Filed Pursuant to Rule 433
Registration Statement No. 333-259205
|
|||
The information in this preliminary terms supplement is not complete and may be changed.
|
|||
Preliminary Terms Supplement
Subject to Completion:
Dated April 3, 2023
Pricing Supplement Dated April __, 2023 to the Product Prospectus Supplement ERN-EI-1, Prospectus Supplement and Prospectus, Each Dated September 14, 2021
|
Buffered Enhanced Return Notes
Each Linked to a Different Index, Due October 30, 2024 Royal Bank of Canada |
||
Reference Asset and Symbol
|
CUSIP
|
Initial
Level*
|
Buffer Level
|
Maximum Redemption
Amount
|
Initial Estimated Value (per $1,000 in
principal amount)
|
S&P 500® Index (SPX)
|
78016HXG0
|
90% of the Initial Level
|
116% to 118%
|
$915 to $965
|
|
EURO STOXX 50® Index (SX5E)
|
78016HXF2
|
90% of the Initial Level
|
121% to 123%
|
$913 to $963
|
• |
Each of the Notes provides a 200% leveraged positive return if the Final Level of the applicable Reference Asset is greater than its Initial Level, up to the applicable Maximum Redemption Amount (to be
determined on the Trade Date) per $1,000 in principal amount.
|
• |
If the Final Level of the applicable Reference Asset is less than or equal to its Initial Level, but is greater than or equal to its Buffer Level, investors will receive the principal amount at maturity.
|
• |
If the Final Level of the applicable Reference Asset is less than its Buffer Level, investors will lose 1% of the principal amount of the applicable Notes for each 1% that the applicable Final Level has
decreased by more than 10% from its Initial Level.
|
• |
Any payments on the Notes are subject to our credit risk.
|
• |
The Notes do not pay interest.
|
• |
The Notes will not be listed on any securities exchange.
|
Per SPX Note
|
Total
|
Per SX5E Note
|
Total
|
||||
Price to public(1)
|
100.00%
|
$
|
100.00%
|
$
|
|||
Underwriting discounts and commissions(1)
|
1.75%
|
$
|
1.75%
|
$
|
|||
Proceeds to Royal Bank of Canada
|
98.25%
|
$
|
98.25%
|
$
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
Issuer:
|
Royal Bank of Canada (“Royal Bank”)
|
|
Underwriter:
|
RBC Capital Markets, LLC (“RBCCM”)
|
|
Reference Assets:
|
As set forth on the cover page.
|
|
Minimum
Investment:
|
$1,000 and minimum denominations of $1,000 in excess thereof
|
|
Trade Date (Pricing
Date):
|
April 25, 2023
|
|
Issue Date:
|
April 28, 2023
|
|
Valuation Date:
|
October 25, 2024
|
|
Maturity Date:
|
October 30, 2024, subject to extension for market and other disruptions, as described in the product prospectus supplement dated September 14, 2021.
|
|
Payment at Maturity
(if held to maturity):
|
If the Percentage Change for the applicable Notes is positive, then the investor will receive an amount per $1,000 principal amount
per Note equal to the lesser of:
1. Principal Amount + [Principal Amount x (Percentage Change x Leverage Factor)] and
2. the Maximum Redemption Amount
If the Percentage Change for the applicable Notes is less than or equal to 0%, but not by more than the Buffer Percentage (that is, the Percentage Change is between 0% and
-10%), then the investor will receive the principal amount only.
If the Percentage Change for the applicable Notes is negative, by more than the Buffer
Percentage (that is, the Percentage Change is between -10.01% and -100%), then the investor will receive a cash payment equal to:
Principal Amount + [Principal Amount x (Percentage Change + Buffer Percentage)]
You could lose a substantial portion of the principal amount if the Final Level for the applicable Notes is less than the Initial Level by more than the Buffer Percentage.
|
|
Percentage Change:
|
The Percentage Change for the applicable Reference Asset, expressed as a percentage, is calculated using the following formula:
|
|
Maximum
Redemption
Amount:
|
A percentage of the principal amount, as set forth on the cover page of this document. Each Maximum Redemption Amount will be determined on the Trade Date, and set forth in
the final pricing supplement relating to the Notes.
|
|
Initial Level:
|
The closing level of the applicable Reference Asset on the Trade Date.
|
|
Final Level:
|
The closing level of the applicable Reference Asset on the Valuation Date.
|
|
Leverage Factor:
|
200%
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
Buffer Percentage:
|
10%
|
|
Buffer Level:
|
90% of the Initial Level of the applicable Reference Asset
|
|
Principal at Risk:
|
The Notes are NOT principal protected. You may lose a substantial portion of your principal amount at maturity if
the applicable Final Level is less than the Buffer Level of the applicable Reference Asset.
|
|
Calculation Agent:
|
RBCCM
|
|
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 applicable Notes as a pre-paid
cash-settled derivative contract for U.S. federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the Notes are uncertain and the Internal Revenue Service could assert that the Notes should be
taxed in a manner that is different from that described in the preceding sentence. Please see the section below, “Supplemental Discussion of U.S. Federal Income Tax Consequences,” and the discussion (including the opinion of Ashurst LLP,
our special U.S. tax counsel) in the product prospectus supplement dated September 14, 2021 under “Supplemental Discussion of U.S. Federal Income Tax Consequences,” which apply to the Notes.
|
|
Secondary Market:
|
RBCCM (or one of its affiliates), though not obligated to do so, may maintain a secondary market in each of 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 “Ownership and Book-Entry Issuance” in the prospectus dated September 14, 2021).
|
|
Terms Incorporated
in the Master Note:
|
As to each of the Notes, all of the applicable 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 captions
“General Terms of the Notes” and “Supplemental Discussion of U.S. Federal Income Tax Consequences” in the product prospectus supplement dated September 14, 2021, as modified by this terms supplement.
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
Example 1 —
|
Calculation of the Payment at Maturity where the Percentage Change is positive.
|
|
Percentage Change:
|
2%
|
|
Payment at Maturity:
|
$1,000 + [$1,000 x (2% x 200%)] = $1,000 + $40 = $1,040
|
|
On a $1,000 investment, a 2% Percentage Change results in a Payment at Maturity of $1,040, a 4% return on the Notes.
|
Example 2 —
|
Calculation of the Payment at Maturity where the Percentage Change is positive (and the Payment at Maturity is subject to the Maximum Redemption Amount).
|
|
Percentage Change:
|
10%
|
|
Payment at Maturity:
|
$1,000 + [$1,000 x (10% x 200%)] = $1,000 + $200 = $1,200
However, the hypothetical Maximum Redemption Amount is $1,150 per $1,000 in principal amount.
|
|
On a $1,000 investment, a 10% Percentage Change results in a Payment at Maturity of $1,150, a 15% 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:
|
-8%
|
|
Payment at Maturity:
|
At maturity, if the Percentage Change is negative BUT not by more than the Buffer Percentage, then the Payment at Maturity will equal the principal amount.
|
|
On a $1,000 investment, a -8% Percentage Change results in a Payment at Maturity of $1,000, 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:
|
-35%
|
|
Payment at Maturity:
|
$1,000 + [$1,000 x (-35% + 10%)] = $1,000 - $250 = $750
|
|
On a $1,000 investment, a -35% Percentage Change results in a Payment at Maturity of $750, a -25% return on the Notes.
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
Hypothetical Percentage
Change
|
Redemption Amount as
Percentage of Principal Amount
|
Redemption Amount
per $1,000 in Principal
Amount
|
40.00%
|
115.00%
|
$1,150.00
|
30.00%
|
115.00%
|
$1,150.00
|
20.00%
|
115.00%
|
$1,150.00
|
10.00%
|
115.00%
|
$1,150.00
|
7.50%
|
115.00%
|
$1,150.00
|
5.00%
|
110.00%
|
$1,100.00
|
2.00%
|
104.00%
|
$1,040.00
|
0.00%
|
100.00%
|
$1,000.00
|
-5.00%
|
100.00%
|
$1,000.00
|
-10.00%
|
100.00%
|
$1,000.00
|
-20.00%
|
90.00%
|
$900.00
|
-30.00%
|
80.00%
|
$800.00
|
-40.00%
|
70.00%
|
$700.00
|
-50.00%
|
60.00%
|
$600.00
|
-60.00%
|
50.00%
|
$500.00
|
-70.00%
|
40.00%
|
$400.00
|
-80.00%
|
30.00%
|
$300.00
|
-90.00%
|
20.00%
|
$200.00
|
-100.00%
|
10.00%
|
$100.00
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
• |
You May Receive Less Than the Principal Amount at Maturity — Investors in each of the Notes could lose a substantial portion of
their principal amount if there is a decline in the level of the applicable Reference Asset. You will lose 1% of the principal amount of your Notes for each 1% that the applicable Final Level is less than the applicable Initial Level by
more than 10%.
|
• |
The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity —
There will be no periodic interest payments on the Notes as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. The return that you will receive on the Notes, which could be negative, may be
less than the return you could earn on other investments. Even if your return is positive, your return may be less than the return you would earn if you purchased one of our conventional senior interest bearing debt securities.
|
• |
Your Potential Payment at Maturity Is Limited — The Notes will provide less opportunity to participate in the appreciation of the applicable Reference Asset than an
investment in a security linked to that Reference Asset providing full participation in the appreciation, because the payment at maturity will not exceed the applicable Maximum Redemption Amount. Accordingly, your return on the Notes may be
less than your return would be if you made an investment in a security directly linked to the positive performance of the applicable Reference Asset.
|
• |
Payments on the Notes Are Subject to Our Credit Risk, and Changes in Our Credit Ratings Are Expected to Affect the Market Value of the Notes — The Notes are our senior unsecured debt securities. As a result, your receipt of the applicable amount due on the maturity date for your Notes is dependent upon our ability to repay our obligations at that time. This will
be the case even if the level of the applicable Reference Asset increases after the Trade Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
|
• |
There May Not Be an Active Trading Market for the Notes—Sales in the Secondary Market May Result in Significant Losses — There may
be little or no secondary market for the Notes. The Notes will not be listed on any securities exchange. RBCCM and our other affiliates may make a market for one or both of the Notes; however, they are not required to do so. RBCCM or any of
our other affiliates may stop any market-making activities at any time. Even if a secondary market for any of 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.
|
• |
The Initial Estimated Value of the Notes Will Be Less than the Price to the Public — The initial estimated value of each of the
Notes that will be set forth in the final pricing supplement for the Notes will not represent a minimum price at which we, RBCCM or any of our affiliates would be willing to purchase the Notes in any secondary market (if any exists) at any
time. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and the initial estimated value. This is due to, among other things, changes in the level of the applicable Reference
Asset, the borrowing rate we pay to issue securities of this kind,
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
• |
The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only, Calculated as of the Time the Terms of the Notes Are Set — The initial estimated value of the Notes will be based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the
Notes. See “Structuring the Notes” below. Our estimate will be based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These
assumptions are based on certain forecasts about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
|
• |
Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the applicable Reference Asset that are
not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates will have in their proprietary accounts, in
facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the level of the applicable Reference Asset, could be
adverse to the interests of the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with companies included in the applicable Reference Asset, including making loans to or
providing advisory services. These services could include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’ obligations and your interests
as a holder of the Notes. Moreover, we, and our affiliates may have published, and in the future expect to publish, research reports with respect to one or both of the Reference Assets. 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 applicable Notes. Any of these activities by us or one or more of our affiliates may affect the level of one or both of the
Reference Assets, and, therefore, the market value of the applicable Notes.
|
• |
You Will Not Have Any Rights to the Securities Included in the Applicable Reference Asset — As a holder of the Notes, you will not
have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities included in the applicable Reference Asset would have. The Final Level for your Notes will not reflect any dividends
paid on the securities included in the applicable Reference Asset, and accordingly, any positive return on any of the Notes may be less than the potential positive return on those securities.
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
• |
The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments — The payment at maturity and
the Valuation Date for each of the Notes 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.
|
• |
An Investment in Notes Linked to the SX5E Is Subject to Risks Associated with Non-U.S. Securities Markets — Because foreign
companies or foreign equity securities included in the SX5E are publicly traded in the applicable foreign countries and are denominated in euros, an investment in the Notes linked to the SX5E involves particular risks. For example, the
non-U.S. securities markets may be more volatile than the U.S. securities markets, and market developments may affect these markets differently from the U.S. or other securities markets. Direct or indirect government intervention to
stabilize the securities markets outside the U.S., as well as cross-shareholdings in certain companies, may affect trading prices and trading volumes in those markets. Also, the public availability of information 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 U.S. reporting companies.
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
SX5E =
|
Free float market capitalization of the SX5E
|
|
Divisor
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
• |
sponsor, endorse, sell, or promote the Notes;
|
• |
recommend that any person invest in the Notes offered hereby or any other securities;
|
• |
have any responsibility or liability for or make any decisions about the timing, amount, or pricing of the Notes;
|
• |
have any responsibility or liability for the administration, management, or marketing of the Notes; or
|
• |
consider the needs of the Notes or the holders of the Notes in determining, composing, or calculating the SX5E, or have any obligation to do so.
|
• |
STOXX does not make any warranty, express or implied, and disclaims any and all warranty concerning:
|
• |
the results to be obtained by the Notes, the holders of the Notes or any other person in connection with the use of the SX5E and the data included in the SX5E;
|
• |
the accuracy or completeness of the SX5E and its data;
|
• |
the merchantability and the fitness for a particular purpose or use of the SX5E and its data;
|
• |
STOXX will have no liability for any errors, omissions, or interruptions in the SX5E or its data; and
|
• |
Under no circumstances will STOXX be liable for any lost profits or indirect, punitive, special, or consequential damages or losses, even if STOXX knows that they might occur.
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|
|
|
Buffered Enhanced Return Notes
Each Linked to a Different Equity Index
|