Bank of Nova Scotia Issues $436 Million Structured Notes Linked to MSCI EAFE Index Through 2028

Structure and Payment Terms of the Enhanced Participation Notes

The Bank of Nova Scotia's offering establishes a clearly defined payment structure for investors based on the performance of the MSCI EAFE Index measured from the trade date of July 21, 2026 to the valuation date of September 6, 2028. The initial level of the reference index is set at 3,119.37, establishing the baseline against which all subsequent performance will be measured. The notes do not bear interest, meaning returns are solely dependent on the index performance outcome at maturity.

The compensation structure incorporates three distinct scenarios based on how the index performs. If the final index level exceeds the initial level, investors receive their $1,000 principal plus gains calculated by multiplying the index return by a 160% participation rate, though this upside is subject to a maximum payment ceiling of $1,305.44 per $1,000 principal amount. If the index declines by up to 15% from its initial level, investors recover their full principal with no loss. However, if the index falls more than 15%, losses accelerate at a rate of approximately 1.1765% for every 1% that the index declines below the 85% threshold, potentially resulting in loss of the entire principal amount.

Downside Protection Mechanism and Buffer Structure

The notes incorporate a 15% downside buffer, which represents a key risk mitigation feature for investors considering this structured product. This buffer means that investors are fully protected against index declines up to 15 percentage points from the initial level of 3,119.37, which would correspond to an index level of approximately 2,651.46. Within this protected zone, investors receive their complete principal investment regardless of the index performance, providing certainty of capital return in moderate market downturns.

Beyond the 15% buffer threshold, the loss acceleration mechanism becomes active. The filing discloses that a buffer rate of approximately 117.65% applies to losses exceeding the 15% decline threshold. This mathematical structure means that for every percentage point the index falls below the 85% threshold, the loss on the investment magnifies at a rate of approximately 1.1765%. For example, if the index were to decline 20% from its initial level, investors would lose more than their proportional share, reflecting the buffer mechanism's design. This acceleration protects the issuer's hedging position while transferring additional risk to note holders in severe market stress scenarios.

Capped Upside and Maximum Payment Limitations

While the notes provide enhanced participation of 160% on positive index performance, this upside is not unlimited. The filing establishes a hard cap on the maximum payment amount of $1,305.44 per $1,000 principal amount, which translates to a maximum total return of approximately 30.544% regardless of how much higher the index rises above its initial level. This cap represents a significant constraint on investor gains in strong bull market scenarios.

The cap implies that the index would need to rise approximately 19.09% from its initial level to reach the maximum payment threshold, at which point the $1,305.44 ceiling becomes binding. For index gains beyond this point, investors receive no additional benefit, creating a truncated payoff profile. This structure allows the Bank of Nova Scotia to limit its economic exposure while still offering attractive participation that exceeds 1-to-1 upside capture, balancing the enhanced participation rate against the issuer's hedging costs and funding requirements.

Valuation and Pricing Methodology Applied to the Offering

The Bank of Nova Scotia determined an initial estimated value of $982.90 per $1,000 principal amount for the notes at the time the terms were established on the trade date. This valuation was derived from the bank's internal pricing models, which incorporate several factors including the bank's internal funding rate as of July 21, 2026, and the bank's assumptions regarding relevant market parameters. The filing explicitly states that this internal estimated value is less than the 100% original issue price that investors paid, creating an immediate economic disparity between what investors paid and what the bank determined the notes were worth.

The difference between the original issue price and the initial estimated value reflects multiple economic components. The Bank of Nova Scotia's internal funding rate—the rate at which the bank would theoretically borrow funds through issuance of market-linked notes—serves as the foundation for the valuation. The filing discloses that this internal funding rate is typically lower than the rate the bank would pay when issuing conventional fixed-rate debt securities. Additionally, underwriting discounts and the economic terms of related hedging arrangements factor into the pricing, all of which contribute to the $17.10 per $1,000 principal amount spread between the estimated value and the issue price at the time of initial pricing.

Secondary Market Trading and Liquidity Considerations

Scotia Capital (USA) Inc., an affiliate of The Bank of Nova Scotia, has agreed to purchase the notes from the bank for distribution to registered broker-dealers and may engage in market-making activities in the notes following their initial sale. The filing establishes a transitional pricing schedule for secondary market transactions. Prior to October 21, 2026, Scotia Capital's bid and ask prices for the notes would reflect its estimate of market value plus any remaining portion of the initial $17.10 per $1,000 principal amount spread, which declines on a straight-line basis over the first three months following issuance.

After October 21, 2026, the secondary market pricing would be based solely on Scotia Capital's then-current estimated value of the notes, with the initial spread fully depreciated. Importantly, the filing notes that the notes will not be listed on any U.S. securities exchange or automated quotation system, meaning trading will occur through Scotia Capital or other market participants on an over-the-counter basis. The bank also clarifies that Scotia Capital is not obligated to make a market in these notes, creating potential liquidity constraints for investors seeking to exit their positions before maturity.

Creditworthiness of the Issuer as a Critical Risk Factor

All payments on the notes are explicitly subject to the creditworthiness of The Bank of Nova Scotia. The filing establishes that these notes are unsubordinated and unsecured obligations of the bank, meaning they are not backed by any pledge of specific assets and would rank equally with other unsecured debt in bankruptcy or insolvency proceedings. This credit exposure represents a fundamental risk that investors must evaluate alongside the structured note's index-linked performance characteristics.

The notes are not insured by the Canada Deposit Insurance Corporation pursuant to the CDIC Act, nor are they protected by the U.S. Federal Deposit Insurance Corporation or any other government agency in Canada, the United States, or any other jurisdiction. This absence of deposit insurance protection means that in a scenario where the Bank of Nova Scotia faces financial distress, investors could lose both their principal and any accrued gains, regardless of how the MSCI EAFE Index performs. While The Bank of Nova Scotia is a major financial institution, this credit risk remains a material consideration for investors evaluating the risk-return profile of these securities.

Index Measurement and Valuation Date Mechanics

The performance of the MSCI EAFE Index will be measured from the trade date of July 21, 2026 through the valuation date of September 6, 2028, with payments to be made at maturity on September 8, 2028. The filing specifies that following the determination of the initial level, the amount paid at maturity will not be affected by the closing level of the index on any day other than the valuation date. This means that interim index fluctuations throughout the nearly two-year holding period are irrelevant to the final outcome; only the index values on the initial measurement date and the final valuation date matter.

This structure creates a European-style payoff, where investors are exposed to a single point-in-time comparison rather than the average or continuous monitoring of the index. The valuation date of September 6, 2028 is set two calendar days before the maturity date of September 8, 2028, providing the bank time to calculate final payments based on the index level as of the close of business on September 6. The index return is calculated as the percentage change from the initial level of 3,119.37 to the final level on the valuation date, providing a straightforward mathematical basis for determining which payment scenario applies.

Additional Issue Details and Distribution Arrangements

The pricing supplement was dated July 21, 2026, which represents the trade date on which the terms of the notes were established. The total issue size of $436 million was sold at 100% of principal amount, generating $436 million in proceeds to the Bank of Nova Scotia with no underwriting commissions disclosed. This structure differs from traditional debt securities where underwriting discounts are typically deducted from proceeds, though the filing's discussion of the initial pricing spread suggests that compensation to Scotia Capital for its distribution services is embedded in the estimated value differential rather than taken as an explicit commission.

The filing notes that the Bank of Nova Scotia may decide to sell additional notes after this pricing date at original issue prices and with commissions and proceeds that differ from the amounts disclosed for this initial offering. This statement indicates that the bank may conduct multiple tranches or reopenings of similar structured notes with potentially different economic terms. The return on investor capital will depend in part on the specific original issue price paid for each investor's notes, meaning investors purchasing in any potential future offerings could face different economic outcomes even if the reference asset and maturity terms remain similar.

Risk Factors and Absence of Dividend or Shareholder Rights

The filing emphasizes that investment in the notes involves certain risks and directs investors to additional risk disclosure sections that commence on page P-15 of the pricing supplement and on subsequent pages of accompanying product supplements and prospectuses. These risks extend beyond standard market risk to include liquidity risk, credit risk of the issuer, model risk in valuation, and the possibility of loss of the principal amount invested due to negative reference asset performance combined with the issuer's creditworthiness.

The notes constitute derivative products based on the MSCI EAFE Index's price return but do not include any dividend or total return component. By acquiring the notes, investors obtain no direct economic interest in any securities represented by the index, no voting rights, no rights to receive dividends or distributions from any underlying security, and no legal or beneficial ownership claims. The notes are contractual obligations of the bank that depend on index performance calculations, not claims on any actual portfolio of securities. This derivative structure means that investors receive exposure to index price movements through a contractual arrangement with the bank rather than through direct or indirect beneficial ownership of the reference asset.

Regulatory Status and Disclosure Framework

The filing constitutes a Form 424B2 pricing supplement filed pursuant to Rule 424(b)(2) and relates to registration number 333-282565. The Bank of Nova Scotia has made clear that neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or adequacy of the pricing supplement, prospectus, prospectus supplement, underlier supplement, or product supplement. Any representation to the contrary would constitute a criminal offense under applicable securities laws.

The notes are offered by Scotia Capital (USA) Inc., which is identified as an affiliate of The Bank of Nova Scotia and has agreed to purchase the notes from the bank for distribution to registered broker-dealers. The filing indicates that this pricing supplement and related documents may be used in market-making transactions and that unless the bank, Scotia Capital, or another affiliate informs investors otherwise in their confirmation of sale, the pricing supplement is being used in such a market-making transaction. This disclosure framework establishes the regulatory foundation for the offering and identifies potential conflicts of interest that arise when the distribution affiliate also engages in secondary market trading activities.