Accrual Notes, Extendible

An Extendible Accrual Note is another alternative to conventional fixed income products because of its higher interest rate. It pays accrued interest on the date the note matures or when the note is redeemed by the issuer, whichever comes first. Yields to maturity on Extendible Accrual Notes are higher than similar term bonds and similarly-rated Extendible Fixed Rate Notes, as the issuer has the option to extend the maturity date and because interest is compounded and paid on only one date.

Investor Rationale: Extendible Accrual Notes offer higher returns compared to traditional bonds.

Investor Profile: Clients should be willing to forgo a steady stream of payments in exchange for a single larger accrued payment on maturity, and be aware that the maturity can be extended throughout the term of the note. These notes are similar to Extendible Step-up Notes; however, coupons accrue and are only paid on one date at maturity or when the notes are redeemed.

Advantages:

• Higher interest rate • Backed by high-quality issuers – IE Canadian Banks

• Simple structure • 100% Principal Protection if held to maturity

• Higher yield compared to Extendible Fixed Rate Notes because interest accrues

• Liquidity in daily secondary market subject to availability

Risks:

• Reinvestment Risk

• Price Risk

• Credit Risk of issuer