The information in this Preliminary Pricing Supplement is not complete and may be
changed. We may not sell these notes until the Pricing Supplement is delivered in final form. We are not selling these notes, nor are we soliciting offers to buy these notes, in any State where such offer or sale is not permitted.
Subject to Completion. Dated January 3, 2019
|
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-228614
|
The Bank of Nova Scotia
$ Digital Notes
Linked to the EURO STOXX 50® Index Due [●]
The notes will not bear interest. The amount that you will be paid on your notes at maturity (expected to be the 2nd business day after the valuation date) is based on
the performance of the EURO STOXX 50® Index (the reference asset) as measured from the trade date to and including the valuation date (expected to be between
24 and 27 months after the trade date). If the final level on the valuation date is equal to or greater than the initial level (set on the trade date), the return on your notes will be positive. If the final level on the valuation date is less than the initial level, the return on your notes will be negative and you may lose your entire principal amount. Specifically, you will lose 1% for
every 1% negative percentage change. Any payment on your notes is subject to the creditworthiness of The Bank of Nova Scotia.
To determine your payment at maturity, we will first calculate the percentage change, which is the percentage
increase or decrease in the final level from the initial level. At maturity, for each $1,000 principal amount of your notes:
|
●
|
if the final level is equal to or greater than
the initial level (the percentage change is zero or positive), you will receive the greater of (i) the threshold settlement amount (expected to be between $1,370.30 and $1,434.40) and (ii) the sum of (a) $1,000 plus (b) the product of (1) $1,000 times (2) the percentage change; or
|
|
●
|
if the final level is less than
the initial level (the percentage change is negative), you will receive an amount in cash equal to the sum of (i) $1,000 plus (ii) the product of (a) $1,000 times (b) the percentage change.
|
Following the determination of the initial level, the amount you will be paid on your notes at maturity will not be affected by the closing level of the reference asset on any day other than the valuation date.In addition, no payments on your notes will be made prior to maturity.
Investment in the notes involves certain risks. You should refer to “Additional Risks” beginning on page P-14 of this pricing supplement
and “Additional Risk Factors Specific to the Notes” beginning on page PS-6 of the accompanying product prospectus supplement and “Risk Factors” beginning on page S-2 of the accompanying prospectus supplement and on page 5 of the accompanying
prospectus.
The initial estimated value of your notes at the time the terms of your notes are set on the trade date is expected to be between $956.00 and $976.00 per $1,000
principal amount, which will be less than the original issue price of your notes listed below. See “Additional Information Regarding Estimated Value of the Notes” on the following page and “Additional Risks” beginning on page P-14 of
this document for additional information. The actual value of your notes at any time will reflect many factors and cannot be predicted with accuracy.
|
|
Per Note
|
Total
|
|
Original Issue Price*
|
100.00%
|
$
|
|
Underwriting commissions*
|
Up to 2.00%
|
$
|
|
Proceeds to The Bank of Nova Scotia
|
At least 98.00%
|
$
|
* The original issue price for certain investors will be between 98.00% and 100.00% of the
principal amount, reflecting a foregone underwriting discount with respect to such notes; see “Supplemental Plan of Distribution (Conflicts of Interest)” on page P-29.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THE NOTES OR PASSED UPON THE ACCURACY OR THE ADEQUACY OF THIS PRICING SUPPLEMENT, THE ACCOMPANYING PROSPECTUS, ACCOMPANYING PROSPECTUS SUPPLEMENT OR ACCOMPANYING PRODUCT PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE NOTES ARE NOT INSURED BY THE CANADA DEPOSIT INSURANCE CORPORATION (THE “CDIC”) PURSUANT TO THE
CANADA DEPOSIT INSURANCE CORPORATION ACT (THE “CDIC ACT”) OR THE U.S. FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OF CANADA, THE UNITED STATES OR ANY OTHER JURISDICTION.
Scotia Capital (USA) Inc.
Pricing Supplement dated January , 2019
The Digital Notes Linked to the EURO STOXX 50® Index Due [l]
(the “notes”) offered hereunder are unsubordinated and unsecured obligations of The Bank of Nova Scotia (the “Bank”) and are subject to investment risks including possible loss of the principal amount invested due to the negative performance of the
reference asset and the credit risk of The Bank of Nova Scotia. As used in this pricing supplement, the “Bank,” “we,” “us” or “our” refers to The Bank of Nova Scotia. The notes will not be listed on any U.S. securities exchange or automated
quotation system.
The return on your notes will relate to the price return of the reference asset and will not include a total return
or dividend component. The notes are derivative products based on the performance of the reference asset. The notes do not constitute a direct investment in any of the shares, units or other securities represented by the reference asset. By
acquiring the notes, you will not have a direct economic or other interest in, claim or entitlement to, or any legal or beneficial ownership of any such share, unit or security and will not have any rights as a shareholder, unitholder or other
security holder of any of the issuers including, without limitation, any voting rights or rights to receive dividends or other distributions.
Scotia Capital (USA) Inc. (“SCUSA”), our affiliate, will purchase the notes from us for distribution to one or more
registered broker dealers. SCUSA or any of its affiliates or agents may use this pricing supplement in market-making transactions in notes after their initial sale. Unless we, SCUSA or another of our affiliates or agents selling such notes to you
informs you otherwise in the confirmation of sale, this pricing supplement is being used in a market-making transaction. See “Supplemental Plan of Distribution (Conflicts of Interest)” in this pricing supplement and “Supplemental Plan of
Distribution (Conflicts of Interest)” on page PS-36 of the accompanying product prospectus supplement.
The original issue price, commissions and proceeds to the Bank listed above relate to the notes we issue initially.
We may decide to sell additional notes after the date of this pricing supplement, at original issue prices and with commissions and proceeds to the Bank that differ from the amounts set forth above. The return (whether positive or negative) on your
investment in the notes will depend in part on the original issue price you pay for such notes.
Additional Information Regarding Estimated Value of the Notes
On the cover page of this pricing supplement, the Bank has provided the initial estimated value range for the notes.
This range of estimated values was determined by reference to the Bank’s internal pricing models, which take into consideration certain factors, such as the Bank’s internal funding rate on the trade date and the Bank’s assumptions about market
parameters. For more information about the initial estimated value, see “Additional Risks” beginning on page P-14.
The economic terms of the notes (including the threshold settlement amount) are based on the Bank’s internal funding
rate, which is the rate the Bank would pay to borrow funds through the issuance of similar market-linked notes, any underwriting discount and the economic terms of certain related hedging arrangements. Due to these factors, the original issue price
you pay to purchase the notes will be greater than the initial estimated value of the notes. The Bank’s internal funding rate is typically lower than the rate the Bank would pay when it issues conventional fixed rate debt securities as discussed
further under “Additional Risks — Neither the Bank’s nor SCUSA’s estimated value of the notes at any time is determined by reference to credit spreads or the borrowing rate the Bank would pay for its conventional fixed-rate debt securities”. The
Bank’s use of its internal funding rate reduces the economic terms of the notes to you.
The value of your notes at any time will reflect many factors and cannot be predicted; however, the price (not
including SCUSA’s customary bid and ask spreads) at which SCUSA would initially buy or sell notes in the secondary market (if SCUSA makes a market, which it is not obligated to do) is equal to approximately SCUSA’s estimate of the market value of
your notes on the trade date, based on its pricing models and taking into account the Bank’s internal funding rate, plus an additional amount (initially equal to $ per $1,000 principal amount).
Prior to , the price (not including SCUSA’s customary bid and ask spreads) at which SCUSA would buy or sell your notes (if it makes a market, which it is not obligated to do) will equal approximately
the sum of (a) the then-current estimated value of your notes (as determined by reference to SCUSA’s pricing models) plus (b) any remaining additional amount (the additional amount will decline to zero on a straight-line basis from the time of
pricing through approximately 3 months). On and after , the price (not including SCUSA’s customary bid and ask spreads) at which SCUSA would buy or sell your notes (if it makes a market) will equal approximately the then-current estimated
value of your notes determined by reference to such pricing models. For additional information regarding the price at which SCUSA would buy or sell your notes (if SCUSA makes a market, which it is not obligated to do), each based on SCUSA’s
pricing models; see “Additional Risks — The price at which SCUSA would buy or sell your notes (if SCUSA makes a market, which it is not obligated to do) will be based on SCUSA’s estimated value of your notes”.
We urge you to read the “Additional Risks” beginning on page P-14 of this pricing supplement.
P-2
|
Summary
|
The information in this “Summary” section is qualified by the more detailed information set forth in this pricing supplement, the
accompanying prospectus, accompanying prospectus supplement, and accompanying product prospectus supplement, each filed with the Securities and Exchange Commission (“SEC”). See “Additional Terms of Your Notes” in this pricing supplement.
|
Issuer:
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The Bank of Nova Scotia (the "Bank”)
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|
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Issue:
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Senior Note Program, Series A
|
|
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CUSIP/ISIN:
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064159NC6 / US064159NC63
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Type of Notes:
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Digital Notes
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|
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Reference Asset:
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The EURO STOXX 50® Index (Bloomberg Ticker: SX5E)
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|
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Minimum Investment and
Denominations:
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$1,000 and integral multiples of $1,000 in excess thereof
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|
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Principal Amount:
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$1,000 per note; $[●] in the aggregate for all the offered notes; the aggregate principal amount of the offered notes may be increased if the Bank,
at its sole option, decides to sell an additional amount of the offered notes on a date subsequent to the date of this pricing supplement.
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|
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Original Issue Price:
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100% of the principal amount of each note
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Currency:
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U.S. dollars
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Trade Date:
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[●]
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Original Issue Date:
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[●] (to be determined on the trade date and expected to be the 5th business day after
the trade date).
We expect that delivery of the notes will be made against payment therefor on or about the 5th business day following the date of
pricing of the notes (this settlement cycle being referred to as “T+5”). Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in two business days (“T+2”),
unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the notes on or prior to the second business day after the trade date will be required, by virtue of the fact that each note
initially will settle in five business days (T+5), to specify alternative settlement arrangements to prevent a failed settlement.
|
|
| Valuation Date: |
[●] (to be determined on the trade date and expected to be approximately 24 to 27 months after
the trade date).
The valuation date could be delayed by the occurrence of a market disruption event. See “General Terms of the Notes—Market Disruption Events”
beginning on page PS-20 in the accompanying product prospectus supplement. Further, if the valuation date is not a trading day, the valuation date will be postponed in the same manner as if a market disruption event has occurred.
|
P-3
|
Maturity Date:
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[●] (to be determined on the trade date and expected to be the 2nd business day after
the valuation date), subject to adjustment due to a market disruption event, a non-trading day or a non-business day as described in more detail under “General Terms of the Notes—Maturity Date” on page PS-18 in the accompanying product
prospectus supplement.
|
|
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Principal at Risk:
|
You may lose all or a substantial portion of your initial investment at maturity if there is a percentage decrease from the initial level to the final
level.
|
|
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Purchase at amount other
than principal amount:
|
The amount we will pay you on the maturity date for your notes will not be adjusted based on the original issue price you pay for your notes, so if
you acquire notes at a premium (or discount) to the principal amount and hold them to the maturity date, it could affect your investment in a number of ways. The return on your investment in such notes will be lower (or higher) than it
would have been had you purchased the notes at the principal amount. Also, if the final level is less than the initial level, you will incur a greater percentage decrease in your investment in the notes than would have been the case if
you had purchased the notes at the principal amount. See “Additional Risks—If you purchase your notes at a premium to the principal amount, the return on your investment will be lower than the return on notes purchased at the principal
amount and the impact of certain key terms of the notes will be negatively affected” on page P-18 of this pricing supplement.
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|
|
Fees and Expenses:
|
As part of the distribution of the notes, SCUSA or one of our affiliates will sell the notes to certain unaffiliated securities dealers at the
original issue price per note specified on the cover hereof less a concession not in excess of 2.00% of the principal amount. The original issue price for notes purchased by certain fee-based advisory accounts will be between 98.00% and
100.00% of the principal amount, which reflects a foregone underwriting discount with respect to such notes (i.e., the underwriting discount specified on the cover hereof with respect to such notes may be as low as 0.00%). See
“Supplemental Plan of Distribution (Conflicts of Interest)” in this pricing supplement.
The price at which you purchase the notes includes costs that the Bank or its affiliates expect to incur and profits that the Bank or its
affiliates expect to realize in connection with hedging activities related to the notes, as set forth below under “Supplemental Plan of Distribution (Conflicts of Interest)”. These costs and profits will likely reduce the secondary market
price, if any secondary market develops, for the notes. As a result, you may experience an immediate and substantial decline in the market value of your notes on the trade date. See “Additional Risks—Hedging activities by the Bank and
SCUSA may negatively impact investors in the notes and cause our respective interests and those of our clients and counterparties to be contrary to those of investors in the notes” in this pricing supplement.
|
|
|
Payment at Maturity:
|
The payment at maturity, for each $1,000 principal amount of notes, will be based on the performance of the reference asset and will be calculated
as follows:
|
|
|
o If the final level is equal to or greater than the initial level, then you will receive the greater of (i) the threshold settlement amount and (ii) the sum of (a) $1,000 plus (b) the product of (1) $1,000 times (2) the percentage change; or
|
P-4
|
o If the final level is less than the initial level, then you will receive the sum of (i) $1,000 plus (ii) the product of (a) $1,000 times (b) the percentage change
In this case you will suffer a percentage loss on your initial investment equal to the negative
percentage change. Accordingly, you could lose up to 100% of your initial investment.
|
||
|
Closing Level:
|
As used herein, the “closing level” of the reference asset on any date will be determined based upon the closing level published on the Bloomberg page “SX5E<Index>” or any successor page on Bloomberg or any successor service, as applicable, on such date. |
|
Initial Level:
|
The closing level of the reference asset on the trade date.
|
|
|
Final Level:
|
The closing level of the reference asset on the valuation date. In certain special circumstances, the final level will be
determined by the calculation agent, in its discretion. See “General Terms of the Notes—Unavailability of the Level of the Reference Asset on a Valuation Date” on page PS-19 and “General Terms of the Notes—Market Disruption Events”
beginning on page PS-20 in the accompanying product prospectus supplement.
|
|
Percentage Change:
|
The percentage change, expressed as a percentage, with respect to the payment at maturity, is calculated as follows:
final level – initial level
initial level
For the avoidance of doubt, the percentage change may be a negative value.
|
|
|
Threshold Settlement Amount:
|
Expected to be between $1,370.30 and $1,434.40 (to be determined on the trade date) for each $1,000 principal amount of your notes.
|
|
| Form of Notes: | Book-entry | |
|
Calculation Agent:
|
Scotia Capital Inc., an affiliate of the Bank
|
|
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Status:
|
The notes will constitute direct, unsubordinated and unsecured obligations of the Bank ranking pari passu with all other direct, unsecured and unsubordinated indebtedness of the Bank from time to time outstanding (except as otherwise prescribed by law). Holders will not have the
benefit of any insurance under the provisions of the Canada Deposit Insurance Corporation Act, the U.S. Federal Deposit Insurance Act or under any other deposit insurance regime of any jurisdiction.
|
|
|
Tax Redemption:
|
The Bank (or its successor) may redeem the notes, in whole but not in part, at a redemption price determined by the calculation agent in a manner
reasonably calculated to preserve your and our relative economic position, if it is determined that changes in tax laws or their interpretation will result in the Bank (or its successor) becoming obligated to pay additional amounts with
respect to the notes. See “Tax Redemption” in the accompanying product prospectus supplement.
|
|
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Listing:
|
The notes will not be listed on any securities exchange or quotation system.
|
|
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Use of Proceeds:
|
General corporate purposes
|
P-5
|
Clearance and Settlement:
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Depository Trust Company
|
|
| Trading Day: |
A day on which the level of the reference asset is calculated and published by the sponsor of the reference asset (the “sponsor”), regardless of
whether one or more of the principal securities markets for the stocks comprising the reference asset (the “reference asset constituent stocks”) are closed on that day.
|
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Business Day:
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New York and Toronto
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|
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Terms Incorporated:
|
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.
|
|
|
Canadian Bail-in:
|
The notes are not bail-inable debt securities under the CDIC Act.
|
|
INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE ALL OR SOME OF YOUR INVESTMENT. ANY PAYMENT ON THE NOTES, INCLUDING ANY
REPAYMENT OF PRINCIPAL, IS SUBJECT TO THE CREDITWORTHINESS OF THE BANK. IF THE BANK WERE TO DEFAULT ON ITS PAYMENT OBLIGATIONS YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
P-6
|
ADDITIONAL TERMS OF YOUR NOTES
|
You should read this pricing supplement together with the prospectus dated December 26, 2018, as supplemented by the
prospectus supplement dated December 26, 2018 and the product prospectus supplement (Equity Linked Index Notes, Series A) dated December 26, 2018, relating to our Senior Note Program, Series A, of which these notes are a part. Capitalized terms
used but not defined in this pricing supplement will have the meanings given to them in the product prospectus supplement. In the event of any conflict between this pricing supplement and any of the foregoing, the following hierarchy will govern:
first, this pricing supplement; second, the accompanying product prospectus supplement; third, the prospectus supplement; and last, the prospectus. The notes may vary from the terms described in the accompanying prospectus, accompanying prospectus supplement and accompanying product prospectus supplement in several important ways. You should read this pricing supplement
carefully, including the documents incorporated by reference herein.
This pricing supplement, together with the documents listed below, contains the terms of the notes and supersedes all prior or
contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of
ours. You should carefully consider, among other things, the matters set forth in “Additional Risk Factors Specific to the Notes” in the accompanying product prospectus supplement, as the notes involve risks not associated with conventional debt
securities. We urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the notes. You may access these documents on the SEC website at www.sec.gov as follows (or if that address has changed, by reviewing
our filings for the relevant date on the SEC website.
Product Prospectus Supplement (Equity Linked Index Notes, Series A) dated December 26, 2018:
Prospectus Supplement dated December 26, 2018:
Prospectus dated December 26, 2018:
P-7
|
INVESTOR SUITABILITY
|
The notes may be suitable for you if:
|
·
|
You fully understand the risks inherent in an investment in the notes, including the risk of losing all or some of your initial
investment.
|
|
·
|
You can tolerate a loss of up to 100% of your initial investment.
|
|
·
|
You are willing to make an investment that has the same downside risk as an investment in the reference asset or in the reference
asset constituent stocks.
|
|
·
|
You believe that the final level of the reference asset will be equal to or greater than the initial level.
|
|
·
|
You are willing to hold the notes to maturity, a term of approximately 24 to 27 months, and accept that there may be little or no
secondary market for the notes.
|
|
·
|
You would be willing to invest in the notes if the threshold settlement amount was set equal to the bottom of the range indicated
on the cover hereof (the actual threshold settlement amount will be set on the trade date).
|
|
·
|
You can tolerate fluctuations in the price of the notes prior to maturity that may be similar to or exceed the downside
fluctuations in the level of the reference asset or in the price of its reference asset constituent stocks.
|
|
·
|
You do not seek current income from your investment.
|
|
·
|
You are willing to assume the credit risk of the Bank for all payments under the notes, and understand that if the Bank defaults
on its obligations you may not receive any amounts due to you including any repayment of principal.
|
The notes may not be suitable for you if:
|
·
|
You do not fully understand the risks inherent in an investment in the notes, including the risk of losing all or some of your
initial investment.
|
|
·
|
You require an investment designed to guarantee a full return of principal at maturity.
|
|
·
|
You cannot tolerate a loss of all or some of your initial investment.
|
|
·
|
You are not willing to make an investment that has the same downside risk as an investment in the reference asset or in the
reference asset constituent stocks.
|
|
·
|
You believe that the final level of the reference asset will be less than the initial level.
|
|
·
|
You would be unwilling to invest in the notes if the threshold settlement amount was set equal to the bottom of the range
indicated on the cover hereof (the actual threshold settlement amount will be set on the trade date).
|
|
·
|
You cannot tolerate fluctuations in the price of the notes prior to maturity that may be similar to or exceed the downside
fluctuations in the level of the reference asset or in the price of its reference asset constituent stocks.
|
|
·
|
You seek current income from your investment or prefer to receive dividends paid on the reference asset constituent stocks.
|
|
·
|
You are unable or unwilling to hold the notes to maturity, a term of approximately 24 to 27 months, or you seek an investment for
which there will be a secondary market.
|
|
·
|
You are not willing to assume the credit risk of the Bank for all payments under the notes.
|
The investor suitability considerations identified above are not exhaustive. Whether or not the notes are a
suitable investment for you will depend on your individual circumstances and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the suitability of an
investment in the notes in light of your particular circumstances. You should also review ‘‘Additional Risks’’ in this pricing supplement and the ‘‘Additional Risk Factors Specific to the Notes’’ beginning on page PS-6 of the accompanying product
prospectus supplement and "Risk Factors" beginning on page S-2 of the accompanying prospectus supplement and "Risk Factors" on page 5 of the accompanying prospectus for risks related to an investment in the notes.
P-8
|
HYPOTHETICAL PAYMENTS AT MATURITY ON THE NOTES
|
The examples set out below are included for illustration purposes only. They should not be taken as an indication or prediction of
future investment results and are intended merely to illustrate the impact that the various hypothetical reference asset levels on the valuation date could have on the payment at maturity assuming all other variables remain constant.
The examples below are based on a range of final levels that are entirely hypothetical; the level of the reference asset on any day
throughout the life of the notes, including the final level on the valuation date, cannot be predicted. The reference asset has been highly volatile in the past, meaning that the level of the reference asset has changed considerably in relatively
short periods, and its performance cannot be predicted for any future period.
The information in the following examples reflects hypothetical rates of return on the offered notes assuming that they are purchased on
the original issue date at the principal amount and held to the maturity date. If you sell your notes in a secondary market prior to the maturity date, your return will depend upon the market value of your notes at the time of sale, which may be
affected by a number of factors that are not reflected in the examples below, such as interest rates, the volatility of the reference asset and our creditworthiness. In addition, the estimated value of your notes at the time the terms of your notes
were set on the trade date (as determined by reference to pricing models used by us) is less than the original issue price of your notes. For more information on the estimated value of your notes, see “Additional Risks—The Bank’s initial estimated
value of the notes at the time of pricing (when the terms of your notes are set on the trade date) will be lower than the original issue price of the notes” on page P-14 of this pricing supplement. The information in the examples also reflect the
key terms and assumptions in the box below.
|
Key Terms and Assumptions
|
|
|
Principal amount
|
$1,000
|
|
Threshold settlement amount
|
$1,370.30*
|
|
*The threshold settlement amount has a range of $1,370.30 - $1,434.40. The actual threshold settlement amount will be determined on the trade date.
|
|
|
Neither a market disruption event nor a non-trading day occurs on the originally scheduled valuation date
|
|
|
No change in or affecting any of the reference asset constituent stocks or the method by which the sponsor calculates the reference asset
|
|
|
Notes purchased on the original issue date at the principal amount and held to the maturity date
|
|
Moreover, we have not yet set the initial level that will serve as the baseline for determining the percentage change or the threshold
settlement amount, each of which will affect the amount that we will pay on your notes, if any, at maturity. We will not do so until the trade date. As a result, the actual initial level may differ substantially from the level of the reference
asset prior to the trade date.
For these reasons, the actual performance of the reference asset over the life of your notes, as well as the amount payable at
maturity, if any, may bear little relation to the hypothetical examples shown below or to the historical levels of the reference asset shown elsewhere in this pricing supplement. For information about the historical levels of the reference asset,
see “Information Regarding the Reference Asset—Historical Information” below. Before investing in the offered notes, you should consult publicly available information to determine the levels of the reference asset between the date of this pricing
supplement and the date of your purchase of the offered notes.
Also, the hypothetical examples shown below do not take into account the effects of applicable taxes. Because of the U.S. tax
treatment applicable to your notes, tax liabilities could affect the after-tax rate of return on your notes to a comparatively greater extent than the after-tax return on the reference asset constituent stocks.
P-9
The levels in the left column of the table below represent hypothetical final levels and are expressed as percentages of the initial level. The amounts in
the right column represent the hypothetical payment at maturity, based on the corresponding hypothetical final level, and are expressed as percentages of the principal amount of a note (rounded to the nearest one-thousandth of a percent). Thus, a
hypothetical payment at maturity of 100.000% means that the value of the cash payment that we would pay for each $1,000 of the outstanding principal amount of the offered notes on the maturity date would equal 100.000% of the principal amount of
a note, based on the corresponding hypothetical final level and the assumptions noted above.
|
Hypothetical Final Level
(as Percentage of Initial Level)
|
Hypothetical Payment at Maturity
(as Percentage of Principal Amount)
|
|
150.000%
|
150.000%
|
|
140.000%
|
140.000%
|
|
137.030%
|
137.030%
|
|
130.000%
|
137.030%
|
|
120.000%
|
137.030%
|
|
110.000%
|
137.030%
|
|
100.000%
|
137.030%
|
|
95.000%
|
95.000%
|
|
90.000%
|
90.000%
|
|
80.000%
|
80.000%
|
|
70.000%
|
70.000%
|
|
60.000%
|
60.000%
|
|
50.000%
|
50.000%
|
|
25.000%
|
25.000%
|
|
0.000%
|
0.000%
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If, for example, the final level were determined to be 25.000% of the initial level, the payment at maturity that we would pay on your notes at maturity
would be 25.000% of the principal amount of your notes, as shown in the table above. As a result, if you purchased your notes on the original issue date at the principal amount and held them to the maturity date, you would lose 75.000% of your
investment (if you purchased your notes at a premium to the principal amount you would lose a correspondingly higher percentage of your investment). If the final level were determined to be 0.000% of the initial level, you would lose 100.000% of
your investment in the notes.
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The following chart shows a graphical illustration of the hypothetical payment at maturity that we would pay on your notes on the maturity date, if the
final level were any of the hypothetical levels shown on the horizontal axis. The hypothetical payments at maturity in the chart are expressed as
percentages of the principal amount of your notes and the hypothetical final levels are expressed as percentages of the initial level. The chart shows that any hypothetical final level of less than 100.000% (the section left of the 100.000%
marker on the horizontal axis) would result in a hypothetical payment at maturity of less than 100.00% of the principal amount of your notes (the section below the 100.00% marker on the vertical axis) and, accordingly, in a loss of principal to
the holder of the notes.
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The following examples illustrate the calculation of the payment at maturity based on the key terms and assumptions above. The amounts
below have been rounded for ease of analysis.
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Example 1—
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Calculation of the payment at maturity where the percentage change is positive (and greater than the percentage return represented
by the threshold settlement amount).
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Percentage Change:
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50.00%
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Payment at Maturity:
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Greater of (a) $1,370.30 and (b) $1,000.00 + ($1,000.00 x 50.00%) = Greater of (a) $1,370.30 and (b) $1,000.00 + $500.00 =
Greater of (a) $1,370.30 and (b) $1,500.00 = $1,500.00
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On a $1,000.00 investment, a 50.00% percentage change results in a payment at maturity of greater than the threshold settlement
amount, equal to $1,500.00.
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Example 2—
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Calculation of the payment at maturity where the percentage change is positive (and equal to or less than the percentage return
represented by the threshold settlement amount).
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Percentage Change:
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5.00%
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Payment at Maturity:
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Greater of (a) $1,370.30 and (b) $1,000.00 + ($1,000.00 x 5.00%) = Greater of (a) $1,370.30 and (b) $1,000.00 + $50.00 =
Greater of (a) $1,370.30 and (b) $1,050.00 = $1,370.30
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On a $1,000.00 investment, a 5.00% percentage change results in a payment at maturity of the threshold settlement amount, equal to
$1,370.30.
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Example 3—
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Calculation of the payment at maturity where the percentage change is negative.
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Percentage Change:
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-5.00%
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Payment at Maturity:
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$1,000.00 + ($1,000.00 x -5.00%) = $1,000.00 - $50.00 = $950.00
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On a $1,000.00 investment, a -5.00% percentage change results in a payment at maturity equal to $950.00.
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Example 4—
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Calculation of the payment at maturity where the percentage change is negative.
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Percentage Change:
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-50.00%
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Payment at Maturity:
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$1,000.00 + ($1,000.00 x -50.00%) = $1,000.00 - $500.00 = $500.00
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On a $1,000.00 investment, a -50.00% percentage change results in a payment at maturity of $500.00.
Accordingly, if the percentage change is negative, the Bank will pay you less than the full
principal amount, resulting in a percentage loss on your investment that is equal to the negative percentage change. You may lose up to 100% of your principal amount.
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The payments at maturity shown above are entirely hypothetical; they are based on a hypothetical threshold settlement amount,
hypothetical levels of the reference asset that may not be achieved on the valuation date and on assumptions that may prove to be erroneous. The actual market value of your notes on the maturity date or at any other time, including any time you may
wish to sell your notes, may bear little relation to the hypothetical payments at maturity shown above, and these amounts should not be viewed as an indication of the financial return on an investment in the offered notes. The hypothetical payments
at maturity on the notes held to the maturity date in the examples above assume you purchased your notes at their principal amount and have not been adjusted to reflect the actual original issue price you pay for your notes. The return on your
investment (whether positive or negative) in your notes will be affected by the amount you pay for your notes. If you purchase your notes for a price other than the principal amount, the return on your investment will differ from, and may be
significantly lower than, the hypothetical returns suggested by the above examples. Please read “Additional Risks—The price at which the notes may be sold prior to maturity will depend on a number of factors and may be substantially less than the
amount for which they were originally purchased” on page P-18 of this pricing supplement.
Payments on the notes are economically equivalent to the amounts that would be paid on a combination of other
instruments. For example, payments on the notes are economically equivalent to a combination of a non- interest-bearing bond bought by the holder and one or more options entered into between the holder and us (with one or more implicit option
premiums paid over time). The discussion in this paragraph does not modify or affect the terms of the notes or the U.S. federal income tax treatment of the notes, as described elsewhere in this pricing supplement.
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We cannot predict the actual final level or what the market value of your notes will be on any particular trading day, nor can
we predict the relationship between the level of the reference asset and the market value of your notes at any time prior to the maturity date. The actual amount that you will receive, if any, at maturity and the rate of return on the
offered notes will depend on the actual initial level and threshold settlement amount, which we will set on the trade date, and the actual final level to be determined by the calculation agent as described above. Moreover, the assumptions
on which the hypothetical returns are based may turn out to be inaccurate. Consequently, the amount of cash to be paid in respect of your notes, if any, on the maturity date may be very different from the information reflected in the
examples above.
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P-13
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ADDITIONAL RISKS
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An investment in the notes involves significant risks. In addition to the following risks included in this
pricing supplement, we urge you to read “Additional Risk Factors Specific to the Notes” beginning on page PS-6 of the accompanying product prospectus supplement and “Risk Factors” beginning on page S-2 of the accompanying prospectus supplement and
page 5 of the accompanying prospectus.
You should understand the risks of investing in the notes and should reach an investment decision only after careful
consideration, with your advisors, of the suitability of the notes in light of your particular financial circumstances and the information set forth in this pricing supplement and the accompanying prospectus, accompanying prospectus supplement and
accompanying product prospectus supplement.
The Bank’s initial estimated value of the notes at the time of pricing (when the terms of your notes are set on the
trade date) will be lower than the original issue price of the notes
The Bank’s initial estimated value of the notes is only an estimate. The original issue price of the notes will
exceed the Bank’s initial estimated value. The difference between the original issue price of the notes and the Bank’s initial estimated value reflects costs associated with selling and structuring the notes, as well as hedging its obligations
under the notes with a third party.
Neither the Bank’s nor SCUSA’s estimated value of the notes at any time is determined by reference to credit spreads
or the borrowing rate the Bank would pay for its conventional fixed-rate debt securities
The Bank’s initial estimated value of the notes and SCUSA’s estimated value of the notes at any time are determined
by reference to the Bank’s internal funding rate. The internal funding rate used in the determination of the estimated value of the notes generally represents a discount from the credit spreads for the Bank’s conventional fixed-rate debt securities
and the borrowing rate the Bank would pay for its conventional fixed-rate debt securities. This discount is based on, among other things, the Bank’s view of the funding value of the notes as well as the higher issuance, operational and ongoing
liability management costs of the notes in comparison to those costs for the Bank’s conventional fixed-rate debt. If the interest rate implied by the credit spreads for the Bank’s conventional fixed-rate debt securities, or the borrowing rate the
Bank would pay for its conventional fixed-rate debt securities were to be used, the Bank would expect the economic terms of the notes to be more favorable to you. Consequently, the use of an internal funding rate for the notes increases the
estimated value of the notes at any time and has an adverse effect on the economic terms of the notes.
The Bank’s initial estimated value of the notes does not represent future values of the notes and may differ from
others’ (including SCUSA’s) estimates
The Bank’s initial estimated value of the notes 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 the Bank’s internal funding rate on the trade date, the expected term of the notes, market conditions and other relevant factors existing at that time, and the
Bank’s assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions (including the pricing models and assumptions used by SCUSA) could provide
valuations for the notes that are different, and perhaps materially lower, from the Bank’s initial estimated value. Therefore, the price at which SCUSA would buy or sell your notes (if SCUSA makes a market, which it is not obligated to do) may be
materially lower than the Bank’s initial estimated value. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to be incorrect.
The price at which SCUSA would buy or sell your notes (if SCUSA makes a market, which it is not obligated to do)
will be based on SCUSA’s estimated value of your notes
SCUSA’s estimated value of the notes is
determined by reference to its pricing models and takes into account the Bank’s internal funding rate. The price at which SCUSA would initially buy or sell your notes in the secondary market (if SCUSA makes a market, which it is not obligated
to do) exceeds SCUSA’s estimated value of your notes at the time of pricing. As agreed by SCUSA and the distribution participants, this excess (i.e., the additional amount described under “Additional Information Regarding Estimated Value of the
Notes” above) will decline to zero on a straight line basis over the period from the trade date through the applicable date set forth above under “Additional Information Regarding Estimated Value of the Notes” above. Thereafter, if SCUSA buys
or sells your notes it will do so at prices that reflect the estimated value determined by reference to SCUSA’s pricing models at that time. The price at which SCUSA will buy or sell your notes at any time also will reflect its then current bid
and ask spread for similar sized trades of structured notes. If SCUSA calculated its estimated
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value of your notes by reference to the Bank’s credit spreads or the borrowing rate the Bank would pay for its
conventional fixed-rate debt securities (as opposed to the Bank’s internal funding rate), the price at which SCUSA would buy or sell your notes (if SCUSA makes a market, which it is not obligated to do) could be significantly lower.
SCUSA’s pricing models consider certain variables, including principally the Bank’s internal funding rate, interest
rates (forecasted, current and historical rates), volatility, price-sensitivity analysis and the time to maturity of the notes. These pricing models are proprietary and rely in part on certain assumptions about future events, which may prove to be
incorrect. As a result, the actual value you would receive if you sold your notes in the secondary market, if any, to others may differ, perhaps materially, from the estimated value of your notes determined by reference to SCUSA’s models, taking
into account the Bank’s internal funding rate, due to, among other things, any differences in pricing models or assumptions used by others. See “The price at which the notes may be sold prior to maturity will depend on a number of factors and may
be substantially less than the amount for which they were originally purchased” below.
In addition to the factors discussed above, the value and quoted price of your notes at any time will reflect many
factors and cannot be predicted. If SCUSA makes a market in the notes, the price quoted by SCUSA would reflect any changes in market conditions and other relevant factors, including any deterioration in the Bank’s creditworthiness or perceived
creditworthiness. These changes may adversely affect the value of your notes, including the price you may receive for your notes in any market making transaction. To the extent that SCUSA makes a market in the notes, the quoted price will reflect
the estimated value determined by reference to SCUSA’s pricing models at that time, plus or minus SCUSA’s then current bid and ask spread for similar sized trades of structured notes (and subject to the declining excess amount described above).
Furthermore, if you sell your notes, you will likely be charged a commission for secondary market transactions, or
the price will likely reflect a dealer discount. This commission or discount will further reduce the proceeds you would receive for your notes in a secondary market sale.
There is no assurance that SCUSA or any
other party will be willing to purchase your notes at any price and, in this regard, SCUSA is not obligated to make a market in the notes. See “The notes lack liquidity” below.
Risk of loss at maturity
You may lose your entire investment in the notes. Any payment on the notes at maturity depends on the percentage
change of the reference asset. The Bank will only repay you the full principal amount of your notes if the final level is equal to or greater than the initial level. If the final level is less than the initial level, you will have a loss for each
$1,000 principal amount of your notes equal to the product of (i) the percentage change times (ii) $1,000. Accordingly, you may lose your entire investment in the notes if the final
level is less than the initial level.
The notes differ from conventional debt instruments
The notes are not conventional notes or debt instruments. The notes do not provide you with
interest payments prior to maturity as a conventional fixed-rate or floating-rate debt security with the same maturity would. The return that you will receive on the notes, which could be negative, may be less than the return you could earn on
other investments. Even if your return is positive, your return may be less than the return you would earn if you bought a conventional senior interest bearing debt security of the Bank.
No interest
The notes will not bear interest and, accordingly, you will not receive any interest payments on the notes.
Your investment is subject to the credit risk of The Bank of Nova Scotia
The notes are senior unsecured debt obligations of the Bank, and are not, either directly or indirectly, an
obligation of any third party. As further described in the accompanying prospectus, accompanying prospectus supplement and accompanying product prospectus supplement, the notes will rank on par with all of the other unsecured and unsubordinated
debt obligations of the Bank, except such obligations as may be preferred by operation of law. Any payment to be made on the notes, including the payment at maturity, depends on the ability of the Bank to satisfy its obligations as they come
due. As a result, the actual and perceived creditworthiness of the Bank may affect the market value of the notes and, in the event the Bank were to default on its obligations, you may not receive the amounts owed to you under the terms of the
notes. If you sell the notes prior to maturity, you may receive substantially less than the principal amount of your notes.
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Scotia Capital Inc., the calculation agent, is one of our affiliates. In performing its duties, the
economic interests of the calculation agent are potentially adverse to your interests as an investor in the notes. The calculation agent is under no obligation to consider your interests as a holder of the notes in taking any actions that might
affect the level of the reference asset and the value of the notes.
Investors should investigate the reference asset and the reference asset constituent stocks as if making a
hypothetical direct investment in the reference asset constituent stocks
Investors should conduct their own diligence of the reference asset and reference asset constituent stocks as an
investor would if it were making a hypothetical direct investment in the reference asset constituent stocks. Neither we nor any of our affiliates have participated in the preparation of any publicly available information or made any “due
diligence” investigation or inquiry with respect to the reference asset or the reference asset constituent stocks. Furthermore, we cannot give any assurance that all events occurring prior to the original issue date have been properly
disclosed. Subsequent disclosure of any such events or the disclosure or failure to disclose material future events concerning the reference asset or the reference asset constituent stocks could affect any payment at maturity. Investors should
not conclude that the sale by the Bank of the notes is any form of investment recommendation by the Bank or any of its affiliates to invest in securities linked to the performance of the reference asset or the reference asset constituent
stocks.
The notes are subject to market risk
The return on the notes is directly linked to the performance of the reference asset and indirectly linked to
the performance of the reference asset constituent stocks, and the extent to which the percentage change is positive or negative. The level of the reference asset can rise or fall sharply due to factors specific to the reference asset
constituent stocks, as well as general market factors, such as general market volatility and levels, interest rates and economic and political conditions.
The notes are subject to non-U.S. securities market risk
The reference asset constituent
stocks are issued by non-U.S. companies in non-U.S. securities markets, specifically the Eurozone. An investment in notes linked directly or indirectly to the value of securities issued by non-U.S. companies involves particular risks.
Generally, non-U.S. securities markets may be
more volatile than U.S. securities markets, and market developments may affect non-U.S. markets differently from U.S. securities markets. Direct or indirect government intervention to stabilize these non-U.S. markets, as well as cross
shareholdings in non-U.S. companies, may affect trading prices and volumes in those markets. There is generally less publicly available information about non-U.S. companies than about those U.S. companies that are subject to the reporting
requirements of the SEC, and non-U.S. companies are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies. Securities prices in non-U.S. countries
are subject to political, economic, financial and social factors that may be unique to the particular country. These factors, which could negatively affect the non-U.S. securities markets, include the possibility of recent or future
changes in the non-U.S. government’s economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other non-U.S. laws or restrictions applicable to non-U.S. companies or investments in non-U.S. equity
securities and the possibility of fluctuations in the rate of exchange between currencies. The United Kingdom has voted to leave the European Union
(popularly known as “Brexit”). The effect of Brexit is uncertain, and Brexit has and may continue to contribute to volatility in the prices of securities of companies located in Europe and currency exchange rates, including the valuation
of the euro and British pound in particular. Further, geographical regions may react to global factors in different ways, which may cause the prices of securities in a foreign securities market to fluctuate in a way that differs
from those of securities in the U.S. securities market or other foreign securities markets. Moreover, certain aspects of a particular non-U.S. economy may differ
favorably or unfavorably from the U.S. economy in important respects, such as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
An investment in the notes
is subject to risks associated with the Eurozone
The reference asset is subject to risks associated with the
Eurozone. The Eurozone has undergone and may again undergo severe financial stress, and the political, legal and regulatory ramifications are impossible to predict. Increased financial stress, or political, legal or regulatory changes in
the Eurozone may cause the USD/EUR exchange rate (and the exchange rate between the Euro and other currencies) to become significantly more volatile than it has been in the past. There is also a possibility that one or more Eurozone
countries may cease to use the euro, which could also adversely affect the exchange rate between the euro and other currencies and potentially the convertibility of the euro in such countries. There is also the
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possibility
that the euro may cease to exist or the USD/EUR exchange rate may otherwise become unavailable. If these events were to happen, the closing level of the reference asset and the value of, and the amount payable on, the notes could be
adversely affected.
The threshold settlement amount applies only at maturity
You should be willing to hold your notes to maturity. If you are able to sell your notes prior to maturity in the
secondary market, the price you receive per $1,000 principal amount will likely not reflect the full economic value of the threshold settlement amount or the notes themselves, and the return you realize may be less than the percentage change
multiplied by the principal amount even if such return is positive. You may receive the full benefit of the threshold settlement amount only if you hold your notes to maturity.
The payment at maturity is not linked to the level of the reference asset at any time other than the valuation date
(except in the case of tax redemptions)
The payment at maturity will be based on the final level. Therefore, for example, if the closing level of the
reference asset declined substantially as of the valuation date compared to the trade date, the payment at maturity may be significantly less than it would otherwise have been had the payment at maturity been linked to the closing levels of the
reference asset prior to the valuation date. Although the actual level of the reference asset at maturity or at other times during the term of the notes may be higher than the final level, you will not benefit from the closing levels of the
reference asset at any time other than the valuation date (except in the case of tax redemptions as described further in the accompanying product prospectus supplement).
If the levels of the reference asset or the reference asset constituent stocks change, the market value of your
notes may not change in the same manner
Your notes may trade quite differently from the performance of the reference asset or the reference asset
constituent stocks. Changes in the levels of the reference asset or the reference asset constituent stocks may not result in a comparable change in the market value of your notes. We discuss some of the reasons for this disparity under “—The
price at which the notes may be sold prior to maturity will depend on a number of factors and may be substantially less than the amount for which they were originally purchased” below.
Holding the notes is not the same as holding the reference asset constituent stocks
Holding the notes is not the same as holding the reference asset constituent stocks. As a holder of the notes, you
will not be entitled to the voting rights or rights to receive dividends or other distributions or other rights that holders of the reference asset constituent stocks would enjoy. Further, the return on your notes may not reflect the return you would realize if you actually owned the reference asset constituent stocks.
There is no assurance that the investment view implicit in the notes will be successful
It is impossible to predict with certainty whether and the extent to which the level of the reference asset will
rise or fall. There can be no assurance that the level of the reference asset will remain flat or rise above the initial level. The final level may be influenced by complex and interrelated political, economic, financial and other factors that
affect the level of the reference asset constituent stocks. You should be willing to accept the risks of the price performance of equity securities in general and the reference asset constituent stocks in particular, and the risk of losing some
or all of your initial investment.
Furthermore, we cannot give you any assurance that the future performance of the reference asset or the reference
asset constituent stocks will result in your receiving an amount greater than or equal to the principal amount of your notes. Certain periods of historical performance of the reference asset or the reference asset constituent stocks would have
resulted in you receiving less than the principal amount of your notes if you had owned notes with terms similar to these notes in the past. See “Information Regarding The Reference Asset” in this pricing supplement for further information
regarding the historical performance of the reference asset.
There is no assurance as to the performance of the reference asset or the reference asset constituent stocks; past
performance of the reference asset or the reference asset constituent stocks should not be taken as an indication of the future performance of the reference asset or the reference asset constituent stocks
The notes are linked directly to the level of the reference asset and indirectly to the levels of the reference
asset constituent stocks, which are speculative and involve a high degree of risk. None of the Bank, the calculation agent, or SCUSA or any other
affiliate of the Bank gives any assurance as to the performance of the reference asset or the reference asset constituent stocks. Investors should
not conclude that the sale by the Bank of the notes is an investment recommendation by
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it or by any of the other entities mentioned above to invest in securities linked to the performance of the
reference asset or the reference asset constituent stocks. Investors should consult with their own financial advisors as to whether an investment
in the notes is appropriate for them. Past performance of the reference asset and the reference asset constituent stocks should not be taken as a
guarantee or assurance of the future performance of the reference asset or the reference asset constituent stocks, and it is impossible to predict whether the level of the reference asset or the reference asset constituent stocks will rise or
fall during the term of the notes.
The reference asset reflects price return only and not total return
The return on your notes is based on the performance of the reference asset, which reflects the changes in the market prices of the
reference asset constituent stocks. It is not, however, linked to a ‘‘total return’’ index or strategy, which, in addition to reflecting those price returns, would also reflect dividends paid on the reference asset constituent stocks. The
return on your notes will not include such a total return feature or dividend component.
We may sell an additional aggregate principal amount of the notes at a different issue price
We may decide to sell an additional aggregate principal amount of the notes subsequent to the date of this pricing
supplement. The issue price of the notes in the subsequent sale may differ substantially (higher or lower) from the original issue price you paid as provided on the cover of this pricing supplement.
Changes affecting the reference asset could have an adverse effect on the value of the notes
The policies of STOXX Limited, the sponsor of the reference asset (the ''sponsor''), concerning additions,
deletions and substitutions of the reference asset constituent stocks and the manner in which the sponsor takes account of certain changes affecting those reference asset constituent stocks may adversely affect the level of the reference asset.
The policies of the sponsor with respect to the calculation of the reference asset could also adversely affect the level of the reference asset. The sponsor may discontinue or suspend calculation or dissemination of the reference asset. Any such
actions could have a material adverse effect on the value of the notes.
The Bank cannot control actions by the sponsor and the sponsor has no obligation to consider your interests
The Bank and its affiliates are not affiliated with the sponsor and have no ability to control or predict its actions, including any errors in or discontinuation of public disclosure regarding methods or policies relating to the calculation of the reference asset. The sponsor is not involved in the notes offering in any way and has no obligation to consider your interest as an owner of the notes in taking any actions that might negatively affect the market value of your notes.
If you purchase your notes at a premium to the principal amount, the return on your investment will be lower than the
return on notes purchased at the principal amount and the impact of certain key terms of the notes will be negatively affected
The payment at maturity will not be adjusted based on the original issue price you pay for the notes. If you
purchase notes at a price that differs from the principal amount of the notes, then the return on your investment in such notes held to the maturity date will differ from, and may be substantially less than, the return on notes purchased at the
principal amount. If you purchase your notes at a premium to the principal amount and hold them to the maturity date, the return on your investment in the notes will be lower than it would have been had you purchased the notes at the principal
amount or at a discount to the principal amount. For example, if the final level is less than the initial level, you will incur a greater percentage decrease in your investment in the notes than would have been the case for notes purchased at the
principal amount or a discount to the principal amount.
The price at which the notes may be sold prior to maturity will depend on a number of factors and may be substantially
less than the amount for which they were originally purchased
The price at which the notes may be sold prior to maturity will depend on a number of factors. Some of these factors include, but are not limited to: (i) actual or anticipated changes in the level of the reference asset over the full term of the notes, (ii)
volatility of the level of the reference asset and the market’s perception of future volatility of the level of the reference asset, (iii) changes in interest rates generally, (iv) any actual or anticipated changes in our credit ratings or credit
spreads and (v) time remaining to maturity. In particular, because the provisions of the notes relating to the payment at maturity behave like options, the value of the notes will vary in ways which are non-linear and may not be intuitive.
Depending on the actual or anticipated level of the reference asset and other relevant factors, the market value of
the notes may decrease and you may receive substantially less than 100% of the issue price if you sell your notes prior to maturity.
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See “Additional Risk Factors Specific to the Notes—The Market Value of Your Notes May Be Influenced by Many
Unpredictable Factors” beginning on page PS-7 of the accompanying product prospectus supplement.
The notes lack liquidity
The notes will not be listed on any securities exchange or automated quotation system. Therefore, there may
be little or no secondary market for the notes. SCUSA and any other affiliates of the Bank may, but are not obligated to, make a market in the notes. Even if there is a secondary market, it may not provide enough liquidity to allow you to
trade or sell the notes easily. Because we do not expect that other broker-dealers will participate significantly in the secondary market for the notes, the price at which you may be able to trade your notes is likely to depend on the
price, if any, at which SCUSA is willing to purchase the notes from you. If at any time SCUSA does not make a market in the notes, it is likely that there would be no secondary market for the notes. Accordingly, you should be willing to
hold your notes to maturity.
Hedging activities by the Bank and SCUSA may negatively impact investors in the notes and cause our respective
interests and those of our clients and counterparties to be contrary to those of investors in the notes
The Bank, SCUSA or one or more of our other affiliates has hedged or expects to hedge the obligations under the
notes by purchasing futures and/or other instruments linked to the reference asset. The Bank, SCUSA or one or more of our other affiliates also expects to adjust the hedge by, among other things, purchasing or selling any of the foregoing, and
perhaps other instruments linked to the reference asset and/or one or more of the reference asset constituent stocks, at any time and from time to time, and to unwind the hedge by selling any of the foregoing on or before the valuation date.
The Bank, SCUSA or one or more of our other affiliates may also enter into, adjust and unwind hedging transactions relating to other basket- or
index-linked notes whose returns are linked to changes in the level or price of the reference asset or the reference asset constituent stocks. Any of these hedging activities may adversely affect the level of the reference asset—directly or
indirectly by affecting the price of the reference asset constituent stocks—and therefore the market value of the notes and the amount you will receive, if any, on the notes. Furthermore, if the dealer from which you purchase notes is to conduct
hedging activities for us in connection with the notes, that dealer may profit in connection with such hedging activities and such profit, if any, will be in addition to the compensation that the dealer receives for the sale of the notes to you.
You should be aware that the potential to earn fees in connection with hedging activities may create a further incentive for the dealer to sell the notes to you in addition to the compensation they would receive for the sale of the notes. In
addition, you should expect that these transactions will cause the Bank, SCUSA or any of our other affiliates, or our respective clients or counterparties, to have economic interests and incentives that do not align with, and that may be directly
contrary to, those of an investor in the notes. None of the Bank, SCUSA or any of our other affiliates will have any obligation to take, refrain from taking or cease taking any action with respect to these transactions based on the potential
effect on an investor in the notes, and the Bank, SCUSA or any of our other affiliates may receive substantial returns with respect to these hedging activities while the value of the notes may decline.
The Bank, SCUSA and
our other affiliates regularly provide services to, or otherwise have business relationships with, a broad client base, which has included and may include us and the issuers of the reference asset constituent stocks and the market activities
by the Bank, SCUSA or our other affiliates for our own account or for our clients could negatively impact investors in the notes
We, SCUSA and our other affiliates regularly provide a wide range of financial services, including financial advisory, investment advisory and
transactional services to a substantial and diversified client base. As such, we each may act as an investor, investment banker, research provider, investment manager, investment advisor, market maker, trader, prime broker or lender. In those
and other capacities, we, SCUSA and/or our other affiliates purchase, sell or hold a broad array of investments, actively trade securities (including the notes or other securities that we have issued), the reference asset constituent stocks,
currencies, derivatives, loans, credit default swaps, indices, baskets and other financial instruments and products for our own accounts or for the accounts of our customers, and we will have other direct or indirect interests, in those
securities and in other markets that may not be consistent with your interests and may adversely affect the level of the reference asset and/or the value of the notes. You should assume that we or they will, at present or in the future, provide
such services or otherwise engage in transactions with, among others, us and the issuers of the reference asset constituent stocks, or transact in securities or instruments or with parties that are directly or indirectly related to these
entities. These services could include making loans to or equity investments in those companies, providing financial advisory or other investment banking services, or issuing research reports. Any of these financial market activities may,
individually or in the aggregate, have an adverse effect on the level of the reference asset and the market for your notes, and you should expect
P-19
that our interests and those of SCUSA and/or our other affiliates, clients or counterparties, will at times be adverse to those of investors in the
notes.
You should expect that we, SCUSA and our other affiliates, in providing these services, engaging in such
transactions, or acting for our own accounts, may take actions that have direct or indirect effects on the notes or other securities that we may issue, the reference asset constituent stocks or other securities or instruments similar to or
linked to the foregoing, and that such actions could be adverse to the interests of investors in the notes. In addition, in connection with these activities, certain personnel within the Bank, SCUSA or our other affiliates may have access to
confidential material non-public information about these parties that would not be disclosed to investors in the notes.
We, SCUSA and our other affiliates regularly offer a wide array of securities, financial instruments and other
products into the marketplace, including existing or new products that are similar to the notes or other securities that we may issue, the reference asset constituent stocks or other securities or instruments similar to or linked to the
foregoing. Investors in the notes should expect that the Bank, SCUSA and our other affiliates offer securities, financial instruments, and other products that may compete with the notes for liquidity or otherwise.
Other investors in the notes may not have the same interests as you
The interests of other investors may, in some circumstances, be adverse to your interests. Other investors may
make requests or recommendations to us or SCUSA regarding the establishment of transactions on terms that are adverse to your interests, and investors in the notes are not required to take into account the interests of any other investor in
exercising remedies, voting or other rights in their capacity as noteholders. Further, other investors may enter into market transactions with respect to the notes, assets that are the same or similar to the notes, assets referenced by the notes
(such as stocks or stock indices) or other similar assets or securities which may adversely impact the market for or value of your notes. For example, an investor could take a short position (directly or indirectly through derivative
transactions) in respect of securities similar to your notes or in respect of the reference asset.
The calculation agent can postpone the valuation date for the notes if a market disruption event with respect to the
reference asset occurs
If the calculation agent determines, in its sole discretion, that, on a day that would otherwise be the valuation
date, a market disruption event with respect to the reference asset has occurred or is continuing for the reference asset, the valuation date will be postponed until the first following trading day on which no market disruption event occurs or is
continuing, although the valuation date will not be postponed by more than seven scheduled trading days. Moreover, if the valuation date is postponed to the last possible day, but a market disruption event occurs or is continuing on that day, that
day will nevertheless be the valuation date, and the calculation agent will determine the applicable final level that must be used to determine the payment at maturity. See “General Terms of the Notes—Unavailability of the Level of the Reference
Asset on a Valuation Date” beginning on page PS-19 and “General Terms of the Notes—Market Disruption Events” beginning on page PS-20 in the accompanying product prospectus supplement.
There is no affiliation between the issuers of any reference asset constituent stock or the sponsor and us or SCUSA
The Bank, SCUSA and our other affiliates may currently, or from time to time in the future, engage in business with
the issuers of the reference asset constituent stocks. Neither we nor any of our affiliates have participated in the preparation of any publicly available information or made any “due diligence” investigation or inquiry with respect to the
reference asset or the reference asset constituent stocks. Before investing in the notes you should make your own investigation into the reference asset and the issuers of the reference asset constituent stocks. See the section below entitled
“Information Regarding the Reference Asset” in this pricing supplement for additional information about the reference asset.
Uncertain tax treatment
Significant aspects of the tax treatment of the notes are uncertain. You should consult your tax advisor about your
tax situation. See “Certain Canadian Income Tax Consequences” and “Material U.S. Federal Income Tax Considerations” in this pricing supplement.
P-20
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INFORMATION REGARDING THE REFERENCE ASSET
|
The EURO STOXX 50® Index (the “SX5E”)
The SX5E is a free-float market capitalization-weighted index of 50 European blue-chip stocks. The
50 stocks included in the SX5E trade in euros, and are allocated based on their country of incorporation, primary listing and largest trading volume, to one of the following countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, the Netherlands, Portugal and Spain, which we refer to collectively as the Eurozone. Companies allocated to a Eurozone country but not traded in Euros are not eligible for inclusion in the SX5E. The SX5E was created by and is
sponsored and maintained by STOXX Limited. Publication of the SX5E began on February 26, 1998, based on an initial index value of 1,000 at December 31, 1991. The level of the SX5E is disseminated on the STOXX Limited website. STOXX Limited is
under no obligation to continue to publish the SX5E and may discontinue publication of it at any time. Additional information regarding the SX5E may be obtained from the STOXX Limited website: stoxx.com. We are not incorporating by reference the
website or any material it includes in this pricing supplement.
The top ten component stocks of the SX5E as of November 30, 2018, by weight,
are: Total S.A. (5.75%), SAP SE (4.31%), Sanofi (3.97%), Siemens AG (3.82%), Allianz SE (3.52%), Linde PLC (3.41%), Unilever N.V. (3.26%), LVMH Moët Hennessy Louis Vuitton SE (2.97%), Banco Santander S.A. (2.97%) and ASML Holding N.V. (2.82%);
constituent weights may be found at stoxx.com/download/indices/factsheets/SX5GT.pdf under “Factsheets and Methodologies” and are updated periodically.
As of November 30, 2018, the top ten industry sectors which comprise the
SX5E represent the following weights in the index: Banks (11.1%), Industrial Goods & Services (10.7%), Personal & Household Goods (10.0%), Health Care (10.0%), Technology (9.6%), Chemicals (8.0%), Oil & Gas (7.3%), Insurance (6.8%),
Telecommunications (5.2%) and Food & Beverage (4.4%); industry weightings may be found at stoxx.com/download/indices/factsheets/SX5GT.pdf under “Factsheets and Methodologies” and are updated periodically. Percentages may not sum to 100% due
to rounding. Sector designations are determined by the basket component sponsor using criteria it has selected or developed. Index sponsors may use very different standards for determining sector designations. In addition, many companies operate
in a number of sectors, but are listed in only one sector and the basis on which that sector is selected may also differ. As a result, sector comparisons between indices with different index sponsors may reflect differences in methodology as well
as actual differences in the sector composition of the indices.
As of November 30, 2018, the eight countries which comprise the SX5E
represent the following weights in the index: France (38.3%), Germany (31.6%), Netherlands (10.5%), Spain (10.3%), Italy (4.7%), Belgium (2.5%), Finland (1.2%) and Ireland (0.9%); country weightings may be found at
stoxx.com/download/indices/factsheets/SX5GT.pdf and are updated periodically.
SX5E Composition.
The SX5E is composed of 50 component stocks chosen by STOXX Limited from the 19 EURO
STOXX Supersector indices, which represent the Eurozone portion of the STOXX Europe 600 Supersector indices. The 19 supersectors from which stocks are selected for the SX5E are Automobiles & Parts, Banks, Basic Resources, Chemicals,
Construction & Materials, Financial Services, Food & Beverages, Health Care, Industrial Goods & Services, Insurance, Media, Oil & Gas, Personal & Household Goods, Real Estate, Retail, Technology, Telecommunications, Travel
& Leisure and Utilities, although stocks from each of these supersectors are not necessarily included at a given time.
Component Selection
The composition of the SX5E is reviewed by STOXX Limited annually in September. Within each of the 19
EURO STOXX Supersector indices, the respective component stocks are ranked by free—float market capitalization. The largest stocks are added to the selection list until the coverage is close to, but still less than, 60% of the free—float market
capitalization of the corresponding EURO STOXX Total Market Index Supersector Index. If the next highest—ranked stock brings the coverage closer to 60% in absolute terms, then it is also added to the selection list. All remaining stocks that
are current SX5E components are then added to the selection list. The stocks on the selection list are then ranked by free—float market capitalization. The 40 largest stocks on the selection list are chosen as index components. The remaining 10
stocks are then selected from the largest current stocks ranked between 41 and 60. If the number of index components is still below 50, then the largest remaining stocks on the selection list are added until the SX5E contains 50 stocks. In
exceptional cases, the STOXX Limited Management Board may make additions and deletions to the selection list.
P-21
Ongoing Maintenance of Component Stocks
The component stocks of the SX5E are monitored on an ongoing monthly basis for deletion and
quarterly basis for addition. Changes to the composition of the SX5E due to corporate actions (including mergers and takeovers, spin—offs, sector changes and bankruptcy) are announced immediately, implemented two trading days later and
become effective on the next trading day after implementation.
The component stocks of the SX5E are subject to a “fast exit” rule. A component
stock is deleted if it ranks 75 or below on the monthly selection list and it ranked 75 or below on the selection list of the previous month. The highest-ranked non-component stock will replace the existing component stock. The SX5E is also
subject to a “fast entry” rule. All stocks on the latest selection lists and initial public offering (IPO) stocks are reviewed for a fast-track addition on a quarterly basis. A stock is added if it qualifies for the latest blue-chip
selection list generated at the end of February, May, August or November and if it ranks within the lower buffer (between 1 and 25) on the selection list. If added, the stock replaces the smallest component stock.
A deleted stock is replaced immediately to maintain the fixed number of stocks. The replacement is based on the latest
monthly selection list. In the case of a merger or takeover where a component stock is involved, the original component stock is replaced by the new component stock. In the case of a spin-off, if the original stock was a component stock,
then each spin-off stock qualifies for addition if it lies within the lower buffer (between 1 and 40) on the latest selection list. The largest qualifying spin-off stock replaces the original component stock, while the next qualifying
spin-off stock replaces the lowest ranked component stock and likewise for other qualifying spin-off stocks.
The free float factors and outstanding number of shares for each component stock
that STOXX Limited uses to calculate the SX5E, as described below, are reviewed, calculated and implemented on a quarterly basis and are fixed until the next quarterly review. Certain extraordinary adjustments to the free float factors
and/or the number of outstanding shares are implemented and made effective more quickly. The timing depends on the magnitude of the change. Each component’s weight is capped at 10% of the SX5E’s total free float market capitalization. The
free float factor reduces the component stock’s number of shares to the actual amount available on the market. All holdings that are larger than five percent of the total outstanding number of shares and held on a long-term basis are
excluded from the index calculation (including, but not limited to, stock owned by the company itself, stock owned by governments, stock owned by certain individuals or families, and restricted shares).
Index Calculation
STOXX Limited calculates the SX5E using the “Laspeyres formula,” which measures the aggregate price changes in the component stocks against a fixed base quantity weight. The discussion below describes the “price
return” calculation of the SX5E. The formula for calculating the SX5E value can be expressed as follows:
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SX5E
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=
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Free Float Market Capitalization of the SX5E
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Divisor
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The “free float market capitalization of the SX5E” is equal to the sum of the product of the price,
the number of shares, the free float factor and the weighting cap factor for each component stock as of the time the SX5E is being calculated. The component stocks trade in Euros and thus, no currency conversion is required. Where any
component stock price is unavailable on any trading day, the basket component sponsor will generally use the last reported price for such component stock.
In case the investability and tradability of the index and index based products is affected by an
upcoming market or company event that is considered significant or “extreme” by the STOXX Management Board, the following actions or a combination of the following actions are taken. For all such changes a minimum notification period of two
full trading days will be observed. The action scope may include but is not limited to:
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·
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application of expert judgment for index component pricing data,
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·
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adjustment of operational procedures,
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·
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postponement of index adjustments,
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·
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adjustment of selection lists,
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·
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change of weights of index constituents by adjusting the number of shares, free-float factors or weighting cap-factors, or
|
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·
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adjustment of index compositions.
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EURO STOXX 50 Divisor
The SX5E is calculated using a divisor that helps to maintain the continuity
of the index’s value so that corporate actions do not artificially increase or decrease the level of the SX5E.
The divisor is calculated by starting with the previous divisor in effect for
the SX5E (which we call the “original divisor value”) and multiplying it by a fraction, the numerator of which is the previous free float market capitalization of the SX5E, plus or minus the difference between the closing market
capitalization of the SX5E and the adjusted closing market capitalization of the SX5E, and the denominator of which is the previous free float market capitalization of the SX5E. The adjusted free float market capitalization is calculated
for stocks of companies that have experienced a corporate action of the type described below as of the time the new divisor value is being calculated using the free float market capitalization calculated with adjusted closing prices, the
new number of shares, and the new free float factor minus the free float market capitalization calculated with that stock’s original closing price, number of shares, and free float factor, in each case as used in calculating the original
divisor value. Errors in divisor calculation are corrected on an intraday basis if discovered on the same day the new divisor is effective. If the error is discovered later, the error is corrected on an intraday basis if feasible and only
if the error is considered significant by the STOXX Limited Management Board.
Divisor Adjustments
STOXX Limited adjusts the divisor for the SX5E to maintain the continuity of
the SX5E values across changes due to corporate actions. Changes in weights due to corporate actions are distributed proportionally across all index components and equal an investment into the portfolio. The following is a summary of the
adjustments to any component stock made for corporate actions and the effect of such adjustments on the divisor, where shareholders of the component stock will receive “B” new shares for every “A” share held (where applicable) and
assuming that the version of the index to which your notes are linked is the price return version. All adjusted prices consider withholding taxes based on the new shares being distributed, using “B * (1 – withholding tax where
applicable)”.
(1) Special cash dividend:
Adjusted price = closing price – dividend announced by the company * (1- withholding tax if
applicable)
Divisor: decreases
(2) Split and reverse split:
Adjusted price = closing price * A / B
New number of shares = old number of shares * B / A Divisor: no change
(3) Rights offering:
Adjusted price = (closing price * A + subscription price * B) / (A + B)
New number of shares = old number of shares * (A + B) / A
Divisor: increases
If the subscription price is not available or if the subscription price is equal to or
greater than the closing price on the day before the effective date, then no adjustment is made.
Extremely dilutive rights issues having a share ratio larger or equal to 2000% (B/A>20) are treated as follows:
STOXX Limited will announce the deletion of the company from the index following the standard rules for
index
P-23
replacements if sufficient notice of two trading days before the ex-date can be given.
The company may enter the index again at the next periodic index review, but only after
the new rights issue shares have been listed.
Extremely dilutive rights issues for which two trading days’ notice before the ex-date
cannot be given, and all highly dilutive rights issues having a share ratio larger or equal to 200% (B/A>2) are treated as follows:
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●
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The rights issue shares are included into the index with a theoretical price on the ex-date;
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●
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The rights issue shares must be listed on an eligible stock exchange and tradable starting on the ex-date, otherwise, only a price adjustment is made
and the rights are not included;
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●
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The rights issue shares will have the same parameters as the parent company;
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●
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The rights issue shares will be removed at the close of the day they start to trade with traded price being available; and
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●
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The number of shares and weighting factors will be increased after the new rights issue shares have been listed.
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(4) Stock
dividend:
Adjusted price = closing price * A / (A + B)
New number of shares = old number
of shares * (A + B) / A
Divisor: no change
(5) Stock
dividend from treasury stock if treated as extraordinary dividend:
Adjusted close = close – close * B / (A + B) Divisor: decreases
(6) Stock
dividend of another company:
Adjusted price = (closing price * A – price of other company * B) / A Divisor: decreases
(7) Return
of capital and share consolidation:
Adjusted price = [closing price – capital return announced by company * (1– withholding tax)] * A / B New
number of shares = old number of shares * B / A
Divisor: decreases
(8) Repurchase
of shares / self-tender:
Adjusted price = [(price before tender * old number of shares) – (tender price * number of tendered
shares)] / (old number of shares – number of tendered shares)
New number of shares = old number of shares – number of tendered shares
Divisor: decreases
(9) Spin–off:
Adjusted price = (closing price * A – price of spin–off shares * B) / A Divisor: decreases
(10) Combination stock distribution (dividend or split) and rights offering:
For this corporate action, the following additional assumptions apply:
Shareholders receive B new shares from the distribution and C new shares from the rights offering for every A
P-24
share held; and
If A is not equal to one, all the following “new number of shares” formulae need to be divided by A.
If rights are applicable after stock distribution (one action applicable to
another):
Adjusted price = [closing price * A + subscription price * C * (1 + B / A)] / [(A + B) * (1 + C / A)]
New number of shares = old
number of shares * [(A + B) * (1 + C / A)] / A
Divisor: increases
If stock distribution is applicable after rights (one action applicable to
another):
Adjusted price = (closing price * A + subscription price * C) / [(A + C) * (1
+ B / A)]
New number of shares = old number of shares * [(A + C) * (1 + B / A)]
Divisor: increases
Stock distribution and rights (neither action is applicable to the other):
Adjusted price = (closing price * A + subscription price * C) / (A + B + C)
New number of shares = old number of shares * (A + B + C) / A
Divisor: increases
(11) Addition/deletion
of a company
No price adjustments are made.
The net change in market capitalization determines the divisor adjustment.
(12) Free float and shares changes
No price adjustments are made. The net change in market capitalization determines
the divisor adjustment.
The SX5E is the intellectual property of STOXX Limited, Zurich, Switzerland and/or its licensors (“Licensors“),
which is used under license. The notes or other financial instruments based on the SX5E are in no way sponsored, endorsed, sold or promoted by STOXX and its Licensors and neither STOXX nor its Licensors shall have any liability with
respect thereto.
License Agreement between STOXX
Limited and the Bank
The Bank has entered into a non-exclusive license agreement with STOXX, which grants the Bank a license in
exchange for a fee to use the Index in connection with the issuance of certain securities, including the notes.
STOXX, Deutsche Börse Group and their licensors, research partners or data providers have no relationship to
the Bank, other than the licensing of the Index and the related trademarks for use in connection with the notes.
STOXX, Deutsche Börse Group and their licensors, research partners or data providers do not:
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sponsor, endorse, sell or promote the notes;
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·
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recommend that any person invest in the notes or any other financial products;
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·
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have any responsibility or liability for or make any decisions about the timing, amount or pricing of the notes;
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·
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have any responsibility or liability for the administration, management or marketing of the notes; and
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P-25
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·
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consider the needs of the notes or the owners of the notes in determining, composing or calculating the Index or have
any obligation to do so.
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STOXX Deutsche Börse Group and their licensors, research partners or data providers give no warranty, and
exclude any liability (whether in negligence or otherwise) in connection with the notes or their performance. STOXX does not assume any contractual relationship with the purchasers of the notes or any third parties.
Specifically,
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·
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The Sponsor, Deutsche Börse Group and their licensors, research partners or data providers do not make any warranty,
express or implied, and disclaim any and all warranty about:
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o
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the results to be obtained by the notes, the owner of the notes or any other person in connection with the use of the
Index and the data included in the Index;
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o
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the accuracy, timeliness, and completeness of the Index or its data;
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o
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the merchantability and the fitness for a particular purpose or use of the Index or its data; and
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o
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the performance of the notes generally
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·
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STOXX, Deutsche Börse Group and their licensors, research partners or data providers give no warranty and exclude any
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·
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liability, for any errors, omissions or interruptions in the Index or its data; and
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·
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under no circumstances will Deutsche Börse Group and their licensors, research partners or data providers be liable
(whether in negligence or otherwise) for any lost profits or indirect, punitive, special or consequential damages or losses, arising as a result of such errors, omissions or interruptions in the Index or its data or
generally in relation to the notes, even in circumstances where the Sponsor Deutsche Börse Group and their licensors, research partners or data providers are aware that such loss or damage may occur.
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The licensing agreement between the Bank and STOXX is solely for their benefit, and not for the benefit of
the owners of the notes or any other third parties.
P-26
Historical Information
We obtained the information regarding the historical performance of the reference asset in the table and
graph below from Bloomberg.
We have not undertaken an independent review or due diligence of the information. The historical performance of the reference
asset should not be taken as an indication of its future performance, and no assurance can be given as to the final level of the reference asset. We cannot give you assurance that the performance of the reference asset will result in
any positive return on your initial investment.
The following table sets forth the quarterly high and low closing levels for the reference asset, based on daily closing levels. The closing
level of the reference asset on January 2, 2019 was 2,993.18. Past performance of the reference asset is not indicative
of the future performance of the reference asset.
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Quarter Begin
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Quarter End
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Quarterly High
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Quarterly Low
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Quarterly Close
|
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1/1/2013
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3/31/2013
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2,749.27
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2,570.52
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2,624.02
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4/1/2013
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6/30/2013
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2,835.87
|
2,511.83
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2,602.59
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|
7/1/2013
|
9/30/2013
|
2,936.20
|
2,570.76
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2,893.15
|
|
10/1/2013
|
12/31/2013
|
3,111.37
|
2,902.12
|
3,109.00
|
|
1/1/2014
|
3/31/2014
|
3,172.43
|
2,962.49
|
3,161.60
|
|
4/1/2014
|
6/30/2014
|
3,314.80
|
3,091.52
|
3,228.24
|
|
7/1/2014
|
9/30/2014
|
3,289.75
|
3,006.83
|
3,225.93
|
|
10/1/2014
|
12/31/2014
|
3,277.38
|
2,874.65
|
3,146.43
|
|
1/1/2015
|
3/31/2015
|
3,731.35
|
3,007.91
|
3,697.38
|
|
4/1/2015
|
6/30/2015
|
3,828.78
|
3,424.30
|
3,424.30
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|
7/1/2015
|
9/30/2015
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3,686.58
|
3,019.34
|
3,100.67
|
|
10/1/2015
|
12/31/2015
|
3,506.45
|
3,069.05
|
3,267.52
|
|
1/1/2016
|
3/31/2016
|
3,178.01
|
2,680.35
|
3,004.93
|
|
4/1/2016
|
6/30/2016
|
3,151.69
|
2,697.44
|
2,864.74
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|
7/1/2016
|
9/30/2016
|
3,091.66
|
2,761.37
|
3,002.24
|
|
10/1/2016
|
12/31/2016
|
3,290.52
|
2,954.53
|
3,290.52
|
|
1/1/2017
|
3/31/2017
|
3,500.93
|
3,230.68
|
3,500.93
|
|
4/1/2017
|
6/30/2017
|
3,658.79
|
3,409.78
|
3,441.88
|
|
7/1/2017
|
9/30/2017
|
3,594.85
|
3,388.22
|
3,594.85
|
|
10/1/2017
|
12/31/2017
|
3,697.40
|
3,503.96
|
3,503.96
|
|
1/1/2018
|
3/31/2018
|
3,672.29
|
3,278.72
|
3,361.50
|
|
4/1/2018
|
6/30/2018
|
3,592.18
|
3,340.35
|
3,395.60
|
|
7/1/2018
|
9/30/2018
|
3,527.18
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3,293.36
|
3,399.20
|
|
10/1/2018
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12/31/2018
|
3,414.16
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2,937.36
|
3,001.42
|
| 1/1/2019 | 1/2/2019* | 2,993.18 | 2,993.18 | 2,993.18 |
| * |
As of the date of this pricing supplement, available information for the first calendar quarter of 2019 includes data for the period from
January 1, 2019 through January 2, 2019. Accordingly, the ‘‘Quarterly High,’’ ‘‘Quarterly Low’’ and ‘‘Quarterly Close’’ data indicated are for this shortened period only and do not reflect complete data for the first calendar
quarter of 2019.
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The graph below
illustrates the performance of the reference asset from January 1, 2009 through January 2, 2019. Past performance of the reference asset is not indicative of the future performance of the reference asset.
Historical Performance of the EURO STOXX 50® Index
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SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
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SCUSA, our affiliate, will purchase the notes at the principal amount and, as part of the distribution of the notes, will sell the notes
to certain unaffiliated securities dealers at the original issue price specified on the cover hereof less a concession not in excess of 2.00% of the principal amount. The original issue price for notes purchased by certain fee-based advisory
accounts will be between 98.00% and 100.00% of the principal amount, which reflects a foregone underwriting discount with respect to such notes (i.e., the underwriting discount specified on the cover hereof with respect to such notes may be as low
as 0.00%). In addition, SCUSA and our other affiliates or agents may use the accompanying product prospectus supplement to which this pricing supplement relates in market-making transactions after the initial sale of the notes. While SCUSA may make
markets in the notes, they are under no obligation to do so and may discontinue any market-making activities at any time without notice. See the sections titled “Supplemental Plan of Distribution (Conflicts of Interest)” in the accompanying
prospectus supplement and accompanying product prospectus supplement.
The price at which you purchase the notes includes costs that the Bank, SCUSA or our other affiliates expect to incur and profits that
the Bank, SCUSA and our other affiliates expect to realize in connection with hedging activities related to the notes, as set forth above. These costs and profits will likely reduce the secondary market price, if any secondary market develops, for
the notes. As a result, you may experience an immediate and substantial decline in the market value of your notes on the original issue date.
Conflicts of interest
Each of SCUSA and Scotia Capital Inc. is an affiliate of the Bank and, as such, has a ‘‘conflict of interest’’ in this offering within
the meaning of FINRA Rule 5121. In addition, the Bank will receive the gross proceeds from the initial public offering of the notes, thus creating an additional conflict of interest within the meaning of Rule 5121. Consequently, the offering is
being conducted in compliance with the provisions of Rule 5121. Neither SCUSA nor Scotia Capital Inc. is permitted to sell notes in this offering to an account over which it exercises discretionary authority without the prior specific written
approval of the account holder.
SCUSA and our other affiliates are full service financial institutions engaged in various activities, which may include securities
trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. SCUSA and our other affiliates have, from time to time, performed, and
may in the future perform, various financial advisory and investment banking services for the Bank, for which they received or will receive customary fees and expenses.
In the ordinary course of their various business activities, SCUSA and our other affiliates may make or hold a
broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and
securities activities may involve securities and/or instruments of the Bank. SCUSA and our other affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments
and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Prohibition of Sales to EEA Retail Investors
The notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail
investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); (ii) a
customer within the meaning of Directive 2002/92/EC, as amended, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive
2003/71/EC, as amended. Consequently no key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”), for offering or selling the notes or otherwise making them available to retail investors in the EEA
has been prepared and therefore offering or selling the notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
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CERTAIN CANADIAN INCOME TAX CONSEQUENCES
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See “Supplemental Discussion of Canadian Tax Consequences” beginning on page PS-24 of the accompanying product prospectus supplement.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
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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. 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. Some of these tax consequences are summarized below, but we urge you to
read the more detailed discussion under “Supplemental Discussion of U.S. Federal Income Tax Consequences” in the product prospectus supplement and to discuss the tax consequences of your particular situation with your tax advisor. This discussion
is based upon the Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed U.S. Treasury Department (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.
U.S. Tax Treatment. Pursuant to the terms of the notes, the Bank and you agree, in the absence of a statutory or regulatory change or an administrative
determination or judicial ruling to the contrary, to characterize your notes as prepaid derivative contracts with respect to the reference asset. If your notes are so treated, you should generally recognize 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 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 (otherwise such gain or loss should be short-term capital gain or loss if held for one year or less). The deductibility of capital losses is subject to limitations. There may also be a risk that the IRS could assert that
the notes should not give rise to long-term capital gain or loss because the notes offer, at least in part, short exposure to the reference asset. You should consult your tax advisor regarding this risk.
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.
Section 1297. We will not
attempt to ascertain whether any Reference Asset Constituent Stock Issuer would be treated as a Passive Foreign Investment Company (“PFIC”) within the meaning of Section 1297 of the Code. If any such entity were so treated, certain adverse
U.S. federal income tax consequences might apply upon the taxable disposition of a note. You should refer to information filed with the SEC or the equivalent governmental authority by such entities and consult your tax advisor regarding the
possible consequences to you if any such entity is or becomes a PFIC.
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,
and they are seeking taxpayer comments on the subject. 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 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.
Medicare Tax on Net Investment Income.
U.S. holders that are individuals or estates and 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
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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 with respect to their investment in the notes.
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. 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 871(m) of the Code, as discussed below, gain from taxable disposition of the notes generally will 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 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,
2021.
Based on our determination that the notes are not “delta-one” with respect to the reference asset or any U.S.
reference asset constituent stocks, 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 reference asset, any U.S. reference asset constituent stocks 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 you enter, or have entered, into certain other transactions in respect of
the reference asset, any U.S. reference asset constituent stocks or the notes. If you enter, or have entered, into other transactions in respect of the reference asset, any U.S. reference asset constituent stocks or the notes, you should consult
your tax advisor regarding the application of Section 871(m) of the Code to your notes in the context of your 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.
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.
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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 own advisors about the application of FATCA, in particular if they may be classified as financial
institutions (or if they hold their notes through a non-U.S. 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 notes purchased after the bill was enacted to accrue interest income over the term of the notes despite the fact that there will 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 impossible 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 the Bank and those of the Reference Asset Constituent Stock Issuers).
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