Types of structured notes
Scotiabank offers four broad categories of structured notes, each offering structural characteristics designed to help investors realize specific financial objectives.
Principal protected notes
Principal protected notes (PPNs) are deposit notes with returns linked to the performance of a variety of underlying assets. As with all other deposits issued by Scotiabank, an investor’s principal amount is 100% guaranteed by the Bank at the maturity date of their investment.
Principal protected notes typically offer the potential for variable returns beyond that of traditional bonds based on the performance of the underlying assets.
These variable returns may be combined with fixed coupon payments and may be paid during the life of the investment or as a lump-sum payment at maturity.
Market linked guaranteed investment certificates
Market linked GICs (MLGICs) are similar to principal protected notes, but they are covered by Canada Deposit Insurance Corporation (CDIC) insurance. They are designed for investors requiring full principal protection and seeking a positive return in flat equity markets.
The appeal of a market linked GIC is that it comes with deposit insurance up to eligible limits, with the potential to gain upside returns from the equity market. BNS MLGICs are distributed to retail investors through Canadian Bank branches or through investment advisors at registered Canadian Dealers.
Principal at risk notes
Principal at risk notes (PARs) provide investors with returns linked to a variety of underlying assets. They do not guarantee repayment of an investors principal amount at maturity.
These products are designed for investors seeking the opportunity for an enhanced return over other traditional equity or fixed rate investments. They’re suited for investors that are prepared to assume the risks associated with an investment linked to equity markets.
The potential return on principal at risk notes is augmented by putting some, or all, of an investor’s principal at risk, based on the performance of the underlying assets during the life of the note.
The most common type of PAR notes offered in Canada are designed to generate an enhanced income stream, even in flat or negative equity markets, and are frequently automatically callable based on underlying asset performance.
Fixed income notes
Fixed income notes (FINs) are alternative investments to traditional fixed or floating rate bonds.
This product is designed for investors requiring full principal protection, while still seeking the opportunity of earning above-market returns relative to traditional fixed income instruments of comparable maturity and credit quality.
As with all other deposits issued by Scotiabank, an investor’s principal amount is 100% guaranteed by the Bank at the maturity date of their investment. FINs can be issued either as deposit-type instruments or as CDIC-eligible GICs.
FINs can be callable or extendible at the Bank’s discretion and can be used to express an outlook on forward interest rates or the shape of the yield curve, or to hedge existing interest rate exposure.
