Principal protected notes

In this installment of our Scotiabank investors solutions product series, we will discuss principal protected notes PPNs for short. What are they and how do they work? This investment is designed for investors requiring full principal protection, while still seeking exposure to equity markets. The most common PPN structure pays a variable return to investors If the underlying reference asset, usually an equity index or a basket of stocks, rises in value over the life of the product.

If the underlying asset falls in value during that period, no variable return is paid. If the underlying asset increases in value over the term of the product, investors will receive a variable return based on the price performance of the asset, multiplied by a factor called the participation rate. For example, a participation rate of 100% means that for every 1% rise in the underlying asset, you will receive a variable return of 1%. For example, if the underlying asset is up 50%, the product will pay a return of 50% for a participation rate of 100%, a return of 100% for a participation rate of 200% and a return of 25% for a participation rate of 50%.

This investment includes a capital protection feature, meaning that investors will still receive the return of all of their original investment at maturity, regardless of the performance of the underlying asset. For example, in this scenario, even though the underlying asset has fallen by 80%, investors will be repaid 100% of their initial investment. The principal protection is only valid if the investment is held to maturity. If an investor sells the notes prior to maturity, the investor may have to do so at a discount from the principal amount, even if the performance of the underlying asset has been positive.

PPNs can be customized to meet specific investment objectives, risk profile, cash flow needs and time horizon. One version of this product includes a guaranteed coupon payable either over the life of the product or as a lump sum at maturity. In addition to the variable return linked to the performance of the underlying asset. The product can be structured with a higher guarantee coupon and a lower participation rate or a higher participation rate and a lower guaranteed coupon or somewhere in the middle.

For example, you may have a product paying a 2% coupon with 100% participation or no coupon at all with 200% participation. You can also make the PPN autocallable, make the coupons contingent or even build the product so it pays a return if the underlying asset goes down in value. Scotiabank also offers Market linked guaranteed investment certificates, or GICs, which work the same way as PPNs but have the addition of CDIC insurance eligibility. That means the product is eligible for deposit insurance, up to eligible limits.

Speak to your Scotiabank representative for more information.

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Important Information: An investment in principal protected notes may not be suitable for all investors. Important information about these investments is contained in the Information Statement of each note. Investors should obtain and carefully read a copy prior to investing, paying particular attention to the associated risks.

This presentation represents information of a public nature. This material is for general informational purposes only and does not constitute an invitation, offer, solicitation or inducement to buy or sell any securities or deposits of The Bank of Nova Scotia (“BNS” or the “Bank”) in any jurisdiction. This presentation does not constitute investment advice or any form of recommendation and should not be construed as such. No securities commission or regulatory body has passed upon the accuracy or adequacy of this presentation. Any representation to the contrary is a criminal offense. Except as otherwise indicated, this presentation speaks as of the date hereof. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no change in the affairs of BNS after the date hereof. Certain of the information contained herein may be derived from information provided by industry sources. While BNS believes that such information is accurate and that the sources from which it has been obtained are reliable, it has not independently verified data from these third-party sources. BNS does not provide any tax, accounting or legal advice and in all cases independent professional advice should be sought in those areas.

The information in this document is provided as of the date hereof and in furnishing this document BNS does not undertake any obligation to update or correct any information contained herein. Historical performance will not necessarily predict future performance of the return on the Notes. Reference is made to the Base Shelf Prospectus and applicable Prospectus Supplement and/or Pricing Supplement, if and when filed, and/or Information Statement or Term Sheet which sets out the specific terms and risk factors associated with an investment in the Notes. Nothing in this document contains a commitment by BNS to sell, issue, purchase or subscribe for financial instruments, or securities, to provide debt or to invest in any way in any transaction described herein, or otherwise provide monies to any party.

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