Preliminary
Terms
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Issuer
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The Bank of Nova Scotia
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Issue
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Senior Note Program, Series A
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Agents
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Scotia Capital (USA) Inc. (“SCUSA”) and UBS Financial Services Inc. (“UBS”). See “Supplemental Plan of Distribution (Conflicts of Interest); Secondary Markets (if any)” herein for additional information.
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Principal Amount
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$10 per Note
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Term
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Approximately 2 years, unless subject to an automatic call. In the event that we make any change to the expected trade date and settlement date, the calculation agent may adjust the observation dates (including the final valuation date), as well as the related coupon payment dates (including the maturity date) to ensure that the stated term of the Notes remains the same.
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Underlying
Asset
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The S&P 500® Index
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Contingent Coupon and Contingent Coupon Rate
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If the closing level of the underlying asset is equal
to or greater than the coupon barrier on any observation date (including the final valuation date), BNS will pay you the contingent
coupon applicable to such observation date on the related coupon payment date.
If the closing level of the underlying asset is less than
the coupon barrier on any observation date (including the final valuation date), the contingent coupon applicable to such observation
date will not accrue or be payable and BNS will not make any payment to you on the related coupon payment date.
The contingent coupon will be a fixed amount based upon equal
periodic installments at a per annum rate (the “contingent coupon rate”) and will be set on the trade date. The table below
sets forth the minimum contingent coupon rate and contingent coupon for each Note that would be applicable to each observation date on
which the closing level of the underlying asset is equal to or greater than the coupon barrier. The actual contingent coupon rate and
contingent coupon will be set on the trade date.
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Contingent Coupon Rate
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At least 8.00%
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Contingent Coupon
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At least $0.20
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Contingent coupons on the Notes are not guaranteed. BNS will not pay you the contingent coupon for any observation date on which the closing level of the underlying asset is less than the coupon barrier.
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Automatic Call Feature
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BNS will automatically call the Notes if the closing level
of the underlying asset on any observation date (quarterly, callable after 6 months) prior to the final valuation date is equal to or
greater than the initial level.
If the Notes are subject to an automatic call, BNS will pay
you on the corresponding coupon payment date (which will be the “call settlement date”) a cash payment per Note equal to your
principal amount plus the contingent coupon otherwise due on such date (the “call settlement amount”). Following an automatic
call, no further payments will be made on the Notes.
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Payment at Maturity (per Note)
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If the Notes are not subject to an automatic call and
the final level is equal to or greater than the downside threshold, BNS will pay you a cash payment equal to:
Principal Amount of $10
If the Notes are not subject to an automatic call and
the final level is less than the downside threshold, BNS will pay you a cash payment that is less than the principal amount, if anything,
equal to:
$10 x (1 + Underlying Return)
In this case, you will suffer a percentage loss on
your principal amount equal to the underlying return and, in extreme situations, you could lose your entire investment in the Notes.
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Underlying Return
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The quotient, expressed as a percentage, of the following
formula:
Final Level – Initial Level
Initial Level
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Downside Threshold(1)
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A specified level of the underlying asset that is less than the initial level, equal to a percentage of the initial level, as indicated on the cover hereof.
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Coupon Barrier(1)
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A specified level of the underlying asset that is less than the initial level, equal to a percentage of the initial level, as indicated on the cover hereof.
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Initial Level(1)
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The closing level of the underlying asset on the trade date.
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Final Level(1)
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The closing level of the underlying asset on the final valuation date.
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Trading Day
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As specified in the product prospectus supplement under “General Terms of the Notes — Special Calculation Provisions — Trading Day”.
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Tax Redemption
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Notwithstanding anything to the contrary in the accompanying product prospectus supplement, the provision set forth under “General Terms of the Notes — Payment of Additional Amounts” and “General Terms of the Notes — Tax Redemption” shall not apply to the Notes.
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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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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-15 in the accompanying product prospectus supplement, as modified by this pricing supplement, and for purposes of the foregoing, references herein to “underlying asset”, “underlying constituents”, “underlying return”, “downside threshold” and “observation dates” mean “reference asset”, “reference asset constituents”, “percentage change”, “barrier level” and “valuation dates”, respectively, each as defined in the accompanying product prospectus supplement. In addition to those terms, the following two sentences are also so incorporated into the master note: BNS confirms that it fully understands and is able to calculate the effective annual rate of interest applicable to the Notes based on the methodology for calculating per annum rates provided for in the Notes. BNS irrevocably agrees not to plead or assert Section 4 of the Interest Act (Canada), whether by way of defense or otherwise, in any proceeding relating to the Notes.
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(1) As determined by the calculation agent and
as may be adjusted as described under “General Terms of the Notes — Unavailability of the Level of the Reference Asset on
a Valuation Date”, as described in the accompanying product prospectus supplement.
Investment
Timeline
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Trade Date
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The initial level of the underlying asset is observed and the final terms of the Notes are set.
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Observation Dates (quarterly, callable after 6 months)
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If the closing level of the underlying asset is equal to
or greater than the coupon barrier on any observation date (including the final valuation date), BNS will pay you a contingent coupon
on the applicable coupon payment date.
The Notes will be subject to an automatic call if the closing
level of the underlying asset on any observation date (quarterly, callable after 6 months) prior to the final valuation date is equal
to or greater than the initial level.
If the Notes are subject to an automatic
call, BNS will pay you a cash payment per Note on the call settlement date equal to $10 plus the contingent coupon otherwise due on
such date. Following an automatic call, no further payments will be made on the Notes.
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Maturity Date
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The final level is observed on the final valuation date and
the underlying return of the underlying asset is calculated.
If the Notes are not subject to an automatic call and
the final level is equal to or greater than the downside threshold, BNS will pay you a cash payment per Note at maturity equal to:
Principal Amount of $10
If the Notes are not subject to an automatic call and
the final level is less than the downside threshold, BNS will pay you a cash payment per Note at maturity that is less than the principal
amount, if anything, equal to:
$10 x (1 + Underlying Return)
In this case, you will suffer a percentage loss on
your principal amount equal to the underlying return and, in extreme situations, you could lose your entire investment in the Notes.
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Investing in the Notes involves significant risks. You
may lose a significant portion or all of your investment in the Notes. Any payment on the Notes, including any repayment of principal,
is subject to the creditworthiness of BNS. If BNS were to default on its payment obligations, you may not receive any amounts owed to
you under the Notes and you could lose your entire investment.
If the Notes are not subject to an automatic call, you
may lose a significant portion or all of your investment. Specifically, if the Notes are not subject to an automatic call and the final
level is less than the downside threshold, you will lose a percentage of your principal amount equal to the underlying return and, in
extreme situations, you could lose your entire investment in the Notes.
Observation
Dates(1)(2), Coupon Payment Dates(1)(2)(3) and Call Settlement Dates(1)(2)(3)
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Observation Dates
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Coupon
Payment Dates
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Observation Dates
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Coupon
Payment Dates
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October 20, 2021*
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October 22, 2021*
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October 20, 2022
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October 24, 2022
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January 20, 2022*
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January 24, 2022
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January 20, 2023
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January 24, 2023
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April 20, 2022
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April 22, 2022
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April 20, 2023
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April 24, 2023
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July 20, 2022
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July 22, 2022
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Final Valuation Date
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Maturity Date
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* The Notes are not callable
until the first potential call settlement date, which is January 24, 2022.
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(1)
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Subject to the market disruption event provisions set forth under “General Terms of the Notes—Unavailability
of the Level of the Reference Asset on a Valuation Date” and “General Terms of the Notes—Market Disruption Events”
in the accompanying product prospectus supplement.
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(2)
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If you are able to sell your Notes in the secondary market on an observation date, the purchaser of the
Notes will be deemed to be the record holder on the applicable record date and therefore you will not be entitled to any contingent coupon
paid on the corresponding coupon payment date. If an observation date listed above is not a trading day, such date will be the next following
trading day. If an observation date is postponed, the corresponding payment date for the Notes will also be postponed to maintain the
same number of business days between such dates as existed prior to such postponement(s).
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(3)
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Two business days following each observation date (as any such date may be postponed with respect to the
underlying asset), except that the coupon payment date for the final valuation date is the maturity date. If a coupon payment date or
call settlement date is not a business day, such date will be the next following business day.
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Key
Risks
An investment in the offering of the Notes involves significant
risks. Investing in the Notes is not equivalent to a hypothetical investment in the underlying asset or underlying constituents. Some
of the key risks that apply to the Notes are summarized below, but we urge you to read the more detailed explanation of risks relating
to the Notes under “Additional Risk Factors Specific to the Notes” of the accompanying product prospectus supplement and “Risk
Factors” of the accompanying prospectus supplement and of the accompanying prospectus. We also urge you to consult your investment,
legal, tax, accounting and other advisors concerning an investment in the Notes in light of your particular circumstances.
Risks Relating to Return Characteristics
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Risk of loss at maturity — The Notes differ from ordinary debt securities in that BNS will
not necessarily make periodic coupon payments or repay the principal amount of the Notes at maturity. If the Notes are not subject to
an automatic call and the final level is less than the downside threshold, you will lose a percentage of your principal amount equal to
the underlying return and, in extreme situations, you could lose your entire investment in the Notes.
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The contingent repayment of principal applies only at maturity — You should be willing to
hold your Notes to an automatic call or maturity. If you are able to sell your Notes prior to an automatic call or maturity in the secondary
market, you may have to sell them at a loss relative to your investment even if the level of the underlying asset is equal to or greater
than the downside threshold. All payments on the Notes are subject to the creditworthiness of BNS.
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You may not receive any contingent coupons with respect to your Notes — BNS will not necessarily
make periodic coupon payments on the Notes. BNS will pay a contingent coupon for each observation date on which the closing level of the
underlying asset is equal to or greater than the coupon barrier. If the closing level of the underlying asset is less than the coupon
barrier on any observation date, BNS will not pay you the contingent coupon applicable to such observation date. If the closing level
of the underlying asset is less than the coupon barrier on each of the observation dates, BNS will not pay you any contingent coupons
during the term of, and you will not receive a positive return on, your Notes. Generally, this non-payment of the contingent coupon coincides
with a period of greater risk of principal loss on your Notes.
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Your potential return on the Notes is limited to any contingent coupons and you will not participate
in any appreciation of the underlying asset or underlying constituents — The return potential of the Notes is limited to the
pre-specified contingent coupon rate, regardless of any appreciation of the underlying asset. In addition, your return on the Notes will
vary based on the number of observation dates, if any, on which the requirements of the contingent coupon have been met prior to maturity
or an automatic call. Further, if the Notes are subject to an automatic call, you will not receive any contingent coupons or any other
payment in respect of any observation dates after the applicable call settlement date. Because the Notes may be subject to an automatic
call as early as the first potential call settlement date, the total return on the Notes could be less than if the Notes remained outstanding
until maturity. Furthermore, if the Notes are not subject to an automatic call, you may be subject to the decline of the underlying asset
even though you cannot participate in any appreciation of the underlying asset or underlying constituents. As a result, the return on
an investment in the Notes could be less than the return on a hypothetical direct investment in any or all of the underlying asset or
underlying constituents. In addition, as an owner of the Notes, you will not have voting rights or any other rights of a holder of the
underlying constituents.
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A higher contingent coupon rate or lower downside threshold or coupon barrier may reflect greater expected
volatility of the underlying asset, and greater expected volatility generally indicates an increased risk of loss at maturity —
The economic terms for the Notes, including the contingent coupon rate, coupon barrier and downside threshold, are based, in part, on
the expected volatility of the underlying asset at the time the terms of the Notes are set. “Volatility” refers to the frequency
and magnitude of changes in the level of the underlying asset. The greater the expected volatility of the underlying asset as of the trade
date, the greater the expectation is as of that date that the closing level of the underlying asset could be less than the coupon barrier
on any observation date and that the final level could be less than the downside threshold and, as a consequence, indicates an increased
risk of not receiving a contingent coupon and an increased risk of loss, respectively. All things being equal, this greater expected volatility
will generally be reflected in a higher contingent coupon rate than the yield payable on our conventional debt securities with a similar
maturity or on otherwise comparable securities, and/or a lower downside threshold and/or coupon barrier than those terms on otherwise
comparable securities. Therefore, a relatively higher contingent coupon rate may indicate an increased risk of loss. Further, a relatively
lower downside threshold and/or coupon barrier may not necessarily indicate that the Notes have a greater likelihood of a return of principal
at maturity and/or paying contingent coupons. You should be willing to accept the downside market risk of the underlying asset and the
potential to lose a significant portion or all of your investment in the Notes.
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Reinvestment risk — The Notes will be subject to an automatic call if the closing level of
the underlying asset is equal to or greater than the initial level on certain observation dates prior to the final valuation date, as
set forth under “Observation Dates and Coupon Payment Dates” herein. Because the Notes could be subject to an automatic call,
the term of your investment may be limited. In the event that the Notes are subject to an automatic call, there is no guarantee that you
would be able to reinvest the proceeds at a comparable return and/or with a comparable contingent coupon rate for a similar level of risk.
In addition, to the extent you are able to reinvest such proceeds in an investment comparable to the Notes, you may incur transaction
costs such as dealer discounts and hedging costs built into the price of the new securities. Generally, however, the longer the Notes
remain outstanding, the less likely the Notes will be subject to an automatic call due to the decline in the level of the underlying asset
and the shorter time remaining for the level of the underlying asset to recover. Such periods generally coincide with a period of greater
risk of principal loss on your Notes.
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Risks Relating to Characteristics
of the Underlying Asset
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Market risk — The return on the Notes, which may be negative, is directly linked to the performance
of the underlying asset and indirectly linked to the value of the underlying constituents. The level of the underlying asset can rise
or fall sharply due to factors specific to the underlying asset and its underlying constituents and their issuers (each, an “underlying
constituent issuer”), such as stock price volatility, earnings and financial conditions, corporate, industry and regulatory developments,
management changes and decisions and other events, as well as general market factors, such as general stock market or commodity market
volatility and levels, interest rates and economic and political conditions. Recently, the coronavirus infection has caused volatility
in the global financial markets and a slowdown in the global economy. Coronavirus or any other communicable disease or infection may adversely
affect the underlying constituent issuers and, therefore, the underlying asset. You, as an investor in the Notes, should conduct your
own investigation into the underlying asset and underlying constituents.
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There can be no assurance that the investment view implicit in the Notes will be successful —
It is impossible to predict whether and the extent to which the level of the underlying asset will rise or fall and there can be no
assurance that the closing level of the underlying asset will be equal to or greater than the coupon barrier on any observation date,
or, if the Notes are not subject to an automatic call, that the final level will be equal to or greater than the downside threshold. The
level of the underlying asset will be influenced by complex and interrelated political, economic, financial and other factors that affect
the underlying constituent issuers. You should be willing to accept the downside risks associated with the relevant market(s) tracked
by the underlying asset in general and the underlying asset and its underlying constituents in particular, and the risk of losing a significant
portion or all of your investment.
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The underlying asset reflects price return, not total return — The return on your Notes is
based on the performance of the underlying asset, which reflect the changes in the market prices of the underlying constituents. Your
Notes are not, however, linked to a “total return” index or strategy, which, in addition to reflecting those price returns,
would also reflect any dividends paid on the underlying constituents. The return on your Notes will not include such a total return feature
or any dividend component.
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BNS cannot control actions by the index sponsor and the index sponsor has no obligation to consider
your interests — None of BNS, UBS or our or their respective affiliates are affiliated with the index sponsor or have any 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 underlying asset. The index 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 affect the market value of, and any amount payable on,
the Notes.
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Changes affecting the underlying asset could have an adverse effect on the market value of, and any
amount payable on, the Notes — The policies of the index sponsor as specified under “Information About the Underlying
Asset” (together, the “index sponsor”), concerning additions, deletions and substitutions of the underlying constituents
and the manner in which the index sponsor takes account of certain changes affecting those underlying constituents may adversely affect
the level of the underlying asset. The policies of the index sponsor with respect to the calculation of the underlying asset could also
adversely affect the level of the underlying asset. The index sponsor may discontinue or suspend calculation or dissemination of the underlying
asset. Any such actions could have an adverse effect on the market value of, and any amount payable on, the Notes.
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Risks Relating to Estimated
Value and Liquidity
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BNS’ initial estimated value of the Notes at the time of pricing (when the terms of your Notes
are set on the trade date) will be lower than the issue price of the Notes — BNS’ initial estimated value of the Notes
is only an estimate. The issue price of the Notes will exceed BNS’ initial estimated value. The difference between the issue price
of the Notes and BNS’ initial estimated value reflects costs associated with selling and structuring the Notes, as well as hedging
its obligations under the Notes with SCUSA or another affiliate. Therefore, the economic terms of the Notes are less favorable to you
than they would have been if these expenses not been paid or had been lower.
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Neither BNS’ nor SCUSA’s estimated value of the Notes at any time is determined by reference
to credit spreads or the borrowing rate BNS would pay for its conventional fixed-rate debt securities — BNS’ initial estimated
value of the Notes and SCUSA’s estimated value of the Notes at any time are determined by reference to BNS’ internal funding
rate. The internal funding rate used in the determination of the estimated value of the Notes generally represents a discount from the
credit spreads for BNS’ conventional fixed-rate debt securities and the borrowing rate BNS would pay for its conventional fixed-rate
debt securities. This discount is based on, among other things, BNS’ view of the funding value of the Notes as well as the higher
issuance, operational and ongoing liability management costs of the Notes in comparison to those costs for BNS’ conventional fixed-rate
debt. If the interest rate implied by the credit spreads for BNS’ conventional fixed-rate debt securities, or the borrowing rate
BNS would pay for its conventional fixed-rate debt securities were to be used, BNS would expect the economic terms of the 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.
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BNS’ initial estimated value of the Notes does not represent future values of the Notes and may
differ from others’ (including SCUSA’s) estimates — BNS’ initial estimated value of the Notes is determined
by reference to its internal pricing models when the terms of the Notes are set. These pricing models consider certain factors, such as
BNS’ internal funding rate on the trade date, the expected term of the Notes, market conditions and other relevant factors existing
at that time, and BNS’ assumptions about market parameters, which can include volatility of the underlying asset, 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 BNS’ 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 BNS’ initial estimated value. In addition, market conditions and other relevant factors in the future may change, and any assumptions
may prove to be incorrect.
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The Notes have limited 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
BNS intend, but are not required 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 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.
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The price at which SCUSA would buy or sell the Notes (if SCUSA makes a market, which it is not obligated
to do) will be based on SCUSA’s estimated value of the Notes and, depending on your broker, may be less than the valuation provided
on your customer account statement — SCUSA’s estimated value of the Notes is determined by reference to its pricing models
and takes into account BNS’ internal funding rate. If SCUSA buys or sells the 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 the Notes at any
time also will reflect its then current bid and ask spread for similar sized trades of structured notes. The value provided by SCUSA on
its customer account statements is based on these pricing models. As a result, depending on your broker, SCUSA or its affiliates may offer
to buy or sell the Notes in the secondary market at a price that is less than the valuation provided on your broker’s customer account
statements. Investors should inquire as to the valuation provided on their customer account statement provided by unaffiliated dealers,
including UBS. As described above, SCUSA and its affiliates intend, but are not required, to make a market for the Notes and may stop
making a market at any time.
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SCUSA’s pricing models consider
certain variables, including principally BNS’ internal funding rate, interest rates (forecasted, current and historical rates),
volatility of the underlying asset, 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
the Notes determined by reference to SCUSA’s models, taking into account BNS’ internal funding rate, due to, among other things,
any differences in pricing models or assumptions used by others. If SCUSA calculated its estimated value of the Notes by reference to
BNS’ credit spreads or the borrowing rate BNS would pay for its conventional fixed-rate debt securities (as opposed to BNS’
internal funding rate), the price at which SCUSA would buy or sell the Notes (if SCUSA makes a market, which it is not obligated to do)
could be significantly lower.
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In addition to the factors discussed
above, the value and quoted price of the 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 BNS’ creditworthiness or perceived creditworthiness. These changes may adversely affect the value of the Notes, including the
price you may receive for the 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. 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.
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The price of the Notes prior to maturity will depend on a number of factors and may be substantially
less than the principal amount — Because structured notes, including the Notes, can be thought of as having a debt component
and a derivative component, factors that influence the values of debt instruments and options and other derivatives will also affect the
terms and features of the Notes at issuance and the market price of the Notes prior to maturity. Some of these factors include, but are
not limited to: (i) actual or anticipated changes in the level of the underlying asset over the full term of the Notes, (ii) volatility
of the level of the underlying asset and their underlying constituents and the market's perception of future volatility of the foregoing,
(iii) changes in interest rates generally, (iv) any actual or anticipated changes in our credit ratings or credit spreads, (v) dividend
yields on the underlying asset constituents and (vi) time remaining to maturity. In particular, because the provisions of the Notes relating
to the contingent coupons and the payment at maturity behave like options, the value of the Notes will vary in ways which are non-linear
and may not be intuitive.
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Depending on the actual or anticipated
level of the underlying asset and other relevant factors, the market value of the Notes may decrease and you may receive substantially
less than the principal amount if you sell your Notes prior to maturity regardless of the level of the underlying asset at such time.
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Risks Relating to Hedging
Activities and Conflicts of Interest
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Hedging activities by BNS and SCUSA may negatively impact investors in the Notes and cause our respective
interests and those of our clients and counterparties to be contrary to those of investors in the Notes — We, SCUSA or one or
more of our other affiliates has hedged or expects to hedge our obligations under the Notes. Such hedging transactions may include entering
into swap or similar agreements, purchasing shares of the underlying constituents and/or purchasing futures, options and/or other instruments
linked to the underlying asset and/or one or more of the underlying constituents. We, SCUSA or one or more of our or their respective
affiliates also expects to adjust the hedge by, among other things, purchasing or selling any of the foregoing, and perhaps other instruments
linked to the underlying asset and/or one or more of the underlying constituents, at any time and from time to time, and to unwind the
hedge by selling any of the foregoing on or before the final valuation date. We, SCUSA or one or more of our or their respective affiliates
may also enter into, adjust and unwind hedging transactions relating to other basket- or index-linked Notes whose returns are linked to
changes in the level of the underlying asset and/or one or more of the underlying constituents. Any of these hedging activities may adversely
affect the level of the underlying asset—directly or indirectly by affecting the price of the underlying constituents — and
therefore the market value of the Notes and the amount you will receive, if any, on the Notes.
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You should expect that these transactions
will cause BNS, SCUSA or our other affiliates, or our or their respective clients or counterparties, to have economic interests and incentives
that do not align with, and that may be directly contrary to, those of an investor in the Notes. None of BNS, SCUSA or any of our other
affiliates will have any obligation to take, refrain from taking or cease taking any action with respect to these transactions based on
the potential effect on an investor in the Notes, and any of the foregoing may receive substantial returns with respect to these hedging
activities while the value of, and return on, the Notes declines.
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We, the Agents and our or their respective affiliates regularly provide services to, or otherwise have
business relationships with, a broad client base, which has included and may include us and the underlying constituent issuers and the
market activities by us, the Agents or our or their respective affiliates for our or their own respective accounts or for our or their
respective clients could negatively impact investors in the Notes — We, the Agents and our or their respective affiliates regularly
provide a wide range of financial services, including financial advisory, investment advisory and transactional services to a substantial
and diversified client base. As such, we each may act as an investor, investment banker, research provider, investment manager, investment
advisor, market maker, trader, prime broker or lender. In those and other capacities, we, the Agents and/or our or their respective affiliates
purchase, sell or hold a broad array of investments, actively trade securities (including the Notes or other securities that we have issued),
the underlying constituents, derivatives, loans, credit default swaps, indices, baskets and other financial instruments and products for
our or their own respective accounts or for the accounts of our or their respective customers, and we will have other direct or indirect
interests, in those securities and in other markets that may not be consistent with your interests and may adversely affect the level
of the underlying 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 underlying constituent issuers, or transact in securities
or instruments or with parties that are directly or indirectly related to these entities. These services could include making loans to
or equity investments in those companies, providing financial advisory or other investment banking services, or issuing research reports.
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Any of these financial market activities
may, individually or in the aggregate, have an adverse effect on the level of the underlying asset and the market for your Notes, and
you should expect that our interests and those of the Agents and/or our or their respective affiliates, clients or counterparties, will
at times be adverse to those of investors in the Notes.
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You should expect that we, the Agents,
and our or their respective affiliates, in providing these services, engaging in such transactions, or acting for our or their own respective
accounts, may take actions that have direct or indirect effects on the Notes or other securities that we may issue, the underlying constituents
other securities or instruments similar to or linked to the foregoing, and that such actions could be adverse to the interests of investors
in the Notes. In addition, in connection with these activities, certain personnel within us, the Agents or our or their respective affiliates
may have access to confidential material non-public information about these parties that would not be disclosed to investors in the Notes.
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We, the Agents and our or their respective
affiliates regularly offer a wide array of securities, financial instruments and other products into the marketplace, including existing
or new products that are similar to the Notes or other securities that we may issue, the underlying constituents or other securities or
instruments similar to or linked to the foregoing. Investors in the Notes should expect that we, the Agents and our or their respective
affiliates offer securities, financial instruments, and other products that may compete with the Notes for liquidity or otherwise.
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Potential BNS impact on price — Trading or transactions by BNS, the Agents or our or their
respective affiliates in the underlying asset or any underlying constituents, listed and/or over-the-counter options, futures, exchange-traded
funds or other instruments with returns linked to the performance of the underlying asset or any underlying constituents may adversely
affect the level of the underlying asset or underlying constituents and, therefore, the market value of the Notes, the likelihood of a
contingent coupon being paid on any coupon payment date and of the Notes being called on a call payment date. See “— Risks
Relating to Hedging Activities and Conflicts of Interest — Hedging activities by BNS 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”
for additional information regarding hedging-related transactions and trading.
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The calculation agent will have significant discretion with respect to the Notes, which may be exercised
in a manner that is adverse to your interests — The calculation agent will be an affiliate of BNS. The calculation agent
will determine whether the contingent coupon is payable to you on any coupon payment date and the payment at maturity of the Notes, if
any, based on observed closing levels of the underlying asset. The calculation agent can postpone the determination of the closing level
or final level (and therefore the related coupon payment date or maturity date, as applicable) if a market disruption event occurs and
is continuing with respect to the underlying asset on any observation date (including the final valuation date).
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Potentially inconsistent research, opinions or recommendations by BNS — BNS, the Agents and
our or their respective affiliates may publish research from time to time on financial markets and other matters that may influence the
value of the Notes, or express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. Any research,
opinions or recommendations expressed by BNS, the Agents or our or their respective affiliates may not be consistent with each other and
may be modified from time to time without notice. Investors should make their own independent investigation of the merits of investing
in the Notes and the underlying asset to which the Notes are linked.
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Risks Relating to General Credit
Characteristics
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Credit risk of BNS — The Notes are senior unsecured debt obligations of BNS and are not,
either directly or indirectly, an obligation of any third party. Any payment to be made on the Notes, including any repayment of principal,
depends on the ability of BNS to satisfy its obligations as they come due. As a result, BNS’ actual and perceived creditworthiness
may affect the market value of the Notes. If BNS were to default on its obligations, you may not receive any amounts owed to you under
the terms of the Notes and you could lose all of your investment in the Notes.
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The COVID-19 virus may have an adverse impact on BNS — On March 11, 2020, the World Health
Organization declared the outbreak of a strain of novel coronavirus disease, COVID-19, a global pandemic. Governments in affected areas
have imposed a number of measures designed to contain the outbreak, including business closures, travel restrictions, quarantines and
cancellations of gatherings and events. The spread of COVID-19 has had disruptive effects in countries in which BNS operates and the global
economy more widely, as well as causing increased volatility and declines in financial markets. COVID-19 has materially impacted and continues
to materially impact the markets in which BNS operates. If the pandemic is prolonged, or further diseases emerge that give rise to similar
effects, the adverse impact on the global economy could deepen and result in further declines in financial markets. A substantial amount
of BNS’ business involves making loans or otherwise committing resources to specific companies, industries or countries. The COVID-19
pandemic’s impact on such borrowers, industries and countries could have a material adverse effect on BNS’ financial results,
businesses, financial condition or liquidity. The COVID-19 pandemic may also result in disruption to BNS’ key suppliers of goods
and services and result in increased unavailability of staff adversely impacting the quality and continuity of service to customers and
the reputation of BNS. As a result the business, results of operations, corporate reputation and financial condition of BNS could be adversely
impacted for a substantial period of time.
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BNS is subject to the resolution authority under the CDIC Act — Although the Notes are not
bail-inable debt securities under the CDIC Act, as described elsewhere in this pricing supplement, BNS remains subject generally to Canadian
bank resolution powers under the CDIC Act. Under such powers, the Canada Deposit Insurance Corporation may in certain circumstances take
actions that could negatively impact holders of the Notes and result in a loss on your investment. See “Risk Factors — Risks
Related to the Bank’s Debt Securities” in the accompanying prospectus for more information.
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Risks Relating to Canadian and
U.S. Federal Income Taxation
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Uncertain tax treatment — Significant aspects of the tax treatment of the Notes are uncertain.
You should consult your tax advisor about your tax situation. See “Material Canadian Income Tax Consequences” and “What
Are the Tax Consequences of the Notes?” herein.
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Hypothetical
Examples of How the Notes Might Perform
The below examples are based on hypothetical terms.
The actual terms will be set on the trade date and will be indicated on the cover of the final pricing supplement.
The examples below illustrate the payment upon an automatic
call or at maturity for a $10 Note on a hypothetical offering of the Notes, with the following assumptions (amounts may have been rounded
for ease of analysis):
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Principal Amount:
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$10
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Term:
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Approximately 2 years
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Contingent Coupon Rate:
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8.00% per annum (or 2.00% per quarter)
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Contingent Coupon:
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$0.20 per quarter
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Observation Dates:
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Quarterly (callable after 6 months)
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Initial Level:
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4,000.00
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Coupon Barrier:
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3,000.00 (which is 75.00% of the Initial Level)
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Downside Threshold:
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3,000.00 (which is 75.00% of the Initial Level)
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Example 1 — The Closing Level of the Underlying
Asset is equal to or greater than the Initial Level on the Observation Date corresponding to the first potential Call Settlement Date.
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Date
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Closing Level
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Payment (per Note)
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First Observation Date
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4,200.00 (equal to or greater than Coupon Barrier and Initial Level)
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$0.20 (Contingent Coupon – Not Callable)
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Second Observation Date
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4,600.00 (equal to or greater than Coupon Barrier and Initial Level)
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$10.20 (Call Settlement Amount)
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Total Payment:
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$10.40 (4.00% total return)
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Because the Notes are subject to an automatic call on the
second observation date (which is approximately 6 months after the trade date and is the first observation date in respect of which they
are callable), BNS will pay you on the call settlement date a total of $10.20 per Note, reflecting your principal amount plus the applicable
contingent coupon. When added to the contingent coupon of $0.20 received in respect of the prior observation date, BNS will have paid
you a total of $10.40 per Note, for a total return of 4.00% on the Notes. No further amount will be owed to you under the Notes.
Example 2 — The Notes are NOT subject to an Automatic
Call and the Final Level is equal to or greater than the Coupon Barrier and Downside Threshold.
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Date
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Closing Level
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Payment (per Note)
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First Observation Date
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3,850.00 (equal to or greater than Coupon Barrier; less than Initial Level)
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$0.20 (Contingent Coupon)
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Second through Seventh Observation Dates
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Various (all less than Coupon Barrier and Initial Level)
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$0.00
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Final Valuation Date
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3,900.00 (equal to or greater than Coupon Barrier and Downside Threshold)
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$10.20 (Payment at Maturity)
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Total Payment:
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$10.40 (4.00% total return)
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Because the Notes are not subject to an automatic call and
the final level is equal to or greater than the coupon barrier and downside threshold, BNS will pay you a total of $10.20 per Note, reflecting
your principal amount plus the applicable contingent coupon. When added to the contingent coupon of $0.20 received in respect of the prior
observation dates, BNS will have paid you a total of $10.40 per Note for a total return of 4.00% on the Notes.
Example 3 — The Notes are NOT subject to an Automatic
Call and the Final Level is less than the Coupon Barrier and Downside Threshold.
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Date
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Closing Level
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Payment (per Note)
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First Observation Date
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3,500.00 (equal to or greater than Coupon Barrier; less than Initial Level)
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$0.20 (Contingent Coupon)
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Second through Seventh Observation Dates
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Various (all less than Coupon Barrier and Initial Level)
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$0.00
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Final Valuation Date
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1,600.00 (less than Coupon Barrier and Downside Threshold)
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$10 x (1 + Underlying Return) =
$10 × [1 + (-60%)] =
$10 x 0.40 =
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$4 (Payment at Maturity)
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Total Payment:
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$4.20 (58.00% loss)
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Because the Notes are not subject to an automatic call and
the final level is less than the coupon barrier and downside threshold, BNS will pay you $4.00 per Note. When added to the contingent
coupon of $0.20 received in respect of prior observation dates, BNS will have paid you $4.20 per Note for a loss on the Notes of 58.00%.
Investing in the Notes involves significant risks. The
Notes differ from ordinary debt securities in that BNS is not necessarily obligated to repay the full amount of your investment. If the
Notes are not subject to an automatic call, you may lose a significant portion or all of your investment. Specifically, if the Notes are
not subject to an automatic call and the final level is less than the downside threshold, you will lose a percentage of your principal
amount equal to the underlying return and, in extreme situations, you could lose your entire investment in the Notes.
Any payment on the Notes, including any payments in
respect of an automatic call, contingent coupon or any repayment of principal, is subject to the creditworthiness of BNS. If BNS were
to default on its payment obligations, you may not receive any amounts owed to you under the Notes and you could lose your entire investment.
Information
About the Underlying Asset
All disclosures contained in this document regarding the
underlying asset for the Notes are derived from publicly available information. BNS has not conducted any independent review or due diligence
of any publicly available information with respect to the underlying asset. You should make your own investigation into the underlying
asset.
Included below is a brief description of the underlying asset.
This information has been obtained from publicly available sources. Set forth below is a graph that illustrates the past performance for
the underlying asset. We obtained the past performance information set forth below from the Bloomberg Professional® service
(“Bloomberg”) without independent verification. You should not take the historical levels of the underlying asset as an indication
of future performance.
S&P 500® Index
The S&P 500® Index includes a representative sample of 500 companies in leading industries of the U.S. economy.
The 500 companies are not the 500 largest companies listed on the New York Stock Exchange (“NYSE”) and not all 500 companies
are listed on the NYSE. S&P Dow Jones Indices LLC (“S&P” or the “sponsor”) chooses companies for inclusion
in the S&P 500® Index with an aim of achieving a distribution by broad industry groupings that approximates the distribution
of these groupings in the common stock population of the U.S. equity market. Although the S&P 500® Index contains 500
constituent companies, at any one time it may contain greater than 500 constituent trading lines since some companies included in the
S&P 500® Index prior to July 31, 2017 may be represented by multiple share class lines in the index. The S&P 500®
Index is calculated, maintained and published by S&P and is part of the S&P Dow Jones Indices family of indices. Additional information,
including information about its constituent stock, sector and country weightings, is available on the following website: spglobal.com/spdji/en/indices/equity/sp-500/.
We are not incorporating by reference the websites or any material they include in this pricing supplement or any document incorporated
herein by reference.
S&P intends for the S&P 500® Index to provide
a performance benchmark for the large-cap U.S. equity markets. Constituent changes are made on an as-needed basis and there is no schedule
for constituent reviews. Index additions and deletions are announced with at least three business days advance notice. Less than three
business days’ notice may be given at the discretion of the S&P 500® Index committee (the “S&P Index
Committee”). Relevant criteria for additions to the S&P 500® Index that are employed by S&P include: the
company proposed for addition should have an unadjusted company market capitalization of $11.8 billion or more and a security level float-adjusted
market capitalization of at least 50% of such threshold (for spin-offs, eligibility is determined using when-issued prices, if available);
using composite pricing and volume, the ratio of annual dollar value traded (defined as average closing price over the period multiplied
by historical volume) in the proposed constituent to float-adjusted market capitalization of that company should be at least 1.00 and
the stock should trade a minimum of 250,000 shares in each of the six months leading up to the evaluation date; the company must be a
U.S. company (characterized as a Form 10-K filer with its U.S. portion of fixed assets and revenues constituting a plurality of the total
and with a primary listing of the common stock on the NYSE, NYSE Arca, NYSE American (formerly NYSE MKT), Nasdaq Global Select Market,
Nasdaq Select Market, Nasdaq Capital Market, Cboe BZX (formerly Bats BZX), Cboe BYX (formerly Bats BYX), Cboe EDGA (formerly Bats EDGA)
or Cboe EDGX (formerly Bats EDGX) (each, an “eligible exchange”)); the proposed constituent has an investable weight factor
(“IWF”) of 10% or more; the inclusion of the company will contribute to sector balance in the index relative to sector balance
in the market in the relevant market capitalization range; financial viability (the sum of the most recent four consecutive quarters’
Generally Accepted Accounting Principles earnings (net income excluding discontinued operations) should be positive as should the most
recent quarter); and, for initial public offerings, the company must be traded on an eligible exchange for at least twelve months (spin-offs
or in-specie distributions from existing constituents do not need to be traded on an eligible exchange for twelve months prior to their
inclusion in the S&P 500® Index). In addition, constituents of the S&P MidCap 400® Index and the
S&P SmallCap 600® Index can be added to the S&P 500® Index provided they meet the unadjusted company
level market capitalization eligibility criteria for the S&P 500® Index. Migrations from the S&P MidCap 400®
Index or the S&P SmallCap 600® Index do not need to meet the financial viability, liquidity, or 50% of the S&P
500® Index’s unadjusted company level minimum market capitalization threshold criteria. Further, constituents of
the S&P Total Market Index Ex S&P Composite 1500 (which includes all eligible U.S. common equities except for those included in
the S&P 500® Index, the S&P MidCap 400® Index and the S&P SmallCap 600® Index)
that acquire a constituent of the S&P 500® Index, the S&P MidCap 400® Index or the S&P SmallCap
600® Index that do not fully meet the financial viability or IWF criteria may still be added to the S&P 500®
Index at the discretion of the S&P Index Committee if the S&P Index Committee determines that the addition could minimize turnover
and enhance the representativeness of the S&P 500® Index as a market benchmark. Certain types of organizational structures
and securities are always excluded, including, but not limited to, business development companies, limited partnerships, master limited
partnerships, limited liability companies, OTC bulletin board issues, closed-end funds, exchange-traded funds (“ETFs”), exchange-traded
notes, royalty trusts, tracking stocks, special purpose acquisition companies, preferred stock and convertible preferred stock, unit trusts,
equity warrants, convertible bonds, investment trusts, rights and American depositary receipts. Stocks are deleted from the S&P 500® Index
when they are involved in mergers, acquisitions or significant restructurings such that they no longer meet the inclusion criteria, and
when they substantially violate one or more of the addition criteria. Stocks that are delisted or moved to the pink sheets or the OTC
bulletin board are removed, and those that experience a trading halt may be retained or removed in S&P’s discretion. S&P
evaluates additions and deletions with a view to maintaining S&P 500® Index continuity.
For constituents included in the S&P 500® Index
prior to July 31, 2017, all publicly listed multiple share class lines are included separately in the S&P 500® Index,
subject to, in the case of any such share class line, that share class line satisfying the liquidity and float criteria discussed above
and subject to certain exceptions. It is possible that one listed share class line of a company may be included in the S&P 500®
Index while a second listed share class line of the same company is excluded. For companies that issue a second publicly traded
share class to index share class holders, the newly issued share class line is considered for inclusion if the event is mandatory and
the market capitalization of the distributed class is not considered to be de minimis.
As of July 31, 2017, companies with multiple share class lines
are no longer eligible for inclusion in the S&P 500® Index. Only common shares are considered when determining whether
a company has a multiple share class structure. Constituents of the S&P 500® Index prior to July 31, 2017 with multiple
share class lines will be grandfathered in and continue to be included in the S&P 500® Index. If an S&P 500®
Index constituent reorganizes into a multiple share class line structure, that company will be reviewed for continued inclusion
in the S&P 500® Index at the discretion of the S&P Index Committee.
Calculation of the S&P 500® Index
The S&P 500® Index is calculated using
a base-weighted aggregative methodology. The value of the S&P 500® Index on any day for which an index value is published
is determined by a fraction, the numerator of which is the aggregate of the market price of each stock in the S&P 500®
Index times the number of shares of such stock included in the S&P 500® Index, and the denominator of which
is the divisor, which is described more fully below. The “market value” of any index stock is the product of the market
price per share of that stock times the number of the then-outstanding shares of such index stock that are then included in the
S&P 500® Index.
The S&P 500® Index is also sometimes called
a “base-weighted aggregative index” because of its use of a divisor. The “divisor” is a value calculated by S&P
that is intended to maintain conformity in index values over time and is adjusted for all changes in the index stocks’ share capital
after the “base date” as described below. The level of the S&P 500® Index reflects the total market value
of all index stocks relative to the index’s base date of 1941-43.
In addition, the S&P 500® Index is float-adjusted,
meaning that the share counts used in calculating the S&P 500® Index reflect only those shares available to investors
rather than all of a company’s outstanding shares. S&P seeks to exclude shares held by long-term, strategic shareholders concerned
with the control of a company, a group that generally includes the following: officers and directors and related individuals whose holdings
are publicly disclosed, private equity, venture capital, special equity firms, asset managers and insurance companies with board of director
representation, publicly traded companies that hold shares in another company, holders of restricted shares (except for shares held as
part of a lock-up agreement), company-sponsored employee share plans/trusts, defined contribution plans/savings, investment plans, foundations
or family trusts associated with the company, government entities at all levels (except government retirement or pension funds), sovereign
wealth funds and any individual person listed as a 5% or greater stakeholder in a company as reported in regulatory filings (collectively,
“strategic holders”). To this end, S&P excludes all share-holdings (other than depositary banks, pension funds (including
government pension and retirement funds), mutual funds, ETF providers, investment funds, asset managers (including hedge funds with no
board of director representation), investment funds of insurance companies (except in certain countries where insurance companies may
be considered strategic holders based on regulatory issues and country-specific practices) and independent foundations not associated
with the company) with a position greater than 5% of the outstanding shares of a company from the float-adjusted share count to be used
in S&P 500® Index calculations.
The exclusion is accomplished by calculating an IWF for each
stock that is part of the numerator of the float-adjusted index fraction described above:
IWF = (available float shares)/(total
shares outstanding)
where available float shares is defined as total shares outstanding
less shares held by strategic holders. In most cases, an IWF is reported to the nearest one percentage point. For companies with multiple
share class lines, a separate IWF is calculated for each share class line. In most cases, an IWF is reported to the nearest one percentage
point.
Maintenance of the S&P 500® Index
In order to keep the S&P 500® Index comparable
over time S&P engages in an index maintenance process. The S&P 500® Index maintenance process involves changing
the constituents as discussed above, and also involves maintaining quality assurance processes and procedures, adjusting the number of
shares used to calculate the S&P 500® Index, monitoring and completing the adjustments for company additions and
deletions, adjusting for stock splits and stock dividends and adjusting for other corporate actions. In addition to its daily governance
of indices and maintenance of the S&P 500® Index methodology, at least once within any 12 month period, the S&P
Index Committee reviews the S&P 500® Index methodology to ensure the S&P 500® Index continues to
achieve the stated objective, and that the data and methodology remain effective. The S&P Index Committee may at times consult with
investors, market participants, security issuers included in or potentially included in the S&P 500® Index, or investment
and financial experts.
Divisor Adjustments
The two types of adjustments primarily used by S&P are
divisor adjustments and adjustments to the number of shares (including float adjustments) used to calculate the S&P 500®
Index. Set forth below is a table of certain corporate events and their resulting effect on the divisor and the share count. If a corporate
event requires an adjustment to the divisor, that event has the effect of altering the market value of the affected underlying constituent
and consequently of altering the aggregate market value of the underlying constituents following the event. In order that the level of
the S&P 500® Index not be affected by the altered market value (which could be an increase or decrease) of the affected
underlying constituent, S&P generally derives a new divisor by dividing the post-event market value of the underlying constituents
by the pre-event index value, which has the effect of reducing the S&P 500® Index’s post-event value to the pre-event
level.
Changes to the Number of Shares of a Constituent
The index maintenance process also involves tracking the
changes in the number of shares included for each of the underlying constituents. Changes as a result of mandatory events, such as mergers
or acquisition driven share/IWF changes, stock splits and mandatory distributions are not subject to a minimum threshold for implementation
and are implemented when the transaction occurs. At S&P’s discretion, however, de minimis merger and acquisition changes may
be accumulated and implemented with the updates made with the quarterly share updates as described below. Material share/IWF changes resulting
from certain non-mandatory corporate actions follow the accelerated implementation rule. Non-material share/IWF changes are implemented
quarterly.
Accelerated Implementation Rule
1. Public offerings. Public offerings of new company-issued
shares and/or existing shares offered by selling shareholders, including block sales and spot secondaries, will be eligible for accelerated
implementation treatment if the size of the event meets the materiality threshold criteria:
(a) at least US
$150 million, and
(b) at least 5%
of the pre-event total shares.
In addition to the materiality threshold, public offerings
must satisfy the following conditions:
• be underwritten.
• have a publicly available prospectus, offering document, or prospectus summary
filed with the relevant authorities.
• have a publicly available confirmation from an official source that the offering
has been completed.
For public offerings that involve a concurrent combination
of new company shares and existing shares offered by selling shareholders, both events are implemented if either of the public offerings
represent at least 5% of total shares and $150 million. Any concurrent share repurchase by the affected company will also be included
in the implementation.
2. Dutch Auctions, self-tender offer buybacks, and split-off
exchange offers. These nonmandatory corporate action types will be eligible for accelerated implementation treatment regardless of size
once their results are publicly announced and verified by S&P.
Exception to the Accelerated Implementation Rule
For non-mandatory corporate actions subject to the accelerated
implementation rule with a size of at least US $1 billion, S&P will apply the share change, and any resulting IWF change, using the
latest share and ownership information publicly available at the time of the announcement, even if the offering size is below the 5% threshold.
This exception ensures that very large events are recognized in a timely manner using the latest available information.
All non-mandatory events not covered by the accelerated implementation
rule (including but not limited to private placements, acquisition of private companies, and conversion of non-index share lines) will
be implemented quarterly coinciding with the third Friday of the third month in each calendar quarter. In addition, events that were not
implemented under the accelerated implementation rule but were found to have been eligible, (e.g. due to lack of publicly available information
at the time of the event) are implemented as part of a quarterly rebalancing.
Announcement Policy
For accelerated implementation, S&P will provide two
(2) business days’ notice for all non-US domiciled stocks, and one (1) business days’ notice for all US domiciled stocks.
IWF Updates
Accelerated implementation for events less than $1 billion
will include an adjustment to the company’s IWF only to the extent that such an IWF change helps the new float share total mimic
the shares available in the offering. To minimize unnecessary turnover, these IWF changes do not need to meet any minimum threshold requirement
for implementation. Any IWF change resulting in an IWF of 0.96 or greater is rounded up to 1.00 at the next annual IWF review.
IWF changes will only be made at the quarterly review if
the change represents at least 5% of total current shares outstanding and is related to a single corporate action that did not qualify
for the accelerated implementation rule.
Quarterly share change events resulting from the conversion
of derivative securities, acquisitions of private companies, or acquisitions of non-index companies that do not trade on a major exchange
are considered to be available to investors unless there is explicit information stating that the new owner is a strategic holder.
Other than the situations described above, please note that
IWF changes are only made at the annual IWF review.
Share Updates
When total shares outstanding increase by at least 5%, but
the new share issuance is to a strategic or major shareholder, it implies that there is no change in float- adjusted shares. However,
in such instances, S&P will apply the share change and resulting IWF change regardless of whether the float change is greater than
or equal to 5%.
For companies with multiple share class lines, the 5% share
change threshold is based on each individual multiple share class line rather than total company shares.
Changes to share counts that total less than 5% of total
shares are accumulated and made quarterly on the third Friday of March, June, September, and December.
Exceptions:
Any non- fully paid or non-fully settled offering such as
forward sales agreements are not eligible for accelerated implementation. Share updates resulting from completion of subscription receipts
terms or the settlement of forward sale agreements are updated at a future quarterly share rebalance.
Rebalancing Guidelines – Share/IWF Freeze
A share/IWF freeze period is implemented during each quarterly
rebalancing. The freeze period begins after the market close on the Tuesday prior to the second Friday of each rebalancing month (i.e.
March, June, September, and December) and ends after the market close on the third Friday of the rebalancing month. Pro-forma files are
normally released after the market close on the second Friday, one week prior to the rebalancing effective date. In September, preliminary
share and float data is released on the first Friday of the month. However, the share freeze period for September follows the same schedule
as the other three quarterly share freeze periods. For illustration purposes, if rebalancing pro-forma files are scheduled to be released
on Friday, March 13, the share/IWF freeze period will begin after the close of trading on Tuesday, March 10 and will end after the close
of trading the following Friday, March 20 (i.e. the third Friday of the rebalancing month).
During the share/IWF freeze period, shares and IWFs are not
changed except for mandatory corporate action events (such as merger activity, stock splits, and rights offerings), and the accelerated
implementation rule is suspended. The suspensions include all changes that qualify for accelerated implementation and would typically
be announced or effective during the share/IWF freeze period. At the end of the freeze period all suspended changes will be announced
on the third Friday of the rebalancing month, and implemented five business days after the quarterly rebalancing effective date.
Adjustments for Corporate Actions
There is a large range of corporate actions that may affect
companies included in the S&P 500® Index. Certain corporate actions require S&P to recalculate the share count
or the float adjustment or to make an adjustment to the divisor to prevent the value of the S&P 500® Index from changing
as a result of the corporate action. This helps ensure that the movement of the S&P 500® Index does not reflect the
corporate actions of individual companies in the S&P 500® Index.
Spin-Offs
As a general policy, a spin-off security is added to the
S&P 500® Index on the ex-date at a price of zero (with no divisor adjustment) and will remain in the index for at least
one trading day. On the ex-date the spin-off will have the same attributes and capping adjustment factor as its parent company. The spin-off
security will remain in the S&P 500® Index if it meets all eligibility criteria. If the spin-off security is determined
ineligible to remain in the S&P 500® Index, it will generally be removed after at least one day of regular way trading
(with a divisor adjustment). The weight of the spin-off being deleted is reinvested across all the index components proportionately such
that the relative weights of all index components are unchanged. The net change in index market capitalization will cause a divisor change.
Companies that are spun off from a constituent of the S&P
500® Index do not need to meet the eligibility criteria for new constituents, but they should be considered U.S. domiciled
for index purposes. At the discretion of the S&P Index Committee, a spin-off company may be retained in the S&P 500®
Index if the S&P Index Committee determines it has a total market capitalization representative of the S&P 500®
Index. If the spin-off company’s estimated market capitalization is below the minimum unadjusted company market capitalization for
the S&P 500® Index but there are other constituent companies in the S&P 500® Index that have a significantly
lower total market capitalization than the spin-off company, the S&P Index Committee may decide to retain the spin-off company in
the S&P 500® Index.
Several additional types of corporate actions, and their related treatment, are listed
in the table below.
|
Corporate Action
|
Treatment
|
|
Company addition/deletion
|
Addition
Companies are added at the float market capitalization weight.
The net change to the index market capitalization causes a divisor adjustment.
Deletion
The weights of all stocks in the index will proportionally change. Relative weights
will stay the same. The index divisor will change due to the net change in the index market capitalization.
|
|
Change in shares outstanding
|
Increasing (decreasing) the shares outstanding increases (decreases) the market capitalization of the index. The change to the index market capitalization causes a divisor adjustment.
|
|
Split/reverse split
|
Shares outstanding are adjusted by split ratio. Stock price is adjusted by split ratio. There is no change to the index market capitalization and no divisor adjustment.
|
|
Change in IWF
|
Increasing (decreasing) the IWF increases (decreases) the market capitalization of the index. A net change to the index market capitalization causes a divisor adjustment.
|
|
Ordinary dividend
|
When a company pays an ordinary cash dividend, the index does not make any adjustments to the price or shares of the stock. As a result there are no divisor adjustments to the index.
|
|
Special dividend
|
The stock price is adjusted by the amount of the special dividend. The net change to the index market capitalization causes a divisor adjustment.
|
|
Rights offering
|
All rights offerings that are in-the-money on the ex-date are applied under the assumption the rights are fully subscribed. The stock price is adjusted by the value of the rights and the shares outstanding are increased by the rights ratio. The net change in market capitalization causes a divisor adjustment.
|
Any company that is removed from the S&P 500®
Index, the S&P MidCap 400® Index or the S&P SmallCap 600® Index must wait a minimum of one year
from its removal date before being reconsidered as a replacement candidate for the S&P 500® Index.
Recalculation Policy
S&P reserves the right to recalculate and republish the S&P
500® Index at its discretion in the event one of the following issues has occurred: (1) incorrect or revised closing price
of one or more constituent securities; (2) missed or misapplied corporate action; (3) incorrect application of an index methodology; (4)
late announcement of a corporate action; or (5) incorrect calculation or data entry error. The decision to recalculate the S&P 500®
Index is made at the discretion of the index manager and/or S&P Index Committee, as further discussed below. The potential market
impact or disruption resulting from a recalculation is considered when making any such decision. In the event of an incorrect closing
price, a missed or misapplied corporate action, a late announcement of a corporate action, or an incorrect calculation or data entry error
that is discovered within two trading days of its occurrence, generally the index is recalculated. In the event any such event is discovered
beyond the two trading day period, the S&P Index Committee shall decide whether the index should be recalculated. In the event of
an incorrect application of the methodology that results in the incorrect composition and/or weighting of index constituents, the S&P
Index Committee shall determine whether or not to recalculate the index following specified guidelines. In the event that the index is
recalculated, it shall be done within a reasonable timeframe following the detection and review of the issue.
Calculations and Pricing Disruptions
Closing levels for the S&P 500® Index
are calculated by S&P based on the closing price of the individual constituents of the index as set by their primary exchange. Closing
prices are received by S&P from one of its third party vendors and verified by comparing them with prices from an alternative vendor.
The vendors receive the closing price from the primary exchanges. Real-time intraday prices are calculated similarly without a second
verification. Prices used for the calculation of real time index values are based on the “Consolidated Tape”. The Consolidated
Tape is an aggregation of trades for each constituent over all regional exchanges and trading venues and includes the primary exchange.
If there is a failure or interruption on one or more exchanges, real-time calculations will continue as long as the “Consolidated
Tape” is operational.
If an interruption is not resolved prior to the market
close, official closing prices will be determined by following the hierarchy set out in NYSE Rule 123C. A notice is published on the S&P
website at spglobal.com indicating any changes to the prices used in S&P 500® Index calculations. In extreme circumstances,
S&P may decide to delay index adjustments or not publish the S&P 500® Index. Real-time indices are not restated.
Unexpected Exchange Closures
An unexpected market/exchange closure occurs when a market/exchange
fully or partially fails to open or trading is temporarily halted. This can apply to a single exchange or to a market as a whole, when
all of the primary exchanges are closed and/or not trading. Unexpected market/exchange closures are usually due to unforeseen circumstances,
such as natural disasters, inclement weather, outages, or other events.
To a large degree, S&P is dependent on the exchanges
to provide guidance in the event of an unexpected exchange closure. S&P’s decision making is dependent on exchange guidance
regarding pricing and mandatory corporate actions.
NYSE Rule 123C provides closing contingency procedures for
determining an official closing price for listed securities if the exchange is unable to conduct a closing transaction in one or more
securities due to a system or technical issue.
3:00 PM ET is the deadline for an exchange to determine its plan
of action regarding an outage scenario. As such, S&P also uses 3:00 PM ET as the cutoff.
If all major exchanges fail to open or unexpectedly halt trading
intraday due to unforeseen circumstances, S&P will take the following actions:
Market Disruption Prior to Open of Trading:
|
|
(i)
|
If all exchanges indicate that trading will not open for a given day, S&P will treat the day as an
unscheduled market holiday. The decision will be communicated to clients as soon as possible through the normal channels. Indices containing
multiple markets will be calculated as normal, provided that at least one market is open that day. Indices which only contain closed markets
will not be calculated.
|
|
|
(ii)
|
If exchanges indicate that trading, although delayed, will open for a given day, S&P will begin index
calculation when the exchanges open.
|
Market Disruption Intraday:
If exchanges indicate that trading will not resume for a
given day, the S&P 500® Index level will be calculated using prices determined by the exchanges based on NYSE Rule
123C. Intraday S&P 500® Index values will continue to use the last traded composite price until the primary exchange
publishes official closing prices.
License Agreement
S&P® is a registered trademark of Standard
& Poor’s Financial Services LLC (“SPFS”) and Dow Jones® is a registered trademark of Dow Jones Trademark
Holdings LLC (“Dow Jones”). These trademarks have been licensed for use by S&P Dow Jones Indices LLC. “Standard
& Poor’s®”, “S&P 500®” and “S&P®” are trademarks
of SPFS. These trademarks have been sublicensed for certain purposes by us. The S&P 500® Index is a product of S&P
Dow Jones Indices LLC and/or its affiliates and has been licensed for use by us for a fee:
The Notes are not sponsored, endorsed, sold or promoted by
S&P Dow Jones Indices LLC, Dow Jones, SPFS or their respective affiliates (collectively, “S&P Dow Jones Indices”).
S&P Dow Jones Indices makes no representation or warranty, express or implied, to the owners of the Notes or any member of the public
regarding the advisability of investing in securities generally or in the Notes particularly or the ability of the S&P 500®
Index to track general stock market performance. S&P Dow Jones Indices’ only relationship to the Bank is the licensing of certain
trademarks and trade names of S&P Dow Jones Indices and/or its third party licensors. The S&P 500® Index is determined,
composed and calculated by S&P Dow Jones Indices without regard to the Bank or the Notes. S&P Dow Jones Indices has no obligation
to take the needs of the Bank or the owners of the Notes into consideration in determining, composing or calculating the S&P 500®
Index. Neither S&P nor its third party licensors are responsible for and has not participated in the determination of the prices and
amount of the Notes or the timing of the issuance or sale of the Notes or in the determination or calculation of the equation by which
the Notes are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading
of the Notes. There is no assurance that investment products based on the S&P 500® Index will accurately track index
performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security
or futures contract within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security or futures
contract, nor is it considered to be investment advice. Notwithstanding the foregoing, CME Group Inc. and its affiliates may independently
issue and/or sponsor financial products unrelated to the Notes currently being issued by us, but which may be similar to and competitive
with the Notes. In addition, CME Group Inc. and its affiliates may trade financial products which are linked to the performance of the
S&P 500® Index. It is possible that this trading activity will affect the value of the Notes.
S&P DOW JONES INDICES DOES NOT GUARANTEE
THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE S&P 500® INDEX OR ANY DATA INCLUDED THEREIN OR ANY COMMUNICATIONS
(INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY
FOR ANY ERRORS, OMISSIONS OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS
ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE MARKS, THE S&P 500®
INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE
FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES,
LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY
OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND US, OTHER
THAN THE LICENSORS OF S&P DOW JONES INDICES.
The graph below illustrates the performance of the underlying
asset from January 1, 2011 through July 16, 2021, based on the daily closing levels as reported by Bloomberg, without independent verification.
BNS has not conducted any independent review or due diligence of publicly available information obtained from Bloomberg. The closing level
of the underlying asset on July 16, 2021 was 4,327.16 (the “hypothetical initial level”). The dotted line represents a hypothetical
downside threshold and a hypothetical coupon barrier of 3,245.37, which is equal to 75.00% of the hypothetical initial level. The actual
initial level, coupon barrier and downside threshold will be determined on the trade date. Past performance of the underlying asset
is not indicative of the future performance of the underlying asset during the term of the Notes.
What
Are the Tax Consequences of the Notes?
The U.S. federal income tax consequences of your investment
in the Notes are uncertain. There are no statutory provisions, regulations, published rulings or judicial decisions addressing the characterization
for U.S. federal income tax purposes of securities with terms that are substantially the same as the Notes. Some of these tax consequences
are summarized below, but we urge you to read the more detailed discussion in “Material U.S. Federal Income Tax Consequences”
in the accompanying product prospectus supplement and to discuss the tax consequences of your particular situation with your tax advisor.
This discussion is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed
U.S. Department of the Treasury (the “Treasury”) regulations, rulings and decisions, in each case, as available and in effect
as of the date hereof, all of which are subject to change, possibly with retroactive effect. Tax consequences under state, local and non-U.S.
laws are not addressed herein. No ruling from the U.S. Internal Revenue Service (the “IRS”) has been sought as to the U.S.
federal income tax consequences of your investment in the Notes, and the following discussion is not binding on the IRS.
U.S. Tax Treatment. Pursuant to the terms of the Notes,
BNS and you agree, in the absence of a statutory or regulatory change or an administrative determination or judicial ruling to the contrary,
to characterize the Notes as prepaid derivative contracts with respect to the underlying asset. You further agree to include any contingent
coupon that is paid by BNS (including on the maturity date or call settlement date) in your income as ordinary income in accordance with
your regular method of accounting for U.S. federal income tax purposes.
Under this treatment, you should generally recognize capital
gain or loss upon the taxable disposition of your Notes in an amount equal to the difference between the amount you receive at such time
(other than amounts or proceeds attributable to a contingent coupon or any amount attributable to any accrued but unpaid contingent coupons)
and the amount you paid for your Notes. Such gain or loss should generally be long-term capital gain or loss if you have held your Notes
for more than one year (and, otherwise, should be short-term capital gain or loss). The deductibility of capital losses is subject to
limitations. Although uncertain, it is possible that proceeds received from the taxable disposition of your Notes prior to a coupon payment
date, but that could be attributed to an expected contingent coupon, could be treated as ordinary income. You should consult your tax
advisor regarding this risk.
However, it is possible that IRS could assert that your holding
period in respect of your Notes should end on the date on which the amount you are entitled to receive upon maturity or automatic call
of your Notes is determined, even though you will not receive any amounts from BNS in respect of your Notes prior to the maturity or automatic
call of your Notes. In such case, you may be treated as having a holding period in respect of your Notes prior to the maturity or automatic
call of your Notes, and such holding period may be treated as less than one year even if you receive cash upon the maturity or automatic
call of your Notes at a time that is more than one year after the beginning of your holding period.
Except to the extent otherwise required by law, BNS intends
to treat your Notes for U.S. federal income tax purposes in accordance with the treatment described above and under “Material U.S.
Federal Income Tax Consequences” in the accompanying product prospectus supplement unless and until such time as the IRS and the
Treasury determine that some other treatment is more appropriate.
Based on certain factual representations received from
us, our special U.S. tax counsel, Cadwalader, Wickersham & Taft LLP, is of the opinion that it would be reasonable to treat your Notes
in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the Notes, it is
possible that your Notes could alternatively be treated for tax purposes as a single contingent payment debt instrument or pursuant to
some other characterization (including possible treatment as a “constructive ownership transaction” under Section 1260 of
the Code), such that the timing and character of your income from the Notes could differ materially and adversely from the treatment described
above, as described further under “Material U.S. Federal Income Tax Consequences” in the accompanying product prospectus supplement.
Notice 2008-2. In 2007, the IRS released a notice
that may affect the taxation of holders of the Notes. According to Notice 2008-2, the IRS and the Treasury are actively considering whether
a holder of an instrument such as the Notes should be required to accrue ordinary income on a current basis. It is not possible to determine
what guidance they will ultimately issue, if any. It is possible, however, that under such guidance, holders of the Notes will ultimately
be required to accrue income currently in excess of any receipt of contingent coupons and this could be applied on a retroactive basis.
The IRS and the Treasury are also considering other relevant issues, including whether additional gain or loss from such instruments should
be treated as ordinary or capital, whether non-U.S. holders of such instruments should be subject to withholding tax on any deemed income
accruals, and whether the special “constructive ownership rules” of Section 1260 of the Code should be applied to such instruments.
Both U.S. and non-U.S. holders are urged to consult their tax advisors concerning the significance and potential impact of the above
considerations.
Medicare Tax on Net Investment Income. U.S. holders
that are individuals, estates or certain trusts are subject to an additional 3.8% tax on all or a portion of their “net investment
income,” or “undistributed net investment income” in the case of an estate or trust, which may include any income or
gain realized with respect to the Notes, to the extent of their net investment income or undistributed net investment income (as the case
may be) that, when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual, $250,000 for a married
taxpayer filing a joint return (or a surviving spouse), $125,000 for a married individual filing a separate return or the dollar amount
at which the highest tax bracket begins for an estate or trust. The 3.8% Medicare tax is determined in a different manner than the regular
income tax. U.S. holders should consult their tax advisors as to the consequences of the 3.8% Medicare tax.
Specified Foreign Financial Assets. U.S. holders may
be subject to reporting obligations with respect to their Notes if they do not hold their Notes in an account maintained by a financial
institution and the aggregate value of their Notes and certain other “specified foreign financial assets” (applying certain
attribution rules) exceeds an applicable threshold. Significant penalties can apply if a U.S. holder is required to disclose its Notes
and fails to do so.
Non-U.S. Holders. The U.S. federal income tax treatment
of the contingent coupons is unclear. Subject to Section 871(m) of the Code and FATCA, as discussed below, we currently do not intend
to treat contingent coupons paid to a non-U.S. holder that provides us (and/or the applicable withholding agent) with a fully completed
and validly executed applicable IRS Form W-8 as subject to U.S. withholding tax and we currently do not intend to withhold any tax on
contingent coupons. However, it is possible that the IRS could assert that such payments are subject to U.S. withholding tax, or that
another withholding agent may otherwise determine that withholding is required, in which case such other withholding agent may withhold
up to 30% on such payments (subject to reduction or elimination of such withholding tax pursuant to an applicable income tax treaty).
We will not pay any additional amounts in respect of such withholding. Subject to Section 897 of the Code and Section 871(m) of the Code,
discussed below, gain realized from the taxable disposition of a Note generally should not be subject to U.S. tax unless (i) such gain
is effectively connected with a trade or business conducted by the non-U.S. holder in the U.S., (ii) the non-U.S. holder is a non-resident
alien individual and is present in the U.S. for 183 days or more during the taxable year of such taxable disposition and certain other
conditions are satisfied or (iii) the non-U.S. holder has certain other present or former connections with the U.S.
Section 897. We will not attempt to ascertain whether
any underlying constituent issuer would be treated as a “United States real property holding corporation” (“USRPHC”)
within the meaning of Section 897 of the Code. We also have not attempted to determine whether the Notes should be treated as “United
States real property interests” (“USRPI”) as defined in Section 897 of the Code. If any such entity and/or the Notes
were so treated, certain adverse U.S. federal income tax consequences could possibly apply, including subjecting any gain to a non-U.S.
holder in respect of a Note upon a taxable disposition of the Note to the U.S. federal income tax on a net basis, and the proceeds from
such a taxable disposition to a 15% withholding tax. Non-U.S. holders should consult their tax advisors regarding the potential treatment
of any such entity as a USRPHC and/or the Notes as USRPI.
Section 871(m). A 30% withholding tax (which may be
reduced by an applicable income tax treaty) is imposed under Section 871(m) of the Code on certain “dividend equivalents”
paid or deemed paid to a non-U.S. holder with respect to a “specified equity-linked instrument” that references one or more
dividend-paying U.S. equity securities or indices containing U.S. equity securities. The withholding tax can apply even if the instrument
does not provide for payments that reference dividends. Treasury regulations provide that the withholding tax applies to all dividend
equivalents paid or deemed paid on specified equity-linked instruments that have a delta of one (“delta-one specified equity-linked
instruments”) issued after 2016 and to all dividend equivalents paid or deemed paid on all other specified equity-linked instruments
issued after 2018. However, the IRS has issued guidance that states that the Treasury and the IRS intend to amend the effective dates
of the Treasury regulations to provide that withholding on dividend equivalents paid or deemed paid will not apply to specified equity-linked
instruments that are not delta-one specified equity-linked instruments and are issued before January 1, 2023.
Based on our determination that the Notes are not “delta-one”
with respect to any U.S. underlying asset or any underlying constituents, our special U.S. tax counsel is of the opinion that the Notes
should not be delta-one specified equity-linked instruments and thus should not be subject to withholding on dividend equivalents. Our
determination is not binding on the IRS, and the IRS may disagree with this determination. Furthermore, the application of Section 871(m)
of the Code will depend on our determinations on the date the terms of the Notes are set. If withholding is required, we will not make
payments of any additional amounts.
Nevertheless, after the date the terms are set, it is possible
that your Notes could be deemed to be reissued for tax purposes upon the occurrence of certain events affecting the underlying asset,
any underlying constituents or your Notes, and following such occurrence your Notes could be treated as delta-one specified equity-linked
instruments that are subject to withholding on dividend equivalents. It is also possible that withholding tax or other tax under Section
871(m) of the Code could apply to the Notes under these rules if a non-U.S. holder enters, or has entered, into certain other transactions
in respect of the underlying asset, any underlying constituents or the Notes. A non-U.S. holder that enters, or has entered, into other
transactions in respect of the underlying asset, any underlying constituents or the Notes should consult its tax advisor regarding the
application of Section 871(m) of the Code to its Notes in the context of its other transactions.
Because of the uncertainty regarding the application of
the 30% withholding tax on dividend equivalents to the Notes, you are urged to consult your tax advisor regarding the potential application
of Section 871(m) of the Code and the 30% withholding tax to an investment in the Notes.
FATCA. The Foreign Account Tax Compliance Act (“FATCA”)
was enacted on March 18, 2010, and imposes a 30% U.S. withholding tax on “withholdable payments” (i.e., certain U.S.-source
payments, including interest (and original issue discount), dividends, other fixed or determinable annual or periodical gain, profits,
and income, and on the gross proceeds from a disposition of property of a type which can produce U.S.-source interest or dividends) and
“passthru payments” (i.e., certain payments attributable to withholdable payments) made to certain foreign financial institutions
(and certain of their affiliates) unless the payee foreign financial institution agrees (or is required), among other things, to disclose
the identity of any U.S. individual with an account at the institution (or the relevant affiliate) and to annually report certain information
about such account. FATCA also requires withholding agents making withholdable payments to certain foreign entities that do not disclose
the name, address, and taxpayer identification number of any substantial U.S. owners (or do not certify that they do not have any substantial
U.S. owners) to withhold tax at a rate of 30%. Under certain circumstances, a holder may be eligible for refunds or credits of such taxes.
Pursuant to final and temporary Treasury regulations and other
IRS guidance, the withholding and reporting requirements under FATCA will generally apply to certain “withholdable payments”,
will not apply to gross proceeds on a sale or disposition, and will apply to certain foreign passthru payments only to the extent that
such payments are made after the date that is two years after final regulations defining the term “foreign passthru payment”
are published. If withholding is required, we (or the applicable paying agent) will not be required to pay additional amounts with respect
to the amounts so withheld. Foreign financial institutions and non-financial foreign entities located in jurisdictions that have an intergovernmental
agreement with the U.S. governing FATCA may be subject to different rules.
Investors should consult their tax advisors about the application
of FATCA, in particular if they may be classified as financial institutions (or if they hold their Notes through a foreign entity) under
the FATCA rules.
Backup Withholding and Information Reporting. The
proceeds received from a taxable disposition of the Notes will be subject to information reporting unless you are an “exempt recipient”
and may also be subject to backup withholding at the rate specified in the Code if you fail to provide certain identifying information
(such as an accurate taxpayer number, if you are a U.S. holder) or meet certain other conditions.
Amounts withheld under the backup withholding rules are not
additional taxes and may be refunded or credited against your U.S. federal income tax liability, provided the required information is
furnished to the IRS.
U.S. Federal Estate Tax Treatment of Non-U.S. Holders.
A Note may be subject to U.S. federal estate tax if an individual non-U.S. holder holds the Note at the time of his or her death. The
gross estate of a non-U.S. holder domiciled outside the U.S. includes only property situated in the U.S. Individual non-U.S. holders should
consult their tax advisors regarding the U.S. federal estate tax consequences of holding the Notes at death.
Proposed Legislation. In 2007, legislation was introduced
in Congress that, if it had been enacted, would have required holders of Notes purchased after the bill was enacted to accrue interest
income over the term of the Notes despite the fact that there may be no interest payments over the term of the Notes.
Furthermore, in 2013, the House Ways and Means Committee
released in draft form certain proposed legislation relating to financial instruments. If it had been enacted, the effect of this legislation
generally would have been to require instruments such as the Notes to be marked to market on an annual basis with all gains and losses
to be treated as ordinary, subject to certain exceptions.
It is not possible to predict whether any similar or identical
bills will be enacted in the future, or whether any such bill would affect the tax treatment of your Notes. You are urged to consult your
tax advisor regarding the possible changes in law and their possible impact on the tax treatment of your Notes.
Both U.S. and non-U.S. holders are urged to consult
their tax advisors concerning the application of U.S. federal income tax laws to their particular situations, as well as any tax consequences
of the purchase, beneficial ownership and disposition of the Notes arising under the laws of any state, local, non-U.S. or other taxing
jurisdiction (including that of BNS).