Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-275898
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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 May 15, 2024
Pricing Supplement Dated May __, 2024 to the Product Prospectus Supplement ERN-EI-1, the Prospectus Supplement and
the Prospectus, Each Dated December 20, 2023
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$
Digital Barrier Return Notes Linked to the Lesser
Performing of Two Equity Indices Due July 3, 2025
Royal Bank of Canada
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Reference Assets
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Initial Levels*
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Barrier Levels
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Dow Jones Industrial Average® (“INDU”)
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75.00% of its Initial Level
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S&P 500® Index (“SPX”)
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75.00% of its Initial Level
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If the Final Level of the Lesser Performing Reference Asset (as defined below) is greater than or equal to its Barrier Level, the Notes will pay at maturity a return equal to the Digital Return. The Digital
Return will be 8.25% of the principal amount. An investor’s return on the Notes will not exceed the Digital Return.
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If the Final Level of the Lesser Performing Reference Asset is less than its Barrier Level, investors will lose 1% of the principal amount for each 1% decrease from 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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100.000%
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$
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Underwriting discounts and commissions(1)
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0.50%
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$
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Proceeds to Royal Bank of Canada
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99.50%
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$
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Issuer:
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Royal Bank of Canada (the “Bank”)
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Underwriter:
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RBC Capital Markets, LLC (“RBCCM”)
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Reference Assets:
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Dow Jones Industrial Average® (“INDU”) and 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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May 30, 2024
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Issue Date:
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June 4, 2024
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Valuation Date:
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June 30, 2025
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Maturity Date:
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July 3, 2025, subject to extension for market and other disruptions, as described in the product prospectus supplement dated December 20, 2023.
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Payment at Maturity (if
held to maturity):
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If the Final Level of the Lesser Performing Reference Asset is greater than or equal to its Barrier Level (that is, its
Percentage Change is greater than or equal to ‑25%), then the investor will receive an amount per $1,000 principal amount per Note equal to:
Principal Amount + (Principal Amount x Digital Return)
The return on the Notes will not exceed the Digital Return.
If the Final Level of the Lesser Performing Reference Asset is less than its Barrier Level (that is, its Percentage Change is
less than ‑25%), then the investor will receive a cash payment equal to:
Principal Amount + (Principal Amount x Percentage Change of the Lesser Performing Reference Asset)
In this case, you could lose all or a substantial portion of the principal amount.
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Percentage Change:
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The Percentage Change with respect to each Reference Asset, expressed as a percentage, is calculated using the following formula:
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Lesser Performing
Reference Asset:
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The Reference Asset which has the lowest Percentage Change.
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Initial Level:
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For each Reference Asset, its closing level on the Trade Date.
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Final Level:
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For each Reference Asset, its closing level on the Valuation Date.
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Digital Return:
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8.25%. An investor’s return on the Notes will not exceed the Digital Return.
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Barrier Percentage:
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25%
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Barrier Level:
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For each Reference Asset, 75% of its 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 of the Lesser Performing Reference Asset is less than its Barrier Level.
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Market Disruption
Events:
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If a market disruption event occurs on the Valuation Date as to a Reference Asset, the determination of the Final Level of that Reference Asset will be postponed. However, the determination
of the Final Level of any Reference Asset that is not affected by that market disruption event will not be postponed.
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Calculation Agent:
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RBCCM
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U.S. Tax Treatment:
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By purchasing a Note, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat the Notes as a pre-paid
cash-settled derivative contract in respect of the Reference Assets for U.S. federal
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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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 December 20, 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 December 20,
2023).
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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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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Example 1 —
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is positive, and exceeds the percentage represented by the
Digital Return.
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Percentage Change:
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10%
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Payment at Maturity:
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$1,000 + ($1,000 x 8.25%) = $1,000 + $82.50 = $1,082.50
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On a $1,000 investment, a Percentage Change of 10% in the Lesser Performing Reference Asset results in a Payment at Maturity of $1,082.50, a return of 8.25% on the Notes. In this case, the
return on the Notes is less than the Percentage Change of the Lesser Performing Reference Asset.
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Example 2 —
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is negative, (but not by more than the Barrier Percentage).
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Percentage Change:
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-20%
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Payment at Maturity:
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At maturity, if the Percentage Change of the Lesser Performing Reference Asset is negative BUT not by more than the Barrier Percentage, then the Payment at Maturity will
equal the sum of the principal amount and the Digital Return.
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On a $1,000 investment, a Percentage Change of -20% in the Lesser Performing Reference Asset results in a Payment at Maturity of $1,082.50, a return of 8.25% on the
Notes.
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In this case, the return on the Notes is positive, even though the Percentage Change of the Lesser Performing Reference Asset is negative.
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Example 3 —
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Calculation of the Payment at Maturity where the Percentage Change of the Lesser Performing Reference Asset is negative (by more than the Barrier Percentage).
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Percentage Change:
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-30%
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Payment at Maturity:
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$1,000 + ($1,000 x -30%) = $1,000 - $300 = $700
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In this case, on a $1,000 investment, a Percentage Change of -30% in the Lesser Performing Reference Asset results in a Payment at Maturity of $700, a return of -30% on the Notes.
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Hypothetical Percentage
Change 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 per $1,000
in Principal Amount
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50.00%
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108.25%
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$1,082.50
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40.00%
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108.25%
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$1,082.50
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30.00%
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108.25%
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$1,082.50
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20.00%
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108.25%
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$1,082.50
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10.00%
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108.25%
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$1,082.50
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8.25%
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108.25%
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$1,082.50
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5.00%
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108.25%
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$1,082.50
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2.00%
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108.25%
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$1,082.50
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0.00%
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108.25%
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$1,082.50
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-10.00%
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108.25%
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$1,082.50
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-20.00%
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108.25%
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$1,082.50
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-25.00%
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108.25%
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$1,082.50
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-25.01%
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74.99%
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$749.90
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-30.00%
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70.00%
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$700.00
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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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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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You May Lose Some or All of the Principal Amount at Maturity – Investors in the Notes could lose some or all of their
principal amount if there is a decline in the level of the Lesser Performing Reference Asset. If the Final Level of the Lesser Performing Reference Asset is less than its Barrier Level, you will lose 1% of the principal amount of your
Notes for each 1% that the Final Level of the Lesser Performing Reference Asset is less than its Initial Level.
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Your Potential Payment at Maturity Is Limited — The Notes will provide less opportunity to participate in the
appreciation of any of the Reference Assets than an investment in a security linked to that Reference Asset providing full participation in the appreciation, because the Payment at Maturity will not exceed the return represented by the
Digital Return. 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 Lesser Performing Reference Asset.
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Your Payment at Maturity Will Be Determined Solely by Reference to the Lesser Performing Reference Asset Even if the Other Reference Asset Performs Better – Your Payment at Maturity will be determined solely by reference to the performance of the Lesser Performing Reference Asset. Even if the Final Level of the other Reference Asset has increased compared to its
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 Asset. 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 component, 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. Because each Reference Asset tracks a different segment of the
U.S. equities market, they may each decrease in a comparable manner.
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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 – You will not receive any interest payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes,
which could be negative, may be less than the return you could earn on other investments. Your return 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 Lesser Performing 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 levels of the Reference Assets increase 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
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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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 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 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, the referral fee 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, the referral fee or the hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined by RBCCM for any
secondary market price is expected to be based on the secondary rate rather than the internal funding rate used to price the Notes and determine the initial estimated value. As a result, the secondary price will be less than if the
internal funding rate was used. The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
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The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only, Calculated as of the Time the Terms of
the Notes Are Set — The initial estimated value of the Notes will be based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative
embedded in the terms of the Notes. See “Structuring the Notes” below. Our estimate will be based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected
term of the Notes. These assumptions are based on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
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Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to 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 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 companies included in 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 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 Assets. 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
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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You Will Not Have Any Rights to the Securities Included in the Reference Assets – 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 Assets would have. The Final Level will not reflect any dividends paid on the securities
included in the Reference Assets, and accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments — The Payment at Maturity and the Valuation Date are subject to
adjustment as to each Reference Asset 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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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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Digital Barrier Return Notes Linked to the
Lesser Performing of Two Equity Indices
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