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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$
Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return Index,
Due August 4, 2026
Royal Bank of Canada
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Reference Asset
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Initial Level*
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Buffer Level
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S&P 500® Futures Excess Return Index (“SPXFP”)
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65.00% of the Initial Level
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If the Final Level of the Reference Asset is greater than the Initial Level, the Notes will pay at maturity a return equal to 109.00% of the Percentage Change, subject to the Maximum Redemption Amount of
160.00% of the principal amount of the Notes.
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If the Final Level is less than or equal to the Initial Level, but is greater than or equal to the Buffer Level, the Notes will pay the principal amount at maturity.
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If the Final Level is less than the Buffer Level, investors will lose approximately 1.5385% of the principal amount for each 1% that the Final Level has decreased by more than 35% from the Initial
Level.
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Any payments on the Notes are subject to our credit risk.
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The Notes do not pay interest.
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The Notes will not be listed on any securities exchange.
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Per Note
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Total
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Price to public(1)
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100.00%
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$
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Underwriting discounts and commissions(1)
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2.95%
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$
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Proceeds to Royal Bank of Canada
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98.05%
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$
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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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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S&P 500® Futures Excess Return Index (“SPXFP”)
The Reference Asset measures the performance of a futures contract and not the performance of equity securities. Specifically, the Reference Asset measures the
performance of the nearest maturing quarterly E-mini S&P 500® futures contract trading on the Chicago Mercantile Exchange (the "CME"), not the performance of the S&P 500® Index (the "Underlying Index"), to
which that futures contract is related. See "Risk Factors — Risks Relating to the Reference Asset — The Notes Are Linked to the Performance of the Reference Asset Comprised of an Equity Futures Contract, Which Is Different From Linking
to the Performance of the Underlying Index" below.
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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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July 30, 2026
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Maturity Date:
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August 4, 2026, 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 is greater than the Initial Level (that is, the Percentage Change is positive), then
the investor will receive an amount per $1,000 principal amount per Note equal to the lesser of:
1. Principal Amount +
[Principal Amount x (Percentage Change x Participation Rate)] and
2. the Maximum
Redemption Amount
If the Final Level is less than or equal to the Initial Level but is greater than or equal to the Buffer Level (that is, the Percentage Change is between 0% and ‑35.00%), then the investor will receive the principal amount only.
If the Final Level is less than the Buffer Level (that is, the Percentage Change is less than ‑35.00%),
then the investor will receive a cash payment equal to:
Principal Amount + [Principal Amount x (Percentage Change + Buffer Percentage) x Downside Multiplier]
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 Level:
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The closing level of the Reference Asset on the Trade Date.
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Final Level:
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The closing level of the Reference Asset on the Valuation Date.
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Participation Rate:
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109.00% (subject to the Maximum Redemption Amount).
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Maximum Redemption
Amount:
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160.00% multiplied by the principal amount.
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Buffer Percentage:
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35.00%
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Buffer Level:
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65.00% of the Initial Level
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Downside Multiplier:
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100/65.00, which is approximately 1.5385
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Principal at Risk:
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The Notes are NOT principal protected. You may lose all or a substantial portion of your principal amount
at maturity if the Final Level is less than the Buffer Level.
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Calculation Agent:
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RBCCM
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U.S. Tax Treatment:
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By purchasing a Note, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat the Notes
as a pre-paid 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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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Example 1 —
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Calculation of the Payment at Maturity where the Percentage Change is positive.
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Percentage Change:
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2%
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Payment at Maturity:
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$1,000 + [$1,000 x (2% x 109.00%)] = $1,000 + $21.80 = $1,021.80
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On a $1,000 investment, a Percentage Change of 2% results in a Payment at Maturity of $1,021.80, a return of 2.18% 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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70%
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Payment at Maturity:
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$1,000 + [$1,000 x (70% x 109.00%)] = $1,000 + $763 = $1,763
However, the Maximum Redemption Amount is $1,600. Accordingly, you will receive a Payment at Maturity equal to $1,600 per $1,000 in principal amount of the Notes.
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On a $1,000 investment, a Percentage Change of 70% results in a Payment at Maturity of $1,600, a return of 60.00% on the Notes.
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Example 3 —
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Calculation of the Payment at Maturity where the Percentage Change is negative (but not by more than the Buffer Percentage).
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Percentage Change:
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-30%
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Payment at Maturity:
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At maturity, if the Percentage Change is negative BUT not by more than the Buffer Percentage, then the Payment at Maturity will equal the principal amount.
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On a $1,000 investment, a Percentage Change of -30% 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 Buffer 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% + 35%) x (100 ÷ 65)] = $923.08
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On a $1,000 investment, a Percentage Change of -40% results in a Payment at Maturity of $923.08, a return of -7.69% on the Notes.
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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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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160.000%
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$1,600.00
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60.00%
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160.000%
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$1,600.00
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55.046%
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160.000%
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$1,600.00
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50.00%
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154.500%
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$1,545.00
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40.00%
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143.600%
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$1,436.00
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30.00%
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132.700%
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$1,327.00
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20.00%
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121.800%
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$1,218.00
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10.00%
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110.900%
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$1,109.00
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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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-35.00%
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100.000%
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$1,000.00
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-40.00%
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92.308%
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$923.08
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-50.00%
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76.923%
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$769.23
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-60.00%
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61.538%
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$615.38
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-70.00%
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46.154%
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$461.54
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-80.00%
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30.769%
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$307.69
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-90.00%
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15.385%
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$153.85
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-100.00%
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0.000%
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$0.00
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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You May Not Receive the Full Principal Amount at Maturity – Investors in the Notes could lose all or a substantial
portion of their principal amount if there is a decline in the level of the Reference Asset. You will lose approximately 1.5385% of the principal amount of the Notes for each 1% that the Final Level is less than the Initial Level by
more than the Buffer Percentage.
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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 return represented by the Maximum
Redemption Amount if the Reference Asset increases in value. Accordingly, your return on the Notes may be less than your return would be if you made an investment in a security directly linked to the positive performance of the
Reference Asset.
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Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market Value of the Notes — The Notes are our senior unsecured debt securities. As a result, your receipt of the amount due on the maturity date is dependent upon our ability to repay our obligations at that time. This will be the case
even if the level of the Reference Asset increases after the Trade Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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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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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
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only, Calculated as of the Time the Terms
of the Notes Are Set — The initial estimated value of the Notes will be based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the
derivative embedded in the terms of the Notes. See “Structuring the Notes” below. Our estimate will be based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and
the expected term of the Notes. These assumptions are based on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different
than we do.
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Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading
activities related to the Reference Asset that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and
our affiliates will have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they
influence the level of the Reference Asset, could be adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with companies included in the
Reference Asset, including making loans to or providing advisory services. These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or
more of our affiliates’ obligations and your interests as a holder of the Notes. Moreover, we and our affiliates may have published, and in the future expect to publish, research reports with respect to the Reference Asset. This
research is modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. Any of these activities by us or one or more of our affiliates may
affect the level of the Reference Asset, and, therefore, the market value of the Notes.
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The Notes Are Linked to the Performance of the Reference Asset Comprised of an Equity Futures Contract, Which Is Different From Linking to the Performance of the Underlying
Index — The return on the Notes will be related to the performance of an equity futures contract, and not to the performance of the Underlying Index or to an underlying asset comprised of equity securities. On a given day, a
“futures price” is the price at which market participants may agree to buy or sell the asset underlying a futures contract in the future, and the “spot price” is the current price of such underlying asset for immediate delivery. A
variety of factors can lead to a disparity between the price of a futures
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Negative Roll Yields Will Adversely Affect the Level of the Reference Asset Over Time and Therefore the Payment at Maturity — The Reference Asset is linked to the E-mini S&P 500 futures contract rather than the Underlying Index. Futures contracts normally specify a certain date for cash settlement of a financial future (such as a futures contract
on a securities index) or delivery of the underlying physical commodity for a deliverable future. As the exchange-traded futures contract that comprises the Reference Asset approaches expiration, it is replaced by a similar contract
that has a later expiration. Thus, for example, a futures contract purchased and held in September may specify a December expiration. As time passes, the contract expiring in December may be replaced by a contract for delivery in
March. This process is referred to as “rolling.”
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The Reference Asset Is an Excess Return Index, Not a Total Return Index — The Reference Asset is an excess return
index, not a total return index. An "excess return" index reflects the "price yield" generated by a change in the price of the futures contract comprising the index and the "roll yield" that is generated when the first expiring
futures contract is rolled into the second expiring futures contract, but it does not include interest earned on collateral that a hypothetical investor must provide to secure its performance under the futures contract. By contrast, a
“total return” index, reflects interest earned on a hypothetical fully collateralized contract position, in addition to the price yield and the roll yield.
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The Futures Contract Comprising the Reference Asset Is Linked to a Price Return Index — The Notes are linked to the
Reference Asset, which is comprised of a futures contract linked to the Underlying Index. The Underlying Index is a "price return" index, which means it reflects changes in the prices of its constituent stocks without taking account
of the value of dividends paid on those stocks. As a result, an investor in the Notes will not benefit from dividends paid on the constituent stocks of the Underlying Index.
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Owning the Notes Is Not the Same as Directly Owning the Securities or Futures Contract Directly or Indirectly Tracked by the Reference Asset — Your return on the Notes
will not reflect the return you would have realized on a direct investment in the E-mini S&P 500 futures contract currently listed for trading on the CME or any of the stocks
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Suspension or Disruptions of Market Trading in Stocks or Futures Contracts May Adversely Affect the Value of the Notes — Securities markets and futures markets are subject to temporary distortions or other disruptions due to various factors, including the lack of liquidity in the markets, the participation of speculators, and government
regulation and intervention. In addition, futures markets typically have regulations that limit the amount of fluctuation in some futures contract prices that may occur during a single business day. These limits are generally referred
to as “daily price fluctuation limits,” and the maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “limit price.” Once the limit price has been reached in a particular contract, no
trades may be made at a price beyond the limit, or trading may be limited for a specified period of time. Limit prices have the effect of precluding trading in a particular contract or forcing the liquidation of contracts at
potentially disadvantageous times or prices. These circumstances could affect the level of the Reference Asset and, therefore, could adversely affect the payments on the Notes.
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Legal and Regulatory Changes Could Adversely Affect the Return on and Value of the Notes — Futures contracts and
options on futures contracts are subject to extensive statutes, regulations, and margin requirements, many of which have been subject to recent changes. The Commodity Futures Trading Commission, and the exchanges on which futures
contracts trade are authorized to take extraordinary actions in the event of a market emergency, including, for example, the implementation of position limits or higher margin requirements, the establishment of daily limits and the
suspension of trading. Furthermore, certain exchanges have regulations that limit the amount of fluctuations in futures contract prices that may occur during a single five-minute trading period. Any legal or regulatory changes could
impact the level of the Reference Asset, and the payments on 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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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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Geared Buffered Enhanced Return Notes
Linked to the S&P 500® Futures Excess Return
Index
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