Bank of Nova Scotia Issues $2.1 Billion Autocallable Barrier Review Notes Linked to Three Major Stock Indices

Product Structure and Automatic Call Mechanism

The Bank of Nova Scotia's newly issued notes operate on a structured platform that automatically triggers redemption if specific market conditions are met. The notes will be automatically called on any observation date if the closing value of each of the three reference assets—the Dow Jones Industrial Average, Russell 2000 Index, and S&P 500 Index—equals or exceeds 100% of its initial value. When this call condition is triggered, the notes will be redeemed at the applicable call payment amount based on the 12.15% annual call return rate, and no further amounts will be owed by the Bank.

The call payment amounts increase at each observation date to reflect the consistent 12.15% per annum return rate, providing investors with a predetermined escalating redemption value if market conditions warrant an early call. This structure incentivizes favorable market performance across all three indices simultaneously. However, if even one reference asset falls below its call value threshold, the automatic call does not trigger, and the notes continue to accrue value at the specified rate until maturity or a subsequent observation date when conditions are met again.

Barrier Level Protection and Downside Exposure

The pricing supplement discloses that if the notes are not automatically called at or prior to maturity, investors receive principal protection only if the final value of each reference asset remains at or above 60% of its initial value. This 60% barrier level represents a critical threshold for loss mitigation. Should all three indices maintain this minimum performance level through the final valuation date, investors will receive their full principal amount at maturity without additional payments.

Conversely, if any single reference asset declines below its 60% barrier value at maturity, the structure exposes investors to the full negative performance of the least performing reference asset. The filing states that investors may lose up to 100% of their principal amount in this scenario. This asymmetric payoff structure means that poor performance by the single weakest index determines the entire portfolio outcome, creating concentration risk that investors must carefully evaluate against their risk tolerance and investment objectives.

Terms, Settlement, and Investment Parameters

The notes carry a July 15, 2026 trade date with settlement on July 20, 2026, providing investors with a standard three-business-day settlement window. The notes have an approximate five-year term if not automatically called prior to maturity, with a final maturity date of July 18, 2031. The original issue price is 100% of the principal amount, with a minimum investment requirement of $1,000 and integral multiples thereof thereafter. The filing discloses CUSIP number 063941BH0 and ISIN US063941BH00 for trading and settlement purposes.

Notably, the notes do not bear interest or pay any coupons prior to maturity, meaning investors receive no periodic income during the five-year holding period. All returns are dependent on either automatic call redemption or maturity-date payoff based on index performance. Scotia Capital (USA) Inc., an affiliate of the Bank, has agreed to purchase the notes at the principal amount and distribute them through registered broker-dealers. The Bank will periodically pay dealers a structuring fee of $7.00 per note on $1,075,000 aggregate principal amount, highlighting the embedded costs of the distribution and structuring arrangement.

Estimated Value and Secondary Market Considerations

The filing discloses that the initial estimated value of the notes at the time terms were set on the trade date was $980.24 per $1,000 principal amount, which is materially lower than the 100% original issue price. This $19.76 per note valuation gap reflects the Bank's internal pricing models, which account for the Bank's internal funding rate, underwriting commissions, and costs associated with selling and structuring the notes, including related hedging arrangements. The Bank explicitly states that its internal funding rate is typically lower than the rate it would pay when issuing conventional fixed-rate debt securities, effectively reducing the economic terms offered to investors.

The Bank has elected to reimburse investors for a portion of estimated hedging costs and other expenses over an approximately three-month period following the original issue date. During this temporary reimbursement period, the price at which Scotia Capital (USA) Inc. may initially buy or sell the notes in secondary market transactions may exceed the estimated value calculated on the trade date. However, the Bank reserves discretion to discontinue this reimbursement at any time or revise its duration based on market conditions. Investors should understand that the secondary market price, if any liquidity emerges, depends entirely on Scotia Capital's pricing models and is not guaranteed.

Credit Risk and Unsecured Debt Status

The notes are unsubordinated and unsecured debt securities of The Bank of Nova Scotia, meaning all payments are directly subject to the Bank's creditworthiness. Unlike deposit accounts, the notes are not insured by the Canada Deposit Insurance Corporation under the CDIC Act or by the U.S. Federal Deposit Insurance Corporation or any other government agency. If the Bank experiences financial distress or insolvency, investors would be exposed to credit loss alongside any market-linked performance risk from the underlying indices.

The combination of derivative structure and credit exposure creates a dual risk layer that investors must evaluate carefully. The notes do not represent a direct investment in the reference assets or their constituent stocks, nor do investors receive any voting rights, dividend entitlements, or other economic interests in the underlying companies. Investors' sole recourse is the Bank's ability to meet its payment obligations as an unsecured creditor.

Absence of Regulatory Approval and Market Listing

The pricing supplement explicitly states that neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved the notes or passed upon the accuracy or adequacy of the offering documents. The filing includes the standard regulatory disclaimer that any representation to the contrary would constitute a criminal offense. This clarification reflects the complex nature of structured products and the securities regulatory framework governing their issuance.

The Bank discloses that the notes will not be listed on any U.S. securities exchange or automated quotation system. This absence of exchange listing means there is no centralized trading mechanism, and liquidity depends entirely on Scotia Capital's willingness to engage in secondary market transactions. Investors seeking to exit positions prior to maturity would need to negotiate sales directly with Scotia Capital or other willing counterparties, and no guaranteed market exists for these securities.

Conflict of Interest and Distribution Arrangement

Scotia Capital (USA) Inc., identified as an affiliate of the Bank, plays a central role in the distribution and potential secondary market support for the notes. The affiliate has agreed to purchase the entire issue at the principal amount and resell it to other registered broker-dealers. Additionally, the Bank has committed to paying structuring fees of $7.00 per note to third-party dealers on $1,075,000 in aggregate principal amount, representing approximately half of the total issuance.

The disclosure of Scotia Capital's role and the fee arrangement highlights potential conflicts of interest inherent in the offering structure. The pricing supplement notes that Scotia Capital may use the pricing supplement in market-making transactions after the initial sale and may be subject to discretionary reimbursement policies determined solely by the Bank. The Bank explicitly advises that unless otherwise noted in the confirmation of sale, the pricing supplement is being used in a market-making transaction, signaling investors that secondary trading activity will be conducted by affiliates under the Bank's control.

Derivative Structure and Lack of Direct Asset Ownership

The notes are derivative products based on the price return of the least performing reference asset, not direct investments in the indices or their constituent stocks. By acquiring the notes, investors obtain no direct economic interest, claim, or entitlement to any reference asset or constituent stock, nor do they acquire any voting rights or rights to receive dividends or other distributions from the underlying companies. The notes track price return only, meaning dividend income generated by index constituents is not passed through to investors.

This derivative structure concentrates all risk and return on the single worst-performing index among the three tracked, creating a unique payoff asymmetry. Investors cannot benefit from strong performance in two of three indices if the third index declines sharply. The use of the least performing asset as the final settlement mechanism represents an inherently unfavorable payoff relative to traditional index exposure and warrants thorough evaluation against alternative investment vehicles.

Cash Settlement and Risk Factor Considerations

All payments on the notes will be made in cash, with no provision for physical settlement or delivery of any underlying securities or commodities. The pricing supplement directs investors to review "Additional Risks" sections beginning on page P-11, additional risk factors specific to the notes beginning on page PS-6 of the accompanying product supplement, and risk factors beginning on page S-2 of the accompanying prospectus supplement and page 8 of the accompanying prospectus. The Bank emphasizes that investment in the notes involves certain risks requiring careful consideration before purchase.

Key risk areas highlighted include the valuation methodology, liquidity constraints, credit risk, and market-linked performance exposure. The filing notes that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy, acknowledging the inherent uncertainty in pricing these complex securities. Investors should thoroughly review all referenced risk disclosures before committing capital to this offering.