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 June 1, 2023
Pricing Supplement Dated June __, 2023 to the Product Prospectus Supplement ERN-EI-1, Prospectus Supplement, and Prospectus, Each Dated September 14, 2021
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$
Auto-Callable Barrier Enhanced Return Notes Linked to the S&P 500® Index, Due July 2, 2026 Royal Bank of Canada |
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Reference Asset
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Initial Level*
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Barrier Level
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S&P 500® Index
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70% 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 at least 165% of the Percentage Change (to be determined on the
Trade Date).
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If the Final Level is less than or equal to the Initial Level, but is greater than or equal to the Barrier Level, the Notes will pay the principal amount at maturity.
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If the Final Level is less than the Barrier Level, investors will lose 1% of the principal amount of the Notes for each 1% that the Final Level has decreased from the Initial Level.
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The Notes will be automatically called for a Call Payment equal to 108.00% of the principal amount if the closing level of the Reference Asset on June 28, 2024 (the "Observation Date") is
greater than or equal to its 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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2.25%
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$
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Proceeds to Royal Bank of Canada
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97.75%
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$
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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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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S&P 500® Index (“SPX”)
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Minimum Investment:
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$1,000 and minimum denominations of $1,000 in excess thereof
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Trade Date (Pricing
Date):
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June 27, 2023
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Issue Date:
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June 30, 2023
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Valuation Date:
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June 29, 2026
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Maturity Date:
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July 2, 2026, subject to extension for market and other disruptions, as described in the product prospectus supplement.
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Automatic Call:
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If the closing level of the Reference Asset is greater than or equal to the Initial Level on the Observation Date, we will automatically
redeem the Notes, and investors will receive an amount equal to 108.00% of the principal amount on the Early Redemption Date ($1,080.00 for each $1,000 in principal amount). If the Notes are automatically called, no further payments will be
made on the Notes after the Early Redemption Date.
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Observation Date:
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June 28, 2024, subject to postponement as described in the product prospectus supplement.
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Early Redemption Date:
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July 3, 2024, subject to postponement as described in the product prospectus supplement.
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Payment at Maturity (if
not automatically called
and held to maturity):
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If the Notes are not previously called, we will pay you at maturity an amount based on the Final Level:
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:
Principal Amount + [Principal Amount x (Percentage Change x Leverage Factor)]
If the Final Level is less than or equal to the Initial Level, but is greater than or equal to the Barrier Level (that is, the Percentage Change is between 0% and -30.00%), then the investor will receive the principal amount only.
If the Final Level is less than the Barrier Level (that is, the Percentage
Change is between ‑30.01% and -100%), then the investor will receive a cash payment equal to:
Principal Amount + (Principal Amount x Percentage Change)
You could lose all or a significant portion of the principal amount of the Notes if the Final Level is less than the Barrier Level.
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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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Leverage Factor:
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At least 165% (to be determined on the Trade Date)
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Barrier Level:
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70% of the Initial Level
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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 Barrier Level.
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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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 callable 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 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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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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Example 1 —
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Calculation of the Payment at Maturity where the Percentage Change is positive.
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Percentage
Change:
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5%
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Payment at
Maturity: |
$1,000 + [$1,000 x (5% x 165%)] = $1,000 + $82.50 = $1,082.50
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On a $1,000 investment, a 5% Percentage Change results in a Payment at Maturity of $1,082.50, an 8.25% 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 negative (but is not less than -30%).
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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 is not less than -30%, 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 3 —
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Calculation of the Payment at Maturity where the Percentage Change is negative (and is less than -30%).
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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%) = $1,000 - $400 = $600
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On a $1,000 investment, a -40% Percentage Change results in a Payment at Maturity of $600, a ‑40% return on the
Notes.
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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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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40.00%
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166.00%
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$1,660.00
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30.00%
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149.50%
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$1,495.00
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20.00%
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133.00%
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$1,330.00
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10.00%
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116.50%
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$1,165.00
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5.00%
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108.25%
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$1,082.50
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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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100.00%
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$1,000.00
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-30.00%
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100.00%
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$1,000.00
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-40.00%
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60.00%
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$600.00
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-50.00%
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50.00%
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$500.00
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-60.00%
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40.00%
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$400.00
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-70.00%
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30.00%
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$300.00
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-80.00%
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20.00%
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$200.00
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-90.00%
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10.00%
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$100.00
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-100.00%
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0.00%
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$0.00
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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You May Receive Less Than 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 level of the Reference Asset. If the Notes are not automatically called, and the Final Level is less than the Barrier Level, you will lose 1% of the principal amount of the
Notes for each 1% that the Final Level is less than the Initial 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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The Notes Are Subject to an Automatic Call —If the Notes are automatically called on the Observation Date, you may
not be able to reinvest at comparable terms or returns. If the Notes are automatically called, you will receive no more further payments on the Notes, and may be forced to invest in a lower interest rate environment and may not be able to
reinvest at comparable terms or returns. In addition, the fixed amount that you will receive upon an automatic call will be 108.00% of the principal amount, even if the value of the Reference Asset increases by more than the percentage
represented by that amount. The payment on the Notes upon an automatic call may also be less than it would have been at maturity if the Notes were not automatically called.
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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 upon an automatic call or 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 level 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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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
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only,
Calculated as of the Time the Terms of the Notes Are Set — The initial estimated value of the Notes will be based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the
derivative embedded in the terms of the Notes. See “Structuring the Notes” below. Our estimate will be based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the
expected term of the Notes. These assumptions are based on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we
do.
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Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading
activities related to the Reference Asset that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our
affiliates will have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence
the level of the Reference Asset, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with companies included in the Reference Asset,
including making loans to or providing advisory services. These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’
obligations and your interests as a holder of the Notes. Moreover, we, and our affiliates may have published, and in the future expect to publish, research reports with respect to the Reference Asset. This research is modified from time to
time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. Any of these activities by us or one or more of our affiliates may affect the level of the Reference Asset,
and, therefore, the market value of the Notes.
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You Will Not Have Any Rights to the Securities Included in the Reference Asset — As a holder of the Notes, you will
not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities included in the Reference Asset would have. The Final Level will not reflect any dividends paid on the securities
included in the Reference Asset, and accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments — The
Observation Date, the Valuation Date and the payments on the Notes are subject to adjustment as described in the product prospectus supplement. For a description of what constitutes a market
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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Auto-Callable Barrier Enhanced
Return Notes Linked to the S&P 500®
Index
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P-16
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RBC Capital Markets, LLC
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