The return on your notes is linked to the performance of the reference asset, and not to that of The MSCI
®
Emerging Markets
Index
SM
(the reference asset index) on which the reference asset is based. The reference asset follows a strategy of "representative sampling", which means the reference asset’s holdings are not the same as those of the reference asset
index. The performance of the reference asset may significantly diverge from that of the reference asset index.
To determine your payment at maturity, we will first calculate the percentage change, which is the percentage
increase or decrease in the final price from the initial price. At maturity, for each $1,000 principal amount of your notes:
Following the determination of the initial price, the amount you will be paid on your notes at maturity will not
be affected by the closing price of the reference asset on any day other than the valuation date.
In addition, no payments on your notes will be made prior
to maturity.
Investment in the notes involves certain risks. You should refer to “Additional Risks” beginning on page P-15 of
this pricing supplement and “Additional Risk Factors Specific to the Notes” beginning on page PS-6 of the accompanying product prospectus supplement and “Risk Factors” beginning on page S-2 of the accompanying prospectus supplement and on page 5 of
the accompanying prospectus.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THE NOTES OR PASSED UPON THE ACCURACY OR THE ADEQUACY OF THIS PRICING SUPPLEMENT, THE ACCOMPANYING PROSPECTUS, ACCOMPANYING PROSPECTUS SUPPLEMENT OR ACCOMPANYING PRODUCT PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE NOTES 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 UNITED STATES OR ANY OTHER JURISDICTION.
The return on your notes will relate to the price return of the reference asset and will not include a total return
or dividend component. The notes are derivative products based on the performance of the reference asset. The notes do not constitute a direct investment in any of the shares, units or other securities represented by the reference asset. By
acquiring the notes, you will not have a direct economic or other interest in, claim or entitlement to, or any legal or beneficial ownership of any such share, unit or security and will not have any rights as a shareholder, unitholder or other
security holder of any of the issuers including, without limitation, any voting rights or rights to receive dividends or other distributions.
Scotia Capital (USA) Inc. (“SCUSA”), our affiliate, has agreed to purchase the notes from us for distribution to one
or more registered broker dealers. SCUSA or any of its affiliates or agents may use this pricing supplement in market-making transactions in notes after their initial sale. Unless we, SCUSA or another of our affiliates or agents selling such notes
to you informs you otherwise in the confirmation of sale, this pricing supplement is being used in a market-making transaction. See “Supplemental Plan of Distribution (Conflicts of Interest)” in this pricing supplement and “Supplemental Plan of
Distribution (Conflicts of Interest)” on page PS-36 of the accompanying product prospectus supplement.
The original issue price, commissions and proceeds to the Bank listed above relate to the notes we issue initially.
We may decide to sell additional notes after the date of this pricing supplement, at original issue prices and with commissions and proceeds to the Bank that differ from the amounts set forth above. The return (whether positive or negative) on your
investment in the notes will depend in part on the original issue price you pay for such notes.
On the cover page of this pricing supplement, the Bank has provided the initial estimated value for the notes. This
estimated value was determined by reference to the Bank’s internal pricing models, which take into consideration certain factors, such as the Bank’s internal funding rate on the trade date and the Bank’s assumptions about market parameters. For
more information about the initial estimated value, see “Additional Risks” beginning on page P-15.
The economic terms of the notes (including the maximum payment amount) are based on the Bank’s internal funding
rate, which is the rate the Bank would pay to borrow funds through the issuance of similar market-linked notes, any underwriting discount and the economic terms of certain related hedging arrangements. Due to these factors, the original issue price
you pay to purchase the notes is greater than the initial estimated value of the notes. The Bank’s internal funding rate is typically lower than the rate the Bank would pay when it issues conventional fixed rate debt securities as discussed further
under “Additional Risks — Neither the Bank’s nor SCUSA’s estimated value of the notes at any time is determined by reference to credit spreads or the borrowing rate the Bank would pay for its conventional fixed-rate debt securities”. The Bank’s use
of its internal funding rate reduces the economic terms of the notes to you.
The value of your notes at any time will reflect many factors and cannot be predicted; however, the price (not
including SCUSA's customary bid and ask spreads) at which SCUSA would initially buy or sell notes in the secondary market (if SCUSA makes a market, which it is not obligated to do) is equal to approximately SCUSA's estimate of the market value of
your notes on the trade date, based on its pricing models and taking into account the Bank’s internal funding rate, plus an additional amount (initially equal to $11.50 per $1,000 principal amount).
Prior to September 19, 2019, the price (not including SCUSA’s customary bid and ask spreads) at which SCUSA would buy or sell your notes (if it makes a market, which it is not obligated to do) will equal
approximately the sum of (a) the then-current estimated value of your notes (as determined by reference to SCUSA’s pricing models) plus (b) any remaining additional amount (the additional amount will decline to zero on a straight-line basis from
the time of pricing through September 18, 2019). On and after September 19, 2019, the price (not including SCUSA’s customary bid and ask spreads) at which SCUSA would buy or sell your notes (if it makes a market) will equal approximately the
then-current estimated value of your notes determined by reference to such pricing models. For additional information regarding the price at which SCUSA would buy or sell your notes (if SCUSA makes a market, which it is not obligated to do), each
based on SCUSA’s pricing models; see “Additional Risks — The price at which SCUSA would buy or sell your notes (if SCUSA makes a market, which it is not obligated to do) will be based on SCUSA’s estimated value of your notes”.
We urge you to read the “Additional Risks” beginning on page P-15 of this pricing supplement.
The information in this “Summary” section is qualified by the more detailed information set forth in this pricing supplement, the
accompanying prospectus, accompanying prospectus supplement, and accompanying product prospectus supplement, each filed with the Securities and Exchange Commission (“SEC”). See “Additional Terms of Your Notes” in this pricing supplement.
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Issuer:
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The Bank of Nova Scotia (the "Bank”)
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Issue:
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Senior Note Program, Series A
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CUSIP/ISIN:
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CUSIP: 064159PH3 / US064159PH33
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Type of Notes:
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Capped Buffered Enhanced Participation Notes
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Reference Asset:
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The iShares
®
MSCI Emerging Markets ETF (Bloomberg Ticker: EEM UP)
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Reference Asset Index:
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MSCI Emerging Markets Index, as published by MSCI, Inc. (the “sponsor”)
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Minimum Investment and
Denominations:
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$1,000 and integral multiples of $1,000 in excess thereof
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Principal Amount:
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$1,000 per note; $644,000 in the aggregate for all the offered notes; the aggregate principal amount of the offered notes may be increased if the
Bank, at its sole option, decides to sell an additional amount of the offered notes on a date subsequent to the date of this pricing supplement.
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Original Issue Price:
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100% of the principal amount of each note
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Currency:
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U.S. dollars
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Trade Date:
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June 19, 2019
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Original Issue Date:
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June 26, 2019
Delivery of the notes will be made against payment therefor on the 5
th
business day following the date of pricing of the notes (this
settlement cycle being referred to as “T+5”). Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in two business days (“T+2”), unless the parties to any
such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the notes on or prior to the second business day before delivery of the notes will be required, by virtue of the fact that each note initially will settle
in five business days (T+5), to specify alternative settlement arrangements to prevent a failed settlement.
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Valuation Date:
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June 21, 2021
The valuation date could be delayed by the occurrence of a market disruption event. See "General Terms of the Notes—Market Disruption Events"
beginning on page PS-27 in the accompanying product prospectus supplement. Further, if the valuation date is not a trading day, the valuation date will be postponed in the same manner as if a market disruption event has occurred.
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Maturity Date:
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June 23, 2021, subject to adjustment due to a market disruption event, a non-trading day or a non-business day as described in more detail under
"General Terms of the Notes—Maturity Date" on page PS-18 in the accompanying product prospectus supplement.
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Principal at Risk:
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You may lose all or a substantial portion of your initial investment at maturity if there is a percentage decrease from the initial price to the final price of more than 15.00%.
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Purchase at amount other
than principal amount:
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The amount we will pay you on the maturity date for your notes will not be adjusted based on the original issue price you pay for your notes, so if you acquire notes at a premium (or
discount) to the principal amount and hold them to the maturity date, it
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could affect your investment in a number of ways. The return on your investment in such notes will be lower (or higher) than it would have been had
you purchased the notes at the principal amount. Also, the stated buffer price would not offer the same measure of protection to your investment as would be the case if you had purchased the notes at the principal amount. Additionally,
the maximum payment amount would be triggered at a lower (or higher) percentage return than indicated below, relative to your initial investment. See “Additional Risks—If you purchase your notes at a premium to the principal amount, the
return on your investment will be lower than the return on notes purchased at the principal amount and the impact of certain key terms of the notes will be negatively affected” beginning on page P-23 of this pricing supplement.
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Fees and Expenses:
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As part of the distribution of the notes, SCUSA or one of our affiliates has agreed to sell the notes to certain unaffiliated securities dealers at
the original issue price per note specified on the cover hereof. See “Supplemental Plan of Distribution (Conflicts of Interest)” in this pricing supplement.
The price at which you purchase the notes includes costs that the Bank or its affiliates expect to incur and profits that the Bank or its
affiliates expect to realize in connection with hedging activities related to the notes, as set forth below under “Supplemental Plan of Distribution (Conflicts of Interest)”. These costs and profits will likely reduce the secondary market
price, if any secondary market develops, for the notes. As a result, you may experience an immediate and substantial decline in the market value of your notes on the trade date. See “Additional Risks—Hedging activities by the Bank and
SCUSA may negatively impact investors in the notes and cause our respective interests and those of our clients and counterparties to be contrary to those of investors in the notes” in this pricing supplement.
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Payment at Maturity:
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The payment at maturity, for each $1,000 principal amount of notes will be based on the performance of the reference asset and will be calculated
as follows:
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·
If the final price is greater than the initial price, then the payment at maturity will equal:
o
The lesser of (a) principal amount + (principal amount x percentage change x participation rate) and (b) maximum payment amount.
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·
If the final price is greater than or equal to the buffer price, but less than or equal to the initial price, then the payment at maturity will equal the principal amount
·
If the final price is less than the buffer price, then the payment at maturity will equal:
o
principal amount + [principal amount x buffer rate x (percentage change + buffer percentage)]
In this case you will suffer a percentage loss on your initial
investment equal to the buffer rate multiplied by the negative percentage change in excess of the buffer percentage. Accordingly, you could lose up to 100% of your initial investment.
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Closing Price:
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As used herein, the “closing price” of the reference asset on any date will equal the closing sale price or last reported sale price, regular way
on a per-share basis, on the principal national securities exchange on which the reference asset is listed for trading, or, if the reference asset is not quoted on any national securities exchange, on any other market system or quotation
system that is the primary market for the trading of the reference asset.
If the reference asset is not listed or traded as described above, then the closing price for the reference asset on any day will be the average,
as determined by the calculation agent, of the bid prices for the reference asset obtained from as many dealers in the reference asset selected by the calculation agent as will make those bid prices available to the calculation agent. The
number of dealers need not exceed three and may include the calculation agent, the dealer or any of our other affiliates.
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Initial Price:
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$42.29, which was the closing price of the reference asset on the trade date.
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Final Price:
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The closing price of the reference asset on the valuation date. In certain special circumstances, the final price will be
determined by the calculation agent, in its discretion. See “General Terms of the Notes—Unavailability of the Closing Price of the Reference Asset on a Valuation Date” and “General Terms of the Notes—Adjustments to an ETF” on page PS-26,
“General Terms of the Notes—Market Disruption Events” beginning on page PS-27 and “General Terms of the Notes—Anti–Dilution Adjustments Relating to Equity Securities or a Reference Asset that is an ETF” on page PS-28 in the accompanying
product prospectus supplement.
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Percentage Change:
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The percentage change, expressed as a percentage, with respect to the payment at maturity, is calculated as follows:
final price – initial price
initial price
For the avoidance of doubt, the percentage change may be a negative value.
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Participation Rate:
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170.00%
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Buffer Price:
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85.00% of the initial price
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Buffer Percentage:
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15.00%
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Buffer Rate:
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The
quotient
of the initial price
divided
by the buffer price, which equals approximately 117.65%
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Maximum Payment Amount:
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$1,261.80, which equals the principal amount x 126.18%. The maximum payment amount sets a cap on appreciation of the reference asset of 15.40%.
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Form of Notes:
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Book-entry
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Calculation Agent:
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Scotia Capital Inc., an affiliate of the Bank
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Status:
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The notes will constitute direct, unsubordinated and unsecured obligations of the Bank ranking
pari passu
with all other direct, unsecured and unsubordinated indebtedness of the Bank from time to time outstanding (except as otherwise prescribed by law). Holders will not have the
benefit of any insurance under the provisions of the
CDIC Act
, the U.S.
Federal Deposit Insurance Act
or under any other deposit insurance regime of any jurisdiction.
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Tax Redemption:
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The Bank (or its successor) may redeem the notes, in whole but not in part, at a redemption price determined by the calculation agent in a manner reasonably calculated to preserve your
and our relative economic position, if it is determined that changes in tax laws or their interpretation will result in the Bank (or its successor) becoming obligated to pay additional amounts with respect to the notes. See “Tax Redemption”
in the accompanying product prospectus supplement.
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Listing:
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The notes will not be listed on any securities exchange or quotation system.
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Use of Proceeds:
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General corporate purposes
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Clearance and Settlement:
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Depository Trust Company
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Trading Day:
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A day on which the principal trading market for the reference asset is scheduled to be open for trading.
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Business Day:
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New York and Toronto
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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” beginning on page PS-22 in the accompanying product prospectus supplement, as modified by this
pricing supplement.
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Canadian Bail-in:
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The notes are not bail-inable debt securities under the CDIC Act.
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INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE ALL OR A SUBSTANTIAL PORTION OF YOUR INVESTMENT. ANY PAYMENT ON THE NOTES,
INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO THE CREDITWORTHINESS OF THE BANK. IF THE BANK WERE TO DEFAULT ON ITS PAYMENT OBLIGATIONS YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
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ADDITIONAL TERMS OF YOUR NOTES
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You should read this pricing supplement together with the prospectus dated December 26, 2018, as supplemented by the
prospectus supplement dated December 26, 2018 and
the product prospectus supplement (Equity Securities Linked Notes and Exchange Traded Fund Linked Notes, Series A) dated December 26, 2018, relating to our Senior Note
Program, Series A, of which these notes are a part. Capitalized terms used but not defined in this pricing supplement will have the meanings given to them in the product prospectus supplement. 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 prospectus supplement; third, the prospectus supplement; and last, the prospectus.
The notes may vary from the terms described in the accompanying prospectus, accompanying prospectus supplement and accompanying product prospectus supplement
in several important ways. You should read this pricing supplement carefully, including the documents incorporated by reference herein.
This pricing supplement, together with the documents listed below, contains the terms of the notes 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 “Additional Risk Factors Specific to the Notes” in the accompanying product prospectus supplement, as the notes involve risks not associated with conventional debt
securities. We urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the notes. 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).
Product Prospectus Supplement (Equity Securities Linked Notes and Exchange Traded Fund Linked Notes, Series A)
dated December 26, 2018:
Prospectus Supplement dated December 26, 2018:
Prospectus dated December 26, 2018:
The notes may be suitable for you if:
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You fully understand the risks inherent in an investment in the notes, including the risk of losing all or a substantial portion of your initial
investment.
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You can tolerate a loss of up to 100% of your initial investment.
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·
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You are willing to make an investment that, if the final price is less than the buffer price, has an accelerated downside risk greater than the
downside market risk of an investment in the reference asset or in the stocks comprising the reference asset (the “reference asset constituent stocks”).
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·
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You believe that the price of the reference asset will appreciate over the term of the notes and that the appreciation is unlikely to exceed the
cap on appreciation within the maximum payment amount.
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·
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You are willing to hold the notes to maturity, a term of approximately 24 months, and accept that there may be little or no secondary market for
the notes.
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·
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You understand and accept that your potential payment at maturity is limited to the maximum payment amount and you are willing to invest in the
notes based on the maximum payment amount indicated on the cover hereof.
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You can tolerate fluctuations in the price of the notes prior to maturity that may be similar to or exceed the downside fluctuations in the price
of the reference asset or in the price of the reference asset constituent stocks.
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You do not seek current income from your investment.
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You seek an investment with exposure to companies in emerging markets.
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·
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You are willing to assume the credit risk of the Bank for all payments under the notes, and understand that if the Bank defaults on its obligations
you may not receive any amounts due to you including any repayment of principal.
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The notes may not be suitable for you if:
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You do not fully understand the risks inherent in an investment in the notes, including the risk of losing all or a substantial portion of your
initial investment.
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You require an investment designed to guarantee a full return of principal at maturity.
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You cannot tolerate a loss of all or a substantial portion of your initial investment.
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·
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You are not willing to make an investment that, if the final price is less than the buffer price, has an accelerated downside risk greater than the
downside market risk of an investment in the reference asset or in the reference asset constituent stocks.
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·
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You believe that the price of the reference asset will decline during the term of the notes and the final price will likely be less than the buffer
price, or you believe the price of the reference asset will appreciate over the term of the notes and that the appreciation is likely to equal or exceed the cap on appreciation within the maximum payment amount.
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·
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You seek an investment that has unlimited return potential without a cap on appreciation or you are unwilling to invest in the notes based on the
maximum payment amount indicated on the cover hereof.
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·
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You cannot tolerate fluctuations in the price of the notes prior to maturity that may be similar to or exceed the downside fluctuations in the
price of the reference asset or in the price of the reference asset constituent stocks.
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·
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You seek current income from your investment or prefer to receive dividends paid on the reference asset.
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You are unable or unwilling to hold the notes to maturity, a term of approximately 24 months, or you seek an investment for which there will be a
secondary market.
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You do not seek an investment with exposure to companies in emerging markets.
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·
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You are not willing to assume the credit risk of the Bank for all payments under the notes.
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The investor suitability considerations identified above are not exhaustive. Whether or not the notes are a suitable
investment for you will depend on your individual circumstances and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the suitability of an investment in
the notes in light of your particular circumstances. You should also review ‘‘Additional Risks’’ in this pricing supplement and the ‘‘Additional Risk Factors Specific to the Notes’’ beginning on page PS-6 of the accompanying product prospectus supplement and "Risk Factors" beginning on page S-2 of the accompanying prospectus supplement and on page 5 of the accompanying prospectus for risks related to an
investment in the notes.
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HYPOTHETICAL PAYMENTS AT MATURITY ON THE NOTES
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The examples set out below are included for illustration purposes only. They should not be taken as an indication or prediction of
future investment results and are intended merely to illustrate the impact that the various hypothetical reference asset prices on the valuation date could have on the payment at maturity assuming all other variables remain constant.
The examples below are based on a range of final prices that are entirely hypothetical; the price of the reference asset on any day
throughout the life of the notes, including the final price on the valuation date, cannot be predicted. The reference asset has been highly volatile in the past, meaning that the price of the reference asset has changed considerably in relatively
short periods, and its performance cannot be predicted for any future period.
The information in the following examples reflects hypothetical rates of return on the offered notes assuming that they are purchased on
the original issue date at the principal amount and held to the maturity date. If you sell your notes in a secondary market prior to the maturity date, your return will depend upon the market value of your notes at the time of sale, which may be
affected by a number of factors that are not reflected in the examples below, such as interest rates, the volatility of the reference asset and our creditworthiness. In addition, the estimated value of your notes at the time the terms of your notes
were set on the trade date (as determined by reference to pricing models used by us) is less than the original issue price of your notes. For more information on the estimated value of your notes, see “Additional Risks— The Bank’s initial estimated value of the notes at the time of pricing (when the terms of your notes were set on the trade date) is lower than the original issue price of the notes” on page P-15
of this pricing supplement. The information in the examples also reflect the key terms and assumptions in the box below.
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Key Terms and Assumptions
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Principal amount
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$1,000
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Participation rate
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170.00%
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Maximum payment amount
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$1,261.80 for each $1,000 principal amount of your notes
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Buffer price
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85.00% of the initial price
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Buffer percentage
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15.00%
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Buffer rate
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Approximately 117.65%
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Neither a market disruption event nor a non-trading day occurs on the originally scheduled valuation date
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No change in or affecting the reference asset, any of the reference asset constituent stocks or the policies of the reference asset’s investment
advisor or the method by which the sponsor of the reference asset index calculates the reference asset index
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Notes purchased on the original issue date at the principal amount and held to the maturity date
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The actual performance of the reference asset over the life of your notes, as well as the amount payable at maturity, if any, may bear little relation to the hypothetical examples shown below or to the historical prices of the reference asset shown
elsewhere in this pricing supplement. For information about the historical prices of the reference asset, see “Information Regarding the Reference Asset—Historical Information” below.
Also, the hypothetical examples shown below do not take into account the effects of applicable taxes. Because of the U.S. tax treatment
applicable to your notes, tax liabilities could affect the after-tax rate of return on your notes to a comparatively greater extent than the after-tax return on the reference asset or reference asset constituent stocks.
The prices in the left column of the table below represent hypothetical final prices and are expressed as percentages of the initial
price. The amounts in the right column represent the hypothetical payment at maturity, based on the corresponding hypothetical final price, and are expressed as percentages of the principal amount of a note (rounded to the nearest one-thousandth of
a percent). Thus, a hypothetical payment at maturity of 100.000% means that the value of the cash payment that we would pay for each $1,000 of the outstanding principal amount of the offered notes on the maturity date would equal 100.000% of the
principal amount of a note, based on the corresponding hypothetical final price and the assumptions noted above.
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Hypothetical Final Price
(as Percentage of Initial Price)
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Hypothetical Payment at Maturity
(as Percentage of Principal Amount)
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150.000%
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126.180%
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140.000%
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126.180%
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130.000%
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126.180%
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120.000%
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126.180%
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115.400%
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126.180%
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110.000%
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117.000%
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106.000%
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110.200%
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104.000%
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106.800%
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102.000%
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103.400%
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100.000%
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100.000%
|
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95.000%
|
100.000%
|
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90.000%
|
100.000%
|
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85.000%
|
100.000%
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80.000%
|
94.118%
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70.000%
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82.353%
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60.000%
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70.588%
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50.000%
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58.824%
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25.000%
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29.412%
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0.000%
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0.000%
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If, for example, the final price were determined to be 25.000% of the initial price, the payment at maturity that we would pay on your notes at maturity
would be approximately 29.412% of the principal amount of your notes, as shown in the table above. As a result, if you purchased your notes on the original issue date at the principal amount and held them to the maturity date, you would lose
approximately 70.588% of your investment (if you purchased your notes at a premium to the principal amount you would lose a correspondingly higher percentage of your investment). If the final price were determined to be 0.000% of the initial
price, you would lose 100.000% of your investment in the notes. In addition, if the final price were determined to be 150.000% of the initial price, the payment at maturity that we would pay on your notes would be capped at the maximum payment
amount, or 126.180% of each $1,000 principal amount of your notes, as shown in the table above. As a result, if you held your notes to the maturity date, you would
not benefit from any increase in the final price of greater than 115.400% of the initial price.
The
following chart shows a
graphical illustration of the hypothetical payment at maturity that we would pay on your notes on the maturity date, if the final price were any of the hypothetical prices shown on the horizontal axis.
The hypothetical payments at maturity in the chart are expressed as percentages of the principal amount of your notes and the hypothetical final prices are expressed as percentages
of the initial price. The chart shows that any hypothetical final price of less than 85.000% (the section left of the 85.000% marker on the horizontal axis) would result in a hypothetical payment at maturity of less than 100.000% of the
principal amount of your notes (the section below the 100.000% marker on the vertical axis) and, accordingly, in a loss of principal to the holder of the notes. The chart also shows that any hypothetical final price of greater than or equal
to
115.400
% (the section right of the
115.400
% marker on the horizontal axis) would result in a
capped return on your investment.
The following examples illustrate the calculation of the payment at maturity based on the key terms and assumptions above. The amounts
below have been rounded for ease of analysis.
|
Example 1—
|
Calculation of the payment at maturity where the percentage change is positive.
|
|
|
|
|
|
Percentage Change:
|
5.00%
|
|
|
|
|
|
|
Payment at Maturity:
|
$1,000.00 + ($1,000.00 x 170.00% x 5.00%) = $1,000.00 + $85.00 = $1,085.00
|
|
|
|
|
|
On a $1,000.00 investment, a 5.00% percentage change results in a payment at maturity of $1,085.00.
|
|
|
|
|
Example 2—
|
Calculation of the payment at maturity where the percentage change is positive and the payment at maturity is subject to the maximum payment
amount.
|
|
|
|
|
|
Percentage Change:
|
50.00%
|
|
|
|
|
|
|
Payment at Maturity:
|
$1,000.00 + ($1,000.00 x 170.00% x 50.00%) = $1,000.00 + $850.00 = $1,850.00. However, the maximum payment amount is $1,261.80 and the payment at
maturity would be $1,261.80.
|
|
|
|
|
|
|
On a $1,000.00 investment, a 50.00% percentage change results in a payment at maturity of $1,261.80.
|
|
|
|
|
Example 3—
|
Calculation of the payment at maturity where the percentage change is negative but is equal to or greater than -15.00%.
|
|
|
|
|
|
Percentage Change:
|
-8.00%
|
|
|
|
|
|
|
Payment at Maturity:
|
$1,000.00 (at maturity, if the percentage change is negative BUT the decrease is not more than the buffer percentage, then the payment at maturity
will equal the principal amount).
|
|
|
|
|
|
|
On a $1,000.00 investment, a -8.00% percentage change results in a payment at maturity of $1,000.00.
|
|
|
|
|
Example 4—
|
Calculation of the payment at maturity where the percentage change is negative and is less than -15.00%.
|
|
|
|
|
|
Percentage Change:
|
-50.00%
|
|
|
|
|
|
|
Payment at Maturity:
|
$1,000.00 + [$1,000.00 x 117.65% x (-50.00% + 15.00%)] = $1,000.00 - $411.76 = $588.24
|
|
|
|
|
|
|
On a $1,000.00 investment, a -50.00% percentage change results in a payment at maturity of approximately $588.24.
Accordingly, if the percentage
change is less than -15.00%
, the Bank will pay you less than the full principal amount, resulting in a percentage loss on your investment
that is equal to the buffer rate
multiplied
by the negative percentage change in excess of the buffer percentage. You may lose up to 100% of your principal amount.
|
Any payment on the notes, including any repayment of principal, is subject to the creditworthiness of the Bank. If
the Bank were to default on its payment obligations, you may not receive any amounts owed to you under the notes and you could lose your entire investment.
The payments at maturity shown above are entirely hypothetical; they are based on, hypothetical prices of the reference asset that may
not be achieved on the valuation date and on assumptions that may prove to be erroneous. The actual market value of your notes on the maturity date or at any other time, including any time you may wish to sell your notes, may bear little relation
to the hypothetical payments at maturity shown above, and these amounts should not be viewed as an indication of the financial return on an investment in the offered notes. The hypothetical payments at maturity on the notes held to the maturity
date in the examples above assume you purchased your notes at their principal amount and have not been adjusted to reflect the actual original issue price you pay for your notes. The return on your investment (whether positive or negative) in your
notes will be affected by the amount you pay for your notes. If you purchase your notes for a price other than the principal amount, the return on your investment will differ from, and may be significantly lower than, the hypothetical returns
suggested by the above examples. Please read “Additional Risks—The price at which the notes may be sold prior to maturity will depend on a number of factors and may be substantially less than the amount for which they were originally purchased” on
page P-23 of this pricing supplement.
Payments on the notes are economically equivalent to the amounts that would be paid on a combination of other
instruments. For example, payments on the notes are economically equivalent to a combination of a non- interest-bearing bond bought by the holder and one or more options entered into between the holder and us (with one or more implicit option
premiums paid over time). The discussion in this paragraph does not modify or affect the terms of the notes or the U.S. federal income tax treatment of the notes, as described elsewhere in this pricing supplement.
|
We cannot predict the actual final price or what the market value of your notes will be on any particular trading day, nor can we
predict the relationship between the price of the reference asset and the market value of your notes at any time prior to the maturity date. The actual amount that you will receive, if any, at maturity and the rate of return on the
offered notes will depend on the actual final price to be determined by the calculation agent as described above. Moreover, the assumptions on which the hypothetical returns are based may turn out to be inaccurate. Consequently, the
amount of cash to be paid in respect of your notes, if any, on the maturity date may be very different from the information reflected in the examples above.
|
An investment in the notes involves significant risks. In addition to the following risks included in this pricing
supplement, we urge you to read “Additional Risk Factors Specific to the Notes” beginning on page PS-6 of the accompanying product prospectus supplement and “Risk Factors” beginning on page S-2 of the accompanying prospectus supplement and page 5
of the accompanying prospectus.
You should understand the risks of investing in the notes and should reach an investment decision only after careful
consideration, with your advisors, of the suitability of the notes in light of your particular financial circumstances and the information set forth in this pricing supplement and the accompanying prospectus, accompanying prospectus supplement and
accompanying product prospectus supplement.
The Bank’s initial estimated value of the notes at the time of pricing (when the terms of your notes were set on the
trade date) is lower than the original issue price of the notes
The Bank’s initial estimated value of the notes is only an estimate. The original issue price of the notes exceeds
the Bank’s initial estimated value. The difference between the original issue price of the notes and the Bank’s initial estimated value reflects costs associated with selling and structuring the notes, as well as hedging its obligations under the
notes with a third party.
Neither the Bank’s nor SCUSA’s estimated value of the notes at any time is determined by reference to credit spreads
or the borrowing rate the Bank would pay for its conventional fixed-rate debt securities
The Bank’s initial estimated value of the notes and SCUSA’s estimated value of the notes at any time are determined
by reference to the Bank’s internal funding rate. The internal funding rate used in the determination of the estimated value of the notes generally represents a discount from the credit spreads for the Bank’s conventional fixed-rate debt securities
and the borrowing rate the Bank would pay for its conventional fixed-rate debt securities. This discount is based on, among other things, the Bank’s view of the funding value of the notes as well as the higher issuance, operational and ongoing
liability management costs of the notes in comparison to those costs for the Bank’s conventional fixed-rate debt. If the interest rate implied by the credit spreads for the Bank’s conventional fixed-rate debt securities, or the borrowing rate the
Bank would pay for its conventional fixed-rate debt securities were to be used, the Bank would expect the economic terms of the notes to be more favorable to you. Consequently, the use of an internal funding rate for the notes increases the
estimated value of the notes at any time and has an adverse effect on the economic terms of the notes.
The Bank’s initial estimated value of the notes does not represent future values of the notes and may differ from
others’ (including SCUSA’s) estimates
The Bank’s initial estimated value of the notes was determined by reference to its internal pricing models when the
terms of the notes were set. These pricing models consider certain factors, such as the Bank’s internal funding rate on the trade date, the expected term of the notes, market conditions and other relevant factors existing at that time, and the
Bank’s assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions (including the pricing models and assumptions used by SCUSA) could provide
valuations for the notes that are different, and perhaps materially lower, from the Bank’s initial estimated value. Therefore, the price at which SCUSA would buy or sell your notes (if SCUSA makes a market, which it is not obligated to do) may be
materially lower than the Bank’s initial estimated value. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect.
The price at which SCUSA would buy or sell your notes (if SCUSA makes a market, which it is not obligated to do) is
based on SCUSA’s estimated value of your notes
SCUSA’s estimated value of the notes is determined by reference to its pricing models and takes into account the
Bank’s internal funding rate. The price at which SCUSA would initially buy or sell your notes in the secondary market (if SCUSA makes a market, which it is not obligated to do) exceeds SCUSA’s estimated value of your notes at the time of pricing.
As agreed by SCUSA and the distribution participants, this excess (i.e., the additional amount described under “Additional Information Regarding Estimated Value of the Notes” above) will decline to zero on a straight line basis over the period
from the trade date through the applicable date set forth under “Additional Information Regarding Estimated Value of the Notes” above. Thereafter, if SCUSA buys or sells your notes 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 notes 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 notes by reference to the Bank’s credit spreads or the borrowing rate the Bank would pay for its conventional fixed-rate debt securities (as opposed to the Bank’s internal funding rate), the price at which
SCUSA would buy or sell your notes (if SCUSA makes a market, which it is not obligated to do) could be significantly lower.
SCUSA’s pricing models consider certain variables, including principally the Bank’s internal funding rate, interest
rates (forecasted, current and historical rates), volatility, price-sensitivity analysis and the time to maturity of the notes. 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 notes in the secondary market, if any, to others may differ, perhaps materially, from the estimated value of your notes determined by reference to SCUSA’s models, taking
into account the Bank’s internal funding rate, due to, among other things, any differences in pricing models or assumptions used by others. See “The price at which the notes may be sold prior to maturity will depend on a number of factors and may
be substantially less than the amount for which they were originally purchased” below.
In addition to the factors discussed above, the value and quoted price of your notes at any time will reflect many
factors and cannot be predicted. If SCUSA makes a market in the notes, the price quoted by SCUSA would reflect any changes in market conditions and other relevant factors, including any deterioration in the Bank’s creditworthiness or perceived
creditworthiness. These changes may adversely affect the value of your notes, including the price you may receive for your notes in any market making transaction. To the extent that SCUSA makes a market in the notes, 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 notes, 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 notes in a secondary market sale.
There is no assurance that SCUSA or any
other party will be willing to purchase your notes at any price and, in this regard, SCUSA is not obligated to make a market in the notes. See “The notes lack liquidity” below.
Risk of loss at maturity
You
may lose your entire investment in the notes. Any payment on the notes at maturity depends on the percentage change of the reference asset. The Bank will only repay you the full principal amount of your notes if the
percentage change is equal to or greater than -15.00%. If the percentage change is less than -15.00%, you will have a loss for each $1,000 principal amount of your notes equal to the
product
of (i) the buffer rate
times
(ii) the
sum
of the percentage change
plus
the buffer percentage
times
(iii) $1,000.
Accordingly, you may lose your entire investment in
the notes if the percentage decline from the initial price to the final price is greater than 15.00%.
The downside market exposure to the reference asset is buffered only at maturity
You should be willing to hold your notes to maturity. If you are able to sell your notes prior to maturity in the secondary market, you may have to
sell them at a loss relative to your initial investment even if the price of the reference asset at such time is equal to or greater than the buffer price.
Your potential payment at maturity is limited by the maximum payment amount
The payment at maturity will not exceed the maximum payment amount. Therefore, if the appreciation of the price of the reference
asset exceeds the cap on appreciation in the maximum payment amount, the notes will provide less opportunity to participate in the appreciation of the reference asset than an investment in a security linked to the price of the reference asset
providing full participation in the appreciation. Accordingly, the return on the notes may be less than the return would be if you made an investment in a security directly linked to the positive performance of the reference asset.
The notes differ from conventional debt instruments
The notes are not conventional notes or debt instruments. The notes do not provide you with
interest payments prior to maturity as a conventional fixed-rate or floating-rate debt security with the same maturity would. The return that you will receive on the notes, which could be negative, may be less than the return you could earn on
other investments. Even if your return is positive, your return may be less than the return you would earn if you bought a conventional senior interest bearing debt security of the Bank.
No interest
The notes do not bear interest and, accordingly, you will not receive any interest payments on the notes.
Your investment is subject to the credit risk of The Bank of Nova Scotia
The notes are senior unsecured debt obligations of the Bank, and are not, either directly or indirectly, an
obligation of any third party. As further described in the accompanying prospectus, accompanying prospectus supplement and accompanying product prospectus supplement, the notes will rank on par with all of the other unsecured and unsubordinated
debt obligations of the Bank, except such obligations as may be preferred by operation of law. Any payment to be made on the notes, including the payment at maturity, depends on the ability of the Bank to satisfy its obligations as they come due.
As a result, the actual and perceived creditworthiness of the Bank may affect the market value of the notes and, in the event the Bank were to default on its obligations, you may not receive the amounts owed to you under the terms of the notes. If
you sell the notes prior to maturity, you may receive substantially less than the principal amount of your notes.
There are potential conflicts of interest between you and the calculation agent
Scotia Capital Inc., the calculation agent, is one of our affiliates. In performing its duties, the economic
interests of the calculation agent are potentially adverse to your interests as an investor in the notes. The calculation agent is under no obligation to consider your interests as a holder of the notes in taking any actions that might affect the
price of the reference asset and the value of, and amount payable on, the notes.
Investors should investigate the reference asset and the reference asset constituent stocks as if making a
direct investment in the reference asset or the reference asset constituent stocks
Investors should conduct their own diligence of the reference asset and reference asset constituent stocks as an
investor would if it were making a direct investment in the reference asset or the reference asset constituent stocks. Neither we nor any of our affiliates have participated in the preparation of any publicly available information or made any
“due diligence” investigation or inquiry with respect to the reference asset or the reference asset constituent stocks. Furthermore, we cannot give any assurance that all events occurring prior to the original issue date have been properly
disclosed. Subsequent disclosure of any such events or the disclosure or failure to disclose material future events concerning the reference asset or the reference asset constituent stocks could affect any payment at maturity. Investors should
not conclude that the sale by the Bank of the notes is any form of investment recommendation by the Bank or any of its affiliates to invest in securities linked to the performance of the reference asset or the reference asset constituent
stocks.
The notes are subject to market risk
The return on the notes is directly linked to the performance of the reference asset and indirectly linked to the
performance of the reference asset constituent stocks, and the extent to which the percentage change is positive or negative. The price of the reference asset can rise or fall sharply due to factors specific to the reference asset and the
reference asset constituent stocks, as well as general market factors, such as general market volatility and prices, interest rates and economic and political conditions.
The participation rate applies only at maturity
You should be willing to hold your notes to maturity. If you are able to sell your notes prior to maturity in the
secondary market, the price you receive will likely not reflect the full economic value of the participation rate or the notes themselves, and the return you realize may be less than the percentage change multiplied by the participation rate even
if such return is positive and less than the maximum payment amount. You may receive the full benefit of the participation rate only if you hold your notes to maturity.
The payment at maturity is not linked to the price of the reference asset at any time other than the valuation date
(except in the case of tax redemptions)
The payment at maturity will be based on the final price. Therefore, for example, if the closing price of the
reference asset declined substantially as of the valuation date compared to the trade date, the payment at maturity may be significantly less than it would otherwise have been had the payment at maturity been linked to the closing prices of the
reference asset prior to the valuation date. Although the actual price of the reference asset at maturity or at other times during the term of the notes may be higher than the final price, you will not benefit from the closing prices of the
reference asset at any time other than the valuation date (except in the case of tax redemptions as described further in the accompanying product prospectus supplement).
If the prices of the reference asset or the reference asset constituent stocks change, the market value of your notes
may not change in the same manner
Your notes may trade quite differently from the performance of the reference asset or the reference asset
constituent stocks. Changes in the prices of the reference asset or the reference asset constituent stocks may not result in a comparable change in the market value of your notes. We discuss some of the reasons for this disparity under “—The
price at which the notes may be sold prior to maturity will depend on a number of factors and may be substantially less than the amount for which they were originally purchased” below.
The return on your notes will not reflect any dividends paid on the reference asset or the reference
asset constituent stocks
The return on your notes will not reflect the return you would realize if you actually owned the reference asset and
received the distributions paid on the shares of the reference asset.
You will not receive any dividends that may be paid on any of the reference
asset constituent stocks by their respective issuers (the “reference asset constituent stock issuers”) or the shares of the reference asset.
See
“—Holding the notes is not the same as holding shares of the reference asset or the reference asset constituent stocks” below for additional information.
Holding the notes is not the same as holding shares of the reference asset or the reference asset constituent
stocks
Holding the notes is not the same as holding shares of the reference asset or the reference asset constituent
stocks. As a holder of the notes, you will not be entitled to the voting rights or rights to receive dividends or other distributions or other rights that holders of shares of the reference asset or the reference asset constituent stocks would
enjoy. Further, the return on your notes may not reflect the return you would realize if you actually owned shares of the reference asset or the reference asset constituent stocks. For instance, you will not benefit from any positive percentage
change of the reference asset in excess of the cap on appreciation set by the maximum payment amount.
There is no assurance that the investment view implicit in the notes will be successful
It is impossible to predict with certainty whether and the extent to which the price of the reference asset will
rise or fall. There can be no assurance that the price of the reference asset will rise above the initial price or that the percentage decline from the initial price to the final price will not be greater than the buffer percentage. The final
price may be influenced by complex and interrelated political, economic, financial and other factors that affect the price of the reference asset constituent stocks. You should be willing to accept the risks of the price performance of equity
securities in general and the reference asset constituent stocks in particular, foreign exchange markets in general and the risk of losing some or all of your initial investment.
Furthermore, we cannot give you any assurance that the future performance of the reference asset or the reference
asset constituent stocks will result in your receiving an amount greater than or equal to the principal amount of your notes. Certain periods of historical performance of the reference asset or the reference asset constituent stocks would have
resulted in you receiving less than the principal amount of your notes if you had owned notes with terms similar to these notes in the past. See “Information Regarding The Reference Asset” in this pricing supplement for further information
regarding the historical performance of the reference asset.
There is no assurance as to the performance of the reference asset or the reference asset constituent stocks; past
performance of the reference asset or the reference asset constituent stocks should not be taken as an indication of the future performance of the reference asset or the reference asset constituent stocks
The notes are linked directly to the price of the reference asset and indirectly to the prices of the reference
asset constituent stocks, which are speculative and involve a high degree of risk
.
None of the Bank, the calculation agent, or SCUSA or any other
affiliate of the Bank gives any assurance as to the performance of the reference asset or the reference asset constituent stocks
.
Investors should
not conclude that the sale by the Bank of the notes is an investment recommendation by it or by any of the other entities mentioned above to invest in securities linked to the performance of the reference asset or the reference asset constituent
stocks
.
Investors should consult with their own financial advisors as to whether an investment in the notes is appropriate for them
.
Past performance of the reference asset and the reference asset constituent stocks should not be taken as a guarantee or assurance of the future
performance of the reference asset or the reference asset constituent stocks, and it is impossible to predict whether the price of the reference asset or the reference asset constituent stocks will rise or fall during the term of the notes.
We may sell an additional aggregate principal amount of the notes at a different issue price
We may decide to sell an additional aggregate principal amount of the notes subsequent to the date of this pricing
supplement. The issue price of the notes in the subsequent sale may differ substantially (higher or lower) from the original issue price you paid as provided on the cover of this pricing supplement.
Changes affecting the reference asset index could have an adverse effect on the value of the notes
The sponsor of the reference asset
index owns the reference asset index and is responsible for the design and maintenance of the reference asset index. The policies of the sponsor concerning the calculation of the reference asset index, including decisions regarding the addition,
deletion or substitution of the equity securities included in the reference asset index, could affect the level of the reference asset index and, consequently, could affect the market price of shares of the reference asset and, therefore, the
amount payable on the notes and their market value. The sponsor may discontinue or suspend calculation or dissemination of the reference asset index. Any such actions could have a material adverse effect on the value of, and any amount payable on,
the notes.
The Bank cannot control actions by the sponsor of the reference asset index and the sponsor has no obligation to
consider your interests
The Bank and its affiliates are not affiliated with the sponsor of the reference asset index and have no ability to control or
predict its actions,
including any errors in or discontinuation of public disclosure regarding methods or policies relating to the calculation of
the
reference asset index. The sponsor is not involved in the notes offering in any way and has no obligation to consider your
interest as an owner of the notes in taking any actions that might negatively affect the market value of your notes.
The Bank cannot control actions by the investment advisor of the reference asset that may adjust the reference asset
in a way that could adversely affect any payment on the notes and their market value, and the investment advisor has no obligation to consider your interests
The investment advisor may from time to time be called upon to make certain policy decisions or judgments with
respect to the implementation of its policies concerning the calculation of the net asset value of the reference asset, additions, deletions or substitutions of the reference asset constituent stocks and the manner in which changes affecting the
reference asset index are reflected in the reference asset that could affect the market price of the shares of the reference asset, and therefore, the amount payable on your notes on the maturity date. The amount payable on your notes and their
market value could also be affected if the investment advisor changes these policies, for example, by changing the manner in which it calculates the net asset value of the reference asset, or if the investment advisor discontinues or suspends
calculation or publication of the net asset value of the reference asset, in which case it may become difficult or inappropriate to determine the market value of your notes. If events such as these occur, the calculation agent may determine the
closing price of the reference asset on the valuation date, and thus any amount payable on the maturity date, in a manner it considers appropriate.
There are risks associated with the reference asset
Although the reference asset's shares are listed for trading on NYSE Arca, Inc. (the “NYSE Arca”) and a number of
similar products have been traded on NYSE Arca or other securities exchanges for varying periods of time, there is no assurance that an active trading market will continue for the shares of the reference asset or that there will be liquidity in the
trading market.
In addition, the reference asset is subject to management risk, which is the risk that the investment advisor’s
investment strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. For example, the investment advisor may select
up
to 10%
of the reference asset's assets to be invested in shares of equity securities that are not included in the reference asset index, and other assets, such as futures contracts, options and swaps, as well as cash and cash equivalents,
including shares of money market funds affiliated with the investment advisor. The reference asset is also not actively managed and may be affected by a general decline in market segments relating to the reference asset index. The investment
advisor invests in securities included in, or representative of, the reference asset index regardless of their investment merits. The investment advisor does not attempt to take defensive positions in declining markets.
In addition, the reference asset is subject to custody risk, which refers to the risks in the process of clearing
and settling trades and to the holding of securities by local banks, agent and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle, and governments or trade groups may compel
local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country’s securities market is, the greater the likelihood of custody problems.
Further, under continuous listing standards adopted by NYSE Arca, the reference asset will be required to confirm on
an ongoing basis that the components of the reference asset index satisfy the applicable listing requirements. In the event that its reference asset index does not comply with the applicable listing requirements, the reference asset would be
required to rectify such non-compliance by requesting that the sponsor of the reference asset index modify such reference asset index, adopting a new reference asset index or obtain relief from the SEC. There can be no assurance that such sponsor
would so modify the reference asset index or that relief would be obtained from the SEC and, therefore, non-compliance with the continuous listing standards may result in the reference asset being delisted by NYSE Arca.
The reference asset and the reference asset index are different and the performance of the reference asset may not
correlate with the performance of the reference asset index
The reference asset uses a representative sampling strategy (as more fully described under “Information Regarding
the Reference Asset”) to attempt to track the performance of the reference asset index. The reference asset may not hold all or substantially all of the equity securities included in the reference asset index and may hold securities or assets not
included in the reference asset index. Therefore, while the performance of the reference asset is generally linked to the performance of the reference asset index, the performance of the reference asset is also linked in part to shares of equity
securities not included in the reference asset index and to the performance of other assets, such as futures contracts, options and swaps, as well as cash and cash equivalents, including shares of money market funds affiliated with the investment
advisor.
Imperfect correlation between the reference asset's portfolio securities and those in the reference asset index,
rounding of prices, changes to the reference asset index and regulatory requirements may cause tracking error, which is the divergence of the reference asset's performance from that of the reference asset index.
In addition, the performance of the reference asset will reflect additional transaction costs and fees that are
not included in the calculation of the reference asset index and this may increase the tracking error of the reference asset. Also, corporate actions with respect to the sample of equity securities (such as mergers and spin-offs) may impact the
performance differential between the reference asset and the reference asset index. Finally, because the shares of the reference asset are traded on NYSE Arca and are subject to market supply and investor demand, the market value of one share of
the reference asset may differ from the net asset value per share of the reference asset.
For all of the foregoing reasons, the performance of the reference asset may not correlate with the performance of
the reference asset index. Consequently, the return on the notes will not be the same as investing directly in the reference asset or in the reference asset constituent stocks or in the reference asset index or in the securities comprising the
reference asset index, and will not be the same as investing in a debt security with payments linked to the performance of the reference asset index.
Investment in the offered notes is subject to risks associated with foreign securities markets
The value of your notes is linked to a reference asset that holds stocks traded in the equity markets of emerging
market countries. Investments linked to the value of foreign equity securities involve particular risks. Any foreign securities market may be less liquid, more volatile and affected by global or domestic market developments in a different way than
are the U.S. securities market or other foreign securities markets. Both government intervention in a foreign securities market, either directly or indirectly, and cross-shareholdings in foreign companies, may affect trading prices and volumes in
that market. Also, there is generally less publicly available information about foreign companies than about those U.S. companies that are subject to the reporting requirements of the SEC. Further, foreign companies are subject to accounting,
auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies.
The prices of securities in a foreign country are subject to political, economic, financial and social factors
that are unique to such foreign country’s geographical region. These factors include: recent changes, or the possibility of future changes, in the applicable foreign government’s economic and fiscal policies; the possible implementation of, or
changes in, currency exchange laws or other laws or restrictions applicable to foreign companies or investments in foreign equity securities; fluctuations, or the possibility of fluctuations, in currency exchange rates; and the possibility of
outbreaks of hostility, political instability, natural disaster or adverse public health developments. The United Kingdom has voted to leave the European Union (popularly known as “Brexit”). The effect of Brexit is uncertain, and Brexit has and
may continue to contribute to volatility in the prices of securities of companies located in Europe and currency exchange rates, including the valuation of the euro and British pound in particular. Any one of these factors, or the combination of
more than one of these factors, could negatively affect such foreign securities market and the price of securities therein. Further, geographical regions may react to global factors in different ways, which may cause the prices of securities in a
foreign securities market to fluctuate in a way that differs from those of securities in the U.S. securities market or other foreign securities markets. Foreign economies may also differ from the U.S. economy in important respects, including
growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency, which may have a positive or negative effect on foreign securities prices.
Because foreign exchanges may be open on days when the reference asset is not traded, the value of the reference
asset constituent stocks may change on days when shareholders will not be able to purchase or sell shares of the reference asset.
The countries whose markets are represented by the reference asset include Argentina, Brazil, Chile, China,
Colombia, the Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and the United Arab Emirates.
Countries with emerging markets may have relatively unstable governments, may present the risks of nationalization
of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets, and may have less protection of property rights than more developed countries. The economies of countries with emerging markets may be based on only
a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. Local securities markets may trade a small number of securities and may be unable
to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible at times.
Your investment in the notes will be subject to foreign currency exchange rate risk
The reference asset constituent stocks are denominated in non-U.S. dollar currencies. The value of the reference
asset constituent stocks that are denominated in non-U.S. dollar currencies will be adjusted to reflect their U.S. dollar value by converting the price of such reference asset constituent stocks from the non-U.S. dollar currency to U.S. dollars.
Consequently, if the value of the U.S. dollar strengthens against the non-U.S. dollar currency in which a reference asset constituent stock is denominated, the price of
the reference asset may not increase even if the non-dollar value of the reference asset constituent stock increases.
Foreign currency exchange rates vary over time, and may vary considerably during the term of your notes. Changes in
a particular exchange rate result from the interaction of many factors directly or indirectly affecting economic and political conditions. Of particular importance are:
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existing and expected rates of inflation;
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existing and expected interest rate levels;
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the balance of payments among countries;
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the extent of government surpluses or deficits in the relevant foreign country and the United States; and
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other financial, economic, military and political factors.
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All of these factors are, in turn, sensitive to the monetary, fiscal and trade policies pursued by the governments
of the relevant foreign countries and the United States and other countries important to international trade and finance.
The market price of the notes and price of the reference asset could also be adversely affected by delays in, or
refusals to grant, any required governmental approval for conversions of a local currency and remittances abroad or other de facto restrictions on the repatriation of U.S. dollars.
It has been reported that the U.K. Financial Conduct Authority and regulators from other countries are in the
process of investigating the potential manipulation of published currency exchange rates. If such manipulation has occurred or is continuing, certain published exchange rates may have been, or may be in the future, artificially lower (or higher)
than they would otherwise have been. Any such manipulation could have an adverse impact on the value of, and any amount payable on, your notes and the trading market for your notes. In addition, we cannot predict whether any changes or reforms
affecting the determination or publication of exchange rates or the supervision of currency trading will be implemented in connection with these investigations. Any such changes or reforms could also adversely impact your notes.
Time zone differences between the cities where the reference asset constituent stocks and the reference asset trade
may create discrepancies in trading prices
As a result of the time zone difference between the cities where the reference asset constituent stocks trade and
where the shares of the reference asset trade, there may be discrepancies between the values of the reference asset constituent stocks and the market value of the notes. In addition, there may be periods when the foreign securities markets are
closed for trading (for example, during holidays in a country other than the United States) that may result in the values of the reference asset constituent stocks remaining unchanged for multiple trading days in the city where the shares of the
reference asset trade. Conversely, there may be periods in which the applicable foreign securities markets are open, but the securities market on which the reference asset trades is closed.
If you purchase your notes at a premium to the principal amount, the return on your investment will be lower than
the return on notes purchased at the principal amount and the impact of certain key terms of the notes will be negatively affected
The payment at maturity will not be adjusted based on the original issue price you pay for the notes. If you purchase notes at a price that differs from the principal amount of the notes, then the return on your investment in such notes held to the
maturity date will differ from, and may be substantially less than, the return on notes purchased at the principal amount. If you purchase your notes at a premium to the principal amount and hold them to the maturity date, the return on your
investment in the notes will be lower than it would have been had you purchased the notes at the principal amount or at a discount to the principal amount. In addition, the impact of the maximum payment amount and the buffer price on the return on
your investment will depend upon the price you pay for your notes relative to the principal amount. For example, if you purchase your notes at a premium to the principal amount, the maximum payment amount will only permit a lower positive return on
your investment in the notes than would have been the case for notes purchased at the principal amount or a discount to the principal amount. Similarly, the buffer price, while still providing some protection for the return on the notes, will allow
a greater percentage decrease in your investment in the notes than would have been the case for notes purchased at the principal amount or a discount to the principal amount.
The price at which the notes may be sold prior to maturity will depend on a number of factors and may be
substantially less than the amount for which they were originally purchased
The price at which the notes 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 reference asset over the full term of the notes, (ii)
volatility of the price of the reference asset and the market’s perception of future volatility of the price of the reference asset, (iii) changes in interest rates generally, (iv) any actual or anticipated changes in our credit ratings or credit
spreads and (v) time remaining to maturity. In particular, because the provisions of the notes relating to the payment at maturity and the maximum payment amount behave like options, the value of the notes will vary in ways which are non-linear
and may not be intuitive.
Depending on the actual or anticipated price of the reference asset and other relevant factors, the market value
of the notes may decrease and you may receive substantially less than 100% of the issue price if you sell your notes prior to maturity.
See “Additional Risk Factors Specific to the Notes—The Market Value of Your Notes May Be Influenced by Many
Unpredictable Factors” beginning on page PS-7 of the accompanying product prospectus supplement.
The notes lack liquidity
The notes will not be listed on any securities exchange or automated quotation system. Therefore, there may be
little or no secondary market for the notes. SCUSA and any other affiliates of the Bank may, but are not obligated to, make a market in the notes. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or
sell the notes easily. Because we do not expect that other broker-dealers will participate significantly in the secondary market for the notes, the price at which you may be able to trade your notes is likely to depend on the price, if any, at
which SCUSA is willing to purchase the notes from you. If at any time SCUSA does not make a market in the notes, it is likely that there would be no secondary market for the notes. Accordingly, you should be willing to hold your notes to
maturity.
Hedging activities by the Bank and SCUSA may negatively impact investors in the notes and cause our respective
interests and those of our clients and counterparties to be contrary to those of investors in the notes
The Bank, SCUSA or one or more of our other affiliates has hedged or expects to hedge the obligations under the
notes by purchasing futures and/or other instruments linked to the reference asset. The Bank, 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 reference asset and/or one or more of the reference asset 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 valuation date.
The Bank, SCUSA or one or more of our other affiliates may also enter into, adjust and unwind hedging transactions
relating to other equity-linked notes whose returns are linked to changes in the level or price of the reference asset or the reference asset constituent stocks. Any of these hedging activities may adversely affect the price of the reference
asset—directly or indirectly by affecting the price of the reference asset constituent stocks—and therefore the market value of the notes and the amount you will receive, if any, on the notes. Furthermore, if the dealer from which you purchase
notes is to conduct hedging activities for us in connection with the notes, that dealer may profit in connection with such hedging activities and
such profit, if any, will be in addition to the compensation that the dealer receives for the sale of the notes to
you. You should be aware that the potential to earn fees in connection with hedging activities may create a further incentive for the dealer to sell the notes to you in addition to the compensation they would receive for the sale of the notes. In
addition, you should expect that these transactions will cause the Bank, SCUSA or any of our other affiliates, or our respective clients or counterparties, to have economic interests and incentives that do not align with, and that may be directly
contrary to, those of an investor in the notes. None of the Bank, 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 notes, and the Bank, SCUSA or any of our other affiliates may receive substantial returns with respect to these hedging activities while the value of the notes may decline.
The Bank, 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 issuers of the reference asset constituent stocks and the market activities by the Bank, SCUSA or our other affiliates for our own account or for our clients could
negatively impact investors in the notes
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 notes or other securities that we have issued), the reference asset constituent stocks,
derivatives, loans, credit default swaps, indices, baskets and other financial instruments and products for our own 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 reference asset and/or the value of the notes. You should assume that we or they will, at present or in the future, provide such services
or otherwise engage in transactions with, among others, us and the issuers of the reference asset constituent stocks, 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 reference asset and the market for your notes, 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 notes.
You should expect that we, SCUSA and our other affiliates, in providing these services, engaging in such
transactions, or acting for our own accounts, may take actions that have direct or indirect effects on the notes or other securities that we may issue, the reference asset constituent stocks or 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 notes. In addition, in connection with these activities, certain personnel within the Bank, 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 notes.
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 notes or other securities that we may issue, the reference asset constituent stocks or other securities or instruments similar to or linked to the
foregoing. Investors in the notes should expect that the Bank, SCUSA and our other affiliates offer securities, financial instruments, and other products that may compete with the notes for liquidity or otherwise.
Other investors in the notes may not have the same interests as you
The interests of other investors may, in some circumstances, be adverse to your interests. Other investors may make requests or recommendations to us or SCUSA regarding the establishment of transactions on terms that are adverse to your interests,
and investors in the notes are not required to take into account the interests of any other investor in exercising remedies, voting or other rights in their capacity as noteholders. Further, other investors may enter into market transactions with
respect to the notes, assets that are the same or similar to the notes, assets referenced by the notes (such as stocks or stock indices) or other similar assets or securities which may adversely impact the market for or value of your notes. For
example, an investor could take a short position (directly or indirectly through derivative transactions) in respect of securities similar to your notes or in respect of the reference asset or the reference asset constituent stocks.
The calculation agent can postpone the valuation date for the notes if a market disruption event with respect to the
reference asset occurs
If the calculation agent determines, in its sole discretion, that, on a day that would otherwise be the valuation
date, a market disruption event with respect to the reference asset has occurred or is continuing for the reference asset, the valuation date will be postponed until the first following trading day on which no market disruption event occurs or is
continuing, although the valuation date will not be postponed by more than seven scheduled trading days. Moreover, if the valuation date is postponed to the last possible day, but a market disruption event occurs or is continuing on that day, that
day will nevertheless be the valuation date, and the calculation agent will determine the applicable final price that must be used to determine the payment at maturity. See “General Terms of the Notes—Unavailability of the Closing Price of the
Reference Asset on a Valuation Date” beginning on page PS-26 and “General Terms of the Notes—Market Disruption Events” beginning on page PS-27 in the accompanying product prospectus supplement.
The calculation agent can make anti-dilution and reorganization adjustments that affect the payment at maturity
For anti-dilution and reorganization events affecting the reference asset, the calculation agent may make
adjustments to the initial price and/or the final price, as applicable, and any other term of the notes. However, the calculation agent will not make an adjustment in response to every corporate event that could affect the reference asset. If an
event occurs that does not require the calculation agent to make an adjustment, the value of the notes 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 prospectus
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 notes and your payment at maturity,
if any. See “General Terms of the Notes — Anti-Dilution Adjustments Relating to Equity Securities or a Reference Asset that is an ETF” in the accompanying product prospectus supplement.
Following a de-listing, liquidation or termination of the ETF, the payment at maturity may be based on a share of
another ETF or calculated by a computation methodology that the calculation agent determines will as closely as reasonably possible replicate the ETF. See “General Terms of the Notes — Adjustments to an ETF” in the accompanying product prospectus
supplement.
There is no affiliation between the issuers of any reference asset constituent stock, the sponsor or the investment
advisor and us or SCUSA
The Bank, SCUSA and our other affiliates may currently, or from time to time in the future, engage in business with
the issuers of the reference asset constituent stocks, the sponsor of the reference asset index or the investment advisor. Neither we nor any of our affiliates have participated in the preparation of any publicly available information or made any
“due diligence” investigation or inquiry with respect to the reference asset or the reference asset constituent stocks. Before investing in the notes you should make your own investigation into the reference asset and the issuers of the reference
asset constituent stocks. See the section below entitled “Information Regarding the Reference Asset” in this pricing supplement for additional information about the reference asset.
Uncertain tax treatment
Significant aspects of the tax treatment of the notes are uncertain. You should consult your tax advisor about your
own tax situation. See “Certain Canadian Income Tax Consequences” and “Material U.S. Federal Income Tax Considerations” in this pricing supplement.
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INFORMATION REGARDING THE REFERENCE ASSET
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The iShares
®
MSCI Emerging Markets ETF
The shares of the iShares
®
MSCI Emerging Markets
ETF (the “reference asset”) are issued by iShares, Inc. (the “company”). The company was organized as a Maryland corporation on September 1, 1994 and is authorized to have multiple series or portfolios, of which the reference asset is one. On July
1, 2013, the iShares
®
MSCI Emerging Markets Index Fund changed its name to the iShares
®
MSCI Emerging Markets ETF.
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The reference asset is a tracking ETF that seeks investment results which correspond generally to the price and yield performance, before fees and expenses, of The MSCI
®
Emerging Markets Index
SM
(the “reference asset index”).
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The index it tracks is the USD net total return version of the reference asset index (ticker NDUEEGF).
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Investment Advisor: BlackRock Fund Advisors (“BFA”).
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The reference asset’s shares trade on the NYSE Arca under the ticker symbol “EEM”.
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The company’s SEC CIK Number is 0000930667.
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The reference asset’s inception date was April 7, 2003.
The
reference asset’s shares are issued or redeemed only in creation units of 450,000 shares or multiples thereof.
The reference asset index was launched on December 31, 1987 with an initial level of 100.
We obtained the following fee information from the iShares
®
website without independent verification. The
reference asset investment advisor is entitled to receive a management fee from the reference asset based on the reference asset’s allocable portion of an aggregate management fee based on the aggregate average daily net assets of the reference
asset and a set of other specified iShares
®
funds (the “funds”) as follows: 0.75% per annum of the aggregate net assets of the funds less than or equal to U.S. $14.0 billion,
plus
0.68% per annum of the aggregate net assets of the funds on amounts in excess of U.S. $14.0 billion up to and including U.S. $28.0 billion,
plus
0.61% per annum of the aggregate net assets of the funds on amounts in excess of U.S. $28.0 billion up to and including U.S. $42.0 billion,
plus
0.54% per annum of the aggregate net assets of the funds on amounts in excess of U.S. $42.0 billion up to and including U.S. $56.0 billion,
plus
0.47% per annum of the aggregate net assets of the funds on amounts in excess of U.S. $56.0 billion up to and including U.S. $70.0 billion,
plus
0.41% per annum of the aggregate net assets of the funds on amounts in excess of U.S. $70.0 billion up to and including U.S. $84.0 billion,
plus
0.35% per annum of the aggregate net assets of the funds in excess of U.S. $84.0 billion. As of March 31, 2019, the aggregate expense ratio of
the reference asset was 0.67% per annum.
The investment advisory agreement of the reference asset provides that BFA will pay all operating expenses of the
reference asset, except interest expenses, taxes, brokerage expenses, future distribution fees or expenses, and extraordinary expenses. The reference asset may also pay “Acquired Fund Fees and Expenses”. Acquired Fund Fees and Expenses reflect
the reference asset’s pro rata share of the fees and expenses incurred by investing in other investment companies.
For additional information regarding the company or BFA, please consult the reports (including the Semi-Annual Report to Shareholders on Form N-CSRS dated
February 28, 2019) and other information the company files with the SEC. In addition, information regarding the reference asset, including its top portfolio holdings, may be obtained from other sources including, but not limited to, press
releases, newspaper articles, other publicly available documents and the iShares
®
website at us.ishares.com/product_info/fund/overview/ EEM.htm. We are not incorporating by reference the website, the sources listed above or any
material they include in this pricing supplement.
Investment Objective
The reference asset seeks to track the investment results, before fees and expenses, of the
reference asset index. The reference asset’s investment objective may be changed without shareholder approval.