Subject to Completion
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May 2024
Preliminary Pricing Supplement
Dated May 16, 2024
Registration Statement No. 333-261476
Filed pursuant to Rule 424(b)(2)
(To Prospectus dated December 29, 2021,
Prospectus Supplement dated December 29, 2021
and Product Supplement dated December 29, 2021)
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SUMMARY TERMS
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Issuer:
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The Bank of Nova Scotia (“BNS”)
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Issue:
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Senior Note Program, Series A
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Underlying stock:
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Common Stock of Tesla, Inc. (Bloomberg Ticker: “TSLA UW”)
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Aggregate principal amount:
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$•
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Stated principal amount:
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$1,000.00 per security
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Issue price:
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$1,000.00 per security (see “Commissions and issue price” below)
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Minimum investment:
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$1,000 (1 security)
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Pricing date:
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May 24, 2024
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Original issue date:
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May 30, 2024 (3 business days after the pricing date). 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 a trade expressly agree otherwise. Accordingly, purchasers who wish to trade the securities in the secondary market on any date prior to two business days before
delivery of the securities will be required, by virtue of the fact that each security initially will settle in three business days (T+3), to specify alternative settlement arrangements to prevent a failed settlement of the secondary
market trade.
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Maturity date:
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May 27, 2027, subject to postponement for certain market disruption events and as described under “General Terms of the Notes — Market Disruption Events” and “—
Maturity Date” in the accompanying product supplement.
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Early redemption:
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If the closing price of the underlying stock on any determination date other than the final determination date is greater than or equal to the
call threshold price, the securities will be automatically redeemed for an amount per security equal to the early redemption payment on the first contingent coupon payment date immediately following the related determination date. No
further payments will be made on the securities once they have been redeemed.
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Early redemption payment:
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The early redemption payment will be an amount equal to (i) the stated principal amount plus (ii) the contingent quarterly coupon with respect to the applicable
determination date and any previously unpaid contingent quarterly coupons with respect to any previous determination dates pursuant to the memory coupon feature.
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Contingent quarterly coupon:
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◾
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If the closing price on any determination date is greater than or equal to the downside threshold price, we will pay on the related contingent
coupon payment date a contingent quarterly coupon of $36.875 (equivalent to 14.75% per annum of the stated principal amount) per security, plus any previously unpaid contingent quarterly coupons with respect to any previous
determination dates pursuant to the memory coupon feature.
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◾
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If the closing price on any determination date is less than the downside threshold price, we will not pay a contingent quarterly coupon on the
related contingent coupon payment date.
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Memory coupon feature:
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If a contingent quarterly coupon is not paid on a contingent coupon payment date (other than the maturity date) because the closing price of the underlying stock on the related
determination date is less than the downside threshold price, such contingent quarterly coupon will be paid on a later contingent coupon payment date if the closing price of the underlying
stock on the determination date corresponding to such later contingent coupon payment date is greater than or equal to the downside threshold price. For the avoidance of doubt, once a
previously unpaid contingent quarterly coupon has been paid on a later contingent coupon payment date, it will not be made again on any subsequent contingent coupon payment date.
If the closing price of the underlying stock on each of the determination dates is less than the downside threshold price, you will receive no contingent quarterly
coupons during the term of, and will not receive a positive return on, the securities.
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Determination dates:
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August 26, 2024, November 25, 2024, February 24, 2025, May 27, 2025, August 25, 2025, November 24, 2025, February 24, 2026, May 26, 2026, August 24, 2026, November
24, 2026, February 24, 2027 and May 24, 2027, subject to postponement for non-trading days and certain market disruption events (as described under “General Terms of the Notes — Market Disruption Events” and “— Valuation Dates” in the
accompanying product supplement). We also refer to May 24, 2027 as the final determination date.
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Contingent coupon payment dates:
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August 29, 2024, November 29, 2024, February 27, 2025, May 30, 2025, August 28, 2025, November 28, 2025, February 27, 2026, May 29, 2026, August 27, 2026, November 30, 2026, March 1,
2027 and the maturity date, subject to postponement for non-business days and as described under “General Terms of the Securities — Coupon Payment Dates” and “— Maturity Date” in the accompanying product supplement.
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Payment at maturity:
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◾
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If the final share price is greater than or equal to the downside threshold
price:
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(i) the stated principal amount plus (ii) the contingent quarterly coupon with respect to the final determination date and
any previously unpaid contingent quarterly coupons with respect to any previous determination dates pursuant to the memory coupon feature
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◾
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If the final share price is less than the downside threshold price:
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(i) the stated principal amount multiplied by (ii) the share performance factor
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If the final share price is less than the downside threshold price, the payment at maturity will be less than 50% of the stated principal amount
and could be as low as zero.
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Share performance factor(1):
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Final share price divided by the initial share price.
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Call threshold price(1):
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$•, which is equal to 100% of the initial share price
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Downside threshold price(1):
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$•, which is equal to 50% of the initial share price
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Initial share price(1):
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$•, which is equal to the closing price of the underlying stock on the pricing date
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Final share price(1):
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The closing price of the underlying stock on the final determination date
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CUSIP / ISIN:
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06417YX87 / US06417YX879
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Listing:
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The securities will not be listed or displayed on any securities exchange or any electronic communications network.
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Calculation agent:
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Scotia Capital Inc.
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Agent:
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Scotia Capital (USA) Inc. (“SCUSA”), an affiliate of BNS. See “Supplemental information regarding plan of distribution (conflicts of interest); secondary markets (if any).”
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Estimated value on the pricing
date:
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Expected to be between $939.40 and $969.40 per stated principal amount, which will be less than the issue price listed above. See “Additional Information About the Securities — Additional information
regarding estimated value of the securities” herein and “Risk Factors — Risks Relating to Estimated Value and Liquidity” beginning on page 11 of this document for additional information. The actual value of your securities at any time
will reflect many factors and cannot be predicted with accuracy.
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Commissions and issue price:
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Price to Public(2)
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Fees and Commissions(2)
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Proceeds to Issuer
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Per security
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$1,000.00
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$17.50(a)
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$977.50
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+ $5.00(b)
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$22.50
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Total
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$•
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$•
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$•
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(1) |
As determined by the calculation agent and as may be adjusted in the case of certain adjustment events as described under “General Terms of the Notes — Unavailability of the Closing Value of a Reference
Asset; Adjustments to a Reference Asset — Unavailability of the Closing Value of a Reference Equity” and “— Anti-Dilution Adjustments Relating to a Reference Equity”, as described in the accompanying product supplement.
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(2) |
SCUSA will purchase the securities at the stated principal amount and, as part of the distribution of the securities, will sell the securities to Morgan Stanley Smith Barney LLC (“Morgan Stanley Wealth
Management”) at an underwriting discount which reflects:
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(a) |
a fixed sales commission of $17.50 per $1,000.00 stated principal amount of securities that Morgan Stanley Wealth Management sells and
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(b)
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a fixed structuring fee of $5.00 per $1,000.00 stated principal amount of securities that Morgan Stanley Wealth Management sells,
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Contingent Income Auto-Callable Securities due on or about May 27, 2027
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Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
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♦ |
Product Supplement (Market-Linked Notes, Series A) dated December 29, 2021:
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♦ |
Prospectus Supplement dated December 29, 2021:
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♦ |
Prospectus dated December 29, 2021:
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Contingent Income Auto-Callable Securities due on or about May 27, 2027
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Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
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Contingent Income Auto-Callable Securities due on or about May 27, 2027
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Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
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Scenario 1
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On any of the determination dates other than the final determination date, the closing price of the underlying stock is greater than or equal to the call threshold price.
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◾
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The securities will be automatically redeemed for an amount per security equal to the early redemption payment, which will be (i) the stated principal amount plus (ii) the contingent quarterly coupon otherwise payable with respect to the applicable determination date and any previously unpaid contingent quarterly coupons with respect to any previous determination dates
pursuant to the memory coupon feature.
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◾
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Investors will not participate in any appreciation of the underlying stock from the initial share price and will not realize a return beyond the returns represented by the contingent
quarterly coupons received, if any, during the term of the securities.
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Scenario 2
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The securities are not automatically redeemed prior to maturity and the final share price is greater than
or equal to the downside threshold price.
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◾
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The payment due at maturity will be (i) the stated principal amount plus (ii) the contingent quarterly coupon with respect to the final
determination date and any previously unpaid contingent quarterly coupons with respect to any previous determination dates pursuant to the memory coupon feature.
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◾
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Investors will not participate in any appreciation of the underlying stock from the initial share price and will not realize a return beyond the returns represented by the contingent
quarterly coupons received, if any, during the term of the securities.
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Scenario 3
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The securities are not automatically redeemed prior to maturity and the final share price is less than
the downside threshold price.
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◾
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The payment due at maturity will be equal to (i) the stated principal amount multiplied by (ii) the share performance factor.
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◾
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Investors will lose a significant portion, and may lose all, of their investment in the securities in this scenario.
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Contingent Income Auto-Callable Securities due on or about May 27, 2027
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Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
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◾ |
You fully understand and are willing to accept the risks of an investment in the securities, including the risk that you may lose up to 100% of your investment in the securities.
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You can tolerate a loss of a significant portion or all of your investment and are willing to make an investment that may have the same downside market risk as a direct investment in the underlying stock
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You believe that the closing price of the underlying stock on each determination date will be greater than or equal to the downside threshold price
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You understand and accept that (i) you will not participate in any appreciation in the price of the underlying stock and that any potential positive return is limited to the contingent quarterly coupons specified on the cover hereof
and (ii) you may receive few or no contingent quarterly coupons during the term of the securities
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You can tolerate fluctuations in the market price of the securities prior to maturity that may be similar to or exceed the fluctuations in the price of the underlying stock
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You are willing to forgo any dividends paid on the underlying stock and you do not seek guaranteed current income from this investment
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You are willing to invest in securities that may be redeemed prior to the maturity date, you are otherwise willing to hold such securities to maturity, a term of approximately 3 years, and you accept that there may be little or no
secondary market for the securities
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You understand and are willing to accept the risks associated with the underlying stock
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You are willing to assume the credit risk of BNS for all payments under the securities, and you understand that if BNS defaults on its obligations you may not receive any amounts due to you including any repayment of principal
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You do not fully understand or are unwilling to accept the risks of an investment in the securities, including the risk that you may lose up to 100% of your investment in the securities
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You require an investment designed to provide a full or at least partial return of principal at maturity
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You cannot tolerate a loss of a significant portion or all of your investment, or you are not willing to make an investment that may have the same downside market risk as a direct investment in the underlying stock
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You believe that the closing price of the underlying stock on one or more determination dates is likely to be less than the downside threshold price
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You seek an investment that participates in the full appreciation in the price of the underlying stock or that has unlimited return potential
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You cannot tolerate fluctuations in the market price of the securities prior to maturity that may be similar to or exceed the fluctuations in the price of the underlying stock
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You prefer to receive any dividends paid on the underlying stock or you seek guaranteed current income from this investment
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You are unable or unwilling to hold securities that may be redeemed prior to the maturity date, you are otherwise unable or unwilling to hold such securities to maturity, a term of approximately 3 years, or you seek an investment for
which there will be an active secondary market
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You do not understand or are not willing to accept the risks associated with the underlying stock
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You are not willing to assume the credit risk of BNS for all payments under the securities, including any repayment of principal
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Contingent Income Auto-Callable Securities due on or about May 27, 2027
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Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
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Contingent Income Auto-Callable Securities due on or about May 27, 2027
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Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
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Hypothetical Initial Share Price:
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$175.00
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Hypothetical Call Threshold Price:
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$175.00, which is 100.00% of the hypothetical initial share price
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Hypothetical Downside Threshold Price:
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$87.50, which is 50.00% of the hypothetical initial share price
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Hypothetical Quarterly Coupon:
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$36.875 (equivalent to 14.75% per annum of the stated principal
amount) per security
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Stated Principal Amount:
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$1,000.00 per security
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Example 1
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Example 2
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Determination
Dates
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Hypothetical
Closing Price
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Contingent
Quarterly Coupon |
Early
Redemption
Payment*
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Hypothetical
Closing Price
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Contingent
Quarterly Coupon
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Early
Redemption
Payment*
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#1
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$182.00
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$–
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$1,036.875
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$77.00
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$0.00
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N/A
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#2
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N/A
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N/A
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N/A
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$98.00
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$73.75**
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N/A
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#3
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N/A
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N/A
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N/A
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$210.00
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$–
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$1,036.875
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#4
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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#5
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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#6
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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#7
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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#8
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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#9
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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#10
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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#11
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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Final
Determination
Date
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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Payment at
Maturity
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N/A
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N/A
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* |
The early redemption payment includes the unpaid contingent quarterly coupon with respect to the determination date on which the closing price is greater than or equal to the call threshold price plus any previously unpaid contingent
quarterly coupons pursuant to the memory coupon feature.
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** |
Includes the contingent quarterly coupon with respect to the second determination date and the unpaid contingent quarterly coupon with respect to the first determination date pursuant to the memory coupon feature.
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▪ |
In Example 1, the securities are automatically redeemed following the first determination date as the closing price of the underlying stock on such determination date is greater than or equal
to the call threshold price. Because the closing price of the underlying stock on such determination date is greater than or equal to the downside threshold price, on the corresponding contingent coupon payment date, you receive an
early redemption payment of $1,036.875, which includes the contingent quarterly coupon with respect to such determination date.
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Contingent Income Auto-Callable Securities due on or about May 27, 2027
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Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
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▪ |
In Example 2, the securities are automatically redeemed following the third determination date as the closing price of the underlying stock on such determination date is greater than or equal
to the call threshold price. As the closing price of the underlying stock on the first determination date is less than the downside threshold price, you will not receive the contingent quarterly coupon with respect to such determination
date on the related contingent coupon payment date. Because the closing price of the underlying stock on the second determination date is greater than or equal to the downside threshold price and less than the call threshold price, you
will receive on the related contingent coupon payment date the contingent quarterly coupon with respect to such determination date plus the unpaid contingent quarterly coupon with respect to the first determination date pursuant to the
memory coupon feature.
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Example 3
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Example 4
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Determination
Dates
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Hypothetical
Closing Price
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Contingent
Quarterly Coupon
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Early
Redemption
Payment
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Hypothetical
Closing Price
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Contingent
Quarterly Coupon
|
Early
Redemption
Payment
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#1
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$67.80
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$0.00
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N/A
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$77.50
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$0.00
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N/A
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#2
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$69.60
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$0.00
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N/A
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$73.20
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$0.00
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N/A
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#3
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$63.70
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$0.00
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N/A
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$78.90
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$0.00
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N/A
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#4
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$60.50
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$0.00
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N/A
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$74.20
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$0.00
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N/A
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#5
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$64.00
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$0.00
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N/A
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$77.40
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$0.00
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N/A
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#6
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$61.90
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$0.00
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N/A
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$76.70
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$0.00
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N/A
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#7
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$62.60
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$0.00
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N/A
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$70.50
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$0.00
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N/A
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#8
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$65.20
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$0.00
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N/A
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$71.20
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$0.00
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N/A
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#9
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$60.50
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$0.00
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N/A
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$74.50
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$0.00
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N/A
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#10
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$68.90
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$0.00
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N/A
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$71.00
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$0.00
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N/A
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#11
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$61.20
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$0.00
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N/A
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$73.00
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$0.00
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N/A
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Final
Determination
Date
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$157.50
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$442.50*
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N/A
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$70.00
|
$0.00
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N/A
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Payment at
Maturity
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$1,442.50
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$400.00
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* |
The final contingent quarterly coupon (and any previously unpaid contingent quarterly coupons pursuant to the memory coupon feature) will be paid at maturity.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
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▪ |
In Example 3, the closing price of the underlying stock on each determination date prior to the final determination date is less than the downside threshold price and less than the call
threshold price. As a result, you do not receive a contingent quarterly coupon on any of the related contingent coupon payment dates and the securities are not automatically redeemed prior to maturity. Because the closing price on the
final determination date is greater than or equal to the downside threshold price, at maturity you receive the stated principal amount plus the contingent quarterly coupon with respect to the final determination date and the previously
unpaid contingent quarterly coupons with respect to the previous determination dates pursuant to the memory coupon feature. Your payment at maturity is calculated as follows:
|
▪ |
In Example 4, the closing price of the underlying stock on each determination date throughout the term of the securities is less than the downside threshold price and the call threshold price.
As a result, you do not receive any contingent quarterly coupon during the term of the securities and the securities are not automatically redeemed prior to maturity. Furthermore, because the final share price is less than the downside
threshold price, you receive a cash payment at maturity calculated as follows:
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
◾ |
Risk of significant loss at maturity. The securities differ from ordinary debt securities in that BNS will not necessarily repay the stated principal amount of the securities at maturity. If
the securities are not redeemed prior to maturity, BNS will repay you the stated principal amount of your securities in cash only if the final share price of the underlying stock is greater than or equal to the downside threshold price
and will only make such payment at maturity. If the securities are not redeemed prior to maturity and the final share price is less than the downside threshold price, you will receive a cash payment per security that will be less than
50% of the stated principal amount and could be zero and you will be exposed on a 1-to-1 basis to the decline of the final share price relative to the initial share price. You may
lose your entire investment in the securities.
|
◾ |
Contingent repayment of stated principal amount only at maturity. If your securities are not redeemed prior to maturity, you should be willing to hold your securities to maturity. If you are
able to sell your securities prior to maturity in the secondary market, you may have to sell them at a loss relative to your investment even if the then-current price of the underlying stock is greater than or equal to the downside
threshold price.
|
◾ |
You may not receive any contingent quarterly coupons. BNS will not necessarily make periodic payments on the securities. A contingent quarterly coupon, plus any previously unpaid contingent
quarterly coupons with respect to any previous determination dates pursuant to the memory coupon feature, will be made on a contingent coupon payment date only if the closing price of the underlying stock on the related determination
date is greater than or equal to the downside threshold price. If the closing price of the underlying stock on any determination date is less than the downside threshold price, BNS will not pay a contingent quarterly coupon on the
related contingent coupon payment date, and if the closing price of the underlying stock is less than the downside threshold price on each subsequent determination date, you will not receive such contingent quarterly coupon on any
subsequent contingent coupon payment date (including the maturity date). If the closing price of the underlying stock on each of the determination dates is less than the downside threshold price, you will receive no contingent quarterly
coupons during the term of, and will not receive a positive return on, the securities. Generally, this non-payment of the contingent quarterly coupon coincides with a period of greater risk of principal loss on your securities.
|
◾ |
Greater expected volatility with respect to the underlying stock generally reflects a higher contingent quarterly coupon and a higher expectation as of the pricing date that the final share price of
the underlying stock could be less than the downside threshold price on the final determination date. Greater expected volatility with respect to the underlying stock reflects a higher expectation as of the pricing date that
the final share price could be less than the downside threshold price on the final determination date. “Volatility” refers to the frequency and magnitude of changes in the price of the underlying stock. This greater expected risk will
generally be reflected in a higher contingent quarterly coupon rate than would have been the case had expected volatility been lower. However, while the contingent quarterly coupon is set on the pricing date based, in part, on the
underlying stock’s volatility calculated using our internal models, the underlying stock’s volatility can change significantly over the term of the securities. The price of the underlying stock could fall sharply, which could result in
the loss of a significant portion or all of your investment in the securities.
|
◾ |
The securities are subject to reinvestment risk in the event of an early redemption. The securities will be automatically redeemed prior to maturity if the closing price of the underlying stock
on any determination date other than the final determination date is greater than or equal to the call threshold price and you will not receive any more contingent quarterly coupons after the related contingent coupon payment date.
Conversely, the securities will not be automatically redeemed when the closing price on any determination date is less than the call threshold price, which generally coincides with a greater risk of principal loss on your securities.
The securities could be redeemed as early as the first contingent coupon payment date, potentially limiting your investment to a term of approximately 3 months. In the event that the securities are redeemed prior to maturity, there is
no guarantee that you will be able to reinvest the proceeds from an investment in the securities at a comparable rate of return for a similar level of risk. In addition, to the extent you are able to reinvest such proceeds in an
investment comparable to the securities, you will incur transaction costs and the original issue price for such an investment is likely to include certain built-in costs such as dealer discounts and hedging costs.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
◾ |
The contingent quarterly coupon, if any, is based solely on the closing price or the final share price, as applicable. Whether any contingent
quarterly coupon(s) will be paid on a contingent coupon payment date will be based on the closing price or the final share price, as applicable, of the underlying stock on the related determination date. As a result, you will not know whether you will receive any contingent quarterly coupon(s) until the related determination date. If you do not receive the contingent quarterly coupon on a contingent coupon payment date, you will
not know whether you will receive such contingent quarterly coupon on any subsequent contingent coupon payment date pursuant to the memory coupon feature until the later determination date corresponding to such contingent coupon
payment date. Moreover, if you do not receive the contingent quarterly coupon on a contingent coupon payment date and the closing price of the underlying stock is less than the downside threshold price on each subsequent determination
date (including the final determination date), you will not receive any contingent quarterly coupon with respect to such determination date, even if the closing price of the underlying stock was higher than the downside threshold
price on other days during the term of the securities.
|
◾ |
Your potential return on the securities is limited, you will not participate in any appreciation of the underlying stock and you will not realize a return beyond the returns represented by the
contingent quarterly coupons received, if any, during the term of the securities. The return potential of the securities is limited to the contingent quarterly coupons, regardless of any appreciation of the underlying stock.
Your return on the securities will vary based on the number of determination dates on which the requirements of the contingent quarterly coupon have been met prior to maturity or an early redemption. Furthermore, if the securities are
redeemed prior to maturity, you will not receive any contingent quarterly coupons or any other payment in respect of any determination dates after the applicable contingent coupon payment date, and your return on the securities could be
less than if the securities remained outstanding until maturity. If the securities are not redeemed prior to maturity, you may be subject to the depreciation in the price of the underlying stock even though you cannot participate in any
appreciation in the price of the underlying stock. As a result, the return on an investment in the securities could be less than the return on a direct investment in the underlying stock. In addition, as an owner of the securities, you
will not receive any dividends or distributions on the underlying stock and you will not have voting rights or any other rights of a holder of the underlying stock.
|
◾ |
The securities are subject to risks associated with investments in single equity securities. The value of the underlying stock can rise or fall sharply due to factors specific to the underlying
stock and the issuer of the underlying stock (the “underlying stock issuer”), such as stock price volatility, earnings, financial conditions, corporate, industry and regulatory developments, management changes and decisions and other
events, as well as general market factors, such as general stock market volatility and levels, interest rates and economic, political and other conditions. You, as an investor in the securities, should make your own investigation into
the underlying stock issuer and the underlying stock. For additional information regarding the underlying stock, please see “Information About the Underlying Stock” below and the underlying stock issuer’s SEC filings referred to in this
section. We urge you to review financial and other information filed periodically by the underlying stock issuer with the SEC.
|
◾ |
There can be no assurance that the investment view implicit in the securities will be successful. It is impossible to predict whether and the extent to which the value of the underlying stock
will rise or fall and there can be no assurance that the closing price of the underlying stock on any determination date will be greater than or equal to the downside threshold price or, if the securities are not redeemed prior to
maturity, that the final share price on the final valuation date will be greater than or equal to the downside threshold price. The value of the underlying stock will be influenced by complex and interrelated political, economic,
financial and other factors that affect the underlying stock and the underlying stock issuer. You should be willing to accept the downside risks of owning equities in general and the underlying stock in particular, and the risk of
losing a significant portion or all of your investment in the securities.
|
◾ |
There is no affiliation between BNS and the underlying stock issuer. The underlying stock issuer is not an affiliate of ours, is not involved with the offering in any way, and has no obligation
to consider your interests in taking any corporate actions that might affect the value of the securities. We have not made any due diligence inquiry with respect to the underlying stock.
|
◾ |
BNS’ initial estimated value of the securities at the time of pricing (when the terms of your securities are set on the pricing date) will be lower than the issue price of the securities. BNS’
initial estimated value of the securities is only an estimate. The issue price of the securities will exceed BNS’ initial estimated value. The difference between the issue price of the securities and BNS’ initial estimated value
reflects costs associated with selling and structuring the securities, as well as hedging its obligations under the securities. Therefore, the economic terms of the securities are less favorable to you than they would have been if these
expenses had not been paid or had been lower.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
◾ |
Neither BNS’ nor SCUSA’s estimated value of the securities at any time is determined by reference to credit spreads or the borrowing rate BNS would pay for its conventional fixed-rate debt securities.
BNS’ initial estimated value of the securities and SCUSA’s estimated value of the securities at any time are determined by reference to BNS’ internal funding rate. The internal funding rate used in the determination of the estimated
value of the securities generally represents a discount from the credit spreads for BNS’ conventional fixed-rate debt securities and the borrowing rate BNS would pay for its conventional fixed-rate debt securities. This discount is
based on, among other things, BNS’ view of the funding value of the securities as well as the higher issuance, operational and ongoing liability management costs of the securities in comparison to those costs for BNS’ conventional
fixed-rate debt. If the interest rate implied by the credit spreads for BNS’ conventional fixed-rate debt securities, or the borrowing rate BNS would pay for its conventional fixed-rate debt securities were to be used, BNS would expect
the economic terms of the securities to be more favorable to you. Consequently, the use of an internal funding rate for the securities increases the estimated value of the securities at any time and has an adverse effect on the economic
terms of the securities.
|
◾ |
BNS’ initial estimated value of the securities does not represent future values of the securities and may differ from others’ (including SCUSA’s) estimates. BNS’ initial estimated value of the
securities is determined by reference to its internal pricing models when the terms of the securities are set. These pricing models consider certain factors, such as BNS’ internal funding rate on the pricing date, the expected term of
the securities, market conditions and other relevant factors existing at that time, and BNS’ assumptions about market parameters, which can include volatility of the underlying stock, 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 securities that are different, and perhaps materially lower, from BNS’ initial estimated value.
Therefore, the price at which SCUSA would buy or sell your securities (if SCUSA makes a market, which it is not obligated to do) may be materially lower than BNS’ initial estimated value. In addition, market conditions and other
relevant factors in the future may change, and any assumptions may prove to be incorrect.
|
◾ |
The securities have limited liquidity. The securities will not be listed on any securities exchange or automated quotation system. Therefore, there may be little or no secondary market for the
securities. SCUSA and any other affiliates of BNS intend, but are not required, to make a market in the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities
easily. Because we do not expect that other broker-dealers will participate in the secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which SCUSA
is willing to purchase the securities from you. If at any time SCUSA does not make a market in the securities, it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold your
securities to maturity.
|
◾ |
The price at which SCUSA would buy or sell your securities (if SCUSA makes a market, which it is not obligated to do) will be based on SCUSA’s estimated value of your securities. SCUSA’s estimated
value of the securities is determined by reference to its pricing models and takes into account BNS’ internal funding rate. The price at which SCUSA would initially buy or sell your securities in the secondary market (if SCUSA
makes a market, which it is not obligated to do) exceeds SCUSA’s estimated value of your securities at the time of pricing. As agreed by SCUSA and the distribution participants, this excess is expected to decline to zero over the period
specified under “Additional Information About the Securities — Supplemental information regarding plan of distribution (conflicts of interest); secondary markets (if any)”. Thereafter, if SCUSA buys or sells your securities 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 securities at any time also will reflect its then-current bid and ask spread
for similar sized trades of structured notes. If SCUSA calculated its estimated value of your securities by reference to BNS’ credit spreads or the borrowing rate BNS would pay for its conventional fixed-rate debt securities (as opposed
to BNS’ internal funding rate), the price at which SCUSA would buy or sell your securities (if SCUSA makes a market, which it is not obligated to do) could be significantly lower.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
◾ |
The price of the securities prior to maturity will depend on a number of factors and may be substantially less than the stated principal amount. The
price at which the securities may be sold prior to maturity will depend on a number of factors. Some of these factors include, but are not limited to: (i) actual or anticipated changes in the price of the underlying stock over the full
term of the securities, (ii) volatility of the price of the underlying stock and the market's perception of the future volatility of the underlying stock, (iii) changes in interest rates generally, (iv) any actual or anticipated changes
in our credit ratings or credit spreads, (v) dividend yields on the underlying stock and (vi) time remaining to maturity. In particular, because the provisions of the securities relating to the contingent quarterly coupons and the
payment at maturity behave like options, the value of the securities will vary in ways which are non-linear and may not be intuitive.
|
◾ |
Payments on the securities are subject to the credit risk of BNS. The securities are senior unsecured debt obligations of BNS and are not, either directly or indirectly, an obligation of any
third party. Any payment to be made on the securities, including any repayment of principal, depends on the ability of BNS to satisfy its obligations as they come due. As a result, BNS’ actual and perceived creditworthiness may affect
the market value of the securities. If BNS were to default on its obligations, you may not receive any amounts owed to you under the terms of the securities and you could lose your entire investment in the securities.
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◾ |
Hedging activities by BNS and SCUSA may negatively impact investors in the securities and cause our respective interests and those of our clients and counterparties to be contrary to those of
investors in the securities. We, SCUSA or one or more of our other affiliates has hedged or expects to hedge our obligations under the securities. Such hedging transactions may include entering into swap or similar agreements,
purchasing shares of the underlying stock and/or purchasing futures, options and/or other instruments linked to the underlying stock. We, 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 underlying stock, at any time and from time to time, and to unwind the hedge by selling any of the foregoing on or before the final
determination date. We, SCUSA or one or more of our other affiliates may also enter into, adjust and unwind hedging transactions relating to other basket- or equity-linked securities whose returns are linked to changes in the price of
the underlying stock. Any of these hedging activities may adversely affect the price of the underlying stock and therefore the market value of the securities and the amount you will receive, if any, on the securities.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
◾ |
The calculation agent can make antidilution and other adjustments that may adversely affect the market value of, and any amounts payable on, the securities. For antidilution and certain other
events affecting the underlying stock, the calculation agent may make adjustments to the initial share price, share performance factor, downside threshold price, closing price and/or final share price, as applicable, and any other term
of the securities. However, the calculation agent will not make an adjustment in response to every corporate event that could affect the underlying stock. If an event occurs that does not require the calculation agent to make an
adjustment, the market value of, and any payment on, the securities may be materially and adversely affected. In addition, all determinations and calculations concerning any such adjustments will be made by the calculation agent. You
should be aware that the calculation agent may make any such adjustment, determination or calculation in a manner that differs from that discussed in the accompanying product supplement or this document as necessary to achieve an
equitable result. Following certain reorganization events relating to the underlying stock issuer where such issuer is not the surviving entity, the determination as to whether the securities are redeemed early and/or the amount you
receive at maturity may be based on the equity security of a successor to the underlying stock issuer in combination with any cash or any other assets distributed to holders of the underlying stock in such reorganization event. If the
underlying stock issuer becomes subject to (i) a reorganization event whereby the underlying stock is exchanged for cash, securities or other property, (ii) a merger or consolidation, or (iii) the underlying stock is delisted or
otherwise suspended from trading, the determination as to whether the securities are redeemed early and/or the amount you receive at maturity may be based on a substitute security. The occurrence of any antidilution or reorganization
event and the consequent adjustments may materially and adversely affect the value of, and any amounts payable on, the securities. For more information, see the sections as described under “General Terms of the Notes — Unavailability of
the Closing Value of a Reference Asset; Adjustments to a Reference Asset — Unavailability of the Closing Value of a Reference Equity” and “— Anti-Dilution Adjustments Relating to a Reference Equity” in the accompanying product
supplement.
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We, 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 underlying stock
issuer and the market activities by us, SCUSA or our other affiliates for our or their own respective accounts or for our clients could negatively impact investors in the securities. 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 securities or other securities that we have issued), the underlying stock, derivatives, loans, credit default swaps, indices, baskets and other financial instruments and products for our or their own respective
accounts or for the accounts of our customers, and we will have other direct or indirect interests, in those securities and in other markets that may not be consistent with your interests and may adversely affect the price of the
underlying stock and/or the value of the securities. 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 underlying stock issuer, or
transact in securities or instruments or with parties that are directly or indirectly related to these entities. These services could include making loans to or equity investments in those companies, providing financial advisory or
other investment banking services, or issuing research reports. Any of these financial market activities may, individually or in the aggregate, have an adverse effect on the price of the underlying stock and the market for your
securities, and you should expect that our interests and those of SCUSA and/or our other affiliates, clients or counterparties, will at times be adverse to those of investors in the securities.
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◾ |
Activities conducted by BNS and its affiliates may impact the market price of the underlying stock and the value of the securities. Trading or transactions by BNS, SCUSA or our other affiliates
in the underlying stock, listed and/or over-the-counter options, futures, exchange-traded funds or other instruments with returns linked to the performance of the underlying stock may adversely affect the price of the underlying stock
and, therefore, the market value of the securities and the likelihood of a contingent quarterly coupon being paid on any contingent coupon payment date. See “— Hedging activities by BNS and SCUSA may negatively impact investors in the
securities and cause our respective interests and those of our clients and counterparties to be contrary to those of investors in the securities” for additional information regarding hedging-related transactions and trading.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
◾ |
The calculation agent will have significant discretion with respect to the securities, which may be exercised in a manner that is adverse to your interests. The calculation agent will be an
affiliate of BNS. The calculation agent will determine whether the contingent quarterly coupon is payable to you on any contingent coupon payment date and the payment at maturity of the securities, if any, based on observed closing
prices of the underlying stock. The calculation agent can postpone the determination of the closing price or final share price (and therefore the related contingent coupon payment date or maturity date, as applicable) if a market
disruption event occurs and is continuing with respect to the underlying stock on any determination date (including the final determination date).
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◾ |
BNS and its affiliates may publish research or make opinions or recommendations that are inconsistent with an investment in the securities. BNS, SCUSA and our other affiliates may publish
research from time to time on financial markets and other matters that may influence the value of the securities, or express opinions or provide recommendations that are inconsistent with purchasing or holding the securities. Any
research, opinions or recommendations expressed by BNS, SCUSA or our other affiliates may not be consistent with each other and may be modified from time to time without notice. Investors should make their own independent investigation
of the merits of investing in the securities and the underlying stock to which the securities are linked.
|
◾ |
Uncertain tax treatment. Significant aspects of the tax treatment of the securities are uncertain. You should consult your tax advisor about your tax situation. See “Additional Information
About the Securities — Tax Considerations” and “— Material Canadian Income Tax Consequences” herein.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
Bloomberg Ticker Symbol:
|
TSLA UW <Equity>
|
52 Week High (on July 18, 2023):
|
$293.34
|
Current Stock Price:
|
$173.99
|
52 Week Low (on April 22, 2024):
|
$142.05
|
52 Weeks Ago (on May 15, 2023):
|
$166.35
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
Tesla, Inc.
|
High
|
Low
|
Period End
|
2019
|
|||
First Quarter
|
$23.154
|
$17.3613
|
$18.6573
|
Second Quarter
|
$19.454
|
$11.9313
|
$14.8973
|
Third Quarter
|
$17.6587
|
$14.0933
|
$16.058
|
Fourth Quarter
|
$28.7293
|
$15.4287
|
$27.8887
|
2020
|
|||
First Quarter
|
$61.1613
|
$24.0813
|
$34.9333
|
Second Quarter
|
$71.9873
|
$30.298
|
$71.9873
|
Third Quarter
|
$166.1067
|
$74.642
|
$143.0033
|
Fourth Quarter
|
$235.2233
|
$129.3467
|
$235.2233
|
2021
|
|||
First Quarter
|
$294.3633
|
$187.6667
|
$222.6433
|
Second Quarter
|
$254.1067
|
$187.82
|
$226.5667
|
Third Quarter
|
$263.7867
|
$214.46
|
$258.4933
|
Fourth Quarter
|
$409.97
|
$258.4067
|
$352.26
|
2022
|
|||
First Quarter
|
$399.9267
|
$254.68
|
$359.20
|
Second Quarter
|
$381.8167
|
$209.3867
|
$224.4733
|
Third Quarter
|
$309.32
|
$227.2633
|
$265.25
|
Fourth Quarter
|
$249.44
|
$109.10
|
$123.18
|
2023
|
|||
First Quarter
|
$214.24
|
$108.10
|
$207.46
|
Second Quarter
|
$274.45
|
$153.75
|
$261.77
|
Third Quarter
|
$293.34
|
$215.49
|
$250.22
|
Fourth Quarter
|
$263.62
|
$197.36
|
$248.48
|
2024
|
|||
First Quarter
|
$248.42
|
$162.50
|
$175.79
|
Second Quarter (through May 15, 2024)
|
$194.05
|
$142.05
|
$173.99
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
The Common Stock of Tesla, Inc. –
Daily Closing Prices January 1, 2019 to May 15, 2024
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
Additional Provisions:
|
||||
Record date:
|
The record date for each contingent coupon payment date shall be the date that is one business day prior to such scheduled contingent coupon payment date.
|
|||
Trustee:
|
Computershare Trust Company, N.A.
|
|||
Calculation agent:
|
Scotia Capital Inc.
|
|||
Trading day:
|
As specified in the product supplement under “General Terms of the Notes — Special Calculation Provisions — Trading Day”.
|
|||
Business day:
|
A day other than a Saturday or Sunday or a day on which banking institutions in New York City are authorized or required by law to close.
|
|||
Tax redemption:
|
Notwithstanding anything to the contrary in the accompanying product supplement, the provisions set forth under “General Terms of the Notes — Payment of Additional Amounts” and “General
Terms of the Notes — Tax Redemption” shall not apply to the securities.
|
|||
Canadian bail-in:
|
The securities are not bail-inable debt securities under the CDIC Act.
|
|||
Terms incorporated:
|
All of the terms appearing above the item under the caption “General Terms of the Notes” in the accompanying product supplement, as modified by this document, and for purposes of the
foregoing, the terms used herein mean the corresponding terms as defined in the accompanying product supplement, as specified below:
|
|||
Term used herein
|
Corresponding term in the accompanying
product supplement
|
|||
underlying stock
|
reference asset
|
|||
stated principal amount
|
principal amount
|
|||
original issue date
|
issue date
|
|||
determination dates
|
valuation dates
|
|||
final determination date
|
final valuation date
|
|||
contingent quarterly coupon
|
contingent coupon
|
|||
contingent coupon payment date(s)
|
coupon payment date(s)
|
|||
closing price
|
closing value
|
|||
initial share price
|
initial value
|
|||
call threshold price
|
call threshold
|
|||
final share price
|
final value
|
|||
downside threshold price
|
barrier value, contingent coupon barrier value
|
|||
In addition to those terms, the following two sentences are also so incorporated into the master note: BNS confirms that it fully understands and is able to calculate the effective annual
rate of interest applicable to the securities based on the methodology for calculating per annum rates provided for in the securities. BNS irrevocably agrees not to plead or assert Section 4 of the Interest Act (Canada), whether by way
of defense or otherwise, in any proceeding relating to the securities.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
Additional information regarding
estimated value of the securities:
|
On the cover page of this pricing supplement, BNS has provided the initial estimated value range for the securities. This range of estimated values was determined by reference to BNS’
internal pricing models, which take into consideration certain factors, such as BNS’ internal funding rate on the pricing date and BNS’ assumptions about market parameters. For more information about the initial estimated value, see
“Risk Factors — Risks Relating to Estimated Value and Liquidity” herein.
The economic terms of the securities (including the contingent quarterly coupon and downside threshold price) are based on BNS’ internal funding rate, which is the rate BNS would pay to
borrow funds through the issuance of similar market-linked securities and the economic terms of certain related hedging arrangements. Due to these factors, the issue price you pay to purchase the securities will be greater than the
initial estimated value of the securities. BNS’ internal funding rate is typically lower than the rate BNS would pay when it issues conventional fixed rate debt securities as discussed further under “Risk Factors — Risks Relating to
Estimated Value and Liquidity — Neither BNS’ nor SCUSA’s estimated value of the securities at any time is determined by reference to credit spreads or the borrowing rate BNS would pay for its conventional fixed-rate debt securities”.
BNS’ use of its internal funding rate reduces the economic terms of the securities to you. We urge you to read the “Risk Factors” in this pricing supplement for additional information.
|
||
Material Canadian income tax
consequences:
|
See “Supplemental Discussion of Canadian Tax Consequences” in the accompanying product supplement for a discussion of the material Canadian income tax consequences of an investment in the
securities. In addition to the assumptions, limitations and conditions described therein, such discussion assumes that a Non-Resident Holder is not an entity in respect of which BNS is a “specified entity” as defined in proposals to
amend the Income Tax Act (Canada) (the “Act”) released by the Minister of Finance (Canada) on November 28, 2023 with respect to “hybrid mismatch arrangements”, as defined (the “Hybrid Mismatch Proposals”). In general terms, the Hybrid
Mismatch Proposals provide that two entities will be treated as specified entities in respect of one another if one entity, directly or indirectly, holds a 25% equity interest in the other entity, or a third entity, directly or
indirectly, holds a 25% equity interest in both entities.
Such discussion further assumes that no amount paid or payable to a Non-Resident Holder will be the deduction component of a “hybrid mismatch arrangement” under which the payment arises
within the meaning of proposed paragraph 18.4(3)(b) of the Act contained in the Hybrid Mismatch Proposals.
Investors should note that the Hybrid Mismatch Proposals are in consultation form, are highly complex, and there remains significant uncertainty as to their interpretation and
application. There can be no assurance that the Hybrid Mismatch Proposals will be enacted in their current form, or at all.
|
||
Tax considerations:
|
The U.S. federal income tax consequences of your investment in the securities 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 securities. Some of these tax consequences are summarized below, but we urge you to
read the more detailed discussion in “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement and to discuss the tax consequences of your particular situation with your tax advisor. This discussion is based
upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed U.S. Department of the Treasury (the “Treasury”) regulations, rulings and decisions, in each case, as available and in effect as of the
date hereof, all of which are subject to change, possibly with retroactive effect. Tax consequences under state, local and non-U.S. laws are not addressed herein. No ruling from the U.S. Internal Revenue Service (the “IRS”) has been
sought as to the U.S. federal income tax consequences of your investment in the securities, and the following discussion is not binding on the IRS.
|
||
U.S. Tax Treatment. Pursuant to the terms of the securities, BNS and you agree, in the absence of a statutory or regulatory change or an
administrative determination or judicial ruling to the contrary, to characterize the securities as prepaid derivative contracts with respect to the underlying stock. If your securities are so treated, any contingent quarterly coupon
that is paid by BNS (including on the maturity date or upon early redemption) should be included in your income as ordinary income in accordance with your regular method of accounting for U.S. federal income tax purposes.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
In addition, excluding amounts attributable to any contingent quarterly coupon, you should generally recognize capital gain or loss upon the taxable disposition (including cash
settlement) of your securities in an amount equal to the difference between the amount you receive at such time (other than amounts or proceeds attributable to a contingent quarterly coupon or any amount attributable to any accrued but
unpaid contingent quarterly coupon) and the amount you paid for your securities. Such gain or loss should generally be long-term capital gain or loss if you have held your securities for more than one year (and, otherwise, short-term
capital gain or loss). The deductibility of capital losses is subject to limitations. Although uncertain, it is possible that proceeds received from the taxable disposition of your securities prior to a contingent coupon payment date,
but that could be attributed to an expected contingent quarterly coupon, could be treated as ordinary income. You should consult your tax advisor regarding this risk.
Except to the extent otherwise required by law, BNS intends to treat your securities for U.S. federal income tax purposes in accordance with the treatment described above and under
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement unless and until such time as the IRS and the Treasury determine that some other treatment is more appropriate.
Based on certain factual representations received from us, our special U.S. tax counsel, Fried, Frank, Harris, Shriver & Jacobson LLP, is of the opinion that it
would be reasonable to treat your securities in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the securities, it is possible that your securities 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 securities could differ materially and adversely from the
treatment described above, as described further under “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement.
Notice 2008-2. In 2007, the IRS released a notice that may affect the taxation of holders of the securities. According to Notice 2008-2, the IRS
and the Treasury are actively considering whether a holder of an instrument such as the securities should be required to accrue ordinary income on a current basis. It is not possible to determine what guidance they will ultimately
issue, if any. It is possible, however, that under such guidance, holders of the securities will ultimately be required to accrue income currently in excess of any receipt of contingent quarterly coupons and this could be applied on a
retroactive basis. The IRS and the Treasury are also considering other relevant issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether non-U.S. holders of such
instruments should be subject to withholding tax on any deemed income accruals, and whether the special “constructive ownership rules” of Section 1260 of the Code should be applied to such instruments. Both U.S. and non-U.S. holders are
urged to consult their tax advisors concerning the significance and potential impact of the above considerations.
Medicare Tax on Net Investment Income. U.S. holders that are individuals, estates or certain trusts are subject to an additional 3.8% tax on all
or a portion of their “net investment income,” or “undistributed net investment income” in the case of an estate or trust, which may include any income or gain realized with respect to the securities, to the extent of their net
investment income or undistributed net investment income (as the case may be) that, when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual, $250,000 for a married taxpayer filing a joint
return (or a surviving spouse), $125,000 for a married individual filing a separate return or the dollar amount at which the highest tax bracket begins for an estate or trust. The 3.8% Medicare tax is determined in a different manner
than the regular income tax. U.S. holders should consult their tax advisors as to the consequences of the 3.8% Medicare tax.
Specified Foreign Financial Assets. Certain U.S. holders that own “specified foreign financial assets” in excess of an applicable threshold may be
subject to reporting obligations with respect to such assets with their tax returns, especially if such assets are held outside the custody of a U.S. financial institution. U.S. holders are urged to consult their tax advisors as to the
application of this legislation to their ownership of the securities.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
Non-U.S. Holders. The U.S. federal income tax treatment of the contingent quarterly coupons is unclear. Subject to Section 871(m) of the Code and
FATCA, as discussed below, we currently do not intend to treat contingent quarterly coupons paid to a non-U.S. holder that provides us (and/or the applicable withholding agent) with a fully completed and validly executed applicable IRS
Form W-8 as subject to U.S. withholding tax and we currently do not intend to withhold any tax on contingent quarterly coupons. However, it is possible that the IRS could assert that such payments are subject to U.S. withholding tax, or
that another withholding agent may otherwise determine that withholding is required, in which case we or the other withholding agent may withhold up to 30% on such payments (subject to reduction or elimination of such withholding tax
pursuant to an applicable income tax treaty). We will not pay any additional amounts in respect of such withholding. Subject to Section 897 of the Code and Section 871(m) of the Code, discussed below, gain realized from the taxable
disposition of a security generally should not be subject to U.S. tax unless (i) such gain is effectively connected with a trade or business conducted by the non-U.S. holder in the U.S., (ii) the non-U.S. holder is a non-resident alien
individual and is present in the U.S. for 183 days or more during the taxable year of such taxable disposition and certain other conditions are satisfied or (iii) the non-U.S. holder has certain other present or former connections with
the U.S.
Section 897. We will not attempt to ascertain whether the underlying stock issuer would be treated as a
“United States real property holding corporation” (“USRPHC”) within the meaning of Section 897 of the Code. We also have not attempted to determine whether the securities should be treated as “United States real property interests”
(“USRPI”) as defined in Section 897 of the Code. If any such entity and/or the securities were so treated, certain adverse U.S. federal income tax consequences could possibly apply, including subjecting any gain to a non-U.S. holder in
respect of a security upon a taxable disposition of the security to the U.S. federal income tax on a net basis, and the proceeds from such a taxable disposition to a 15% withholding tax. Non-U.S. holders should consult their tax
advisors regarding the potential treatment of the underlying stock issuer as a USRPHC and/or the securities as USRPI.
Section 871(m). A 30% withholding tax (which may be reduced by an applicable income tax treaty) is imposed under Section 871(m) of the Code on
certain “dividend equivalents” paid or deemed paid to a non-U.S. holder with respect to a “specified equity-linked instrument” that references one or more dividend-paying U.S. equity securities. The withholding tax can apply even if the
instrument does not provide for payments that reference dividends. Treasury regulations provide that the withholding tax applies to all dividend equivalents paid or deemed paid on specified equity-linked instruments that have a delta of
one (“delta-one specified equity-linked instruments”) issued after 2016 and to all dividend equivalents paid or deemed paid on all other specified equity-linked instruments issued after 2017. 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, 2025.
Based on our determination that the securities are not “delta-one” with respect to the underlying stock, our special U.S. tax counsel is of the opinion that the securities should not be
delta-one specified equity-linked instruments and thus should not be subject to withholding on dividend equivalents. Our determination is not binding on the IRS, and the IRS may disagree with this determination. Furthermore, the
application of Section 871(m) of the Code will depend on our determinations on the date the terms of the securities are set. If withholding is required, we will not make payments of any additional amounts.
Nevertheless, after the date the terms are set, it is possible that your securities could be deemed to be reissued for tax purposes upon the occurrence of certain events affecting the
underlying stock or your securities, and following such occurrence your securities 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 securities under these rules if you enter, or have entered, into certain other transactions in respect of the underlying stock or the securities. If you
enter, or have entered, into other transactions in respect of the underlying stock or the securities, you should consult your tax advisor regarding the application of Section 871(m) of the Code to your securities in the context of your
other transactions.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
Because of the uncertainty regarding the application of the 30% withholding tax on dividend equivalents to the securities, 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 securities.
Foreign Account Tax Compliance Act. Legislation commonly referred to as the Foreign Account Tax Compliance Act (“FATCA”) generally imposes a
withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to certain financial instruments, unless various U.S. information reporting and due diligence requirements have been
satisfied. An intergovernmental agreement between the U.S. and the non-U.S. entity’s jurisdiction may modify these requirements. This legislation generally applies to certain financial instruments that are treated as paying U.S.-source
interest or other U.S.-source “fixed or determinable annual or periodical” income (“FDAP income”). Withholding (if applicable) applies to payments of U.S.-source FDAP income but, pursuant to certain Treasury regulations and IRS
guidance, does not apply to payments of gross proceeds on the disposition (including upon retirement) of financial instruments. As the treatment of the securities is unclear, it is possible that any contingent quarterly coupon with
respect to the securities could be subject to the FATCA rules. If withholding applies to the securities, we will not be required to pay any additional amounts with respect to amounts withheld. Both U.S. and non-U.S. holders should
consult their tax advisors regarding the potential application of FATCA to the securities.
Proposed Legislation. In 2007, legislation was introduced in Congress that, if it had been enacted, would have required holders of securities
similar to the securities purchased after the bill was enacted to accrue interest income over the term of such securities despite the fact that there may be no interest payments over the term of such securities.
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 securities to be marked to market on an annual basis with all gains and losses to be treated as ordinary, subject to certain exceptions.
It is not possible to predict whether any similar or identical bills will be enacted in the future, or whether any such bill would affect the tax treatment of your securities. You are
urged to consult your tax advisor regarding the possible changes in law and their possible impact on the tax treatment of your securities.
Both U.S. and non-U.S. holders are urged to consult their tax advisors concerning the application of U.S. federal income tax laws to their particular situations, as
well as any tax consequences of the purchase, beneficial ownership and disposition of the securities arising under the laws of any state, local, non-U.S. or other taxing jurisdiction (including that of BNS).
|
|||
Supplemental information
regarding plan of distribution
(conflicts of interest); secondary
markets (if any):
|
SCUSA, our affiliate, will purchase the securities at the stated principal amount and, as part of the distribution of the securities, will sell the securities to Morgan Stanley Wealth
Management with an underwriting discount of $22.50 reflecting a fixed sales commission of $17.50 and a fixed structuring fee of $5.00 per $1,000.00 stated principal amount of securities that Morgan Stanley Wealth Management sells. BNS
or an affiliate may also pay a fee to LFT Securities, LLC, an entity in which an affiliate of Morgan Stanley Wealth Management has an ownership interest, for providing certain electronic platform services with respect to this offering.
|
||
BNS, SCUSA or any other affiliate of BNS may use this document, the accompanying product supplement and the accompanying prospectus in a market-making transaction for any securities after
their initial sale. In connection with the offering, BNS, SCUSA, any other affiliate of BNS or any other securities dealers may distribute this document, the accompanying product supplement and the accompanying prospectus
electronically. Unless BNS or its agent informs the purchaser otherwise in the confirmation of sale, this document, the accompanying product supplement and the accompanying prospectus are being used in a market-making transaction.
|
Contingent Income Auto-Callable Securities due on or about May 27, 2027
|
Based on the Performance of the Common Stock of Tesla, Inc.
Principal at Risk Securities
|
Conflicts of Interest — SCUSA is an affiliate of BNS and, as such, has a “conflict of interest” in this
offering within the meaning of the Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121. In addition, BNS will receive the gross proceeds from the initial public offering of the securities, thus creating an additional
conflict of interest within the meaning of FINRA Rule 5121. Consequently, the offering is being conducted in compliance with the provisions of FINRA Rule 5121. SCUSA is not permitted to sell securities in this offering to an account
over which it exercises discretionary authority without the prior specific written approval of the account holder.
In the ordinary course of their various business activities, SCUSA, and its 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
BNS. SCUSA, and its 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.
|
|||
SCUSA and its affiliates may offer to buy or sell the securities in the secondary market (if any) at prices greater than BNS’ internal valuation — The value of the securities at any time will vary based on many factors that cannot be predicted. However, the price (not including SCUSA’s or any affiliates’ customary bid-ask spreads) at which
SCUSA or any affiliate would offer to buy or sell the securities immediately after the pricing date in the secondary market is expected to exceed the initial estimated value of the securities as determined by reference to our internal
pricing models. The amount of the excess will decline to zero on a straight line basis over a period ending no later than 6 weeks after the pricing date, provided that SCUSA may shorten the period based on various factors, including the
magnitude of purchases and other negotiated provisions with selling agents. Notwithstanding the foregoing, SCUSA and its affiliates intend, but are not required, to make a market for the securities and may stop making a market at any
time. For more information about secondary market offers and the initial estimated value of the securities, see “Risk Factors” herein.
|
|||
Prohibition of sales to EEA retail
investors:
|
The securities 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 (EU) 2016/97, 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 Regulation (EU)
2017/1129, as amended. Consequently no key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”), for offering or selling the securities or otherwise making them available to retail
investors in the EEA has been prepared and therefore offering or selling the securities or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
|
||
Prohibition of sales to United
Kingdom retail investors:
|
The only categories of person in the United Kingdom to whom this document may be distributed are those persons who (i) have professional experience in matters relating to investments
falling within the definition of investment professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Financial Promotion Order”)), (ii) are persons
falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Financial Promotion Order, or (iii) are persons to whom an invitation or inducement to engage in investment activity (within
the meaning of section 21 of the Financial Services and Markets Act 2000 (“FSMA”)) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons in (i)-(iii)
above together being referred to as “Relevant Persons”). This document is directed only at Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which
this document relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. This document may only be provided to persons in the United Kingdom in circumstances where section 21(1) of FSMA does not
apply to BNS. The securities are not being offered to “retail investors” within the meaning of the Packaged Retail and Insurance-based Investment Products Regulations 2017 and accordingly no Key Information Document has been produced
under these regulations.
|
May 2024
|
Page 24
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