What are some risks associated with investing in PPNs?

PPNs provide opportunities for a variable return, but they also pose risks. Investors should carefully consider the risks involved before purchasing. A few of those possible risks include the following:

  • The Notes may not be suitable investments for all investors.
  • The Notes are different from conventional fixed income investments.
  • Investors in PPNs do not have an ownership interest, nor any recourse to the underlying benchmark.
  • All principal repayment and variable return is dependent upon the credit worthiness of the issuer.
  • The PPNs typically constitute direct, unsubordinated and unsecured obligations of the issuer.
  • No return may be payable in respect of the Notes.
  • Variable Return will depend on the closing prices of the underlying benchmark.
  • The occurrence of an Extraordinary Event could affect the return payable on the Notes.
  • The occurrence of Special Circumstances may alter future payments.
  • The issuer may engage in activities that could adversely impact the Notes.
  • The issuer or one of its affiliates may publish reports with respect to the Notes that may express opinions inconsistent with purchasing the Notes.
  • Changes in economic conditions may adversely affect the business and prospects of the PPN’s underlying benchmark.
  • A secondary market for the Notes may not be developed or be sustainable.
  • The performance of the Notes may not track the underlying benchmark.
  • The issuer may have economic interests that are adverse to those of investors.
  • The Canada Revenue Agency’s (CRA) position with respect to the taxation of the Notes could change prior to the PPNs maturity.

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Investment considerations of PPNs