BNS
ROC payments
Semi-annual principal repayments of $2.50 per Note, starting on September 14, 2014, if the closing level of the Index (the S&P/TSX 60) is at least equal to the Barrier Level (70% of the initial level) two business days before such repayment date.
Autocall redemption
If on an observation day two business days before the 2nd to 5th anniversary of the March 14, 2014 day of issue (with the 5th anniversary being the maturity date) the closing level of the Index is higher than 110% of its initial level, the Notes will automatically be redeemed.
Maturity Redemption Amount
If the closing level of the Index on the redempton date is higher than the (70%) Barrier Level, a Note's redemption amount will be its $100 initial principal plus a percentage of $100 equal to 5% of any (positive) Index return in excess of 10%. If such closing level is equal to or lower than the Barrier Level, the redemption amount will be reduced to reflect such negative return (subject to a $1 minimum).
Canadian taxation
The semi-annual principal repayents should not be included in income and should instead reduce the inital investor's ACB. Provided that the Maturity Redemption Amount is not yet determinable, a Note transfer should not result in a requirement to recognize accrued interest, and (while not free from doubt) should result in capital gain or loss treatment. Where held as capital property, redemption at maturity for less than the outstanding principal will result in a capital loss.
No Part XIII tax.