Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-228614 (To Prospectus dated December 26, 2018, Prospectus Supplement dated December 26, 2018 and Product Prospectus Supplement EQUITY SUN-1 dated February 21, 2019)
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901,032 Units $10 principal amount per unit CUSIP No. 06417Q650 |
Pricing Date Settlement Date Maturity Date |
October 24, 2019 October 31, 2019 October 29, 2021 |
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Autocallable Market-Linked Step Up Notes Linked to the PHLX Housing SectorSM Index
◾ Maturity of approximately two years, if not called prior to maturity
◾ Automatic call of the notes per unit at $10 plus the Call Premium ($0.895) if the Index is flat or increases above 100.00% of the Starting Value on the
Observation Date
◾ The Observation Date will occur approximately one year after the pricing date
◾ If the notes are not called, at maturity:
◾ a return of 14.00% if the Index is flat or increases up to the Step Up Value
◾ a return equal to the percentage increase in the Index if the Index increases above the Step Up Value
◾ 1-to-1 downside exposure to decreases in the Index, with up to 100.00% of your principal at risk
◾ All payments are subject to the credit risk of The Bank of Nova Scotia
◾ No periodic interest payments
◾ In addition to the underwriting discount set forth below, the notes include a hedging-related charge of $0.075 per unit. See
“Structuring the Notes”.
◾ Limited secondary market liquidity, with no exchange listing
◾ The notes are unsecured debt securities and are not savings accounts or insured deposits of a bank. The notes are not insured or
guaranteed by the Canada Deposit Insurance Corporation (the “CDIC”), the U.S. Federal Deposit Insurance Corporation (the “FDIC”), or any other governmental agency of Canada, the United States or any other jurisdiction
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Per Unit
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Total
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Public offering price
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$10.00
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$9,010,320.00
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Underwriting discount
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$0.20
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$180,206.40
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Proceeds, before expenses, to BNS
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$9.80
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$8,830,113.60
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Terms of the Notes
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Issuer:
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The Bank of Nova Scotia (“BNS”)
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Call Settlement Date:
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Approximately the fifth business day following the Observation Date, subject to postponement if the Observation Date is postponed, as described on page PS-26 of product prospectus supplement EQUITY SUN-1.
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Principal Amount:
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$10.00 per unit
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Call Premium:
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$0.895 per unit if called on the Observation Date (which represents a return of 8.95% over the principal amount).
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Term:
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Approximately two years, if not called
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Ending Value:
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The closing level of the Market Measure on the calculation day. The scheduled calculation day is subject to postponement in the event of Market Disruption Events, as described beginning on page PS-28 of product
prospectus supplement EQUITY SUN-1.
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Market Measure:
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The PHLX Housing SectorSM Index (Bloomberg symbol: “HGX”), a price return index
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Step Up Value:
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406.81 (114.00% of the Starting Value, rounded to two decimal places).
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Starting Value:
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356.85 |
Step Up Payment:
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$1.40 per unit, which represents a return of 14.00% over the principal amount.
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Observation Level:
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The closing level of the Market Measure on the Observation Date.
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Threshold Value:
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356.85 (100.00% of the Starting Value).
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Observation Date:
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October 30, 2020. The scheduled Observation Date is subject to postponement in the event of Market Disruption Events, as described beginning on page PS-28 of product prospectus
supplement EQUITY SUN-1.
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Calculation Day:
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October 22, 2021 |
Call Level: |
356.85 (100.00% of the Starting Value).
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Fees and Charges:
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The underwriting discount of $0.20 per unit listed on the cover page and the hedging related charge of $0.075 per unit described in “Structuring the Notes” on page TS-17.
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Call Amount (per Unit):
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$10.895 if called on the Observation Date.
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Calculation Agent:
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BofA Securities, Inc. (“BofAS”).
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
◾
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Prospectus supplement dated December 26, 2018:
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◾
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Prospectus dated December 26, 2018:
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You may wish to consider an investment in the notes if:
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The notes may not be an appropriate investment for you if:
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◾ You
are willing to receive a return on your investment capped at the Call Premium if the Observation Level is equal to or greater than the Call Level.
◾ You anticipate that the notes will be automatically called or that the Index will not decrease from the Starting Value to the Ending Value.
◾ You are willing to risk a substantial loss of principal and return if the notes are not automatically called and the Index decreases from the Starting Value to the Ending Value.
◾ You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
◾ You are willing to forgo dividends or other benefits of owning the stocks included in the Index.
◾ You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our actual and perceived
creditworthiness, our internal funding rate and fees and charges on the notes.
◾You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.
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◾ You want to hold your notes for the full term.
◾ You believe that the notes will not be automatically called and the Index will decrease from the Starting Value to the Ending Value.
◾ You seek principal repayment or preservation of capital.
◾ You seek interest payments or other current income on your investment.
◾ You want to receive dividends or other distributions paid on the stocks included in the Index.
◾ You seek an investment for which there will be a liquid secondary market.
◾ You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Autocallable Market-Linked Step Up Notes
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This graph reflects the returns on the notes, based on the Threshold Value of 100.00% of the Starting Value, the Step Up Payment of $1.40 per unit and the Step Up Value
of 114.00% of the Starting Value. The green line reflects the returns on the notes, while the dotted gray line reflects the returns of a direct investment in the stocks included in the Index, excluding dividends.
This graph has been prepared for purposes of illustration only.
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Ending Value
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Percentage Change from the Starting Value to the Ending Value
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Redemption Amount per Unit
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Total Rate of Return on the Notes
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0.00
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-100.00%
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$0.00
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-100.00%
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50.00
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-50.00%
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$5.00
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-50.00%
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75.00
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-25.00%
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$7.50
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-25.00%
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80.00
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-20.00%
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$8.00
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-20.00%
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90.00
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-10.00%
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$9.00
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-10.00%
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95.00
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-5.00%
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$9.50
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-5.00%
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100.00(1)(2)
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0.00%
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$11.40(3)
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14.00%
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105.00
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5.00%
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$11.40
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14.00%
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110.00
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10.00%
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$11.40
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14.00%
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114.00(4)
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14.00%
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$11.40
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14.00%
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120.00
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20.00%
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$12.00
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20.00%
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130.00
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30.00%
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$13.00
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30.00%
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140.00
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40.00%
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$14.00
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40.00%
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150.00
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50.00%
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$15.00
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50.00%
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160.00
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60.00%
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$16.00
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60.00%
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(1)
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This is the hypothetical Threshold Value.
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(2)
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The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes only. The actual Starting Value is 356.85, which was the closing level of the Market Measure
on the pricing date.
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(3)
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This amount represents the sum of the principal amount and the Step Up Payment of $1.40.
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(4)
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This is the hypothetical Step Up Value.
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Example 1
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The Ending Value is 90.00, or 90.00% of the Starting Value:
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Starting Value:
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100.00
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Threshold Value: | 100.00 |
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Ending Value:
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90.00
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Redemption Amount per unit
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Example 2
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The Ending Value is 110.00, or 110.00% of the Starting Value:
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Starting Value:
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100.00
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Step Up Value:
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114.00
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Ending Value:
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110.00
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Redemption Amount per unit, the principal amount plus the Step Up Payment, since the Ending Value is equal to or greater than the Starting Value, but less than the Step Up Value.
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Example 3
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The Ending Value is 140.00, or 140.00% of the Starting Value:
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Starting Value:
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100.00
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Step Up Value:
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114.00
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Ending Value:
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140.00
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Redemption Amount per unit
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
◾
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If the notes are not automatically called, depending on the performance of the Index as measured shortly before the maturity date, your investment may result in a loss;
there is no guaranteed return of principal.
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◾
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Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
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◾
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If the notes are called, your investment return is limited to the return represented by the Call Premium.
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◾
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Your investment return may be less than a comparable investment directly in the stocks included in the Index.
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◾
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Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If we become
insolvent or are unable to pay our obligations, you may lose your entire investment.
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◾
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Our initial estimated value of the notes is lower than the public offering price of the notes. Our initial estimated value of the notes is only an estimate. The public
offering price of the notes exceeds our initial estimated value because it includes costs associated with selling and structuring the notes, as well as hedging our obligations under the notes with a third party, which may include BofAS or one
of its affiliates. These costs include the underwriting discount and an expected hedging related charge, as further described in “Structuring the Notes” on page TS-17.
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◾
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Our initial estimated value of the notes does not represent future values of the notes and may differ from others’ estimates. Our initial estimated value of the notes is
determined by reference to our internal pricing models when the terms of the notes are set. These pricing models consider certain factors, such as our internal funding rate on the pricing date, the expected term of the notes, market
conditions and other relevant factors existing at that time, and our assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions could provide
valuations for the notes that are different from our initial estimated value. In addition, market conditions and other relevant factors in the future may change, and any of our assumptions may prove to be incorrect. On future dates, the
market value of the notes could change significantly based on, among other things, the performance of the Index, changes in market conditions, our creditworthiness, interest rate movements and other relevant factors. These factors, together
with various credit, market and economic factors over the term of the notes, are expected to reduce the price at which you may be able to sell the notes in any secondary market and will affect the value of the notes in complex and
unpredictable ways. Our initial estimated value does not represent a minimum price at which we or any agents would be willing to buy your notes in any secondary market (if any exists) at any time.
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◾
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Our initial estimated value is not determined by reference to credit spreads or the borrowing rate we would pay for our conventional fixed-rate debt securities. The
internal funding rate used in the determination of our initial estimated value of the notes generally represents a discount from the credit spreads for our conventional fixed-rate debt securities and the borrowing rate we would pay for our
conventional fixed-rate debt securities. If we were to use the interest rate implied by the credit spreads for our conventional fixed-rate debt securities, or the borrowing rate we would pay for our conventional fixed-rate debt securities, we
would expect the economic terms of the notes to be more favorable to you. Consequently, our use of an internal funding rate for the notes would have an adverse effect on the economic terms of the notes, the initial estimated value of the
notes on the pricing date, and the price at which you may be able to sell the notes in any secondary market.
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◾
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A trading market is not expected to develop for the notes. None of us, MLPF&S or BofAS is obligated to make a market for, or to repurchase, the notes. There is no
assurance that any party will be willing to purchase your notes at any price in any secondary market.
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◾
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Our business, hedging and trading activities, and those of MLPF&S, BofAS and our respective affiliates (including trades in shares of companies included in the
Index), and any hedging and trading activities we, MLPF&S, BofAS or our respective affiliates engage in for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with you.
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◾
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The Index sponsor may adjust the Index in a way that may adversely affect its level and your interests, and the Index sponsor has no obligation to consider your
interests.
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◾
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You will have no rights of a holder of the securities included in the Index, and you will not be entitled to receive securities or dividends or other distributions by the
issuers of those securities.
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◾
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While we, MLPF&S, BofAS or our respective affiliates may from time to time own securities of companies included in the Index, none of us, MLPF&S, BofAS or our
respective affiliates control any company included in the Index, and have not verified any disclosure made by any other company.
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◾
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There may be potential conflicts of interest involving the calculation agent, which is BofAS. We have the right to appoint and remove the calculation agent.
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
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The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See “Summary of U.S. Federal Income Tax Consequences”
below.
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◾
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The conclusion that no portion of the interest paid or credited or deemed to be paid or credited on a note will be “Participating Debt Interest” subject to Canadian
withholding tax is based in part on the current published administrative position of the CRA. There cannot be any assurance that CRA’s current published administrative practice will not be subject to change, including potential expansion in
the current administrative interpretation of Participating Debt Interest subject to Canadian withholding tax. If, at any time, the interest paid or credited or deemed to be paid or credited on a note is subject to Canadian withholding tax,
you will receive an amount that is less than the Redemption Amount. You should consult your own adviser as to the potential for such withholding and the potential for reduction or refund of part or all of such withholding, including under any
bilateral Canadian tax treaty the benefits of which you may be entitled. For a discussion of the Canadian federal income tax consequences of investing in the notes, see “Summary of Canadian Federal Income Tax Consequences” below, “Canadian
Taxation—Debt Securities” on page 62 of the prospectus dated December 26, 2018, and “Supplemental Discussion of Canadian Federal Income Tax Consequences” on page PS-41 of product prospectus supplement EQUITY SUN-1.
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
•
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employment levels and job growth;
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•
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the availability of financing for home buyers;
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•
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market interest rates;
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•
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consumer confidence;
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•
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housing demand and real estate values;
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•
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the availability of suitable undeveloped land;
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•
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raw material and labor shortages and price fluctuations;
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•
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federal, state, and local laws and regulations concerning the development of land, housing construction, home sales, consumer financing, and environmental protection;
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•
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competition among companies which engage in the housing construction business; and
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•
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the supply of homes and other housing alternatives.
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
◾
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the security must be listed on the New York Stock Exchange, the Nasdaq Stock Market, NYSE American or the Chicago Board Options Exchange (“CBOE”);
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◾
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the issuer of the security must be classified, as reasonably determined by NASDAQ OMX, as a company whose primary business is associated with the U.S. housing construction market under Industry Classification Benchmark (“ICB”) codes,
which are products of FTSE International Limited and are licensed for use by the Index sponsor;
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◾
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only one class of security per issuer is allowed—if an issuer has multiple securities, the security with the highest dollar trading volume will be selected for possible inclusion in the Index;
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
◾
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the security must have a market capitalization of at least $100 million;
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◾
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the security must have traded at least 1.5 million shares in each of the last six months;
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◾
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the security must have listed options on a recognized options market in the U.S. or be eligible for listed-options trading on a recognized options market in the U.S.;
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◾
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the security may not be issued by an issuer currently in bankruptcy proceedings;
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◾
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the issuer of the security may not have entered into a definitive agreement or other arrangement which would likely result in the security no longer being eligible for the Index;
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◾
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the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn; and
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◾
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the security must have “seasoned” on a recognized market for at least six months; in the case of spin-offs, the operating history of the spin-off will be considered.
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◾
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no single Index Security is greater than 20% of the weight of the Index, and the top five Index Securities do not constitute more than 55% of the weight of the Index; and
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◾
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no more than 15% of the weight of the Index is composed of non-U.S. component securities that are not subject to comprehensive surveillance agreements.
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◾
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the security must be listed on the New York Stock Exchange, the Nasdaq Stock Market, or NYSE American;
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◾
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the issuer of the security must be classified, as reasonably determined by NASDAQ OMX, as a company whose primary business is associated with the U.S. housing sector under ICB codes;
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◾
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the security must have a market capitalization of at least $60 million;
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◾
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the security may not be issued by an issuer currently in bankruptcy proceedings; and
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◾
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the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn.
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◾
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no single Index Security is greater than 25% of the weight of the Index, and the top five Index Securities do not constitute more than 60% of the weight of the Index (measured semi-annually on the first
trading day in January and July);
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◾
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no more than 18% of the weight of the Index is composed of non-U.S. Index Securities that are not subject to comprehensive surveillance agreements;
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◾
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the total number of Index Securities has not increased or decreased by 33 1/3% of the Index and in no event will be less than nine;
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◾
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Index Securities representing at least 95% of the weight of the Index have a market capitalization of at least $75 million;
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◾
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Index Securities representing at least 92% of the weight of the Index and at least 82% of the total number of Index Securities meet the security options eligibility rules;
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◾
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Index Securities must have trading volume of at least 600,000 shares for each of the last six months, except that for each of the lowest weighted Index Securities that in the aggregate account for no more than
5% of the weight of the Index, trading volume must be at least 500,000 shares for each of the last six months; and
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◾
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the lesser of the five highest weighted Index Securities or the highest weighted Index Securities that in the aggregate represent at least 30% of the total number of Index Securities each have had an average
monthly trading volume of at least 1,250,000 shares over the past six months.
|
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Company
|
Percentage of Index Weighting
|
Weyerhaeuser Company
|
13.14%
|
Vulcan Materials Company
|
11.65%
|
Lennar Corporation
|
8.86%
|
DR Horton Inc.
|
7.96%
|
Masco Corporation
|
7.91%
|
PulteGroup, Inc.
|
7.85%
|
Fidelity National Financial Inc.
|
7.64%
|
Lennox International Inc.
|
6.61%
|
Owens Corning
|
4.68%
|
Toll Brothers, Inc.
|
4.14%
|
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Radian Group Inc.
|
3.52%
|
Armstrong World Industries, Inc.
|
3.42%
|
LendingTree, Inc.
|
2.85%
|
KB Home
|
2.24%
|
Meritage Homes Corporation
|
2.04%
|
M.D.C. Holdings, Inc.
|
1.97%
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LGI Homes, Inc.
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1.36%
|
Mueller Water Products, Inc.
|
1.28%
|
M/I Homes, Inc.
|
0.87%
|
* Rounded to two decimal places.
|
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing SectorSM Index, due October 29, 2021 |
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