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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-228614
(To Prospectus dated December 26, 2018, Prospectus Supplement dated December 26, 2018 and Product Prospectus Supplement STEPS-1 dated April 10, 2019) |
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793,642 Units $10 principal amount per unit CUSIP No. 06417P348  |
Pricing Date
Settlement Date Maturity Date |
April 25, 2019
May 2, 2019 May 8, 2020 |
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STEP Income Securities® Linked to the Common Stock of Lowe's Companies,
Inc.
◾ Maturity of approximately one year and one week
◾ Interest payable quarterly at the rate of 7.50% per year
◾ A payment of $0.452 per unit if the Underlying Stock increases to or above 107.50% of the Starting Value
◾ 1-to-1 downside exposure to decreases in the Underlying Stock, with up to 100.00% of your principal at risk
◾ All payments on the notes subject to the credit risk of The Bank of Nova Scotia
◾ In addition to the underwriting discount set forth below, the notes include a hedging-related charge of $0.075 per unit. See “Structuring the Notes”
◾ Limited secondary market liquidity, with no exchange listing
◾ The notes are unsecured debt securities and are not savings
accounts or insured deposits of a bank. The notes are not insured or guaranteed by the Canada Deposit Insurance Corporation (the “CDIC”), the U.S. Federal Deposit Insurance Corporation (the “FDIC”), or any other governmental agency of
Canada, the United States or any other jurisdiction
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The notes are being issued by The Bank of Nova Scotia (“BNS”). There are important differences between the
notes and a conventional debt security, including different investment risks and certain additional costs. See “Risk Factors” beginning on page TS-6 of this term sheet and beginning on page PS-6 of product prospectus supplement STEPS-1.
The initial estimated value of the notes as of the pricing date is
$9.67 per unit, which is less than the public offering price listed below. See “Summary” on the following page,
“Risk Factors” beginning on page TS-6 of this term sheet and “Structuring the Notes” on page TS-11 of this term sheet for additional information. The actual value of your notes at any time will reflect many factors and cannot be predicted with
accuracy.
_________________________
None of the U.S. Securities and Exchange Commission (the “SEC”), any state securities commission, or any other regulatory
body has approved or disapproved of these securities or determined if this Note Prospectus (as defined below) is truthful or complete. Any representation to the contrary is a criminal offense.
_________________________
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Per Unit
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Total
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Public offering price(1)
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$10.000
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$7,936,420.00
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Underwriting discount(2)
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$ 0.175
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$138,887.35
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Proceeds, before expenses, to BNS
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$ 9.825
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$7,797,532.65
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(1)
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Plus accrued interest from the scheduled settlement date, if settlement occurs after that date.
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The notes:
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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Merrill Lynch & Co.
April 25, 2019
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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Summary
The STEP Income Securities® Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 (the “notes”) are our senior unsecured debt securities. The notes are not
guaranteed or insured by the CDIC or the FDIC, and are not, either directly or indirectly, an obligation of any third party. The notes are not
bail-inable debt securities (as defined in the prospectus). The notes will rank equally with all of our other unsecured senior debt. Any payments due on the
notes, including any repayment of principal, will be subject to the credit risk of BNS. The notes provide quarterly interest payments. Additionally, if the Ending Value of the Underlying Stock, which is the common stock of Lowe’s
Companies, Inc., is at or above the Step Level, the notes will also provide a payment of $0.452 per unit at maturity. If the Ending Value is less than the Step Level, the Redemption Amount will not be greater than your principal amount. If the
Ending Value is less than the Starting Value, the Redemption Amount will be less than the principal amount of your notes, and may be as low as zero. Payments on the notes, including the amount you receive at maturity, will be calculated based on the
$10 principal amount per unit and will depend on the performance of the Underlying Stock, subject to our credit risk. See “Terms of the Notes” below.
The economic terms of the notes (including the Step Payment) are based on our internal funding rate, which is the rate we would pay to borrow funds through the
issuance of market-linked notes, and the economic terms of certain related hedging arrangements. Our internal funding rate is typically lower than the rate we would pay when we issue conventional fixed rate debt securities. This difference in
funding rate, as well as the underwriting discount and the hedging related charge described below, reduced the economic terms of the notes to you and the initial estimated value of the notes on the pricing date. Due to these factors, the public
offering price you pay to purchase the notes is greater than the initial estimated value of the notes.
On the cover page of this term sheet, we have provided the initial estimated value for the notes. This estimated value was determined by reference to our
internal pricing models, which take into consideration certain factors, such as our internal funding rate on the pricing date and our assumptions about market parameters. For more information about the initial estimated value and the structuring of
the notes, see “Structuring the Notes” on page TS-11.
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Terms of the Notes
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Redemption Amount Determination
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Issuer:
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The Bank of Nova Scotia (“BNS”)
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In addition to interest payable, on the maturity date, you will receive a cash payment per unit determined as follows:
 |
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Principal Amount:
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$10.00 per unit
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Term:
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Approximately one year and one week
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Underlying Stock:
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Common stock of Lowe's Companies, Inc. (the “Underlying Company”) (NYSE symbol: LOW)
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Starting Value:
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113.64 (The Volume Weighted Average Price on the pricing date, rounded to two decimal places).
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Volume Weighted Average Price:
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The volume weighted average price (rounded to two decimal places) shown on page “AQR” on Bloomberg L.P. for trading in the Underlying Stock taking place
from approximately 9:30 a.m. to 4:02 p.m. on all U.S. exchanges.
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Ending Value:
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The Closing Market Price of the Underlying Stock on the valuation date, multiplied by the Price Multiplier. The valuation date is subject to postponement
in the event of Market Disruption Events, as described beginning on page PS-20 of product prospectus supplement STEPS-1.
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Valuation Date:
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May 1, 2020
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Interest Rate:
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7.50% per year, payable quarterly
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Interest Payment Dates:
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August 8, 2019, November 8, 2019, February 8, 2020 and the maturity date
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Step Payment:
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$0.452 per unit, which represents a return of 4.52% of the principal amount.
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Step Level:
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122.16 (107.50% of the Starting Value, rounded to two decimal places).
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Threshold Value:
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113.64 (100.00% of the Starting Value).
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Price Multiplier:
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1, subject to adjustment for certain corporate events relating to the Underlying Stock described beginning on page PS-21 of product prospectus supplement
STEPS-1.
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Fees and Charges:
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The underwriting discount of $0.175 per unit listed on the cover page and the hedging related charge of $0.075 per unit described in “Structuring the
Notes” on page TS-11.
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Calculation Agent:
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Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”).
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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The terms and risks of the notes are contained in this term sheet and in the following:
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◾
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Product prospectus supplement STEPS-1 dated April 10, 2019:
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◾
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Prospectus supplement dated December 26, 2018:
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◾
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Prospectus dated December 26, 2018:
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These documents (together, the “Note Prospectus”) have been filed as part of a registration statement with the SEC, which may,
without cost, be accessed on the SEC website as indicated above or obtained from MLPF&S by calling 1-800-294-1322. Before you invest, you should read the Note Prospectus, including this term sheet, for information about us and this offering. Any
prior or contemporaneous oral statements and any other written materials you may have received are superseded by the Note Prospectus. Capitalized terms used but not defined in this term sheet have the meanings set forth in product prospectus supplement
STEPS-1. Unless otherwise indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,” or similar references are to BNS.
Investor Considerations
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You may wish to consider an investment in the notes if:
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The notes may not be an appropriate investment for you if:
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◾ You anticipate that the Ending Value will be greater than or equal to the Starting
Value.
◾ You seek interest payments on your investment.
◾ You accept that the maximum return on the notes is limited to the sum of the quarterly interest payments and the Step Payment, if any.
◾ You accept that your investment may result in a loss, which could be significant, if the Ending Value is below the Starting Value.
◾ You are willing to forgo dividends or other benefits of owning the Underlying Stock.
◾ You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for the notes, if any, will be
affected by various factors, including our actual and perceived creditworthiness, our internal funding rate and fees and charges on the notes.
◾ You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.
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◾ You anticipate that the Ending Value will be less than the Starting Value.
◾ You anticipate that the price of the Underlying Stock will increase substantially and do not want a payment at maturity that is limited to the Step
Payment.
◾ You seek principal repayment or preservation of capital.
◾ In addition to interest payments, you seek an additional guaranteed return above the principal amount.
◾ You seek to receive dividends or other distributions paid on the Underlying Stock.
◾ You seek an investment for which there will be a liquid secondary market.
◾ You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.
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We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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Hypothetical Payments at Maturity
The following examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical payments on the notes. The actual amount you receive and the resulting return will depend on the actual Starting Value, Threshold Value, Ending Value, Step Level and the term of your investment. The following
examples do not take into account any tax consequences from investing in the notes. These examples are based on:
1) a Starting Value of 100.00;
2) a Threshold Value of 100.00;
3) a Step Level of 107.50;
4) the Step Payment of $0.452 per unit;
5) the term of the notes from May 2, 2019 to May 8, 2020; and
6) the Interest Rate of 7.50% per year.
The hypothetical Starting Value of 100.00
used in these examples has been chosen for illustrative purposes only. The actual Starting Value is 113.64, which was the Volume Weighted Average Price on the pricing date. For recent actual prices of the Underlying Stock, see “The Underlying Stock”
section below. In addition, all payments on the notes are subject to issuer credit risk.
Example 1
The Ending Value is 115.00 (115.00% of the Starting Value)
The Ending Value is greater than the Step Level. Consequently, in addition to the quarterly interest payments, you will receive on the maturity
date the principal amount of your notes plus the Step Payment of $0.452 per unit. The Redemption Amount per unit on the maturity date will therefore be equal to $10.452 per unit ($10.00 plus the Step Payment of $0.452 per unit).
Example 2
The Ending Value is 105.00 (105.00% of the Starting Value)
The Ending Value is greater than the Starting Value and the Threshold Value but below the Step Level. Consequently, you will receive the
quarterly interest payments, but you will not receive the Step Payment on the maturity date. The Redemption Amount per unit on the maturity date will therefore be equal to $10.00.
Example 3
The Ending Value is 70.00 (70.00% of the Starting Value)
The Ending Value is less than the Starting Value and the Threshold Value. Consequently, you will receive the quarterly interest payments, but you
will not receive the Step Payment on the maturity date, and you will participate on a 1-for-1 basis in the decrease in the price of the Underlying Stock. The Redemption Amount per unit will equal:
On the maturity date, you will receive the Redemption Amount per unit of $7.00.
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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Summary of the Hypothetical Examples
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Example 1
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Example 2
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Example 3
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The Ending Value is greater than or equal to the Step Level
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The Ending Value is less than the Step Level but greater than or equal to the Starting Value
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The Ending Value is less than the Starting Value and the Threshold Value
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Starting Value
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100.00
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100.00
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100.00
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Ending Value
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115.00
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105.00
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70.00
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Step Level
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107.50
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107.50
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107.50
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Threshold Value
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100.00
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100.00
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100.00
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Interest Rate (per year)
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7.50%
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7.50%
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7.50%
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Step Payment
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$0.452
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$0.000
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$0.000
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Redemption Amount per Unit
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$10.452
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$10.000
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$7.000
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Total Return of the Underlying Stock(1)
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16.72%
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6.72%
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-28.28%
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Total Return on the Notes(2)
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12.145%
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7.625%
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-22.375%
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(1)
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The total return of the Underlying Stock may be rounded for ease of analysis and assumes:
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(a)
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the percentage change in the price of the Underlying Stock from the Starting Value to the Ending Value;
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(b)
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a constant dividend yield of 1.69% per year; and
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(c)
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no transaction fees or expenses.
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(2)
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The total return on the notes may be rounded for ease of analysis, includes interest paid on the notes from May 2, 2019 to May 8, 2020.
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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Risk Factors
There are important differences between the notes and a conventional debt security. An investment in the notes involves
significant risks, including those listed below. You should carefully review the more detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page PS-6 of product prospectus supplement STEPS-1, page S-2 of the
prospectus supplement, and page 5 of the prospectus identified above. We also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
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◾
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Depending on the performance of the Underlying Stock as measured shortly before the maturity date, your investment may result in a loss;
there is no guaranteed return of principal.
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◾
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Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of
comparable maturity.
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◾
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Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the
value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your entire investment.
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◾
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You will not receive a Step Payment at maturity unless the Ending Value is greater than or equal to the Step Level.
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◾
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Your investment return is limited to the return represented by the periodic interest payments over the term of the notes and the Step
Payment, if any, and may be less than a comparable investment directly in the Underlying Stock.
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◾
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Our initial estimated value of the notes is lower than the public offering price of the notes. Our initial estimated value of the notes
is only an estimate. The public offering price of the notes exceeds our initial estimated value because it includes costs associated with selling and structuring the notes, as well as hedging our obligations under the notes with a third
party, which may include MLPF&S or one of its affiliates. These costs include the underwriting discount and an expected hedging related charge, as further described in “Structuring the Notes” on page TS-11.
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◾
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Our initial estimated value of the notes does not represent future values of the notes and may differ from others’ estimates. Our initial
estimated value of the notes is determined by reference to our internal pricing models when the terms of the notes are set. These pricing models consider certain factors, such as our internal funding rate on the pricing date, the expected
term of the notes, market conditions and other relevant factors existing at that time, and our assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and
assumptions could provide valuations for the notes that are different from our initial estimated value. In addition, market conditions and other relevant factors in the future may change, and any of our assumptions may prove to be incorrect.
On future dates, the market value of the notes could change significantly based on, among other things, the performance of the Underlying Stock, changes in market conditions, our creditworthiness, interest rate movements and other relevant
factors. These factors, together with various credit, market and economic factors over the term of the notes, are expected to reduce the price at which you may be able to sell the notes in any secondary market and will affect the value of
the notes in complex and unpredictable ways. Our initial estimated value does not represent a minimum price at which we or any agents would be willing to buy your notes in any secondary market (if any exists) at any time.
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◾
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Our initial estimated value is not determined by reference to credit spreads or the borrowing rate we would pay for our conventional
fixed-rate debt securities. The internal funding rate used in the determination of our initial estimated value of the notes generally represents a discount from the credit spreads for our conventional fixed-rate debt securities and the
borrowing rate we would pay for our conventional fixed-rate debt securities. If we were to use the interest rate implied by the credit spreads for our conventional fixed-rate debt securities, or the borrowing rate we would pay for our
conventional fixed-rate debt securities, we would expect the economic terms of the notes to be more favorable to you. Consequently, our use of an internal funding rate for the notes would have an adverse effect on the economic terms of the
notes, the initial estimated value of the notes on the pricing date, and the price at which you may be able to sell the notes in any secondary market.
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◾
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A trading market is not expected to develop for the notes. Neither we nor MLPF&S is obligated to make a market for, or to repurchase,
the notes. There is no assurance that any party will be willing to purchase your notes at any price in any secondary market.
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◾
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Our business, hedging and trading activities, and those of MLPF&S and our respective affiliates (including trades in the Underlying
Stock) and any hedging and trading activities we, MLPF&S or our respective affiliates engage in for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with you.
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◾
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The Underlying Company will have no obligations relating to the notes, and neither we nor MLPF&S will perform any due diligence
procedures with respect to the Underlying Company in connection with this offering.
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◾
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You will have no rights of a holder of the Underlying Stock, and you will not be entitled to receive the Underlying Stock or dividends or
other distributions by the Underlying Company.
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◾
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While we, MLPF&S or our respective affiliates may from time to time own securities of the Underlying Company, we, MLPF&S and our
respective affiliates do not control the Underlying Company, and have not verified any disclosure made by the Underlying Company.
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◾
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The Redemption Amount will not be adjusted for all corporate events that could affect the Underlying Stock. See “Description of the Notes—Anti-Dilution Adjustments” beginning on page PS-21 of
product prospectus supplement STEPS-1.
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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◾
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There may be potential conflicts of interest involving the calculation agent, which is MLPF&S. We have the right to appoint and
remove the calculation agent.
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◾
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The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See “Summary of U.S.
Federal Income Tax Consequences” below.
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◾
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The conclusion that no portion of the interest paid or credited or deemed to be paid or credited on a note will be “Participating Debt
Interest” subject to Canadian withholding tax is based in part on the current published administrative position of the CRA. There cannot be any assurance that CRA’s current published administrative practice will not be subject to change,
including potential expansion in the current administrative interpretation of Participating Debt Interest subject to Canadian withholding tax. If, at any time, the interest paid or credited or deemed to be paid or credited on a note is
subject to Canadian withholding tax, you will receive an amount that is less than the Redemption Amount. You should consult your own adviser as to the potential for such withholding and the potential for reduction or refund of part or all of
such withholding, including under any bilateral Canadian tax treaty the benefits of which you may be entitled. For a discussion of the Canadian federal income tax consequences of investing in the notes, see “Summary of Canadian Federal Income
Tax Consequences” below, “Canadian Taxation—Debt Securities” on page 62 of the prospectus dated December 26, 2018, and “Supplemental Discussion of Canadian Federal Income Tax Consequences” on page PS-30 of the product prospectus supplement
STEPS-1.
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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The Underlying Stock
We have derived the following information from publicly available documents. We have not independently verified the accuracy or completeness of the
following information. Lowe's Companies, Inc. is a home improvement retailer that distributes building materials and supplies through stores in the United States. The Company offers a complete line of products and services for home decorating,
maintenance, repair, remodeling and property maintenance.
Because the Underlying Stock is registered under the Securities Exchange Act of 1934, the Underlying Company is required to file periodically
certain financial and other information specified by the SEC. Information provided to or filed with the SEC by the Underlying Company can be located at the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549 or
through the SEC’s website at http://www.sec.gov by reference to SEC CIK number 60667.
This term sheet relates only to the notes and does not relate to the Underlying Stock or to any other securities of the Underlying Company. None
of us, MLPF&S, or any of our respective affiliates has participated or will participate in the preparation of the Underlying Company’s publicly available documents. None of us, MLPF&S, or any of our respective affiliates has made any due
diligence inquiry with respect to the Underlying Company in connection with the offering of the notes. None of us, MLPF&S, or any of our respective affiliates makes any representation that the publicly available documents or any other publicly
available information regarding the Underlying Company are accurate or complete. Furthermore, there can be no assurance that all events occurring prior to the date of this term sheet, including events that would affect the accuracy or completeness of
these publicly available documents that would affect the trading price of the Underlying Stock, have been or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material future events concerning
the Underlying Company could affect the price of the Underlying Stock and therefore could affect your return on the notes. The selection of the Underlying Stock is not a recommendation to buy or sell the Underlying Stock.
The Underlying Stock trades on the New York Stock Exchange under the symbol “LOW.”
Historical Data
The following table shows the quarterly high and low Closing Market Prices of the Underlying Stock on its primary exchange from the first quarter
of 2008 through the pricing date. We obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. These historical trading prices may have been
adjusted to reflect certain corporate actions such as stock splits and reverse stock splits.
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High ($)
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Low ($)
|
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|
2008
|
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|
First Quarter
|
26.44
|
20.31
|
|
Second Quarter
|
26.27
|
20.75
|
|
Third Quarter
|
27.36
|
18.28
|
|
Fourth Quarter
|
23.23
|
16.82
|
|
2009
|
||
|
First Quarter
|
22.96
|
13.39
|
|
Second Quarter
|
21.50
|
18.18
|
|
Third Quarter
|
23.85
|
18.62
|
|
Fourth Quarter
|
24.17
|
19.45
|
|
2010
|
||
|
First Quarter
|
25.16
|
21.59
|
|
Second Quarter
|
28.22
|
20.42
|
|
Third Quarter
|
22.48
|
19.59
|
|
Fourth Quarter
|
25.68
|
21.05
|
|
2011
|
||
|
First Quarter
|
27.28
|
23.99
|
|
Second Quarter
|
27.09
|
22.05
|
|
Third Quarter
|
23.99
|
18.11
|
|
Fourth Quarter
|
25.96
|
18.98
|
|
2012
|
||
|
First Quarter
|
31.38
|
25.52
|
|
Second Quarter
|
32.10
|
25.49
|
|
Third Quarter
|
30.26
|
24.85
|
|
Fourth Quarter
|
36.09
|
30.29
|
|
2013
|
||
|
First Quarter
|
39.79
|
34.76
|
|
Second Quarter
|
43.23
|
37.32
|
|
Third Quarter
|
48.98
|
41.06
|
|
Fourth Quarter
|
51.95
|
46.50
|
|
STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
|
|
2014
|
||
|
First Quarter
|
50.82
|
44.90
|
|
Second Quarter
|
49.52
|
44.63
|
|
Third Quarter
|
54.15
|
47.20
|
|
Fourth Quarter
|
68.80
|
51.21
|
|
2015
|
||
|
First Quarter
|
75.61
|
66.08
|
|
Second Quarter
|
75.06
|
66.97
|
|
Third Quarter
|
74.37
|
66.25
|
|
Fourth Quarter
|
77.61
|
69.79
|
|
2016
|
||
|
First Quarter
|
76.02
|
63.40
|
|
Second Quarter
|
80.76
|
75.01
|
|
Third Quarter
|
82.94
|
70.81
|
|
Fourth Quarter
|
76.40
|
65.63
|
|
2017
|
||
|
First Quarter
|
83.53
|
70.95
|
|
Second Quarter
|
86.06
|
76.07
|
|
Third Quarter
|
79.94
|
72.56
|
|
Fourth Quarter
|
92.94
|
76.65
|
|
2018
|
||
|
First Quarter
|
107.40
|
83.77
|
|
Second Quarter
|
100.50
|
81.48
|
|
Third Quarter
|
116.84
|
94.87
|
|
Fourth Quarter
|
114.07
|
85.96
|
|
2019
|
||
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First Quarter
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109.47
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91.17
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Second Quarter (through the pricing date)
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117.18
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108.93
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This historical data on the Underlying Stock is not necessarily indicative of the future performance of the Underlying Stock
or what the value of the notes may be. Any historical upward or downward trend in the price per share of the Underlying Stock during any period set forth above is not an indication that the price per share of the Underlying Stock is more or less
likely to increase or decrease at any time over the term of the notes.
Before investing in the notes, you should consult publicly available sources for the prices and trading pattern of the Underlying Stock.
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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Supplement to the Plan of Distribution
Under our distribution agreement with MLPF&S, MLPF&S will purchase the notes from us as principal at the public offering price indicated on
the cover of this term sheet, less the indicated underwriting discount.
We will deliver the notes against payment therefor in New York, New York on a date that is greater than two business days following the pricing
date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to
trade the notes more than two business days prior to the settlement date will be required to specify alternative settlement arrangements to prevent a failed settlement.
The notes will not be listed on any securities exchange. In the original offering of the notes, the notes will be sold in minimum investment
amounts of 100 units. If you place an order to purchase the notes, you are consenting to MLPF&S acting as a principal in effecting the transaction for your account.
MLPF&S may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at
negotiated prices, and these prices will include MLPF&S’s trading commissions and mark-ups. MLPF&S may act as principal or agent in these market-making transactions; however, it is not obligated to engage in any such transactions. At
MLPF&S’s discretion, for a short, undetermined initial period after the issuance of the notes, MLPF&S may offer to buy the notes in the secondary market at a price that may exceed the initial estimated value of the notes. Any price offered by
MLPF&S for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the Underlying Stock and the remaining term of the notes. However, none of us, MLPF&S, or any of our respective
affiliates is obligated to purchase your notes at any price or at any time, and we cannot assure you that we, MLPF&S or any of our respective affiliates will purchase your notes at a price that equals or exceeds the initial estimated value of the
notes.
The value of the notes shown on your account statement produced by MLPF&S will be based on MLPF&S’s estimate of the value of the notes if
MLPF&S or another of its affiliates were to make a market in the notes, which it is not obligated to do. That estimate will be based upon the price that MLPF&S may pay for the notes in light of then-prevailing market conditions, and other
considerations, as mentioned above, and will include transaction costs. At certain times, this price may be higher than or lower than the initial estimated value of the notes.
The distribution of the Note Prospectus in connection with these offers or sales will be solely for the purpose of providing investors with the
description of the terms of the notes that was made available to investors in connection with their initial offering. Secondary market investors should not, and will not be authorized to, rely on the Note Prospectus for information regarding BNS or
for any purpose other than that described in the immediately preceding sentence.
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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Structuring the Notes
The notes are our unsecured senior debt securities, the return on which is linked to the performance of the Underlying Stock. As is the case for
all of our debt securities, including our market-linked notes, the economic terms of the notes reflect our actual or perceived creditworthiness at the time of pricing. The internal funding rate we use in pricing the market-linked note is typically
lower than the rate we would pay when we issue conventional fixed-rate debt securities of comparable maturity. This generally relatively lower internal funding rate, which is reflected in the economic terms of the notes, along with the fees and
charges associated with market-linked notes, resulted in the initial estimated value of the notes on the pricing date being less than their public offering price.
Payments on the notes, including the interest payments on the notes and the Redemption Amount, will be calculated based on the $10.00 principal
amount per unit. The Redemption Amount will depend on the performance of the Underlying Stock. In order to meet these payment obligations, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include
call options, put options or other derivatives) with MLPF&S or one of its affiliates. The terms of these hedging arrangements are determined by seeking bids from market participants, including MLPF&S and its affiliates, and take into account
a number of factors, including our creditworthiness, interest rate movements, the volatility of the Underlying Stock, the tenor of the notes and the tenor of the hedging arrangements. The economic terms of the notes and their initial estimated value
depend in part on the terms of these hedging arrangements.
MLPF&S has advised us that the hedging arrangements will include a hedging related charge of approximately $0.075 per unit, reflecting an
estimated profit to be credited to MLPF&S from these transactions. Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be realized by MLPF&S or
any third party hedge providers.
For further information, see “Risk Factors—General Risks Relating to the Notes” beginning on page PS-6 and “Use of Proceeds and Hedging” on page
PS-16 of product prospectus supplement STEPS-1.
MLPF&S Reorganization
The current business of MLPF&S is being reorganized into two affiliated broker-dealers: MLPF&S and a new broker-dealer, BofA Securities, Inc.
(“BofAS”). MLPF&S will be assigning its rights and obligations as selling agent for the notes under our distribution agreement to BofAS effective on the “Transfer Date”. Effective on the Transfer Date, BofAS will be the new legal entity for the
institutional services that are now provided by MLPF&S. As such, beginning on the Transfer Date, the institutional services currently being provided by MLPF&S, including acting as selling agent for the notes, acting as calculation agent for
the notes, acting as principal or agent in secondary market-making transactions for the notes and entering into hedging arrangements with respect to the notes, are expected to be provided by BofAS. Accordingly, references to MLPF&S in this term
sheet as such references relate to MLPF&S’s institutional services, such as those described above, should be read as references to BofAS to the extent these services are to be performed on or after the Transfer Date.
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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Summary of Canadian Federal Income Tax Consequences
An investor should read carefully the description of principal Canadian federal income tax considerations under “Canadian Taxation” in the
accompanying prospectus relevant to a holder (as defined on page 20 of the prospectus) owning debt securities, and the description of principal Canadian federal income tax considerations under “Supplemental Discussion of Canadian Federal Income Tax
Consequences” in the applicable product prospectus supplement.
Summary of U.S. Federal Income Tax Consequences
The following is a general description of certain U.S. federal tax considerations relating to the notes. Prospective purchasers of the notes
should consult their tax advisors as to the consequences under the tax laws of the country of which they are residents for tax purposes and the tax laws of the U.S. of acquiring, holding and disposing of the notes and receiving payments under the
notes. This summary is based upon the law as in effect on the date of this document and is subject to any change in law that may take effect after such date. We urge you to read the more detailed discussion in the “Material U.S. Federal Income Tax
Consequences” section beginning on page PS-31 of product prospectus supplement STEPS-1.
No statutory, regulatory, judicial or administrative authority directly discusses how the notes should be treated for U.S. federal income
tax purposes. As a result, the U.S. federal income tax consequences of your investment in the notes are uncertain. Accordingly, we urge you to consult your tax advisor as to the tax consequences of your investment in the notes (and of having agreed
to the required tax treatment of your notes described below) and as to the application of state, local or other tax laws to your investment in your notes and the possible effects of changes in federal or other tax laws.
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 income-bearing prepaid derivative contracts with respect to the
Underlying Stock. We intend to treat interest payments on the notes (including any interest payments paid on or with respect to the maturity date) as ordinary income includable in income by you in accordance with your regular method of accounting for
U.S. federal income tax purposes. You are urged to consult your tax advisor concerning the significance, and the potential impact, of the above considerations.
If the notes are so treated, you should generally realize gain or loss on the taxable disposition of your notes in an amount equal to the
difference between the amount realized (other than pursuant to a periodic interest payment or any amount attributable to any accrued but unpaid periodic interest payments) at such time and your tax basis in the notes. Such gain or loss should
generally be long-term capital gain or loss if you have held your notes for a period of greater than one year (otherwise, such gain or loss would be short-term capital gain or loss if held for one year or less). 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 an interest payment date, but that could be attributed to an expected periodic interest payment, could be treated as
ordinary income. You should consult your tax advisor regarding this risk.
However, it is possible that the Internal Revenue Service (the “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 of your notes is determined, even though you will not receive any amounts from the issuer in respect of your notes prior to the maturity of your notes. In such case, you may be
treated as having a holding period in respect of your notes ending prior to the maturity date for your notes, and such holding period may be treated as less than one year even if you receive cash on the maturity date of your notes at a time that is
more than one year after the beginning of your holding period.
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, such that the timing and character of your income from the notes could differ materially and adversely from the
treatment described above.
Contingent Payment Debt Instrument. It is possible that the notes could be treated as debt instruments subject to the special tax rules governing contingent payment debt instruments. If the
notes are so treated, you would be required to accrue interest income as original issue discount over the term of your notes based upon the yield at which we would issue a non-contingent fixed-rate debt instrument with other terms and conditions
similar to that of your notes, with the result that your taxable income in any year could differ significantly from the periodic interest payments you receive in a particular year because such comparable yield would consist of periodic interest
payments, the principal amount, noncontingent payments and projections for any contingent payments, including any step payment. You would recognize gain or loss upon the taxable disposition of your notes in an amount equal to the difference, if any,
between the amount you receive at such time and your adjusted basis in your notes. In general, your adjusted basis in your notes would be equal to the amount you paid for your notes, increased by the amount of interest you previously accrued with
respect to your note and decreased by any contingent payments or periodic interest payments. Any gain you recognize upon the taxable disposition of your notes would be ordinary income and any loss recognized by you at such time would be ordinary loss
to the extent of interest you included in income in the current or previous taxable years in respect of your notes, and thereafter, would be capital loss. If you recognize a loss above certain thresholds, you could be required to file a disclosure
statement.
If the rules governing contingent payment debt instruments apply, special rules would apply to a person who purchases notes at a price other
than the adjusted issue price as determined for tax purposes.
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
|
Possible Change in Law. 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 U.S. Treasury Department (the “Treasury”) are actively considering whether the 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 such
instruments would ultimately be required to accrue income currently and this could be applied on a retroactive basis. The IRS and the Treasury are also considering other relevant issues, including whether additional gain or loss from such
instruments should be treated as ordinary or capital, whether non-U.S. holders of such instruments should be subject to withholding tax on any deemed income accruals, and whether the special “constructive ownership rules” under Section 1260 of the
Internal Revenue Code of 1986, as amended (the “Code”) should be applied to such instruments. You are urged to consult your tax advisor 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 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 advisors with respect to 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.
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.
Non-U.S. Holders. If you are a non-U.S.
holder, subject to Section 871(m) of the Code and FATCA, discussed below, you should generally not be subject to U.S. withholding tax with respect to payments on your notes or to generally applicable information reporting and backup withholding
requirements with respect to payments on your notes if you comply with certain certification and identification requirements as to your non-U.S. status including providing us (and/or the applicable withholding agent) a properly executed and fully
completed applicable IRS Form W-8. Subject to Section 897 of the Code and Section 871(m) of the Code, discussed below, gain 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 you in the U.S., (ii) you are a non-resident alien individual and are present in the U.S. for 183 days or more during the taxable year of such taxable disposition and certain other conditions are
satisfied or (iii) you have certain other present or former connections with the U.S.
Section 897. We will not attempt to ascertain whether the Underlying Stock 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 the Underlying Stock issuer 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 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 the Underlying Stock issuer 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. 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, 2021.
Based on our determination that the notes are not “delta-one”
with respect to the Underlying Stock, 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 made upon issuance of the notes. If withholding is required,
we will not make payments of any additional amounts.
Nevertheless, after issuance, it is possible that your notes
could be deemed to be reissued for tax purposes upon the occurrence of certain events affecting the Underlying Stock 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 equivalent payments. 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,
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
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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.
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.
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 or other fixed or determinable annual or periodical gain, profits, and income, and on the gross proceeds from a disposition of property of a type that 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 (and/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.
Proposed Legislation. In 2007, legislation was introduced in Congress that, if it had been enacted, would have required holders of an instrument similar to the notes purchased after the bill was enacted to
accrue interest income over the term of such notes even if such notes provide that there will be no interest payments over their term.
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 be 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 should consult
their tax advisors regarding the U.S. federal income tax consequences of an investment in the notes, as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction (including that of BNS).
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STEP Income Securities®
Linked to the Common Stock of Lowe’s Companies, Inc., due May 8, 2020 |
|
Validity of the Notes
In the opinion of Cadwalader, Wickersham & Taft LLP, as special counsel to the issuer, when the notes offered by this term
sheet have been executed and issued by the issuer and authenticated by the trustee pursuant to the indenture and delivered, paid for and sold as contemplated herein, the notes will be valid and binding obligations of the issuer, enforceable against
the issuer in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, receivership or other laws relating to or affecting creditors’ rights generally, and to general principles
of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). This opinion is given as of the date hereof and is limited to the laws of the State of New York. Insofar as this opinion involves matters governed by
Canadian law, Cadwalader, Wickersham & Taft LLP has assumed, without independent inquiry or investigation, the validity of the matters opined on by Osler, Hoskin & Harcourt LLP, Canadian legal counsel for the issuer, in its opinion
expressed below. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the indenture and, with respect to the Securities, authentication of the Securities and the genuineness of
signatures and certain factual matters, all as stated in the opinion of Cadwalader, Wickersham & Taft LLP dated November 30, 2018 filed with the Securities and Exchange Commission as Exhibit 5.3 to the Registration Statement on Form F-3 on
November 30, 2018.
In the opinion of Osler, Hoskin & Harcourt LLP, the issue and sale of the notes has been duly authorized by all necessary
corporate action of BNS in conformity with the Indenture, and when the notes have been duly executed, authenticated and issued in accordance with the Indenture, the notes will be validly issued and, to the extent validity of the notes is a matter
governed by the laws of the Province of Ontario, or the laws of Canada applicable therein, and will be valid obligations of BNS, subject to the following limitations (i) the enforceability of the Indenture may be limited by the Canada Deposit
Insurance Corporation Act (Canada), the Winding-up and Restructuring Act (Canada) and bankruptcy, insolvency, reorganization, receivership, moratorium, arrangement or winding-up laws or other similar laws affecting the enforcement of creditors’
rights generally; (ii) the enforceability of the Indenture may be limited by equitable principles, including the principle that equitable remedies such as specific performance and injunction may only be granted in the discretion of a court of
competent jurisdiction; (iii) pursuant to the Currency Act (Canada) a judgment by a Canadian court must be awarded in Canadian currency and that such judgment may be based on a rate of exchange in existence on a day other than the day of payment;
and (iv) the enforceability of the Indenture will be subject to the limitations contained in the Limitations Act, 2002 (Ontario), and such counsel expresses no opinion as to whether a court may find any provision of the Indenture to be
unenforceable as an attempt to vary or exclude a limitation period under that Act. This opinion is given as of the date hereof and is limited to the laws of the Province of Ontario and the federal laws of Canada applicable thereto. In addition,
this opinion is subject to customary assumptions about the Trustees’ authorization, execution and delivery of the Indenture and the genuineness of signatures and certain factual matters, all as stated in the letter of such counsel dated November
30, 2018, which has been filed as Exhibit 5.2 to BNS’s Form F-3 filed with the SEC on November 30, 2018.
Where You Can Find More Information
We have filed a registration statement (including a product prospectus supplement, a prospectus supplement, and a prospectus) with the SEC for the
offering to which this term sheet relates. Before you invest, you should read the Note Prospectus, including this term sheet, and the other documents that we have filed with the SEC, for more complete information about us and this offering. You may
get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, we, any agent, or any dealer participating in this offering will arrange to send you these documents if you so request by calling MLPF&S toll-free
at 1-800-294-1322.
Market-Linked Investments Classification
MLPF&S classifies certain market-linked investments (the “Market-Linked Investments”) into categories, each with different
investment characteristics. The following description is meant solely for informational purposes and is not intended to represent any particular Enhanced Income Market-Linked Investment or guarantee any performance.
Enhanced Income Market-Linked Investments are short- to medium-term market-linked notes that offer you a way to enhance your
income stream, either through variable or fixed-interest coupons, an added payout at maturity based on the performance of the linked asset, or both. In exchange for receiving current income, you will generally forfeit upside potential on the linked
asset. Even so, the prospect of higher interest payments and/or an additional payout may equate to a higher return potential than you may be able to find through other fixed-income securities. Enhanced Income Market-Linked Investments generally do
not include market downside protection. The degree to which your principal is repaid at maturity is generally determined by the performance of the linked asset. Although enhanced income streams may help offset potential declines in the asset, you can
still lose part or all of your original investment.
“STEP Income Securities®” and “STEPS®” are registered service marks of Bank of America Corporation, the parent company of MLPF&S.