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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Royal Bank of Canada | NYSE:RY | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.79 | -0.76% | 103.60 | 104.06 | 102.44 | 103.69 | 597,137 | 01:00:00 |
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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 13, 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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$
Buffered Return Notes
Linked to the MSCI Emerging Markets Index,
Due May 22, 2025
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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MSCI Emerging Markets Index (“MXEF”)
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85.00% 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 100.00% of the Percentage Change, subject to the Maximum Redemption Amount of
113.65% 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 1% of the principal amount for each 1% that the Final Level has decreased by more than 15% 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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0.75%
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$
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Proceeds to Royal Bank of Canada
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99.25%
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$
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Buffered Return Notes Linked to the MSCI
Emerging Markets 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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MSCI Emerging Markets Index (“MXEF”)
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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 16, 2024
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Issue Date:
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May 21, 2024
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Valuation Date:
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May 19, 2025
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Maturity Date:
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May 22, 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 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 ‑15.00%), 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 ‑15.00%), then the investor
will receive a cash payment equal to:
Principal Amount + [Principal Amount x (Percentage Change + Buffer Percentage)]
In this case, you could lose 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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100.00% (subject to the Maximum Redemption Amount).
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Maximum Redemption
Amount:
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113.65% multiplied by the principal amount.
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Buffer Percentage:
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15.00%
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Buffer Level:
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85.00% of the Initial Level
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Principal at Risk:
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The Notes are NOT principal protected. You may lose 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,
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
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“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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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
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Buffered Return Notes Linked to the MSCI
Emerging Markets 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 100.00%)] = $1,000 + $20 = $1,020
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On a $1,000 investment, a Percentage Change of 2% results in a Payment at Maturity of $1,020, a return of 2.00% 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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20%
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Payment at Maturity:
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$1,000 + [$1,000 x (20% x 100.00%)] = $1,000 + $200 = $1,200
However, the Maximum Redemption Amount is $1,136.50. Accordingly, you will receive a Payment at Maturity equal to $1,136.50 per $1,000 in principal amount of the
Notes.
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On a $1,000 investment, a Percentage Change of 20% results in a Payment at Maturity of $1,136.50, a return of 13.65% 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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-10%
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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 -10% 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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-20%
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Payment at Maturity:
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$1,000 + [$1,000 x (-20% + 15%)] = $1,000 - $50 = $950
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In this case, on a $1,000 investment, a Percentage Change of -20% results in a Payment at Maturity of $950, a return of -5% on the Notes.
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Buffered Return Notes Linked to the MSCI
Emerging Markets 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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50.00%
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113.65%
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$1,136.50
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40.00%
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113.65%
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$1,136.50
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30.00%
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113.65%
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$1,136.50
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20.00%
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113.65%
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$1,136.50
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13.65%
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113.65%
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$1,136.50
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10.00%
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110.00%
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$1,100.00
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5.00%
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105.00%
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$1,050.00
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2.00%
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102.00%
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$1,020.00
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0.00%
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100.00%
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$1,000.00
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-10.00%
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100.00%
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$1,000.00
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-15.00%
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100.00%
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$1,000.00
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-20.00%
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95.00%
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$950.00
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-30.00%
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85.00%
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$850.00
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-40.00%
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75.00%
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$750.00
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-50.00%
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65.00%
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$650.00
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-60.00%
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55.00%
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$550.00
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-70.00%
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45.00%
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$450.00
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-80.00%
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35.00%
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$350.00
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-90.00%
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25.00%
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$250.00
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-100.00%
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15.00%
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$150.00
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
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• |
You May Lose Some or a Significant Portion of the Principal Amount at Maturity – Investors in the Notes could lose a
substantial portion of their principal amount if there is a decline in the level of the Reference Asset. You will lose 1% of the principal amount of the Notes for each 1% that the Final Level is less than the Initial Level by more
than 15%.
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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 minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary
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Buffered Return Notes Linked to the MSCI
Emerging Markets 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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An Investment in the Notes Is Subject to Risks Relating to Non-U.S. Securities Markets — Because foreign companies or foreign equity securities included in the
Reference Asset are publicly traded in the applicable foreign countries and are denominated in non-U.S. currencies, an investment in the Notes involves particular risks. For example, the non-U.S. securities markets may be more
volatile than the U.S. securities markets, and market developments may affect these markets differently from the U.S. or other securities markets. Direct or indirect government intervention to stabilize the securities markets outside
the U.S., as well as cross-shareholdings in certain companies, may affect trading prices and trading volumes in those markets. Also, the public availability of information
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
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An Investment in the Notes Is Subject to Risks Associated with Emerging Markets — Investments in securities linked
directly or indirectly to emerging market equity securities, such as the securities included in the MXEF, involve many risks, including, but not limited to: economic, social, political, financial and military conditions in the
emerging market; regulation by national, provincial, and local governments; less liquidity and smaller market capitalizations than exist in the case of many large U.S. companies; different accounting and disclosure standards; and
political uncertainties. Stock prices of emerging market companies may be more volatile and may be affected by market developments differently than U.S. companies. Government intervention to stabilize securities markets and
cross-shareholdings may affect prices and volume of trading of the securities of emerging market companies. Economic, social, political, financial and military factors could, in turn, negatively affect such companies’ value. These
factors could include changes in the emerging market government’s economic and fiscal policies, possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to the emerging market companies
or investments in their securities, and the possibility of fluctuations in the rate of exchange between currencies. Moreover, emerging market economies may differ favorably or unfavorably from the U.S. economy in a variety of ways,
including growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency. You should carefully consider the risks related to emerging markets, to which the Notes are susceptible, before
making a decision to invest in the Notes.
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Notes Linked to the Reference Asset Are Subject to Foreign Currency Exchange Rate Risk — The payment amount on the
Notes will be calculated based on the Reference Asset, and the prices of the applicable stocks are converted into U.S. dollars for purposes of calculating the level of the Reference Asset. As a result, investors in the Notes will be
exposed to currency exchange rate risk with respect to each of the currencies represented by the Reference Asset. An investor’s net exposure will depend on the extent to which the currencies represented by the Reference Asset
strengthen or weaken against the U.S. dollar and the relative weight of each relevant currency represented by the Reference Asset. If, taking into account such weight, the dollar strengthens against such currencies, the level of the
Reference Asset will be adversely affected and the amount payable, if any, at maturity of the Notes may be reduced.
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You Will Not Have Any Rights to the Securities Included in the Reference Asset — As a holder of the Notes, you will
not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities included in the Reference Asset would have. The Final Level will not reflect any dividends paid on the
securities included in the Reference Asset, and accordingly, any positive return on the Notes may be less than the potential positive return on those securities.
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
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◾ |
defining the equity universe;
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determining the market investable equity universe for each market;
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defining market capitalization size segments for each market;
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applying index continuity rules for the MSCI Standard Index;
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creating style segments within each size segment within each market; and
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classifying securities under the Global Industry Classification Standard (the “GICS”).
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Identifying Eligible Equity Securities: the equity universe initially looks at securities listed in any of the countries in the MSCI Global Index Series, which will be classified as either Developed Markets
(“DM”) or Emerging Markets
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
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◾ |
Classifying Eligible Securities into the Appropriate Country: each company and its securities (i.e., share classes) is classified in only one country. All securities in the Equity Universe classified into a
Developed Market make up the DM Equity Universe, while all securities in the Equity Universe classified into an Emerging Market make up the EM Equity Universe. Additionally, all securities in the Equity Universe classified into a
Frontier Market make up the FM Equity Universe.
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The security is classified in a country that meets the Foreign Listing Materiality Requirement, and
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The security’s foreign listing is traded on an eligible stock exchange of: a DM country if the security is classified in a DM country, a DM or an EM country if the security is classified in an EM country,
or a DM or an EM or a FM country if the security is classified in a FM country.
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Equity Universe Minimum Size Requirement: this investability screen is applied at the company level. In order to be included in a market investable equity universe,
a company must have the required minimum full market capitalization. This minimum full market capitalization is referred to as the Equity Universe Minimum Size Requirement. The Equity Universe Minimum Size Requirement applies to all
companies in all markets, Developed and Emerging, and is derived as follows: first, the companies in the DM Equity Universe are sorted in descending order of full market capitalization and the cumulative coverage of free
float-adjusted market capitalization of the DM Equity Universe is calculated at each company; second, when the free float-adjusted market capitalization coverage of 99% of the sorted Equity Universe is achieved, the full market
capitalization of the company at that point defines the Equity Universe Minimum Size Requirement. The rank of each company by descending order of full market capitalization within the DM Equity Universe is noted, and will be used in
determining the Equity Universe Minimum Size Requirement at the next rebalance.
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Equity Universe Minimum Free Float-Adjusted Market Capitalization Requirement: this investability screen is applied at the individual security level. To be eligible
for inclusion in a market investable equity universe, a
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
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• |
DM and EM Minimum Liquidity Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable
equity universe, a security must have adequate liquidity. The twelve-month and three-month Annual Traded Value Ratio (“ATVR”), a measure that mitigates the impact of extreme daily trading volumes and takes into account the free
float-adjusted market capitalization of securities, together with the three-month frequency of trading, are used to select securities with a sound long and short-term liquidity. A minimum liquidity level of 20% of three- and
twelve-month ATVR and 90% of three-month frequency of trading over the last four consecutive quarters is required for inclusion of a security in a market investable equity universe of a Developed Market, and a minimum liquidity level
of 15% of three- and twelve-month ATVR and 80% of three-month frequency of trading over the last four consecutive quarters is required for inclusion of a security in a market investable equity universe of an Emerging Market. Certain
securities in the MSCI China Equity Universe are not eligible for inclusion in the market investable equity universe unless they meet additional requirements as described further in the index methodology Only one listing per security
may be included in the market investable equity universe and priority rules described in the index methodology will be applied in instances when a security has two or more eligible listings that meet the above liquidity requirements.
A stock-price limit of $10,000 has been set, thus securities with stock prices above $10,000 fail the liquidity screening. The stock-price limit applies only for non-constituents of the MSCI Global Investable Markets Indexes and does
not apply to constituents of the MSCI Global Investable Market Indexes if the stock price surpasses the $10,000 threshold.
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Global Minimum Foreign Inclusion Factor Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market
investable equity universe, a security’s Foreign Inclusion Factor (“FIF”) must reach a certain threshold. The FIF of a security is defined as the proportion of shares outstanding that is available for purchase in the public equity
markets by international investors. This proportion accounts for the available free float of and/or the foreign ownership limits applicable to a specific security (or company). In general, a security must have an FIF equal to or
larger than 0.15 to be eligible for inclusion in a market investable equity universe. MSCI may make exceptions to this general rule in the limited cases where the exclusion of securities of a very large company would compromise the
Standard Index’s ability to fully and fairly represent the characteristics of the underlying market.
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• |
Minimum Length of Trading Requirement: this investability screen is applied at the individual security level. For an initial public offering (“IPO”) to be eligible
for inclusion in a market investable equity universe, the new issue must have started trading at least three months before the implementation of an index review (as described below). This requirement is applicable to small new issues
in all markets. Large IPOs are not subject to the minimum length of trading requirement and may be included in a market investable equity universe and the Standard Index outside of an index review.
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• |
Minimum Foreign Room Requirement: this investability screen is applied at the individual security level. For a security that is subject to a foreign ownership limit
to be eligible for inclusion in a market investable equity universe, the proportion of shares still available to foreign investors relative to the maximum allowed (referred to as “foreign room”) must be at least 15%. The index
methodology applies an adjustment to securities within the market investable equity universe that have foreign room less than 25%.
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• |
Financial Reporting Requirement: this investability screen is applied at the company level.
|
• |
Investable Market Index (Large + Mid + Small);
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• |
Standard Index (Large + Mid);
|
• |
Large Cap Index;
|
• |
Mid Cap Index; or
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
|
• |
Small Cap Index.
|
• |
defining the market coverage target range for each size segment;
|
• |
determining the global minimum size range for each size segment;
|
• |
determining the market size-segment cutoffs and associated segment number of companies;
|
• |
assigning companies to the size segments; and
|
• |
applying final size-segment investability requirements.
|
◾ |
updating the indices on the basis of a fully refreshed equity universe;
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◾ |
taking buffer rules into consideration for migration of securities across size and style segments; and
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
|
◾ |
updating FIFs and Number of Shares (“NOS”).
|
◾ |
including significant new eligible securities (such as IPOs that were not eligible for earlier inclusion) in the Index;
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◾ |
allowing for significant moves of companies within the Size Segment Indices, using wider buffers than in the SAIR; and
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◾ |
reflecting the impact of significant market events on FIFs and updating NOS.
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
|
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
|
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
|
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
|
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Buffered Return Notes Linked to the MSCI
Emerging Markets Index
|
1 Year Royal Bank of Canada Chart |
1 Month Royal Bank of Canada Chart |
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