Subject to Completion
Preliminary Term Sheet dated
April 26, 2019
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Filed Pursuant to Rule 433
Registration Statement No. 333- 228614 (To Prospectus dated December 26, 2018,
Prospectus Supplement dated December 26, 2018
and Product Prospectus Supplement EQUITY
INDICES MITTS-1 dated December 26, 2018)
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Units
$10 principal amount per unit CUSIP No. |
Pricing Date*
Settlement Date* Maturity Date* |
May , 2019
June , 2019 May , 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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Market Index Target-Term Securities® Linked to the Dow Jones Industrial Average®
◾ Maturity of approximately six years
◾ 100% participation in increases in the Index, subject
to a capped return of [35% to 55%]
◾ If the Index is flat or decreases, payment at maturity
will be the principal amount
◾ All payments occur at maturity and 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 $0.075 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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$ 0.25
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$
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Proceeds, before expenses, to BNS
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$ 9.75
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$
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(1)
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For any purchase of 500,000 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.
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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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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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Terms of the Notes
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Redemption Amount Determination
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Issuer:
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The Bank of Nova Scotia ("BNS")
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On the maturity date, you will receive a cash payment per unit determined as follows:
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Principal Amount:
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$10.00 per unit
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You will receive the Minimum Redemption Amount per unit of $10.00
(The Redemption Amount will not be less than the Minimum Redemption Amount per unit.)
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Term:
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Approximately six years
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Market Measure:
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The Dow Jones Industrial Average® (Bloomberg symbol: “INDU”), 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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Ending Value:
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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-19 of product prospectus supplement EQUITY INDICES MITTS-1.
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Minimum Redemption Amount:
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$10.00 per unit. If you sell your notes before the maturity date, you may receive less than the Minimum Redemption Amount per unit. | ||
Participation Rate:
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100%
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Capped Value:
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[$13.50 to $15.50] per unit, which represents a return of [35.00% to 55.00%] over the principal amount. The actual Capped Value will
be determined on the pricing date.
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Maturity Valuation Period:
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Five scheduled calculation days shortly before the maturity date
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Fees and Charges:
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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-12.
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Calculation Agent:
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Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S")
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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◾
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Product prospectus supplement EQUITY INDICES MITTS-1 dated
December 26, 2018:
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◾
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Prospectus supplement dated December 26, 2018:
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◾
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Prospectus dated December 26, 2018:
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You may wish to consider an investment in the notes if:
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The notes may not be an appropriate investment for you if:
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◾ You anticipate that the Index will
increase moderately from the Starting Value to the Ending Value.
◾ You accept that the return on the
notes will be zero if the Index does not increase from the Starting Value to the Ending Value.
◾ You accept that the return on the
notes will be capped.
◾ 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 Index.
◾ 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.
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◾ You believe that the Index 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 a guaranteed return beyond
the Minimum Redemption Amount.
◾ You seek an uncapped return on your
investment.
◾ 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 Index.
◾ 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.
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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This graph reflects the returns on the notes, based on the Participation Rate of 100%, the Minimum Redemption Amount of $10.00 and
a hypothetical Capped Value of $14.50 (the midpoint of the Capped Value range of [$13.50 to $15.50]). The blue 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 Index, excluding dividends.
This graph has been prepared for purposes of illustration only.
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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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$10.00(2)
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0.00%
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25.00
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-75.00%
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$10.00
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0.00%
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50.00
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-50.00%
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$10.00
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0.00%
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75.00
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-25.00%
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$10.00
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0.00%
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100.00(1)
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0.00%
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$10.00
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0.00%
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110.00
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10.00%
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$11.00
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10.00%
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120.00
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20.00%
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$12.00
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20.00%
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130.00
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30.00%
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$13.00
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30.00%
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140.00
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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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$14.50(3)
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45.00%
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160.00
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60.00%
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$14.50
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45.00%
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170.00
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70.00%
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$14.50
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45.00%
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190.00
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90.00%
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$14.50
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45.00%
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(1)
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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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(2)
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The Redemption Amount per unit will not be less than the Minimum Redemption Amount.
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(3)
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The Redemption Amount per unit cannot exceed the hypothetical Capped Value.
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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Example 1
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The Ending Value is 90.00, or 90.00% of the Starting Value:
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Starting Value: 100.00
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Ending Value: 90.00
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= $9.00, however, because the Redemption Amount for the notes cannot be less than the Minimum Redemption Amount, the Redemption Amount will be $10.00 per unit
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Example 2
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The Ending Value is 120.00, or 120.00% of the Starting Value:
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Starting Value: 100.00
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Ending Value: 120.00
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= $12.00 Redemption Amount per unit
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Example 3
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The Ending Value is 190.00, or 190.00% of the Starting Value:
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Starting Value: 100.00
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Ending Value: 190.00
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= $19.00, however, because the Redemption Amount for the notes cannot exceed the hypothetical Capped Value, the Redemption Amount will be $14.50 per unit
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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◾
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Depending on the performance of the Index as measured shortly before the maturity date, you may not earn a return on your investment.
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◾
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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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◾
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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.
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◾
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Your investment return is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the stocks
included in the Index.
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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 MLPF&S 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-12.
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◾
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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. Neither we nor MLPF&S 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 and our respective affiliates (including trades in shares of companies included in
the Index), and any hedging and trading activities we, MLPF&S 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.
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◾
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The Index sponsor (as defined below) 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 or our respective affiliates may from time to time own securities of companies included in the
Index, we, MLPF&S 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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◾
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There may be
potential conflicts of interest involving the calculation agent, which is MLPF&S. We have the right to appoint and remove the calculation agent.
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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◾
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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.
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◾
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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 62 of the prospectus dated December 26, 2018, and “Supplemental Discussion of Canadian Federal Income Tax Consequences” on page PS-26 of product prospectus supplement
EQUITY INDICES MITTS-1.
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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●
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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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●
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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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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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Accrual Period
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Interest Deemed to Accrue During Accrual Period (per $10.00 Note)
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Total Interest Deemed to Have Accrued From Original Issue Date (per $10.00 Note) as of
End of Accrual Period
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June 6, 2019 through December 31, 2019
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$0.18
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$0.18
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January 1, 2020 through December 31, 2020
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$0.33
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$0.51
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January 1, 2021 through December 31, 2021
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$0.34
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$0.85
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January 1, 2022 through December 31, 2022
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$0.35
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$1.20
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January 1, 2023 through December 31, 2023
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$0.36
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$1.56
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January 1, 2024 through December 31, 2024
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$0.37
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$1.93
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January 1, 2025 through May 30, 2025
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$0.16
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$2.09
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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Market Index Target-Term Securities®
Linked to the Dow Jones Industrial Average®, due May , 2025 |
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