Filed Pursuant to Rule 433
Registration Statement No. 333-259205
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The information in this preliminary terms supplement is not complete and may be changed.
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Preliminary Terms Supplement
Subject to Completion:
Dated July 17, 2023
Pricing Supplement Dated August __, 2023 to the Product Prospectus Supplement ERN-EI-1, the Prospectus Supplement and the Prospectus, Each Dated
September 14, 2021
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$
Buffered Absolute Return Notes Linked to the S&P
500® Index, Due August 21, 2025
Royal Bank of Canada
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Reference Asset
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Initial Level*
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Buffer Level
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S&P 500® Index
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80% of the Initial Level
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If the Final Level of the Reference Asset is greater than the Initial Level, the Notes will pay at maturity a return equal to the Percentage Change, subject to a Maximum Upside Return of at least 123.50% of the
principal amount of the Notes.
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If the Final Level of the Reference Asset is less than or equal to the Initial Level, but is greater than or equal to 80% of its Initial Level (the "Buffer Level"), then the Notes will pay a one-for-one positive
return equal to the absolute value of the Percentage Change.
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If the Final Level of the Reference Asset is less than the Buffer Level, investors will lose 1% of the principal amount of the Notes for each 1% decrease from the Initial Level to the Final Level of more than 20%.
Accordingly, investors may lose a substantial portion of their principal amount.
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Any payments on the Notes are subject to our credit risk.
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The Notes do not pay interest.
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The Notes will not be listed on any securities exchange.
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Per Note
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Total
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Price to public(1)
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100.00%
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$
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Underwriting discounts and commissions(1)
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0.15%
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$
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Proceeds to Royal Bank of Canada
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99.85%
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$
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Buffered Absolute Return Notes
Royal Bank of Canada
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General:
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This terms supplement relates to an offering of Buffered Absolute Return Notes linked to the Reference Asset (the “Notes”).
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Issuer:
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Royal Bank of Canada (the “Bank”)
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Trade Date (Pricing
Date):
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August 18, 2023
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Issue Date:
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August 23, 2023
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Valuation Date:
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August 18, 2025
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Maturity Date:
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August 21, 2025
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Denominations:
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Minimum denomination of $1,000, and integral multiples of $1,000 thereafter.
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Initial Level:
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The closing level of the Reference Asset on the Trade Date.
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Final Level:
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The closing level of the Reference Asset on the Valuation Date.
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Buffer Level:
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80% of the Initial Level
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Buffer Percentage:
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20%
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Payment at Maturity (if
held to maturity):
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We will pay you at maturity an amount based on the Final Level:
If the Final Level is greater than the Initial Level (that is, the Percentage Change is positive), then the investor will receive an
amount per $1,000 in principal amount per Note equal to the lesser of:
1. $1,000 + ($1,000 x Percentage
Change)
2. Maximum Upside
Return
If the Final Level is less than or equal to the Initial Level, but greater than
or equal to the Buffer Level (that is, the Percentage Change is between 0% and -20%), the investor will receive, for each $1,000 in principal amount of the Notes, a one-for-one positive return equal to the absolute value of the
Percentage Change, calculated as follows:
$1,000 + [-1 x ($1,000 x Percentage Change)]
In this case, you will receive a positive return on the Notes, even if the Percentage Change is negative.
If the Final Level is less than the Buffer Level (that is, the Percentage Change is less than -20%), then the investor will receive, for each $1,000 in principal amount of the Notes:
$1,000 + [$1,000 x (Percentage Change + Buffer Percentage)]
In this case, you will lose some or a substantial portion of the principal amount.
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Percentage Change:
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Final Level – Initial Level
Initial Level |
Maximum Upside
Return:
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At least 123.50% multiplied by the principal amount (to be determined on the Trade Date).
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Calculation Agent:
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RBC Capital Markets, LLC (“RBCCM”)
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Buffered Absolute Return Notes
Royal Bank of Canada
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U.S. Tax Treatment:
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By purchasing a Note, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat the 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 special U.S.
tax counsel, Ashurst LLP) in the product prospectus supplement dated September 14, 2021 under “Supplemental Discussion of U.S. Federal Income Tax Consequences,” which apply to the Notes.
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Secondary Market:
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RBCCM (or one of its affiliates), though not obligated to do so, may maintain a secondary market in the Notes after the issue date. The amount that you may
receive upon sale of the Notes prior to maturity may be less than the principal amount.
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Listing:
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The Notes will not be listed on any securities exchange.
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Settlement:
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DTC global (including through its indirect participants Euroclear and Clearstream, Luxembourg as described under “Ownership and Book-Entry Issuance” in the
prospectus dated September 14, 2021).
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Terms Incorporated in
the Master Note:
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All of the terms appearing on the cover page and above the item captioned “Secondary Market” 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.
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Buffered Absolute Return Notes
Royal Bank of Canada
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Buffered Absolute Return Notes
Royal Bank of Canada
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Hypothetical Initial Level:
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1,000.00*
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Hypothetical Buffer Level:
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800.00, which is 80% of the hypothetical Initial Level
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Hypothetical Maximum Upside Return:
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123.50% of the principal amount (the actual
Maximum Upside Return will be determined on the
Trade Date).
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Principal Amount:
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$1,000 per Note
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Hypothetical Final Level
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Redemption Amount as
Percentage of Principal Amount
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Redemption Amount
per $1,000 in Principal
Amount
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1,700.00
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123.50%
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$1,235.00
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1,600.00
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123.50%
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$1,235.00
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1,500.00
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123.50%
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$1,235.00
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1,400.00
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123.50%
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$1,235.00
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1,300.00
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123.50%
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$1,235.00
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1,235.00
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123.50%
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$1,235.00
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1,200.00
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120.00%
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$1,200.00
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1,100.00
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110.00%
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$1,100.00
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1,000.00
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100.00%
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$1,000.00
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950.00
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105.00%
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$1,050.00
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900.00
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110.00%
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$1,100.00
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850.00
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115.00%
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$1,150.00
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800.00
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120.00%
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$1,200.00
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700.00
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90.00%
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$900.00
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600.00
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80.00%
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$800.00
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500.00
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70.00%
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$700.00
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400.00
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60.00%
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$600.00
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300.00
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50.00%
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$500.00
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200.00
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40.00%
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$400.00
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100.00
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30.00%
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$300.00
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0.00
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20.00%
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$200.00
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Buffered Absolute Return Notes
Royal Bank of Canada
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Example 1 —
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Calculation of the Payment at Maturity where the Percentage Change is 2%.
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Percentage Change:
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2%
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Payment at Maturity:
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$1,000 + ($1,000 x 2%) = $1,000 + $20.00 = $1,020.00
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In this case, on a $1,000 investment, a 2% Percentage Change results in a Payment at Maturity of $1,020.00, a 2.00% return on the Notes.
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Example 2 —
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Calculation of the Payment at Maturity where the Percentage Change is positive (and the Payment at Maturity is subject to the Maximum Upside Return).
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Percentage Change:
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30.00%
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Payment at Maturity:
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$1,000 + ($1,000 x 30.00%) = $1,000 + $300.00 = $1,300.00
However, the Maximum Upside Return is $1,235.00
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On a $1,000 investment, a 30.00% Percentage Change for the Reference Asset results in a Payment at Maturity of $1,235.00, a 23.50% return on the Notes.
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Example 3 —
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Calculation of the Payment at Maturity where the Percentage Change is negative, but the Final Level is greater than or equal to the Buffer Level.
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Percentage Change:
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-10%
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Payment at Maturity:
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$1,000 + [-1 x ($1,000 x -10%)] = $1,000 + $100 = $1,100
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In this case, on a $1,000 investment, a -10% Percentage Change results in a Payment at Maturity of $1,100.00, a 10% return on the Notes.
In this case, even though the Percentage Change is negative, you will receive a positive return equal to the absolute value of the Percentage Change.
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Example 4 —
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Calculation of the Payment at Maturity where the Percentage Change is negative, and the Final Level is less than the Buffer Level.
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Percentage Change:
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-50%
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Payment at Maturity:
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$1,000 + [$1,000 x (-50% + 20%)] = $1,000 - $300 = $700.00
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In this case, on a $1,000 investment, a -50% Percentage Change results in a Payment at Maturity of $700.00, a -30% return on the Notes.
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Buffered Absolute Return Notes
Royal Bank of Canada
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You May Not Receive the Full Principal Amount at Maturity – Investors in the Notes will lose some or a substantial portion of their principal amount if the Final Level is
less than the Buffer Level. In such a case, you will lose 1% of the principal amount of the Notes for each 1% that the Final Level is less than the Buffer Level.
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Your Potential Payment at Maturity Is Limited — The Notes will provide less opportunity to participate in the appreciation of the Reference Asset than an investment in a
security linked to that Reference Asset providing full participation in the appreciation, because the payment at maturity will not exceed the Maximum Upside Return if the Reference Asset increases in value. Accordingly, your return on the
Notes may be less than your return would be if you made an investment in a security directly linked to the positive performance of the Reference Asset. In addition, if the Reference Asset decreases in value, but is not less than the Buffer
Level, your maximum payment at maturity will be $1,200, due to the impact of the Buffer Level.
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The Notes Do Not Pay Interest and Your Return May Be Lower than the Return on a Conventional Debt Security of Comparable Maturity – You will not receive any 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, the return may be less than the return you would earn if you purchased one of our conventional senior interest bearing debt securities.
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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 Redemption Amount is dependent upon our ability to repay our obligations at that time. This will be the case even if the level of the Reference Asset increases or decreases after the
Trade Date. No assurance can be given as to what our financial condition will be at the maturity of the Notes.
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There May Not Be an Active Trading Market for the Notes – Sales in the Secondary Market May Result in Significant Losses – There may
be little or no secondary market for the Notes. The Notes will not be listed on any securities exchange. RBCCM and our other affiliates may make a market for the Notes; however, they are not required to do so. RBCCM or any of our other
affiliates may stop any market-making activities at any time. Even if a secondary market for the Notes develops, it may not provide significant liquidity or trade at prices advantageous to you. We expect that transaction costs in any
secondary market would be high. As a result, the difference between bid and asked prices for the Notes in any secondary market could be substantial.
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The Initial Estimated Value of the Notes Will Be Less than the Price to the Public — The initial estimated value that will be set
forth on the cover page of 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
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Buffered Absolute Return Notes
Royal Bank of Canada
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The Initial Estimated Value of the Notes that We Will Provide in the Final Pricing Supplement Will Be an Estimate Only, Calculated as of the Time the Terms of the Notes Are Set —
The initial estimated value of the Notes will be based on the value of our obligation to make the payments on the Notes, together with the mid-market value of the derivative embedded in the terms of the Notes. See “Structuring the Notes”
below. Our estimate will be based on a variety of assumptions, including our credit spreads, expectations as to dividends, interest rates and volatility, and the expected term of the Notes. These assumptions are based on certain forecasts
about future events, which may prove to be incorrect. Other entities may value the Notes or similar securities at a price that is significantly different than we do.
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Our Business Activities May Create Conflicts of Interest — We and our affiliates expect to engage in trading activities related to the Reference Asset that are not for the
account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests we and our affiliates will have in their proprietary accounts, in facilitating
transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the level of the Reference Asset, could be adverse to the interests of
the holders of the Notes. We and one or more of our affiliates may, at present or in the future, engage in business with companies included in the Reference Asset, including making loans to or providing advisory services. These services could
include investment banking and merger and acquisition advisory services. These activities may present a conflict between our or one or more of our affiliates’ obligations and your interests as a holder of the Notes. Moreover, we, and our
affiliates may have published, and in the future expect to publish, research reports with respect to the Reference Asset. This research is modified from time to time without notice and may express opinions or provide recommendations that are
inconsistent with purchasing or holding the Notes. Any of these activities by us or one or more of our affiliates may affect the level of the Reference Asset, and, therefore, the market value of the Notes.
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You Will Not Have Any Rights to the Securities Included in the Reference Asset — As a holder of the Notes, you will not have voting rights or rights to receive cash dividends
or other distributions or other rights that holders of securities included in the Reference Asset would have. The Final Level will not reflect any dividends paid on the securities included in the Reference Asset, and accordingly, any positive
return on the Notes may be less than the potential positive return on those securities.
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The Payments on the Notes Are Subject to Postponement Due to Market Disruption Events and Adjustments – The Redemption Amount and the Valuation Date are subject to
adjustment as described in the product prospectus supplement. For a description of what constitutes a market disruption event as well as the consequences of that market disruption event, see “General Terms of the Notes—Market Disruption
Events” in the product prospectus supplement.
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Buffered Absolute Return Notes
Royal Bank of Canada
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Buffered Absolute Return Notes
Royal Bank of Canada
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Buffered Absolute Return Notes
Royal Bank of Canada
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Buffered Absolute Return Notes
Royal Bank of Canada
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Buffered Absolute Return Notes
Royal Bank of Canada
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Buffered Absolute Return Notes
Royal Bank of Canada
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Buffered Absolute Return Notes
Royal Bank of Canada
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P-15
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RBC Capital Markets, LLC
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