Transcript: Structured Notes: Principal At Risk Notes

[Title Name: Roni Taza - Director, Wealth Solutions Group.]

[Music plays.]

[CIBC logo. Market linked GICs.]

[Roni sits and speaks to the camera.]

>> Roni Taza: If you're looking to benefit from market exposure in your investment portfolio, but fear the potential risks associated with direct investment in stocks or mutual funds, then Structured Notes may be a good option for you.

[A graphic is titled: “Principal At Risk Notes (PARs):”.  Below is a graphic of a table holding a lamp, closed laptop. The laptop opens and an icon of a certificate is shown. Above is the following: “Combine the protection of bonds with the growth potential of equities”. Then the icon on the laptop of the certificate slides to the left and a new icon of a bar graph is shown to the right with and arrow pointing upwards.]

Principal At Risk Notes, or PARs, are investment solutions that effectively combine the protection and income potential of bonds with the growth potential of equities.

[To the right of Roni is the following title: “Autocallable Buffer Notes:”. Below are the following points: “Potential to provide a fixed return linked to the performance of a reference asset; Contingent principal protection at maturity or early call date based on the performance of the underlying reference asset”.]

One type of Principal At Risk Note is the Autocallable Buffer Note. Autocallable Buffer Notes are structured investment products that have the potential to provide a fixed return linked to the performance of a reference asset, while also providing contingent principal protection at maturity or early call date based on the performance of the underlying reference asset.

[A graphic is titled: “Autocallable Buffer Notes:”. Below is a graphic of a table holding a cup with pens in it and a computer monitor, with an icon of a document on it.  Above the cup is the following: “Note can be automatically called”.]

[The graphic of the document changes to a grid with a dotted line through the middle. To the right the following appears: “if the return is above the call threshold level on a valuation date.” A line graph appears on the grid, moves up and down sharply, ending above the dotted line and an up arrow is shown to the side.]

These notes have a call feature whereby the note can be automatically called if the reference asset return is above the predetermined call threshold level on a valuation date.

[The graphic on the monitor then changes to a calendar which flips to 2025, then 2026. To the right the wording changes to: “typically observed on an annual or semi-annual basis.”]

[The wording then changes to: “If the note is not called, initial investment is fully protected,”. The graphic on the monitor then changes to a clipboard with a check marked shield on it.]

[The wording then changes to: “as long as the return is above the downside buffer level at maturity.”, while the graphic on the  monitor changes back to the grid and line graph. This time the line graph ends below the dotted line and the area between the dotted line and lower is highlighted.]

Typically, that's observed on an annual or semi-annual basis. If the note is not called prior to maturity, the investor's initial investment is fully protected, as long as that reference asset return is above the predetermined downside buffer level at maturity.

[A graphic is titled: “Autocallable Buffer Notes: Benefits”. Below and to the left an icon of a gage is shown through a magnifying glass. To the right is the following: “Potential to outperform a direct investment”.] 

There are a number of features associated with Autocallable Buffer Notes, so it's important you understand these potential benefits and risks before making an investment decision. 

[The magnifying glass moves down to a new icon of money with an arrow moving to the right below it, which has the following information to the right: “Potential to receive their initial investment and a predetermined fixed return prior to the maturity date”.]

Investors have the potential to outperform a direct investment in the reference asset under certain circumstances. Investors have the potential to receive their initial investment and a predetermined fixed return prior to the maturity date of the note.

[The magnifying glass moves down to a new icon of a shield with a checkmark in it and to the right is the following: “Contingent principal protection at maturity”.]

Investors have contingent principal protection at maturity.

[The magnifying glass then moves up to the top and all information below the title is removed. The magnifying glass moves down to a new icon of a bar graph with an arrow moving up and down but ends in an downward trajectory. The following information is to the right: “If the underlying asset performs poorly, some of the original investment may be lost”.] 

[The magnifying glass moves down to a new icon of a calendar with the following to the right: “If called earlier than the maturity date, the market conditions will dictate less favourable investment terms for reinvesting the proceeds.”]

On the other hand, if the underlying asset performs poorly and decreases in value over the term of the investment, some of the original investment may be lost. As the possibility exists that a note may be called earlier than the scheduled maturity date, there's a risk that the market conditions at that time will dictate less favorable investment terms for reinvesting the proceeds from the note being called.

[The magnifying glass moves down to a new icon of a clipboard with a check marked shield and the following is to the right: “Not eligible for CDIC insurance”.]

Autocallable Buffer Notes, like all Principal At Risk Notes, are not eligible for CDIC insurance. With that said, let's go into a little more detail on how these notes actually work. The return of Autocallable Buffer Notes are typically based on the performance of equities or equity indices.

[A graphic is titled: “Call Feature:”.  Below is a graphic of a table holding a lamp and a closed laptop. Above the laptop is the following: “Based on a predetermined call threshold”. The laptop opens and shows a line graph with a line that moves up and down sharply ending above the mid line. To the right is the following: “If the return of the reference asset is above the call threshold,”. This wording is replaced with: “… the note will be automatically called and investors will receive a predetermined return.”]

The call feature of the notes is based on a predetermined call threshold. If the return or the reference asset is above the call threshold on a valuation date during the term of the note, the note will be automatically called by CIBC and investors will receive a predetermined return. The call threshold, returns, and valuation dates are all specified upfront, so investors have full transparency on these product features.

[A graphic is titled: “Contingent Principal Protection:”.  Below is a graphic of a table holding a closed laptop.  Above the laptop is the following: “Based on a predetermined downside buffer percentage.”]

[The laptop opens and shows a line graph with a line that moves up and down sharply ending below the mid line. To the right is the following: “If the return is negative but is still at or above the downside buffer, investors will receive an amount equal to their initial investment.”]

The contingent principal protection of notes is based on a predetermined downside buffer percentage. If at maturity, the return of the reference asset is negative but is still at or above the downside buffer, investors will receive an amount equal to their initial investment.

[The line graph continues and dips below a lower dotted line. To the right: “If the return is negative and declined by more than the buffer percentage,”.  This wording is replaced with: “… investors will only lose the amount below the downside buffer percentage, multiplied by a specified participation factor.”]

If, at maturity, the return of the reference asset is negative and declined by more than the buffer percentage, investors will only lose the amount below the downside buffer percentage, multiplied by a specified participation factor. In these situations, investors will sustain a loss of a portion of their initial investment, but this feature means that they will lose less than a direct investment in the underlying reference asset.

[A graphic is titled: “Autocallable Buffer Note Examples:”. Below a line graph is shown. Along the horizontal X axis are the time periods: “June 2024; Dec 2024; June 2025; Dec 2025; June 2026”. Along the vertical Y axis are the following percentages, starting at -20% and moving up by 10%, ending at 20%. The area between -10% and 0% is labelled: “maturity buffer” and is coloured in blue. The area above 0% is green and is labelled call threshold. The top of the green area is a line graph that starts at 0% and moves sharply up and down, ending at 10%.]

Let's walk through a few more detailed examples of how this actually works. So in this example, the performance of the reference asset is greater than or equal to the call threshold of 0% on a valuation date prior to maturity.

[The graph slides to the left and further information is shown to the right of each label. The green graph indicates: “Example 1: Note will be called; Predetermined fixed return”. The following information is below: “Plus variable amount if the reference asset return is greater than the fixed return.” On the far left the area between 0% and 15% is labelled: “Fixed return”.  Above the area between the 15% and 20%, with is where the graph line ends is labelled: “Variable amount”.]

So in this case the note will be called, investors will be paid a predetermined fixed return, plus a variable amount, if the reference asset return is greater than the fixed return. In this example, the note was not called during the term.

[The blue area is labelled as: “Example 2: Note not called”. The following information is below: “No return; Repaid original investment.” The blue graph line has changed so that it starts at 0% and ends at -6%.]

Investors will not receive a return on their note, but will be repaid their original investment, even though the performance of the reference asset was negative. This is because performance of the reference asset is greater than the specified buffer percentage at maturity. In this example, the note was not called.

[The graph changes so that there is a new red graph line that ends below -20%. This is labelled: “Example 3: Note will not be called”. The following information is below: “Will receive less than their original investment; Reference asset is less than buffer percentage”.]

Investors will receive less than their original investment at maturity because the return of the reference asset is negative and less than the specified buffer percentage. That being said, investors will lose 10% of their investment, even though the reference asset decreased by 20%.

There are many Autocallable Buffer Notes to choose from and lots of great information available.

[To learn more, talk to your Advisor]

[CIBC Structured Notes. Increase your return potential, not your risk.]

CIBC Structured Notes. Increase your return potential, not your risk.

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