Filed Pursuant to Rule 433 Dated July 17, 2020 | |
Registration No. 333-228614 | |
Market Linked Securities – Auto-Callable with Contingent Downside, Principal at Risk Securities Linked to the VanEck Vectors® Gold Miners ETF due August 7, 2023 Term Sheet to the Preliminary Pricing Supplement dated July 17, 2020 |
Summary of Terms
*We expect that delivery of the Securities will be made against payment therefor on or about the 3rd Business Day following the Trade Date (this settlement cycle being referred to as “T+3”). Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in 2 Business Days (“T+2”), unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Securities on the Trade Date will be required, by virtue of the fact that each Security initially will settle in 3 Business Days (T+3), to specify alternative settlement arrangements to prevent a failed settlement.
Investment Description
• | Linked to the VanEck Vectors® Gold Miners ETF |
• | Unlike ordinary debt securities, the Securities do not pay interest or guarantee any repayment of principal at maturity. Instead, the Securities are subject to potential automatic call upon the terms described below. Any return you receive on the Securities and whether they are automatically called will depend on the performance of the Reference Asset. |
Call Date | Call Premium** |
August 5, 2021 | [11.00 - 13.00]% of the Principal Amount |
August 5, 2022 | [22.00 - 26.00]% of the Principal Amount |
July 31, 2023 (the “Final Calculation Day”) | [33.00 - 39.00]% of the Principal Amount |
** The actual Call Premium applicable to each Call Date will be determined on the Pricing Date.
o | If the Ending Price is less than the Starting Price but not by more than 25.00% (the Percentage Change is zero or negative but not below -25.00%): |
You will be repaid the Principal Amount;
o | If the Ending Price is less than the Starting Price by more than 25.00% (the Percentage Change is negative and below -25.00%): |
Principal Amount + (Principal Amount × Percentage Change)
In this case, you will have full downside exposure to the decrease in the price of the Reference Asset from the Starting Price to the Ending Price. If the Securities are not automatically called and the Ending Price is less than the Threshold Price, you will lose more than 25.00%, and possibly up to 100.00%, of your initial investment.
• | Investors may lose up to 100.00% of the Principal Amount. |
• | Any positive return on the Securities will be limited to the applicable Call Premium. |
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• | No periodic interest payments or dividends. |
If the Securities priced today, the estimated value of the Securities would be between $900.00 and $925.00 per $1,000 Principal Amount. See “The Bank’s Estimated Value of the Securities” in the preliminary pricing supplement. |
The Securities have complex features and investing in the Securities involves risks not associated with an investment in conventional debt securities. See “Selected Risk Considerations” in this term sheet, “Additional Risks” in the preliminary pricing supplement, “Additional Risk Factors Specific to the Notes” in the product prospectus supplement and “Risk Factors” in the prospectus supplement and prospectus. |
This introductory term sheet does not provide all the information that an investor should consider prior to making an investment decision. This term sheet should be read in conjunction with the preliminary pricing supplement, product prospectus supplement, prospectus supplement, and prospectus. |
NOT A BANK DEPOSIT AND NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY |
Hypothetical Returns
If the Securities are automatically called:
Hypothetical Call Date on which Securities are automatically called | Hypothetical payment per Security on related Call Settlement Date | Hypothetical pre-tax total rate of return |
1st call date | $1,120.00 | 12.00% |
2nd call date | $1,240.00 | 24.00% |
3rd call date | $1,360.00 | 36.00% |
Assumes the Call Premiums are equal to the midpoints of their specified ranges. Each Security has a Principal Amount of $1,000.
If the Securities are not automatically called:
Hypothetical Ending Price | Hypothetical Percentage Change | Hypothetical Redemption Amount at Maturity per Security | Hypothetical pre-tax total rate of return |
$90.00 | -10.00% | $1,000.00 | 0.00% |
$80.00 | -20.00% | $1,000.00 | 0.00% |
$75.00 | -25.00% | $1,000.00 | 0.00% |
$74.00 | -26.00% | $740.00 | -26.00% |
$70.00 | -30.00% | $700.00 | -30.00% |
$60.00 | -40.00% | $600.00 | -40.00% |
$50.00 | -50.00% | $500.00 | -50.00% |
$25.00 | -75.00% | $250.00 | -75.00% |
$0.00 | -100.00% | $0.00 | -100.00% |
Assumes a hypothetical Starting Price of $100.00. The actual Starting Price will be determined on the Pricing Date. Each Security has a Principal Amount of $1,000.
The above figures are for purposes of illustration only and may have been rounded for ease of analysis. The actual amount you receive upon automatic call or at maturity and the resulting pre-tax rate of return will depend on (i) whether the Securities are automatically called; (ii) if the Securities are automatically called, the actual Call Premium and the actual Call Date on which the Securities are called; (iii) if the Securities are not automatically called, the actual Ending Price of the Reference Asset; and (iv) whether you hold your Securities to maturity or earlier automatic call.
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Call Dates and Call Premiums
Call Date | Call Premium | Payment per Security upon an Automatic Call |
August 5, 2021 | [11.00 - 13.00]% of the Principal Amount | [$1,110.00 - $1,130.00] |
August 5, 2022 | [22.00 - 26.00]% of the Principal Amount | [$1,220.00 - $1,260.00] |
July 31, 2023* | [33.00 - 39.00]% of the Principal Amount | [$1,330.00 - $1,390.00] |
The actual Call Premium and Payment per Security upon an automatic call that is applicable to each Call Date will be determined on the Pricing Date and will be within the ranges specified in the foregoing table. The last Call Date is the Final Calculation Day, and payment upon an automatic call on the Final Calculation Day, if applicable, will be made on the Maturity Date.
*July 31, 2023 is also the Final Calculation Day.
How the Redemption Amount at Maturity is Calculated
If the Fund Closing Price of the Reference Asset is less than the Starting Price on each of the three Call Dates, the Securities will not be automatically called, and on the Maturity Date you will receive a Redemption Amount at Maturity per Security determined as follows:
• | If the Ending Price is less than the Starting Price and greater than or equal to the Threshold Price, the Redemption Amount at Maturity will equal: $1,000 |
• | If the Ending Price is less than the Threshold Price, the Redemption Amount at Maturity will be equal: |
Principal Amount + (Principal Amount × Percentage Change)
In this case, you will have full downside exposure to the decrease in the price of the Reference Asset from the Starting Price to the Ending Price. If the Securities are not automatically called and the Ending Price is less than the Threshold Price, you will lose more than 25.00%, and possibly up to 100.00%, of your initial investment.
Any positive return on the Securities will be limited to the applicable Call Premium, even if the Fund Closing Price of the Reference Asset significantly exceeds the Starting Price on the applicable Call Date. You will not participate in any appreciation of the Reference Asset beyond the applicable Call Premium. If the Securities are not automatically called on any Call Date and the Ending Price is less than the Threshold Price, you will lose more than 25.00%, and possibly all, of the Principal Amount of your Securities at maturity.
VanEck Vectors® Gold Miners ETF Daily Closing Prices*
* The graph above illustrates the performance of the Reference Asset from January 1, 2015 through July 13, 2020. The dotted line represents a hypothetical Threshold Price of $27.8475, which is equal to 75.00% of $37.13, which was the Closing Price of the Reference Asset on July 13, 2020. Past performance of the Reference Asset is not indicative of the future performance of the Reference Asset.
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Selected Risk Considerations
The risks set forth below are discussed in detail in “Additional Risks” in the pricing supplement, “Additional Risk Factors Specific to the Notes” in the product prospectus supplement and “Risk Factors” in the prospectus supplement and prospectus. Please review those risk disclosures carefully.
• | The Inclusion of Dealer Spread and Projected Profit from Hedging in the Original Offering Price is Likely to Adversely Affect Secondary Market Prices. |
• | Risk of Loss at Maturity: Any payment on the Securities at maturity depends on the Percentage Change of the Reference Asset. If the Securities are not automatically called, the Bank will only repay you the full Principal Amount of your Securities if the Percentage Change does not reflect a decrease in the Reference Asset of more than 25.00%. If the Percentage Change is less than -25.00%, meaning the Ending Price is less than the Threshold Price, you will be fully exposed to the negative performance of the Reference Asset and, accordingly, you will lose more than 25.00%, and possibly all, of your initial investment. Accordingly, if the Securities are not automatically called, and if the percentage decline from the Starting Price to the Ending Price is greater than 25.00%, you will lose more than 25.00%, and possibly all, of your investment in the Securities. |
• | The Contingent Downside Feature Applies Only at Maturity. |
• | The Potential Return On The Securities Is Limited To The Call Premium. |
• | You Will Be Subject To Reinvestment Risk. |
• | The Bank's Estimated Value of the Securities Will be Lower than the Original Offering Price of the Securities. |
• | The Bank's Estimated Value Does Not Represent Future Values of the Securities and may Differ from Others' Estimates. |
• | The Bank's Estimated Value is not Determined by Reference to Credit Spreads for our Conventional Fixed-Rate Debt. |
• | The Securities Differ from Conventional Debt Instruments. |
• | No Interest: The Securities will not bear interest and, accordingly, you will not receive any interest payments on the Securities. |
• | Your Investment is Subject to the Credit Risk of The Bank of Nova Scotia. |
• | The COVID-19 virus may have an adverse impact on the Bank. |
• | The Securities are Subject to Market Risk. |
• | The Reference Asset Does Not Measure the Performance of Gold Bullion. |
• | The Securities are Subject to Risks Associated with Investments in The Gold and Silver Mining Industry. |
• | An Investment In The Securities Is Subject To Risks Associated With Foreign Securities Markets. |
• | Exchange Rate Movements May Impact The Value Of The Securities. |
• | The Bank Cannot Control Actions by the Investment Advisor of the Reference Asset that May Adjust the Reference Asset in a Way that Could Adversely Affect the Payments on the Securities and Their Market Value, and the Investment Advisor Has No Obligation to Consider Your Interests. |
• | There Are Risks Associated with The Reference Asset. |
• | The Reference Asset Utilizes a Passive Indexing Approach. |
• | The Value of the Reference Asset May Fluctuate Relative to its NAV. |
• | The Reference Asset and The Target Index are Different and the Performance of the Reference Asset May Not Correlate with the Performance of the Target Index |
• | If the Prices of the Reference Asset or the Reference Asset Constituent Stocks Change, the Market Value of Your Securities May Not Change in the Same Manner. |
• |
• | No Assurance that the Investment View Implicit in the Securities Will Be Successful. |
• | Past Performance is Not Indicative of Future Performance. |
• | We May Sell an Additional Aggregate Principal Amount of the Securities at a Different Issue Price. |
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• | Changes Affecting the Reference Asset Could Have an Adverse Effect on the Value of, and any Amount Payable on, the Securities. |
• | The Bank Cannot Control Actions by the Investment Advisor and the Investment Advisor Has No Obligation to Consider Your Interests. |
• | The Price at Which the Securities May Be Sold Prior to Maturity will Depend on a Number of Factors and May Be Substantially Less Than the Amount for Which They Were Originally Purchased. |
• | The Securities Lack Liquidity. |
• | Hedging activities by the Bank and/or the Underwriters may negatively impact investors in the Securities and cause our respective interests and those of our clients and counterparties to be contrary to those of investors in the Securities. |
• | Market activities by the Bank or the Underwriters for their own respective accounts or for their respective clients could negatively impact investors in the Securities |
• |
• | Other Investors in the Securities May Not Have the Same Interests as You. |
• | The Calculation Agent Can Postpone any Call Date (including the Final Calculation Day) for the Securities if a Market Disruption Event with Respect to the Reference Asset Occurs. |
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• |
• | A Participating Dealer or its Affiliates May Realize Hedging Profits Projected by its Proprietary Pricing Models in Addition to any Selling Concession, Creating a Further Incentive for the Participating Dealer to Sell the Securities to You. |
• | Uncertain Tax Treatment: Significant aspects of the tax treatment of the Securities are uncertain. You should consult your tax advisor about your own tax situation. See "Canadian Income Tax Consequences" and "U.S. Federal Income Tax Consequences" in the pricing supplement. |
Not suitable for all investors
Investment suitability must be determined individually for each investor. The Securities described herein are not a suitable investment for all investors. In particular, no investor should purchase the Securities unless they understand and are able to bear the associated market, liquidity and yield risks. Unless market conditions and other relevant factors change significantly in your favor, a sale of the Securities prior to maturity is likely to result in sale proceeds that are substantially less than the Principal Amount per Security. The Underwriters and their respective affiliates are not obligated to purchase the Securities from you at any time prior to maturity.
The Bank has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the Bank has filed with the SEC for more complete information about the Bank and this offering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, the Bank, any Underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling your financial advisor or by calling Wells Fargo Securities, LLC at 866-346-7732.
Not a research report
This material is not a product of the Bank’s research department.
Consult your tax advisor
Investors should review carefully the preliminary pricing supplement and consult their tax advisors regarding the application of the U.S. federal tax laws to their particular circumstances, as well as any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction.
GDX® and VanEck Vectors® are trademarks of Van Eck Associates Corp. (“VanEck”). The Securities are not sponsored, endorsed, sold or promoted by VanEck or the VanEck Vectors® ETF Trust (the “Trust”). Neither the Trust nor VanEck makes any representations or warranties to the holders of the Securities or any member of the public regarding the advisability of investing in the Securities. Neither the Trust nor VanEck will have any obligation or liability in connection with the registration, operation, marketing, trading or sale of the Securities or in connection with our use of information about the VanEck Vectors® Gold Miners ETF.
Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.
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