Download Dynamic allocation strategy

CIBC CI Global Insights Deposit Notes,
Series 2 (CBL309)
The Smart Global Diversification Strategy
The information contained herein is confidential and for advisor use only.
It is not to be reproduced or distributed to the public or the press.
This presentation is not an offer or a solicitation of an offer or a recommendation to buy or sell any securities or financial
instrument, nor shall it be deemed to provide investment, tax or accounting advice. The information contained herein is
intended as a summary only and is qualified entirely by, and should be read in conjunction with, the more detailed
information appearing in the Information Statement. Details regarding the dynamic allocation strategy, calculation and
payment of interest,, the notional portfolio, repayment of principal at maturity and certain risk factors are contained in the
Information Statement. Any examples in this presentation are included for illustrative purposes only and are not intended to
predict actual results, which may differ substantially from those reflected herein.
“CI”, “CI Investments”, Synergy”, “Synergy Funds” and the CI Investments design are registered trademarks of CI
Investments Inc. and have been licensed for use by CIBC and its affiliates.
Investment Highlights
 Global Diversification (3 CI Global Equity Funds)
 Efficient CPPI Structure
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Dynamic allocation strategy
Potential for 200% exposure to the Funds
100% reinvestment of any distributions made by the Funds
Low cost loan facility (1-month BAs + 25 bps)
Low portfolio fees (max. 2.85%) only 0.32% higher than blended 2005 MER of funds
 100% Principal Protection at maturity
 Effective Tax Treatment
• Tax deferral on interest income
• Capital Gains potential if sold prior to maturity
The International Opportunity
The chart shows how portfolios with global diversification have
outperformed (with less risk) portfolios with Canadian assets only.
The Global CI Portfolio
CI International Value Fund
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Altrinsic Global Advisors (Hock)
Undervalued global equities, including emerging
markets and emerging industries in any market
CI International
Value Fund
40%
Synergy Global Corporate Class
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Synergy Asset Management (Picton, Mahoney)
Growth investing in developed markets represented by
MSCI World Index
S ynergy Global
Corporate Class
40%
Sector Breakdown - March 31, 2006
CI American
CI
Value Trust
Value FundClass
Corporate
20%
20%
CI Value Trust Corporate Class
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Legg Mason Capital Management (Miller)
Concentrated portfolio of 30 - 50 high quality U.S. equities
The U.S. version of the fund has outperformed the S&P 500
for 15 consecutive calendar years.
M edia
4%
Utilities
2%
Other
1%
Cash
7%
Business Services
7%
Consumer Goods
8%
Industrial M aterials
10%
Consumer Services
9%
Energy
5%
Health Care
11%
Telecom
5%
Software
2%
Hardware
7%
Financials
22%
The Global CI Portfolio
Portfolio Performance
$10,000 Investment Over 3 Years
Risk and Return - 3 Years Ending March 31, 2006
20.0%
$17,000
$16,436
Global
Insights
$15,000
$15,126
$13,000
Return %
18.0%
16.0%
MSCI World C$
14.0%
$11,000
$9,000
Mar-03
Global Insights
MSCI World C$
Mar-04
Mar-05
Mar-06
12.0%
8.5%
9.0%
9.5%
Standard Deviation %
Since Sep 2000, the weighted basket of Funds would have
outperformed the MSCI World Index.
10.0%
10.5%
The Smart Global Diversification Structure
Constant Proportion Portfolio Insurance (CPPI) Structure
• In rising global equity markets where Fund performance may be positive,
additional exposure to the Funds may be gained through leverage for enhanced returns.
• In fluctuating global equity markets where Fund performance may be positive
or negative, the structure may reduce volatility and dampen losses in an effort to allow
participation in any subsequent recovery of the Funds.
• In declining global equity markets where Fund performance may be negative,
allocating assets to bonds will ensure that 100% of the principal amount will be repaid to
investors at maturity.
How Does “Dynamic Allocation” Work?
Constant Proportion Portfolio Insurance (CPPI) Structure
Initial Purchase
Initially, the assets
will be fully
allocated to Units of
the Funds
Fund Account
Assets will reallocate
according to the
dynamic allocation
strategy
Bond Account
• On the Issue Date, $100 per Deposit Note will be used to notionally purchase Units of
the Funds.
• The Deposit Notes dynamically allocate between Units in the Fund Account and
Bonds in a Bond Account in accordance with pre-defined Portfolio Allocation Rules.
• The Portfolio Allocation Rules are based on the Distance between the NAV of the
Deposit Notes and the Floor Price (i.e., generally, the value of a zero-coupon bond).
• A rebalancing (known as an Allocation Event) will occur after a significant change in
Distance has taken place.
• The dynamic allocation strategy provides 100% initial exposure (with potential for
200% exposure) to the Funds and 100% principal protection at maturity.
“Distance” is the Benchmark for Re-balancing
Value
Dynamic allocation strategy
NAV of Deposit Note
Distance
ReLeveraging
De- Leveraging
Price of Notional
Zero Coupon Bond
Principal
Repayment
Leveraging
Initial
Investment
Time
Maturity
Effect of Bond Prices on the “Floor”
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Higher Bond Prices increase the level of the “Floor”.
Example 1: Price of 1.00% Coupon Bond with 5.5 year term to maturity – $81.14*
Example 2: Price of 0.00% Coupon Bond with 5.5 year term to maturity – $76.80*
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An increase in the “Floor” will generally decrease the “Distance”, which
determines exposure to the underlying assets.
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CPPI structures “eject” once the “Distance” falls to less than a predetermined percentage of the NAV of the Deposit Notes (thus, a higher
Floor decreases the Distance increasing the likelihood of fully
allocating to Bonds.
* As of May 8, 2006.
What triggers a Re-balancing?
When
“Target Exposure” differs from “Actual Exposure”
by more than 25%,
an Allocation Event will occur to bring Actual Exposure
back in line with Target Exposure.
Leveraging Scenario
Target Exposure exceeds
Actual Exposure by more
than 25%. Upper and low er
limits are reset from this point.
Actual Exposure is
brought in line w ith
Target Exposure
+25%
actual exposure
(new )
+25%
actual exposure
(initial)
-25%
-25%
De-Leveraging Scenario
+25%
actual exposure
(initial)
Actual Exposure is
brought in line with
Target Exposure
+25%
actual exposure
(new)
-25%
-25%
Target Exposure falls
below Actual Exposure by
more than 25%. Upper and
lower limits are reset.
Protection Event
A “Protection Event” would occur when the “Distance” falls
below 1.50% of the “Floor”, at which point the assets would
become fully allocated to Bonds until maturity, regardless of
the subsequent performance of the Funds.
Example #1: Positive Performance
$220
During st rong asset performance, a loan facilit y will be used t o generat e up
t o 200%of exposure t o t he Fund Account . This has t he effect of enhancing
ret urns.
$190
NAV
$160
Fund Price Performance
$130
(assuming re-investment of
distributions)
$100
Floor
$70
Loan Amount
$160
$120
$80
$40
$0
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Hypothetical Deposit Note outperforms a direct investment in the Funds. (12.37% p.a. vs 9.71% p.a.)
Assuming Bonds’ YTM 4.80% and a constant Loan rate of 4.35% over the term of the Notes.
Example #2: Protection Event
$120
Prot ect ion event occurs
prior t o mat urit y.
$110
NAV
$100
$90
Fund Price Performance
$80
Floor
(assuming re-investment of
distributions)
$70
$60
Loan Amount
$20
$15
$10
$5
$0
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A direct investment in Units of the Funds would not have returned its original value after 5.5 years. (-2.71% p.a.)
An investment in the Deposit Notes would have paid $101.51 per Deposit Note on the Maturity Date, (0.27% p.a.)
Benefits of the Structure

Responsive to Fund Performance
Scenario 1: In global equity market conditions where the Funds perform well, additional exposure to the Funds may be
achieved through leverage generating enhanced returns.
Scenario 2: In global equity market conditions where Funds may perform negatively, reduced exposure to the Funds
may dampen losses in an effort to enable participation in any subsequent recovery.

Protects against Interest Rate Fluctuations
Scenario 3: In a rising interest rate environment, continued exposure to the Funds increases growth potential to keep
pace with higher interest rates.
Scenario 4: In a declining interest rate environment, reinvestment of any distributions will help preserve exposure to
the Funds.
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Efficient CPPI Structure
Trading bands are reset following each Allocation Event to avoid multiple rebalancing in a short period of time.
Comparatively low fees and interest charges help prolong exposure to the Funds by making the structure less prone
to de-leveraging and allocating to Bonds.

100% Capital Protection
100% principal protection by CIBC at maturity regardless of the performance of the Funds.
Potential Investors
 Equity Investors:
 Medium to long-term, risk-sensitive investors who are holding high levels of cash.
 Investors with portfolios more heavily skewed to Canadian content.
 Investors seeking global diversification with professionally managed mutual funds
with safety of principal protection.
 Fixed Income Investors:
 Investors hesitant to lock in long-term rates at current levels.
 Investors missing investment goals due to low interest rates.
 Registered Accounts:
 100% eligible for RRSP, RRIF, RESP, DPSP and LIRA accounts
 Diversified growth opportunity for investors with long-term investment horizons
Summary of Terms
Issuer
Canadian Imperial Bank of Commerce
Issue Date
July 12, 2006
Maturity Date
December 29, 2011 (Term to Maturity: 5.5 years)
Issue Size
Subscription Price: $100 per Deposit Note
Minimum Purchase: $5,000 (50 Deposit Notes)
Compensation
4.25% up front.
0.25% p.a. trailer on Fund Account Value.
Fees & Expenses
All-in Maximum Portfolio fee: (i) 2.85%
Portfolio fee will be dependant upon allocation between Fund Account and Bond Account:
2.85% of value of Units in the Fund Account; and (ii) 0.00% of face amount of Bonds in
Bond Account; Interest on loan facility of BA’s, plus 25 bps per annum
All fees and expenses calculated daily and payable monthly in arrears
RRSP Eligibility
100% eligible for RRSPs, RRIFs, RESPs, DPSPs and LIRAs.
CIBC offers client-name purchases for RRSP accounts only (no fees). All other registered
plan purchases must be placed through a dealer or intermediary sponsored plan.
Secondary Market
CIBC World Markets Inc. will maintain a secondary market for Deposit Notes (subject to
availability). Early trading charge will apply on dispositions in first 2 years.
FundSERV Code:
CBL309
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