RBC Capital Markets®

Filed Pursuant to Rule 433
Registration Statement No. 333-227001
 


The information in this preliminary terms supplement is not complete and may be changed.
 

Preliminary Terms Supplement
Subject to Completion:
Dated October 22, 2018

Pricing Supplement Dated October __, 2018 to the Product Prospectus Supplement ERN-ETF-1 Dated September 11, 2018, Prospectus Supplement Dated September 7, 2018, and Prospectus Dated September 7, 2018


$_________
Buffer Booster Notes Linked to a Basket
of Two Exchange Traded Funds,
Due October 27, 2022
Royal Bank of Canada
 


 

Royal Bank of Canada is offering the Buffer Booster Notes (the “Notes”) linked to the performance of an unequally weighted basket (the “Basket”) of two ETFs: the iShares® MSCI EAFE ETF (70% weighting) and the iShares® MSCI Emerging Markets ETF (30% weighting).
The CUSIP number for the Notes is 78013XP77. If the Percentage Change of the Basket is greater than or equal to 0%, but does not exceed the Booster Coupon of 15%, the Notes provide a fixed return equal to the Principal Amount plus the Booster Coupon. If the Percentage Change exceeds the Booster Percentage, in addition to the Booster Coupon, the Notes provide a leveraged positive return equal to [106% to 116%] (to be determined on the Pricing Date) of the Percentage Change above the Booster Coupon.  If the Percentage Change is negative, but not less than -15%, the Notes will pay the principal amount.  If the Percentage Change is less than   -15%, you will lose 1.1765% of the principal amount for each 1% that the Percentage Change is less than -15%. Any payments on the Notes are subject to our credit risk.
Issue Date: October 25, 2018
Maturity Date: October 27, 2022
The Notes will not pay interest.  The Notes will not be listed on any securities exchange.
Investing in the Notes involves a number of risks. See “Risk Factors” beginning on page S-1 of the prospectus supplement dated September 7, 2018, “Additional Risk Factors Specific to the Notes” beginning on page PS-6 of the product prospectus supplement dated September 11, 2018, and “Selected Risk Considerations” on page P-6 of this terms supplement.
The Notes will not constitute deposits insured by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation or any other Canadian or U.S. government agency or instrumentality. The Notes are not subject to conversion into our common shares under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined that this terms supplement is truthful or complete. Any representation to the contrary is a criminal offense.
 
Per Note
 
Total
Price to public(1)
100.00%
 
$
Underwriting discounts and commissions(1)
3.00%
 
$
Proceeds to Royal Bank of Canada
97.00%
 
$
(1)Certain dealers who purchase the Notes for sale to certain fee-based advisory accounts may forego some or all of their underwriting discount or selling concessions.  The public offering price for investors purchasing the Notes in these accounts may be between $970.00 and $1,000 per $1,000 in principal amount.
The initial estimated value of the Notes as of the date of this terms supplement is $948.74 per $1,000 in principal amount, which is less than the price to public. The final pricing supplement relating to the Notes will set forth our estimate of the initial value of the Notes as of the Pricing Date, which will not be less than $928.74 per $1,000 in principal amount. The actual value of the Notes at any time will reflect many factors, cannot be predicted with accuracy, and may be less than this amount.  We describe our determination of the initial estimated value in more detail below.
If the Notes priced on the date of this terms supplement, RBC Capital Markets, LLC, which we refer to as RBCCM, acting as agent for Royal Bank of Canada, would receive a commission of approximately $30.00 per $1,000 in principal amount of the Notes and would use a portion of that commission to allow selling concessions to other dealers of up to approximately $30.00 per $1,000 in principal amount of the Notes. The other dealers may forgo, in their sole discretion, some or all of their selling concessions. See “Supplemental Plan of Distribution (Conflicts of Interest)” below.

RBC Capital Markets, LLC



 



Buffer Booster Notes Linked to a Basket of Two Exchange
Traded Funds


SUMMARY
The information in this “Summary” section is qualified by the more detailed information set forth in this terms supplement, the product prospectus supplement, the prospectus supplement, and the prospectus.
 
Issuer:
 
Royal Bank of Canada (“Royal Bank”)
 
Issue:
 
Senior Global Medium-Term Notes, Series H
 
Underwriter:
 
RBC Capital Markets, LLC
 
Reference Asset:
 
The Notes are linked to the level of a basket (the “Basket”) of two ETFs (each, a “Basket Component,” collectively, the “Basket Components”).  The Basket Components and their respective Component Weights are indicated in the table below.
 
Currency:
 
U.S. Dollars
 
Denominations
 
$1,000 and minimum denominations of $1,000 in excess thereof
 
Pricing Date:
 
October 22, 2018
 
Issue Date:
 
October 25, 2018
 
CUSIP:
 
78013XP77
 
Valuation Date:
 
October 24, 2022
 
Maturity Date:
 
October 27, 2022.  The Maturity Date is subject to extension for market and other disruptions, as described in the product prospectus supplement dated September 11, 2018.
 
Payment at Maturity
(if held to maturity):
 
If, on the Valuation Date, the Percentage Change is greater than the Booster Coupon, then the investor will receive, for each $1,000 in principal amount of the Notes, an amount calculated as follows:
$1,000 + ((a) ($1,000 x Booster Coupon) + (b) ($1,000 x (Percentage Change – Booster Coupon) x Leverage Factor))
If, on the Valuation Date, the Percentage Change is greater than or equal to zero, but is less than or equal to the Booster Coupon, then the investor will receive a return equal to the principal amount plus the Booster Coupon.
 
If, on the Valuation Date, the Percentage Change is negative but greater than or equal to -15%, the investor will receive the Principal Amount of the Notes.
 
If, on the Valuation Date, the Percentage Change is negative and less than -15%, then the investor will receive a cash payment equal to:
 
Principal Amount + [(Principal Amount x (Percentage Change + Buffer Percentage) x Downside Multiplier)]
In this case, you will lose approximately 1.1765% of the principal amount for each 1% that the Percentage Change is less than -15%.
 
Leverage Factor:
 
106% to 116% (to be determined on the Pricing Date)
 
Downside Multiplier:
 
1 divided by 0.85, which equals approximately 1.1765.
 
Booster Coupon:
 
15%
 
Buffer Percentage:
 
15%

P-2
RBC Capital Markets, LLC


 



Buffer Booster Notes Linked to a Basket of Two Exchange
Traded Funds


 
Percentage Change:
 
The Percentage Change, expressed as a percentage and rounded to two decimal places, will be equal to the sum of the Weighted Component Change for each Basket Component. The Weighted Component Change for each Basket Component will be determined as follows:
      Component Weight x 
 
Initial Level:
 
The closing price per share of a Basket Component on the Pricing Date.
 
Final Level:
 
The closing price per share of a Basket Component on the Valuation Date.
 
The Basket:
 
Basket Component
 
Bloomberg
Ticker
 
Component Weight
 
 
Initial Level
iShares® MSCI EAFE ETF (the “EFA”)
 
EFA
 
70%
   
iShares® MSCI Emerging Markets ETF (the “EEM”)
 
EEM
 
30%
   
 
Principal at Risk:
 
The Notes are NOT principal protected.  You could lose some or all of your principal amount at maturity if the Percentage Change is less than -15%.
 
Calculation Agent:
 
RBC Capital Markets, LLC
 
U.S. Tax Treatment:
 
 
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 Note as a pre-paid cash-settled derivative contract for U.S. federal income tax purposes.  However, the U.S. federal income tax consequences of your investment in the Notes are uncertain and the Internal Revenue Service could assert that the Notes should be taxed in a manner that is different from that described in the preceding sentence.  Please see the section below, “Supplemental Discussion of U.S. Federal Income Tax Consequences,” and the discussion (including the opinion of our counsel Morrison & Foerster LLP) in the product prospectus supplement dated September 11, 2018 under “Supplemental Discussion of U.S. Federal Income Tax Consequences,” which apply to the Notes.
 
Secondary Market:
 
RBC Capital Markets, LLC (or one of its affiliates), though not obligated to do so, may maintain a secondary market in the Notes after the Issue Date.  The amount that you may receive upon sale of your Notes prior to maturity may be less than the principal amount of your Notes.
 
Listing:
 
The Notes will not be listed on any securities exchange.
 
Clearance and Settlement:
 
DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Description of Debt Securities—Ownership and Book-Entry Issuance” in the prospectus dated September 7, 2018).
 
Terms Incorporated in the Master Note:
 
All of the terms appearing above the item captioned “Secondary Market” on pages P-2 and P-3 of this terms supplement and the terms appearing under the caption “General Terms of the Notes” in the product prospectus supplement dated September 11, 2018, as modified by this terms supplement.

P-3
RBC Capital Markets, LLC


 



Buffer Booster Notes Linked to a Basket of Two Exchange
Traded Funds


ADDITIONAL TERMS OF YOUR NOTES
You should read this terms supplement together with the prospectus dated September 7, 2018, as supplemented by the prospectus supplement dated September 7, 2018 and the product prospectus supplement dated September 11, 2018, relating to our Senior Global Medium-Term Notes, Series H, of which these Notes are a part. Capitalized terms used but not defined in this terms supplement will have the meanings given to them in the product prospectus supplement. In the event of any conflict, this terms supplement will control.  The Notes vary from the terms described in the product prospectus supplement in several important ways.  You should read this terms supplement carefully.
This terms supplement, together with the documents listed below, contains the terms of the Notes and supersedes all prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in “Risk Factors” in the prospectus supplement dated September 7, 2018 and “Additional Risk Factors Specific to the Notes” in the product prospectus supplement dated September 11, 2018, as the Notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the Notes. You may access these documents on the Securities and Exchange Commission (the “SEC”) website at www.sec.gov as follows (or if that address has changed, by reviewing our filings for the relevant date on the SEC website):
Prospectus dated September 7, 2018:
https://www.sec.gov/Archives/edgar/data/1000275/000121465918005973/l96181424b3.htm
Prospectus Supplement dated September 7, 2018:
https://www.sec.gov/Archives/edgar/data/1000275/000121465918005975/f97180424b3.htm
Product Prospectus Supplement ERN-ETF-1 dated September 11, 2018:
https://www.sec.gov/Archives/edgar/data/1000275/000114036118038211/form424b5.htm
Our Central Index Key, or CIK, on the SEC website is 1000275.  As used in this terms supplement, “we,” “us,” or “our” refers to Royal Bank of Canada.
Royal Bank of Canada has filed a registration statement (including a product prospectus supplement, a prospectus supplement, and a prospectus) with the SEC for the offering to which this terms supplement relates.  Before you invest, you should read those documents and the other documents relating to this offering that we have filed with the SEC for more complete information about us and this offering.  You may obtain these documents without cost by visiting EDGAR on the SEC website at www.sec.gov.  Alternatively, Royal Bank of Canada, any agent or any dealer participating in this offering will arrange to send you the product prospectus supplement, the prospectus supplement and the prospectus if you so request by calling toll-free at 1-877-688-2301.

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RBC Capital Markets, LLC


 



Buffer Booster Notes Linked to a Basket of Two Exchange
Traded Funds


HYPOTHETICAL RETURNS
The examples set out below are included for illustration purposes only. The hypothetical Percentage Changes of the Reference Asset used to illustrate the calculation of the Payment at Maturity (rounded to two decimal places) are not estimates or forecasts of the Final Level or the price of any Basket Component on the Valuation Date or on any trading day prior to the Maturity Date. All examples assume a Booster Coupon of 15% of the principal amount, a Buffer Percentage of 15%, a Leverage Factor of 111% (the midpoint of the Leverage Factor range set forth above), and a Downside Multiplier of 1.1765, and assume that a holder purchased Notes with an aggregate principal amount of $1,000 and that no market disruption event occurs on the Valuation Date.

Example 1 —
Calculation of the Payment at Maturity where the Percentage Change is positive and less than or equal to the Booster Coupon.
 
Percentage Change:
2%
 
Payment at Maturity:
$1,000 + ($1,000 x 15%) = $1,000 + $150.00 = $1,150.00

On a $1,000 investment, a 2% Percentage Change results in a Payment at Maturity of $1,150.00, a 15.00% return on the Notes.

Example 2—
Calculation of the Payment at Maturity where the Percentage Change is positive and greater than the Booster Coupon.
 
Percentage Change:
40%
 
Payment at Maturity:
$1,000 + [($1,000 x 15%) + ($1,000 x (40% -15%) x 111%)] =
$1,000 + [$150 + $277.50] = $1,427.50
 
On a $1,000 investment, a 40% Percentage Change results in a Payment at Maturity of $1,427.50, a 42.75% return on the Notes.

Example 3 —
Calculation of the Payment at Maturity where the Percentage Change is negative (but not by more than the Buffer Percentage).
 
Percentage Change:
-10%
 
Payment at Maturity:
$1,000
 
On a $1,000 investment, a -10% Percentage Change results in a Payment at Maturity of $1,000.00, a 0% return on the Notes.

Example 4 —
Calculation of the Payment at Maturity where the Percentage Change is negative (by more than the Buffer Percentage).
 
Percentage Change:
-60%
 
Payment at Maturity:
1,000 + ($1,000 x (-60% + 15%) x 1.1765) = $1,000 - $529.425 = $470.575
 
On a $1,000 investment, a -60% Percentage Change results in a Payment at Maturity of $470.575, a -52.9425% return on the Notes.

P-5
RBC Capital Markets, LLC


 



Buffer Booster Notes Linked to a Basket of Two Exchange
Traded Funds


SELECTED RISK CONSIDERATIONS
An investment in the Notes involves significant risks.  Investing in the Notes is not equivalent to investing directly in the Basket Components.  These risks are explained in more detail in the section “Additional Risk Factors Specific to the Notes,” beginning on page PS-6 of the product prospectus supplement.  In addition to the risks described in the prospectus supplement and the product prospectus supplement, you should consider the following:
Principal at Risk – Investors in the Notes could lose all or a substantial portion of their principal amount if there is a decline in the level of the Reference Asset of more than 15%.  In such a case, you will lose approximately 1.1765% of the principal amount of your Notes for each 1% that the Percentage Change is less than -15%.
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.  Your return may be less than the return you would earn if you bought a conventional senior interest bearing debt security of Royal Bank.
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 Royal Bank’s senior unsecured debt securities.  As a result, your receipt of the amount due on the maturity date is dependent upon Royal Bank’s ability to repay its obligations at that time.  This will be the case even if the level of the Reference Asset increases after the Pricing Date.  No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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 other affiliates of Royal Bank may make a market for the Notes; however, they are not required to do so.  RBCCM or any other affiliate of Royal Bank 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 asked prices for your Notes in any secondary market could be substantial.
You Will Not Have Any Rights to the Securities Included in the Basket Components – 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.
The Initial Estimated Value of the Notes Will Be Less than the Price to the Public – The initial estimated value set forth on the cover page and that will be set forth in the final pricing supplement for the Notes does not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any time.  If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value.  This is due to, among other things, changes in the level of the Reference Asset, the borrowing rate we pay to issue securities of this kind, and the inclusion in the price to the public of the underwriting discount and the estimated costs relating to our hedging of the Notes.  These factors, together with various credit, market and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable ways.  Assuming no change in market conditions or any other relevant factors, the price, if any, at which you may be able to sell your Notes prior to maturity may be less than your original purchase price, as any such sale price would not be expected to include the underwriting discount and the hedging costs relating to the Notes. In addition to bid-ask spreads, the value of the Notes determined for any secondary market price is expected to be based on the secondary rate rather than the internal funding rate used to price the Notes and determine the initial estimated value.  As a result, the secondary price will be less than if the internal funding rate was used.  The Notes are not designed to be short-term trading instruments.  Accordingly, you should be able and willing to hold your Notes to maturity.
The Initial Estimated Value of the Notes on the Cover Page and that We Will Provide in the Final Pricing Supplement Are Estimates 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 estimates are 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.

P-6
RBC Capital Markets, LLC


 



Buffer Booster Notes Linked to a Basket of Two Exchange
Traded Funds


The value of the Notes at any time after the Pricing Date will vary based on many factors, including changes in market conditions, and cannot be predicted with accuracy.  As a result, the actual value you would receive if you sold the Notes in any secondary market, if any, should be expected to differ materially from the initial estimated value of your Notes.
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.
The Correlation Between the Performance of each Basket Component and the Performance of its Underlying Index May Be Imperfect — The performance of each Basket Component is linked principally to the performance of its Underlying Index. However, because of the potential discrepancies identified in more detail in the product prospectus supplement, the return on each Basket Component may correlate imperfectly with the return on its Underlying Index.
Changes in the Level of One Basket Component May Be Offset by Changes in the Level of the Other Basket Component – A change in the level of one Basket Component may not correlate with changes in the level of the other Basket Component.  The level of one Basket Component may increase, while the level of the other Basket Component may not increase as much, or may even decrease.  Therefore, in determining the level of the Reference Asset as of any time, increases in the level of one Basket Component may be moderated, or wholly offset, by lesser increases or decreases in the level of the other Basket Component.  Because the EFA has a higher component weight in the Basket than the EEM, decreases in the price of the EFA will have a greater impact on the value of the Basket than comparable changes in the price of the EEM.
·
Risks Associated with Foreign Securities Markets – Because foreign companies or foreign equity securities held by the EFA and 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.
Securities prices generally are subject to political, economic, financial and social factors that apply to the markets in which they trade and, to a lesser extent, foreign markets. Securities prices outside the United States are subject to political, economic, financial and social factors that apply in foreign countries. These factors, which could negatively affect foreign securities markets, include the possibility of changes in a foreign government’s economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to foreign companies or investments in foreign equity securities and the possibility of fluctuations in the rate of exchange between currencies. Moreover, foreign economies may differ favorably or unfavorably from the United States economy in important respects such as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
·
Exchange Rate Risk – The share prices of the EFA and the EEM will fluctuate based in large part upon its respective 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 EFA and 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 EFA and 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 EFA and the EEM will be adversely affected and the level of the Reference Asset, and consequently, the market value of the Notes may decrease.
·
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

P-7
RBC Capital Markets, LLC


 



Buffer Booster Notes Linked to a Basket of Two Exchange
Traded Funds


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.
·
Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the Reference Asset or the securities held by the EFA and the EEM 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 value of the Basket, could be adverse to the interests of the holders of the Notes.  We and one or more of our affiliates may, at present or in the future, engage in business with the issuers of the securities represented by the Basket, 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 Basket Components.  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 value of the Basket, and, therefore, the market value of the Notes.

P-8
RBC Capital Markets, LLC


 



Buffer Booster Notes Linked to a Basket of Two Exchange
Traded Funds


INFORMATION REGARDING THE BASKET COMPONENTS
We have derived the following information regarding each of the applicable Basket Components from publicly available documents. We have not independently verified the accuracy or completeness of the following information. We are not affiliated with any of the Basket Components and the Basket Components will have no obligations with respect to the applicable notes. This document relates only to the Notes and does not relate to the shares of any of the Basket Component or any securities included in any of the underlying indices. Neither we nor our affiliates participates in the preparation of the publicly available documents described below. Neither we nor our affiliates has made any due diligence inquiry with respect to any of the Basket Components in connection with the offering of any of the Notes. There can be no assurance that all events occurring prior to the date of this document, including events that would affect the accuracy or completeness of the publicly available documents described below, that would affect the trading prices of the shares of any of the Basket Components have been or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material future events concerning any of the Basket Components could affect the price of the shares of the applicable Basket Component after the Pricing Date, and therefore could affect the payment at maturity.
The selection of the applicable Basket Component relating to any of the Notes is not a recommendation to buy or sell the shares of the applicable Basket Component. Neither we nor any of our affiliates make any representation to you as to the performance of the shares of any of the Basket Components. Information provided to or filed with the SEC under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 relating to each Basket Component may be obtained through the SEC’s website at http://www.sec.gov.
iShares consists of numerous separate investment portfolios (the “iShares Funds”), including the applicable Basket Component. Each of the Basket Components seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of their respective underlying indices. The Basket Components typically earn income from dividends from securities held by the Basket Components. These amounts, net of expenses and taxes (if applicable), are passed along to the Basket Components’ shareholders as “ordinary income.” In addition, the Basket Components realizes capital gains or losses whenever they sell securities. Net long-term capital gains are distributed to their respective shareholders as “capital gain distributions.” However, because the applicable notes are linked only to the share price of the applicable Basket Component, you will not be entitled to receive income, dividend, or capital gain distributions from the applicable Basket Component or any equivalent payments.
“iShares®” and “BlackRock®” are registered trademarks of BlackRock®.  The Notes are not sponsored, endorsed, sold, or promoted by BlackRock®, or by any of the iShares® Funds. Neither BlackRock® nor the iShares® Funds make any representations or warranties to the owners of any of the Notes or any member of the public regarding the advisability of investing in any of the Notes. Neither BlackRock® nor the iShares® Funds shall have any obligation or liability in connection with the registration, operation, marketing, trading, or sale of any of the Notes or in connection with our use of information about any of the Basket Components or any of the iShares® Funds.
iShares® MSCI EAFE ETF (the “EFA”)
The iShares® MSCI EAFE ETF trades on the NYSE Arca under the ticker symbol “EFA.” The Advisor employs a technique known as representative sampling to track the MSCI EAFE Index. The EFA generally invests at least 90% of its assets in the securities of the MSCI EAFE Index and in American Depositary Receipts or Global Depositary Receipts based on the securities of the MSCI EAFE Index. The EFA may invest the remainder of its assets in securities not included in the MSCI EAFE Index, but which the Advisor believes will help the EFA track the MSCI EAFE Index, or in futures contracts, options on futures contracts, other types of options and swaps related to the MSCI EAFE Index, as well as cash and cash equivalents, including shares of money market funds affiliated with the Advisor or its affiliates. The Advisor will waive portfolio management fees in an amount equal to the portfolio management fees of such other iShares funds for any portion of the EFA’s assets invested in shares of such other funds.
The MSCI EAFE Index
The information below is included only to give insight to the MSCI EAFE Index, the performance of which the EFA attempts to reflect. The Notes are linked to the performance of the EFA and not to the MSCI EAFE Index. We have derived all information contained in this document regarding the MSCI EAFE Index, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information.  The MSCI EAFE Index is a stock index calculated, published and disseminated daily by MSCI, Inc. (“MSCI”), a majority-owned subsidiary of Morgan Stanley, through numerous data vendors, on the MSCI website and in real time on Bloomberg Financial Markets and Reuters Limited.  Neither MSCI nor Morgan Stanley has any obligation to continue to calculate and publish, and may discontinue calculation and publication of the MSCI EAFE Index.
The MSCI EAFE Index is a free float-adjusted market capitalization index with a base date of December 31, 1969 and an initial value of 100. The MSCI EAFE Index is calculated daily in U.S. dollars and published in real time every 60 seconds during market trading hours. The MSCI EAFE Index currently consists of the following 21 developed countries: Australia, Austria, Belgium, Denmark, Finland,

P-9
RBC Capital Markets, LLC


 



Buffer Booster Notes Linked to a Basket of Two Exchange
Traded Funds


France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. The MSCI EAFE Index is comprised of companies in both the Large Cap Index and Mid Cap Index, as discussed in the section “—Defining Market Capitalization Size Segments for Each Market” below. The MSCI EAFE Index is part of the MSCI Regional Equity Indices series and is an MSCI Global Investable Market Index, which is a family within the MSCI International Equity Indices.

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iShares® MSCI Emerging Markets ETF (the “EEM”)

The EEM trades on the NYSE Arca under the ticker symbol “EEM.” The Advisor employs a technique known as representative sampling to track the MSCI Emerging Markets Index. The EEM generally invests at least 90% of its assets in the securities of the MSCI Emerging Markets Index and in American Depositary Receipts or Global Depositary Receipts based on the securities of the MSCI Emerging Markets Index. The EEM may invest the remainder of its assets in securities not included in the MSCI Emerging Markets Index, but which the Advisor believes will help the EEM track the MSCI Emerging Markets Index, or in futures contracts, options on futures contracts, other types of options and swaps related to the MSCI Emerging Markets Index, as well as cash and cash equivalents, including shares of money market funds affiliated with the Advisor or its affiliates. The Advisor will waive portfolio management fees in an amount equal to the portfolio management fees of such other iShares funds for any portion of the EEM’s assets invested in shares of such other funds.
The MSCI Emerging Markets Index
The information below is included only to give insight to the MSCI Emerging Markets Index, the performance of which the EEM attempts to reflect. The Notes are linked to the performance of the EEM and not to the MSCI Emerging Markets Index. We have derived all information contained in this document regarding the MSCI Emerging Markets Index, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information.  The MSCI Emerging Markets Index is a stock index calculated, published and disseminated daily by MSCI, Inc. (“MSCI”), a majority-owned subsidiary of Morgan Stanley, through numerous data vendors, on the MSCI website and in real time on Bloomberg Financial Markets and Reuters Limited.  Neither MSCI nor Morgan Stanley has any obligation to continue to calculate and publish, and may discontinue calculation and publication of the MSCI Emerging Markets Index.
The MSCI Emerging Markets Index is intended to measure equity market performance in the global emerging markets. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index with a base date of December 31, 1987 and an initial value of 100. The MSCI Emerging Markets Index is calculated daily in U.S. dollars and published in real time every 60 seconds during market trading hours. The MSCI Emerging Markets Index currently consists of the following 23 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Greece, Egypt, Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. The MSCI Emerging Markets Index is part of the MSCI Regional Equity Indices series and is an MSCI Global Investable Market Index, which is a family within the MSCI International Equity Indices.
General – MSCI Indices
MSCI provides global equity indices intended to measure equity performance in international markets and the MSCI International Equity Indices are designed to serve as global equity performance benchmarks. In constructing these indices, MSCI applies its index construction and maintenance methodology across developed, emerging, and frontier markets.
MSCI enhanced the methodology used in its MSCI International Equity Indices. The MSCI Standard and MSCI Small Cap Indices, along with the other MSCI equity indices based on them, transitioned to the global investable market indices methodology described below. The transition was completed at the end of May 2008. The Enhanced MSCI Standard Indices are composed of the MSCI Large Cap and Mid Cap Indices. The MSCI Global Small Cap Index transitioned to the MSCI Small Cap Index resulting from the Global Investable Market Indices methodology and contains no overlap with constituents of the transitioned MSCI Standard Indices. Together, the relevant MSCI Large Cap, Mid Cap, and Small Cap Indices will make up the MSCI investable market index for each country, composite, sector, and style index that MSCI offers.
Constructing the MSCI Global Investable Market Indices. MSCI undertakes an index construction process, which involves:

·
defining the equity universe;

·
determining the market investable equity universe for each market;

·
determining market capitalization size segments for each market;

·
applying index continuity rules for the MSCI Standard Index;

·
creating style segments within each size segment within each market; and

·
classifying securities under the Global Industry Classification Standard (the “GICS”).
Defining the Equity Universe. The equity universe is defined by:

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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.

·
Classifying Eligible Securities into the Appropriate Country: each company and its securities (i.e., share classes) are classified in only one country.
Effective with the November 2015 semi-annual index review, companies traded outside of their country of classification (i.e., “foreign listed companies”) became eligible for inclusion in the MSCI Country Investable Market Indexes along with the applicable MSCI Global Index. In order for a MSCI Country Investable Market Index to be eligible to include foreign listed companies, it must meet the Foreign Listing Materiality Requirement. To meet the Foreign Listing Materiality Requirement, the aggregate market capitalization of all securities represented by foreign listings should represent at least (i) 5% of the free float-adjusted market capitalization of the relevant MSCI Country Investable Market Index and (ii) 0.05% of the free-float adjusted market capitalization of the MSCI ACWI Investable Market Index.
Determining the Market Investable Equity Universes. A market investable equity universe for a market is derived by applying investability screens to individual companies and securities in the equity universe that are classified in that market. A market is equivalent to a single country, except in DM Europe, where all DM countries in Europe are aggregated into a single market for index construction purposes. Subsequently, individual DM Europe country indices within the MSCI Europe Index are derived from the constituents of the MSCI Europe Index under the global investable market indices methodology.
The investability screens used to determine the investable equity universe in each market are as follows:

·
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.

·
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.

·
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.

·
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.

·
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.

·
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%.
Defining Market Capitalization Size Segments for Each Market. Once a market investable equity universe is defined, it is segmented into the following size−based indices:

·
Investable Market Index (Large + Mid + Small);

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Buffer Booster Notes Linked to a Basket of Two Exchange
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·
Standard Index (Large + Mid);

·
Large Cap Index;

·
Mid Cap Index; or

·
Small Cap Index.
Creating the size segment indices in each market involves the following steps:

·
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.
Index Continuity Rules for the Standard Indices. In order to achieve index continuity, as well as to provide some basic level of diversification within a market index, and notwithstanding the effect of other index construction rules described in this section, a minimum number of five constituents will be maintained for a DM Standard Index and a minimum number of three constituents will be maintained for an EM Standard Index.
Creating Style Indices within Each Size Segment. All securities in the investable equity universe are classified into value or growth segments using the MSCI Global Value and Growth methodology.
Classifying Securities under the Global Industry Classification Standard. All securities in the global investable equity universe are assigned to the industry that best describes their business activities. To this end, MSCI has designed, in conjunction with S&P Dow Jones Indexes, the GICS. Under the GICS, each company is assigned to one sub−industry according to its principal business activity. Therefore, a company can belong to only one industry grouping at each of the four levels of the GICS.
Index Maintenance
The MSCI Global Investable Market Indices are maintained with the objective of reflecting the evolution of the underlying equity markets and segments on a timely basis, while seeking to achieve index continuity, continuous investability of constituents and replicability of the indices, index stability and low index turnover. In particular, index maintenance involves:

(i)
Semi−Annual Index Reviews (“SAIRs”) in May and November of the Size Segment and Global Value and Growth Indices which include:

·
updating the indices on the basis of a fully refreshed equity universe;

·
taking buffer rules into consideration for migration of securities across size and style segments; and

·
updating FIFs and Number of Shares (“NOS”).
(ii)    Quarterly Index Reviews in February and August of the Size Segment Indices aimed at:

·
including significant new eligible securities (such as IPOs that were not eligible for earlier inclusion) in the index;

·
allowing for significant moves of companies within the Size Segment Indices, using wider buffers than in the SAIR; and

·
reflecting the impact of significant market events on FIFs and updating NOS.
(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.
None of us, RBCCM or any of our other affiliates accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in, the index or any successor to the index.

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Historical Information for the iShares® MSCI EAFE ETF (“EFA”)
The graph below sets forth the information relating to the historical performance of the EFA. In addition, below the graph is a table setting forth the intra-day high, intra-day low and period-end closing share prices of the EFA. The information provided in this table is for the period from January 1, 2008 through October 18, 2018.
We obtained the information regarding the historical performance of the EFA in the chart below from Bloomberg Financial Markets.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg Financial Markets. The historical performance of the EFA should not be taken as an indication of its future performance, and no assurance can be given as to the Final Level of the EFA. We cannot give you assurance that the performance of the EFA will result in any positive return on your initial investment.

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Buffer Booster Notes Linked to a Basket of Two Exchange
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Period-Start
Date
 
Period-End
Date
 
High Intra-Day Price of this
Basket Component ($)
 
Low Intra-Day Price of this
Basket Component ($)
 
Period-End Closing Price of
this Basket Component ($)
1/1/2008
 
3/31/2008
 
79.22
 
65.63
 
71.90
4/1/2008
 
6/30/2008
 
78.76
 
68.06
 
68.70
7/1/2008
 
9/30/2008
 
68.39
 
52.36
 
56.30
10/1/2008
 
12/31/2008
 
56.42
 
35.53
 
44.33
1/1/2009
 
3/31/2009
 
45.61
 
31.56
 
37.59
4/1/2009
 
6/30/2009
 
49.18
 
37.28
 
45.81
7/1/2009
 
9/30/2009
 
56.31
 
43.49
 
54.70
10/1/2009
 
12/31/2009
 
57.66
 
52.42
 
55.90
1/1/2010
 
3/31/2010
 
58.00
 
49.94
 
56.00
4/1/2010
 
6/30/2010
 
58.08
 
45.86
 
46.51
7/1/2010
 
9/30/2010
 
55.81
 
46.45
 
54.92
10/1/2010
 
12/31/2010
 
59.50
 
53.85
 
57.87
1/1/2011
 
3/31/2011
 
61.98
 
54.69
 
60.09
4/1/2011
 
6/30/2011
 
64.35
 
56.71
 
60.14
7/1/2011
 
9/30/2011
 
60.86
 
46.09
 
47.75
10/1/2011
 
12/31/2011
 
55.86
 
45.46
 
49.53
1/1/2012
 
3/31/2012
 
55.91
 
48.99
 
54.90
4/1/2012
 
6/30/2012
 
55.68
 
46.55
 
49.96
7/1/2012
 
9/30/2012
 
55.57
 
47.30
 
53.00
10/1/2012
 
12/31/2012
 
56.88
 
51.63
 
56.82
1/1/2013
 
3/31/2013
 
59.99
 
56.69
 
58.98
4/1/2013
 
6/30/2013
 
64.13
 
56.45
 
57.38
7/1/2013
 
9/30/2013
 
65.11
 
57.02
 
63.79
10/1/2013
 
12/31/2013
 
67.36
 
62.54
 
67.06
1/1/2014
 
3/31/2014
 
68.19
 
62.28
 
67.17
4/1/2014
 
6/30/2014
 
70.78
 
65.69
 
68.37
7/1/2014
 
9/30/2014
 
69.29
 
63.85
 
64.12
10/1/2014
 
12/31/2014
 
64.54
 
58.64
 
60.84
1/1/2015
 
3/31/2015
 
66.20
 
58.29
 
64.17
4/1/2015
 
6/30/2015
 
68.52
 
63.27
 
63.49
7/1/2015
 
9/30/2015
 
65.60
 
55.89
 
57.32
10/1/2015
 
12/31/2015
 
62.18
 
56.99
 
58.75
1/1/2016
 
3/31/2016
 
58.06
 
50.94
 
57.13
4/1/2016
 
6/30/2016
 
60.16
 
51.94
 
55.81
7/1/2016
 
9/30/2016
 
60.15
 
53.77
 
59.13
10/1/2016
 
12/31/2016
 
59.35
 
56.11
 
57.73
1/1/2017
 
3/31/2017
 
62.65
 
57.85
 
62.29
4/1/2017
 
6/30/2017
 
67.24
 
61.35
 
65.20
7/1/2017
 
9/30/2017
 
68.68
 
64.56
 
68.48
10/1/2017
 
12/31/2017
 
70.96
 
68.14
 
70.31
1/1/2018
 
3/31/2018
 
75.27
 
66.90
 
69.68
4/1/2018
 
6/30/2018
 
72.10
 
66.20
 
66.97
7/1/2018
 
9/30/2018
 
69.13
 
65.15
 
67.99
10/1/2018
 
10/18/2018
 
68.32
 
63.19
 
63.38
                 
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

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Historical Information for the iShares® MSCI Emerging Markets ETF (“EEM”)

The graph below sets forth the information relating to the historical performance of the EEM. In addition, below the graph is a table setting forth the intra-day high, intra-day low and period-end closing share prices of the EEM. The information provided in this table is for the period from January 1, 2008 through October 18, 2018.
We obtained the information regarding the historical performance of the EEM in the chart below from Bloomberg Financial Markets.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg Financial Markets. The historical performance of the EEM should not be taken as an indication of its future performance, and no assurance can be given as to the Final Level of the EEM. We cannot give you assurance that the performance of the EEM will result in any positive return on your initial investment.

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Period-Start
Date
 
Period-End
Date
 
High Intra-Day Price of this
Basket Component ($)
 
Low Intra-Day Price of this
Basket Component ($)
 
Period-End Closing Price of
this Basket Component ($)
1/1/2008
 
3/31/2008
 
50.75
 
40.68
 
44.79
4/1/2008
 
6/30/2008
 
52.48
 
44.43
 
45.19
7/1/2008
 
9/30/2008
 
44.76
 
30.88
 
34.53
10/1/2008
 
12/31/2008
 
34.29
 
18.22
 
24.69
1/1/2009
 
3/31/2009
 
27.28
 
19.87
 
24.81
4/1/2009
 
6/30/2009
 
34.88
 
24.72
 
32.23
7/1/2009
 
9/30/2009
 
39.51
 
30.25
 
38.91
10/1/2009
 
12/31/2009
 
42.52
 
37.30
 
41.16
1/1/2010
 
3/31/2010
 
43.47
 
35.01
 
42.12
4/1/2010
 
6/30/2010
 
44.02
 
35.21
 
37.32
7/1/2010
 
9/30/2010
 
44.99
 
36.76
 
44.77
10/1/2010
 
12/31/2010
 
48.62
 
44.51
 
47.31
1/1/2011
 
3/31/2011
 
48.75
 
44.25
 
48.69
4/1/2011
 
6/30/2011
 
50.43
 
44.77
 
47.60
7/1/2011
 
9/30/2011
 
48.63
 
34.71
 
35.07
10/1/2011
 
12/31/2011
 
43.21
 
33.43
 
37.94
1/1/2012
 
3/31/2012
 
44.91
 
38.21
 
42.94
4/1/2012
 
6/30/2012
 
43.75
 
36.58
 
39.19
7/1/2012
 
9/30/2012
 
42.83
 
37.15
 
41.32
10/1/2012
 
12/31/2012
 
44.42
 
39.93
 
44.35
1/1/2013
 
3/31/2013
 
45.28
 
41.72
 
42.78
4/1/2013
 
6/30/2013
 
44.26
 
36.16
 
38.57
7/1/2013
 
9/30/2013
 
43.32
 
36.98
 
40.77
10/1/2013
 
12/31/2013
 
43.91
 
40.15
 
41.77
1/1/2014
 
3/31/2014
 
41.25
 
37.06
 
40.99
4/1/2014
 
6/30/2014
 
43.98
 
40.55
 
43.23
7/1/2014
 
9/30/2014
 
45.85
 
41.36
 
41.56
10/1/2014
 
12/31/2014
 
42.46
 
37.23
 
39.29
1/1/2015
 
3/31/2015
 
41.11
 
37.72
 
40.13
4/1/2015
 
6/30/2015
 
44.18
 
39.03
 
39.62
7/1/2015
 
9/30/2015
 
40.02
 
30.00
 
32.78
10/1/2015
 
12/31/2015
 
36.42
 
31.51
 
32.19
1/1/2016
 
3/31/2016
 
34.58
 
27.62
 
34.25
4/1/2016
 
6/30/2016
 
35.34
 
31.71
 
34.36
7/1/2016
 
9/30/2016
 
38.31
 
33.33
 
37.45
10/1/2016
 
12/31/2016
 
38.19
 
33.95
 
35.01
1/1/2017
 
3/31/2017
 
40.23
 
35.30
 
39.39
4/1/2017
 
6/30/2017
 
42.04
 
38.72
 
41.39
7/1/2017
 
9/30/2017
 
45.96
 
40.96
 
44.81
10/1/2017
 
12/31/2017
 
47.93
 
44.80
 
47.12
1/1/2018
 
3/31/2018
 
52.08
 
45.04
 
48.28
4/1/2018
 
6/30/2018
 
48.31
 
42.16
 
43.33
7/1/2018
 
9/30/2018
 
45.06
 
40.63
 
42.92
10/1/2018
 
10/18/2018
 
43.16
 
38.78
 
39.30
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

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Buffer Booster Notes Linked to a Basket of Two Exchange
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SUPPLEMENTAL DISCUSSION OF
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following disclosure supplements, and to the extent inconsistent supersedes, the discussion in the product prospectus supplement dated September 11, 2018 under “Supplemental Discussion of U.S. Federal Income Tax Consequences.”
Under Section 871(m) of the Code, a “dividend equivalent” payment is treated as a dividend from sources within the United States. Such payments generally would be subject to a 30% U.S. withholding tax if paid to a non-U.S. holder.  Under U.S. Treasury Department regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”) that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an “underlying security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend. However, the IRS has issued guidance that states that the U.S. Treasury Department and the IRS intend to amend the effective dates of the U.S. Treasury Department regulations to provide that withholding on dividend equivalent payments will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2021. Based on our determination that the Notes are not delta-one instruments, non-U.S. holders should not be subject to withholding on dividend equivalent payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed reissued for U.S. federal income tax purposes upon the occurrence of certain events affecting the Basket Components or the Notes (for example, upon a rebalancing of the underlying Basket Components), and following such occurrence the Notes could be treated as subject to withholding on dividend equivalent payments. Non-U.S. holders that enter, or have entered, into other transactions in respect of the Basket Components or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding tax in the context of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding, we (or the applicable withholding agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect to amounts so withheld.
SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
We expect that delivery of the Notes will be made against payment for the Notes on or about October 25, 2018, which is the third (3rd) business day following the Pricing Date (this settlement cycle being referred to as “T+3”). See “Plan of Distribution” in the prospectus dated September 7, 2018. For additional information as to the relationship between us and RBCCM, please see the section “Plan of Distribution—Conflicts of Interest” in the prospectus dated September 7, 2018.
We expect to deliver the Notes on a date that is greater than two business days following the trade date. Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes more than two business days prior to the original Issue Date will be required to specify alternative arrangements to prevent a failed settlement.
In the initial offering of the Notes, they will be offered to investors at a purchase price equal to par, except with respect to certain accounts as indicated on the cover page of this document.
The value of the Notes shown on your account statement may be based on RBCCM’s estimate of the value of the Notes if RBCCM or another of our affiliates were to make a market in the Notes (which it is not obligated to do). That estimate will be based upon the price that RBCCM may pay for the Notes in light of the prevailing market conditions, our creditworthiness and transaction costs. For a period of approximately 9 months after the Issue Date of the Notes, the value of the Notes that may be shown on your account statement may be higher than RBCCM’s estimated value of the Notes at that time. This is because the estimated value of the Notes will not include the underwriting discount and our hedging costs and profits; however, the value of the Notes shown on your account statement during that period may be a higher amount, reflecting the addition of RBCCM’s underwriting discount and our estimated costs and profits from hedging the Notes. This excess is expected to decrease over time until the end of this period. After this period, if RBCCM repurchases your Notes, it expects to do so at prices that reflect their estimated value.
We may use this terms supplement in the initial sale of the Notes.  In addition, RBCCM or another of our affiliates may use this terms supplement in a market-making transaction in the Notes after their initial sale. Unless we or our agent informs the purchaser otherwise in the confirmation of sale, this terms supplement is being used in a market-making transaction.
STRUCTURING THE NOTES
The Notes are our debt securities, the return on which is linked to the performance of the Basket Components.  As is the case for all of our debt securities, including our structured notes, the economic terms of the Notes reflect our actual or perceived creditworthiness at the time of pricing.  In addition, because structured notes result in increased operational, funding and liability management costs to us, we typically borrow the funds under these Notes at a rate that is more favorable to us than the rate that we might pay for a conventional fixed or floating rate debt security of comparable maturity.  Using this relatively lower implied borrowing rate rather than the secondary market rate, is a factor that is likely to reduce the initial estimated value of the Notes at the time their terms are set. Unlike the estimated

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RBC Capital Markets, LLC


 



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Traded Funds


value included in this terms supplement or in the final pricing supplement, any value of the Notes determined for purposes of a secondary market transaction may be based on a different funding rate, which may result in a lower value for the Notes than if our initial internal funding rate were used.
In order to satisfy our payment obligations under the Notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other derivatives) on the Issue Date with RBCCM or one of our other subsidiaries. The terms of these hedging arrangements take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Basket Components, and the tenor of the Notes. The economic terms of the Notes and their initial estimated value depend in part on the terms of these hedging arrangements.
The lower implied borrowing rate is a factor that reduces the economic terms of the Notes to you. The initial offering price of the Notes also reflects the underwriting commission and our estimated hedging costs. These factors result in the initial estimated value for the Notes on the Pricing Date being less than their public offering price. See “Selected Risk Considerations—The Initial Estimated Value of the Notes Will Be Less than the Price to the Public” above.


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RBC Capital Markets, LLC