Bank of Nova Scotia Issues $19.8 Million Amazon-Linked Contingent Income Securities With Automatic Call Feature

Structured Investment Framework and Amazon Reference Asset

The Bank of Nova Scotia structured these securities as senior unsecured debt obligations issued under the bank's Senior Note Program, Series A. The underlying reference asset is Amazon.com Inc. common stock, tracked through Bloomberg ticker AMZN UW. The securities operate as principal-at-risk investments, meaning investors do not receive traditional interest payments but instead have the opportunity to earn contingent quarterly coupons tied to Amazon's stock performance on specifically designated determination dates throughout the three-year holding period.

The initial issue price of $1,000 per security establishes the baseline reference point for all subsequent performance calculations. The minimum investment requirement is one security at $1,000, with a total aggregate principal amount of $19.788 million available across the issue. Investors purchasing these securities must understand that BNS does not guarantee principal repayment and that the securities carry full credit risk exposure to the bank's financial stability. Any default by BNS would expose investors to potential total loss, as these are unsecured obligations with no underlying collateral or security interest.

Contingent Coupon Payment Mechanics and Memory Feature

The securities incorporate a memory coupon feature that distinguishes this structure from standard linked notes. If Amazon's stock price closes at or above the downside threshold price (65% of the initial share price) on any determination date, BNS will pay the quarterly contingent coupon of $27.65 per security on the related coupon payment date. Critically, if a coupon payment is missed because the stock price fell below the downside threshold, that unpaid coupon amount becomes eligible for payment on any future coupon payment date, provided Amazon's stock recovers above the threshold on the subsequent determination date corresponding to that future payment.

The annualized coupon rate of 11.06% represents a potentially above-market return relative to typical fixed-income instruments, reflecting compensation for the substantial risks embedded in the structure. However, investors must acknowledge that if Amazon's stock price remains below the downside threshold on every single determination date throughout the security's three-year life, no contingent coupons will be paid at all. This scenario, while not required by the issuer to disclose probability estimates, represents a material outcome that investors must be prepared to accept when purchasing these securities.

Automatic Call Redemption Mechanism and Early Exit Scenarios

The securities include an automatic call feature that enables early redemption if Amazon's stock price reaches the call threshold price on any determination date prior to maturity. When the call threshold is breached, BNS will automatically redeem the securities on the next contingent coupon payment date for an amount equal to the stated principal amount plus the applicable contingent quarterly coupon and any previously unpaid coupons accrued under the memory feature. Once redeemed early, no further payments accrue and investors' participation in the investment terminates immediately.

This call feature benefits the issuer by capping potential losses if Amazon's stock appreciates significantly above the initial reference price. From an investor perspective, the early redemption means that gains are capped at the coupon payments received to that point, and investors cannot benefit from any appreciation of Amazon's underlying stock beyond the redemption trigger. The pricing supplement does not disclose the specific percentage level at which the call threshold price is set, requiring investors to reference additional product documentation for this critical parameter.

Principal-at-Risk Return Structure at Maturity

At maturity on July 20, 2029, the payment received by investors depends entirely on Amazon's final share price relative to the initial reference price. If Amazon's stock closes at or above the downside threshold price (65% of initial price) on the final determination date of July 17, 2029, investors will receive their full stated principal amount of $1,000 per security plus any applicable contingent quarterly coupons and accrued unpaid coupons from the memory feature. This outcome represents the best-case scenario for principal protection.

Conversely, if Amazon's final share price falls below the 65% downside threshold, investors will receive a cash payment calculated by multiplying the stated principal amount by the share performance factor, which the pricing supplement does not quantify in the disclosure. The filing explicitly states that this payment will be less than 65% of the principal amount and could be as low as zero if Amazon's stock price declines to or near zero. In this scenario, investors face direct one-to-one exposure to Amazon's price decline from the initial reference level, creating potential for substantial capital loss or total loss of the entire $1,000 investment per security.

Determination and Coupon Payment Schedule

The securities feature twelve quarterly determination dates scheduled to occur on October 19, 2026, January 19, 2027, April 19, 2027, July 19, 2027, October 18, 2027, January 18, 2028, April 17, 2028, July 17, 2028, October 17, 2028, January 17, 2029, April 17, 2029, and July 17, 2029. These dates are subject to postponement if they fall on non-trading days or if certain market disruption events occur, as further described in the accompanying product supplement filed with this pricing disclosure. The corresponding contingent coupon payment dates follow roughly three business days after each determination date.

The staggered schedule provides regular opportunities for Amazon's stock price to be evaluated and for contingent coupons to accrue or remain unpaid. The quarterly frequency aligns with typical earnings and economic calendar cycles, though the pricing supplement does not explicitly discuss the rationale for this frequency. Investors must monitor each determination date to understand whether they will receive the contingent coupon for that quarter or whether the coupon will be deferred under the memory feature pending a future date when Amazon's stock recovers above the downside threshold.

Settlement Terms and Secondary Market Trading Considerations

The original issue date for these securities is July 22, 2026, representing three business days after the pricing date of July 17, 2026. Under Securities Exchange Act Rule 15c6-1, secondary market trades typically settle in one business day (T+1). However, because these securities initially settle in three business days (T+3), investors who wish to trade the securities in the secondary market before one business day prior to delivery must arrange alternative settlement accommodations to prevent failed trades. This settlement feature may impact liquidity and trading flexibility during the initial weeks after issuance.

The pricing supplement does not disclose information regarding expected secondary market liquidity, trading volume, bid-ask spreads, or the availability of exit strategies for investors who wish to liquidate their positions before maturity. Investors should consult their financial advisors regarding the potential difficulty or cost of selling these securities in the secondary market if they determine that early liquidation becomes necessary due to changed circumstances or investment objectives.

No Participation in Underlying Stock Appreciation

A critical limitation of these structured securities is the explicit prohibition against investor participation in any upside appreciation of Amazon's common stock. The filing states that investors will not participate in any appreciation of the underlying stock and will not realize any return beyond the contingent quarterly coupon payments received during the three-year term. This means that if Amazon's stock price rises significantly above the initial reference price, investors receive no benefit from that appreciation beyond receiving their scheduled contingent coupons and potentially being called away at the stated principal amount plus accrued coupons.

This structure effectively caps returns while maintaining full downside exposure below the 65% threshold. Investors seeking equity upside exposure or growth participation would be better served by direct purchase of Amazon common stock or equity mutual funds. These securities are specifically designed for investors who prioritize income generation over capital appreciation and who accept the risk that no income will be generated if Amazon's stock underperforms, in exchange for the potential 11.06% annual coupon if the stock remains above the downside threshold.

Credit Risk and Unsecured Debt Obligations

The Bank of Nova Scotia's creditworthiness directly affects the securities' safety. All payments on the securities are subject to BNS's ability and willingness to fulfill its payment obligations. If BNS were to experience financial distress, become insolvent, or default on its obligations, investors may not receive any amounts owed under the securities and could lose their entire investment regardless of Amazon's stock performance. The pricing supplement emphasizes this credit risk directly and states that investors could lose their entire investment if BNS defaults.

The securities are not secured obligations, meaning investors have no security interest in any assets and no access to any collateral that could be liquidated to satisfy claims. These are general unsecured senior debt obligations competing with other unsecured creditors in any bankruptcy or restructuring scenario. Investors must conduct independent credit analysis of The Bank of Nova Scotia and must satisfy themselves that the issuer's credit quality justifies the investment before purchase, particularly given the extended three-year maturity date and the substantial principal-at-risk nature of the structure.

Market Disruption Events and Valuation Date Adjustments

The pricing supplement references potential postponement of determination dates and valuation procedures in the event of market disruption events, with details provided in the accompanying product supplement. While the pricing document does not enumerate specific market disruption scenarios, it acknowledges that such events may require adjustment of scheduled determination and coupon payment dates. This flexibility protects both the issuer and investors from situations where normal market pricing becomes impossible or unreliable due to exchange closures, trading halts, or other extraordinary events affecting Amazon's stock.

Investors should review the full product supplement to understand the complete definition of market disruption events and the procedures BNS will follow to determine valuation dates if normal market conditions are unavailable. The potential for postponement means that the maturity date itself and coupon payment dates could shift, affecting the timing and amount of investor cash flows. This represents a timing risk that investors should factor into their overall investment planning, particularly for those who depend on receiving coupon payments on specific dates.

Investor Suitability and Risk Acceptance Requirements

The Bank of Nova Scotia's pricing supplement explicitly states that these securities are intended for investors willing to risk their entire investment and who seek an opportunity to earn interest at a potentially above-market rate in exchange for accepting the risk of receiving no interest over the entire investment term. This is not a product for conservative investors, those near or in retirement requiring stable income, or those unable to afford the loss of their full principal investment. The issuer emphasizes that investors must be willing to accept the risk of not receiving any contingent quarterly coupons during the three-year term.

Potential purchasers should conduct thorough due diligence regarding both The Bank of Nova Scotia's credit profile and Amazon.com Inc.'s business prospects and stock price trajectory over the next three years. Investors must understand that they are making two simultaneous credit decisions: assessing BNS's ability to pay, and assessing Amazon's likelihood of trading above the 65% threshold on determination dates. Neither the issuer nor any distributor makes any guarantee regarding Amazon's future stock price performance, and investors must rely on their own research and analysis to determine whether the risk-return profile aligns with their investment objectives and risk tolerance.