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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 | |
---|---|---|---|---|---|---|---|---|
1.40 | 1.36% | 104.61 | 104.71 | 103.30 | 103.50 | 561,560 | 00:58:01 |
ISSUER FREE WRITING PROSPECTUS
Filed Pursuant to Rule 433
Registration Statement No. 333-227001
Dated November 25, 2020
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Investment Description
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Features
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Key Dates1
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❑ |
Contingent Coupon — We will pay a quarterly Contingent Coupon payment if the closing price of the Underlying on the applicable Coupon Observation Date is greater than
or equal to the Coupon Barrier. Otherwise, no coupon will be paid for the quarter.
|
❑ |
Automatically Callable — We will automatically call the Notes and pay you the principal amount of your Notes plus the Contingent Coupon otherwise due for the
applicable quarter if the closing price of the Underlying on any quarterly Call Observation Date (beginning 12 months after the Trade Date) is greater than or equal to the Initial Price. If the Notes are not called, investors will have
the potential for downside equity market risk at maturity.
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❑
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Contingent Repayment of Principal at Maturity — If by maturity the Notes have not been called and the price of the Underlying does
not close below the Downside Threshold on the Final Valuation Date, we will repay your principal amount per Note at maturity. However, if the closing price of the Underlying closes below the Downside Threshold on the Final Valuation
Date, we will pay less than the principal amount, if anything, resulting in a loss on your initial investment that is proportionate to the decline in the price of the Underlying from the date that the Initial Price was set to the
Final Valuation Date. The contingent repayment of principal only applies if you hold the Notes until maturity. Any payment on the Notes, including any repayment of principal, is subject to our creditworthiness.
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Trade Date1
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November 25, 2020
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Settlement Date1
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November 30, 2020
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Coupon Observation Dates2
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Quarterly (see page 6)
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Call Observation Dates2
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Quarterly (beginning in 12 months)
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(see page 6)
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Final Valuation Date2
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November 27, 2023
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Maturity Date2
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November 30, 2023
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1 |
Expected. If we make any change to the expected Trade Date and settlement date, the Coupon Observation Dates, the Call Observation Dates, the Final Valuation Date and/or the maturity date will be changed
so that the stated term of the Notes remains approximately the same.
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2
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Subject to postponement if a market disruption event occurs, as described under “General Terms of the Notes—Payment at Maturity” in the accompanying product prospectus
supplement no. UBS-TACYN-1.
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NOTICE TO INVESTORS: THE NOTES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. WE ARE NOT NECESSARILY OBLIGATED TO REPAY THE FULL PRINCIPAL AMOUNT OF THE NOTES AT MATURITY, AND
THE NOTES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE UNDERLYING. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING ONE OF OUR DEBT OBLIGATIONS. YOU SHOULD NOT PURCHASE THE NOTES IF YOU DO NOT UNDERSTAND OR ARE NOT
COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE NOTES.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “KEY RISKS" BEGINNING ON PAGE 7, THE RISKS DESCRIBED UNDER “RISK FACTORS” BEGINNING ON PAGE PS-5 OF THE PRODUCT
PROSPECTUS SUPPLEMENT NO. UBS-TACYN-1 AND UNDER ‘‘RISK FACTORS’’ BEGINNING ON PAGE S-1 OF THE PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY NOTES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT
THE MARKET VALUE OF, AND THE RETURN ON, YOUR NOTES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL INVESTMENT IN THE NOTES.
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Note Offering
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Underlying
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Ticker
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Contingent
Coupon Rate
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Initial Price
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Downside Threshold*
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Coupon Barrier*
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CUSIP
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ISIN
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IShares® MSCI
Emerging
Markets ETF
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EEM
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4.20% per annum
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$49.85
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$32.40, which is 65% of
the Initial Price
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$32.40, which is
65% of the Initial
Price
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78014M408
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US78014M4087
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Price to Public
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Fees and Commissions (1)
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Proceeds to Us
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|||
Offering of the Notes
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Total
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Per Note
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Total
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Per Note
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Total
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Per Note
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Notes linked to the shares of iShares® MSCI Emerging Markets ETF
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•
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$10.00
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•
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$0.125
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•
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$9.875
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Additional Information About Royal Bank of Canada and the Notes
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♦ |
Product prospectus supplement no. UBS-TACYN-1 dated October 3, 2018:
|
♦ |
Prospectus supplement dated September 7, 2018:
|
♦ |
Prospectus dated September 7, 2018:
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Investor Suitability
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♦ |
You fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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♦ |
You can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that may have the same downside market risk as an investment in the Underlying.
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♦ |
You believe the closing price of the Underlying will be greater than or equal to the Coupon Barrier on most or all of the Coupon Observation Dates (including the Final Valuation Date).
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♦ |
You are willing to make an investment whose return is limited to the applicable Contingent Coupon payments, regardless of any potential appreciation of the Underlying, which could be significant.
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♦ |
You do not seek guaranteed current income from this investment and are willing to forgo the dividends paid on the equity securities held by the Underlying.
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♦ |
You can tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations of the Underlying.
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♦ |
You are willing to invest in Notes for which there may be little or no secondary market, and you accept that the secondary market will depend in large part on the price, if any, at which RBC Capital Markets, LLC, which we refer to as
“RBCCM,” is willing to purchase the Notes.
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♦ |
You are willing to invest in the Notes based on the Contingent Coupon Rate specified on the cover page of this free writing prospectus.
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♦ |
You understand and accept the risks associated with the Underlying.
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♦ |
You are willing to invest in securities that may be called early and you are otherwise willing to hold such securities to maturity.
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♦
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You are willing to assume our credit risk for all payments under the Notes, and understand that if we default on our obligations, you may not receive any amounts due to you, including any repayment of
principal.
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♦ |
You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire initial investment.
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♦ |
You cannot tolerate a loss on your investment and require an investment designed to provide a full return of principal at maturity.
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♦ |
You are not willing to make an investment that may have the same downside market risk as an investment in the Underlying.
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♦ |
You believe that the price of the Underlying will decline during the term of the Notes and is likely to close below the Coupon Barrier on most or all of the Coupon Observation Dates and below the Downside Threshold on the Final
Valuation Date.
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♦ |
You seek an investment that participates in the full appreciation in the price of the Underlying or that has unlimited return potential.
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♦ |
You cannot tolerate fluctuations in the price of the Notes prior to maturity that may be similar to or exceed the downside fluctuations of the Underlying.
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♦ |
You are unwilling to invest in the Notes based on the Contingent Coupon Rate specified on the cover page of this free writing prospectus.
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♦ |
You seek guaranteed current income from this investment or prefer to receive the dividends paid on the securities composing the Underlying.
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♦ |
You do not understand or accept the risks associated with the Underlying.
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♦ |
You are unable or unwilling to hold securities that may be called early, or you are otherwise unable or unwilling to hold such securities to maturity, or you seek an investment for which there will be an active secondary market for
the Notes.
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♦
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You are not willing to assume our credit risk for all payments under the Notes, including any repayment of principal.
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Indicative Terms of the Notes1
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1
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Terms used in this free writing prospectus, but not defined herein, shall have the meanings ascribed to them in the prospectus or the prospectus supplement.
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2
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In the event we make any change to the expected Trade Date and settlement date, the other dates set forth above may be changed as well, including to ensure that the stated
term of the Notes remains approximately the same.
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Payment at Maturity:
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If the Notes are not called and the Final Price is greater than or equal to the Downside Threshold and the Coupon Barrier, we will pay you a cash payment per Note on
the maturity date equal to $10.00 plus the Contingent Coupon otherwise due on the maturity date.
If the Notes are not called and the Final Price is less than the Downside Threshold, we will pay you a cash payment on the maturity date of less than the principal
amount, if anything, resulting in a loss on your initial investment that is proportionate to the negative Underlying Return, equal to:
$10.00 + ($10.00 × Underlying Return)
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Underlying Return:
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Final Price – Initial Price
Initial Price
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Downside Threshold:
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65% of the Initial Price, as set forth on the cover page (as may be adjusted in the case of certain adjustment events as described under “General Terms of the
Notes—Anti-dilution Adjustments” in the product prospectus supplement).
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Coupon Barrier:
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65% of the Initial Price, as set forth on the cover page (as may be adjusted in the case of certain adjustment events as described under “General Terms of the
Notes—Anti-dilution Adjustments” in the product prospectus supplement).
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Closing Price:
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On any trading day, the last reported sale price of the Underlying on the principal national securities exchange in the U.S. on which it is listed for trading, as
determined by the calculation agent.
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Initial Price:
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The closing price of the Underlying on November 24, 2020, as set forth on the cover page.
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Final Price:
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The closing price of the Underlying on the Final Valuation Date, as determined by the calculation agent.
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Investment Timeline
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||
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November 24,
2020:
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The Initial Price, Downside Threshold and Coupon Barrier were determined. The Contingent Coupon Rate was set.
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Quarterly
(beginning
12
months after
the Trade
Date):
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If the closing price of the Underlying is greater than or equal to the Coupon Barrier on any Coupon Observation Date, we will pay you a Contingent Coupon payment on the applicable Coupon Payment Date.
The Notes will be called if the closing price of the Underlying on any Call Observation Date (beginning 12 months after the Trade Date) is greater than or equal to
the Initial Price. If the Notes are called, we will pay you a cash payment per Note equal to $10.00 plus the Contingent Coupon otherwise due on that date.
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||
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Maturity
Date:
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The Final Price is observed on the Final Valuation Date.
If the Notes have not been called and the Final Price is greater than or equal to the Downside Threshold (and the Coupon Barrier), we will repay the principal amount equal to $10 per Note plus the Contingent Coupon otherwise due on
the maturity date.
If the Notes have not been called and the Final Price is less than the Downside Threshold, we will pay less than the principal amount, if anything, resulting in a loss on your initial investment proportionate to the decline of the
Underlying, for an amount equal to:
$10 + ($10 × Underlying Return) per Note
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Coupon Observation Dates and Coupon Payment Dates*
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Coupon Observation Dates
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Coupon Payment Dates
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February 24, 2021
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March 1, 2021
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May 25, 2021
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May 27, 2021
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August 25, 2021
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August 27, 2021
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November 26, 2021(1)
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November 30, 2021(2)
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February 25, 2022(1)
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March 1, 2022(2)
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May 25, 2022(1)
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May 27, 2022(2)
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August 25, 2022(1)
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August 29, 2022(2)
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November 25, 2022(1)
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November 29, 2022(2)
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February 27, 2023(1)
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March 1, 2023(2)
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May 25, 2023(1)
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May 30, 2023(2)
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August 25, 2023(1)
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August 29, 2023(2)
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November 27, 2023(3)
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November 30, 2023(4)
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(1) |
These Coupon Observation Dates are also Call Observation Dates.
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(2) |
These Coupon Payment Dates are also Call Settlement Dates.
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(3) |
This is also the Final Valuation Date.
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(4) |
This is also the maturity date.
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Key Risks
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♦ |
Risk of Loss at Maturity — The Notes differ from ordinary debt securities in that we will not necessarily repay the full principal amount of the Notes at maturity. If the
Notes are not called, we will repay you the principal amount of your Notes in cash only if the Final Price of the Underlying is greater than or equal to the Downside Threshold, and will only make that payment at maturity. If the Notes are
not called and the Final Price is less than the Downside Threshold, you will lose some or all of your initial investment in an amount proportionate to the decline in the price of the Underlying.
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♦ |
The Contingent Repayment of Principal Applies Only at Maturity — If the Notes are not automatically called, you should be willing to hold your Notes to maturity. If you are
able to sell your Notes prior to maturity in the secondary market, if any, you may have to do so at a loss relative to your initial investment, even if the price of the Underlying is above the Downside Threshold.
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♦ |
You May Not Receive any Contingent Coupons —We will not necessarily make periodic Contingent Coupon payments on the Notes. If the closing price of the Underlying on a
Coupon Observation Date is less than the Coupon Barrier, we will not pay you the Contingent Coupon applicable to that Coupon Observation Date. If the closing price of the Underlying is less than the Coupon Barrier on each of the Coupon
Observation Dates, we will not pay you any Contingent Coupons during the term of, and you will not receive a positive return on, your Notes. Generally, this non-payment of the Contingent Coupon coincides with a period of greater risk of
principal loss on your Notes. Accordingly, if we do not pay the Contingent Coupon on the maturity date, you will incur a loss of principal, because the Final Price will be less than the Downside Threshold.
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♦ |
The Call Feature and the Contingent Coupon Feature Limit Your Potential Return — The return potential of the Notes is limited to the pre-specified Contingent Coupon Rate,
regardless of the appreciation of the Underlying. In addition, the total return on the Notes will vary based on the number of Coupon Observation Dates on which the Contingent Coupon becomes payable prior to maturity or an automatic call.
Further, if the Notes are called due to the automatic call feature, you will not receive any Contingent Coupons or any other payment in respect of any Coupon Observation Dates after the applicable Call Settlement Date. Since the Notes could
be called as early as one year after the issue date of the Notes, the total return on the Notes could be limited. If the Notes are not called, you may be subject to the full downside performance of the Underlying even though your potential
return is limited to the Contingent Coupon Rate. Generally, the longer the Notes are outstanding, the less likely it is that they will be automatically called due to the decline in the price of the Underlying and the shorter time remaining
for the price of the Underlying to recover. As a result, the return on an investment in the Notes could be less than the return on a direct investment in the Underlying or on a similar security that allows you to participate in the
appreciation of the price of the Underlying.
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♦ |
The Contingent Coupon Rate Per Annum Payable on the Notes Will Reflect in Part the Volatility of the Underlying, and May Not Be Sufficient to Compensate You for the Risk of Loss
at Maturity — “Volatility” refers to the frequency and magnitude of changes in the price of the Underlying. The greater the volatility of the Underlying, the more likely it is that the price of that equity could close below the
Downside Threshold on the Final Valuation Date. This risk will generally be reflected in a higher Contingent Coupon Rate for the Notes than the rate payable on our conventional debt securities with a comparable term. However, while the
Contingent Coupon Rate will be set on the Trade Date, the Underlying’s volatility can change significantly over the term of the Notes, and may increase. The price of the Underlying could fall sharply as of the Final Valuation Date, which
could result in missed Contingent Coupon payments and a significant loss of your principal.
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♦ |
The Notes Are Subject to Reinvestment Risk — The Notes will be called automatically if the closing price of the Underlying is greater than or equal to the Initial Price on
any Call Observation Date (beginning 12 months after the Trade Date). In the event that the Notes are called prior to maturity, there is no guarantee that you will be able to reinvest the proceeds from an investment in the Notes at a
comparable rate of return for a similar level of risk. To the extent you are able to reinvest your proceeds in an investment comparable to the Notes, you will incur transaction costs and the original issue price for such an investment is
likely to include certain built in costs such as dealer discounts and hedging costs.
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♦ |
The Notes Are Subject to Our Credit Risk — The Notes are subject to our credit risk, and our credit ratings and credit spreads may
adversely affect the market value of the Notes. Investors are dependent on our ability to pay all
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♦ |
The Notes Will Be Subject to Risks, Including Non-Payment in Full, Under Canadian Bank Resolution Powers — Under Canadian bank resolution powers, the Canada Deposit Insurance Corporation ("CDIC") may,
in circumstances where we have ceased, or are about to cease, to be viable, assume temporary control or ownership over us and may be granted broad powers by one or more orders of the Governor in Council (Canada), including the power to
sell or dispose of all or a part of our assets, and the power to carry out or cause us to carry out a transaction or a series of transactions the purpose of which is to restructure our business. See “Description of Debt
Securities—Canadian Bank Resolution Powers” in the accompanying prospectus for a description of the Canadian bank resolution powers, including the bail-in regime. If the CDIC were to take action under the Canadian bank resolution powers
with respect to us, holders of the Notes could be exposed to losses.
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♦ |
The Initial Estimated Value of the Notes Will Be Less than the Price to the Public — The initial estimated value for the Notes that will be set forth in the final pricing
supplement for the Notes, will be less than the public offering price you pay for the Notes and does not represent a minimum price at which we, RBCCM or any of our other 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 Underlying, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to public of the underwriting discount, and our estimated profit and the 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 the price to public, as any such sale
price would not be expected to include the underwriting discount and our estimated profit and the costs relating to our hedging of the Notes. In addition, any price at which you may sell the Notes is likely to reflect customary bid-ask
spreads for similar trades. In addition to bid-ask spreads, the value of the Notes determined for any secondary market price is expected to be based on a secondary market rate rather than the internal borrowing rate used to price the Notes
and determine the initial estimated value. As a result, the secondary market price will be less than if the internal borrowing 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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|
♦ |
Our Initial Estimated Value of the Notes Is an Estimate Only, Calculated as of the Time the Terms of the Notes Are Set — The initial estimated value of the Notes is 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 is 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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♦ |
Owning the Notes Is Not the Same as Owning the Underlying or the Stocks Comprising the Underlying or the Underlying’s Underlying Index — The return on your Notes may not
reflect the return you would realize if you actually owned the Underlying or stocks included in the Underlying or the Underlying’s underlying index. As a holder of the Notes, you will not have voting rights or rights to receive dividends or
other distributions or other rights that holders of the Underlying or these stocks would have, and any such dividends will not be incorporated in the determination of the Underlying Return.
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♦ |
The Policies of the Underlying’s Investment Adviser
Could Affect the Amount Payable on the Notes and Their Market Value — The policies of the Underlying’s investment adviser concerning the management of the Underlying, additions, deletions or
substitutions of the securities held by the Underlying could affect the market price of shares of the Underlying and, therefore, the amounts payable on the Notes 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 Underlying investment adviser changes these policies, for example, by changing the manner in which it manages the Underlying, or if the Underlying investment adviser
discontinues or suspends maintenance of the Underlying, in which case it may become difficult to determine the market value of the Notes. The Underlying's investment adviser has no connection
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♦ |
An Investment in the Notes is Subject to Risks Associated with Foreign Securities Markets — Because foreign companies or foreign equity securities held by the EEM are
publicly traded in the applicable foreign countries and trade in currencies other than U.S. dollars, investments in the Notes involve particular risks. For example, the foreign securities markets may be more volatile than the U.S.
securities markets, and market developments may affect these markets differently from the United States or other securities markets. Direct or indirect government intervention to stabilize the securities markets outside the United States,
as well as cross-shareholdings in certain companies, may affect trading prices and trading volumes in those markets. Also, the public availability of information concerning the foreign issuers may vary depending on their home jurisdiction
and the reporting requirements imposed by their respective regulators. In addition, the foreign issuers may be subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to United
States reporting companies.
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♦ |
An Investment in the Notes is Subject to Emerging Markets Risk — Investments in securities linked directly or indirectly to emerging market equity securities, such as the
EEM, 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 highly susceptible, before making a decision to invest in the Notes.
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♦ |
Exchange Rate Risk — The share price of the EEM will fluctuate based in large part upon its net asset value, which will in turn depend in part upon changes in the value of
the currencies in which the stocks held by the EEM are traded. Accordingly, investors in the Notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the stocks held by the EEM are traded. An
investor’s net exposure will depend on the extent to which these currencies strengthen or weaken against the U.S. dollar. If the dollar strengthens against these currencies, the net asset value of the EEM will be adversely affected and the
price of the EEM, and consequently, the market value of the Notes may decrease.
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♦ |
The Correlation Between the Performance of the Underlying and the Performance of the Underlying Index May Be Imperfect — The performance of the Underlying is linked
principally to the performance of the Underlying Index. However, because of the potential discrepancies identified in more detail in the product prospectus supplement, the return on the Underlying may correlate imperfectly with the return
on the Underlying Index. Further, the performance of the Underlying may not exactly replicate the performance of the Underlying Index, because the Underlying will reflect transaction costs and fees that are not included in the calculation
of the Underlying Index.
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♦ |
Historical Prices of the Underlying Should Not Be Taken as an Indication of its Future Prices During the Term of the Notes — The trading prices of the Underlying will
determine the value of the Notes at any given time. However, it is impossible to predict whether the price of the Underlying will rise or fall, trading prices of the common stocks held by the Underlying will be influenced by complex and
interrelated political, economic, financial and other factors that can affect the issuers of those stocks, and therefore, the price of the Underlying.
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♦ |
There Can Be No Assurance that the Investment View Implicit in the Notes Will Be Successful — It is impossible to predict whether and the extent to which the price of the
Underlying will rise or fall. The closing price of the Underlying will be influenced by complex and interrelated political, economic, financial and other factors that affect the Underlying. You should be willing to accept the downside risks
of owning equities in general and the Underlying in particular, and the risk of losing some or all of your initial investment.
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♦ |
The Underlying and its Underlying Index Are Different — The performance of the Underlying may not exactly replicate the performance of the underlying index, because the
Underlying will reflect transaction costs and fees that are not included in the calculation of the underlying index. It is also possible that the performance of the Underlying may not fully replicate or may in certain circumstances diverge
significantly from the performance of the underlying index due to the temporary unavailability of certain securities in the secondary market, the performance of any derivative instruments contained in the Underlying or due to other
circumstances. The Underlying may use futures contracts, options, swap agreements, currency forwards and repurchase agreements in seeking performance that corresponds to the underlying index and in managing cash flows.
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♦ |
Management Risk — The Underlying is not managed according to traditional methods of “active” investment management, which involve the buying and selling of securities
based on economic, financial and market analysis and investment judgment. Instead, the Underlying, utilizing a “passive” or indexing investment approach, attempts to approximate the investment performance of its underlying index by
investing in a portfolio of securities that generally replicate the underlying index. Therefore, unless a specific security is removed from the underlying index, the Underlying generally would not sell a security because the security’s
issuer was in financial trouble. In addition, the Underlying is subject to the risk that the investment strategy of the Underlying’s investment advisor may not produce the intended results.
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♦ |
Lack of Liquidity — The Notes will not be listed on any securities exchange. RBCCM intends to offer to purchase the Notes in the secondary market, but is not required to do
so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Notes easily. Because other dealers are not likely to make a secondary market for the Notes, the price at which you may be able
to trade your Notes is likely to depend on the price, if any, at which RBCCM is willing to buy the Notes.
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♦ |
Potential Conflicts — We and our affiliates play a variety of roles in connection with the issuance of the Notes, including hedging our obligations under the Notes. In
performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the Notes.
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♦ |
Potentially Inconsistent Research, Opinions or Recommendations by RBCCM, UBS or Their Affiliates — RBCCM, UBS, or their respective affiliates may publish research, express
opinions or provide recommendations as to the Underlying that are inconsistent with investing in or holding the Notes, and which may be revised at any time. Any such research, opinions or recommendations could affect the value of the
Underlying, and therefore, the market value of the Notes.
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♦ |
Uncertain Tax Treatment — Significant aspects of the tax treatment of an investment in the Notes are uncertain. You should consult your tax adviser
about your tax situation.
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♦ |
Potential Royal Bank of Canada and UBS Impact on Price — Trading or transactions by us, UBS or our respective affiliates in the Underlying, or in futures, options,
exchange-traded funds or other derivative products on the
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♦ |
The Terms of the Notes at Issuance and Their Market Value Prior to Maturity Will Be Influenced by Many Unpredictable Factors — Many economic and market factors will
influence the terms of the Notes at issuance and their value prior to maturity. These factors are similar in some ways to those that could affect the value of a combination of instruments that might be used to replicate the payments on the
Notes, including a combination of a bond with one or more options or other derivative instruments. For the market value of the Notes, we expect that, generally, the price of the Underlying on any day will affect the value of the Notes more
than any other single factor. However, you should not expect the value of the Notes in the secondary market to vary in proportion to changes in the price of the Underlying. The value of the Notes will be affected by a number of economic and
other factors that may either offset or magnify each other, including:
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♦ |
the price of the Underlying;
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♦ |
the actual and expected volatility of the price of the Underlying;
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♦ |
the time remaining to maturity of the Notes;
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♦ |
the dividend rates on the securities held by the Underlying;
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♦ |
interest and yield rates in the market generally;
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♦ |
a variety of economic, financial, political, regulatory or judicial events;
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♦ |
the occurrence of certain events with respect to the Underlying that may or may not require an adjustment to the terms of the Notes; and
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♦ |
our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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♦ |
The Anti-Dilution Protection for the Underlying Is Limited — The calculation agent will make adjustments to the Initial Price, Downside Threshold and Coupon Barrier for
certain events affecting the shares of the Underlying. However, the calculation agent will not be required to make an adjustment in response to all events that could affect the Underlying. If an event occurs that does not require the
calculation agent to make an adjustment, the value of the Notes and the payments on the Notes may be materially and adversely affected.
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Hypothetical Examples
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Principal Amount:
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$10
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Term:
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Approximately three years
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Contingent Coupon Rate:
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4.20% per annum (or 1.05% per quarter)
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Contingent Coupon*:
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$0.105 per quarter
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Coupon Observation Dates:
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Quarterly
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Call Observation Dates:
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Quarterly (callable after five months)
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Hypothetical Initial Price**:
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$100.00
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Hypothetical Coupon Barrier**:
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$65.00 (which is 65% of the Initial Price)
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Hypothetical Downside Threshold**:
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$65.00 (which is 65% of the Initial Price)
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Date
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Closing Price
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Payment (per Note)
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First Coupon Observation Date
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$80.00 (at or above Coupon Barrier and Initial Price)
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$0.105 (Contingent Coupon – not callable)
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Second Coupon Observation Date
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$85.00 (at or above Coupon Barrier and Initial Price)
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$10.105 (Contingent Coupon – not callable)
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Third Coupon Observation Date
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$95.00 (at or above Coupon Barrier and Initial Price)
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$0.105 (Contingent Coupon – not callable)
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Fourth Coupon Observation Date
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$105.00 (at or above Coupon Barrier and Initial Price)
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$10.105 (Call Settlement Amount)
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Date
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Closing Price
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Payment (per Note)
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First Coupon Observation Date
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$95.00 (at or above Coupon Barrier; below Initial Price)
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$0.105 (Contingent Coupon – not callable)
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Second Coupon Observation Date
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$63.00 (below Coupon Barrier)
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$0.00 (not callable)
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Third Coupon Observation Date
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$60.00 (below Coupon Barrier)
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$0.00 (not callable)
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Fourth Coupon Observation Date
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$37.00 (below Coupon Barrier)
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$0.00 (not called)
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Fifth to Eleventh Coupon Observation Dates
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Various (each at or above Coupon Barrier; below Initial Price)
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$0.735 (7 Contingent Coupon payments of $0.105 – not called)
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Final Valuation Date
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$85.00 (at or above Downside Threshold and Coupon Barrier; below Initial Price)
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$10.105 (Payment at Maturity)
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Total Payment:
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$10.945 (9.45% return)
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Date
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Closing Price
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Payment (per Note)
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First Coupon Observation Date
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$85.00 (at or above Coupon Barrier; below Initial Price)
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$0.105 (Contingent Coupon – not callable)
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Second Coupon Observation Date
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$90.00 (at or above Coupon Barrier; below Initial Price)
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$0.105 (Contingent Coupon – not callable)
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Third Coupon Observation Date
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$95.00 (at or above Coupon Barrier; below Initial Price)
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$0.105 (Contingent Coupon – not callable)
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Fourth Coupon Observation Date
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$50.00 (below Coupon Barrier; below Initial Price)
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$0.00 (not called)
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Fifth to Eleventh Coupon Observation Dates
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Various (each below Coupon Barrier; below Initial Price)
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$0.00 (not called)
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Final Valuation Date
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$30.00 (below Downside Threshold and Coupon Barrier)
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$10.00 + [$10.00 × Underlying Return] =
$10.00 + [$10.00 × -70%] =
$10.00 - $7.00 =
$3.00 (Payment at Maturity)
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Total Payment:
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$3.315 (-66.85% return)
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What Are the Tax Consequences of the Notes?
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iShares® MSCI Emerging Markets ETF
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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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• |
determining 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
(“EM”). All listed equity securities, including Real Estate Investment Trusts, are eligible for inclusion in the equity universe. Conversely, mutual funds, ETFs, equity derivatives and most investment trusts are not eligible for inclusion
in the equity universe.
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• |
Classifying Eligible Securities into the Appropriate Country: each company and its securities (i.e., share classes) are classified in only one 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.
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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 security must have a free float−adjusted market capitalization equal to or higher than 50% of the equity universe minimum size
requirement.
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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 screens out extreme daily trading volumes and takes into account the free float−adjusted market capitalization size of securities,
together with the three-month frequency of trading are used to measure 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 are
required for inclusion of a security in a market investable equity universe of a DM, 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
are required for inclusion of a security in a market investable equity universe of an EM.
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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.
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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 a semi−annual 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 a Quarterly or Semi−Annual 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%.
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Investable Market Index (Large + Mid + Small);
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• |
Standard Index (Large + Mid);
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Large Cap Index;
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• |
Mid Cap Index; or
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• |
Small Cap Index.
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• |
defining the market coverage target range for each size segment;
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• |
determining the global minimum size range for each size segment;
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• |
determining the market size segment cutoffs and associated segment number of companies;
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• |
assigning companies to the size segments; and
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• |
applying final size−segment investability requirements.
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(i) |
Semi−Annual Index Reviews (“SAIRs”) in May and November of the Size Segment and Global Value and Growth Indices which include:
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• |
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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• |
updating FIFs and Number of Shares (“NOS”).
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(ii) |
Quarterly Index Reviews in February and August of the Size Segment Indices aimed at:
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• |
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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(iii) |
Ongoing Event−Related Changes: changes of this type are generally implemented in the indices as they occur. Significantly large IPOs are included in the indices after the close of the company’s tenth day of trading.
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■ Coupon Barrier / Downside Threshold = 65% of the Initial Price
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Supplemental Plan of Distribution (Conflicts of Interest)
|
Structuring the Notes
|
Terms Incorporated in Master Note
|
1 Year Royal Bank of Canada Chart |
1 Month Royal Bank of Canada Chart |
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