Subject to Completion
Preliminary Term Sheet dated
November 30, 2022
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Filed Pursuant to Rule 433
Registration Statement No. 333-261476 (To Prospectus dated December 29, 2021, Prospectus Supplement dated December 29, 2021 and Product Supplement EQUITY SUN-1 dated December
29, 2021)
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Units
$10 principal amount per unit
CUSIP No.
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Pricing Date*
Settlement Date*
Maturity Date*
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December , 2022
December , 2022
December , 2025 |
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*Subject to change based on the actual date the notes are priced for initial sale to the public (the “pricing date”) | |||||
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Autocallable Market-Linked Step Up Notes Linked to the S&P 500® Index
◾ Maturity of approximately three years, if not called prior to maturity
◾ Automatic call of the notes per unit at $10 plus the applicable Call Premium ([$1.15 to $1.25] on the first Observation
Date and [$2.30 to $2.50] on the final Observation Date) if the Index is flat or increases above 100.00% of the Starting Value on the relevant Observation Date
◾ The Observation Dates will occur approximately one year and two years after the pricing date
◾ If the notes are not called, at maturity:
◾ a return of 40.00% if the Index is flat or increases up to the Step Up Value
◾ a return equal to the percentage increase in the Index if the Index increases above the Step Up Value
◾ 1-to-1 downside exposure to decreases in the Index, with up to 100.00% of your principal at risk
◾ All payments are subject to the credit risk of The Bank of Nova Scotia
◾ No periodic interest payments
◾ In addition to the underwriting discount set forth below, the notes include a hedging-related charge of $0.05 per unit.
See “Structuring the Notes”
◾ Limited secondary market liquidity, with no exchange listing
◾ The notes are unsecured debt securities and are not savings accounts or insured deposits of a bank. The notes are not
insured or guaranteed by the Canada Deposit Insurance Corporation (the “CDIC”), the U.S. Federal Deposit Insurance Corporation (the “FDIC”), or any other governmental agency of Canada, the United States or any other jurisdiction
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Per Unit
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Total
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Public offering price(1)
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$10.00
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$
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Underwriting discount(1)
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$0.20
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$
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Proceeds, before expenses, to BNS
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$9.80
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$
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(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 $0.15 per unit, respectively. See “Supplement to the Plan of Distribution” below.
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Issuer:
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The Bank of Nova Scotia (“BNS”)
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Principal
Amount:
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$10.00 per unit
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Term:
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Approximately three years, if not called
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Market Measure:
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The S&P 500® Index (Bloomberg symbol: “SPX”), a price return index
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Starting Value:
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The closing level of the Market Measure on the pricing date.
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Observation
Level:
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The closing level of the Market Measure on the applicable Observation Date.
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Observation
Dates:
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On or about December , 2023 and December , 2024, approximately one and two years after the pricing date. The Observation Dates are subject to postponement in
the event of Market Disruption Events, as described beginning on page PS-27 of product supplement EQUITY SUN-1.
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Call Level:
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100.00% of the Starting Value.
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Call Amounts
(per Unit):
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[$11.15 to $11.25] if called on the first Observation Date and [$12.30 to $12.50] if called on the final Observation Date.
The actual Call Amounts will be determined on the pricing date.
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Call
Settlement
Dates:
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Approximately the fifth business day following the applicable Observation Date, subject to postponement if the related Observation Date is postponed, as described
on page PS-25 of product supplement EQUITY SUN-1.
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Call
Premiums: |
[$1.15 to $1.25] per unit if called on the first Observation Date (which represents a return of [11.50% to 12.50%] over the principal amount) and [$2.30 to $2.50] per
unit if called on the final Observation Date (which represents a return of [23.00% to 25.00%] over the principal amount). The actual Call Premiums will be determined on the pricing date.
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Ending Value:
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The closing level of the Market Measure on the calculation day. The scheduled calculation day is subject to postponement in the event of Market Disruption Events,
as described beginning on page PS-27 of product supplement EQUITY SUN-1.
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Step Up Value:
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140.00% of the Starting Value.
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Step Up
Payment:
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$4.00 per unit, which represents a return of 40.00% over the principal amount.
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Threshold
Value: |
100.00% of the Starting Value.
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Calculation
Day:
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Approximately the fifth scheduled Market Measure Business Day immediately preceding the maturity date.
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Fees and
Charges:
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The underwriting discount of $0.20 per unit listed on the cover page and the hedging related charge of $0.05 per unit described in “Structuring the Notes” on page
TS-16.
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Calculation
Agent:
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BofA Securities, Inc. (“BofAS”).
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Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
◾ |
Product supplement EQUITY SUN-1 dated December 29, 2021:
http://www.sec.gov/Archives/edgar/data/9631/000091412121007919/bn57062762--424b2.htm |
◾ |
Prospectus supplement dated December 29, 2021:
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◾ |
Prospectus dated December 29, 2021:
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◾ |
You are willing to receive a return on your investment capped at the applicable Call Premium if the relevant Observation Level is equal to or greater than the Call Level.
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◾ |
You anticipate that the notes will be automatically called or that the Index will not decrease from the Starting Value to the Ending Value.
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◾ |
You are willing to risk a substantial loss of principal and return if the notes are not automatically called and the Index decreases from the Starting Value to the Ending Value.
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◾ |
You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
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◾ |
You are willing to forgo dividends or other benefits of owning the stocks included in the Index.
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◾ |
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.
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◾ |
You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.
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◾ |
You want to hold your notes for the full term.
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◾ |
You believe that the notes will not be automatically called and the Index will decrease from the Starting Value to the Ending Value.
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◾ |
You seek principal repayment or preservation of capital.
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◾ |
You seek interest payments or other current income on your investment.
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◾ |
You want to receive dividends or other distributions paid on the stocks included in the Index.
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◾ |
You seek an investment for which there will be a liquid secondary market.
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◾ |
You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.
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Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Ending Value
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Percentage Change from the
Starting Value to the Ending
Value
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Redemption Amount per
Unit
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Total Rate of Return on the
Notes
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|||
0.00
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-100.00%
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$0.00
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-100.00%
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50.00
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-50.00%
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$5.00
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-50.00%
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60.00
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-40.00%
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$6.00
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-40.00%
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70.00
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-30.00%
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$7.00
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-30.00%
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80.00
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-20.00%
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$8.00
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-20.00%
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90.00
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-10.00%
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$9.00
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-10.00%
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95.00
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-5.00%
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$9.50
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-5.00%
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97.00
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-3.00%
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$9.70
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-3.00%
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100.00(1)(2)
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0.00%
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$14.00(3)
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40.00%
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105.00
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5.00%
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$14.00
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40.00%
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110.00
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10.00%
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$14.00
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40.00%
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120.00
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20.00%
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$14.00
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40.00%
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130.00
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30.00%
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$14.00
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40.00%
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140.00(4)
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40.00%
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$14.00
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40.00%
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150.00
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50.00%
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$15.00
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50.00%
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154.00
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54.00%
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$15.40
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54.00%
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(1) |
This is the hypothetical Threshold Value.
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(2) |
The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes only, and does not represent a likely actual Starting Value for the Market Measure.
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(3) |
This amount represents the sum of the principal amount and the Step Up Payment of $4.00.
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(4) |
This is the hypothetical Step Up Value.
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Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Example 1
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The Ending Value is 70.00, or 70.00% of the Starting Value:
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Starting Value:
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100.00 |
Threshold Value:
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100.00 |
Ending Value:
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70.00 |
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Redemption Amount per unit |
Example 2
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The Ending Value is 110.00, or 110.00% of the Starting Value:
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Starting Value:
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100.00 |
Step Up Value:
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140.00 |
Ending Value:
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110.00 |
$10.00 + $4.00 = $14.00
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Redemption Amount per unit, the principal amount plus the Step Up Payment, since the Ending Value is equal to or greater than the Starting Value, but less than the Step Up
Value.
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Example 3
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The Ending Value is 150.00, or 150.00% of the Starting Value:
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Starting Value:
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100.00 |
Step Up Value:
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140.00 |
Ending Value:
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150.00 |
Redemption Amount per unit
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Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
◾ |
If the notes are not automatically called, depending on the performance of the Index as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
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◾ |
Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
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◾ |
If the notes are called, your investment return is limited to the return represented by the applicable Call Premium.
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◾ |
Your investment return may be less than a comparable investment directly in the stocks included in the Index.
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◾ |
The Index sponsor may adjust the Index in a way that may adversely affect its level and your interests, and the Index sponsor has no obligation to consider your interests.
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◾ |
You will have no rights of a holder of the securities included in the Index, and you will not be entitled to receive securities or dividends or other distributions by the issuers of those securities.
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◾ |
While we, MLPF&S, BofAS or our respective affiliates may from time to time own securities of companies included in the Index, except to the extent that the common stock of Bank of America Corporation (the parent company of
MLPF&S and BofAS) is included in the Index, we, MLPF&S, BofAS and our respective affiliates do not control any company included in the Index, and have not verified any disclosure made by any other company.
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◾ |
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-16.
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◾ |
Our initial estimated value of the notes does not represent future values of the notes and may differ from others’ estimates. Our initial estimated value of the notes is determined by reference to our internal pricing models when the
terms of the notes are set. These pricing models consider certain factors, such as our internal funding rate on the pricing date, the expected term of the notes, market conditions and other relevant factors existing at that time, and
our assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions could provide valuations for the notes that are different from our
initial estimated value. In addition, market conditions and other relevant factors in the future may change, and any of our assumptions may prove to be incorrect. On future dates, the market value of the notes could change significantly
based on, among other things, the performance of the Index, changes in market conditions, our creditworthiness, interest rate movements and other relevant factors. These factors, together with various credit, market and economic
factors over the term of the notes, are expected to reduce the price at which you may be able to sell the notes in any secondary market and will affect the value of the notes in complex and unpredictable ways. Our initial estimated
value does not represent a minimum price at which we or any agents would be willing to buy your notes in any secondary market (if any exists) at any time.
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◾ |
Our initial estimated value is not determined by reference to credit spreads or the borrowing rate we would pay for our conventional fixed-rate debt securities. The internal funding rate used in the determination of our initial
estimated value of the notes generally represents a discount from the credit spreads for our conventional fixed-rate debt securities and the borrowing rate we would pay for our conventional fixed-rate debt securities. If we were to use
the interest rate implied by the credit spreads for our conventional fixed-rate debt securities, or the borrowing rate we would pay for our conventional fixed-rate debt securities, we would expect the economic terms of the notes to be
more favorable to you. Consequently, our use of an internal funding rate for the notes would have an adverse effect on the economic terms of the notes, the initial estimated value of the notes on the pricing date, and the price at which
you may be able to sell the notes in any secondary market.
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◾ |
A trading market is not expected to develop for the notes. None of us, MLPF&S or BofAS is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at
any price in any secondary market.
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◾ |
Our business, hedging and trading activities, and those of MLPF&S, BofAS and our respective affiliates (including trades in shares of companies included in the Index), and any hedging and trading activities we, MLPF&S, BofAS
or our respective
|
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
◾ |
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.
|
◾ |
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.
|
◾ |
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-40 of product supplement EQUITY SUN-1.
|
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
• |
holdings by other publicly traded corporations, venture capital firms, private equity firms, or strategic partners or leveraged buyout groups;
|
• |
holdings by government entities, including all levels of government within the United States or foreign countries, except for pension and retirement funds; and
|
• |
holdings by current or former officers and directors of the company, funders of the company, or family trusts of officers, directors or founders. Second, holdings of trusts, foundations, pension funds, employee stock ownership plans
or other investment vehicles associated with and controlled by the company.
|
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Corporate Action
|
Share Count Revision Required?
|
Divisor Adjustment
Required?
|
||
Stock split
|
Yes – share count is revised to reflect new count.
|
No – share count and price changes are off-setting
|
||
Change in shares outstanding (secondary issuance, share repurchase and/or share buy-back)
|
Yes – share count is revised to reflect new count
|
Yes – divisor adjustment reflects change in market capitalization
|
||
Spin-off if spun-off company is not being added to the Index
|
No
|
Yes – divisor adjustment reflects decline in index market value (i.e. value of the spun-off unit)
|
||
Spin-off if spun-off company is being added to the Index and no company is being removed
|
No
|
No
|
||
Spin-off if spun-off company is being added to the Index and another company is being removed
|
No.
|
Yes – divisor adjustment reflects deletion
|
||
Special dividends
|
No.
|
Yes – calculation assumes that share price drops by the amount of the dividend; divisor adjustment reflects this change in index market value
|
||
Change in IWF
|
No
|
Yes – divisor change reflects the change in market value caused by the change to an IWF
|
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Company added to or deleted from the Index
|
No.
|
Yes – divisor is adjusted by the net change in market value
|
||
Rights offering
|
No.
|
Yes – divisor adjustment reflects increase in market capitalization (calculation assumes that offering is fully subscribed at the set price)
|
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
• |
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;
|
• |
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
|
• |
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.
|
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |
Autocallable Market-Linked Step Up Notes
Linked to the S&P 500® Index due December , 2025 |