The notes are being issued by The
Bank of Nova Scotia (“BNS”). There are important differences
between the notes and a conventional debt security, including
different investment risks and certain additional costs. See “Risk
Factors” beginning on page TS-6 of this term sheet, “Additional
Risk Factors” on page TS-7 of this term sheet and “Risk Factors”
beginning on page PS-7 of product supplement EQUITY LIRN-1.
The initial estimated value of the notes as of
the pricing date is expected to be between $8.45 and $8.90 per
unit, which is less than the public offering price listed
below. See “Summary” on the following page, “Risk Factors”
beginning on page TS-6 of this term sheet and “Structuring the
Notes” on page TS-30 of this term sheet for additional information.
The actual value of your notes at any time will reflect many
factors and cannot be predicted with accuracy.
None of the U.S.
Securities and Exchange Commission (the “SEC”), any state
securities commission, or any other regulatory body has approved or
disapproved of these securities or determined if this Note
Prospectus (as defined below) is truthful or complete. Any
representation to the contrary is a criminal offense.
|
Per Unit
|
Total
|
Public
offering price(1)
|
$10.00
|
$
|
Underwriting
discount(1)
|
$0.25
|
$
|
Proceeds,
before expenses, to BNS
|
$9.75
|
$
|
|
(1) |
For any purchase of 300,000 units or more in a single
transaction by an individual investor or in combined transactions
with the investor’s household in this offering, the public offering
price and the underwriting discount will be $9.95 per unit and
$0.20 per unit, respectively. See “Supplement to the Plan of
Distribution” below.
|
The notes:
Are Not FDIC
Insured
|
Are Not Bank
Guaranteed
|
May Lose
Value
|
BofA Securities
July ,
2022
Summary
The Leveraged Index
Return Notes®
Linked to an International Equity Index Basket due July ,
2027 (the “notes”) are our senior unsecured debt securities. The
notes are not guaranteed or insured by the CDIC or the FDIC, and
are not, either directly or indirectly, an obligation of any third
party. The notes are not bail-inable debt securities (as defined in
the prospectus). The notes will
rank equally with all of our other unsecured senior debt. Any
payments due on the notes, including any repayment of principal,
will be subject to the credit risk of BNS. The notes provide
you a leveraged return, if the Ending Value of the Market Measure,
which is the international equity index basket described below (the
“Basket”), is greater than the Starting Value (as determined
below). If the Ending Value is equal to or less than the Starting
Value but greater than or equal to the Threshold Value, you will
receive the principal amount of your notes. If the Ending Value is
less than the Threshold Value, you will lose a portion, which could
be significant, of the principal amount of your notes. Any payments
on the notes will be calculated based on the $10 principal amount
per unit and will depend on the performance of the Basket, subject
to our credit risk. See “Terms of the Notes” below.
The Basket will be
comprised of the EURO STOXX 50®
Index, the FTSE®
100 Index, the Nikkei Stock Average Index, the Swiss Market
Index®,
the S&P/ASX 200 Index and the FTSE®
China 50 Index (each a “Basket Component”). On the pricing date,
the EURO STOXX 50®
Index will be given an initial weight of 40.00%, each of the
FTSE®
100 Index and the Nikkei Stock Average Index will be given an
initial weight of 20.00%, each of the Swiss Market Index®
and the S&P/ASX 200 Index will be given an initial weight of
7.50% and the FTSE®
China 50 Index will be given an initial weight of 5.00%.
The economic terms of
the notes (including the Threshold Value) are based on our internal
funding rate, which is the rate we would pay to borrow funds
through the issuance of market-linked notes, and the economic terms
of certain related hedging arrangements. Our internal funding
rate is typically lower than the rate we would pay when we issue
conventional fixed rate debt securities. This difference in funding
rate, as well as the underwriting discount and the hedging related
charge described below, will reduce the economic terms of the notes
to you and the initial estimated value of the notes on the pricing
date. Due to these factors, the public offering price you pay to
purchase the notes will be greater than the initial estimated value
of the notes.
On the cover page of
this term sheet, we have provided the initial estimated value range
for the notes. This range of estimated values was determined by
reference to our internal pricing models, which take into
consideration certain factors, such as our internal funding rate on
the pricing date and our assumptions about market parameters. For
more information about the initial estimated value and the
structuring of the notes, see “Structuring the Notes” on page
TS-30.
Terms of the
Notes
|
Redemption
Amount Determination
|
|
Issuer:
|
|
The Bank of Nova Scotia (“BNS”)
|
|
On the maturity date, you will receive
a cash payment per unit determined as follows:
|
|
Principal Amount:
|
|
$10.00 per unit
|
|
|
|
Term:
|
|
Approximately five years
|
|
Market Measure:
|
|
An international equity index basket
comprised of the EURO STOXX 50®
Index (Bloomberg symbol: “SX5E”), the FTSE®
100 Index (Bloomberg symbol: “UKX”), the Nikkei Stock Average Index
(Bloomberg symbol: “NKY”), the Swiss Market Index®
(Bloomberg symbol: “SMI”), the S&P/ASX 200 Index (Bloomberg
symbol: “AS51”) and the FTSE®
China 50 Index (Bloomberg symbol: “XIN0I”). Each Basket Component
is a price return index.
|
|
Starting Value:
|
|
The Starting Value will be set to
100.00 on the pricing date.
|
|
Ending Value:
|
|
The average of the closing levels of
the Market Measure on each calculation day occurring during the
Maturity Valuation Period. The scheduled calculation days are
subject to postponement in the event of Market Disruption Events,
as described beginning on page PS-25 of product supplement EQUITY
LIRN-1.
|
|
Threshold Value:
|
|
80.00% of the Starting Value
|
|
Participation
Rate:
|
|
[131.00% to 151.00%]. The actual
Participation Rate will be determined on the pricing date.
|
|
Maturity Valuation
Period:
|
|
Five scheduled calculation days
shortly before the maturity date.
|
|
Fees
and
Charges:
|
|
The underwriting discount of $0.25 per
unit listed on the cover page and the hedging related charge of
$0.075 per unit described in “Structuring the Notes” on page
TS-30.
|
|
Calculation
Agent:
|
|
BofA Securities, Inc. (“BofAS”).
|
The terms and
risks of the notes are contained in this term sheet and in the
following:
◾ |
Product supplement EQUITY LIRN-1 dated December 29,
2021:
|
◾ |
Prospectus supplement dated December 29, 2021:
|
◾ |
Prospectus dated December 29, 2021:
|
These documents
(together, the “Note Prospectus”) have been filed as part of a
registration statement with the SEC, which may, without cost, be
accessed on the SEC website as indicated above or obtained from
Merrill Lynch, Pierce, Fenner & Smith Incorporated
(“MLPF&S”) or BofAS by calling 1-800-294-1322. Before you
invest, you should read the Note Prospectus, including this term
sheet, for information about us and this offering. Any prior
or contemporaneous oral statements and any other written materials
you may have received are superseded by the Note Prospectus.
Capitalized terms used but not defined in this term sheet have the
meanings set forth in product supplement EQUITY LIRN-1. Unless
otherwise indicated or unless the context requires otherwise, all
references in this document to “we,” “us,” “our,” or similar
references are to BNS.
Investor Considerations
You may wish to consider an
investment in the notes if:
• |
You anticipate that the Basket will increase moderately from
the Starting Value to the Ending Value.
|
• |
You are willing to risk a substantial loss of principal if the
Basket decreases from the Starting Value to an Ending Value that is
below the Threshold Value.
|
• |
You are willing to forgo the interest payments that are paid
on conventional interest bearing debt securities.
|
• |
You are willing to forgo dividends or other benefits of owning
the stocks included in the Basket Components.
|
• |
You are willing to accept a limited or no market for sales
prior to maturity, and understand that the market prices for the
notes, if any, will be affected by various factors, including our
actual and perceived creditworthiness, our internal funding rate
and fees and charges on the notes.
|
•
|
You are willing to assume our credit
risk, as issuer of the notes, for all payments under the notes,
including the Redemption Amount.
|
The notes may not be an appropriate
investment for you if:
• |
You believe that the Basket will decrease from the Starting
Value to the Ending Value or that it will not increase sufficiently
over the term of the notes to provide you with your desired
return.
|
• |
You seek 100% principal repayment or preservation of
capital.
|
• |
You seek interest payments or other current income on your
investment.
|
• |
You want to receive dividends or other distributions paid on
the stocks included in the Basket Components.
|
• |
You seek an investment for which there will be a liquid
secondary market.
|
•
|
You are unwilling or are unable to
take market risk on the notes or to take our credit risk as issuer
of the notes.
|
We urge you to consult your investment, legal, tax, accounting, and
other advisors before you invest in the notes.
Hypothetical Payout Profile and Examples of Payments at
Maturity
The graph below is based on hypothetical numbers and values.
Leveraged Index Return Notes®
This graph reflects the returns on the
notes, based on a Participation Rate of 141.00% (the midpoint of
the Participation Rate range of [131.00% to 151.00%]) and the
Threshold Value of 80.00% of the Starting Value. The green line
reflects the returns on the notes, while the dotted gray line
reflects the returns of a direct investment in the stocks included
in the Basket Components, excluding dividends.
This graph has been prepared for
purposes of illustration only.
The following table and examples are for purposes of illustration
only. They are based on
hypothetical values and show
hypothetical returns on the
notes. They illustrate the calculation of the Redemption Amount and
total rate of return based on a hypothetical Starting Value of
100.00, a hypothetical Threshold Value of 80.00, a hypothetical
Participation Rate of 141.00% and a range of hypothetical Ending
Values.
The actual amount you
receive and the resulting total rate of return will depend on the
actual Starting Value, Threshold Value, Participation Rate, Ending
Value and whether you hold the notes to maturity. The
following examples do not take into account any tax consequences
from investing in the notes.
For recent
hypothetical levels of the Basket, see “The Basket” section below.
For recent actual levels of the Basket Components, see the “Basket
Component” section below. Each Basket Component is a price return
index and as such the Ending Value will not include any income
generated by dividends paid on the stocks included in any of the
Basket Components, which you would otherwise be entitled to receive
if you invested in those stocks directly. In addition, all payments
on the notes are subject to issuer credit risk.
Ending
Value
|
|
Percentage
Change from the
Starting Value
to the Ending
Value
|
|
Redemption
Amount per
Unit(1)
|
|
Total Rate of
Return on the
Notes
|
0.00
|
|
-100.00%
|
|
$2.000
|
|
-80.00%
|
25.00
|
|
-75.00%
|
|
$4.500
|
|
-55.00%
|
50.00
|
|
-50.00%
|
|
$7.000
|
|
-30.00%
|
80.00(2)
|
|
-20.00%
|
|
$10.000
|
|
0.00%
|
90.00
|
|
-10.00%
|
|
$10.000
|
|
0.00%
|
95.00
|
|
-5.00%
|
|
$10.000
|
|
0.00%
|
97.00
|
|
-3.00%
|
|
$10.000
|
|
0.00%
|
100.00(3)
|
|
0.00%
|
|
$10.000
|
|
0.00%
|
|
|
2.00%
|
|
$10.282
|
|
2.82%
|
|
|
3.00%
|
|
$10.423
|
|
4.23%
|
105.00
|
|
5.00%
|
|
$10.705
|
|
7.05%
|
110.00
|
|
10.00%
|
|
$11.410
|
|
14.10%
|
120.00
|
|
20.00%
|
|
$12.820
|
|
28.20%
|
130.00
|
|
30.00%
|
|
$14.230
|
|
42.30%
|
140.00
|
|
40.00%
|
|
$15.640
|
|
56.40%
|
150.00
|
|
50.00%
|
|
$17.050
|
|
70.50%
|
160.00
|
|
60.00%
|
|
$18.460
|
|
84.60%
|
(1) |
The Redemption Amount per unit is based on the hypothetical Threshold Value.
|
(2) |
This is the hypothetical Threshold Value.
|
(3)
|
The Starting Value will be set to
100.00 on the pricing date.
|
Redemption Amount Calculation
Examples
Example 1
|
The Ending Value is 50.00, or 50.00% of the Starting
Value:
|
Starting Value:
|
100.00 |
Threshold Value:
|
80.00 |
Ending Value:
|
50.00 |
|
Redemption Amount per unit
|
Example 2
|
The Ending Value is 95.00, or 95.00% of the Starting
Value:
|
Starting Value:
|
100.00 |
Threshold Value:
|
80.00 |
Ending Value:
|
95.00 |
Redemption Amount (per unit) = $10.00, the principal amount, since
the Ending Value is less than the Starting Value but equal to or
greater than the Threshold Value.
|
Example 3
|
The Ending Value is 105.00, or 105.00% of the Starting
Value:
|
Starting Value:
|
100.00 |
Ending Value:
|
105.00 |
|
Redemption Amount per unit
|
|
Risk Factors
There are
important differences between the notes and a conventional debt
security. An investment in the notes involves significant
risks, including those listed below. You should carefully review
the more detailed explanation of risks relating to the notes in the
“Risk Factors” sections beginning on page PS-7 of product
supplement EQUITY LIRN-1, page S-2 of the prospectus supplement,
and page 7 of the prospectus identified above. We also urge you to
consult your investment, legal, tax, accounting, and other advisors
before you invest in the notes.
Structure-Related Risks
|
◾ |
Depending on the performance of the Basket as measured shortly
before the maturity date, your investment may result in a loss;
there is no guaranteed return of principal.
|
|
◾ |
Your return on the notes may be less than the yield you could
earn by owning a conventional fixed or floating rate debt security
of comparable maturity.
|
|
◾ |
Your investment return may be less than a comparable
investment directly in the stocks included in the Basket
Components.
|
Market
Measure-Related Risks
|
◾ |
Changes in the level of one of the Basket Components may be
offset by changes in the levels of the other Basket
Components. Due to the different Initial Component Weights
(as defined in “The Basket” section below), changes in the levels
of some Basket Components will have a more substantial impact on
the value of the Basket than similar changes in the levels of the
other Basket Components.
|
|
◾ |
An Index sponsor (as defined below) may adjust the relevant
Basket Component in a way that may adversely affect its level and
your interests, and has no obligation to consider your
interests.
|
|
◾ |
You will have no rights of a holder of the securities included
in the Basket Components or of a holder with a short position
directly in the Basket Components (or the securities included in
the Basket Components), and you will not be entitled to receive
securities or dividends or other distributions by the issuers of
the securities included in the Basket Components.
|
|
◾ |
While we, MLPF&S, BofAS or our respective affiliates may
from time to time own securities of companies included in the
Basket Components, we, MLPF&S, BofAS and our respective
affiliates do not control any company included in the Basket
Components, and have not verified any disclosure made by any other
company.
|
|
◾ |
Your return on the notes may be affected by factors affecting
the international securities markets, specifically changes in the
countries represented by the Basket Components. In addition, you
will not obtain the benefit of any increase in the value of the
currencies in which the securities in the Basket Components trade
against the U.S. dollar which you would have received if you had
owned the securities in the Basket Components during the term of
your notes, although the value of the Basket may be adversely
affected by general exchange rate movements in the market.
|
Valuation- and Market-Related Risks
|
◾ |
Our initial estimated value of the notes will be lower than
the public offering price of the notes. Our initial estimated value
of the notes is only an estimate. The public offering price of the
notes will exceed our initial estimated value because it includes
costs associated with selling and structuring the notes, as well as
hedging our obligations under the notes with a third party, which
may include BofAS or one of its affiliates. These costs include the
underwriting discount and an expected hedging related charge, as
further described in “Structuring the Notes” on page TS-30.
|
|
◾ |
Our initial estimated value of the notes does not represent
future values of the notes and may differ from others’ estimates.
Our initial estimated value of the notes is determined by reference
to our internal pricing models when the terms of the notes are
set. These pricing models consider certain factors, such as
our internal funding rate on the pricing date, the expected term of
the notes, market conditions and other relevant factors existing at
that time, and our assumptions about market parameters, which can
include volatility, dividend rates, interest rates and other
factors. Different pricing models and assumptions could
provide valuations for the notes that are different from our
initial estimated value. In addition, market conditions and other
relevant factors in the future may change, and any of our
assumptions may prove to be incorrect. On future dates, the market
value of the notes could change significantly based on, among other
things, the performance of the Basket, changes in market
conditions, our creditworthiness, interest rate movements and other
relevant factors. These factors, together with various
credit, market and economic factors over the term of the notes, are
expected to reduce the price at which you may be able to sell the
notes in any secondary market and will affect the value of the
notes in complex and unpredictable ways. Our initial estimated
value does not represent a minimum price at which we or any agents
would be willing to buy your notes in any secondary market (if any
exists) at any time.
|
|
◾ |
Our initial estimated value is not determined by reference to
credit spreads or the borrowing rate we would pay for our
conventional fixed-rate debt securities. The internal funding rate
used in the determination of our initial estimated value of the
notes generally represents a discount from the credit spreads for
our conventional fixed-rate debt securities and the borrowing rate
we would pay for our conventional fixed-rate debt securities. If we
were to use the interest rate implied by the credit spreads for our
conventional fixed-rate debt securities, or the borrowing rate we
would pay for our conventional fixed-rate debt securities, we would
expect the economic terms of the notes to be more favorable to you.
Consequently, our use of an internal
|
funding rate for
the notes would have an adverse effect on the economic terms of the
notes, the initial estimated value of the notes on the pricing
date, and the price at which you may be able to sell the notes in
any secondary market.
|
◾ |
A trading market is not expected to develop for the notes.
None of us, MLPF&S or BofAS is obligated to make a market for,
or to repurchase, the notes. There is no assurance that any party
will be willing to purchase your notes at any price in any
secondary market.
|
Conflict-Related Risks
|
◾ |
Our business, hedging and trading activities, and those of
MLPF&S, BofAS and our respective affiliates (including trades
in shares of companies included in the Basket Components), and any
hedging and trading activities we, MLPF&S, BofAS or our
respective affiliates engage in for our clients’ accounts, may
affect the market value and return of the notes and may create
conflicts of interest with you.
|
|
◾ |
There may be potential conflicts of interest involving the
calculation agent, which is BofAS. We have the right to
appoint and remove the calculation agent.
|
General Credit Risks
|
◾ |
Payments on the notes are subject to our credit risk, and
actual or perceived changes in our creditworthiness are expected to
affect the value of the notes. If we become insolvent or are unable
to pay our obligations, you may lose your entire investment.
|
Tax-Related Risks
|
◾ |
The U.S. federal income tax consequences of the notes are
uncertain, and may be adverse to a holder of the notes. See
“Summary of U.S. Federal Income Tax Consequences” below.
|
|
◾ |
The conclusion that no portion of the interest paid or
credited or deemed to be paid or credited on a note will be
“Participating Debt Interest” subject to Canadian withholding tax
is based in part on the current published administrative position
of the CRA. There cannot be any assurance that CRA’s current
published administrative practice will not be subject to change,
including potential expansion in the current administrative
interpretation of Participating Debt Interest subject to Canadian
withholding tax. If, at any time, the interest paid or
credited or deemed to be paid or credited on a note is subject to
Canadian withholding tax, you will receive an amount that is less
than the Redemption Amount. You should consult your own adviser as
to the potential for such withholding and the potential for
reduction or refund of part or all of such withholding, including
under any bilateral Canadian tax treaty the benefits of which you
may be entitled. For a discussion of the Canadian federal income
tax consequences of investing in the notes, see “Summary of
Canadian Federal Income Tax Consequences” below, “Canadian
Taxation—Debt Securities” on page 66 of the prospectus dated
December 29, 2021, and “Supplemental Discussion of Canadian Federal
Income Tax Consequences” on page PS-37 of product supplement EQUITY
LIRN-1.
|
Additional Risk Factors
Additional Risk Factors Related to the Market Measure
Recent executive orders could adversely affect your investment in
the notes.
Pursuant to
an executive order issued in November 2020, as amended (the
“Executive Order”), U.S. persons are prohibited from engaging in
transactions in publicly traded securities of certain companies
that are determined to be linked to the People’s Republic of China
(the “PRC”) military, intelligence and security apparatus. The
prohibition also covers any securities that are derivative of, or
are designed to provide investment exposure to, such
securities.
If the issuer of any of the component
securities of the FTSE®
China 50 Index is in the future
designated as such a prohibited company, the value of such company
may be adversely affected, perhaps significantly, which would
adversely affect the performance of the FTSE®
China 50 Index. In addition,
under these circumstances, FTSE Russell has publicly indicated that
they expect to remove the securities of any such prohibited company
from the FTSE®
China 50 Index. Any changes to
the composition of the FTSE®
China 50 Index in response to
the Executive Order could adversely affect the performance of the
FTSE®
China 50 Index and, therefore,
the market value of, and return on, the notes.
It is impossible to predict whether the
securities of any particular company will become subject to the
Executive Order or any similar executive action or other legal
restrictions and, in such circumstances, there is no assurance that
FTSE Russell would ultimately remove such prohibited securities
from the FTSE®
China 50 Index. Although neither
BNS nor BofAS believe the notes to be subject to the Executive
Order at this time, it is possible that the Executive Order could
be expanded or modified to include the notes or that the notes
could become subject to the Executive Order if any component
security of the FTSE®
China 50 Index is so prohibited
and is not removed from the FTSE®
China 50 Index. Under those
circumstances, the value of the notes may be adversely affected and
transactions in or holdings of the notes may become prohibited
under U.S. law. You may suffer significant losses if you are forced
to sell the notes prior to scheduled maturity.
Additional Risk Factors Related to General Credit
Considerations
The COVID-19
virus may have an adverse impact on BNS.
On March 11, 2020, the World Health
Organization declared the outbreak of a strain of novel coronavirus
disease, COVID-19, a global pandemic. Governments in affected areas
have imposed a number of measures designed to contain the outbreak,
including business closures, travel restrictions, quarantines and
cancellations of gatherings and events. The spread of COVID-19 has
had disruptive effects in countries in which BNS operates and the
global economy more widely, as well as causing increased volatility
and declines in financial markets. COVID-19 has materially impacted
and continues to materially impact the markets in which BNS
operates. If the pandemic is prolonged, or further diseases emerge
that give rise to similar effects, the adverse impact on the global
economy could deepen and result in further declines in financial
markets. A substantial amount of BNS’s business involves making
loans or otherwise committing resources to specific companies,
industries or countries. The COVID-19 pandemic’s impact on such
borrowers, industries and countries could have a material adverse
effect on BNS’s financial results, businesses, financial condition
or liquidity. The COVID-19 pandemic may also result in disruption
to BNS’s key suppliers of goods and services and result in
increased unavailability of staff adversely impacting the quality
and continuity of service to customers and the reputation of BNS.
As a result, the business, results of operations, corporate
reputation and financial condition of BNS could be adversely
impacted for a substantial period of time.
Other Terms of the Notes
Business
Day
A “business day”
means a day which is a Monday, Tuesday, Wednesday, Thursday or
Friday that is neither a legal holiday nor a day on which banking
institutions are authorized or required by law to close in New York
City.
Market
Measure Business Day
The following definition shall supersede and replace the
definition of a “Market Measure Business Day” set forth in product
supplement EQUITY LIRN-1:
A “Market Measure
Business Day” means a day on which:
|
(A) |
each of the Eurex (as to the EURO STOXX 50®
Index), the London Stock Exchange (as to the FTSE®
100 Index), the Tokyo Stock Exchange (as to the Nikkei Stock
Average Index), the SIX Swiss Exchange (as to the Swiss Market
Index®),
the Australian Stock Exchange (as to the S&P/ASX 200 Index) and
the Stock Exchange of Hong Kong (as to the FTSE®
China 50 Index) (or any successor to the foregoing exchanges) are
open for trading; and
|
|
(B)
|
the Basket Components or any successors thereto are calculated
and published.
|
The Basket
The Basket is designed to
allow investors to participate in the percentage changes in the
levels of the Basket Components from the Starting Value to the
Ending Value of the Basket. The Basket Components are described in
the section “The Basket Components” below. Each Basket Component
will be assigned an initial weight on the pricing date, as set
forth in the table below.
For more information on the
calculation of the value of the Basket, please see the section
entitled “Description of the LIRNs—Basket Market Measures”
beginning on page PS-32 of product supplement EQUITY LIRN-1.
If June 21, 2022 were the pricing
date, for each Basket Component, the Initial Component Weight, the
closing level, the hypothetical Component Ratio and the initial
contribution to the Basket value would be as follows:
Basket
Component
|
|
Bloomberg
Symbol
|
|
Initial
Component
Weight
|
|
Closing
Level(1)(2)
|
|
Hypothetical
Component
Ratio(1)(3)
|
|
Initial
Basket
Value
Contribution
|
EURO STOXX 50®
Index
|
|
SX5E
|
|
40.00%
|
|
3,494.00
|
|
0.01144820
|
|
40.00
|
FTSE®
100 Index
|
|
UKX
|
|
20.00%
|
|
7,152.05
|
|
0.00279640
|
|
20.00
|
Nikkei Stock Average Index
|
|
NKY
|
|
20.00%
|
|
26,246.31
|
|
0.00076201
|
|
20.00
|
Swiss Market Index®
|
|
SMI
|
|
7.50%
|
|
10,479.84
|
|
0.00071566
|
|
7.50
|
S&P/ASX 200 Index
|
|
AS51
|
|
7.50%
|
|
6,523.804
|
|
0.00114964
|
|
7.50
|
FTSE®
China 50 Index
|
|
XIN0I
|
|
5.00%
|
|
15,029.55
|
|
0.00033268
|
|
5.00
|
|
|
|
|
|
|
|
|
Starting
Value
|
|
100.00
|
|
(1) |
The actual closing level of each Basket Component and the
resulting actual Component Ratios will be determined on the pricing
date, subject to adjustment as more fully described in the section
entitled “Description of LIRNs—Basket Market Measures—Determination
of the Component Ratio for Each Basket Component” beginning on page
PS-32 of product supplement EQUITY LIRN-1 if a Market Disruption
Event occurs on the pricing date as to any Basket Component.
|
|
(2) |
These were the closing levels of the Basket Components on June
21, 2022.
|
|
(3) |
Each hypothetical Component Ratio equals the Initial Component
Weight of the relevant Basket Component (as a percentage)
multiplied by 100.00, and then divided by the closing level of that
Basket Component on June 21, 2022 and rounded to eight decimal
places.
|
The calculation agent will calculate
the value of the Basket on each calculation day during the Maturity
Valuation Period by summing the products of the closing level for
each Basket Component on such calculation day and the Component
Ratio applicable to such Basket Component. If a Market Disruption
Event occurs as to any Basket Component on any scheduled
calculation day, the closing level of that Basket Component will be
determined as more fully described beginning on page PS-34 of
product supplement EQUITY LIRN-1 in the section “Description of
LIRNs—Ending Value of the Basket”.
While
actual historical information on the Basket will not exist before
the pricing date, the following graph sets forth the hypothetical
historical performance of the Basket from January 1, 2012 through
June 21, 2022. The graph is based upon actual daily
historical levels of the Basket Components, hypothetical Component
Ratios based on the closing levels of the Basket Components as of
December 31, 2011, and a Basket value of 100.00 as of that date.
This hypothetical historical data on the Basket is not necessarily
indicative of the future performance of the Basket or what the
value of the notes may be. Any hypothetical historical upward or
downward trend in the value of the Basket during any period set
forth below is not an indication that the value of the Basket is
more or less likely to increase or decrease at any time over the
term of the notes.
Hypothetical Historical Performance of the Basket
The Basket
Components
All disclosures
contained in this term sheet regarding the Basket Components,
including, without limitation, their make-up, method of
calculation, and changes in their components, have been derived
from publicly available sources. The information reflects the
policies of, and is subject to change by each of STOXX Limited
(“STOXX”) with respect to the EURO STOXX 50®
Index (the “SX5E”), FTSE International Limited (“FTSE”) with
respect to the FTSE®
100 Index and the FTSE®
China 50 Index (the “UKX” and the “XIN0I”, respectively), Nikkei
Inc. (“Nikkei”) with respect to the Nikkei 225 Index (the “NKY”),
S&P Dow Jones Indices LLC (“S&P”), a division of S&P
Global, with respect to the S&P/ASX 200 Index (the “AS51”) the
Geneva, Zurich, SIX Group Ltd., certain of its subsidiaries, and
the Management Committee of the SIX Swiss Exchange (the “SIX
Exchange”), with respect to the Swiss Market Index®
(the “SMI”). (STOXX, FTSE, Nikkei, S&P and Six Exchange
together, the “Index sponsors”). The Index sponsors have no
obligation to continue to publish, and may discontinue or suspend
the publication of any Basket Component at any time. The
consequences of any Index sponsor discontinuing publication of a
Basket Component are discussed in the section entitled “Description
of LIRNs—Discontinuance of an Index” beginning on page PS-27 of
product supplement EQUITY LIRN-1. None of us, the calculation
agent, MLPF&S or BofAS accepts any responsibility for the
calculation, maintenance or publication of any Basket Component or
any successor index.
The EURO STOXX
50®
Index
The SX5E is a capitalization-weighted
index of 50 European blue-chip stocks in 11 Eurozone countries.
Publication of the SX5E began on February 26, 1998, based on an
initial index value of 1,000 at December 31, 1991. The level of the
SX5E is disseminated on, and additional information about the SX5E
is published on, the STOXX website. Information contained in the
STOXX website is not incorporated by reference in, and should not
be considered a part of, this term sheet.
As of May 31,
2022, the top ten industry sectors which comprise the SX5E
represent the following weights in the SX5E: Technology (14.0%),
Industrial Goods & Services (12.8%), Consumer Products &
Services (12.2%), Chemicals (9.8%), Health Care (8.6%), Banks
(7.9%), Energy (6.4%), Insurance (5.6%), Automobile & Parts
(5.0%) and Food, Beverage & Tobacco (4.2%). As of May 31, 2022,
the eight countries which comprise the SX5E represent the following
weights in the SX5E: France (38.8%), Germany (32.0%), Netherlands
(13.7%), Spain (6.2%), Italy (5.3%), Ireland (1.8%), Belgium (1.6%)
and Finland (0.7%).
Index Composition
and Maintenance
For each of the 19 EURO STOXX
regional supersector indices, the stocks are ranked in terms of
free-float market capitalization. The largest stocks are added to
the selection list until the coverage is close to, but still less
than, 60% of the free-float market capitalization of the
corresponding supersector index. If the next highest-ranked stock
brings the coverage closer to 60% in absolute terms, then it is
also added to the selection list. All current stocks in the SX5E
are then added to the selection list. All of the stocks on the
selection list are then ranked in terms of free-float market
capitalization to produce the final index selection list. The
largest 40 stocks on the selection list are selected; the remaining
10 stocks are selected from the largest remaining current stocks
ranked between 41 and 60; if the number of stocks selected is still
below 50, then the largest remaining stocks are selected until
there are 50 stocks. In exceptional cases, STOXX’s management board
can add stocks to and remove them from the selection list.
The SX5E components are subject to a
capped maximum index weight of 10%, which is applied on a quarterly
basis.
The composition of the SX5E is
reviewed annually, based on the closing stock data on the last
trading day in August. Changes in the composition of the SX5E are
made to ensure that the SX5E includes the 50 market sector leaders
from within the SX5E.
The SX5E is subject to a “fast exit
rule.” The SX5E components are monitored for any changes based on
the monthly selection list ranking. A stock is deleted from the
SX5E if: (a) it ranks 75 or below on the monthly selection list and
(b) it ranked 75 or below on the selection list of the previous
month. The highest-ranked stock that is not an SX5E component will
replace it. Changes will be implemented on the close of the fifth
trading day of the month, and are effective the next trading
day.
The SX5E is also subject to a “fast
entry rule.” All stocks on the latest selection lists and initial
public offering (IPO) stocks are reviewed for a fast-track addition
on a quarterly basis. A stock is added, if (a) it qualifies for the
latest STOXX blue-chip selection list generated at the end of
February, May, August or November and (b) it ranks within the
“lower buffer” (ranks 1-25) on this selection list. The SX5E is
also reviewed on an ongoing basis. Corporate actions (including
initial public offerings, mergers and takeovers, spin-offs,
delistings, and bankruptcy) that affect the SX5E composition are
immediately reviewed. Any changes are announced, implemented, and
effective in line with the type of corporate action and the
magnitude of the effect.
Index
Calculation
The SX5E is calculated with the
“Laspeyres formula,” which measures the aggregate price changes in
the component stocks against a fixed base quantity weight. The
formula for calculating the SX5E value can be expressed as
follows:
Index =
free float market
capitalization of the Index at the time
divisor of the Index at the
time
The “free float market capitalization of the Index” is equal
to the sum of the products of the closing price, number of shares,
free float factor, and weighting cap factor for the component
company as of the time that the SX5E is being calculated.
The SX5E is calculated using a
divisor that helps to maintain the continuity of the SX5E’s value
so that corporate actions do not artificially increase or decrease
the level of the SX5E. The divisor of the SX5E is adjusted to
maintain the continuity of the SX5E’s values across changes due to
corporate actions, such as cash dividends, rights offerings, stock
dividends from treasury shares, repurchases of shares and
self-tender, and spin-offs.
The
following graph shows the daily historical performance of the SX5E
in the period from January 1, 2012 through June 21, 2022. We
obtained this historical data from Bloomberg L.P. We have not
independently verified the accuracy or completeness of the
information obtained from Bloomberg L.P. On June 21, 2022, the
closing level of the Index was 3,494.00.
Historical Performance of the EURO STOXX 50®
Index
This
historical data on the SX5E is not necessarily indicative of the
future performance of the SX5E or what the value of the notes may
be. Any historical upward or downward trend in the level of the
SX5E during any period set forth above is not an indication that
the level of the SX5E is more or less likely to increase or
decrease at any time over the term of the notes.
Before investing in the notes, you
should consult publicly available sources for the levels of the
SX5E.
License
Agreement
BNS has entered into a non-exclusive
license agreement with STOXX, which grants BNS a license in
exchange for a fee to use the SX5E in connection with the issuance
of certain securities, including the notes.
STOXX, Deutsche Börse Group and their
licensors, research partners or data providers have no relationship
to BNS, other than the licensing of the SX5E and the related
trademarks for use in connection with the notes.
STOXX, Deutsche Börse Group and their
licensors, research partners or data providers do not:
|
• |
sponsor, endorse, sell or promote the notes;
|
|
• |
recommend that any person invest in the notes or any other
financial products;
|
|
• |
have any responsibility or liability for or make any decisions
about the timing, amount or pricing of the notes;
|
|
• |
have any responsibility or liability for the administration,
management or marketing of the notes; and
|
|
• |
consider the needs of the notes or the owners of the notes in
determining, composing or calculating the SX5E or have any
obligation to do so.
|
STOXX, Deutsche Börse Group and their
licensors, research partners or data providers give no warranty,
and exclude any liability (whether in negligence or otherwise) in
connection with the notes or their performance.
STOXX does not assume any contractual
relationship with the purchasers of the notes or any third
parties.
Specifically,
|
• |
The Sponsor, Deutsche Börse Group and their licensors,
research partners or data providers do not make any warranty,
express or implied and disclaim any and all warranty about:
|
|
•
|
the results to be obtained by the notes, the owner of the
notes or any other person in connection with the use of the SX5E
and the data included in the SX5E;
|
|
• |
the accuracy, timeliness, and completeness of the SX5E or its
data;
|
|
• |
the merchantability and the fitness for a particular purpose
or use of the SX5E or its data; and
|
|
• |
the performance of the notes generally.
|
|
• |
STOXX, Deutsche Börse Group and their licensors, research
partners or data providers give no warranty and exclude any
liability, for any errors, omissions or interruptions in the SX5E
or its data; and
|
|
•
|
under no circumstances will Deutsche Börse Group and their
licensors, research partners or data providers be liable (whether
in negligence or otherwise) for any lost profits or indirect,
punitive, special or consequential damages or losses, arising as a
result of such errors, omissions or interruptions in the SX5E or
its data or generally in relation to the notes, even in
circumstances where the Sponsor Deutsche Börse Group and their
licensors, research partners or data providers are aware that such
loss or damage may occur.
|
The
FTSE®
100 Index
The UKX is a market-capitalization
weighted index calculated, published and disseminated by FTSE, an
independent company wholly owned by the London Stock Exchange Group
(the “LSE”). The UKX is designed to measure the composite
performance of the 100 largest UK domiciled blue chip companies
that pass screening for size and liquidity traded on the LSE. The
UKX was launched on January 3, 1984 and has a base date of December
30, 1983. The UKX is reported by Bloomberg under the ticker symbol
“UKX.”
The UKX is calculated by (i)
multiplying the per share price of each stock included in the UKX
by the number of outstanding shares and by the free float factor
applicable to such stock, (ii) calculating the sum of all these
products (such sum referred to hereinafter as the “FTSE Aggregate
Market Value”) as of the starting date of the UKX and (iii)
dividing the FTSE Aggregate Market Value by a divisor which
represents the total issued share capital of the UKX on the base
date and which can be adjusted to allow changes in the issued share
capital of individual underlying stocks (including the deletion and
addition of stocks, the substitution of stocks, stock dividends and
stock splits) to be made without distorting the UKX. Because of
such capitalization weighting, movements in share prices of
companies with relatively larger market capitalization will have a
greater effect on the level of the entire UKX than will movements
in share prices of companies with relatively smaller market
capitalization.
The 100 stocks included in the UKX
(the “FTSE 100 Index Underlying Stocks”) were selected from a
reference group of stocks trading on the LSE which were selected by
excluding certain stocks that have low liquidity based on public
float, accuracy and reliability of prices, size and number of
trading days. The FTSE 100 Index Underlying Stocks were selected
from this reference group by selecting 100 stocks with the largest
market value. A list of the issuers of the FTSE 100 Index
Underlying Stocks is available from FTSE. The UKX is reviewed
quarterly by the FTSE Europe/Middle East/Africa Regional Committee
(the “Committee”) in order to maintain continuity in the level. The
FTSE 100 Index Underlying Stocks may be replaced, if necessary, in
accordance with deletion/addition rules which provide generally for
the removal and replacement of a stock from the UKX if such stock
is delisted or its issuer is subject to a takeover offer that has
been declared unconditional or it has ceased to be a viable
component of the UKX. To maintain continuity, a stock will be added
at the quarterly review if it has risen to 90th place or above and
a stock will be deleted if at the quarterly review it has fallen to
111th place or below, in each case ranked on the basis of market
value.
The
following graph shows the daily historical performance of the UKX
in the period from January 1, 2012 through June 21, 2022. We
obtained this historical data from Bloomberg L.P. We have not
independently verified the accuracy or completeness of the
information obtained from Bloomberg L.P. On June 21, 2022, the
closing level of the UKX was 7,152.05.
Historical Performance of the FTSE®
100 Index
This
historical data on the UKX is not necessarily indicative of the
future performance of the UKX or what the value of the notes may
be. Any historical upward or downward trend in the level of the UKX
during any period set forth above is not an indication that the
level of the UKX is more or less likely to increase or decrease at
any time over the term of the notes.
Before investing in the notes, you
should consult publicly available sources for the levels of the
UKX.
License Agreement
BNS has entered into a non-exclusive
license agreement with FTSE, whereby BNS and its affiliates and
subsidiary companies and certain of its affiliates, in exchange for
a fee, will be permitted to use the UKX, which is owned and
published by FTSE, in connection with certain products, including
the notes.
Neither FTSE nor the LSE makes any
representation or warranty, express or implied, to the owners of
the notes or any member of the public regarding the advisability of
investing in structured products generally or in the notes
particularly, or the ability of the UKX to track
general stock market performance.
FTSE and the LSE’s only relationship with BNS is the licensing of
certain trademarks and trade names of FTSE, respectively, without
regard to us or the notes. FTSE and the LSE have no obligation to
take the needs of us or the holders of the notes into consideration
in determining, composing or calculating the UKX. Neither FTSE nor
the LSE is responsible for and has not participated in the
determination of the timing, price or quantity of the notes to be
issued or in the determination or calculation of the amount due at
maturity of the notes. Neither FTSE nor the LSE has any obligation
or liability in connection with the administration, marketing or
trading of the notes.
The notes are not in any way
sponsored, endorsed, sold or promoted by FTSE or the LSE, and
neither FTSE nor the LSE makes any claim, prediction, warranty or
representation whatsoever, expressly or impliedly, either as to the
results to be obtained from the use of the UKX and/or the figure at
which the said component stands at any particular time on any
particular day or otherwise, or the suitability of the UKX for the
purpose to which it is being put in connection with the notes. The
UKX is compiled and calculated by FTSE. However, neither FTSE nor
the LSE shall be liable (whether in negligence or otherwise) to any
person for any error in the UKX and neither FTSE nor the LSE shall
be under any obligation to advise any person of any error
therein.
“FTSE®,”
“FTSETM,”
“FT-SE®”
and “Footsie®”
are trademarks of the London Stock Exchange Group companies and are
used by FTSE International Limited under license. “All-World,”
“All-Share” and “All-Small” are trademarks of FTSE International
Limited.
The Nikkei Stock
Average Index
The NKY is a stock index that
measures the composite price performance of selected Japanese
stocks. The NKY is based on 225 underlying stocks (the “Nikkei
Underlying Stocks”) trading on the Tokyo Stock Exchange (“TSE”),
representing a broad cross-section of Japanese industries. All 225
Nikkei Underlying Stocks are stocks listed in the First Section of
the TSE. Stocks listed in the First Section of the TSE are among
the most actively traded stocks on the TSE. Nikkei’s rules require
that the 75 most liquid issues (one-third of the component count of
the NKY) be included in the NKY. Nikkei first calculated and
published the NKY in 1970; prior to 1970, the TSE calculated the
NKY. The NKY is reported by Bloomberg under the ticker symbol
“NKY.”
The 225 companies
included in the NKY are divided into six sector categories:
Technology, Financials, Consumer Goods, Materials, Capital
Goods/Others and Transportation and Utilities. These six sector
categories are further divided into 36 industrial classifications
as follows:
|
◾ |
Technology — Pharmaceuticals, Electrical Machinery,
Automobiles, Precision Machinery, Telecommunications;
|
|
◾ |
Financials — Banks, Miscellaneous Finance, Securities,
Insurance;
|
|
◾ |
Consumer Goods — Marine Products, Food, Retail,
Services;
|
|
◾ |
Materials — Mining, Textiles, Paper and Pulp, Chemicals, Oil,
Rubber, Ceramics, Steel, Nonferrous Metals, Trading Houses;
|
|
◾ |
Capital Goods/Others — Construction, Machinery, Shipbuilding,
Transportation Equipment, Miscellaneous Manufacturing, Real Estate;
and
|
|
◾ |
Transportation and Utilities — Railroads and Buses, Trucking,
Shipping, Airlines, Warehousing, Electric Power, Gas.
|
Calculation of
the NKY
The NKY is a modified, price-weighted
index (i.e., a Nikkei
Underlying Stock’s weight in the NKY is based on its price per
share rather than the total market capitalization of the issuer)
which is calculated by (i) multiplying the per share price of each
Nikkei Underlying Stock by the corresponding weighting factor for
such Nikkei Underlying Stock (a “Weight Factor”), (ii) calculating
the sum of all these products and (iii) dividing such sum by a
divisor (the “Divisor”). The Divisor was initially set at 225 for
the date of May 16, 1949 (the date on which the TSE was reopened
after World War II) using historical numbers from that date. The
Divisor is subject to periodic adjustments as set forth below. Each
Weight Factor is computed by dividing ¥50 by the presumed par value
of the relevant Nikkei Underlying Stock, so that the share price of
each Nikkei Underlying Stock when multiplied by its Weight Factor
corresponds to a share price based on a uniform par value of ¥50.
The stock prices used in the calculation of the NKY are those
reported by a primary market for the Nikkei Underlying Stocks
(currently the TSE). The level of the NKY is calculated once every
15 seconds during TSE trading hours.
In order to maintain continuity in
the NKY in the event of certain changes due to non-market factors
affecting the Nikkei Underlying Stocks, such as the addition or
deletion of stocks, substitution of stocks, stock splits or
distributions of assets to stockholders, the Divisor used in
calculating the NKY is adjusted in a manner designed to prevent any
instantaneous change or discontinuity in the level of the NKY.
Thereafter, the Divisor remains at the new value until a further
adjustment is necessary as the result of another change. As a
result of such change affecting any Nikkei Underlying Stock, the
Divisor is adjusted in such a way that the sum of all share prices
immediately after the change multiplied by the applicable Weight
Factor and divided by the new Divisor (i.e., the level of the NKY immediately
after such change) will equal the level of the NKY immediately
prior to the change.
Standards for
Listing and Maintenance
A Nikkei Underlying Stock may be
deleted or added by Nikkei. Any stock becoming ineligible for
listing in the First Section of the TSE due to any of the following
reasons will be deleted from the Nikkei Underlying Stocks: (i)
bankruptcy of the issuer, (ii) merger of the issuer with, or
acquisition of the issuer by, another company, (iii) delisting of
such stock, (iv) transfer of such stock to the “Seiri-Meigara”
because of excess debt of the issuer or because of any other reason
or (v) transfer of such stock to the Second Section. In addition, a
component stock transferred to the “Kanri-Meigara” (posts for
stocks under supervision) becomes a candidate for deletion. Nikkei
Underlying Stocks with relatively low liquidity, based on trading
value and rate of price fluctuation over the past five years, may
be deleted by Nikkei. Upon deletion of a stock from the Nikkei
Underlying Stocks, Nikkei will select a replacement for such
deleted Nikkei Underlying Stock in accordance with certain
criteria. In an exceptional case, a newly listed stock in the First
Section of the TSE that is recognized by Nikkei to be
representative of a market may be added to the Nikkei Underlying
Stocks. In such a case, an existing Nikkei Underlying Stock with
low trading volume and deemed not to be representative of a market
will be deleted by Nikkei.
A list of the issuers of the Nikkei
Underlying Stocks constituting the NKY is published by Nikkei.
Nikkei may delete, add or substitute any stock underlying the
NKY.
The
following graph shows the daily historical performance of the NKY
in the period from January 1, 2012 through June 21, 2022. We
obtained this historical data from Bloomberg L.P. We have not
independently verified the accuracy or completeness of the
information obtained from Bloomberg L.P. On June 21, 2022, the
closing level of the NKY was 26,246.31.
Historical Performance of the Nikkei Stock Average Index
This
historical data on the NKY is not necessarily indicative of the
future performance of the NKY or what the value of the notes may
be. Any historical upward or downward trend in the level of the NKY
during any period set forth above is not an indication that the
level of the NKY is more or less likely to increase or decrease at
any time over the term of the notes.
Before investing in the notes, you
should consult publicly available sources for the levels of the
NKY.
License
Agreement
BNS will enter into an agreement with
Nikkei providing us with a non-exclusive license with the right to
use the NKY in exchange for a fee. The NKY is the
intellectual property of Nikkei. “Nikkei,” “Nikkei Stock Average,”
“Nikkei Average,” and “Nikkei 225” are the service marks of Nikkei.
Nikkei reserves all the rights, including copyright, to the
NKY.
The notes are not in any way
sponsored, endorsed or promoted by Nikkei. Nikkei does not make any
warranty or representation whatsoever, express or implied, either
as to the results to be obtained as to the use of the NKY or the
figure as which the NKY stands at any particular day or otherwise.
The NKY is compiled and calculated solely by Nikkei. However,
Nikkei shall not be liable to any person for any error in the NKY
and Nikkei shall not be under any obligation to advise any person,
including a purchaser or seller of the notes, of any error
therein.
In addition, Nikkei gives no
assurance regarding any modification or change in any methodology
used in calculating the NKY and is under no obligation to continue
the calculation, publication and dissemination of the NKY.
The Swiss Market
Index®
The Swiss Market Index®
(Bloomberg ticker “SMI”):
|
◾ |
was first launched with a base level of 1,500 as of June 30,
1988; and
|
|
◾ |
is sponsored, calculated, published and disseminated by the
SIX Exchange.
|
The SMI is a price return
float-adjusted market capitalization-weighted index of the 20
largest stocks traded on the Swiss Stock Exchange. The Management
Committee of SIX Swiss Exchange is supported by an Index Commission
(advisory board) in all index-related matters, notably in
connection with changes to the SMI rules and adjustments, additions
and exclusions outside of the established review and acceptance
period. The Index Commission meets at least twice annually.
Index Composition
and Selection Criteria
The SMI is comprised of the 20
highest ranked stocks traded on the Swiss Stock Exchange that have
a free float of 20% or more and that are not investment companies.
The equity universe is largely Swiss domestic companies; however,
in some cases, foreign issuers with a primary listing on the Swiss
Stock Exchange or investment companies that do not hold any shares
of any other eligible company and that have a primary listing on
the Swiss Stock Exchange may be included.
The ranking of each security is
determined by a combination of the following criteria:
|
◾ |
average free-float market capitalization (compared to the
capitalization of the entire Swiss Stock Exchange index family),
and
|
|
◾ |
cumulative on order book turnover (compared to the total
turnover of the Swiss Stock Exchange index family).
|
Each of these two factors is assigned
a 50% weighting in ranking the stocks eligible for the SMI.
The SMI is reconstituted annually
after prior notice of at least two months on the third Friday in
September after the close of trading.
The reconstitution is based on data
from the previous July 1 through June 30. Provisional interim
selection (ranking) lists are also published following the end of
the third, fourth and first financial quarters.
In order to reduce turnover, an index
constituent will not be replaced unless it is ranked below 23 or,
if it is ranked 21 or 22, if another share ranks 18 or higher. If a
company has primary listings on several exchanges and less than 50%
of that company’s total turnover is generated on the Swiss Stock
Exchange, it will not be included in the SMI unless it ranks at
least 18 or better on the selection list on the basis of its
turnover alone (i.e., without considering its free float).
Maintenance of the
SMI
Constituent Changes. In the case of
major market changes as a result of capital events such as mergers
or new listings, the Management Committee of SIX Swiss Exchange can
decide at the request of the Index Commission that a security
should be admitted to the SMI outside the annual review period as
long as it clearly fulfills the criteria for inclusion. For the
same reasons, a security can also be excluded if the requirements
for admission to the SMI are no longer fulfilled. As a general
rule, extraordinary acceptances into the SMI take place after a
three-month period on a quarterly basis after the close of trading
on the third Friday of March, June, September and December (for
example, a security listed on or before the fifth trading day prior
to the end of November cannot be included until the following
March). An announced insolvency is deemed to be an extraordinary
event and the security will be removed from the SMI with five
trading days’ prior notice if the circumstances permit such
notice.
Number of Shares and Free Float. The
securities included in the SMI are weighted according to their free
float. This means that shares deemed to be in firm hands are
subtracted from the total market capitalization of that company.
The free float is calculated on the basis of outstanding shares.
Issued and outstanding equity capital is, as a rule, the total
amount of equity capital that has been fully subscribed and wholly
or partially paid in and documented in the Commercial Register. Not
counting as issued and outstanding equity capital are the approved
capital and the conditional capital of a company. The free float is
calculated on the basis of listed shares only. If a company offers
several different categories of listed participation rights, each
is treated separately for purposes of index calculation.
Shares held deemed to be in firm
hands are shareholdings that have been acquired by one person or a
group of persons in companies domiciled in Switzerland and which,
upon exceeding 5%, have been reported to the SIX Exchange. Shares
of persons and groups of persons who are subject to a shareholder
agreement which is binding for more than 5% of the listed shares or
who, according to publicly known facts, have a long-term interest
in a company, are also deemed to be in firm hands.
For the calculation of the number of
shares in firm hands, the SIX Exchange may also use other sources
than the reports submitted to it. In particular, the SIX Exchange
may use data gained from issuer surveys that it conducts
itself.
In general, shares held by custodian
nominees, trustee companies, investment funds, pension funds and
investment companies are deemed free-floating regardless whether a
report has been made to the SIX Exchange. The SIX Exchange
classifies at its own discretion persons and groups of persons who,
because of their area of activity or the absence of important
information, cannot be clearly assigned.
The free-float rule applies only to
bearer shares and registered shares. Capital issued in the form of
participation certificates and bonus certificates is taken into
full account in calculating the SMI because it does not confer
voting rights.
The number of securities in the SMI
and the free-float factors are adjusted after the close of trading
on four adjustment dates per year, the third Friday of March, June,
September and December. Such changes are pre-announced at least one
month before the adjustment date, although the Index sponsor
reserves the right to take account of recent changes before the
adjustment date in the actual adjustment, so the definite new
securities are announced five trading days before the adjustment
date.
In order to avoid frequent slight
changes to the weighting and to maintain the stability of the SMI,
any extraordinary change of the total number of outstanding
securities or the free float will only result in an extraordinary
adjustment if it exceeds 10% and 5% respectively and is in
conjunction with a corporate action.
After a takeover, Six Exchange may,
in exceptional cases, adjust the free float of a company upon
publication of the end results after a five-day notification period
or may exclude the security from the relevant index family. When an
insolvency has been announced, an extraordinary adjustment will be
made and the affected security will be removed from the SMI after
five trading days’ notice.
The Index sponsor reserves the right
to make an extraordinary adjustment, in exceptional cases, without
observing the notification period.
Calculation of the
Index
The Index sponsor calculates the
SMI using the “Laspeyres formula,” with a weighted arithmetic mean
of a defined number of securities issues. The formula for
calculating the index value can be expressed as follows:
Index =
|
Free Float Market
Capitalization of the index
Divisor
|
The “free float market capitalization of the index” is equal
to the sum of the product of the last-paid price, the number of
shares, the free-float factor and, if a foreign stock is included,
the current CHF exchange rate as of the time the index value is
being calculated. The index value is calculated in real time and is
updated whenever a trade is made in a component stock. Where any
index component stock price is unavailable on any trading day, Six
Exchange will use the last reported price for such component stock.
Only prices from the SIX Exchange’s electronic order book are used
in calculating the SMI.
Divisor Value and
Adjustments
The divisor is a technical number
used to calculate the SMI and is adjusted to reflect changes in
market capitalization due to corporate events, and is adjusted by
Six Exchange to reflect corporate events, as described in the SMI
rules.
The
following graph shows the daily historical performance of the SMI
in the period from January 1, 2012 through June 21, 2022. We
obtained this historical data from Bloomberg L.P. We have not
independently verified the accuracy or completeness of the
information obtained from Bloomberg L.P. On June 21, 2022, the
closing level of the SMI was 10,479.84.
Historical Performance of the Swiss Market Index®
This
historical data on the SMI is not necessarily indicative of the
future performance of the SMI or what the value of the notes may
be. Any historical upward or downward trend in the level of the SMI
during any period set forth above is not an indication that the
level of the SMI is more or less likely to increase or decrease at
any time over the term of the notes.
Before investing in the notes, you
should consult publicly available sources for the levels of the
SMI.
License
Agreement
SIX Swiss Exchange AG (“SIX Swiss
Exchange”) and its licensors (“Licensors”) have no relationship to
BNS, other than the licensing of the SMI and the related
trademarks, in exchange for a fee, for use in connection with the
notes.
SIX Swiss Exchange and its Licensors
do not:
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• |
Sponsor, endorse, sell or promote the notes.
|
|
• |
Recommend that any person invest in the notes or any other
securities.
|
|
• |
Have any responsibility or liability for or make any decisions
about the timing, amount or pricing of the notes.
|
|
• |
Have any responsibility or liability for the administration,
management or marketing of the notes.
|
|
• |
Consider the needs of the notes or the owners of the notes in
determining, composing or calculating the SMI or have any
obligation to do so.
|
SIX Swiss Exchange
and its Licensors give no warranty, and exclude any liability
(whether in negligence or otherwise), in connection with the notes
or their performance.
SIX Swiss Exchange does not assume
any contractual relationship with the purchasers of the notes or
any other third parties.
Specifically,
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• |
SIX Swiss Exchange and its Licensors do not give any warranty,
express or implied, and exclude any liability for:
|
|
o |
The results to be obtained by the notes; the owner of the
notes or any other person in connection with the use of the SMI and
the data included in the SMI.
|
|
o |
The accuracy, timeliness, and completeness of the SMI and its
data.
|
|
o |
The merchantability and the fitness for a particular purpose
or use of the SMI and its data.
|
|
o |
The performance of the notes generally.
|
|
• |
SIX Swiss Exchange and its Licensors give no warranty, and
exclude any liability, for any errors, omissions or interruptions
in the SMI or its data.
|
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• |
Under no circumstances will SIX Swiss Exchange or its
Licensors be liable (whether in negligence or otherwise) for any
lost profits or indirect, punitive, special or consequential
damages or losses arising as a result of such errors, omissions or
interruptions in the SMI or its data or generally in relation to
the notes, even in circumstances where SIX Swiss Exchange or its
Licensors are aware that such loss or damage may occur.
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The licensing agreement between BNS
and SIX Swiss Exchange is solely for their benefit and not for the
benefit of the owners of the notes or any other third
parties.
The S&P/ASX
200 Index
The S&P/ASX 200 Index (Bloomberg
ticker “AS51”):
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◾ |
was first launched in 1979 by the Australian Securities
Exchange and was acquired and re-launched by its current Index
sponsor on April 3, 2000; and
|
|
◾ |
is sponsored, calculated, published and disseminated by
S&P.
|
The AS51 includes 200 companies and
covers approximately 80% of the Australian equity market by market
capitalization. As discussed below, the AS51 is not limited solely
to companies having their primary operations or headquarters in
Australia or to companies having their primary listing on the
Australian Securities Exchange (the “ASX”). All ordinary and
preferred shares (if such preferred shares are not of a fixed
income nature) listed on the ASX, including secondary listings, are
eligible for the AS51. Hybrid stocks, bonds, warrants, preferred
stock that provides a guaranteed fixed return and listed investment
companies are not eligible for inclusion.
The AS51 is intended to provide
exposure to the largest 200 eligible securities that are listed on
the ASX by float-adjusted market capitalization. Constituent
companies for the AS51 are chosen based on market capitalization,
public float and liquidity. All index-eligible securities that have
their primary or secondary listing on the ASX are included in the
initial selection of stocks from which the 200 index stocks may be
selected.
The float-adjusted market
capitalization of companies is determined based on the daily
average market capitalization over the last six months. The
security’s price history over the last six months, the latest
available shares on issue and the investable weight factor (the
“IWF”), are the factors relevant to the calculation of daily
average market capitalization. The IWF is a variable that is
primarily used to determine the available float of a security for
ASX listed securities.
Number of
Shares
When considering the index
eligibility of securities for inclusion or promotion into
S&P/ASX indices, the number of index securities under
consideration is based upon the latest available ASX quoted
securities. For domestic securities (companies incorporated in
Australia and traded on the ASX, companies incorporated overseas
but exclusively listed on the ASX and companies incorporated
overseas and traded on other markets but most of its trading
activity is on the ASX), this figure is purely based upon the
latest available data from the ASX.
Foreign-domiciled securities may
quote the total number of securities on the ASX that is
representative of their global equity capital; whereas other
foreign-domiciled securities may quote securities on the ASX on a
partial basis that represents their Australian equity capital. In
order to overcome this inconsistency, S&P will quote the number
of index securities that are represented by CHESS Depositary
Interests (“CDIs”) for a foreign entity. When CDIs are not issued,
S&P will use the total securities held on the Australian
register (CHESS and, where supplied, the issuer sponsored
register). This quoted number for a foreign entity is
representative of the Australian equity capital, thereby allowing
the AS51 to be increasingly reflective of the Australian
market.
The number of CDIs or shares of a
foreign entity quoted on the ASX can experience more volatility
than is typically the case for ordinary shares on issue. Therefore,
an average number on issue will be applied over a six-month
period.
Where CDI information is not supplied
to the ASX by the company or the company’s share register,
estimates for Australian equity capital will be drawn from CHESS
data and, ultimately, registry-sourced data.
IWF
The IWF represents the float-adjusted
portion of a stock’s equity capital. Therefore any strategic
holdings that are classified as either corporate, private or
government holdings reduce the IWF which, in turn, results in a
reduction in the float-adjusted market capital.
The IWF ranges between 0 and 1, is
calculated as 1 – Sum of the % held by strategic shareholders who
possess 5% or more of issued shares, and is an adjustment factor
that accounts for the publicly available shares of a company. A
company must have a minimum IWF of 0.3 to be eligible for index
inclusion.
S&P Dow Jones Indices identifies
the following shareholders whose holdings are considered to be
control blocks and are subject to float adjustment:
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1. |
Government and government agencies;
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2. |
Controlling and strategic shareholders/partners;
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|
3. |
Any other entities or individuals which hold more than 5%,
excluding insurance companies, securities companies and investment
funds; and
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4. |
Other restricted portions such as treasury stocks.
|
Liquidity
Test
Only stocks that are regularly traded
are eligible for inclusion. Eligible stocks are considered for
index inclusion based on their stock median liquidity (median daily
value traded divided by its average float-adjusted market
capitalization for the last six months relative to the market
capitalization weighted average of the stock median liquidities of
the 500 constituents of the All Ordinaries index, another member of
the S&P/ASX index family).
Index
Maintenance
S&P rebalances constituents
quarterly to ensure adequate market capitalization and liquidity
using the previous six months’ data to determine index eligibility.
Quarterly review changes take effect the third Friday of March,
June, September and December. Eligible stocks are considered for
index inclusion based on their float-adjusted market capitalization
rank relative to the stated quota of 200 securities. For example, a
stock that is currently in the S&P/ASX 300 and is ranked at
175, based on float-adjusted market capitalization, within the
universe of eligible securities may be considered for inclusion
into the AS51, provided that liquidity hurdles are met.
In order to limit the level of index
turnover, eligible securities will only be considered for index
inclusion once another stock is excluded due to a sufficiently low
rank and/or liquidity, based on the float-adjusted market
capitalization. Potential index inclusions and exclusions need to
satisfy buffer requirements in terms of the rank of the stock
relative to a given index. The buffers are established to limit the
level of index turnover that may take place at each quarterly
rebalancing.
Between rebalancing dates, an index
addition is generally made only if a vacancy is created by an index
deletion. Index additions are made according to float-adjusted
market capitalization and liquidity. An initial public offering is
added to the AS51 only when an appropriate vacancy occurs and is
subject to proven liquidity for at least two months. An exception
may be made for extraordinary large offerings where sizeable
trading volumes justify index inclusion.
Deletions can occur between index
rebalancing dates due to acquisitions, mergers and spin-offs or due
to suspension or bankruptcies. The decision to remove a stock from
the AS51 will be made once there is sufficient evidence that the
transaction will be completed. Stocks that are removed due to
mergers and acquisitions are removed from the AS51 at the cash
offer price for cash-only offers. Otherwise, the best available
price in the market is used.
Share numbers for all index
constituents are updated quarterly and are rounded to the nearest
thousand. The update to the number of issued shares will be
considered if the change is at least 5% of the float adjusted
shares or $100 million in value.
Share updates for foreign-domiciled
securities will take place annually at the March rebalancing. The
update to the number of index shares will only take place when the
six-month average of CDIs or the Total Securities held in the
Australian branch of issuer sponsored register (where supplied) and
in CHESS, as of the March rebalancing, differs from the current
index shares by either 5% or a market-cap dollar amount greater
than A$ 100 million. Where CDI information is not supplied to the
ASX by the company or the company’s share register, estimates for
Australian equity capital will be drawn from CHESS data and,
ultimately, registry-sourced data.
Intra-quarter share changes are
implemented at the effective date or as soon as reliable
information is available; however, they will only take place in the
following circumstances:
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◾ |
changes in a company’s float-adjusted shares of 5% or more due
to market-wide shares issuance;
|
|
◾ |
rights issues, bonus issues and other major corporate actions;
and
|
|
◾ |
share issues resulting from index companies merging and major
off-market buy-backs.
|
Share changes due to mergers or
acquisitions are implemented when the transaction occurs, even if
both of the companies are not in the same index and regardless of
the size of the change.
IWFs are reviewed annually as part of
the September quarterly review. However, any event that alters the
float of a security in excess of 5% will be implemented as soon as
practicable by an adjustment to the IWF.
The function of the IWF is also to
manage the index weight of foreign-domiciled securities that quote
shares on the basis of CDIs. Due to the volatility that is
displayed by CDIs, unusually large changes in the number of CDIs on
issue could result. Where this is the case, the IWF may be used to
limit the effect of unusually large changes in the average number
of CDIs (and, thereby, limit the potential to manipulate this
figure). Where the Australian Index Committee sees fit to apply the
IWF in this manner, the rationale for the decision will be
announced to the market. This will be reviewed annually at the
March-quarter index rebalancing date.
Index
Calculation
The AS51 is calculated using a
base-weighted aggregate methodology. The value of the AS51 on any
day for which an index value is published is determined by a
fraction, the numerator of which is the aggregate of the price of
each stock in the AS51 times the number of shares of such stock
included in the AS51 times that stock’s IWF, and the denominator of
which is the divisor, which is described more fully below.
In order to prevent the value of the
AS51 from changing due to corporate actions, all corporate actions
may require S&P to make an index or divisor adjustment, as
described in S&P’s rules. This helps maintain the value of the
AS51 and ensures that the movement of the AS51 does not reflect the
corporate actions of the individual companies that comprise the
AS51.
In situations where an exchange is
forced to close early due to unforeseen events, such as computer or
electric power failures, weather conditions or other events,
S&P will calculate the closing price of the indices based on
(1) the closing prices published by the exchange or (2) if no
closing price is available, the last regular trade reported for
each security before the exchange closed. If the exchange fails to
open due to unforeseen circumstances, S&P treats this closure
as a standard market holiday. The AS51 will use the prior day’s
closing prices and shifts any corporate actions to the following
business day. If all exchanges fail to open or in other extreme
circumstances, S&P may determine not to publish the AS51 for
that day.
S&P reserves the right to
recalculate the AS51 under certain limited circumstances.
The
following graph shows the daily historical performance of the AS51
in the period from January 1, 2012 through June 21, 2022. We
obtained this historical data from Bloomberg L.P. We have not
independently verified the accuracy or completeness of the
information obtained from Bloomberg L.P. On June 21, 2022, the
closing level of the AS51 was 6,523.804.
Historical Performance of the S&P/ASX 200 Index
This
historical data on the AS51 is not necessarily indicative of the
future performance of the AS51 or what the value of the notes may
be. Any historical upward or downward trend in the level of the
AS51 during any period set forth above is not an indication that
the level of the AS51 is more or less likely to increase or
decrease at any time over the term of the notes.
Before investing in the notes, you
should consult publicly available sources for the levels of the
AS51.
License
Agreement
The AS51 is a product of S&P or
its affiliates (“SPDJI”) and the Australian Securities Exchange,
and has been licensed for use by us in exchange for a fee.
Standard & Poor’s®
and S&P®
are registered trademarks of Standard & Poor’s Financial
Services LLC (“S&P Financial”); Dow Jones®
is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow
Jones”); and ASX®
is a registered trademark of the Australian Securities Exchange.
The trademarks have been licensed to SPDJI and have been
sublicensed for certain purposes by us. The notes are not
sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P
Financial, any of their respective affiliates (collectively,
“S&P Dow Jones Indices”) or the Australian Securities
Exchange. Neither S&P Dow Jones Indices nor the
Australian Securities Exchange make any representation or warranty,
express or implied, to the owners of the notes or any member of the
public regarding the advisability of investing in securities
generally or in the notes particularly or the ability of the AS51
to track general market performance. S&P Dow Jones
Indices’ and the Australian Securities Exchange’s only relationship
to us with respect to the AS51 is the licensing of the AS51 and
certain trademarks, service marks and/or trade names of S&P Dow
Jones Indices and/or its licensors. The AS51 is determined,
composed and calculated by S&P Dow Jones Indices or the
Australian Securities Exchange without regard to us or the
notes. S&P Dow Jones Indices and the Australian
Securities Exchange have no obligation to take our needs or the
owners of notes into consideration in determining, composing or
calculating the AS51. S&P Dow Jones Indices and the
Australian Securities Exchange are not responsible for and have not
participated in the determination of the prices, and amount of the
notes or the timing of the issuance or sale of the notes or in the
determination or calculation of the equation by which the notes are
to be converted into cash, surrendered or redeemed, as the case may
be. S&P Dow Jones Indices and the Australian Securities
Exchange have no obligation or liability in connection with the
administration, marketing or trading of the notes. There is no
assurance that investment products based on the AS51 will
accurately track index performance or provide positive investment
returns. SPDJI is not an investment advisor. Inclusion of a
security within an index is not a recommendation by S&P Dow
Jones Indices to buy, sell, or hold such security, nor is it
considered to be investment advice.
NEITHER S&P DOW JONES INDICES NOR
THIRD PARTY LICENSORS GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS
AND/OR THE COMPLETENESS OF THE AS51 OR ANY DATA RELATED THERETO OR
ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN
COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT
THERETO. S&P DOW JONES INDICES AND THE AUSTRALIAN
SECURITIES EXCHANGE SHALL NOT BE SUBJECT TO ANY DAMAGES OR
LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN.
S&P DOW JONES INDICES AND THE AUSTRALIAN SECURITIES EXCHANGE
MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE OR AS TO RESULTS TO BE OBTAINED BY US, OWNERS OF THE NOTES,
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE AS51 OR WITH
RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF
THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES
INDICES OR THE AUSTRALIAN SECURITIES EXCHANGE BE LIABLE FOR
ANY
INDIRECT, SPECIAL, INCIDENTAL,
PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO,
LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF
THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER
IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE
NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS
BETWEEN S&P DOW JONES INDICES AND US, OTHER THAN THE LICENSORS
OF S&P DOW JONES INDICES.
The FTSE®
China 50 Index
The
XIN0I was previously known as the “FTSE China 25 index.” On
September 22, 2014, FTSE Russell expanded the XIN0I to a 50 stock
index, and changed its name from FTSE China 25 Index to
FTSE®
China 50 Index. The XIN0I is a stock index calculated, published
and disseminated by FTSE Russell, and is designed to represent the
performance of the mainland Chinese market that is available to
international investors. The XIN0I is calculated and published in
Hong Kong dollars and United States dollars and is currently based
on the 50 largest and most liquid Chinese stocks (called “H”
shares, “P Chips” and “Red Chips”), listed and trading on the Hong
Kong Stock Exchange. Currently, only “H” shares, “Red Chip” shares
and “P Chip” shares are eligible for inclusion in the XIN0I. “H”
shares are securities of companies incorporated in the People’s
Republic of China and nominated by the Chinese government for
listing and trading on the Hong Kong Stock Exchange. “Red Chip”
shares are securities of companies incorporated outside the
People’s Republic of China, which are substantially owned directly
or indirectly by the Chinese government, have the majority of their
revenue or assets derived from mainland China and are listed on the
Hong Kong Stock Exchange. “P Chip” shares are securities of
companies incorporated outside the People’s Republic of China,
which are controlled by individuals located in mainland China, have
the majority of their revenue or assets derived from mainland China
and are listed on the Hong Kong Stock Exchange.
Standards for Listing and Maintenance
All
classes of equity in issue are eligible for inclusion in the XIN0I,
subject to certain restrictions, however, each constituent must
also be a constituent of the FTSE®
All-World Index. The FTSE®
All-World Index is a market-capitalization weighted index designed
to represent the performance of the large- and mid- capitalization
stocks from the FTSE®
Global Equity Index Series and covers approximately 90.00% to
95.00% of the world’s investable market capitalization. Companies
whose business is that of holding equity and other investments
(e.g., investment trusts) are not eligible for inclusion.
Convertible preference shares and loan stocks are excluded until
converted.
Securities must be sufficiently liquid to be traded, therefore, the
following criteria, among others, are used to ensure that illiquid
securities are excluded:
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• |
Price. There must be
an accurate and reliable price for the purposes of determining the
market value of a company.
|
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• |
Liquidity. Each
security is tested for liquidity on a semi-annual basis in March
and September by calculation of its monthly median of daily trading
volume as part of the FTSE®
All-World Index review. When calculating the median of daily
trading volume of any security for a particular month, a minimum of
5 trading days in that month must exist, otherwise the month will
be excluded from the test.
|
For each month,
the daily trading volume for each security is calculated as a
percentage of the shares in issue for that day adjusted by the free
float at the review cut-off date. These daily values are then
ranked in descending order and the median is taken by selecting the
value for the middle ranking day if there is an odd number of days
and the mean of the middle two if there is an even number of
days.
Daily totals
with zero trades are included in the ranking; therefore, a security
that fails to trade for more than half of the days in a month will
have a zero median trading volume for that month.
Any period
suspension will not be included in the test.
The liquidity
test will be applied on a pro-rata basis where the testing period
is less than 12 months:
|
(i) |
A non-constituent which does not turnover at least 0.05% of
their shares in issue (after the application of any free float
weightings) based on their median daily trading volume per month in
ten of the twelve months prior to a full market review, will not be
eligible for inclusion in the XIN0I.
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|
(ii) |
An existing constituent which does not turnover at least 0.04%
of its shares in issue (after the application of any free float
weightings) based on its median daily trading volume per month for
a least eight of the twelve months prior to a full market review
will be removed from the XIN0I.
|
|
(iii) |
New issues which do not have a twelve month trading record
must have a minimum three month trading record when reviewed. They
must turnover at least 0.05% of their free float adjusted shares
based on their median daily trading volume each month, on a
pro-rata basis since listing. When testing liquidity, the free
float weight as at the last date in the testing period will be used
for the calculation for the whole of that period. This rule will
not apply to new issues added under fast entry inclusion as part of
the FTSE®
All-World Index review.
|
At the sole
discretion of FTSE Russell, the above percentage figures may be
adjusted by up to 0.01% at the March and September review so that,
in FTSE Russell’s opinion, the XIN0I better reflects the liquid
investable market of the region. This discretion may only be
exercised across the whole market and may not be applied to
individual securities.
At the March
and September reviews of the FTSE®
All-World Index, newly listed companies will have their liquidity
assessed on a pro-rata basis.
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• |
New Issues. New issues, which do not qualify as early
entrants, will become eligible for inclusion at the March and
September reviews of the FTSE All-World Index providing they have,
since the commencement of official non-conditional trading, a
minimum of at least three trading months prior to the date of that
review and turnover of at least 0.05% of their free float adjusted
shares based in issue based on their median daily trading volume
each month, on a pro rata basis since their listing.
|
The inclusion
of early entries will not require a minimum trading record.
The XIN0I, like
other indices of FTSE Russell, is governed by an independent
advisory committee, the FTSE Russell Asia Pacific Regional Equity
Advisory Committee, that ensures that the XIN0I is operated in
accordance with its published ground rules, and that the rules
remain relevant to the XIN0I. The FTSE Russell Asia Pacific
Regional Equity Advisory Committee is responsible for undertaking
the review of the XIN0I and for approving changes of
constituents.
Computation of the tracked
index
The XIN0I is
calculated using the free float index calculation methodology of
FTSE Russell. The XIN0I is calculated using the following
formula:
Where:
“N” is the number of securities in the XIN0I;
“pi”
is the latest trade price of the component security “i” (or the
price at the close of the XIN0I on the previous day);
“ei”
is the exchange rate required to convert the security’s currency
into the XIN0I’s base currency;
”si”
is the number of shares in issue used by FTSE for the
security;
”fi”
is the investability weighting factor published by FTSE, to be
applied to such security to all amendments to its weighting,
expressed as a number between 0 and 1, where 1 represents a 100.00%
free float;
”ci”
is the capping factor published by FTSE to be applied to a security
to correctly weight that security in the XIN0I; and
”d” is the divisor, a figure that represents the total issued
share capital of the XIN0I at the base date, which may be adjusted
to allow for changes in the issued share capital of individual
securities to be made without distorting the XIN0I.
The
capping factor serves to limit the weight of any individual company
to no more than 9.00% of the XIN0I and to limit the aggregate
weight of all companies that have a weight greater than 4.50% to no
more than 38.00% of the XIN0I.
The
XIN0I uses actual trade prices for securities with local stock
exchange quotations.
Free
float restrictions are calculated using available published
information. Companies with a free float of 5.00% or below are
excluded from the XIN0I. In June, a constituent’s free float will
be updated regardless of size. No buffers are applied. Quarterly
updates to free float will be applied after the close of business
on the third Friday of March, June, September and December. Free
float changes resulting from corporate events will not be subject
to the buffers as detailed above and will be implemented in line
with the event.
The
XIN0I will be periodically reviewed for changes in free float.
These reviews will coincide with the quarterly reviews of the
XIN0I. Implementation of any changes will happen at close of
trading on the third Friday in March, June, September and
December.
A
constituent’s free float will also be reviewed and adjusted if
necessary:
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By identifying information which necessitates a change in free
float weighting;
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Following a corporate event; or
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Expiry of a lock-in clause.
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If a
corporate event includes a corporate action which affects the
XIN0I, any change in free float will be implemented at the same
time as the corporate action.
Foreign
ownership limits, if any, will be applied after calculating the
actual free float restriction. FTSE’s methodology takes account of
the restrictions placed on the equity holdings of foreigners in a
company where these have been imposed by governments or regulatory
authorities, for example on strategically sensitive industrial
sectors such as defense and telecommunications, or where they have
been explicitly set out in a company’s constitution. Where the
presence of foreign ownership restrictions creates a limit on
foreign ownership that is more restrictive than the calculated free
float for a company, the precise foreign ownership limit is used in
place of the free float for the purposes of calculating the
company’s investability weight. If the foreign ownership limit is
less restrictive or equal to the free float restriction, the free
float restriction is applied, subject to the above.
Where
a company’s shares are issued partly, or nil, paid and the call
dates are already determined and known, the market price will, for
the purposes of calculating its market capitalization, be adjusted
so as to include all such calls (i.e., the fully paid price).
Periodic Review of Constituents
The
quarterly review of the XIN0I constituents takes place in March,
June, September and December. The constituents will be reviewed
using data from the close of business on the Monday following the
third Friday in February, May, August and November. Where there is
a market holiday in either China or Hong Kong on the Monday
following the third Friday, the close of business on the last
trading day prior to the Monday after the third Friday, where both
markets are open, will be used. Any constituent changes will be
implemented after the close of business on the third Friday of
March, June, September and December.
At
the quarterly review, the constituents of the XIN0I are capped
using prices adjusted for corporate actions as at the close of
business on the second Friday in March, June, September and
December. The capping is implemented after close of business on the
third Friday in March, June, September and December based on the
constituents, shares in issue and free float on the next trading
day following the third Friday of the review month.
Quarterly changes are published after the close of business on the
Wednesday before the first Friday of March, June, September and
December to give users of the XIN0I sufficient notification of the
changes before their implementation.
At
review, all constituents of the XIN0I must be existing or pending
constituents to the FTSE®
All-World Index, i.e., the review will take into consideration any
constituent changes to the FTSE®
All-World Index as announced by FTSE and will therefore be
conducted before the implementation date of these changes.
A
company will be inserted into the XIN0I at the periodic review if
it rises to 40th position or above when the eligible companies are
ranked by full market capitalization (before the application of any
investability weightings).
A
company in the XIN0I will be deleted at the periodic review if it
falls to 61st position or below when the eligible companies are
ranked by full market value (before the application of any
investability weightings).
A constant
number of constituents will be maintained for the XIN0I. Where a
greater number of companies qualify to be inserted in the XIN0I
than those qualifying to be deleted, the lowest ranking
constituents presently included in the XIN0I will be deleted to
ensure that an equal number of companies are inserted and deleted
at the periodic review. Likewise, where a greater number of
companies qualify to be deleted than those qualifying to be
inserted, the securities of the highest ranking companies which are
presently not included in the XIN0I will be inserted to match the
number of companies being deleted at the periodic review.
The
following graph shows the daily historical performance of the XIN0I
in the period from January 1, 2012 through June 21, 2022. We
obtained this historical data from Bloomberg L.P. We have not
independently verified the accuracy or completeness of the
information obtained from Bloomberg L.P. On June 21, 2022, the
closing level of the XIN0I was 15,029.55.
Historical Performance of the FTSE®
China 50 Index
This
historical data on the XIN0I is not necessarily indicative of the
future performance of the XIN0I or what the value of the notes may
be. Any historical upward or downward trend in the level of the
XIN0I during any period set forth above is not an indication that
the level of the XIN0I is more or less likely to increase or
decrease at any time over the term of the notes.
Before investing in the notes, you
should consult publicly available sources for the levels of the
XIN0I.
License
Agreement
BNS will enter entered into a
non-exclusive license agreement with FTSE, whereby BNS and its
affiliates and subsidiary companies and certain of its affiliates,
in exchange for a fee, will be permitted to use the XIN0I, which is
owned and published by FTSE, in connection with certain products,
including the notes.
Neither FTSE nor the LSE makes any
representation or warranty, express or implied, to the owners of
the notes or any member of the public regarding the advisability of
investing in structured products generally or in the notes
particularly, or the ability of the XIN0I to track general stock
market performance. FTSE and the LSE’s only relationship with BNS
is the licensing of certain trademarks and trade names of FTSE,
respectively, without regard to us or the notes. FTSE and the LSE
have no obligation to take the needs of us or the holders of the
notes into consideration in determining, composing or calculating
the XIN0I. Neither FTSE nor the LSE is responsible for and has not
participated in the determination of the timing, price or quantity
of the notes to be issued or in the determination or calculation of
the amount due at maturity of the notes. Neither FTSE nor the LSE
has any obligation or liability in connection with the
administration, marketing or trading of the notes.
The notes are not in any way
sponsored, endorsed, sold or promoted by FTSE or the LSE, and
neither FTSE nor the LSE makes any claim, prediction, warranty or
representation whatsoever, expressly or impliedly, either as to the
results to be obtained from the use of the XIN0I and/or the figure
at which the said component stands at any particular time on any
particular day or otherwise, or the suitability of the XIN0I for
the purpose to which it is being put in connection with the notes.
The XIN0I is compiled and calculated by FTSE. However, neither FTSE
nor the LSE shall be liable (whether in negligence or otherwise) to
any person for any error in the XIN0I and neither FTSE nor the LSE
shall be under any obligation to advise any person of any error
therein.
“FTSE®,”
and “FTSETM,”
are trademarks of the London Stock Exchange Group companies and are
used by FTSE International Limited under license. “All-World,”
“All-Share” and “All-Small” are trademarks of FTSE International
Limited.
Supplement to the Plan of Distribution
Under our
distribution agreement with BofAS, BofAS will purchase the notes
from us as principal at the public offering price indicated on the
cover of this term sheet, less the indicated underwriting
discount.
MLPF&S will purchase the notes
from BofAS for resale, and will receive a selling concession in
connection with the sale of the notes in an amount up to the full
amount of the underwriting discount set forth on the cover of this
term sheet.
We may deliver the notes against
payment therefor in New York, New York on a date that is greater
than two business days following the pricing date. Under Rule
15c6-1 of the Securities Exchange Act of 1934, trades in the
secondary market generally are required to settle in two business
days, unless the parties to any such trade expressly agree
otherwise. Accordingly, if the initial settlement of the notes
occurs more than two business days from the pricing date,
purchasers who wish to trade the notes more than two business days
prior to the settlement date will be required to specify
alternative settlement arrangements to prevent a failed
settlement.
The notes will not be listed on any
securities exchange. In the original offering of the notes, the
notes will be sold in minimum investment amounts of 100 units. If
you place an order to purchase the notes, you are consenting to
MLPF&S and/or one of its affiliates acting as a principal in
effecting the transaction for your account.
MLPF&S and BofAS may repurchase
and resell the notes, with repurchases and resales being made at
prices related to then-prevailing market prices or at negotiated
prices, and these prices will include MLPF&S’s and BofAS’s
trading commissions and mark-ups or mark-downs. MLPF&S and
BofAS may act as principal or agent in these market-making
transactions; however, neither is obligated to engage in any such
transactions. At their discretion, for a short, undetermined
initial period after the issuance of the notes, MLPF&S and
BofAS may offer to buy the notes in the secondary market at a price
that may exceed the initial estimated value of the notes. Any price
offered by MLPF&S or BofAS for the notes will be based on
then-prevailing market conditions and other considerations,
including the performance of the Basket and the remaining term of
the notes. However, none of us, MLPF&S, BofAS or any of our
respective affiliates is obligated to purchase your notes at any
price or at any time, and we cannot assure you that we, MLPF&S,
BofAS or any of our respective affiliates will purchase your notes
at a price that equals or exceeds the initial estimated value of
the notes.
The value of the notes shown on your
account statement produced by MLPF&S will be based on BofAS’s
estimate of the value of the notes if BofAS or another of its
affiliates were to make a market in the notes, which it is not
obligated to do. That estimate will be based upon the price that
BofAS may pay for the notes in light of then-prevailing market
conditions, and other considerations, as mentioned above, and will
include transaction costs. At certain times, this price may be
higher than or lower than the initial estimated value of the
notes.
The distribution of the Note
Prospectus in connection with these offers or sales will be solely
for the purpose of providing investors with the description of the
terms of the notes that was made available to investors in
connection with their initial offering. Secondary market investors
should not, and will not be authorized to, rely on the Note
Prospectus for information regarding BNS or for any purpose other
than that described in the immediately preceding sentence.
An
investor’s household, as referenced on the cover of this term
sheet, will generally include accounts held by any of the
following, as determined by MLPF&S in its discretion and acting
in good faith based upon information then available to
MLPF&S:
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the investor’s spouse (including
a domestic partner), siblings, parents, grandparents, spouse’s
parents, children and grandchildren, but excluding accounts held by
aunts, uncles, cousins, nieces, nephews or any other family
relationship not directly above or below the individual
investor;
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a family investment vehicle,
including foundations, limited partnerships and personal holding
companies, but only if the beneficial owners of the vehicle consist
solely of the investor or members of the investor’s household as
described above; and
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a trust where the grantors and/or
beneficiaries of the trust consist solely of the investor or
members of the investor’s household as described above; provided
that, purchases of the notes by a trust generally cannot be
aggregated together with any purchases made by a trustee’s personal
account.
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Purchases in retirement accounts
will not be considered part of the same household as an individual
investor’s personal or other non-retirement account, except for
individual retirement accounts (“IRAs”), simplified employee
pension plans (“SEPs”), savings incentive match plan for employees
(“SIMPLEs”), and single-participant or owners only accounts (i.e.,
retirement accounts held by self-employed individuals, business
owners or partners with no employees other than their
spouses).
Please contact your Merrill
financial advisor if you have any questions about the application
of these provisions to your specific circumstances or think you are
eligible.
The notes are our unsecured senior
debt securities, the return on which is linked to the performance
of the Basket. As is the case for all of our debt securities,
including our market-linked notes, the economic terms of the notes
reflect our actual or perceived creditworthiness at the time of
pricing. The internal funding rate we use in pricing the
market-linked note is typically lower than the rate we would pay
when we issue conventional fixed-rate debt securities of comparable
maturity. This generally relatively lower internal funding rate,
which is reflected in the economic terms of the notes, along with
the fees and charges associated with market-linked notes, typically
results in the initial estimated value of the notes on the pricing
date being less than their public offering price.
At maturity, we are required to pay
the Redemption Amount to holders of the notes, which will be
calculated based on the performance of the Basket and the $10 per
unit principal amount. In order to meet these payment obligations,
at the time we issue the notes, we may choose to enter into certain
hedging arrangements (which may include call options, put options
or other derivatives) with BofAS or one of its affiliates.
The terms of these hedging arrangements are determined by seeking
bids from market participants, including MLPF&S, BofAS and its
affiliates, and take into account a number of factors, including
our creditworthiness, interest rate movements, the volatility of
the Basket Components, the tenor of the notes and the tenor of the
hedging arrangements. The economic terms of the notes and their
initial estimated value depend in part on the terms of these
hedging arrangements.
BofAS has advised us that the hedging
arrangements will include a hedging related charge of approximately
$0.075 per unit, reflecting an estimated profit to be credited to
BofAS from these transactions. Since hedging entails risk and
may be influenced by unpredictable market forces, additional
profits and losses from these hedging arrangements may be realized
by BofAS or any third party hedge providers.
For further information, see “Risk
Factors—Valuation- and Market Related Risks” beginning on page
PS-14 and “Use of Proceeds and Hedging” on page PS-21 of product
supplement EQUITY LIRN-1.
Summary of Canadian Federal Income Tax Consequences
An investor
should read carefully the description of principal Canadian federal
income tax considerations under “Canadian Taxation” in the
accompanying prospectus relevant to a holder (as defined on page 20
of the prospectus) owning debt securities, and the description of
principal Canadian federal income tax considerations under
“Supplemental Discussion of Canadian Federal Income Tax
Consequences” in the product supplement EQUITY LIRN-1. 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 the Bank 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 April 29, 2022 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.
Summary of U.S. Federal Income Tax Consequences
The following is a general
description of certain U.S. federal tax considerations relating to
the notes. Prospective purchasers of the notes should consult their
tax advisors as to the consequences under the tax laws of the
country of which they are residents for tax purposes and the tax
laws of the U.S. of acquiring, holding and disposing of the notes
and receiving payments under the notes. This summary is based upon
the law as in effect on the date of this document and is subject to
any change in law that may take effect after such date. We urge you
to read the more detailed discussion in the “Material U.S. Federal
Income Tax Consequences” section beginning on page PS-38 of product
supplement EQUITY LIRN-1.
No statutory, regulatory, judicial or
administrative authority directly discusses how the notes should be
treated for U.S. federal income tax purposes. As a result, the U.S.
federal income tax consequences of your investment in the notes are
uncertain. Accordingly, we urge you to consult your tax advisor as
to the tax consequences of your investment in the notes (and of
having agreed to the required tax treatment of your notes described
below) and as to the application of state, local or other tax laws
to your investment in your notes and the possible effects of
changes in federal or other tax laws.
Pursuant to the terms of the notes,
BNS and you agree, in the absence of a statutory or regulatory
change or an administrative determination or judicial ruling to the
contrary, to characterize your notes as prepaid derivative
contracts with respect to the Basket. If your notes are so treated,
you should generally recognize long-term capital gain or loss if
you hold your notes for more than one year (and, otherwise,
short-term capital gain or loss) upon the taxable disposition of
your notes in an amount equal to the difference between the amount
you receive at such time and the amount you paid for your notes.
The deductibility of capital losses is subject to
limitations.
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 notes in the manner described
above. However, because there is no authority that specifically
addresses the tax treatment of the notes, it is possible that your
notes could alternatively be treated for tax purposes as a single
contingent payment debt instrument or pursuant to some other
characterization, such that the timing and character of your income
from the notes could differ materially and adversely from the
treatment described above.
Section 1297. We will not attempt to
ascertain whether any entity the stock of which is included in any
Basket Component would be treated as a “passive foreign investment
company” (a “PFIC”) within the meaning Section 1297 of the U.S.
Internal Revenue Code of 1986, as amended (the “Code”). If any such
entity were so treated, certain adverse U.S. federal income tax
consequences might apply to U.S. holders upon the taxable
disposition (including cash settlement) of the notes. You should
refer to information filed with the SEC or an equivalent
governmental authority by such entities and consult your tax
advisor regarding the possible consequences to you if such entity
is or becomes a PFIC.
Notice 2008-2. In 2007, the Internal
Revenue Service (the “IRS”) released a notice that may affect the
taxation of holders of the notes. According to Notice 2008-2, the
IRS and the U.S. Department of the Treasury (the “Treasury”) are
actively considering whether a holder of an instrument such as the
notes should be required to accrue ordinary income on a current
basis. It is not possible to determine what guidance they will
ultimately issue, if any. It is possible, however, that under such
guidance, holders of the notes will ultimately be required to
accrue income currently 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 the potential impact, of the above
considerations.
Medicare Tax on Net Investment Income.
U.S. holders that are individuals, estates or certain trusts are
subject to an additional 3.8% tax on all or a portion of their “net
investment income,” or “undistributed net investment income” in the
case of an estate or trust, which may
include any income or gain realized
with respect to the notes, to the extent of their net investment
income or undistributed net investment income (as the case may be)
that, when added to their other modified adjusted gross income,
exceeds $200,000 for an unmarried individual, $250,000 for a
married taxpayer filing a joint return (or a surviving spouse),
$125,000 for a married individual filing a separate return or the
dollar amount at which the highest tax bracket begins for an estate
or trust. The 3.8% Medicare tax is determined in a different manner
than the regular income tax. U.S. holders should consult their tax
advisors with respect to the 3.8% Medicare tax.
Specified Foreign Financial Assets.
U.S. holders may be subject to reporting obligations with respect
to their notes if they do not hold their notes in an account
maintained by a financial institution and the aggregate value of
their notes and certain other “specified foreign financial assets”
(applying certain attribution rules) exceeds an applicable
threshold. Significant penalties can apply if a U.S. holder is
required to disclose its notes and fails to do so.
Backup Withholding and Information
Reporting. The proceeds received from a taxable disposition
of the notes will be subject to information reporting unless you
are an “exempt recipient” and may also be subject to backup
withholding at the rate specified in the Code if you fail to
provide certain identifying information (such as an accurate
taxpayer number, if you are a U.S. holder) or meet certain other
conditions.
Amounts withheld under the backup
withholding rules are not additional taxes and may be refunded or
credited against your U.S. federal income tax liability, provided
the required information is furnished to the IRS.
Non-U.S. Holders. If you are a
non-U.S. holder, subject to Section 871(m) of the Code and FATCA,
discussed below, you should generally not be subject to generally
applicable information reporting and backup withholding
requirements with respect to payments on your notes if you comply
with certain certification and identification requirements as to
your non-U.S. status including providing us (and/or the applicable
withholding agent) a properly executed and fully completed
applicable IRS Form W-8. Subject to Section 871(m) of the Code,
discussed below, gain realized from the taxable disposition of a
note generally will not be subject to U.S. tax unless (i) such gain
is effectively connected with a trade or business conducted by you
in the U.S., (ii) you are a non-resident alien individual and are
present in the U.S. for 183 days or more during the taxable year of
such taxable disposition and certain other conditions are satisfied
or (iii) you have certain other present or former connections with
the U.S.
Section 871(m). A 30% withholding tax
(which may be reduced by an applicable income tax treaty) is
imposed under Section 871(m) of the Code on certain “dividend
equivalents” paid or deemed paid to a non-U.S. holder with respect
to a “specified equity-linked instrument” that references one or
more dividend-paying U.S. equity securities or indices containing
U.S. equity securities. The withholding tax can apply even if
the instrument does not provide for payments that reference
dividends. Treasury regulations provide that the withholding
tax applies to all dividend equivalents paid or deemed paid on
specified equity-linked instruments that have a delta of one
(“delta-one specified equity-linked instruments”) issued after 2016
and to all dividend equivalents paid or deemed paid on all other
specified equity-linked instruments issued after 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, 2023.
Based on our determination that the
notes are not “delta-one” with respect to any Basket Component or
any stocks comprising any Basket Component, our special U.S. tax
counsel is of the opinion that the notes should not be delta-one
specified equity-linked instruments and thus should not be subject
to withholding on dividend equivalents. Our determination is not
binding on the IRS, and the IRS may disagree with this
determination. Furthermore, the application of Section 871(m) of
the Code will depend on our determinations on the date the terms of
the notes are set. If withholding is required, we will not make
payments of any additional amounts.
Nevertheless, after the date the
terms are set, it is possible that your notes could be deemed to be
reissued for tax purposes upon the occurrence of certain events
affecting the Basket Components, any stocks comprising any Basket
Component or your notes, and following such occurrence your notes
could be treated as delta-one specified equity-linked instruments
that are subject to withholding on dividend equivalents. It
is also possible that withholding tax or other tax under Section
871(m) of the Code could apply to the notes under these rules if
you enter, or have entered, into certain other transactions in
respect of the Basket Components, any stocks comprising any Basket
Component or your notes. If you enter, or have entered, into
other transactions in respect of the Basket Components, any stocks
comprising any Basket Component or your notes, you should consult
your tax advisor regarding the application of Section 871(m) of the
Code to your notes in the context of your other transactions.
Because of the uncertainty regarding
the application of the 30% withholding tax on dividend equivalents
to the notes, you are urged to consult your tax advisor regarding
the potential application of Section 871(m) of the Code and the 30%
withholding tax to an investment in the notes.
U.S. Federal Estate Tax Treatment of Non-U.S.
Holders. A note may be subject to U.S. federal estate tax if
an individual non-U.S. holder holds the note at the time of his or
her death. The gross estate of a non-U.S. holder domiciled outside
the U.S. includes only property situated in the U.S. Individual
non-U.S. holders should consult their tax advisors regarding the
U.S. federal estate tax consequences of holding the notes at
death.
FATCA. The Foreign Account Tax
Compliance Act (“FATCA”) was enacted on March 18, 2010, and imposes
a 30% U.S. withholding tax on “withholdable payments” (i.e.,
certain U.S.-source payments, including interest (and original
issue discount), dividends or other fixed or determinable annual or
periodical gain, profits, and income, and on the gross proceeds
from a disposition of property of a type which can produce
U.S.-source interest or dividends) and “passthru payments” (i.e.,
certain payments attributable to withholdable
payments) made to certain foreign
financial institutions (and certain of their affiliates) unless the
payee foreign financial institution agrees (or is required), among
other things, to disclose the identity of any U.S. individual with
an account at the institution (or the relevant affiliate) and to
annually report certain information about such account. FATCA also
requires withholding agents making withholdable payments to certain
foreign entities that do not disclose the name, address, and
taxpayer identification number of any substantial U.S. owners (or
do not certify that they do not have any substantial U.S. owners)
to withhold tax at a rate of 30%. Under certain circumstances, a
holder may be eligible for refunds or credits of such taxes.
Pursuant to final and temporary
Treasury regulations and other IRS guidance, the withholding and
reporting requirements under FATCA will generally apply to certain
“withholdable payments”, will not apply to gross proceeds on a sale
or disposition, and will apply to certain foreign passthru payments
only to the extent that such payments are made after the date that
is two years after final regulations defining the term “foreign
passthru payment” are published. If withholding is required, we (or
the applicable paying agent) will not be required to pay additional
amounts with respect to the amounts so withheld. Foreign financial
institutions and non-financial foreign entities located in
jurisdictions that have an intergovernmental agreement with the
U.S. governing FATCA may be subject to different rules.
Investors should
consult their own advisors about the application of FATCA, in
particular if they may be classified as financial institutions (or
if they hold their notes through a foreign entity) under the FATCA
rules.
Proposed Legislation. In 2007,
legislation was introduced in Congress that, if it had been
enacted, would have required holders of notes purchased after the
bill was enacted to accrue interest income over the term of the
notes despite the fact that there will be no interest payments over
the term of the notes.
Furthermore, in 2013 the House Ways
and Means Committee released in draft form certain proposed
legislation relating to financial instruments. If it had been
enacted, the effect of this legislation generally would have been
to require instruments such as the notes to be marked to market on
an annual basis with all gains and losses to be treated as
ordinary, subject to certain exceptions.
It is impossible to predict what any
such legislation or administrative or regulatory guidance might
provide, and whether the effective date of any legislation or
guidance will affect securities that were issued before the date
that such legislation or guidance is issued. You are urged to
consult your tax advisor as to the possibility that any legislative
or administrative action may adversely affect the tax treatment of
your notes.
Both U.S. and
non-U.S. holders should consult their tax advisors regarding the
U.S. federal income tax consequences of an investment in the notes,
as well as any tax consequences arising under the laws of any
state, local or non-U.S. taxing jurisdiction (including that of BNS
and those of the issuers of the stocks included in the Basket
Components).
Where You Can Find More Information
We have filed a registration statement (including a product
supplement, a prospectus supplement and a prospectus) with the SEC
for the offering to which this term sheet relates. Before you
invest, you should read the Note Prospectus, including this term
sheet, and the other documents that we have filed with the SEC, for
more complete information about us and this offering. You may
get these documents without cost by visiting EDGAR on the SEC
website at www.sec.gov. Alternatively, we, any agent, or any
dealer participating in this offering will arrange to send you
these documents if you so request by calling MLPF&S or BofAS
toll-free at 1-800-294-1322.
“Leveraged Index Return Notes®”
and “LIRNs®”
are registered service marks of Bank of America Corporation, the
parent company of MLPF&S and BofAS.