.00
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$100.00
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Observation Price
on the First
Observation Date
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$125.00
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$90.00
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$95.00
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$97.50
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$95.00
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Observation Price
on the Second
Observation Date
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N/A
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$110.00
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$97.50
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$95.00
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$55.00
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Observation Price
on the Third and
Fourth Observation
Dates
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N/A
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N/A
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Less than $100.00
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Less than $100.00
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Less than $100.00
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Observation Price
on the Final
Observation Date
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N/A
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N/A
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$110.00
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$90.00
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$50.00
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Percentage
Change
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N/A
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N/A
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N/A
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-10%
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-50%
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Call Amount
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$1,135.00
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$1,168.75
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$1,270.00 (paid on the maturity date)
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N/A
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N/A
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Payment at
Maturity (if not
previously called)
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N/A
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N/A
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N/A
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$1,000
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$500
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
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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 price of the Reference Asset between the Trade Date and the Valuation Date. If the Notes are not automatically called and the Final Price on the Valuation Date is less than the Barrier
Price, the amount of cash that you receive at maturity will represent a loss of your principal that is proportionate to the decline in the price of the Reference Asset from the Trade Date to the Valuation Date.
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The Notes Are Subject to an Automatic Call — If, on any Observation Date, the Observation Price is greater than or equal to the
Initial Price, then the Notes will be automatically called. If the Notes are automatically called, then, on the applicable Call Settlement Date, for each $1,000 in principal amount, you will receive the applicable Call Amount on the
corresponding Call Settlement Date. You will not receive any payments after the Call Settlement Date and you will not receive any return on the Notes that exceeds the applicable Call Amount set forth above, even if the price of the
Reference Asset increases substantially. You may be unable to reinvest your proceeds from the automatic call in an investment with a return that is as high as the return on the Notes.
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The Return on the Notes Will Be Limited to the Call Return Rate — You will only receive a positive return on the Notes if the Observation Price of the Reference Asset on
an Observation Date is greater than or equal to the Initial Price. Even in such a case, your return on the Notes will not exceed the return represented by the Call Return Rate, even if the price of the Reference Asset exceeds that return.
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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. 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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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 any Call Amounts, if payable, and the amount due on the maturity date, is dependent upon our ability to repay our obligations on the
applicable payment date. This will be the case even if the price of the Reference Asset increases after the Trade Date. No assurance can be given as to what our financial condition will be at any time during the term 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 Price 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,
each Observation Date 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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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
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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 that will be set
forth in the final pricing supplement for the Notes does not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any time. If you attempt to
sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the price of the Reference Asset, the borrowing rate we pay
to issue securities of this kind, and the inclusion in the price to the public of the underwriting discount and the 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 or the hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined by RBCCM 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 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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The Reference Asset and its Underlying Index Are Different — The performance of the Reference Asset may not exactly replicate the performance of its underlying index,
because the Reference Asset will reflect transaction costs and fees that are not included in the calculation of its underlying index. It is also possible that the performance of the Reference Asset may not fully replicate or may in certain
circumstances diverge significantly from the performance of its underlying index due to the temporary unavailability of certain securities in the secondary market, the performance of any derivative instruments contained in the Reference
Asset, or due to other circumstances. The Reference Asset may use futures contracts, options, swap agreements, currency forwards and repurchase agreements in seeking performance that corresponds to its underlying index and in managing cash
flows.
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
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Management Risk — The Reference Asset is not managed according to traditional methods of ‘‘active’’ investment management, which involve the buying and selling of
securities based on economic financial and market analysis and investment judgment. Instead, the Reference Asset, utilizing a ‘‘passive’’ or indexing investment approach, attempts to approximate the investment performance of its underlying
index by investing in a portfolio of securities that generally replicate its underlying index. Therefore, unless a specific security is removed from its underlying index, the Reference Asset generally would not sell a security because the
security’s issuer was in financial trouble. In addition, the Reference Asset is subject to the risk that the investment strategy of its investment advisor (the "Advisor") may not produce the intended results.
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An Investment in the Notes Is Subject to Risks Relating to Non-U.S. Securities Markets — Because foreign companies or foreign equity securities included in the Reference
Asset are publicly traded in the applicable foreign countries and are denominated in non-U.S. currencies, an investment in the Notes involves particular risks. For example, the non-U.S. securities markets may be more volatile than the U.S.
securities markets, and market developments may affect these markets differently from the U.S. or other securities markets. Direct or indirect government intervention to stabilize the securities markets outside the U.S., as well as
cross-shareholdings in certain companies, may affect trading prices and trading volumes in those markets.
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All of the Securities Held by the Reference Asset Are Concentrated in One Sector — All of the securities held by the Reference Asset are issued by companies in the
semiconductor production and equipment sector. As a result, the securities that will determine the performance 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 held by the Reference Asset, the return on an investment in the Notes will be subject to certain risks similar to those associated with direct equity investments in the semiconductor production and
equipment sector. The Notes may be subject to greater volatility and be more adversely affected by a single positive or negative economic, political or regulatory occurrence affecting this industry than a different investment linked to
securities of a more broadly diversified group of issuers.
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Adverse Conditions in the Semiconductor Production and Equipment Sector May Reduce Your Return on the Notes — All or substantially all of the stocks held by the Reference
Asset are issued by companies whose primary line of business is directly associated with the semiconductor production and equipment sector. The Reference Asset is subject to the risk that companies that are in the semiconductor production
and equipment sector may be similarly affected by particular economic or market events. As product cycles shorten and manufacturing capacity increases, these companies may become increasingly subject to aggressive pricing, which hampers
profitability. Semiconductor companies are vulnerable to wide fluctuations in securities prices due to rapid product obsolescence. Many semiconductor companies may not successfully introduce new products, develop and maintain a loyal
customer base or achieve general market acceptance for their products, and failure to do so could have a material adverse effect on their business, results of operations and financial condition. Reduced demand for end-user products,
underutilization of manufacturing capacity, and other factors could adversely impact the operating results of companies in the semiconductor production and equipment sector. Semiconductor companies typically face high capital costs and such
companies may need additional financing, which may be difficult to obtain. They also may be subject to risks relating
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
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Changes that Affect the Underlying Index Will Affect the Market Value of the Notes and the Amount You Will Receive on the Notes — 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, whether the Notes are automatically called, 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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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 on the Notes.
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 the 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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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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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
that it holds 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 share price of the
Reference Asset, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with the 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 share price of the Reference
Asset, and therefore, the market value of the Notes.
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
|
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
|
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
|
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
|
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
|
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Auto-Callable Cumulative Barrier Notes Linked
to the VanEck® Semiconductor ETF
Royal Bank of Canada
|
P-16
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RBC Capital Markets, LLC
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