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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 September 22, 2023
Pricing Supplement Dated September __, 2023 to the Product Prospectus Supplement No. CCBN-1 Dated August 1, 2023, and the Prospectus Supplement and the
Prospectus, Each Dated September 14, 2021
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$
Auto-Callable Contingent Coupon Barrier Notes
Linked to the Lesser Performing of One Index and Two
Exchange Traded Funds, due October 1, 2026
Royal Bank of Canada
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Reference Assets
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Initial Levels*
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Coupon Barriers
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Trigger Levels
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Russell 2000® Index (“RTY”)
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70% of its Initial Level
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60% of its Initial Level
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iShares® Russell 2000 Value ETF ("IWN")
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70% of its Initial Level
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60% of its Initial Level
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Utilities Select Sector SPDR® Fund (“XLU")
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70% of its Initial Level
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60% of its Initial Level
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Issuer:
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Royal Bank of Canada
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Stock Exchange Listing:
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None
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Trade Date:
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September 28, 2023
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Principal Amount:
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$1,000 per Note
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Issue Date:
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October 3, 2023
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Maturity Date:
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October 1, 2026
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Call Observation Dates:
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Quarterly, as set forth below.
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Coupon Payment Dates:
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Monthly, as set forth below.
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Valuation Date:
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September 28, 2026
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Contingent Coupon Rate:
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9.60% per annum
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Contingent Coupon:
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If the Notes have not been previously called and the Observation Level of each Reference Asset is greater than or equal to its
Coupon Barrier on the applicable Observation Date, we will pay the Contingent Coupon applicable to that Observation Date. You may not receive any Contingent Coupons during the term of the Notes.
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Payment at Maturity (if
held to maturity):
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If the Notes are not previously called, the investor will receive at maturity, for each $1,000 in principal amount:
• If the Final Level of the Lesser
Performing Reference Asset is greater than or equal to its Coupon Barrier, $1,000 plus the Contingent Coupon due at maturity.
• If the Final Level of the Lesser
Performing Reference Asset is greater than or equal to its Trigger Level but is less than its Coupon Barrier, $1,000 (the investor will not receive the Contingent Coupon at maturity).
• If the Final Level of the Lesser
Performing Reference Asset is less than its Trigger Level, a cash payment equal to:
$1,000 + ($1,000 x Percentage Change of the Lesser Performing Reference Asset)
In this case, investors will lose some or all of the principal amount and will not receive the Contingent Coupon at maturity.
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Lesser Performing
Reference Asset:
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The Reference Asset with the lowest Percentage Change.
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Percentage Change:
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Expressed as a percentage for each Reference Asset, as an amount equal to the quotient of (a) its Final Level minus its Initial Level divided by (b) its Initial Level
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Call Feature:
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If, on any quarterly Call Observation Date beginning on March 28, 2024, the Observation Level of each Reference Asset is greater than or equal to its Initial Level, then
the Notes will be automatically called, for 100% of the principal amount plus the related Contingent Coupon.
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Observation Level:
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For the RTY, its closing level, and for the IWN and the XLU, its closing price, on any Observation Date.
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Final Level:
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For the RTY, its closing level, and for the IWN and the XLU, its closing price, on the Valuation Date.
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CUSIP:
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78016NG92
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Per Note
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Total
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Price to public(1)
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100.00%
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$
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Underwriting discounts and commissions(1)
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0.70%
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$
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Proceeds to Royal Bank of Canada
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99.30%
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$
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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General:
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This terms supplement relates to an offering of Auto-Callable Contingent Coupon Barrier Notes (the “Notes”) linked to the lesser performing of the following (each, a
“Reference Asset,” and collectively, the “Reference Assets”):
(i) Russell 2000® Index (the “RTY”);
(ii) iShares® Russell 2000 Value ETF ("IWN"); and
(iii) Utilities Select Sector SPDR® Fund (“XLU”).
We refer to the RTY as the "Index." See “Additional Terms of Your Notes Related to the Index” below, which relates to the RTY.
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Issuer:
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Royal Bank of Canada (the “Bank”)
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Trade Date:
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September 28, 2023
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Issue Date:
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October 3, 2023
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Valuation Date:
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September 28, 2026
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Maturity Date:
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October 1, 2026
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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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Contingent Coupon:
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We will pay you a Contingent Coupon during the term of the Notes, periodically in arrears on each Coupon Payment Date, under the conditions described below:
• If the
Observation Level of each Reference Asset is greater than or equal to its Coupon Barrier on the applicable Observation Date, we will pay the Contingent Coupon applicable to that Observation Date.
• If the
Observation Level of any of the Reference Assets is less than its Coupon Barrier on the applicable Observation Date, we will not pay you the Contingent Coupon applicable to that Observation Date.
You may not receive a Contingent Coupon for one or more monthly periods during the term of the Notes.
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Contingent Coupon
Rate:
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9.60% per annum (0.8% per month)
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Observation Dates and
Coupon Payment
Dates:
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The Observation Dates and Coupon Payment Dates will occur monthly, and the Call Observation Dates and Call Settlement Dates will occur quarterly, as set forth below:
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Observation Dates
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Coupon Payment Dates
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October 30, 2023
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November 2, 2023
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November 28, 2023
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December 1, 2023
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December 28, 2023
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January 3, 2024
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January 29, 2024
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February 1, 2024
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February 28, 2024
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March 4, 2024
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March 28, 2024(1)
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April 3, 2024(2)
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April 29, 2024
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May 2, 2024
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May 28, 2024
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May 31, 2024
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June 28, 2024(1)
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July 3, 2024(2)
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July 29, 2024
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August 1, 2024
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August 28, 2024
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September 3, 2024
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September 30, 2024(1)
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October 3, 2024(2)
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October 28, 2024
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October 31, 2024
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November 29, 2024
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December 4, 2024
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December 30, 2024(1)
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January 3, 2025(2)
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January 28, 2025
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January 31, 2025
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February 28, 2025
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March 5, 2025
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March 28, 2025(1)
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April 2, 2025(2)
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April 28, 2025
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May 1, 2025
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May 28, 2025
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June 2, 2025
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June 30, 2025(1)
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July 3, 2025(2)
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July 28, 2025
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July 31, 2025
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August 28, 2025
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September 3, 2025
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September 29, 2025(1)
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October 2, 2025(2)
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October 28, 2025
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October 31, 2025
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November 28, 2025
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December 3, 2025
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December 29, 2025(1)
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January 2, 2026(2)
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January 28, 2026
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February 2, 2026
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February 27, 2026
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March 4, 2026
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March 30, 2026(1)
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April 2, 2026(2)
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April 28, 2026
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May 1, 2026
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May 28, 2026
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June 2, 2026
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June 29, 2026(1)
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July 2, 2026(2)
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July 28, 2026
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July 31, 2026
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August 28, 2026
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September 2, 2026
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September 28, 2026 (Valuation Date)
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October 1, 2026 (Maturity Date)
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(1) This date is also a Call Observation Date.
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(2) This date is also a Call Settlement Date.
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Record Dates:
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The record date for each Coupon Payment Date will be one business day prior to that scheduled Coupon Payment Date; provided, however, that any Contingent Coupon payable at
maturity or upon a call will be payable to the person to whom the payment at maturity or upon the call, as the case may be, will be payable.
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Call Feature:
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If, on any quarterly Call Observation Date beginning in March 2024, the Observation Level of each Reference Asset is greater than or equal to its Initial Level, then the
Notes will be automatically called.
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Payment if Called:
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If the Notes are automatically called, then, on the applicable Call Settlement Date, for each $1,000 principal amount, you will receive $1,000 plus the Contingent Coupon
otherwise due on that Call Settlement Date.
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Call Settlement Dates:
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If the Notes are called on any Observation Date beginning in March 2024, the Call Settlement Date will be the Coupon Payment Date corresponding to that Observation Date.
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Initial Level:
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For the RTY, its closing level, and for the IWN and the XLU, its closing price, on the Trade Date.
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Final Level:
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For the RTY, its closing level, and for the IWN and the XLU, its closing price, on the Valuation Date.
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Observation Level
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For the RTY, its closing level, and for the IWN and the XLU, its closing price, on any Observation Date.
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Coupon Barrier:
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For each Reference Asset, 70% of its Initial Level.
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Trigger Level:
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For each Reference Asset, 60% of its Initial Level.
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Payment at Maturity (if
not previously called
and held to maturity):
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If the Notes are not previously called, the investor will receive at maturity, for each $1,000 in principal amount:
• If the Final Level of the
Lesser Performing Reference Asset is greater than or equal to its Coupon Barrier, $1,000 plus the Contingent Coupon due at maturity.
• If the Final Level of
the Lesser Performing Reference Asset is greater than or equal to its Trigger Level but is less than its Coupon Barrier, $1,000 (the investor will not receive the Contingent Coupon at maturity).
• If the Final Level of the Lesser Performing
Reference Asset is less than its Trigger Level, a cash payment equal to:
$1,000 + ($1,000 x Percentage Change of the Lesser Performing Reference Asset)
In this case, investors will lose some or all of their principal amount and will not receive the Contingent Coupon at Maturity.
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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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Percentage Change:
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With respect to each Reference Asset:
Final Level – Initial Level
Initial Level
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Lesser Performing
Reference Asset:
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The Reference Asset with the lowest Percentage Change.
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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 any of the Reference Assets will result in the postponement of an Observation Date, a Call
Observation Date or the Valuation Date as to that Reference Asset, as described in the product prospectus supplement, but not to any non-affected Reference Asset.
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Calculation Agent:
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RBC Capital Markets, LLC (“RBCCM”)
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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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 contingent income-bearing derivative contract linked to the Reference Assets for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the Notes are
uncertain and the Internal Revenue Service could assert that the Notes should be taxed in a manner that is different from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of U.S. Federal
Income Tax Consequences,” and the discussion (including the opinion of our special U.S. tax counsel, Ashurst LLP) in the product prospectus supplement dated August 1, 2023 under “Supplemental Discussion of U.S. Federal Income Tax
Consequences,” which apply to the Notes.
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Secondary Market:
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RBCCM (or one of its affiliates), though not obligated to do so, may maintain a secondary market in the Notes after the issue date. The amount that you may receive upon
sale of your Notes prior to maturity may be less than the principal amount of your Notes.
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Listing:
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The Notes will not be listed on any securities exchange.
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Clearance and
Settlement:
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DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Ownership and Book-Entry Issuance” in the prospectus
dated September 14, 2021).
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Terms Incorporated in
the Master Note:
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All of the terms appearing on the cover page and above the item captioned “Secondary Market” in this section and the terms appearing under the caption “General Terms of
the Notes” in the product prospectus supplement, as modified by this terms supplement.
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Hypothetical Initial Level (for each Reference Asset):
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100*
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Hypothetical Coupon Barrier and Trigger Level:
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70 and 60, which is 70% and 60%, respectively, of the hypothetical Initial Level of the Lesser Performing Reference Asset
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Contingent Coupon Rate:
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9.60% per annum (or 0.8% per month)
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Contingent Coupon Amount:
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$8.00 per month
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Observation Dates:
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Monthly
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Principal Amount:
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$1,000 per Note
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Hypothetical Final Level of
the Lesser Performing
Reference Asset
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Payment at Maturity as
Percentage of Principal
Amount
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Payment at Maturity
(assuming that the Notes
were not previously called)
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140.00
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100.80%
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$1,008.00*
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130.00
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100.80%
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$1,008.00*
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120.00
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100.80%
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$1,008.00*
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110.00
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100.80%
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$1,008.00*
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100.00
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100.80%
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$1,008.00*
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90.00
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100.80%
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$1,008.00*
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80.00
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100.80%
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$1,008.00*
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70.00
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100.80%
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$1,008.00*
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65.00
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100.00%
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$1,000.00
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60.00
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100.00%
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$1,000.00
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59.99
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59.99%
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$599.90
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50.00
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50.00%
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$500.00
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40.00
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40.00%
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$400.00
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25.00
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25.00%
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$250.00
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10.00
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10.00%
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$100.00
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0.00
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0.00%
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$0.00
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
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 value of the Lesser Performing Reference Asset between the Trade Date and the Valuation Date. If the Notes are not automatically called and the Final Level of the Lesser Performing Reference Asset is less than its Trigger
Level, the amount of cash that you receive at maturity will represent a loss of your principal that is proportionate to the decline in the value of the Lesser Performing Reference Asset from the Trade Date to the Valuation Date. Any
Contingent Coupons received on the Notes prior to the Maturity Date may not be sufficient to compensate for any such loss.
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The Payments on the Notes Are Limited — The payments on the Notes will be limited to the Contingent Coupons. Accordingly, your
return on the Notes may be less than your return would be if you made an investment in the Reference Assets, the securities included in the Reference Assets, or in a security directly linked to the positive performance of the Reference
Assets.
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The Notes Are Subject to an Automatic Call — If on any quarterly Call Observation Date beginning in March 2024, the Observation
Level of each Reference Asset is greater than or equal to its Initial Level, 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 $1,000 plus the Contingent Coupon otherwise due on the applicable Call Settlement Date. You will not receive any Contingent Coupons after that payment. 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 would have been if they had not been called.
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You May Not Receive Any Contingent Coupons — We will not necessarily make any Contingent Coupons on the Notes. If the Observation Level of any of the Reference Assets on
an Observation Date is less than its Coupon Barrier, we will not pay you the Contingent Coupon applicable to that Observation Date. If the Observation Level of any of the Reference Assets is less than its Coupon Barrier on each of the
Observation Dates and on the Valuation Date, we will not pay you any Contingent Coupons during the term of, and you will not receive a positive return on your Notes. Generally, this non-payment of the Contingent Coupon may coincide with a
period of greater risk of principal loss on your Notes. Accordingly, if we do not pay the Contingent Coupon on the Maturity Date, you will also incur a loss of principal, if the Final Level of the Lesser Performing Reference Asset is less
than its Trigger Level.
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The Notes Are Linked to the Lesser Performing Reference Asset, Even if the Other Reference Assets Perform Better — If any of the Reference Assets has a Final Level that is
less than its Trigger Level, your return will be linked to the lesser performing of the three Reference Assets. Even if the Final Level of the other Reference Assets have increased compared to its respective Initial Level, or has
experienced a decrease that is less than that of the Lesser Performing Reference Asset, your return will only be determined by reference to the performance of the Lesser Performing Reference Asset, regardless of the performance of the other
Reference Assets.
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Your Payment on the Notes Will Be Determined by Reference to Each Reference Asset Individually, Not to a Basket, and the Payment at Maturity Will Be Based on the Performance of
the Lesser Performing Reference Asset — The Payment at Maturity will be determined only by reference to the performance of the Lesser Performing Reference Asset, regardless of the performance of the other Reference Assets. The
Notes are not linked to a weighted basket, in which the risk may be mitigated and diversified among each of the basket components. For example, in the case of notes linked to a weighted basket, the return would depend on the weighted
aggregate performance of the basket components reflected as the basket return. As a result, the depreciation of one basket component could be mitigated by the appreciation of the other basket components, as scaled by the weighting of that
basket component. However, in the case of the Notes, the individual performance of each of the Reference Assets would not be combined, and the depreciation of one Reference Asset would not be mitigated by any appreciation of the other
Reference Asset. Instead, your return will depend solely on the Final Level of the Lesser Performing Reference Asset.
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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• |
The Call Feature and the Contingent Coupon Feature Limit Your Potential Return — The return potential of the Notes is limited to the pre-specified Contingent Coupon Rate,
regardless of the appreciation of the Reference Assets. In addition, the total return on the Notes will vary based on the number of Observation Dates on which the Contingent Coupon becomes payable prior to maturity or an automatic call.
Further, if the Notes are called due to the Call Feature, you will not receive any Contingent Coupons or any other payment in respect of any Observation Dates after the applicable Call Settlement Date. Since the Notes could be called as
early as the Observation Date occurring in March 2024, the total return on the Notes could be minimal. If the Notes are not called, you may be subject to the full downside performance of the Lesser Performing Reference Asset even though
your potential return is limited to the Contingent Coupon Rate. As a result, the return on an investment in the Notes could be less than the return on a direct investment in the Reference Assets.
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• |
Your Return on the Notes May Be Lower than the Return on a Conventional Debt Security of Comparable 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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• |
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 Contingent Coupons, if payable, and the amount due on any relevant payment date is dependent upon our ability to repay our obligations on the applicable payment dates. This will be
the case even if the values of the Reference Assets increase 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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• |
Prior to Maturity, the Value of the Notes Will Be Influenced by Many Unpredictable Factors — Many economic and market factors will
influence the value of the Notes. We expect that, generally, the price or level of each Reference Asset on any day will affect the value of the Notes more than any other single factor. However, you should not expect the value of the Notes
in the secondary market to vary in proportion to changes in the value of the Reference Assets. The value of the Notes will be affected by a number of other factors that may either offset or magnify each other, including:
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➢ |
the market value of the Reference Assets;
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➢ |
whether the market value of one or more of the Reference Assets is less than its Coupon Barrier or its Trigger Level;
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➢ |
the expected volatility of the Reference Assets;
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➢ |
the time to maturity of the Notes;
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➢ |
the dividend rate on the Reference Assets or on the equity securities represented by the Reference Assets;
|
➢ |
interest and yield rates in the market generally, as well as in the markets of the equity securities represented by the Reference Assets;
|
➢ |
the occurrence of certain events relating to a Reference Asset that may or may not require an adjustment to the Initial Level, the Coupon Barrier and the Trigger Level;
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
|
➢ |
economic, financial, political, regulatory or judicial events that affect the Reference Assets or the equity securities represented by the Reference Assets or stock markets generally, and which may affect the
market value of the Reference Assets on any Observation Date; and
|
➢ |
our creditworthiness, including actual or anticipated downgrades in our credit ratings.
|
• |
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 on the cover page of 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 prices or levels of the Reference Assets, 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 Set Forth on the Cover Page of 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.
|
• |
Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the securities included in or
represented by the Reference Assets that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates
will have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the prices
or levels of the Reference Assets, 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 securities included in or represented by
the Reference Assets, 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
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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An Investment in the Notes Linked to the RTY and the IWN Is Subject to Risks Associated with an Investment in Stocks With a Small Market Capitalization — The RTY and the
IWN consist of stocks issued by companies with relatively small market capitalizations. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies. As a result, the
level and price of the RTY and IWN, respectively, may be more volatile than that of a market measure that does not track solely small-capitalization stocks. Stock prices of small-capitalization companies are also generally more vulnerable
than those of large-capitalization companies to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive to many investors if they do not pay dividends. In
addition, small capitalization companies are often less well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss of those
individuals. Small capitalization companies tend to have lower revenues, less diverse product lines, smaller shares of their target markets, fewer financial resources and fewer competitive strengths than large-capitalization companies.
These companies may also be more susceptible to adverse developments related to their products or services.
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The Investment Strategy Represented by the IWN's Underlying Index May Not Be Successful — The "underlying index" of the IWN is the
Russell 2000® Value Index. The underlying index measures the capitalization-weighted performance of the stocks included in the Russell 2000® Index that are determined by the sponsor of the underlying index to be value
oriented, with lower price-to-book ratios and lower forecasted and historical growth. The basic principle of a value investment strategy is to invest in stocks that are determined to be relatively cheap or "undervalued" under the assumption
that the value of such stocks will increase over time as the market recognizes and reflects those stocks' "fair" market value. However, stocks that are considered value stocks may fail to appreciate for extended periods of time, and may
never realize their full potential value. In addition, stocks that are considered to be value oriented may have lower growth potential than other securities. Even if a value strategy with respect to the stocks included in the underlying
index would generally be successful, the manner in which the underlying index implements its strategy may prove to be unsuccessful. As described below, the methodology of the underlying index has set parameters to determine whether a stock
should be considered a "value" stock. The underlying index's parameters may not effectively implement its value strategy, and there can be no assurance that it will select stocks that are value oriented, or that the underlying index's
methodology will not underperform any alternative implementation of such a strategy. Accordingly, the investment strategy represented by the underlying index may not be successful, and your investment in the Notes may result in a loss. An
investment in the Notes may also provide a return that is less than an investment linked to the underlying index as a whole.
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The Securities Held by the XLU Are Concentrated in One Sector — All of the securities included in the XLU's underlying index are issued by companies in the utilities
sector. As a result, the securities that will determine the performance of the XLU 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 XLU, the return on an investment in the Notes will be subject to certain risks associated with a direct equity investment in companies in the utilities sector. Accordingly, by investing in the Notes, you may not benefit from the
diversification which could result from an investment linked to companies that operate in multiple sectors.
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An Investment in the Notes Is Subject to Management Risk — Each of the IWN and the XLU (each an "ETF" and collectively, the "ETFs") 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, each ETF, 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, each ETF generally would not sell a security because the security’s issuer was in financial trouble. In addition, each ETF is subject to the risk that the investment strategy of its investment advisor may not produce the
intended results.
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Each ETF and its Underlying Index Are Different — The performance of the each ETF may not exactly replicate the performance of its underlying index, because each ETF 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 each ETF 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 each ETF or due to other circumstances. Each ETF may use
futures contracts, options, swap agreements, repurchase agreements and other instruments in seeking performance that corresponds to its underlying index and in managing cash flows.
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We and Our Affiliates Do Not Have Any Affiliation with the Advisor of Each ETF or the Sponsor its Underlying Index and Are Not Responsible for Its Public Disclosure of Information — We and our affiliates are not affiliated with the investment advisors of the ETFs or the sponsors of the underlying indices in any way and have no ability to control or predict their actions, including
any errors in or discontinuance of disclosure regarding their methods or policies relating to the ETFs or the underlying indices. These investment advisors and sponsors are not involved in the offering of the Notes in any way and have no
obligation to consider your interests as an owner of the Notes in taking any actions relating to each ETF 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 investment advisors, the sponsors, or each ETF contained in any public disclosure of information. You, as an investor in the Notes, should make your own investigation into each ETF.
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The Policies of Each ETF's Investment Adviser Could Affect the Amount Payable on the Notes and Their Market Value — The policies of the investment adviser concerning the
management of an ETF, additions, deletions or substitutions of the securities held by an ETF could affect the market price of shares of an ETF and, therefore, the amounts payable on the Notes and the market value of the Notes before that
date. The amounts payable on the Notes and their market value could also be affected if the investment adviser changes these policies, for example, by changing the manner in which it manages an ETF, or if the investment adviser discontinues
or suspends maintenance of an ETF, in which case it may become difficult to determine the market value of the Notes. The investment advisers have no connection to the offering of the Notes and have no obligations to you as an investor in
the Notes in making decisions regarding the ETFs.
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Changes that Affect the RTY Will Affect the Market Value of the Notes and the Payments on the Notes — The policies of the index sponsor of the RTY concerning the
calculation of the RTY, additions, deletions or substitutions of the components of the RTY and the manner in which changes affecting those components, such as stock dividends, reorganizations or mergers, may be reflected in the RTY and,
therefore, could affect the amounts payable on the Notes, and the market value of the Notes prior to maturity. The amounts payable on the Notes and their market value could also be affected if the index sponsor change these policies, for
example, by changing the manner in which it calculates the RTY, or if the index sponsor discontinues or suspends calculation or publication of the RTY, in which case it may become difficult to determine the market value of the Notes.
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We Have No Affiliation with the Index Sponsor and Will Not Be Responsible for any Actions Taken by the Index Sponsor — The index sponsor of the RTY is not our affiliate
and will not be involved in the offering of the Notes in any way. Consequently, we have no control of the actions of the index sponsor, including any actions of the type that might impact the value of 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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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Owning the Notes Is Not the Same as Owning the Securities Represented by the Reference Assets — The return on your Notes is unlikely to reflect the return you would
realize if you actually owned shares of the Reference Assets or the securities represented by the Reference Assets. For instance, you will not receive or be entitled to receive any dividend payments or other distributions on these
securities during the term of your Notes. As an owner of the Notes, you will not have voting rights or any other rights that holders of these securities may have. Furthermore, the Reference Assets may appreciate substantially during the
term of the Notes, while your potential return will be limited to the applicable Contingent Coupon payments.
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You Must Rely on Your Own Evaluation of the Merits of an Investment Linked to the Reference Assets — In the ordinary course of their business, our affiliates may have
expressed views on expected movements in the Reference Assets or the equity securities that they represent, and may do so in the future. These views or reports may be communicated to our clients and clients of our affiliates. However, these
views are subject to change from time to time. Moreover, other professionals who transact business in markets relating to any Reference Asset may at any time have significantly different views from those of our affiliates. For these
reasons, you are encouraged to derive information concerning the Reference Assets from multiple sources, and you should not rely solely on views expressed by our affiliates.
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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, each Call
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 and “—Additional Terms of Your Notes Related to the Index” below.
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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a suspension, absence or limitation of trading in index components constituting 20% or more, by weight, of the Index;
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a suspension, absence or limitation of trading in futures or options contracts relating to the Index on their respective markets;
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any event that disrupts or impairs, as determined by the calculation agent, the ability of market participants to (i) effect transactions in, or obtain market values for, index components constituting 20% or more, by weight, of the
Index, or (ii) effect transactions in, or obtain market values for, futures or options contracts relating to the Index on their respective markets;
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the closure on any day of the primary market for futures or options contracts relating to the Index or index components constituting 20% or more, by weight, of the Index on a scheduled trading day prior to the scheduled weekday closing
time of that market (without regard to after hours or any other trading outside of the regular trading session hours) unless such earlier closing time is announced by the primary market at least one hour prior to the earlier of (i) the
actual closing time for the regular trading session on such primary market on such scheduled trading day for such primary market and (ii) the submission deadline for orders to be entered into the relevant exchange system for execution at
the close of trading on such scheduled trading day for such primary market;
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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any scheduled trading day on which (i) the primary markets for index components constituting 20% or more, by weight, of the Index or (ii) the exchanges or quotation systems, if any, on which futures or options contracts on the Index are
traded, fails to open for trading during its regular trading session; or
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any other event, if the calculation agent determines in its sole discretion that the event interferes with our ability or the ability of any of our affiliates to unwind all or a portion of a hedge with respect to the Notes that we or our
affiliates have effected or may effect.
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Each of the component stocks in a Select Sector Index (the “Component Stocks”) is a constituent company of the S&P 500® Index.
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The eleven Select Sector Indices together will include all of the companies represented in the S&P 500® Index and each of the stocks in the S&P 500® Index will be allocated to at least one of the Select Sector Indices.
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Each constituent stock of the S&P 500® Index is assigned to a Select Sector Index based on the Global Industry Classification Sector (“GICS”) structure. Each Select Sector
Index is made up of all the stocks in the applicable GICS sector.
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Each Select Sector Index is calculated by S&P using a capped market capitalization methodology where single index constituents or defined groups of index constituents are confined to a maximum weight and the
excess weight is distributed proportionally among the remaining index constituents. Each Select Sector Index is rebalanced from time to time to re-establish the proper weighting.
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For reweighting purposes, each Select Sector Index is rebalanced quarterly after the close of business on the third Friday of March, June, September and December using the following procedures: (1) The
rebalancing reference date is the second Friday of March, June, September and December; (2) With prices reflected on the rebalancing reference date, and membership, shares outstanding and investable weight factors as of the rebalancing
effective date, each company is weighted by float-adjusted market capitalization methodology. Modifications are made as defined below.
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If any Component Stock has a weight greater than 24%, that Component Stock has its float-adjusted market capitalization weight capped at 23%. The 23% weight cap creates a 2% buffer to ensure that no Component
Stock exceeds 25% as of the quarter-end diversification requirement date.
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All excess weight is equally redistributed to all uncapped Component Stocks within the relevant Select Sector Index.
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After this redistribution, if the float-adjusted market capitalization weight of any other Component Stock(s) then breaches 23%, the process is repeated iteratively until no Component Stocks breaches the 23%
weight cap.
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The sum of the Component Stocks with weights greater than 4.8% cannot exceed 50% of the total index weight. These caps are set to allow for a buffer below the 5% limit.
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If the rule in step (iv) is breached, all the Component Stocks are ranked in descending order of their float-adjusted market capitalization weights and the first Component Stock that causes the 50% limit to be
breached has its weight reduced to 4.5%.
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This excess weight is equally redistributed to all Component Stocks with weights below 4.5%. This process is repeated iteratively until step (iv) is satisfied.
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Index share amounts are assigned to each Component Stock to arrive at the weights calculated above. Since index shares are assigned based on prices one week prior to rebalancing, the actual weight of each
Component Stock at the rebalancing differs somewhat from these weights due to market movements.
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If, on the second to last business day of March, June, September, or December a company has a weight greater than 24% or the sum of the companies with weights greater than 4.8% exceeds 50%, a secondary
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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Auto-Callable Contingent Coupon Barrier Notes
Royal Bank of Canada
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