The information in this preliminary pricing supplement is not complete and may be changed. We may not sell these Trigger Securities until the pricing
supplement, the accompanying product supplement, underlier supplement, prospectus supplement and prospectus (collectively, the “Offering Documents”) are delivered in final form. The Offering Documents are not an offer to sell these Trigger
Securities and we are not soliciting offers to buy these Trigger Securities in any state where the offer or sale is not permitted.
Opportunities in U.S. Equities
The Trigger Participation Securities (the “Trigger Participation Securities” or “Trigger Securities”) will pay no interest and do not guarantee any return of
principal at maturity. At maturity, if the final share price of the underlying shares is greater than the initial share price, investors will receive the stated principal amount of their investment plus the
unleveraged upside performance of the underlying shares, subject to the maximum payment at maturity. If the final share price is less than or equal to the initial share price but greater than or equal to the trigger price, investors will receive
the stated principal amount at maturity. However, if the final share price is less than the trigger price, investors will lose 1% for every 1% that the final share price falls below the initial share price. Under these circumstances, the payment at
maturity will be significantly less than the stated principal amount and could be as low as zero. Accordingly, the Trigger Securities do not guarantee any return of principal at maturity and you could lose a
significant portion or all of your investment in the Trigger Securities. The Trigger Securities are for investors who seek an equity fund-based return and who are willing to risk their principal and forgo current income and upside above
the maximum payment at maturity in exchange for the limited protection against loss that applies only if the final share price is greater than or equal to the trigger price. The Trigger Securities are
senior unsecured debt securities issued by The Bank of Nova Scotia (“BNS”). The Trigger Securities are notes issued as part of BNS’ Senior Note Program, Series A.
All payments on the Trigger Securities are subject to the credit risk of BNS. If BNS were to default on its payment obligations, you may not
receive any amounts owed to you under the Trigger Securities and you could lose your entire investment in the Trigger Securities. These Trigger Securities are not
secured obligations and you will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
The Trigger Securities involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 7.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy
of this document, the accompanying product supplement, the underlier supplement, the prospectus supplement or the prospectus. Any representation to the contrary is a criminal offense.
The Trigger Securities are not insured by the Canada Deposit Insurance Corporation (the “CDIC”) pursuant to the Canada Deposit Insurance Corporation Act (the
“CDIC Act”) or the U.S. Federal Deposit Insurance Corporation or any other government agency of Canada, the U.S. or any other jurisdiction. The Trigger Securities are not bail-inable debt securities under the CDIC Act.
Additional Information About BNS and the Trigger 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 Trigger 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 Trigger 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 Trigger 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 “Risk Factors” herein, in “Additional Risk Factors Specific to the Notes” of the accompanying product supplement and in “Risk Factors” of the accompanying prospectus supplement and of the accompanying
prospectus, as the Trigger 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 Trigger 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 “Trigger
Securities” refers to the Trigger Participation 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 Trigger Securities prior to their issuance. In the event of any changes to the terms of the
Trigger 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.
Investment Overview
Trigger Participation Securities
Principal at Risk Securities
The Trigger Participation Securities Based on the iShares® MSCI USA Quality Factor ETF due on or about February 19, 2027 can be used:
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To achieve similar levels of upside exposure to the underlying shares as that of a direct investment in the underlying shares, subject to the maximum payment at maturity; however, by investing in the Trigger Securities, you will not be
entitled to receive any dividends paid with respect to the underlying shares or the stocks held in the fund’s portfolio (the “underlying constituent stocks”) or any interest payments, and your return will not exceed the maximum payment at
maturity. You should carefully consider whether an investment that does not provide for any dividends, interest payments or exposure to the positive performance of the underlying shares beyond a value that exceeds the maximum gain is
appropriate for you.
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To provide limited protection against a loss of principal in the event of a decline of the underlying shares as of the valuation date but only if the final share price is greater than or equal to the trigger price.
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Maturity:
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Approximately 30 months
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Trigger price:
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75.00% of the initial share price
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Maximum payment at maturity:
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$1,335.00 per security (133.50% of the stated principal amount)
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Maximum gain:
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33.50%
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Coupon:
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None
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Minimum payment at maturity:
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None. Investors may lose up to their entire investment in the Trigger Securities.
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Listing:
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The Trigger Securities will not be listed or displayed on any securities exchange or any electronic communications network.
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Key Investment Rationale
Investors can use the Trigger Securities to obtain exposure to any positive performance of the underlying shares up to the maximum gain, and obtain contingent protection
against a loss of the stated principal amount in the event of a decline of the underlying shares as of the valuation date but only if the final share price is greater than or equal to the trigger price. At
maturity, investors will receive an amount in cash based upon the underlying return. If the final share price is greater than the initial share price, investors will receive the stated principal amount of their investment plus the unleveraged upside performance of the underlying shares, subject to the maximum payment at maturity. If the final share price is less than or equal to the
initial share price but greater than or equal to the trigger price, investors will receive the stated principal amount at maturity. However, if the final share price is less
than the trigger price, investors will lose 1% for every 1% that the final share price falls below the initial share price. Investors may lose up to their entire investment in the Trigger Securities. All
payments on the Trigger Securities are subject to the credit risk of BNS.
Investors will not be entitled to receive any dividends paid with respect to the underlying shares or the underlying constituent stocks and the Trigger Securities do not pay periodic interest. You
should carefully consider whether an investment that does not provide for any dividends or periodic interest is appropriate for you.
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Upside Scenario
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If the final share price is greater than the initial share price, at maturity you will receive the stated principal amount of $1,000.00 plus the unleveraged upside performance of the underlying
shares, subject to the maximum payment at maturity of $1,335.00 per security (133.50% of the stated principal amount).
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Par Scenario
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If the final share price is less than or equal to the initial share price but is greater than or equal to the trigger price, at maturity you will receive the stated principal amount.
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Downside Scenario
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If the final share price is less than the trigger price, at maturity you will receive significantly less than the stated principal amount, if anything, resulting in a
percentage loss of your investment equal to the underlying return. For example, if the underlying return is -35%, each Trigger Security will redeem for $650.00, or 65% of the stated principal amount. There
is no minimum payment on the Trigger Securities and you could lose up to your entire investment in the Trigger Securities.
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Investor Suitability
The Trigger Securities may be suitable for you if:
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You fully understand and are willing to accept the risks of an investment in the Trigger Securities, including the risk that you may lose up to 100% of your investment in the Trigger Securities
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You can tolerate a loss of a significant portion or all of your investment and are willing to make an investment that, if the final share price is less than the trigger price, has the same downside market risk as that of a direct
investment in the underlying shares or the underlying constituent stocks
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You believe that the final share price will be greater than the initial share price and you understand and accept that any positive return that you earn on the securities will not exceed the maximum gain
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You can tolerate fluctuations in the market prices of the Trigger Securities prior to maturity that may be similar to or exceed the fluctuations in the price of the underlying shares
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You do not seek current income from your investment and are willing to forgo any dividends paid on the underlying shares and the underlying constituent stocks
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You are willing and able to hold the Trigger Securities to maturity, a term of approximately 30 months, and accept that there may be little or no secondary market for the Trigger Securities
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You understand and are willing to accept the risks associated with the underlying shares
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You are willing to assume the credit risk of BNS for all payments under the Trigger Securities, and you 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 Trigger Securities may not be suitable for you if:
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You do not fully understand or are unwilling to accept the risks of an investment in the Trigger Securities, including the risk that you may lose up to 100% of your investment in the Trigger Securities
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You require an investment that provides for full or at least partial protection against loss of principal
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You are not willing to make an investment that, if the final share price is less than the trigger price, has the same downside market risk as that of a direct investment in the underlying shares or the underlying constituent stocks
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You believe that the final share price will be less than or equal to the initial share price
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You seek an investment that has unlimited return potential or you do not understand and cannot accept that your potential return on the securities is limited to the maximum gain
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You cannot tolerate fluctuations in the market price of the Trigger Securities prior to maturity that may be similar to or exceed the fluctuations in the price of the underlying shares
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You seek current income from your investment or prefer to receive the dividends paid on the underlying shares or the underlying constituent stocks
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You are unable or unwilling to hold the Trigger Securities to maturity, a term of approximately 30 months, or seek an investment for which there will be an active secondary market
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You do not understand or are not willing to accept the risks associated with the underlying shares
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You are not willing to assume the credit risk of BNS for all payments under the Trigger Securities, including any repayment of principal
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How the Trigger Securities Work
Hypothetical Examples
The below examples are based on the following terms and are purely hypothetical (the actual terms of your Trigger Securities will be determined on the pricing
date and will be specified in the final pricing supplement):
Investors will not be entitled to receive any dividends paid with respect to the underlying shares or the underlying constituent stocks or any periodic interest. You should carefully consider
whether an investment that does not provide for any dividends or periodic interest is appropriate for you. All payments on the PLUS are subject to the credit risk of BNS.
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Stated principal amount:
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$1,000.00 per Trigger Security
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Hypothetical initial share price:
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$50.00
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Trigger price:
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$37.50, which is 75.00% of the initial share price
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Maximum payment at maturity:
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$1,335.00 per security
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Maximum gain:
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33.50%
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Minimum payment at maturity:
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None
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EXAMPLE 1: The price of the underlying shares increases over the term of the Trigger Securities and the payment at maturity is less than the maximum payment
at maturity.
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Final share price
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$55.00
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Underlying return
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($55.00 – $50.00) / $50.00 = 10.00%
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Payment at maturity
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= $1,000.00 + upside payment, subject to the maximum payment at maturity
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= $1,000.00 + ($1,000.00 × underlying return), subject to the maximum payment at maturity
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= $1,000.00 + ($1,000.00 × 10.00%), subject to the maximum payment at maturity
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= $1,100.00
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In Example 1, the final share price is greater than the initial share price and the underlying return is 10.00%.
Accordingly, investors receive the stated principal amount at maturity plus a return equal to the underlying return, resulting in a payment at maturity of $1,100.00 per Trigger Security (a total return of 10.00%).
EXAMPLE 2: The price of the underlying shares increases over the term of the Trigger Securities such that the payment at maturity is equal to the maximum
payment at maturity.
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Final share price
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$70.00
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Underlying return
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($70.00 – $50.00) / $50.00 = 40.00%
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Payment at maturity
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= $1,000.00 + upside payment, subject to the maximum payment at maturity
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= $1,000.00 + ($1,000.00 × underlying return), subject to the maximum payment at maturity
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= $1,000.00 + ($1,000.00 × 40.00%), subject to the maximum payment at maturity
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= $1,335.00
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In Example 2, the final share price is greater than the initial share price and the underlying return is 40.00%. Under the terms of the
securities, investors will realize the maximum payment at maturity if the underlying return is 33.50% or higher. Therefore, in this example, investors receive the maximum payment at maturity of $1,335.00 per stated principal amount, even though
the underlying shares has appreciated by an amount significantly greater than the return represented by the maximum payment at maturity.
EXAMPLE 3: The underlying shares decline over the term of the Trigger Securities and the final share price is greater than or equal to the trigger price.
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Final share price
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$47.50
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Underlying return
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($47.50 – $50.00) / $50.00 = -5.00%
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Payment at maturity
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= $1,000.00
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In Example 3, the final share price is less than or equal to the initial share price but greater than or equal to
the trigger price and the underlying return is -5.00%. Because the final share price is less than the initial share price but greater than or equal to the trigger price, investors receive the stated principal amount of $1,000.00 per Trigger
Security at maturity (a total return of 0.00%).
EXAMPLE 4: The underlying shares decline over the term of the Trigger Securities and the final share price is less than the trigger price.
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Final share price
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$25.00
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Underlying return
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($25.00 – $50.00) / $50.00 = -50.00%
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Payment at maturity
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= $1,000.00 + ($1,000.00 × underlying return)
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= $1,000.00 + ($1,000.00 × -50.00)
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= $1,000.00 - $500.00
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= $500.00
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In Example 4, the final share price is less than the trigger price and the underlying return is -50.00%. Because
the final share price is less than the trigger price, investors are fully exposed to the decline of the underlying shares from the initial share price to the final share price, resulting in a payment at maturity of $500.00 per Trigger Security (a
return on investment of -50.00%).
If the final share price is less than the trigger price, investors will receive an amount that is significantly less than the stated principal amount, based on a 1%
loss of principal for each 1% decline in the underlying shares. Under these circumstances, the payment at maturity will be less than 75.00% of the stated principal amount per Trigger Security. There is no minimum payment at maturity on the
Trigger Securities.
Risk Factors
The following is a non-exhaustive list of certain key risk factors for investors in the Trigger Securities. For further discussion of these and other risks, you should read the
section entitled “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 Trigger Securities.
Risks Relating to Return Characteristics
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Risk of significant loss at maturity; you may lose up to your entire investment. The Trigger Securities differ from ordinary debt securities in that BNS will not necessarily repay the stated
principal amount of the Trigger Securities at maturity. BNS will pay you the stated principal amount of your Trigger Securities at maturity only if the final share price is greater than or equal to the trigger price. If the final share
price is less than the trigger price, you will lose 1% for every 1% that the final share price falls below the initial share price. You may lose up to your entire investment in the
Trigger Securities.
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The stated payout from the issuer applies only at maturity. You should be willing to hold your Trigger Securities to maturity. The stated payout is available only if you hold your Trigger
Securities to maturity. If you are able to sell your Trigger Securities prior to maturity in the secondary market, you may have to sell them at a loss relative to your investment in the Trigger Securities even if the then-current price of
the underlying shares is greater than or equal to the trigger price.
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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 exceeds the maximum gain. Your return on the securities may be less than that of al direct investment in the underlying shares.
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You will not receive any interest payments. BNS will not pay any interest with respect to the Trigger Securities.
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The amount payable on the Trigger Securities is not linked to the price of the underlying shares at any time other than the valuation date. The final share price will be based on the closing price on the valuation date, subject to postponement for non-trading days and certain market disruption events. If the price of the underlying shares falls on the valuation
date, the payment at maturity may be significantly less than it would have been had the payment at maturity been linked to the price of the underlying shares at any time prior to such drop. Although the actual price of the underlying
shares on the stated maturity date or at other times during the term of the Trigger Securities may be higher than the closing price on the valuation date, the payment at maturity will be based solely on the closing price on the valuation
date.
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Owning the Trigger Securities is not the same as owning the underlying shares or the underlying constituent stocks. The return on your Trigger Securities may not reflect the return you would
realize if you actually owned the underlying shares or the underlying constituent stocks. For instance, you will not benefit from any positive underlying return in excess of an amount that exceeds the maximum gain. Furthermore, you will
not receive or be entitled to receive any dividend payments or other distributions paid on the underlying shares or the underlying constituent stocks, and any such dividends or distributions will not be factored into the calculation of
the payment at maturity on your Trigger Securities. In addition, as an owner of the Trigger Securities, you will not have voting rights or any other rights that a holder of the underlying shares or the underlying constituent stocks may
have.
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Risks Relating to Characteristics of the Underlying Shares
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An investment in the Trigger Securities involves market risk associated with the underlying shares. The return on the Trigger Securities, which may be negative, is linked to the performance of
the underlying shares and indirectly linked to the value of the underlying constituent stocks. The price of the underlying shares can rise or fall sharply due to factors specific to the underlying shares or the underlying constituent
stocks and their issuers (the “underlying constituent stock issuers”), such as stock or commodity price volatility, earnings, 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. You, as an investor in the Trigger Securities, should make your
own investigation into the underlying shares and the underlying constituent stocks. For additional information regarding the underlying shares, please see “Information About the Fund” below and the sponsor of the fund’s (the “sponsor’s”)
SEC filings referred to in that section. We urge you to review financial and other information filed periodically by the sponsor with the SEC.
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There can be no assurance that the investment view implicit in the Trigger Securities will be successful. It is impossible to predict whether and the extent to which the price of the underlying
shares will rise or fall and there can be no assurance that the final share price will be greater than the initial share price. The final share price (and therefore the underlying return) will be influenced by complex and interrelated
political, economic, financial and other factors that affect the underlying constituent stock issuers. You should be willing to accept the risks associated with the relevant markets tracked by the underlying shares in general and each
underlying constituent stock in particular, and the risk of losing a significant portion or all of your investment in the Trigger Securities.
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Changes affecting the target index of the underlying shares could have an adverse effect on the market value of, and any amount payable on, the Trigger Securities. The underlying shares seek to
track the performance of the MSCI USA Sector Neutral Quality (the “target index”). The policies of the sponsor of the target index as specified in the accompanying underlier supplement (the “index sponsor”), concerning additions,
deletions and substitutions of the underlying constituent stocks and the manner in which the index sponsor takes account of certain changes affecting those underlying constituent stocks may adversely affect the level of the target index
and, therefore, the price of the underlying shares. The policies of the index sponsor with respect to the calculation of the target index could also adversely affect the price of the underlying shares. The index sponsor may discontinue or
suspend calculation or dissemination of the target index. Any such actions could have an adverse effect on the market value of, and any amount payable on, the Trigger Securities.
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There is no affiliation between the index sponsor and BNS, and BNS is not responsible for any disclosure by such index sponsor. We or our affiliates may currently, or from time to time engage in
business with the index sponsor. However, we and our affiliates are not affiliated with the index sponsor and have no ability to control or predict its actions. You, as an investor in the Trigger Securities, should conduct your own
independent investigation of the index sponsor. The index sponsor is not involved in the Trigger Securities offered hereby in any way and has no obligation of any sort with respect to your Trigger Securities. The index sponsor has no
obligation to take your interests into consideration for any reason, including when taking any actions that might affect the market value of, and any amounts payable on, your Trigger Securities.
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BNS cannot control actions by the sponsor and the sponsor has no obligation to consider your interests. The sponsor may from time to time be called upon to make certain policy decisions or
judgments with respect to the implementation of policies of the sponsor concerning the calculation of the net asset value (“NAV”) per share of the fund, additions, deletions or substitutions of securities in the target index and the
manner in which changes affecting the target index are reflected in the fund that could affect the market price of the underlying shares, and therefore, the amount payable on the Trigger Securities. The amount payable on the Trigger
Securities and their market value could also be affected if the sponsor changes these policies, for example, by changing the manner in which it calculates the NAV per share of the fund, or if the sponsor discontinues or suspends
publication of the NAV per share of the fund, in which case it may become difficult to determine the market value of your Trigger Securities. If events such as these occur, the calculation agent may be required to make discretionary
judgments that affect the return you receive on the Trigger Securities.
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The methodology utilized by the index sponsor to identify “qualify” stocks may be unsuccessful. The target index seeks to select stocks that exhibit higher “quality” characteristics relative to
their peers, using three fundamental variables: high returns on equity, low earnings variability and low leverage. There is no guarantee that the criteria used by the target index to select “quality” stocks will be successful in achieving
the objective of the target index. Furthermore, there is no guarantee that the past performance of stocks included in the target index will continue as it relates to the fundamental variables utilized by the target index to select its
components. The target index (and, accordingly, the underlying share) may significantly underperform other portfolios of assets selected using other sets of criteria.
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There are risks associated with an investment that is linked to the performance of an exchange-traded fund. Although the fund’s shares are listed for trading on a national securities exchange
and a number of similar products have been traded on national securities exchanges for varying periods of time, there is no assurance that an active trading market will continue for the shares of the fund or that there will be liquidity
in the trading market. In addition:
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Management Risk
The fund is subject to management risk, which is the risk that the sponsor’s investment strategy, the implementation of which is subject to a number of constraints, may not
produce the intended results. The fund is also not actively managed and may be affected by a general decline in market segments relating to the target index. The sponsor employs a representative sampling strategy to track the target index.
Representative sampling is an indexing strategy that involves investing in a representative sample of securities that collectively has an investment profile similar to that of the target index, as described below under “Information About the
Fund”. The sponsor does not attempt to take defensive positions in declining markets. Accordingly, the performance of the fund could be lower than other types of funds that may
actively shift portfolio assets to take advantage of market opportunities or to lessen the impact of a market decline.
Custody and Liquidity Risk
Under continuous listing standards adopted by the exchange on which shares of the fund trade, the fund will be required to confirm on an ongoing basis that the components of the
target index satisfy the applicable listing requirements. In the event that the target index does not comply with the applicable listing requirements, the fund would be required to rectify such non-compliance by requesting that the sponsor of the
target index modify such target index, adopting a new target index or obtain relief from the SEC. There can be no assurance that such sponsor would so modify the target index or that relief would be obtained from the SEC and, therefore,
non-compliance with the continuous listing standards may result in the fund being delisted from the exchange on which its shares trade.
Tracking and Underperformance Risk
In addition to the risk that the fund may not track the target index due to management risk as discussed above, the performance of the fund will reflect additional transaction
costs and fees that are not included in the calculation of the target index. Also, corporate actions with respect to the equity securities held in the fund’s portfolio (such as mergers and spin-offs) may impact the performance differential
between the fund and the target index. Finally, because the shares of the fund are traded on a securities exchange and are subject to market supply and investor demand, the market value of one share of the fund may differ from the net asset value
per share of the fund.
For all of the foregoing reasons, the performance of the fund may not correlate with the performance of the target index. Consequently, the return on the Trigger Securities will
not be the same as investing directly in the underlying shares or in the underlying constituent stocks or in the target index or in the securities comprising the target index, and will not be the same as investing in a debt security with payments
linked to the performance of the target index. This variation in performance is called “tracking error” and, at times, the tracking error may be significant.
Risks Relating to Estimated Value and Liquidity
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BNS’ initial estimated value of the Trigger Securities at the time of pricing (when the terms of your Trigger Securities are set on the pricing date) will be lower than the issue price of the Trigger
Securities. BNS’ initial estimated value of the Trigger Securities is only an estimate. The issue price of the Trigger Securities will exceed BNS’ initial estimated value. The difference between the issue price of the Trigger
Securities and BNS’ initial estimated value reflects costs associated with selling and structuring the Trigger Securities, as well as hedging its obligations under the Trigger Securities. Therefore, the economic terms of the Trigger
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 Trigger 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 Trigger Securities and SCUSA’s estimated value of the Trigger 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 Trigger 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 Trigger Securities as well as the higher issuance, operational and ongoing liability management costs of the Trigger 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 Trigger Securities to be more favorable to you. Consequently, the use of an internal funding rate for the Trigger Securities increases the estimated value of the
Trigger Securities at any time and has an adverse effect on the economic terms of the Trigger Securities.
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BNS’ initial estimated value of the Trigger Securities does not represent future values of the Trigger Securities and may differ from others’ (including SCUSA’s) estimates. BNS’ initial estimated
value of the Trigger Securities is determined by reference to its internal pricing models when the terms of the Trigger Securities are set. These pricing models consider certain factors, such as BNS’ internal funding rate on the pricing
date, the expected term of the Trigger Securities, market conditions and other relevant factors existing at that time, and BNS’ assumptions about market parameters, which can include volatility of the underlying shares, 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 Trigger Securities that are different, and perhaps materially lower,
from BNS’ initial estimated value. Therefore, the price at which SCUSA would buy or sell your Trigger 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.
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| ■ |
The Trigger Securities have limited liquidity. The Trigger Securities will not be listed on any securities exchange or automated quotation system.
Therefore, there may be little or no secondary market for the Trigger Securities. SCUSA and any other affiliates of BNS intend, but are not required to, make a market in the Trigger Securities. Even if there is a secondary market, it may
not provide enough liquidity to allow you to trade or sell the Trigger Securities easily. Because we do not expect that other broker-dealers will participate in the secondary market for the Trigger Securities, the price at which you may
be able to trade your Trigger Securities is likely to depend on the price, if any, at which SCUSA is willing to purchase the Trigger Securities from you. If at any time SCUSA does not make a market in the Trigger Securities, it is likely
that there would be no secondary market for the Trigger Securities. Accordingly, you should be willing to hold your Trigger Securities to maturity.
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| ■ |
The price at which SCUSA would buy or sell your Trigger Securities (if SCUSA makes a market, which it is not obligated to do) will be based on SCUSA’s estimated value of your Trigger Securities. SCUSA’s
estimated value of the Trigger 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 your Trigger Securities in the
secondary market (if SCUSA makes a market, which it is not obligated to do) exceeds SCUSA’s estimated value of your Trigger Securities at the time of pricing. As agreed by SCUSA and the distribution participants, this excess is expected
to decline to zero over the period specified under “Additional Information About the Trigger Securities — Supplemental information regarding plan of distribution (conflicts of interest); secondary markets (if any)”. Thereafter, if SCUSA
buys or sells your Trigger 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 your Trigger Securities at any time
also will reflect its then-current bid and ask spread for similar sized trades of structured notes. If SCUSA calculated its estimated value of your Trigger 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 your Trigger Securities (if SCUSA makes a market, which it is not obligated to do) could be
significantly lower.
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SCUSA’s pricing models consider certain variables, including principally BNS’ internal funding rate, interest rates (forecasted, current and historical rates), the volatility of
the underlying shares, price-sensitivity analysis and the time to maturity of the Trigger 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 Trigger Securities in the secondary market, if any, to others may differ, perhaps materially, from the estimated value of the Trigger 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. See “— The price of the Trigger Securities prior to maturity will depend on a number of factors and may be
substantially less than the stated principal amount” herein.
In addition to the factors discussed above, the value and quoted price of the Trigger Securities at any time will reflect many factors and cannot be predicted. If SCUSA makes a
market in the Trigger 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 Trigger Securities, including the price you may receive for the Trigger Securities in any market making transaction. To the extent that SCUSA makes a market in the Trigger 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 Trigger 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 Trigger Securities in a secondary market sale.
There is no assurance that SCUSA or any other party will be willing to purchase your Trigger Securities at any price and, in this regard, SCUSA is not obligated to make a market
in the Trigger Securities. See “— The Trigger Securities have limited liquidity” herein.
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The price of the Trigger Securities prior to maturity will depend on a number of factors and may be substantially less than the stated principal amount. The price at which the Trigger Securities may be sold prior to maturity will depend on a number of factors. Some of these factors include, but are not limited to: (i) actual or anticipated
changes in the price of the underlying shares over the full term of the Trigger Securities, (ii) volatility of the price of the underlying shares and the underlying constituent stocks and the market’s perception of future volatility of
the foregoing, (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 constituent stocks and (vi) time remaining to maturity. In
particular, because the provisions of the Trigger Securities relating to the payment at maturity behave like options, the value of the Trigger Securities will vary in ways which are non-linear and may not be intuitive.
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Depending on the actual or anticipated price of the underlying shares and other relevant factors, the market value of the Trigger Securities may decrease and you may receive
substantially less than the stated principal amount if you sell your Trigger Securities prior to maturity regardless of the price of the underlying shares at such time.
See “Additional Risk Factors Specific to the Notes — Risks Relating to Liquidity — The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors” in the
accompanying product supplement.
Risks Relating to General Credit Characteristics
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Payments on the Trigger Securities are subject to the credit risk of BNS. The Trigger 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 Trigger Securities, including any repayment of principal, 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 Trigger Securities. If BNS were to default on its obligations, you may not receive any amounts owed to you under the terms of the Trigger Securities and you could lose your entire
investment in the Trigger Securities.
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Risks Relating to Hedging Activities and Conflicts of Interest
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Hedging activities by BNS and SCUSA may negatively impact investors in the Trigger Securities and cause our respective interests and those of our clients and
counterparties to be contrary to those of investors in the Trigger Securities. We, SCUSA or one or more of our other affiliates has hedged or expects to hedge our obligations under the Trigger Securities. Such hedging
transactions may include entering into swap or similar agreements, purchasing shares of the fund, the underlying constituent stocks and/or purchasing futures, options and/or other instruments linked to the underlying shares and/or one or
more of the underlying constituent stocks. We, SCUSA or one or more of our other 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 shares and/or one or more of the underlying constituent stocks, at any time and from time to time, and to unwind the hedge by selling any of the foregoing on or before the final determination date. We, SCUSA or one or more of
our other 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 price of the underlying shares and/or one or more underlying
shares and/or the underlying constituent stocks. Any of these hedging activities may adversely affect the price of the underlying shares—directly or indirectly by affecting the price of their underlying constituent stocks — and therefore
the market value of the Trigger Securities and the amount you will receive on the Trigger Securities at maturity, if any.
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You should expect that these transactions will cause BNS, SCUSA or our other affiliates, or our 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 Trigger 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 Trigger Securities, and any of the foregoing may receive substantial returns with respect to these hedging activities while the value of, and return on, the Trigger Securities
declines.
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We, SCUSA and our other affiliates regularly provide services to, or otherwise have business relationships with, a broad client base, which has included and may include us and the sponsor and/or the
underlying constituent stock issuers and the market activities by us, SCUSA or our other affiliates for our or their own respective accounts or for our clients could negatively impact investors in the Trigger Securities. We,
SCUSA and our other 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, SCUSA and/or our other affiliates purchase, sell or hold a broad
array of investments, actively trade securities (including the Trigger Securities or other securities that we have issued), the underlying shares, the underlying constituent stocks, 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 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 price of the underlying shares and/or the value of the Trigger 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, the sponsor and/or the underlying constituent stock 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 price of the underlying shares and the market for your Trigger Securities, and you should expect that our interests and those of SCUSA and/or our other affiliates, clients or
counterparties, will at times be adverse to those of investors in the Trigger Securities.
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You should expect that we, SCUSA, and our other 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 Trigger Securities or other securities that we may issue, the underlying shares, the underlying constituent stocks, 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 Trigger Securities. In addition, in connection with these activities, certain personnel within us, SCUSA or our other affiliates may have access to confidential material
non-public information about these parties that would not be disclosed to investors in the Trigger Securities.
We, SCUSA and our other 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 Trigger Securities or other securities that we may issue, the underlying shares, the underlying constituent stocks or other securities or instruments similar to or linked to the foregoing. Investors in the Trigger
Securities should expect that we, SCUSA and our other affiliates offer securities, financial instruments, and other products that may compete with the Trigger Securities for liquidity or otherwise.
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Activities conducted by BNS and its affiliates may impact the market price of the underlying shares and the value of the Trigger Securities. Trading or transactions by BNS, SCUSA or our other
affiliates in the underlying shares or any underlying constituent stocks, listed and/or over-the-counter options, futures, exchange-traded funds or other instruments with returns linked to the performance of the underlying shares or any
underlying constituent stocks may adversely affect the price of the underlying shares or underlying constituent stocks and, therefore, the market value of the Trigger Securities. See “— Hedging activities by BNS and SCUSA may negatively
impact investors in the Trigger Securities and cause our respective interests and those of our clients and counterparties to be contrary to those of investors in the Trigger Securities” for additional information regarding hedging-related
transactions and trading.
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The calculation agent can make anti-dilution and reorganization adjustments that affect the payment at maturity. For anti-dilution and reorganization events affecting the underlying shares, the
calculation agent may make adjustments to the initial share price, trigger price and/or the final share price, as applicable, and any other term of the Trigger Securities. However, the calculation agent will not make an adjustment in
response to every corporate event that could affect the underlying shares. If an event occurs that does not require the calculation agent to make an adjustment, the value of the Trigger Securities and your payment at maturity may be
materially and adversely affected. In addition, 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 herein as necessary to achieve an equitable result. The occurrence of any anti-dilution or reorganization event and the
consequent adjustments may materially and adversely affect the value of the Trigger Securities and your payment at maturity, if any. See “General Terms of the Notes — Unavailability of the Closing Value of a Reference Asset; Adjustments
to a Reference Asset — Anti-Dilution Adjustments Relating to a Reference Equity” in the accompanying product supplement.
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Following a de-listing, liquidation or termination of the underlying shares, the payment at maturity may be based on a share of another exchange-traded fund or calculated by a
computation methodology that the calculation agent determines will as closely as reasonably possible replicate the underlying shares. See “General Terms of the Notes — Unavailability of the Closing Value of a Reference Asset; Adjustments to a
Reference Asset — Adjustments to a Reference ETF” in the accompanying product supplement.
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The calculation agent will have significant discretion with respect to the Trigger 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 will determine the payment at maturity of the Trigger Securities based on the observed final share price. The calculation agent can postpone the determination of the final share price (and
therefore the related maturity date) if a market disruption event occurs and is continuing with respect to the underlying shares on the valuation date.
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BNS and its affiliates may publish research or make opinions or recommendations that are inconsistent with an investment in the Trigger Securities. BNS, SCUSA and our other affiliates may publish
research from time to time on financial markets and other matters that may influence the value of the Trigger Securities, or express opinions or provide recommendations that are inconsistent with purchasing or holding the Trigger
Securities. Any research, opinions or recommendations expressed by BNS, SCUSA or our other 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 Trigger Securities and the underlying shares to which the Trigger Securities are linked.
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Risks Relating to Canadian and U.S. Federal Income Taxation
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Uncertain tax treatment. Significant aspects of the tax treatment of the Trigger Securities are uncertain. You should consult your tax advisor about your tax situation. See “Additional
Information About the Trigger Securities — Tax Considerations” and “— Material Canadian Income Tax Consequences” herein.
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Information About the Fund
All disclosures contained in this document regarding the fund 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 fund. You should make your own investigation into the fund.
iShares® MSCI USA Quality Factor ETF
We have derived all information contained herein regarding the iShares® MSCI USA Quality Factor ETF (referred to in this section as the “QUAL Fund”) and the target
index, as defined below, from publicly available information. Such information reflects the policies of, and is subject to changes by, the QUAL Fund’s investment adviser, BlackRock Fund Advisors (“BFA” or the “investment adviser”) and the index
sponsor of the target index, as defined below.
The QUAL Fund is one of the separate investment portfolios that constitute the iShares Trust (“iShares”). The QUAL Fund seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the MSCI USA Sector Neutral Quality Index (the “target index”) which is based on a traditional market capitalization-weighted parent index the MSCI USA Index (the “parent
index”). The target index seeks to measure the performance of securities in the parent index that exhibit higher quality characteristics relative to their peers within the corresponding Global Industry Classification Standard sector. To construct
the target index, the index sponsor (as defined below) determines the quality score of each security in the Parent Index based on three fundamental variables: high return on equity, low earnings variability and low leverage. The target index is
weighted based on a component’s quality score multiplied by its weight in the Parent Index. Weights in the target index are next normalized so that sectors in the target represent the same weight as in the parent index. Additionally, each
individual issuer is capped at 5%. The target index was created by, and is calculated, maintained and published by, MSCI Inc. (the “index sponsor”). The index sponsor is under no obligation to continue to publish, and may discontinue or suspend
the publication of, the target index at any time.
Select information regarding the QUAL Fund’s expense ratio and its top constituents, country, industry and/or sector weightings may be made available on the QUAL Fund’s website.
Expenses of the QUAL Fund reduce the net asset value of the assets held by the QUAL Fund and, therefore, reduce the value of the shares of the QUAL Fund.
BFA uses a representative sampling strategy to manage the QUAL Fund. “Representative sampling” is an indexing strategy that involves investing in a representative sample of the
securities included in the target index that the investment adviser determines to collectively have an investment profile similar to that of the target index. The securities selected are intended to have, in the aggregate, investment
characteristics (based on market capitalization and industry weightings), fundamental characteristics (such as return variability and yield) and liquidity measures similar to those of the target index. The QUAL Fund may or may not hold all of the
securities that are included in the target index.
The QUAL Fund generally invests at least 80% of its assets in the securities of the target index and in investments that have economic characteristics that are substantially
identical to the component securities of its target index and may invest up to 20% of its assets in certain futures, options and swap contracts, cash and cash equivalents, including shares of money market funds advised by BFA or its affiliates,
as well as in securities not included in the target index, but which BFA believes will help the QUAL Fund track the target index.
Shares of the QUAL Fund are listed on the Cboe BZX Exchange, Inc. under the ticker symbol “QUAL”.
Information from outside sources including, but not limited to the prospectus related to the QUAL Fund and any other website referenced in this section, is not incorporated by
reference in, and should not be considered part of, this document or any document incorporated herein by reference. We have not undertaken an independent review or due diligence of any publicly available information with respect to the QUAL Fund
or the target index.
Information filed by iShares, Inc. with the SEC, including the prospectus for the QUAL Fund, can be found by reference to its SEC file numbers: 033-97598 and 811-09102 or its
CIK Code: 0000930667.
Information as of market close on August 9, 2024:
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Bloomberg Ticker Symbol:
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QUAL UF <Equity>
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52 Week High (on July 16, 2024):
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$176.08
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Current Fund Price:
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$168.26
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52 Week Low (on October 27, 2023):
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$127.66
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52 Weeks Ago (on August 9, 2023):
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$136.88
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Historical Information
The table below sets forth the published high and low closing prices, as well as the end-of-quarter closing prices, of the underlying shares for the specified period. The
closing price of the underlying shares on August 9, 2024 was $168.26 (the “hypothetical initial share price”). The dotted line represents the hypothetical trigger price of $126.195, which is equal to 75.00% of the hypothetical initial share
price. The graph below sets forth the closing prices of the underlying shares for each day from January 1, 2019 through August 9, 2024. We obtained the information in the table below from Bloomberg Professional® service (“Bloomberg”),
without independent verification. BNS has not undertaken an independent review or due diligence of any publicly available information obtained from Bloomberg. The historical performance of the underlying shares
should not be taken as an indication of its future performance, and no assurance can be given as to the closing price of the underlying shares at any time, including the valuation date.
iShares® MSCI USA Quality Factor ETF
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2019
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First Quarter
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$88.74
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$74.79
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$88.55
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Second Quarter
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$92.22
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$85.59
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$91.47
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Third Quarter
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$94.10
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$88.14
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$92.40
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Fourth Quarter
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$101.30
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$89.66
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$101.00
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2020
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First Quarter
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$105.06
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$69.28
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$81.04
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Second Quarter
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$101.43
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$77.66
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$95.92
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Third Quarter
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$110.16
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$96.43
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$103.74
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Fourth Quarter
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$116.21
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$100.86
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$116.21
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2021
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First Quarter
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$122.16
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$112.92
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$121.78
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Second Quarter
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$133.01
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$123.09
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$132.87
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Third Quarter
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$141.78
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$131.73
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$131.73
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Fourth Quarter
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$146.30
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$130.89
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$145.56
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2022
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First Quarter
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$145.17
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$123.55
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$134.63
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Second Quarter
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$135.98
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$108.57
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$111.73
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Third Quarter
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$126.48
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$103.94
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$103.94
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Fourth Quarter
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$121.24
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$103.82
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$113.96
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2023
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First Quarter
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$126.20
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$113.23
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$124.065
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Second Quarter
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$134.87
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$121.98
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$134.87
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Third Quarter
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$139.97
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$130.77
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$131.79
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Fourth Quarter
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$147.99
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$127.66
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$147.14
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2024
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First Quarter
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$165.44
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$144.615
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$164.35
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Second Quarter
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$173.19
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$154.56
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$170.76
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Third Quarter (through August 9, 2024)
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$176.08
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$162.64
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$168.26
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iShares® MSCI USA Quality Factor ETF – Daily Closing Prices
January 1, 2019 to August 9, 2024
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This document relates only to the Trigger Securities offered hereby and does not relate to the underlying shares or other Trigger Securities linked to the underlying shares. We
have derived all disclosures contained in this document regarding the fund from the publicly available documents described in the preceding paragraphs. In connection with the offering of the Trigger Securities, none of us or any of our affiliates
have participated in the preparation of such documents or made any due diligence inquiry with respect to the fund. Neither we nor the agent makes any representation that such publicly available documents or any other publicly available
information regarding the fund is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available
documents described above) that would affect the trading price of the underlying shares (and therefore the price of the underlying shares at the time we price the Trigger Securities) have been publicly disclosed. Subsequent disclosure of any such
events or the disclosure of or failure to disclose material future events concerning the fund could affect the value received at maturity with respect to the Trigger Securities and therefore the value of the Trigger Securities.
Neither the issuer nor any of its affiliates makes any representation to you as to the performance of the underlying shares.
Additional Information About the Trigger Securities
Please read this information in conjunction with the summary terms on the front cover of this document.
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Additional Provisions:
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Trustee:
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Computershare Trust Company, N.A.
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Calculation agent:
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Scotia Capital Inc.
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Trading day:
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As specified in the product supplement under “General Terms of the Notes — Special Calculation Provisions — Trading Day”.
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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 provisions 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 Trigger Securities.
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Canadian bail-in:
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The Trigger 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 document, and for purposes of the
foregoing, the terms used herein mean the corresponding terms as defined in the accompanying product supplement, as specified below:
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Term used herein
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Corresponding term in the accompanying
product supplement
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underlying shares
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reference asset
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underlying constituent stocks
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reference asset constituents
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stated principal amount
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principal amount
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original issue date
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issue date
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valuation date
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final valuation date
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closing price
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closing value
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initial share price
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initial value
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final share price
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final value
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trigger price
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barrier value
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underlying return
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reference asset return
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Additional information
regarding estimated value of
the Trigger Securities:
|
On the cover page of this pricing supplement, BNS has provided the initial estimated value range for the Trigger Securities. This range of estimated values was determined by
reference to BNS’ internal pricing models, which take into consideration certain factors, such as BNS’ internal funding rate on the pricing date and BNS’ assumptions about market parameters. For more information about the initial
estimated value, see “Risk Factors — Risks Relating to Estimated Value and Liquidity” herein.
The economic terms of the Trigger Securities are based on BNS’ internal funding rate, which is the rate BNS would pay to borrow funds through the issuance of similar
market-linked securities and the economic terms of certain related hedging arrangements. Due to these factors, the issue price you pay to purchase the Trigger Securities will be greater than the initial estimated value of the Trigger
Securities. BNS’ internal funding rate is typically lower than the rate BNS would pay when it issues conventional fixed rate debt securities as discussed further under “Risk Factors — Risks Relating to Estimated Value and Liquidity —
Neither BNS’ nor SCUSA’s estimated value of the Trigger 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’ use of its internal
funding rate reduces the economic terms of the Trigger Securities to you. We urge you to read the “Risk Factors” in this pricing supplement for additional information.
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Material Canadian income
tax consequences:
|
See “Supplemental Discussion of Canadian Tax Consequences” in the accompanying product supplement. In addition to the assumptions, limitations and conditions described
therein, such discussion assumes that a Non-Resident Holder is not an entity in respect of which BNS is a “specified entity” as defined in the Income Tax Act (Canada) (the “Act”).
Such discussion further assumes that no amount paid or payable to a Non-Resident Holder will be the deduction component of a “hybrid mismatch arrangement” under which the
payment arises within the meaning of paragraph 18.4(3)(b) of the Act.
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| |
Tax considerations:
|
The U.S. federal income tax consequences of your investment in the Trigger 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 Trigger 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
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| |
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as to the U.S. federal income tax consequences of your investment in the Trigger Securities, and the following discussion is not binding on the IRS.
U.S. Tax Treatment. Pursuant to the terms of the Trigger 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 Trigger Securities as prepaid derivative contracts with respect to the underlying shares. Subject to the discussion below regarding
“constructive ownership transactions”, if your Trigger Securities are so treated, you should generally recognize long-term capital gain or loss if you hold your Trigger Securities for more than one year (and, otherwise, short-term capital
gain or loss) upon the taxable disposition of your Trigger Securities, in an amount equal to the difference between the amount you receive at such time and the amount you paid for your Trigger Securities. The deductibility of capital
losses is subject to limitations.
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 Trigger Securities in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the Trigger Securities, it is possible that your
Trigger 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 Trigger 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.
Section 1260. Because the underlying shares would be treated as a “pass-thru entity” for purposes of Section 1260 of the Code, it
is possible that the Trigger Securities could be treated as a constructive ownership transaction under Section 1260 of the Code. If the Trigger Securities were treated as a constructive ownership transaction, certain adverse U.S. federal
income tax consequences could apply (i.e., all or a portion of any gain that you recognize upon the taxable disposition of your Trigger Securities could be recharacterized as ordinary income and you could be subject to an interest charge
on any deferred tax liability with respect to such recharacterized gain). We urge you to read the discussion concerning the possible treatment of the Trigger Securities as a constructive ownership transaction 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 Trigger Securities for U.S. federal income tax purposes in accordance with the treatment described
above and under “Material U.S. Federal Income Tax Consequences” 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 Trigger Securities. According to
Notice 2008-2, the IRS and the Treasury are actively considering whether a holder of an instrument such as the Trigger 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 Trigger 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 Trigger 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 Trigger Securities
if they do not hold their Trigger Securities in an account maintained by a financial institution and the aggregate value of their Trigger 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 Trigger 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 Trigger Securities or to generally applicable information reporting and backup withholding requirements with respect to payments on your Trigger 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
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Section 897 of the Code and Section 871(m) of the Code, discussed below, gain realized from the taxable disposition of a Trigger Securities 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 issuer of the underlying shares 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 Trigger 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 Trigger 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 Trigger Securities 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 Trigger 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, 2027.
Based on our determination that the Trigger Securities are not “delta-one” with respect to the underlying shares or any underlying constituent stocks, our special U.S. tax
counsel is of the opinion that the Trigger 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 Trigger 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 Trigger Securities could be deemed to be reissued for tax purposes upon the occurrence of certain
events affecting the underlying shares, any underlying constituent stocks or your Trigger Securities, and following such occurrence your Trigger 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 Trigger Securities under these rules. If you enter, or have entered, into other transactions
in respect of the underlying shares, any underlying constituent stocks or the Trigger Securities should consult your tax advisor regarding the application of Section 871(m) of the Code to your Trigger 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 Trigger 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 Trigger 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
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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 Trigger
Securities through a foreign entity) under the FATCA rules.
Backup Withholding and Information Reporting. The proceeds received from a taxable disposition of the Trigger 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 Trigger Security may be subject to U.S. federal estate tax if an individual
non-U.S. holder holds the Trigger Securities 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 Trigger Securities at death.
Proposed Legislation. In 2007, legislation was introduced in Congress that, if it had been enacted, would have required holders of
Trigger Securities purchased after the bill was enacted to accrue interest income over the term of the Trigger Securities despite the fact that there will be no interest payments over the term of the Trigger 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 Trigger 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 Trigger
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 Trigger 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 Trigger Securities arising under the laws of any state, local, non-U.S. or other taxing jurisdiction (including that of BNS).
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Supplemental information
regarding plan of
distribution (conflicts of
interest); secondary markets
(if any):
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SCUSA, our affiliate, will purchase the Trigger Securities at the stated principal amount and, as part of the distribution of the Trigger Securities, will sell the Trigger
Securities to Morgan Stanley Wealth Management with an underwriting discount of $30.00 reflecting a fixed sales commission of $25.00 and fixed structuring fee of $5.00 per $1,000.00 stated principal amount of Trigger Securities that
Morgan Stanley Wealth Management sells. BNS or an affiliate may also pay a fee to LFT Securities, LLC, an entity in which an affiliate of Morgan Stanley Wealth Management has an ownership interest, for providing certain electronic
platform services with respect to this offering.
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BNS, SCUSA or any other affiliate of BNS may use this document, the accompanying product supplement and the accompanying prospectus in a market-making transaction for any
Trigger Securities after their initial sale. In connection with the offering, BNS, SCUSA, any other affiliate of BNS or any other securities dealers may distribute this document, the accompanying product supplement and the accompanying
prospectus electronically. Unless BNS or its agent informs the purchaser otherwise in the confirmation of sale, this document, the accompanying product supplement and the accompanying prospectus are being used in a market-making
transaction.
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Conflicts of Interest — SCUSA is an affiliate of BNS and, as such, has a “conflict of
interest” in this offering within the meaning of the Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121. In addition, BNS will receive the gross proceeds from the initial public offering of the Trigger Securities, thus
creating an additional conflict of interest within the meaning of FINRA Rule 5121. Consequently, the offering is being conducted in compliance with the provisions of FINRA Rule 5121. SCUSA is not permitted to sell securities in this
offering to an account over which it exercises discretionary authority without the prior specific written approval of the account holder.
In the ordinary course of their various business activities, SCUSA, and its affiliates may make or hold a broad array of investments and actively trade debt and equity
securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or
instruments of BNS. SCUSA, and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients
that they acquire, long and/or short positions in such securities and instruments.
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SCUSA and its affiliates may offer to buy or sell the Trigger Securities in the secondary market (if any) at prices greater than BNS’
internal valuation — The value of the Trigger Securities at any time will vary based on many factors that cannot be predicted. However, the price (not including SCUSA’s or any affiliates’
customary bid-ask spreads) at which SCUSA or any affiliate would offer to buy or sell the Trigger Securities immediately after the pricing date in the secondary market is expected to exceed the initial estimated value of the Trigger
Securities as determined by reference to our internal pricing models. The amount of the excess will decline to zero on a straight line basis over a period ending no later than 6 weeks after the pricing date, provided that SCUSA may
shorten the period based on various factors, including the magnitude of purchases and other negotiated provisions with selling agents. Notwithstanding the foregoing, SCUSA and its affiliates intend, but are not required, to make a market
for the Trigger Securities and may stop making a market at any time. For more information about secondary market offers and the initial estimated value of the Trigger Securities, see “Risk Factors” herein.
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Prohibition of sales to EEA
retail investors:
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The Trigger Securities are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor
in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); (ii) a
customer within the meaning of Directive (EU) 2016/97, as amended, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in
Regulation (EU) 2017/1129, as amended. Consequently no key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”), for offering or selling the Trigger Securities or otherwise making them
available to retail investors in the EEA has been prepared and therefore offering or selling the Trigger Securities or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
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Prohibition of sales to United
Kingdom retail investors:
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The only categories of person in the United Kingdom to whom this document may be distributed are those persons who (i) have professional experience in matters relating to
investments falling within the definition of investment professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Financial Promotion Order”)), (ii) are
persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Financial Promotion Order, or (iii) are persons to whom an invitation or inducement to engage in investment activity
(within the meaning of section 21 of the Financial Services and Markets Act 2000 (“FSMA”)) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons in
(i)-(iii) above together being referred to as “Relevant Persons”). This document is directed only at Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to
which this document relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. This document may only be provided to persons in the United Kingdom in circumstances where section 21(1) of FSMA does not
apply to BNS. The Trigger Securities are not being offered to “retail investors” within the meaning of the Packaged Retail and Insurance-based Investment Products Regulations 2017 and accordingly no Key Information Document has been
produced under these regulations.
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