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 28, 2023
Pricing Supplement Dated March __, 2023, to the Product Prospectus Supplement ERN-EI-1, the Prospectus Supplement and the Prospectus, Each Dated September
14, 2021
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$_________
Buffered Return Notes Linked to the Nasdaq-100 Index®, Due March 8, 2028 Royal Bank of Canada |
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Reference Asset
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Initial Level
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Buffer Level
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Nasdaq-100 Index®
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80% of its Initial Level
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If the Final Level of the Reference Asset is greater than the Initial Level, the Notes will pay at maturity a return equal to the Percentage Change, subject to a Maximum Redemption Amount of 188.25% of the
principal amount of the Notes.
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If the Final Level is less than or equal to the Initial Level, but greater than or equal to the Buffer Level, the Notes will pay the principal amount at maturity.
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If the Final Level is less than the Buffer Level of 80% of the Initial Level, investors will lose 1% of the principal amount for each 1% that the Final Level has decreased by more than 20% from the Initial
Level.
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Any payments on the Notes are subject to our credit risk.
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The Notes do not pay interest.
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The Notes will not be listed on any securities exchange.
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Per Note
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Total
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Price to public(1)
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100.00%
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$
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Underwriting discounts and commissions(1)
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4.25%
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$
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Proceeds to Royal Bank of Canada
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95.75%
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$
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Buffered Return Notes
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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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Nasdaq-100 Index® (“NDX”)
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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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March 3, 2023
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Issue Date:
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March 8, 2023
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Valuation Date:
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March 3, 2028
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Maturity Date:
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March 8, 2028, subject to extension for market and other disruptions, as described in the product prospectus supplement dated September 14, 2021.
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Payment at Maturity
(if held to maturity):
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If the Final Level is greater than the Initial Level (that is, the Percentage Change is positive), then the investor will
receive an amount per $1,000 principal amount per Note equal to the lesser of:
1. Principal Amount + (Principal Amount x Percentage Change) and
2. Maximum Redemption Amount
If the Final Level is less than or equal to the Initial Level, but is greater than or equal to the Buffer Level (that is, the Percentage Change is between 0% and -20%), then the investor will receive the principal amount only.
If the Final Level is less than the Buffer Level (that is, the
Percentage Change is between -20.01% and -100%), then the investor will receive a cash payment equal to:
Principal Amount + [Principal Amount x (Percentage Change + Buffer Percentage)]
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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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Maximum
Redemption Amount:
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188.25% multiplied by the principal amount
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Buffer Percentage:
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20%
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Buffer Level:
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80% of the Initial Level
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Principal at Risk:
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The Notes are NOT principal protected. You may lose a substantial portion of your principal amount at maturity
if the Final Level is less than the Buffer Level.
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Calculation Agent:
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RBCCM
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U.S. Tax Treatment:
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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
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Buffered Return Notes
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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 Ashurst LLP, our special U.S. tax counsel) in the product prospectus supplement dated September 14, 2021 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 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 September 14, 2021, as modified by this terms supplement.
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Buffered Return Notes
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Buffered Return Notes
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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%) = $1,000 + $50 = $1,050
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On a $1,000 investment, a 5% Percentage Change results in a Payment at Maturity of $1,050, a 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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90%
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Payment at Maturity:
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$1,000 + ($1,000 x 90%) = $1,000 + $900 = $1,900
However, the Maximum Redemption Amount is $1,882.50.
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On a $1,000 investment, a 90% Percentage Change results in a Payment at Maturity of $1,882.50, an 88.25% 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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-35%
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Payment at Maturity:
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$1,000 + [$1,000 x (-35% + 20%)] = $1,000 - $150 = $850
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On a $1,000 investment, a -35% Percentage Change results in a Payment at Maturity of $850, a -15% return on the Notes.
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Buffered Return Notes
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Hypothetical Percentage Change
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Redemption Amount as Percentage
of Principal Amount
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Redemption Amount per
$1,000 in Principal
Amount
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100.00%
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188.25%
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$1,882.50
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90.00%
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188.25%
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$1,882.50
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88.25%
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188.25%
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$1,882.50
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80.00%
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180.00%
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$1,800.00
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70.00%
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170.00%
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$1,700.00
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60.00%
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160.00%
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$1,600.00
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50.00%
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150.00%
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$1,500.00
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40.00%
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140.00%
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$1,400.00
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30.00%
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130.00%
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$1,300.00
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20.00%
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120.00%
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$1,200.00
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10.00%
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110.00%
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$1,100.00
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5.00%
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105.00%
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$1,050.00
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0.00%
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100.00%
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$1,000.00
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-5.00%
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100.00%
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$1,000.00
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-10.00%
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100.00%
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$1,000.00
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-20.00%
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100.00%
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$1,000.00
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-25.00%
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95.00%
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$950.00
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-30.00%
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90.00%
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$900.00
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-40.00%
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80.00%
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$800.00
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-50.00%
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70.00%
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$700.00
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-60.00%
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60.00%
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$600.00
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-70.00%
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50.00%
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$500.00
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-80.00%
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40.00%
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$400.00
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-90.00%
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30.00%
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$300.00
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-100.00%
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20.00%
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$200.00
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Buffered Return Notes
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You May Receive Less than the Principal Amount at Maturity — Investors in the Notes could lose a substantial portion of their principal amount if there is a decline in
the level of the Reference Asset. You will lose 1% of the principal amount of the Notes for each 1% that the Final Level is less than the Initial Level by more than 20%.
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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 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 asked prices for your Notes in any secondary market could be substantial.
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The Initial Estimated Value of the Notes Will Be Less than the Price to the Public — The initial estimated value of the Notes that will be set forth on the cover page of
the final pricing supplement for the Notes will not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary 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 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
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Buffered Return Notes
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The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only, Calculated as of the Time the Terms of the Notes Are Set
— The initial estimated value of the Notes will be based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See “Structuring the
Notes” below. Our estimate will be based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are based on certain
forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
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Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the Reference Asset that are not for
the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates will have in their proprietary accounts, in
facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the level of the Reference Asset, could be adverse to
the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with companies included in the Reference Asset, including making loans to or providing advisory services.
These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’ obligations and your interests as a holder of the Notes.
Moreover, we, and our affiliates may have published, and in the future expect to publish, research reports with respect to the Reference Asset. This research is modified from time to time without notice and may express opinions or provide
recommendations that are inconsistent with purchasing or holding the Notes. Any of these activities by us or one or more of our affiliates may affect the level of the Reference Asset, and, therefore, the market value of the Notes.
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You Will Not Have Any Rights to the Securities Included in the Reference Asset – As a holder of the Notes, you will not have voting rights or rights to receive cash
dividends or other distributions or other rights that holders of securities included in the Reference Asset would have. The Final Level will not reflect any dividends paid on the securities included in the Reference Asset, and
accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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An Investment in the Notes Is Subject to Risks Relating to Non-U.S. Securities Markets – Because certain securities
included in the NDX are issued by non-U.S. issuers and/or are traded outside of the U.S., an investment in the Notes involves particular risks. For example, the relevant 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.
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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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Buffered Return Notes
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the security’s U.S. listing must be exclusively on the Nasdaq Global Select Market or the Nasdaq Global Market;
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the security must be issued by a non-financial company;
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the security may not be issued by an issuer currently in bankruptcy proceedings;
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the security must generally be a common stock, ordinary share, American Depositary Receipt, or tracking stock (closed-end funds, convertible debentures, exchange traded funds, limited liability companies,
limited partnership interests, preferred stocks, rights, shares or units of beneficial interests, warrants, units and other derivative securities are not included in the NDX, nor are the securities of investment companies);
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the security must have a three-month average daily trading volume of at least 200,000 shares;
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if the security is issued by an issuer organized under the laws of a jurisdiction outside the United States, it must have listed options on a recognized market in the United States or be eligible for
listed-options trading on a recognized options market in the United States;
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the issuer of the security may not have entered into a definitive agreement or other arrangement which would likely result in the security no longer being eligible;
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the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn; and
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Buffered Return Notes
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the security must have traded for at least three full calendar months, not including the month of initial listing, on an “eligible exchange,” as determined under the index rules.
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the security’s U.S. listing must be exclusively on the Nasdaq Global Select Market or the Nasdaq Global Market;
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the security must be issued by a non-financial company;
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the security may not be issued by an issuer currently in bankruptcy proceedings;
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the security must have an average daily trading volume of at least 200,000 shares in the previous three‑month trading period as measured annually during the ranking review process described below;
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if the issuer of the security is organized under the laws of a jurisdiction outside the United States, then such security must have listed options on a recognized market in the United States or be eligible for
listed‑options trading on a recognized options market in the United States, as measured annually during the ranking review process;
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the issuer of the security may not have entered into a definitive agreement or other arrangement that would likely result in the security no longer being eligible;
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the security must have an adjusted market capitalization equal to or exceeding 0.10% of the aggregate adjusted market capitalization of the NDX at each month-end. In the event that a company does not meet this
criterion for two consecutive month-ends, it will be removed from the NDX effective after the close of trading on the third Friday of the following month; and
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the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn.
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Buffered Return Notes
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Buffered Return Notes
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Buffered Return Notes
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Buffered Return Notes
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Buffered Return Notes
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