Understanding structured notes: Principal At Risk Notes

Return potential depends on the type of note, which can include:

Auto-callable Notes

These notes can be automatically called at specified time periods during the term, if the reference asset return is at or above the predetermined call threshold level on a valuation date. They also provide contingent principal protection if the note isn’t called prior to maturity. The valuation date may occur on an annual, semi-annual, quarterly or even monthly basis.

Auto-callable Coupon Notes

Auto-callable Coupon Notes can be automatically called at specified time periods during the term, if the reference asset return is at or above the predetermined call threshold level on a valuation date. They also provide contingent principal protection if the note is not called prior to maturity. The valuation date may occur on an annual, semi-annual, quarterly or even monthly basis. These notes have the potential to provide periodic fixed coupon payments linked to the performance of a reference asset, if the reference asset return is at or above the predetermined coupon threshold level on a valuation date.

Boosted Return Notes

Boosted Return Notes provide a return at maturity equal to a predetermined percentage. If the reference asset return is positive at maturity, investors receive a note return equal to the greater of the reference asset return and the boosted return. These notes have the potential to provide enhanced returns linked to the performance of a reference asset while also offering partial or contingent principal protection. They provide a return at maturity based on a predetermined boosted percentage. If the reference asset return is positive at maturity, investors receive a note return equal to such boosted percentage. If the reference asset return is above the boosted percentage, the note may offer full, enhanced or partial participation in the reference asset return above the boosted percentage.

Accelerated Return Notes

These notes provide accelerated exposure linked to the performance of a reference asset. They have the potential to provide enhanced returns linked to the performance of a reference asset while also providing partial or contingent principal protection.

Principal protection categories include:

• No protection: No principal protection if the reference asset return is negative.
• Partial protection: If the asset return is negative, losses are capped at a specified level. 
• Contingent protection: Principal protection is offered as long as the reference asset return is at or above a specified level. If the performance of the reference asset is below this specified level, some or all of the principal will be at risk, depending on the specified barrier or buffer level: 
  • Barrier level of protection: Potential loss of original investment is protected to a predetermined barrier level, or percentage return, below which the investor would be exposed to a loss equal to the performance of the underlying asset.
  • Buffer level of protection: Potential loss of original investment is protected to a predetermined buffer level, or percentage return, below which the investor would be exposed to the incremental difference between the total loss and the buffer level. Depending on the structure of the Note, the difference between the total loss and the buffer level may also be multiplied by a specified participation level. 

• Principal protection: Partial or contingent protection at maturity may be available.
• Income potential: Some notes may offer the potential for enhanced income, based on the performance of the underlying reference assets.
• Growth potential: Some notes may offer the potential for enhanced returns at maturity, depending on the performance of the underlying reference assets.
• Diversification: Some notes may provide exposure to reference assets that may not otherwise be directly accessible. 
• Liquidity: Opportunity to sell PARs prior to maturity in a daily secondary market.¹ 
• ^{Currency hedged: No direct currency exposure when the reference asset is denominated in a foreign currency.}

• CDIC coverage: PARs are not eligible for CDIC insurance.
• Credit risk: Any payments are dependent on the creditworthiness of the issuer.
• Market risk: If the underlying assets perform poorly, some or all of the original investment may be lost.   
• Liquidity risk: There’s no assurance that the notes can be sold in a secondary market prior to maturity, or that the secondary market price will be at or above $100 purchase price when the investor wishes to sell.
• Reinvestment risk: The possibility exists that an Auto-callable PAR will be called earlier than maturity. Consequently, there’s a risk that the market conditions at that time will dictate less favourable investment terms for reinvesting the proceeds from the note being called.
• Minimum investment: Minimum investment is $5,000.
• Fees: PARs available through Investor’s Edge will include an upfront selling concession. All fees and selling commissions are stated in the Pricing Supplement for each PAR.