Additional Information about BNS and the Securities
You should read this pricing supplement together with the prospectus dated December 29, 2021, as supplemented by the prospectus supplement dated December 29, 2021, the underlier supplement dated
December 29, 2021 and the product supplement (Market-Linked Notes, Series A) dated December 29, 2021, relating to our Senior Note Program, Series A, of which these Securities are a part. Capitalized terms used but not defined in this pricing
supplement will have the meanings given to them in the product supplement.
The Securities may vary from the terms described in the accompanying prospectus, prospectus supplement, underlier supplement and product supplement in several important ways. You should read this
pricing supplement carefully, including the documents incorporated by reference herein. In the event of any conflict between this pricing supplement and any of the foregoing, the following hierarchy will govern: first, this pricing supplement;
second, the accompanying product supplement; third, the accompanying underlier supplement; fourth, the accompanying prospectus supplement; and last, the accompanying prospectus. You may access these documents on the SEC website at www.sec.gov as
follows (or if that address has changed, by reviewing our filings for the relevant date on the SEC website).
This pricing supplement, together with the documents listed below, contains the terms of the Securities and supersedes all prior or contemporaneous oral statements as well as any other written
materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. You should carefully consider, among other things, the
matters set forth in “Key Risks” herein, in “Additional Risk Factors Specific to the Securities” of the accompanying product supplement and in “Risk Factors” of the accompanying prospectus supplement and of the accompanying prospectus, as the
Securities involve risks not associated with conventional debt securities.
We urge you to consult your investment, legal, tax, accounting and other advisors concerning an investment in the Securities in light of your particular circumstances.
You may access these documents on the SEC website at www.sec.gov as follows:
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Product Supplement (Market-Linked Notes, Series A) dated December 29, 2021:
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Underlier Supplement dated December 29, 2021:
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Prospectus Supplement dated December 29, 2021:
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Prospectus dated December 29, 2021:
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References to “BNS”, “we”, “our” and “us” refer only to The Bank of Nova Scotia and not to its consolidated subsidiaries and references to the “Capped GEARS” or the “Securities”
refer to the Securities that are offered hereby. Also, references to the “accompanying product supplement” mean the BNS product supplement, dated December 29, 2021, references to the “accompanying underlier supplement” mean the BNS underlier
supplement, dated December 29, 2021, references to the “accompanying prospectus supplement” mean the BNS prospectus supplement, dated December 29, 2021 and references to the “accompanying prospectus” mean the BNS prospectus, dated December 29, 2021.
BNS reserves the right to change the terms of, or reject any offer to purchase, the Securities prior to their issuance. In the event of any changes to the terms of the Securities, BNS will notify you
and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case BNS may reject your offer to purchase.
The Securities may be suitable for you if:
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You fully understand and are willing to accept the risks inherent in an investment in the Securities, including the risk of loss of your entire investment.
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You can tolerate a loss of some or all of your investment in the Securities and are willing to make an investment that has the same downside market risk as that of an investment in the underlying or the assets comprising the
underlying (the “underlying constituents”).
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You believe that the level of the underlying will appreciate over the term of the Securities and that the percentage of appreciation, when multiplied by the upside gearing, is unlikely to exceed the maximum gain indicated on the
cover hereof.
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You understand and accept that your potential return is limited to the maximum gain and you are willing to invest in the Securities based on the maximum gain indicated on the cover hereof.
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You are willing to invest in the Securities based on the upside gearing indicated on the cover hereof.
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You can tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the downside fluctuations in the level of the underlying.
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You do not seek current income from your investment and are willing to forgo any dividends paid on the underlying or the underlying constituents.
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You understand and are willing to accept the risks associated with the underlying.
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You are willing to hold the Securities to maturity and accept that there may be little or no secondary market for the Securities.
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You are willing to assume the credit risk of BNS for all payments under the Securities, and understand that if BNS defaults on its obligations you may not receive any amounts due to you including any repayment of principal.
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The Securities may not be suitable for you if:
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You do not fully understand or are not willing to accept the risks inherent in an investment in the Securities, including the risk of loss of your entire investment.
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You require an investment designed to provide a full return of principal at maturity.
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You cannot tolerate a loss of some or all of your investment in the Securities or are unwilling to make an investment that has the same downside market risk as that of an investment in the underlying or the underlying constituents.
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You believe that the level of the underlying will decline during the term of the Securities or you believe that the level of the underlying will appreciate over the term of the Securities by more than the maximum gain indicated on
the cover hereof.
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You seek an investment that has unlimited return potential without a cap on appreciation or you are unwilling to invest in the Securities based on the maximum gain indicated on the cover hereof.
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You are unwilling to invest in the Securities based on the upside gearing indicated on the cover hereof.
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You cannot tolerate fluctuations in the price of the Securities prior to maturity that may be similar to or exceed the downside fluctuations in the level of the underlying.
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You do not understand or are not willing to accept the risks associated with the underlying.
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You seek current income from your investment or prefer to receive any dividends paid on the underlying or the underlying constituents.
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You are unable or unwilling to hold the Securities to maturity or you seek an investment for which there will be an active secondary market.
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You are not willing to assume the credit risk of BNS for all payments under the Securities, including any repayment of principal.
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The investor suitability considerations identified above are not exhaustive. Whether or not the Securities are a suitable investment for you will depend on your individual
circumstances and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the suitability of an investment in the Securities in light of your particular
circumstances. You should review “Information About the Underlying” herein for more information on the underlying. You should also review “Key Risks” herein and the more detailed “Risk Factors” in the accompanying product supplement for risks
related to an investment in the Securities.
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Issuer
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The Bank of Nova Scotia
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Issue
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Senior Note Program, Series A
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Agents
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Scotia Capital (USA) Inc. (“SCUSA”) and UBS Financial Services Inc. (“UBS”)
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Principal
Amount
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$10 per Security (subject to a minimum investment of 100 Securities)
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Term
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Approximately 14 months
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Underlying
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Shares of the Securities linked to iShares® MSCI Emerging Markets ETF
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Maximum
Gain
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20.75%
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Maximum
Payment at
Maturity per
Security
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$12.075
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Upside
Gearing
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3.00
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Payment at
Maturity (per
Security)
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If the underlying return is positive, BNS will pay you an amount in cash equal to:
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$10 × (1 + the lesser of (a) Underlying Return × Upside Gearing and (b) Maximum Gain)
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If the underlying return is zero, BNS will pay you an amount in cash equal to:
Principal Amount of $10
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If the underlying return is negative, BNS will pay you an amount in cash that is less than your principal amount, if anything, equal to:
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$10 × (1 + Underlying Return)
In this scenario, you will suffer a percentage loss on your principal amount equal to the underlying return and, in extreme situations, you could lose your entire investment in the Securities.
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Underlying
Return
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The quotient, expressed as a percentage, of the following formula:
Final Level − Initial Level
Initial Level
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Initial Level(1)
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The closing level of the underlying on the trade date, as indicated on the cover hereof
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Final Level(1)
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The closing level of the underlying on the final valuation date
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(1) As determined by the calculation agent and as may be determined or adjusted by the calculation agent in certain special circumstances, as described under “General Terms of the Notes —
Unavailability of the Closing Value of a Reference Asset; Adjustments to a Reference Asset — Adjustments to a Reference ETF”, “General Terms of the Notes — Adjustments to an ETF” and “General Terms of the Notes — Anti-Dilution
Adjustments Relating to Equity Securities or a Reference Asset that is an ETF” in the accompanying product supplement.
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Business Day
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A day other than a Saturday or Sunday or a day on which banking institutions in New York City are authorized or required by law to close
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Tax Redemption
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Notwithstanding anything to the contrary in the accompanying product supplement, the provision set forth under “General Terms of the Notes—Payment of Additional Amounts”
and “General Terms of the Notes—Tax Redemption” shall not apply to the Securities
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Canadian Bail-in
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The Securities are not bail-inable debt securities under the CDIC Act
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Terms
Incorporated
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All of the terms appearing above the item under the caption “General Terms of the Notes” in the accompanying product supplement, as modified by this pricing supplement,
and for purposes of the foregoing, references herein to “underlying”, “underlying constituents”, “closing level” and “underlying return” mean “reference asset”, “reference asset constituents”, “closing value” and “reference asset
return”, respectively, each as defined in the accompanying product supplement. In addition to those terms, the following two sentences are also so incorporated into the master note: BNS confirms that it fully understands and is able to
calculate the effective annual rate of interest applicable to the Securities based on the methodology for calculating per annum rates provided for in the Securities. BNS irrevocably agrees not to plead or assert Section 4 of the
Interest Act (Canada), whether by way of defense or otherwise, in any proceeding relating to the Securities.
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Trade Date
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The initial level is observed and the final terms of the Securities are set.
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Maturity Date
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The final level is observed on the final valuation date and the underlying return is calculated.
If the underlying return is positive, BNS will pay you an amount in cash per Security equal to:
$10 × (1 + the lesser of (a) Underlying Return × Upside Gearing and (b) Maximum Gain)
If the underlying return is zero, BNS will pay you an amount in cash per Security equal to:
Principal Amount of $10
If the underlying return is negative, BNS will pay you an amount in cash per Security that is less than your principal amount, if
anything, equal to:
$10 × (1 + Underlying Return)
In this scenario, you will suffer a percentage loss on your principal amount equal to the underlying return and, in extreme
situations, you could lose your entire investment in the Securities.
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Investing in the Securities involves significant risks. You may lose some or all of your investment in the Securities. Specifically, if the final level is less than the initial level, you will lose
a percentage of your principal amount equal to the underlying return and, in extreme situations, you could lose all of your investment in the Securities. Any payment on the Securities, including any repayment of principal, is subject to the
creditworthiness of BNS. If BNS were to default on its payment obligations, you may not receive any amounts owed to you under the Securities and you could lose your entire investment in the Securities.
An investment in the Securities involves significant risks. Some of the key risks that apply to the Securities are summarized below, but we urge you to read the more detailed explanation of risks
relating to the Securities under “Additional Risk Factors Specific to the Notes” of the accompanying product supplement and “Risk Factors” of the accompanying prospectus supplement and of the accompanying prospectus. We also urge you to consult your
investment, legal, tax, accounting and other advisors concerning an investment in the Securities in light of your particular circumstances.
Risks Relating to Return Characteristics
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Risk of loss at maturity — The Securities differ from ordinary debt securities in that BNS will not necessarily repay the principal amount of the Securities. BNS will pay you the principal amount of
your Securities in cash at maturity only if the final level is equal to or greater than the initial level. You will be exposed to any decline in the level of the underlying from the initial level to the final level. If the underlying return
is negative, you will lose a percentage of your principal amount equal to the underlying return and, in extreme situations, you could lose your entire investment in the Securities.
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The stated payout from the issuer applies only at maturity — You should be willing to hold your Securities to maturity. The stated payout by the issuer is available only if you hold your Securities
to maturity. If you are able to sell your Securities prior to maturity in the secondary market, you may have to sell them at a loss relative to your investment in the Securities even if the then-current level of the underlying is equal to or
greater than the initial level.
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The upside gearing applies only at maturity — You should be willing to hold your Securities to maturity. If you are able to sell your Securities prior to maturity in the secondary market, the price
you receive will likely not reflect the full economic value of the upside gearing, subject to the maximum gain, and the percentage return you realize may be less than the then-current underlying return multiplied by the upside gearing, even
if such product is positive and less than the maximum gain. You can receive the full benefit of the upside gearing, subject to the maximum gain, only if you hold your Securities to maturity.
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Your potential return on the Securities is limited to the maximum gain — The return potential of the Securities is limited to the maximum gain. Therefore, you will not benefit from any positive
underlying return in excess of an amount that, when multiplied by the upside gearing, exceeds the maximum gain and your return on the Securities may be less than it would be in a hypothetical direct investment in the underlying.
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No interest payments — BNS will not pay any interest with respect to the Securities.
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Owning the Securities is not the same as owning the underlying constituents — The return on your Securities may not reflect the return you would realize if you actually owned the underlying or the
underlying constituents. For instance, you will not benefit from any positive underlying return in excess of an amount that, when multiplied by the upside gearing, exceeds the maximum gain. Furthermore, you will not receive or be entitled to
receive any dividend payments or other distributions paid to holders of the underlying or the underlying constituents during the term of the Securities, and any such dividends or distributions will not be factored into the calculation of the
payment at maturity on your Securities. In addition, as an owner of the Securities, you will not have voting rights or any other rights that a holder of the underlying or the underlying constituents may have.
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Risks Relating to Characteristics of the Underlying
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Market risk — The return on the Securities, which may be negative, is directly linked to the performance of the underlying and indirectly linked to the performance of the underlying constituents, and
will depend on whether, and the extent to which, the underlying return is positive or negative. The level of the underlying can rise or fall sharply due to factors specific to the underlying and the investment advisor of the underlying and
the underlying constituents and their issuers (each, an “underlying constituent issuer”), such as stock price volatility, earnings and financial conditions, corporate, industry and regulatory developments, management changes and decisions and
other events, as well as general market factors, such as general stock market or commodity market volatility and levels, interest rates and economic and political conditions.
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In recent years, the COVID-19 pandemic has caused volatility in the global financial markets and a slowdown in the global economy. COVID-19 or any other communicable disease or
infection may adversely affect the underlying constituent issuers and, therefore, the underlying. You, as an investor in the Securities, should conduct your own investigation into the underlying.
For additional information regarding the underlying, please see “Information About the Underlying” herein and the SEC filings relating to the underlying. We urge you to review financial and other information filed regarding the underlying periodically by with the SEC.
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There can be no assurance that the investment view implicit in the Securities will be successful — It is impossible to predict whether and the extent to which the level of the underlying will rise
or fall and there can be no assurance that the final level will be greater than the initial level. The performance of the underlying from the initial level to the final level will be influenced by complex and interrelated political, economic,
financial and other factors that affect the underlying constituents. You should be willing to accept the risks of owning equities in general and the underlying constituents in particular, and the risk of losing some or all of your investment
in the Securities.
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The value of the underlying may not completely track the value of its underlying constituents — Although the trading characteristics and valuations of the underlying will usually mirror the
characteristics and valuations of its underlying constituents, the level of the underlying may not completely track the value of its underlying constituents. The level of the underlying will reflect transaction costs and fees that its
underlying constituents do not have. In addition, although the underlying is currently listed for
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trading on an exchange, there is no assurance that an active trading market will continue for the underlying or that there will be liquidity in the trading market.
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Fluctuation of NAV — The net asset value (the “NAV”) of the underlying may fluctuate with changes in the market value of its underlying constituents. The market prices of the underlying may fluctuate
in accordance with changes in NAV and supply and demand on the applicable stock exchanges. In addition, the market price of the underlying may trade at, above or below its NAV per share.
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Failure of the underlying to track the level of its target index — While the underlying is designed and intended to track the level of a specific index as specified under “Information About the
Underlying” (its “target index”), various factors, including fees and other transaction costs that affect the underlying, will prevent the underlying from correlating exactly with changes in the level of its target index. Accordingly, the
underlying is expected to underperform its target index during the term of the Securities. This difference in performance is sometimes referred to as “tracking error” and may be significant.
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The underlying utilizes a representative sampling investment approach — The underlying uses a “representative sampling” strategy, which means that it will invest in a representative sample of
securities that collectively has an investment profile similar to that of its target index. The underlying is generally expected to invest at least 80% of its assets in components of the target index, but the underlying may not hold all or
substantially all of the components of the target index and may hold securities or assets not included in the target index. While the performance of the underlying is generally linked to the performance of the target index, the performance of
the underlying may also be linked in part to shares of equity securities not included in the target index and to the performance of other assets, such as futures contracts, options and swaps, as well as cash and cash equivalents, including
shares of money market funds affiliated with the investment advisor for the underlying.
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The Securities are subject to currency exchange rate risk — The Securities are subject to currency exchange rate risk because the underlying may invest in
securities that are traded and quoted in non-U.S. currencies on non-U.S. markets. Therefore, holders of the Securities may be exposed to currency exchange rate risk with respect to the currencies in which such securities trade. The values of
the currencies of the countries in which the underlying may invest may be subject to a high degree of fluctuation due to changes in interest rates, the effects of monetary policies issued by the U.S., non-U.S. governments, central banks or
supranational entities, the imposition of currency controls or other national or global political or economic developments. An investor’s net exposure will depend on the extent to which the relevant non-U.S. currencies strengthen or weaken
against the U.S. dollar and the relative weight of each non-U.S. underlying constituent. If, taking into account such weighting, the U.S. dollar strengthens against the relevant non-U.S. currencies, the value of the underlying constituents
will be adversely affected and the market value of, and return on, the Securities may decrease.
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There is no affiliation among the underlying constituent issuers, the sponsor of the target index or the underlying and us or the Agents — BNS, the Agents and our other or their respective affiliates
may currently, or from time to time in the future, engage in business with the underlying constituent issuers, the target index sponsor or the investment advisor of the underlying. None of us, the Agents or any of our other or their
respective affiliates have participated in the preparation of any publicly available information or made any “due diligence” investigation or inquiry with respect to the underlying or its underlying constituents. You should make your own
investigation into the underlying, the target index sponsor, the investment advisor of the underlying and the underlying constituent issuers. See the section below entitled “Information About the Underlying” herein for additional information
about the underlying.
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BNS cannot control actions by the investment advisor of the underlying that may adjust the underlying in a way that could adversely affect the market value of, and return on, the Securities, and the
investment advisor of the underlying has no obligation to consider your interests — The investment advisor of the underlying may from time to time be called upon to make certain policy decisions or judgments with respect to the
implementation of its policies concerning the calculation of the net asset value of the underlying, additions, deletions or substitutions of its underlying constituents and the manner in which changes affecting the target index are reflected
in the underlying that could affect the market price of the shares of the underlying, and therefore, any amounts payable on the Securities. Any amounts payable on the Securities and their market value could also be affected if the investment
advisor of the underlying changes these policies, for example, by changing the manner in which it calculates the net asset value of the underlying, or if the investment advisor discontinues or suspends calculation or publication of the net
asset value of the underlying, in which case it may become difficult or inappropriate to determine the market value of your Securities. See also “— Risks Relating to Hedging Activities and Conflicts of Interest — The calculation agent can
make antidilution and other adjustments that may adversely affect the market value of, and any amounts payable on, the Securities” herein.
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The Securities are subject to risks associated with non-U.S. securities — The Securities are subject to risks associated with non-U.S. securities because underlying invests in non-U.S. securities.
Market developments may affect non-U.S. markets differently from U.S. securities markets and direct or indirect government intervention to stabilize these non-U.S. markets, as well as cross shareholdings in non-U.S. companies, may affect
trading prices and volumes in those markets. Securities issued by non-U.S. companies are subject to political, economic, financial and social factors that may be unique to the particular country. These factors, which could negatively affect
the applicable underlying constituents include the possibility of recent or future changes in the non-U.S. government’s economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other non-U.S. laws or
restrictions applicable to non-U.S. companies or investments in non-U.S. equity securities and the possibility of fluctuations in the rate of exchange between currencies. Moreover, certain aspects of a particular non-U.S. economy may differ
favorably or unfavorably from the U.S. economy in important respects, such as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
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The Securities are subject to emerging markets risk — The underlying is subject to risks associated with emerging market companies and emerging market securities that are traded on various emerging
market exchanges. Investments in securities linked directly or indirectly to emerging market equity securities involve many risks, including, but not limited to: economic, social, political, financial and military conditions in the emerging
market; regulation by national, provincial, and local governments; less liquidity and smaller market capitalizations than exist in the case of many large U.S. companies; different accounting and disclosure standards; and
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political uncertainties. Securities of emerging market companies may be more volatile and may be affected by market developments differently than U.S. companies. Government interventions to
stabilize securities markets and cross-shareholdings may affect prices and volume of trading of the securities of emerging market companies. Economic, social, political, financial and military factors could, in turn, negatively affect such companies’
value. These factors could include changes in the emerging market government’s economic and fiscal policies, possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to the emerging market companies or
investments in their securities, and the possibility of fluctuations in the rate of exchange between currencies. Moreover, emerging market economies may differ favorably or unfavorably from the U.S. economy in a variety of ways, including growth of
gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency. You should carefully consider the risks related to emerging markets, to which the underlying is susceptible.
Additionally, pursuant to recent executive orders, U.S. persons are prohibited from engaging in transactions in publicly traded securities of certain companies that are determined to
be linked to the military, intelligence and security apparatus of the People’s Republic of China. The prohibition also covers any securities that are derivative of, or are designed to provide investment exposure to, such securities. In response to
this, the sponsor of the target index of the underlying (the “target index sponsor”) publicly announced that it removed the equity securities of a small number of companies from such target index and the investment adviser of the underlying also
publicly announced that it removed affected stocks from such ETF and each such party has also publicly announced that it intends to remove any such underlying constituent from its target index and such ETF, respectively. Additionally, the investment
adviser of the underlying suspended the purchase of Russian securities on February 28, 2022 and the target index sponsor began the removal of Russian securities from its target index beginning the week of March 7, 2022. Currently, the investment
adviser of the underlying determines the fair market value for any Russian securities in the underlying through a formal process governed by a pricing policy, and is actively consulting with regulators and other market participants to help ensure the
underlying can exit any positions in Russian securities, consistent with their removal from the target index, whenever and wherever regulatory and market conditions allow. If the issuer of any existing underlying constituent is in the future
designated as such a prohibited company or any actions are taken similar to those taken with respect to Russian securities, the value of such underlying constituent may be adversely affected, perhaps significantly, which would adversely affect the
performance of the target index and the underlying. Any changes to the composition of the underlying or its target index in response to the executive orders or other circumstances like those described above could adversely affect the performance of
the underlying and, therefore, the market value of, and return on, the Securities.
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Changes affecting the target index could have an adverse effect on the market value of, and return on, the Securities— The target index sponsor owns the target index and is responsible for the design
and maintenance of the target index. The policies of the target index sponsor concerning the calculation of the target index, including decisions regarding the addition, deletion or substitution of the equity securities included in the target
index, could affect the level of the target index and, consequently, could affect the market price of the underlying and, therefore, the amount payable on the Securities and their market value. The target index sponsor may discontinue or
suspend calculation or dissemination of its target index. Any such actions could have a material adverse effect on the market value of, and any amount payable on, the Securities.
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BNS cannot control actions by the target index and the target index sponsor has no obligation to consider your interests — BNS and its affiliates are not affiliated with the target index sponsor and
have no ability to control or predict its actions, including any errors in or discontinuation of public disclosure regarding methods or policies relating to the calculation of the target index. The sponsor of the target index sponsor is not
involved in the Securities offering in any way and has no obligation to consider your interest as an owner of the Securities in taking any actions that might negatively affect the market value of, and any amount payable on, your Securities.
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Estimated Value Considerations
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BNS’ initial estimated value of the Securities at the time of pricing (when the terms of your Securities were set on the trade date) is lower than the issue price of the Securities — BNS’ initial
estimated value of the Securities is only an estimate. The issue price of the Securities exceeds BNS’ initial estimated value. The difference between the issue price of the Securities and BNS’ initial estimated value reflects costs associated
with selling and structuring the Securities, as well as hedging its obligations under the Securities with SCUSA or another affiliate. Therefore, the economic terms of the Securities are less favorable to you than they would have been if these
expenses had not been paid or had been lower.
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Neither BNS’ nor SCUSA’s estimated value of the Securities at any time is determined by reference to credit spreads or the borrowing rate BNS would pay for its conventional fixed-rate debt securities —
BNS’ initial estimated value of the Securities and SCUSA’s estimated value of the Securities at any time are determined by reference to BNS’ internal funding rate. The internal funding rate used in the determination of the estimated value of
the Securities generally represents a discount from the credit spreads for BNS’ conventional fixed-rate debt securities and the borrowing rate BNS would pay for its conventional fixed-rate debt securities. This discount is based on, among
other things, BNS’ view of the funding value of the Securities as well as the higher issuance, operational and ongoing liability management costs of the Securities in comparison to those costs for BNS’ conventional fixed-rate debt. If the
interest rate implied by the credit spreads for BNS’ conventional fixed-rate debt securities, or the borrowing rate BNS would pay for its conventional fixed-rate debt securities were to be used, BNS would expect the economic terms of the
Securities to be more favorable to you. Consequently, the use of an internal funding rate for the Securities increases the estimated value of the Securities at any time and has an adverse effect on the economic terms of the Securities.
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BNS’ initial estimated value of the Securities does not represent future values of the Securities and may differ from others’ (including SCUSA’s) estimates — BNS’ initial estimated value of the
Securities was determined by reference to its internal pricing models when the terms of the Securities were set. These pricing models consider certain factors, such as BNS’ internal funding rate on the trade date, the expected term of the
Securities, market conditions and other relevant factors existing at that time, and BNS’ assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and
assumptions (including the pricing models and assumptions used by SCUSA) could provide valuations for the Securities that
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are different, and perhaps materially lower, from BNS’ initial estimated value. Therefore, the price at which SCUSA would buy or sell your Securities (if SCUSA makes a market, which it is not
obligated to do) may be materially lower than BNS’ initial estimated value. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect.
Risks Relating to Liquidity and Secondary Market Price Considerations
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The Securities have limited liquidity — The Securities will not be listed on any securities exchange or automated quotation system. Therefore, there may be little or no secondary market for the
Securities. SCUSA and any other affiliates of BNS intend, but are not required to, make a market in the Securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Securities easily.
Because we do not expect that other broker-dealers will participate in the secondary market for the Securities, the price at which you may be able to trade your Securities is likely to depend on the price, if any, at which SCUSA is willing to
purchase the Securities from you. If at any time SCUSA does not make a market in the Securities, it is likely that there would be no secondary market for the Securities. Accordingly, you should be willing to hold your Securities to maturity.
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The price at which SCUSA would buy or sell the Securities (if SCUSA makes a market, which it is not obligated to do) will be based on SCUSA’s estimated value of the Securities and may be greater than BNS’
valuation of the Securities at that time, greater than any other secondary market prices provided by unaffiliated dealers (if any) and, depending on your broker, greater than the valuation provided on your customer account statements
— SCUSA’s estimated value of the Securities is determined by reference to its pricing models and takes into account BNS’ internal funding rate. The price at which SCUSA would initially buy or sell the Securities in the secondary market (if
SCUSA makes a market, which it is not obligated to do) may exceed (i) SCUSA’s estimated value of the Securities at the time of pricing, (ii) any secondary market prices provided by unaffiliated dealers, potentially including UBS, and (ii)
depending on your broker, the valuation provided on your customer account statement. The price that SCUSA may initially offer to buy such Securities following issuance will exceed the valuations indicated by its internal pricing models due to
the inclusion for a limited period of time of the aggregate value of the costs associated with structuring and selling the Securities, including the underwriting discount, hedging costs, issuance costs and theoretical projected trading
profit. The portion of such amounts included in any secondary market price will decline to zero on a straight line basis over a period ending no later than the date specified under “Supplemental Plan of Distribution (Conflicts of Interest);
Secondary Markets (if any).” Thereafter, if SCUSA buys or sells the Securities it will do so at prices that reflect the estimated value determined by reference to SCUSA’s pricing models at that time. The price at which SCUSA will buy or sell
the Securities at any time also will reflect its then current bid and ask spread for similar sized trades of structured notes. The temporary positive differential relative to SCUSA’s internal pricing models arises from requests from and
arrangements made by BNS and the Agents. As described above, SCUSA and its affiliates are not required to make a market for the Securities and may stop making a market at any time. SCUSA reflects this temporary positive differential on its
customer account statements. Investors should inquire as to the valuation provided on customer account statements provided by unaffiliated dealers, including UBS.
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SCUSA’s pricing models consider certain variables, including principally BNS’ internal funding rate, interest rates (forecasted, current and historical rates), volatility of the
underlying, price-sensitivity analysis and the time to maturity of the Securities. These pricing models are proprietary and rely in part on certain assumptions about future events, which may prove to be incorrect. As a result, the actual value you
would receive if you sold your Securities in the secondary market, if any, to others may differ, perhaps materially, from the estimated value of the Securities determined by reference to SCUSA’s models, taking into account BNS’ internal funding rate,
due to, among other things, any differences in pricing models or assumptions used by others. If SCUSA calculated its estimated value of the Securities by reference to BNS’ credit spreads or the borrowing rate BNS would pay for its conventional
fixed-rate debt securities (as opposed to BNS’ internal funding rate), the price at which SCUSA would buy or sell the Securities (if SCUSA makes a market, which it is not obligated to do) could be significantly lower.
In addition to the factors discussed above, the value and quoted price of the Securities at any time will reflect many factors and cannot be predicted. If SCUSA makes a market in the
Securities, the price quoted by SCUSA would reflect any changes in market conditions and other relevant factors, including any deterioration in BNS’ creditworthiness or perceived creditworthiness. These changes may adversely affect the value of the
Securities, including the price you may receive for the Securities in any market making transaction. To the extent that SCUSA makes a market in the Securities, the quoted price will reflect the estimated value determined by reference to SCUSA’s
pricing models at that time, plus or minus SCUSA’s then current bid and ask spread for similar sized trades of structured notes (and subject to the declining excess amount described above). Furthermore, if you sell your Securities, you will likely be
charged a commission for secondary market transactions, or the price will likely reflect a dealer discount. This commission or discount will further reduce the proceeds you would receive for your Securities in a secondary market sale.
♦ |
The price of the Securities prior to maturity will depend on a number of factors and may be substantially less than the principal amount — Because structured notes, including the Securities, can be
thought of as having a debt component and a derivative component, factors that influence the values of debt instruments and options and other derivatives will also affect the terms and features of the Securities at issuance and the market
price of the Securities prior to maturity. Some of these factors include, but are not limited to: (i) actual or anticipated changes in the level of the underlying over the full term of the Securities, (ii) volatility of the level of the
underlying and the market’s perception of future volatility of the underlying, (iii) changes in interest rates generally, (iv) any actual or anticipated changes in our credit ratings or credit spreads, (v) dividend yields on the underlying
and (vi) time remaining to maturity. In particular, because the provisions of the Securities relating to the payment at maturity behave like options, the value of the Securities will vary in ways which are non-linear and may not be intuitive.
Depending on the actual or anticipated level of the underlying and other relevant factors, the market value of the Securities may decrease and you may receive substantially less than the principal amount if you
sell your Securities prior to maturity regardless of the level of the underlying at such time.
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Risks Relating to Hedging Activities and Conflicts of Interest
♦ |
Hedging activities by BNS and SCUSA may negatively impact investors in the Securities and cause our respective interests and those of our clients and counterparties to be contrary to those of investors in
the Securities — We, SCUSA or one or more of our other affiliates has hedged or expects to hedge our obligations under the Securities. Such hedging transactions may include entering into swap or similar agreements, purchasing shares
of the underlying constituents and/or purchasing futures, options and/or other instruments linked to the underlying and/or one or more of the underlying constituents. We, SCUSA or one or more of our or their respective affiliates also expects
to adjust the hedge by, among other things, purchasing or selling any of the foregoing, and perhaps other instruments linked to the underlying and/or one or more of the underlying constituents, at any time and from time to time, and to unwind
the hedge by selling any of the foregoing on or before the final valuation date. We, SCUSA or one or more of our or their respective affiliates may also enter into, adjust and unwind hedging transactions relating to other basket- or
index-linked Securities whose returns are linked to changes in the level of the underlying and/or one or more of the underlying constituents. Any of these hedging activities may adversely affect the level of the underlying — directly or
indirectly by affecting the price of the underlying constituents — and therefore the market value of the Securities and the amount you will receive, if any, on the Securities.
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You should expect that these transactions will cause BNS, SCUSA or our other affiliates, or our or their respective clients or counterparties, to have economic interests and
incentives that do not align with, and that may be directly contrary to, those of an investor in the Securities. None of BNS, SCUSA or any of our other affiliates will have any obligation to take, refrain from taking or cease taking any action with
respect to these transactions based on the potential effect on an investor in the Securities, and any of the foregoing may receive substantial returns with respect to these hedging activities while the value of, and return on, the Securities
declines.
♦ |
The calculation agent can make antidilution and other adjustments that may adversely affect the market value of, and any amounts payable on, the Securities — For antidilution and certain other events
(including, but not limited to, a modification to the methodology of the underlying or its target index) affecting the underlying, the calculation agent may make adjustments to its initial level and/or final level, as applicable, and any
other term of the Securities. However, the calculation agent will not make an adjustment in response to every corporate event that could affect the underlying. If an event occurs that does not require the calculation agent to make an
adjustment, the market value of, and any payment on, the Securities may be materially and adversely affected. In addition, all determinations and calculations concerning any such adjustments will be made by the calculation agent. You should
be aware that the calculation agent may make any such adjustment, determination or calculation in a manner that differs from that discussed in the accompanying product supplement or this document as necessary to achieve an equitable result.
Following a delisting or suspension from trading or discontinuance of an ETF underlying, the determination as to the amount you receive at maturity may be based on the share of another ETF or a basket of securities, futures contracts,
commodities or other assets, as described further under “General Terms of the Notes — Adjustments to an ETF” and “General Terms of the Notes — Anti-Dilution Adjustments Relating to Equity Securities or a Reference Asset that is an ETF” in the
accompanying product supplement. The occurrence of any antidilution or other adjustment event and the consequent adjustments may materially and adversely affect the market value of, and any amounts payable on, the Securities. For more
information, see the sections “General Terms of the Notes — Unavailability of the Closing Value of a Reference Asset; Adjustments to a Reference Asset — Adjustments to a Reference ETF”, “General Terms of the Notes — Adjustments to an ETF” and
“General Terms of the Notes — Anti-Dilution Adjustments Relating to Equity Securities or a Reference Asset that is an ETF” in the accompanying product supplement.
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♦ |
We, the Agents and our or their respective affiliates regularly provide services to, or otherwise have business relationships with, a broad client base, which has included and may include us and the issuers
of the underlying constituents and the market activities by us, the Agents or our or their respective affiliates for our or their own respective accounts or for our or their respective clients could negatively impact investors in the
Securities — We, the Agents and our or their respective affiliates regularly provide a wide range of financial services, including financial advisory, investment advisory and transactional services to a substantial and diversified
client base. As such, we each may act as an investor, investment banker, research provider, investment manager, investment advisor, market maker, trader, prime broker or lender. In those and other capacities, we, the Agents and/or our or
their respective affiliates purchase, sell or hold a broad array of investments, actively trade securities (including the Securities or other securities that we have issued), the underlying constituents, derivatives, loans, credit default
swaps, indices, baskets and other financial instruments and products for our or their own respective accounts or for the accounts of our or their respective customers, and we will have other direct or indirect interests, in those securities
and in other markets that may not be consistent with your interests and may adversely affect the level of the underlying and/or the value of the Securities. You should assume that we or they will, at present or in the future, provide such
services or otherwise engage in transactions with, among others, us and the underlying constituent issuers, or transact in securities or instruments or with parties that are directly or indirectly related to these entities. These services
could include making loans to or equity investments in those companies, providing financial advisory or other investment banking services, or issuing research reports. Any of these financial market activities may, individually or in the
aggregate, have an adverse effect on the level of the underlying and the market for your Securities, and you should expect that our interests and those of the Agents and/or our or their respective affiliates, clients or counterparties, will
at times be adverse to those of investors in the Securities.
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You should expect that we, the Agents, and our or their respective affiliates, in providing these services, engaging in such transactions, or acting for our or their own respective
accounts, may take actions that have direct or indirect effects on the Securities or other securities that we may issue, the underlying constituents other securities or instruments similar to or linked to the foregoing, and that such actions could be
adverse to the interests of investors in the Securities. In addition, in connection with these activities, certain personnel within us, the Agents or our or their respective affiliates may have access to confidential material non-public information
about these parties that would not be disclosed to investors in the Securities.
We, the Agents and our or their respective affiliates regularly offer a wide array of securities, financial instruments and other products into the marketplace, including existing or new
products that are similar to the Securities or other securities that we may issue, the
underlying constituents or other securities or instruments similar to or linked to the foregoing. Investors in the Securities should expect that we, the Agents and our or their respective
affiliates offer securities, financial instruments, and other products that may compete with the Securities for liquidity or otherwise.
♦ |
Potential BNS impact on price — Trading or transactions by BNS, the Agents or our or their respective affiliates in the underlying constituents, listed and/or over-the-counter options, futures or
other instruments with returns linked to the performance of the underlying or any underlying constituents may adversely affect the performance of the underlying or applicable underlying constituent and, therefore, the market value of, and any
amount payable on, the Securities.
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♦ |
The calculation agent will have significant discretion with respect to the Securities, which may be exercised in a manner that is adverse to your interests — The calculation agent will be an
affiliate of BNS. The calculation agent can postpone the determination of the final level on the final valuation date if a market disruption event occurs and is continuing on that day.
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♦ |
Potentially inconsistent research, opinions or recommendations by BNS — BNS, the Agents and our or their respective affiliates may publish research from time to time on financial markets and other
matters that may influence the value of the Securities, or express opinions or provide recommendations that are inconsistent with purchasing or holding the Securities. Any research, opinions or recommendations expressed by BNS, the Agents or
our or their respective affiliates may not be consistent with each other and may be modified from time to time without notice. Investors should make their own independent investigation of the merits of investing in the Securities and the
underlying to which the Securities are linked.
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Risks Relating to General Credit Characteristics
♦ |
Credit risk of BNS — The Securities are senior unsecured debt obligations of BNS and are not, either directly or indirectly, an obligation of any third party. Any payment to be made on the
Securities, including any repayment of principal at maturity, depends on the ability of BNS to satisfy its obligations as they come due. As a result, BNS’ actual and perceived creditworthiness may affect the market value of the Securities. If
BNS were to default on its obligations, you may not receive any amounts owed to you under the terms of the Securities and you could lose your entire investment in the Securities.
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♦ |
The COVID-19 virus may have an adverse impact on BNS — On March 11, 2020, the World Health Organization declared the outbreak of a strain of novel coronavirus disease, COVID-19, a global pandemic.
Governments in affected areas have imposed a number of measures designed to contain the outbreak, including business closures, travel restrictions, quarantines and cancellations of gatherings and events. The spread of COVID-19 has had
disruptive effects in countries in which BNS operates and the global economy more widely, as well as causing increased volatility and declines in financial markets. COVID-19 has materially impacted and continues to materially impact the
markets in which BNS operates. If the pandemic is prolonged, or further diseases emerge that give rise to similar effects, the adverse impact on the global economy could deepen and result in further declines in financial markets. A
substantial amount of BNS’ business involves making loans or otherwise committing resources to specific companies, industries or countries. The COVID-19 pandemic’s impact on such borrowers, industries and countries could have a material
adverse effect on BNS’ financial results, businesses, financial condition or liquidity. The COVID-19 pandemic may also result in disruption to BNS’ key suppliers of goods and services and result in increased unavailability of staff adversely
impacting the quality and continuity of service to customers and the reputation of BNS. As a result, the business, results of operations, corporate reputation and financial condition of BNS could be adversely impacted for a substantial period
of time.
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♦ |
BNS is subject to the resolution authority under the CDIC Act — Although the Securities are not bail-inable debt securities under the CDIC Act, as described elsewhere in this pricing supplement, BNS
remains subject generally to Canadian bank resolution powers under the CDIC Act. Under such powers, the Canada Deposit Insurance Corporation may in certain circumstances take actions that could negatively impact holders of the Securities and
result in a loss on your investment. See “Risk Factors — Risks Related to the Bank’s Debt Securities” in the accompanying prospectus for more information.
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Risks Relating to Canadian and U.S. Federal Income Taxation
♦ |
Uncertain tax treatment — Significant aspects of the tax treatment of the Securities are uncertain. You should consult your tax advisor about your tax situation. See “Material Canadian Income Tax
Consequences” and “What Are the Tax Consequences of the Securities?” in this pricing supplement.
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Hypothetical Examples and Return Table of the Securities at Maturity
The below examples and table are based on hypothetical terms. The actual terms are indicated on the cover hereof.
The examples and table below illustrate the Payment at Maturity for a $10 Security on a hypothetical offering of the Securities, with the following assumptions
(amounts may have been rounded for ease of analysis):
Term:
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Approximately 14 months
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Initial Level:
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$40
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Upside Gearing:
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3.00
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Maximum Gain:
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20.75%
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Range of Underlying Return:
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-100% to 50%
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Example 1: The Underlying Return is 5.00%.
Because the underlying return is positive and, when multiplied by the upside gearing, is less than the maximum gain, the payment at maturity per Security will be calculated as follows:
$10 × (1 + the lesser of (a) 5% × 3.00 and (b) 20.75%)
= $10 × (1 + 15%)
= $11.50 per Security (a 15.00% total return)
Example 2: The Underlying Return is 15.00%.
Because the underlying return is positive and, when multiplied by the upside gearing, is greater than the maximum gain, the payment at maturity per Security will be calculated as
follows:
$10 × (1 + the lesser of (a) 15% × 3.00 and (b) 20.75%)
= $10 × (1 + 20.75%)
= $12.075 per Security (a 20.75% total return)
Example 3: The Underlying Return is 0.00%.
Because the underlying return is zero, the payment at maturity per Security will be equal to the principal amount of $10 (0.00% total return).
Example 4: The Underlying Return is -60.00%.
Because the underlying return is negative, the payment at maturity per Security will be less than the principal amount, if anything, calculated as follows:
$10 × (1 + -60.00%)
= $10 × 0.4
= $4.00 per Security (a 60.00% loss).
In this scenario, you will suffer a percentage loss on your principal amount equal to the underlying return and, in extreme situations, you could
lose your entire investment in the Securities.
Underlying
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Payment and Return at Maturity
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Final Level
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Underlying Return
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Payment at Maturity
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Security Total Return at Maturity
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$60.00
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50.000%
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$12.075
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20.75%
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$56.00
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40.000%
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$12.075
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20.75%
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$52.00
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30.000%
|
$12.075
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20.75%
|
$48.00
|
20.000%
|
$12.075
|
20.75%
|
$44.00
|
10.000%
|
$12.075
|
20.75%
|
$42.77
|
6.917%
|
$12.075
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20.75%
|
$42.40
|
6.000%
|
$11.800
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18.00%
|
$42.00
|
5.000%
|
$11.500
|
15.00%
|
$41.60
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4.000%
|
$11.200
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12.00%
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$40.80
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2.000%
|
$10.600
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6.00%
|
$40.00
|
0.000%
|
$10.000
|
0.00%
|
$36.00
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-10.000%
|
$9.000
|
-10.00%
|
$32.00
|
-20.000%
|
$8.000
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-20.00%
|
$28.00
|
-30.000%
|
$7.000
|
-30.00%
|
$24.00
|
-40.000%
|
$6.000
|
-40.00%
|
$20.00
|
-50.000%
|
$5.000
|
-50.00%
|
$10.00
|
-75.000%
|
$2.500
|
-75.00%
|
$0.00
|
-100.000%
|
$0.000
|
-100.00%
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Information About the Underlying
All disclosures contained in this document regarding the underlying are derived from publicly available information. BNS has not conducted any independent review or due diligence of any publicly
available information with respect to the underlying. Information from outside sources is not incorporated by reference in, and should not be considered part of, this document or any document incorporated herein by reference. You should make your own investigation into the underlying.
Included below is a brief description of the underlying. This information has been obtained from publicly available sources. Set forth below is a graph that illustrates the past performance for the
underlying. We obtained the past performance information set forth below from the Bloomberg Professional® service (“Bloomberg”) without independent verification. You should not take the historical levels of the underlying as an indication
of future performance.
iShares® MSCI Emerging Markets ETF
We have derived all information contained herein regarding the underlying, including without limitation, its make-up, method of calculation and changes in its components from publicly available
information. Such information reflects the policies of, and is subject to change by, BlackRock Fund Advisors (the “investment advisor”) and/or its affiliates.
The underlying seeks to track the investment results, before fees and expenses, of the MSCI® Emerging Markets IndexSM which seeks to measure large- and mid- cap equity performance
in the global emerging markets. The underlying trades on the NYSE Arca under the ticker symbol “EEM”. Please see “Exchange-Traded Funds — iShares® Emerging Markets ETF” in the accompanying underlier supplement for additional information
regarding the underlying and its investment advisor, and “Indices — The MSCI Indices” in the accompanying underlier supplement for additional information regarding the target index. Additional information regarding the underlying, including its
portfolio holdings, may be available on the website for the underlying.
Historical Information
The graph below illustrates the performance of the underlying for the period from January 1, 2012 through June 27, 2022, based on the daily closing levels as reported by Bloomberg Professional®
service (“Bloomberg”), without independent verification. The closing level of the underlying on June 27, 2022 was $40.70. Past performance of the underlying is not indicative of the future
performance of the underlying during the term of the Securities.
What Are the Tax Consequences of the Securities?
The U.S. federal income tax consequences of your investment in the Securities are uncertain. There are no statutory provisions, regulations, published rulings or
judicial decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as the Securities. Some of these tax consequences are summarized below, but we urge you to read the
more detailed discussion in “Material U.S. Federal Income Tax Consequences”, in the accompanying product supplement and to discuss the tax consequences of your particular situation with your tax advisor. This
discussion is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed U.S. Department of the Treasury (the “Treasury”) regulations, rulings and decisions, in each case, as available and in effect as
of the date hereof, all of which are subject to change, possibly with retroactive effect. Tax consequences under state, local and non-U.S. laws are not addressed herein. No ruling from the U.S. Internal Revenue Service (the “IRS”) has been sought
as to the U.S. federal income tax consequences of your investment in the Securities, and the following discussion is not binding on the IRS.
U.S. Tax Treatment. Pursuant to the terms of the Securities, BNS and you agree, in the absence of a statutory or regulatory change or an administrative
determination or judicial ruling to the contrary, to characterize your Securities as prepaid derivative contracts with respect to the underlying. If your Securities are so treated, subject to the constructive ownership rules, discussed below, you
should generally recognize long-term capital gain or loss if you hold your Securities for more than one year (and, otherwise, short-term capital gain or loss) upon the taxable disposition of your Securities, in an amount equal to the difference
between the amount you receive at such time and the amount you paid for your Securities. The deductibility of capital losses is subject to limitations.
Section 1260. Because the Securities are linked to the shares of an ETF, there is a risk that an investment in the Securities could be treated as a
“constructive ownership transaction” within the meaning of Section 1260 of the Code. A “constructive ownership transaction” includes a contract under which an investor will receive payment equal to or credit for the future value of any equity
interest in certain “passthru entities” (including regulated investment companies such as ETFs, real estate investment trusts and passive foreign investment companies). Under the “constructive ownership” rules, if an investment in the Securities is
treated as a “constructive ownership transaction,” any long-term capital gain recognized by a U.S. holder (as defined under “Supplemental Discussion of U.S. Federal Income Tax Consequences” in the accompanying product supplement) in respect of the
Securities would be recharacterized as ordinary income to the extent such gain exceeds the amount of “net underlying long-term capital gain”(as defined in Section 1260 of the Code) of the U.S. holder (the “Excess Gain”). In addition, an interest
charge would also apply to any deemed underpayment of tax in respect of any Excess Gain to the extent such gain would have resulted in gross income inclusion for the U.S. holder in taxable years prior to the taxable year of the taxable disposition of
the Securities (assuming such income accrued such that the amount in each successive year is equal to the income in the prior year increased at a constant rate equal to the applicable federal rate as of the date of the taxable disposition of the
Securities).
It is not clear to what extent any long-term capital gain recognized by a U.S. holder in respect of the Securities would be recharacterized as ordinary income and subject to the interest charge
described above, in part, because it is not clear how the “net underlying long-term capital gain” would be computed in respect of the Securities. Under Section 1260 of the Code, the net underlying long-term capital gain is generally the net long-term
capital gain a taxpayer would have recognized by investing in the underlying “passthru entity” at the inception of the constructive ownership transaction and selling on the date the constructive ownership transaction is closed out (i.e. at maturity
or earlier disposition). It is possible that because the U.S. holder does not share in distributions made on the reference asset, these distributions could be excluded from the calculation of the amount and character of gain, if any, that would have
been realized had the U.S. holder held the reference asset directly and that the application of constructive ownership rules may not recharacterize adversely a significant portion of the long-term capital gain you may recognize with respect to the
Securities. However, it is also possible that all or a portion of your gain with respect to the Securities could be treated as “Excess Gain” because the reference asset is an ETF, the “net underlying long-term capital gain” could equal the amount of
long-term capital gain a U.S. holder would have recognized if on the original issue date of the Securities the holder had invested, pro rata, the principal amount of the Securities in shares of the reference asset and sold those shares for their fair
market value on the date the Securities are sold, exchanged or retired. In addition, all or a portion of your gain recognized with respect to the Securities could be “Excess Gain” if you purchase the Securities for an amount that is less than the
principal amount of the Securities or if the return on the Securities is adjusted to take into account any extraordinary dividends that are paid on the shares of the reference asset. Furthermore, unless otherwise established by clear and convincing
evidence, the “net underlying long-term capital gain” is treated as zero. Accordingly, it is possible that all or a portion of any gain on the sale or settlement of the Securities after one year could be treated as “Excess Gain” from a “constructive
ownership transaction,” which gain would be recharacterized as ordinary income, and subject to an interest charge. Because the application of the constructive ownership rules to the Securities is unclear, you are urged to consult your tax advisors
regarding the potential application of the “constructive ownership” rules to an investment in the Securities.
Based on certain factual representations received from us, our special U.S. tax counsel, Fried, Frank, Harris, Shriver & Jacobson LLP, is of the opinion that it would be
reasonable to treat your Securities in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the Securities, it is possible that your Securities could alternatively be treated for tax
purposes as a single contingent payment debt instrument, or pursuant to some other characterization (including possible treatment as a “constructive ownership transaction” under Section 1260 of the Code), such that the timing and character of your
income from the Securities could differ materially and adversely from the treatment described above, as described further under “Material U.S. Federal Income Tax Consequences”, in the accompanying product supplement.
Except to the extent otherwise required by law, BNS intends to treat your Securities for U.S. federal income tax purposes in accordance with the treatment described above and under “Material U.S.
Federal Income Tax Consequences”, including the section “— Securities Treated as Prepaid Derivatives or Prepaid Forwards”, in the accompanying product supplement, unless and until such time as the Treasury and the IRS determine that some other
treatment is more appropriate.
Notice 2008-2. In 2007, the IRS released a notice that may affect the taxation of holders of the Securities. According to Notice 2008-2, the IRS and the Treasury are actively
considering whether a holder of an instrument such as the Securities should be required to accrue ordinary income on a current basis. It is not possible to determine what guidance they will ultimately issue, if any. It is possible, however, that
under such guidance, holders of the Securities will ultimately be required to accrue income currently and this could be applied on a retroactive basis. The IRS and the Treasury are also considering other relevant issues, including whether additional
gain or loss from such instruments should be treated as ordinary or capital, whether non-U.S. holders of such instruments should be subject to withholding tax on any deemed income accruals, and whether the special “constructive ownership rules” of
Section 1260 of the Code (discussed above) should be applied to such instruments. Both U.S. and non-U.S. holders are urged to consult their tax advisors concerning the significance, and the potential impact, of the above considerations.
Medicare Tax on Net Investment Income. U.S. holders that are individuals, estates or certain trusts are subject to an additional 3.8% tax on all or a portion of
their “net investment income,” or “undistributed net investment income” in the case of an estate or trust, which may include any income or gain realized with respect to the Securities, to the extent of their net investment income or undistributed net
investment income (as the case may be) that, when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual, $250,000 for a married taxpayer filing a joint return (or a surviving spouse), $125,000 for a married
individual filing a separate return or the dollar amount at which the highest tax bracket begins for an estate or trust. The 3.8% Medicare tax is determined in a different manner than the regular income tax. U.S. holders should consult their tax
advisors as to the consequences of the 3.8% Medicare tax.
Specified Foreign Financial Assets. U.S. holders may be subject to reporting obligations with respect to their Securities
if they do not hold their Securities in an account maintained by a financial institution and the aggregate value of their Securities and certain other “specified
foreign financial assets” (applying certain attribution rules) exceeds an applicable threshold. Significant penalties can apply if a U.S. holder is required to disclose its Securities and fails to do so.
Non-U.S. Holders. Subject to Section 871(m) of the Code and “FATCA”, discussed below, if you are a non-U.S. holder you should generally not be subject to U.S.
withholding tax with respect to payments on your Securities or to generally applicable information reporting and backup withholding requirements with respect to payments on your Securities if you comply with certain certification and identification
requirements as to your non-U.S. status (by providing us (and/or the applicable withholding agent) with a fully completed and duly executed applicable IRS Form W-8). Subject to Section 897 of the Code and Section 871(m) of the Code, discussed below,
gain realized from the taxable disposition of a Security generally should not be subject to U.S. tax unless (i) such gain is effectively connected with a trade or business conducted by you in the U.S., (ii) you are a non-resident alien individual and
are present in the U.S. for 183 days or more during the taxable year of such taxable disposition and certain other conditions are satisfied or (iii) you have certain other present or former connections with the U.S.
Section 897. We will not attempt to ascertain whether the underlying issuer or any underlying constituent issuer would
be treated as a “United States real property holding corporation” (“USRPHC”) within the meaning of Section 897 of the Code. We also have not attempted to determine whether the Securities should be treated as
“United States real property interests” (“USRPI”) as defined in Section 897 of the Code. If any such entity and/or the Securities were so treated, certain adverse U.S. federal income tax consequences could
possibly apply, including subjecting any gain to a non-U.S. holder in respect of a Security upon a taxable disposition of the Security to the U.S. federal income
tax on a net basis, and the proceeds from such a taxable disposition to a 15% withholding tax. Non-U.S. holders should consult their tax advisors regarding the potential treatment of any such entity as a USRPHC and/or the Securities as USRPI.
Section 871(m). A 30% withholding tax (which may be reduced by an applicable income tax treaty) is imposed under Section 871(m) of the Code on certain “dividend
equivalents” paid or deemed paid to a non-U.S. holder with respect to a “specified equity-linked instrument” that references one or more dividend-paying U.S. equity securities or indices containing U.S. equity securities or indices containing U.S.
equity securities. The withholding tax can apply even if the instrument does not provide for payments that reference dividends. Treasury regulations provide that the withholding tax applies to all dividend equivalents paid or deemed paid on specified
equity-linked instruments that have a delta of one (“delta-one specified equity-linked instruments”) issued after 2016 and to all dividend equivalents paid or deemed paid on all other specified equity-linked instruments issued after 2017. However,
the IRS has issued guidance that states that the Treasury and the IRS intend to amend the effective dates of the Treasury regulations to provide that withholding on dividend equivalents paid or deemed paid will not apply to specified equity-linked
instruments that are not delta-one specified equity-linked instruments and are issued before January 1, 2023.
Based on our determination that the Securities are not “delta-one” with respect to the underlying or any underlying constituents, our special U.S. tax counsel
is of the opinion that the Securities should not be delta-one specified equity-linked instruments and thus should not be subject to withholding on dividend equivalents. Our determination is not binding on
the IRS, and the IRS may disagree with this determination. Furthermore, the application of Section 871(m) of the Code will depend on our determinations on the date the terms of the Securities are set. If withholding is required, we will not make
payments of any additional amounts.
Nevertheless, after the date the terms are set, it is possible that your Securities could be deemed to be reissued for tax purposes upon the occurrence of
certain events affecting the underlying, any underlying constituents or your Securities, and following such occurrence your Securities could be treated as delta-one
specified equity-linked instruments that are subject to withholding on dividend equivalents. It is also possible that withholding tax or other tax under Section 871(m) of the Code could apply to the Securities
under these rules. If you enter, or have entered, into other transactions in respect of the underlying, any underlying constituents or the Securities should consult your tax advisor regarding the application of Section 871(m) of the Code to your
Securities in the context of your other transactions.
Because of the uncertainty regarding the application of the 30% withholding tax on dividend equivalents to the Securities, you are urged to consult your tax advisor regarding the
potential application of Section 871(m) of the Code and the 30% withholding tax to an investment in the Securities.
FATCA. The Foreign Account Tax Compliance Act (“FATCA”) was enacted on March 18, 2010, and imposes a 30% U.S. withholding tax on “withholdable payments” (i.e.,
certain U.S.-source payments, including interest (and original issue discount), dividends, other fixed or determinable annual or periodical gain, profits, and income, and on the gross proceeds from a disposition of property of a type which can
produce U.S.-source interest or dividends) and “passthru payments” (i.e., certain payments attributable to withholdable payments) made to certain foreign financial institutions (and certain of their affiliates) unless the payee foreign financial
institution agrees (or is required), among other things, to disclose the identity of any U.S. individual with an account at the institution (or the relevant affiliate) and to annually report certain information about such account. FATCA also requires
withholding agents making withholdable payments to certain foreign entities that do not disclose the name, address, and taxpayer identification number of any substantial U.S. owners (or do not certify that they do not have any substantial U.S.
owners) to withhold tax at a rate of 30%. Under certain circumstances, a holder may be eligible for refunds or credits of such taxes.
Pursuant to final and temporary Treasury regulations and other IRS guidance, the withholding and reporting requirements under FATCA will generally apply to certain “withholdable payments”, will not
apply to gross proceeds on a sale or disposition, and will apply to certain foreign passthru payments only to the extent that such payments are made after the date that is two years after final regulations defining the term “foreign passthru payment”
are published. If withholding is required, we (or the applicable paying agent) will not be required to pay additional amounts with respect to the amounts so withheld. Foreign financial institutions and non-financial foreign entities located in
jurisdictions that have an intergovernmental agreement with the U.S. governing FATCA may be subject to different rules.
Investors should consult their tax advisors about the application of FATCA, in particular if they may be classified as financial institutions (or if they hold their Securities
through a foreign entity) under the FATCA rules.
Backup Withholding and Information Reporting. The proceeds received from a taxable disposition of the Securities will
be subject to information reporting unless you are an “exempt recipient” and may also be subject to backup withholding at the rate specified in the Code if you fail to provide certain identifying information (such as an accurate taxpayer number, if
you are a U.S. holder) or meet certain other conditions.
Amounts withheld under the backup withholding rules are not additional taxes and may be refunded or credited against your U.S. federal income tax liability, provided the required information is
furnished to the IRS.
U.S. Federal Estate Tax Treatment of Non-U.S. Holders. A Security may be subject to U.S. federal estate tax if an individual non-U.S. holder holds the Security
at the time of his or her death. The gross estate of a non-U.S. holder domiciled outside the U.S. includes only property situated in the U.S. Individual non-U.S. holders should consult their tax advisors regarding the U.S. federal estate tax
consequences of holding the Securities at death.
Proposed Legislation. In 2007, legislation was introduced in Congress that, if it had been enacted, would have required holders of Securities purchased after the bill was enacted to accrue interest income over the term of the Securities despite the fact that there will be no interest payments over the term of the Securities.
Furthermore, in 2013, the House Ways and Means Committee released in draft form certain proposed legislation relating to financial instruments. If it had been enacted, the effect of this legislation
generally would have been to require instruments such as the Securities to be marked to market on an annual basis with all gains and losses to be treated as ordinary, subject to certain exceptions.
It is not possible to predict whether any similar or identical bills will be enacted in the future, or whether any such bill would affect the tax treatment of your Securities.
You are urged to consult your tax advisor regarding the possible changes in law and their possible impact on the tax treatment of your Securities.
Both U.S. and non-U.S. holders are urged to consult their tax advisors concerning the application of U.S. federal income tax laws to their particular situation, as well as any tax
consequences of the purchase, beneficial ownership and disposition of the Securities arising under the laws of any state, local, non-U.S. or other taxing jurisdiction (including that of BNS).