Product Supplement No. EQUITY LIRN-1
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Filed Pursuant to Rule 424(b)(2)
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(To Prospectus dated December 29, 2021
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Registration No. 333-261476
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and Prospectus Supplement dated December 29, 2021)
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December 29, 2021
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Leveraged Index Return Notes® “LIRNs®” Linked to One or More Equity Indices or Exchange Traded Funds | |
● LIRNs are senior unsecured debt securities issued by The Bank of Nova Scotia (the “Bank”). Any payments due on LIRNs, including any repayment of principal, will be subject to the credit risk of the Bank.
● LIRNs do not guarantee the return of principal at maturity, and we will not pay interest on LIRNs. Instead,
the return on LIRNs will be based on the performance of an underlying “Market Measure,” which will be an equity index (an “Index”), an exchange traded fund (an
“Underlying Fund”), or a basket of the foregoing.
● LIRNs provide an opportunity to earn a multiple of the positive performance of the Market Measure, and may
provide limited protection against the risk of losses. You will be exposed to any negative performance of the Market Measure below the Threshold Value (as defined below) on a 1-to-1 basis. If specified in the applicable term sheet, your
LIRNs may be “Capped LIRNs.” In the case of Capped LIRNs, the Redemption Amount will not exceed a specified cap (the “Capped Value”).
● If the value of the Market Measure increases from its Starting Value to its Ending Value (each as defined
below), you will receive at maturity a cash payment per unit (the “Redemption Amount”) that equals the principal amount plus a multiple of that increase, and in the case of Capped LIRNs, up to the
Capped Value.
● If the value of the Market Measure does not change or decreases from its Starting Value to its Ending Value
but not below the Threshold Value, then the Redemption Amount will equal the principal amount. However, if the Ending Value is less than the Threshold Value, you will be subject to 1-to-1 downside exposure to the decrease of the Market
Measure below the Threshold Value. In such a case, you may lose all or a significant portion of the principal amount of your LIRNs.
● This product supplement
describes the general terms of LIRNs, the risk factors to consider before investing, the general manner in which they may be offered and sold, and other relevant information.
● For each offering of LIRNs, we will provide you with a pricing supplement
(which we refer to as a “term sheet”) that will describe the specific terms of that offering, including the specific Market Measure,
the Capped Value, if applicable, the Participation Rate (as defined below), the Threshold Value, and certain related risk factors. The applicable term sheet will identify, if applicable, any
additions or changes to the terms specified in this product supplement.
● LIRNs will be issued in denominations of whole units. Unless otherwise
set forth in the applicable term sheet, each unit will have a principal amount of $10. The applicable term sheet may also set forth a minimum number of units that you must purchase.
● Unless otherwise specified in the applicable term sheet, LIRNs will not be listed on a securities exchange or
quotation system.
● BofA Securities, Inc. (“BofAS”) and one or more of its affiliates may
act as our agents to offer LIRNs and will act in a principal capacity in such role.
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LIRNs are unsecured and are not savings accounts or insured deposits of a bank. LIRNs are not insured by the Canada Deposit Insurance Corporation,
the U.S. Federal Deposit Insurance Corporation (the “FDIC”) or any other governmental agency of the United States, Canada, or any other jurisdiction. Potential purchasers of LIRNs should consider the
information in “Risk Factors” beginning on page PS-7 of this product supplement, page S-2 of the accompanying prospectus supplement, and page 7 of the accompanying prospectus. You may lose all or a
significant portion of your investment in LIRNs.
None of the Securities and Exchange Commission (the “SEC”), any state securities commission, or any other
regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this product supplement, the prospectus supplement, or the prospectus. Any representation to the contrary is a criminal offense.
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BofA Securities
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General:
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LIRNs are senior unsecured debt securities issued by the Bank, are not guaranteed or insured by the Canada Deposit Insurance Corporation or the FDIC, and are not, either directly or
indirectly, an obligation of any third party. They rank equally with all of our other senior unsecured debt from time to time outstanding. Any payments due on LIRNs, including any repayment of principal,
are subject to our credit risk.
The return on LIRNs will be based on the performance of a Market Measure and there is no guaranteed return of principal at maturity. Therefore, you may lose all or a significant
portion of your investment if the value of the Market Measure decreases from the Starting Value to an Ending Value that is less than the Threshold Value.
Each issue of LIRNs will mature on the date set forth in the applicable term sheet. We cannot redeem LIRNs at any earlier date. We will not make any payments on LIRNs until maturity,
and you will not receive any interest payments.
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Market Measure:
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The Market Measure may consist of one or more of the following:
• Underlying Funds;
• U.S. broad-based Indices;
• U.S. sector or style-based Indices;
• non-U.S. or global Indices; or
• any combination of the above.
The Market Measure may consist of a group, or “Basket,” of the foregoing. We refer to each Index or Underlying Fund included in any Basket as a
“Basket Component.” If the Market Measure to which your LIRNs are linked is a Basket, the Basket Components will be set forth in the applicable term sheet.
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Market Measure Performance:
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The performance of the Market Measure will be measured according to the percentage change of the Market Measure from its Starting Value to its Ending Value.
Unless otherwise specified in the applicable term sheet:
In the case of an Index, the “Starting Value” will be the closing level of the Index on the date when
the LIRNs are priced for initial sale to the public (the “pricing date”).
In the case of an Underlying Fund, the “Starting Value” will be the Closing Market Price, as defined under “Description of LIRNs—Closing Market
Price for Underlying Funds”, of the Underlying Fund on the pricing date.
If the Market Measure consists of a Basket, the Starting Value will be equal to 100. See “Description of LIRNs—Basket Market Measures.”
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Redemption Amount at Maturity:
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At maturity, you will receive a Redemption Amount that is greater than the principal amount if the value of the Market Measure increases from the Starting Value to the Ending
Value. In the case of Capped LIRNs, the Redemption Amount will not exceed the Capped Value. If the value of the Market Measure does not change or decreases from the Starting Value to the Ending Value but not below the Threshold
Value, then the Redemption Amount will equal the principal amount. If the Ending Value is less than the Threshold Value, you will be subject to 1-to-1 downside exposure to the decrease in the value of the Market Measure below the
Threshold Value, and will receive a Redemption Amount that is less than the principal amount and, if the Threshold Value is equal to 100% of the Starting Value, could be zero.
Any payments due on the LIRNs, including any repayment of principal, are subject to our credit risk as issuer of LIRNs.
The Redemption Amount, denominated in U.S. dollars,
will be calculated as follows:
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Principal at Risk:
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You may lose all or a significant portion of the principal amount of the LIRNs. Further, if you sell your LIRNs prior to maturity in the secondary market (if any), you may find that
the market value per LIRN is less than the price that you paid for the LIRNs.
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Calculation Agent:
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The calculation agent will make all determinations associated with the LIRNs. Unless otherwise set forth in the applicable term sheet, we will appoint BofAS or one of its affiliates
to act as the calculation agent for the LIRNs. See the section entitled “Description of LIRNs—Role of the Calculation Agent.”
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Agents:
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BofAS and one or more of its affiliates will act as our agents in connection with each offering of LIRNs and will receive an underwriting discount based on the number of units of
LIRNs sold. None of the agents is your fiduciary or advisor solely as a result of the making of any offering of LIRNs, and you should not rely upon this product supplement, the applicable term sheet, or the accompanying prospectus or
prospectus supplement as investment advice or a recommendation to purchase LIRNs.
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Listing:
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Unless otherwise specified in the applicable term sheet, the LIRNs will not be listed on a securities exchange or quotation system.
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Market Liquidity and Volatility. The relevant foreign securities markets may be less liquid and/or more volatile than U.S. or other securities markets and may be affected by market developments
in different ways than U.S. or other securities markets.
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Political, Economic, and Other Factors. The prices and performance of securities of companies in foreign countries may be affected by political, economic, financial, health, pandemic and social
factors in those regions. Direct or indirect government intervention to stabilize a particular securities market and cross-shareholdings in companies in the relevant foreign markets may affect prices and the volume of trading in those
markets. In addition, recent or future changes in government, economic, and fiscal policies in the relevant jurisdictions, the possible imposition of, or changes in, currency exchange laws, or other laws or restrictions, and possible
fluctuations in the rate of exchange between currencies, are factors that could adversely affect the relevant securities markets. The relevant foreign economies may differ from the U.S. economy in economic factors such as growth of gross
national product, rate of inflation, capital reinvestment, resources, and self-sufficiency.
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In particular, many emerging nations are undergoing rapid change, involving the restructuring of economic, political, financial and legal systems. Regulatory and tax environments may be subject to change
without review or appeal, and many emerging markets suffer from underdevelopment of capital markets and tax systems. In addition, in some of these nations, issuers of the relevant securities face the threat of
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expropriation of their assets and/or nationalization of their businesses. The economic and financial data about some of these countries may be unreliable.
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Publicly Available Information. There is generally less publicly available information about foreign companies than about U.S. companies that are subject to the reporting requirements of the SEC.
In addition, accounting, auditing, and financial reporting standards and requirements applicable to foreign companies in foreign countries may differ from those applicable to U.S. reporting companies.
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Value of the Market Measure. We anticipate that the market value of LIRNs prior to maturity
generally will depend to a significant extent on the value of the Market Measure. In general, it is expected that the market value of LIRNs will decrease as the value of the Market Measure decreases, and increase as the value of the Market
Measure increases. However, as the value of the Market Measure increases, the market value of LIRNs may decrease or may not increase at the same rate. If you sell your LIRNs when the value of the Market Measure is less than, or not
sufficiently above the applicable Starting Value, then you may receive less than the principal amount of your LIRNs.
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In addition, because the Redemption Amount for Capped LIRNs will not exceed the applicable Capped Value, we do not expect that Capped LIRNs
will trade in any secondary market at a price that is greater than the Capped Value.
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Volatility of the Market Measure. Volatility is the term used to describe the size and frequency of
market fluctuations. The volatility of the Market Measure during the term of the LIRNs may vary. In addition, an unsettled international environment and related uncertainties may result in greater market volatility, which may continue over
the term of the LIRNs. Increases or decreases in the volatility of the Market Measure may have an adverse impact on the market value of LIRNs. Even if the value of the Market Measure increases after the applicable pricing date, if you are
able to sell your LIRNs before their maturity date, you may receive substantially less than the amount that would be payable at maturity based on that value because of the anticipation that the value of the Market Measure will continue to
fluctuate until the Ending Value is determined.
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Economic and Other Conditions Generally. The general economic conditions of the capital markets in
the United States, as well as geopolitical conditions and other financial, political, regulatory, and judicial events and related uncertainties that affect stock or commodity markets generally, may adversely affect the value of the Market
Measure and the market value of LIRNs. If the Market Measure includes one or more Underlying Funds or Indices that represent securities, commodities or other assets traded in one or more non-U.S. markets (a “non-U.S. Market Measure”), the value of your LIRNs may also be adversely affected by similar events in the markets of the relevant foreign countries.
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Interest Rates. We expect that changes in interest rates will affect the market value of LIRNs.
In general, if U.S. interest rates increase, we expect that the market value of LIRNs will decrease. In general, we expect that the longer the amount of time that remains until maturity, the more significant the impact of these changes
will be on the value of the LIRNs. In the case of non-U.S. Market Measures, the level of interest rates in the relevant foreign countries may also affect their economies and in turn the value of the non-U.S. Market Measure, and, thus,
the market value of the LIRNs may be adversely affected.
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Dividend Yields. In general, if the cumulative dividend yields on the securities included in
the Market Measure increase, we anticipate that the market value of LIRNs will decrease.
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Exchange Rate Movements and Volatility. If the Market Measure of your LIRNs includes any non-U.S. Market Measures, changes in, and
the volatility of, the exchange rates between the U.S. dollar and the relevant non-U.S. currency or currencies could
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have an adverse impact on the value of your LIRNs, and the Redemption Amount may depend in part on the relevant exchange rates. In addition, the correlation between
the relevant exchange rate and any applicable non-U.S. Market Measure reflects the extent to which a percentage change in that exchange rate corresponds to a percentage change in the applicable non-U.S. Market Measure, and
changes in these correlations may have an adverse impact on the value of your LIRNs.
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Our Financial Condition and Creditworthiness. Our perceived creditworthiness, including
any increases in our credit spreads and any actual or anticipated decreases in our credit ratings, may adversely affect the market value of the LIRNs. In general, we expect the longer the amount of time that remains until
maturity, the more significant the impact will be on the value of the LIRNs. However, a decrease in our credit spreads or an improvement in our credit ratings will not necessarily increase the market value of LIRNs.
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Time to Maturity. There may be a disparity between the market value of the LIRNs prior
to maturity and their value at maturity. This disparity is often called a time “value,” “premium,” or “discount,” and reflects expectations concerning the value of the Market Measure prior to the maturity date. As the time to
maturity decreases, this disparity will likely decrease, such that the market value of the LIRNs will approach the expected Redemption Amount to be paid at maturity.
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If the Ending Value is greater than the Starting Value, then the Redemption Amount will equal:
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If the Ending Value is equal to or less than the Starting Value, but is greater than or equal to the Threshold Value, then the Redemption Amount will equal the principal amount.
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If the Ending Value is less than the Threshold Value, then the Redemption Amount will equal:
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if the Underlying Fund (or such other security) is listed or admitted to trading on a national securities exchange, the last reported sale price, regular way (or, in the case of the
Nasdaq Stock Market, the official closing price), of the principal trading session on that day on the principal U.S. securities exchange registered under the Securities Exchange Act of 1934, as amended, on which the Underlying Fund (or such
other security) is listed or admitted to trading;
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if the Underlying Fund (or such other security) is not listed or admitted to trading on any national securities exchange nor included in a successor to the
Over-The-Counter Bulletin Board (an “OTC Exchange”) as operated by the Financial Industry Regulatory Authority (“FINRA”), the last reported sale price of the
principal trading session on an OTC Exchange on that day;
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if the closing price of the Underlying Fund (or such other security) cannot be determined as set forth in the two bullet points above, and the Underlying Fund (or such other security) is
listed or admitted to trading on a non-U.S. securities exchange or market, the last reported sale price, regular way, of the principal trading session on that day on the primary non-U.S. securities exchange or market on which the Underlying
Fund (or such other security) is listed or admitted to trading (converted to U.S. dollars using such exchange rate as determined by the calculation agent); or
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if the Closing Market Price cannot be determined as set forth in the prior bullets, the mean, as determined by the calculation agent, of the bid prices for the Underlying Fund (or such
other security) obtained from as many dealers in that security (which may include us, BofAS and/or any of our respective affiliates), but not exceeding three, as will make the bid prices available to the calculation agent. If no such bid
price can be obtained, the Closing Market Price will be determined (or, if not determinable, estimated) by the calculation agent.
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(A)
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the suspension of or material limitation on trading, in each case, for more than two consecutive hours of trading, or during the one-half hour period preceding the close of trading, on the
primary exchange where the securities included in an Index trade (without taking into account any extended or after-hours trading session), in 20% or more of the securities which then comprise the Index or any successor index; and
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(B)
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the suspension of or material limitation on trading, in each case, for more than two consecutive hours of trading, or during the one-half hour period preceding the close of trading, on the
primary exchange that trades options contracts or futures contracts related to the Index (without taking into account any extended or after-hours trading session), whether by reason of movements in price otherwise exceeding levels permitted
by the relevant exchange or otherwise, in options contracts or futures contracts related to the Index, or any successor index;
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(1)
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a limitation on the hours in a Market Measure Business Day and/or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the
regular business hours of the relevant exchange;
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(2)
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a decision to permanently discontinue trading in the relevant futures or options contracts related to the Index, or any successor index, will not constitute a Market Disruption Event;
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(3)
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a suspension in trading in a futures or options contract on the Index, or any successor index, by a major securities market by reason of (a) a price change violating limits set by that
securities market, (b) an imbalance of orders relating to those contracts, or (c) a disparity in bid and ask quotes relating to those contracts will constitute a suspension of or material limitation on trading in futures or options contracts
related to the Index;
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(4)
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a suspension of or material limitation on trading on the relevant exchange will not include any time when that exchange is closed for trading under ordinary circumstances; and
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(5)
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if applicable to Indices with component securities listed on the NYSE, for the purpose of clause (A) above, any limitations on trading during significant market fluctuations under NYSE
Rule 80B, or any applicable rule or regulation enacted or promulgated by the NYSE or any other self-regulatory organization or the SEC of similar scope as determined by the calculation agent, will be considered “material” if so determined by
the calculation agent.
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(A)
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the suspension of or material limitation on trading, in each case, for more than two consecutive hours of trading, or during the one-half hour period preceding the
close of trading, of the shares of the Underlying Fund (or the successor underlying fund, as defined below) on the primary exchange where such shares trade, as determined by the calculation agent (without taking into account any extended
or after-hours trading session);
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(B)
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the suspension of or material limitation on trading, in each case, for more than two consecutive hours of trading, or during the one-half hour period preceding the
close of trading, on the primary exchange that trades options contracts or futures contracts related to the shares of the Underlying Fund (or the successor underlying fund) as determined by the calculation agent (without taking into
account any extended or after-hours trading session), in options contracts or futures contracts related to the shares of the Underlying Fund;
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(C)
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with respect to an Underlying Fund that holds equity securities, the suspension of or material limitation on trading, in each case, for more than two consecutive
hours of trading, or during the one-half hour period preceding the close of trading, on the primary exchange where component stocks of the relevant Underlying Index (or the successor underlying index, as defined below) trade, as
determined by the calculation agent (without taking into account any extended or after-hours trading session), in 20% or more of the stocks which then comprise the Underlying Index or any successor underlying index; and
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(D)
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with respect to an Underlying Fund that holds equity securities, the suspension of or material limitation on trading, in each case, for more than two consecutive
hours of trading, or during the one-half hour period preceding the close of trading, on the primary exchange that trades options contracts or futures contracts related to the relevant Underlying Index (or the successor underlying index) as
determined by the calculation agent (without taking into account any extended or after-hours trading session), in options contracts or futures contracts related to the Underlying Index or any successor underlying index;
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(1)
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a limitation on the hours in a Market Measure Business Day and/or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the
regular business hours of the relevant exchange;
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(2)
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a decision to permanently discontinue trading in the shares of the Underlying Fund (or the successor underlying fund) or the relevant futures or options contracts relating to such shares
or the relevant Underlying Index (or any successor underlying index) will not constitute a Market Disruption Event;
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(3)
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a suspension in trading in a futures or options contract on the shares of the Underlying Fund (or the successor underlying fund) or the relevant Underlying Index (or any successor
underlying index), by a major securities market by reason of (a) a price change violating limits set by that securities market, (b) an imbalance of orders relating to those contracts, or (c) a disparity in bid and ask quotes relating to
those contracts, will each constitute a suspension of or material limitation on trading in futures or options contracts relating to the Underlying Fund;
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(4)
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subject to paragraph (3) above, a suspension of or material limitation on trading on the relevant exchange will not include any time when that exchange is closed for
trading under ordinary circumstances; and
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(5)
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if applicable to an Underlying Fund or an Underlying Index with component stocks listed on the NYSE, for the purpose of clauses (A) and (C) above, any limitations on trading during
significant market fluctuations under NYSE Rule 80B, or any applicable rule or regulation enacted or promulgated by the NYSE or any other self-regulatory organization or the SEC of similar scope as determined by the calculation agent,
will be considered “material” if so determined by the calculation agent.
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the determination of the Ending Value; and
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a determination by the calculation agent that a successor index is available,
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the prior Price Multiplier; and
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the number of shares that a holder of one share of the Underlying Fund before the effective date of the share split or reverse share split would have owned immediately following the
applicable effective date.
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the prior Price Multiplier; and
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the number of additional shares issued in the share dividend with respect to one share of the Underlying Fund;
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the prior Price Multiplier; and
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a fraction, the numerator of which is the Closing Market Price per share of the Underlying Fund on the Market Measure Business Day preceding the ex-dividend date and the denominator of which is the amount by which the Closing Market
Price per share of the Underlying Fund on that preceding Market Measure Business Day exceeds the Extraordinary Dividend Amount.
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in the case of cash dividends or other distributions that constitute regular dividends, the amount per share of the applicable Underlying Fund of that Extraordinary Dividend minus the amount per share of the immediately preceding non-Extraordinary Dividend
for that share; or
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in the case of cash dividends or other distributions that do not constitute regular dividends, the amount per share of the applicable Underlying Fund of that Extraordinary Dividend.
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the prior Price Multiplier; and
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a fraction, the numerator of which will be the Current Market Price per share of the applicable Underlying Fund, and the denominator of which will be the Current Market Price per
share of the applicable Underlying Fund, less the fair market value, as determined by the calculation agent, as of the time the adjustment is effected of the portion of the capital stock, evidences of indebtedness, rights or warrants,
or other non-cash assets so distributed or issued applicable to one share of the applicable Underlying Fund.
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an Underlying Index (or the underlying index related to a successor underlying fund) is discontinued or ceases to be published and (i) the Market Measure Publisher of the
Underlying Index or another entity does not publish a successor or substitute underlying index that the calculation agent determines to be comparable to the Underlying Index (a “successor underlying
index”) or (ii) the Market Measure Publisher of the Underlying Fund does not announce that the Underlying Fund will track the successor underlying index; or
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an Underlying Fund (or a successor underlying fund) in any way is modified (including, but not limited to, a material change in the investment policies, objectives or methodology of the Underlying Fund, or a material change to
the related Underlying Index) so that the Underlying Fund does not, in the opinion of the calculation agent, fairly represent the price per share of that Underlying Fund (or that successor underlying fund) had those changes or
modifications not been made;
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the Initial Component Weight (expressed as a percentage) for that Basket Component, multiplied by 100; divided by
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the closing level or the Closing Market Price, as applicable, of that Basket Component on the pricing date.
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Basket Component
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Initial Component
Weight |
Hypothetical Closing
Level or Closing Market Price(1) |
Hypothetical
Component Ratio(2) |
Initial Basket
Value Contribution |
Underlying Fund
ABC
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50.00%
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$500.00
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0.10000000
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50.00
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Index
XYZ
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25.00%
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2,420.00
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0.01033058
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25.00
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Index
RST
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25.00%
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1,014.00
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0.02465483
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25.00
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Starting Value
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100.00
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(1)
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This column sets forth the hypothetical closing level or Closing Market Price, as applicable, of each Basket Component on the hypothetical pricing date.
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(2)
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The hypothetical Component Ratio for each Basket Component equals its Initial Component Weight (expressed as a percentage) multiplied by 100, and
then divided by the hypothetical closing level or Closing Market Price, as applicable, of that Basket Component on the hypothetical pricing date, with the result rounded to eight decimal places.
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The closing level or the Closing Market Price, as applicable, of each Basket Component that is not an Affected Basket Component will be its closing level or Closing Market
Price, as applicable, on such non-calculation day.
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The closing level or the Closing Market Price, as applicable, of each Basket Component that is an Affected Basket Component for the applicable non-calculation day will be determined in the same manner as described in the
second
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to last paragraph of subsection “—The Starting Value and the Ending Value—Ending Value,” provided that references to “Market Measure” will be references to “Basket Component.”
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a dealer in securities or currencies,
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a trader in securities that elects to use a mark-to-market method of accounting for its securities holdings,
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a financial institution or a bank,
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a regulated investment company (a “RIC”) or a real estate investment trust (a “REIT”) or a common trust
fund,
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a life insurance company,
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a tax-exempt organization or an investor holding the LIRNs in a tax-advantaged account (such as an “Individual Retirement Account” or “Roth IRA”), as defined in Section 408 or 408A of
the Code, respectively,
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a person that owns LIRNs as part of a hedging transaction, straddle, synthetic security, conversion transaction, or other integrated transaction, or enters into a “constructive
sale” with respect to the LIRNs or a “wash sale” with respect to the LIRNs or any Market Measure, or
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a U.S. holder (as defined below) whose functional currency for tax purposes is not the U.S. dollar, or
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taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
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the gain with respect to the LIRNs is effectively connected with a trade or business conducted by the non-U.S. holder in the U.S.;
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the non-U.S. holder is a nonresident alien individual who holds the LIRNs as a capital asset and is present in the U.S. for 183 days or more during the taxable year of such taxable
disposition (including but not limited to disposition by sale, exchange, redemption, or repayment of principal at maturity) and certain other conditions are satisfied; or
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the non-U.S. holder has certain other present or former connections with the U.S.
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