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 16, 2024
Pricing Supplement Dated May __, 2024 to the Product Prospectus Supplement ERN-ETF-1, the Prospectus Supplement and the
Prospectus, Each Dated December 20, 2023
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$
Barrier Enhanced Return Notes
Linked to the VanEck® Gold Miners ETF,
Due May 27, 2027
Royal Bank of Canada
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Reference Asset
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Initial Price*
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Barrier Price
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VanEck® Gold Miners ETF (“GDX”)
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70.00% of the Initial Price
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If the Final Price of the Reference Asset is greater than the Initial Price, the Notes will pay at maturity a return equal to 150.00% of the Percentage Change, subject to the Maximum Redemption Amount of 172.15%
of the principal amount of the Notes.
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If the Final Price is less than or equal to the Initial Price, but is greater than or equal to the Barrier Price, the Notes will pay the principal amount at maturity.
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If the Final Price is less than the Barrier Price, investors will lose 1% of the principal amount for each 1% that the Final Price has decreased from the Initial Price.
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Any payments on the Notes are subject to our credit risk.
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The Notes do not pay interest.
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The Notes will not be listed on any securities exchange.
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Per Note
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Total
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Price to public(1)
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100.00%
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$
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Underwriting discounts and commissions(1)
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2.50%
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$
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Proceeds to Royal Bank of Canada
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97.50%
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$
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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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 Asset:
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VanEck® Gold Miners ETF (“GDX”)
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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 22, 2024
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Issue Date:
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May 28, 2024
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Valuation Date:
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May 24, 2027
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Maturity Date:
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May 27, 2027, 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 Price is greater than the Initial Price (that is, the Percentage Change is positive), then the investor will receive
an amount per $1,000 principal amount per Note equal to the lesser of:
1. Principal Amount + [Principal Amount x
(Percentage Change x Participation Rate)] and
2. the Maximum Redemption Amount
If the Final Price is less than or equal to the Initial Price but is greater
than or equal to the Barrier Price (that is, the Percentage Change is between 0% and ‑30.00%), then the investor will receive the principal amount only.
If the Final Price is less than the Barrier Price (that is, the Percentage Change is less than ‑30.00%), then the investor will
receive a cash payment equal to:
Principal Amount + (Principal Amount x Percentage Change)
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, expressed as a percentage, is calculated using the following formula:
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Initial Price:
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The closing price of the Reference Asset on the Trade Date.
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Final Price:
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The closing price of the Reference Asset on the Valuation Date.
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Participation Rate:
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150.00% (subject to the Maximum Redemption Amount).
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Maximum
Redemption Amount:
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172.15% multiplied by the principal amount.
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Barrier Percentage:
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30%
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Barrier Price:
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70% of the Initial Price
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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 Price is less than
the Barrier Price.
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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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 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 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.
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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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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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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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2%
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Payment at Maturity:
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$1,000 + [$1,000 x (2% x 150.00%)] = $1,000 + $30 = $1,030
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On a $1,000 investment, a Percentage Change of 2% results in a Payment at Maturity of $1,030, a return of 3.00% on the Notes.
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Example 2 —
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Calculation of the Payment at Maturity where the Percentage Change is positive (and the Payment at Maturity is subject to the Maximum Redemption Amount).
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Percentage Change:
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80%
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Payment at Maturity:
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$1,000 + [$1,000 x (80% x 150.00%)] = $1,000 + $1,200 = $2,200
However, the Maximum Redemption Amount is $1,721.50. Accordingly, you will receive a Payment at Maturity equal to $1,721.50 per $1,000 in principal amount of the Notes.
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On a $1,000 investment, a Percentage Change of 80% results in a Payment at Maturity of $1,721.50, a return of 72.15% on the Notes.
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Example 3 —
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Calculation of the Payment at Maturity where the Percentage Change is negative (but not by more than the 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 is negative BUT not by more than the Barrier Percentage, then the Payment at Maturity will equal the principal amount.
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On a $1,000 investment, a Percentage Change of -20% results in a Payment at Maturity of $1,000, a return of 0% on the Notes.
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Example 4 —
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Calculation of the Payment at Maturity where the Percentage Change is negative (by more than the Barrier Percentage).
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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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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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On a $1,000 investment, a Percentage Change of -40% results in a Payment at Maturity of $600, a return of -40% on the Notes.
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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Hypothetical Percentage
Change
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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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70.00%
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172.150%
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$1,721.50
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60.00%
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172.150%
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$1,721.50
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50.00%
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172.150%
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$1,721.50
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48.10%
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172.150%
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$1,721.50
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40.00%
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160.000%
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$1,600.00
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30.00%
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145.000%
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$1,450.00
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20.00%
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130.000%
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$1,300.00
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10.00%
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115.000%
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$1,150.00
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0.00%
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100.000%
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$1,000.00
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-10.00%
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100.000%
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$1,000.00
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-20.00%
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100.000%
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$1,000.00
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-30.00%
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100.000%
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$1,000.00
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-30.01%
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69.990%
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$699.90
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-40.00%
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60.000%
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$600.00
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-50.00%
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50.000%
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$500.00
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-60.00%
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40.000%
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$400.00
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-70.00%
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30.000%
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$300.00
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-80.00%
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20.000%
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$200.00
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-90.00%
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10.000%
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$100.00
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-100.00%
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0.000%
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$0.00
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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You May Lose All or a Portion 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 price of the Reference Asset. If the Final Price is less than the Barrier Price, you will lose 1% of the principal amount of your Notes for each 1% that the Final Price is less than the
Initial Price.
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The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity — There will be no periodic interest payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which
could be negative, may be less than the return you could earn on other investments. Even if your return is positive, your return may be less than the return you would earn if you purchased one of our conventional senior interest bearing
debt securities.
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Your Potential Payment at Maturity Is Limited — The Notes will provide less opportunity to participate in the appreciation
of the Reference Asset than an investment in a security linked to the Reference Asset providing full participation in the appreciation, because the Payment at Maturity will not exceed the Maximum Redemption Amount. Accordingly, your
return on the Notes may be less than your return would be if you made an investment in a security directly linked to the positive performance of the Reference Asset.
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Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market Value of the Notes — The Notes are our senior unsecured debt securities. As a result, your receipt of the amount due on the Maturity Date is dependent upon our ability to repay our obligations at that time. This will be the case even
if the price of the Reference Asset increases after the Trade Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments — The Payment at
Maturity and the Valuation Date are subject to adjustment as described in the product prospectus supplement. For a description of what constitutes a market disruption event as well as the consequences of that market disruption event, see
“General Terms of the Notes—Market Disruption Events” in the product prospectus supplement.
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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 ask prices for your Notes in any secondary market could be substantial.
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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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 price of the
Reference Asset, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to the public of the underwriting discount, the structuring 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 structuring fee or the hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined 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 Asset or the securities held by 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 price of the Reference Asset, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with the
issuers of the securities held by the Reference Asset, including making loans to or providing advisory services. These services could include investment banking and merger and acquisition advisory services. These activities may present a
conflict between our or one or more of our affiliates’ obligations and your interests as a holder of the Notes. Moreover, we and our affiliates may have published, and in the future expect to publish, research reports with respect to the
Reference Asset. This research is modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. Any of these activities by us or one or more of
our affiliates may affect the price of the Reference Asset, and, therefore, the market value of the Notes.
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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An Investment in the Notes Is Subject to Risks Associated with the Gold and Silver Mining Industries — All or substantially all of the stocks held by the Reference Asset
are issued by gold or silver mining companies. As a result, the stocks that will determine the performance of the Reference Asset are concentrated in one sector. Although an investment in the Notes will not give holders any ownership or
other direct interests in the stocks held by the Reference Asset, the return on the Notes will be subject to certain risks associated with a direct equity investment in gold or silver mining companies.
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The Notes Are Subject to Exchange Rate Risk — Because certain securities held by the Reference Asset are traded in currencies other than U.S. dollars, and the Notes are
denominated in U.S. dollars, the amount payable on the Notes at maturity may be exposed to fluctuations in the exchange rate between the U.S. dollar and each of the currencies in which those securities are denominated. These changes in
exchange rates may reflect changes in various non-U.S. economies that in turn may affect the payment on the Notes at maturity. An investor’s net exposure will depend on the extent to which the currencies in which the relevant securities are
denominated either strengthen or weaken against the U.S. dollar and the relative weight of each security.
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The Reference Asset and its Underlying Index Are Different — The performance of the Reference Asset may not exactly
replicate the performance of its underlying index, because the Reference Asset will reflect transaction costs and fees that are not included in the calculation of its underlying index. It is also possible that the performance of the
Reference Asset may not fully replicate or may in certain circumstances diverge significantly from the performance of its underlying index due to the temporary unavailability of certain securities in the secondary market, the performance
of any derivative instruments contained in the Reference Asset, or due to other circumstances. The Reference Asset may use futures contracts, options, swap agreements, repurchase agreements and other instruments in seeking performance
that corresponds to its underlying index and in managing cash flows.
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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The Reference Asset Is Subject to Management Risk — The Reference Asset is subject to management risk, which is the risk
that the investment strategy of the Reference Asset's adviser (the “Adviser”), the implementation of which is subject to a number of constraints, may not produce the intended results. For example, the Adviser may invest a portion of the
Reference Asset's assets in securities not included in the relevant industry or sector but which the Adviser believes will help the Reference Asset track the relevant industry or sector.
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Adjustments to the Reference Asset Could Adversely Affect the Notes — The Adviser is responsible for calculating and
maintaining the Reference Asset. The Adviser can add, delete or substitute the stocks comprising the Reference Asset. The Adviser may make other methodological changes that could change the price of the Reference Asset at any time.
Consequently, any of these actions could adversely affect the amount payable at maturity and/or the market value of the Notes.
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Changes that Affect the Underlying Index Will Affect the Market Value of the Notes and the Amount You Will Receive at Maturity — The policies of the sponsor of the
underlying index (the “Index Sponsor”), concerning the calculation of the underlying index, additions, deletions or substitutions of the components of the underlying index and the manner in which changes affecting those components, such as
stock dividends, reorganizations or mergers, may be reflected in the underlying index and, therefore, could affect the price of the Reference Asset, the amount payable on the Notes at maturity, and the market value of the Notes prior to
maturity. The amount payable on the Notes and their market value could also be affected if the Index Sponsor changes these policies, for example, by changing the manner in which it calculates the underlying index, or if the sponsor
discontinues or suspends the calculation or publication of the underlying index.
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We Have No Affiliation with the Index Sponsor and Will Not Be Responsible for Any Actions Taken by the Index Sponsor — The
Index Sponsor is not our affiliate and will not be involved in the offering of the Notes in any way. Consequently, we have no control over the actions of the Index Sponsor, including any actions of the type that would require the
calculation agent to adjust the payment to you at maturity. The Index Sponsor has no obligation of any sort with respect to the Notes. Thus, the Index Sponsor has no obligation to take your interests into consideration for any reason,
including in taking any actions that might affect the value of the Notes. None of our proceeds from the issuance of the Notes will be delivered to the Index Sponsor.
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We and Our Affiliates Do Not Have Any Affiliation with the Adviser and Are Not Responsible for its Public Disclosure of Information — We and our affiliates are not affiliated with the Adviser in any way and have no ability to control or predict its actions, including any errors in or discontinuance of disclosure regarding its methods or policies
relating to the Reference Asset. The Adviser is not involved in the offering of the Notes in any way and has no obligation to consider your interests as an owner of the Notes in taking any actions relating to the Reference Asset that
might affect the value of the Notes. Neither we nor any of our affiliates has independently verified the adequacy or accuracy of the information about the Adviser or the Reference Asset contained in any public disclosure of information.
You, as an investor in the Notes, should make your own investigation into the Reference Asset.
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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You Will Not Have Any Rights to the Securities Included in the Reference Asset — As a holder of the Notes, you will not
have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities included in the Reference Asset would have. The Final Price will not reflect any dividends paid on the securities
included in the Reference Asset, and accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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(1) |
the weight of any single component security may not account for more than 20% of the total value of the Underlying Index;
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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(2) |
the component securities are split into two subgroups – large and small, which are ranked by their unadjusted market capitalization weight in the Underlying Index. Large securities are defined as having a
starting index weight greater than or equal to 5%. Small securities are defined as having a starting index weight below 5%; and
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(3) |
the final aggregate weight of those component securities which individually represent more than 4.5% of the total value of the Underlying Index may not account for more than 45% of the total index value.
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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Barrier Enhanced Return Notes Linked to
the VanEck® Gold Miners ETF
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