Bank of Nova Scotia Issues Autocallable Notes Linked to VanEck Semiconductor ETF Through August 2027

Structure and Payment Mechanics of the Semiconductor-Linked Notes

The Bank of Nova Scotia disclosed the complete terms of its Autocallable Contingent Coupon Trigger Notes, which derive their value from the price performance of the VanEck Semiconductor ETF. The notes are unsubordinated and unsecured obligations of the Bank, meaning they are backed only by the Bank's general creditworthiness and carry no special priority in a bankruptcy or distress scenario. Investors should understand that the notes do not provide direct ownership of the underlying ETF shares and include no rights to dividends or shareholder voting privileges.

The payout structure contains multiple scenarios depending on reference asset performance at designated observation dates. On each observation date—occurring on the 28th calendar day of February, May, August, and November, commencing November 2026 through November 2027—the closing price of the VanEck Semiconductor ETF is measured. This measurement determines both whether contingent coupons are paid and whether the notes are automatically called early, removing the notes from circulation and delivering principal plus accrued coupon to investors.

Contingent Coupon Calculation and Barrier Protection Features

Contingent coupon payments depend on the reference asset maintaining a price floor of 70 percent of its initial level on any given observation date. If the closing price meets or exceeds this 70 percent barrier, investors receive a contingent coupon calculated as at least $45.625 per $1,000 principal per observation date that has occurred. The filing states this represents at least 4.5625 percent quarterly, or the potential for up to at least 18.25 percent per annum, provided the notes remain outstanding through multiple coupon dates. The contingent coupon calculation accumulates across observation dates: the coupon due on any payment date equals the product of the fixed amount times the total number of observation dates that have occurred, minus all coupons previously paid.

If the reference asset price falls below the 70 percent barrier on an observation date, no contingent coupon is paid for that period. This feature exposes investors to income loss if the semiconductor ETF experiences even moderate declines from its initial price level. The barrier structure is asymmetric: it protects the Bank's economics during sideways or modestly declining markets but eliminates coupon income for investors in those same scenarios.

Automatic Call Provisions and Early Redemption Scenarios

The notes contain automatic call provisions that allow for early redemption if the reference asset performs strongly relative to its starting price. Beginning in February 2027 and continuing through August 2027, if the closing price of the VanEck Semiconductor ETF equals or exceeds the initial price on any observation date, the notes are automatically called. When called, investors receive payment on the corresponding payment date (expected to be the third business day following the observation date) equal to $1,000 principal plus the contingent coupon due on that date.

These automatic call features benefit investors if the semiconductor sector experiences strong appreciation, as they lock in principal return plus accumulated coupon income at par value. However, automatic calls eliminate the opportunity for investors to benefit from further gains beyond the initial price level, capping upside potential. From the Bank's perspective, early call provisions allow management of hedging costs and interest rate risk. The filing discloses that observation dates commence in November 2026, but calls cannot occur until the February 2027 observation date.

Maturity Payoff and Downside Risk Exposure

If the notes reach maturity without being called early—which occurs on the expected date of December 2, 2027—investors receive a final payment based on the reference asset's closing price on the final valuation date, expected to be November 29, 2027. The maturity payoff structure divides into two scenarios: if the final price equals or exceeds 70 percent of the initial price, investors receive $1,000 principal plus the full contingent coupon calculated through maturity. However, if the final price falls below the 70 percent barrier at maturity, investors receive only $1,000 times the reference asset return, which will be negative.

The filing explicitly states that investors can lose up to their entire investment in the notes if the semiconductor ETF experiences a severe decline. The disclosure explains that investors will lose 1 percent of principal for every 1 percent the final price declines below the initial price. This means a 30 percent decline in the reference asset from its initial price results in complete loss of capital, with investors receiving nothing at maturity. The notes provide no principal protection mechanism or floor valuation feature. Any payment on the notes remains subject to the creditworthiness of The Bank of Nova Scotia, introducing counterparty credit risk.

Pricing and Initial Estimated Value Range

The Bank of Nova Scotia disclosed that the notes carry an original issue price of 100 percent of principal value. However, the initial estimated value of the notes at the time the terms are set on the trade date—expected to be August 28, 2026—is between $925 and $965 per $1,000 principal amount. This valuation range falls significantly below the original issue price, indicating that investors purchasing the notes immediately pay more than the Bank's internal estimate of their economic value. The pricing supplement discloses that underwriting commissions total up to 2.25 percent, with proceeds to the Bank of at least 97.75 percent of the issue price.

The Bank's estimated value range is derived from internal pricing models incorporating the Bank's internal funding rate and assumptions about market parameters at the time of pricing. The disclosure states that the actual value of the notes at any time cannot be predicted with accuracy and will reflect many factors including market conditions, volatility assumptions, and changes in interest rates. The substantial gap between the 100 percent original issue price and the $925 to $965 estimated value range reflects the costs embedded in the structured product, including underwriting commissions, structuring fees, hedging costs, and the Bank's profit margin on the transaction.

Reference Asset Details and Index Relationship

The notes are linked to the VanEck Semiconductor ETF, referred to in the filing as "the reference asset." The filing clarifies an important distinction: the return on the notes relates solely to the price return of the ETF and does not include dividend or total return components. This means investors do not benefit from any dividends paid by the underlying semiconductor companies held within the ETF during the note's term. The notes are derivative products based on the ETF's performance and do not constitute direct investment in the ETF's underlying holdings.

The filing notes that while the VanEck Semiconductor ETF is based on the MVIS US Listed Semiconductor 25 Index, the return on the notes is linked to the ETF's price return and not directly to the index. This distinction matters because ETF price performance may diverge from index performance due to fund expenses, trading costs, and cash drag within the fund structure. Investors acquire no direct economic interest, claim, or ownership in the ETF shares or the underlying securities held within the fund. The notes do not grant voting rights, dividend rights, or any other security holder rights typical of direct equity ownership.

Underwriting Distribution and Market-Making Activities

The notes are being offered through Scotia Capital (USA) Inc., an affiliate of The Bank of Nova Scotia, and Goldman Sachs & Co. LLC. Scotia Capital (USA) Inc. will purchase the notes from the Bank for distribution to other registered broker dealers. The pricing supplement discloses that Scotia Capital or its affiliates may engage in market-making transactions in the notes after their initial sale, meaning the distributors may buy and sell notes in secondary markets and profit from bid-ask spreads.

The Bank indicated that it may decide to sell additional notes after the final pricing supplement date at original issue prices and underwriting commissions that differ from those disclosed for the initial offering. The return on investors' notes depends in part on the original issue price paid, meaning secondary market purchasers may receive different economic terms than initial investors depending on market conditions and pricing at the time of their purchase.

Key Risk Factors and Investor Considerations

The Bank of Nova Scotia highlighted multiple risk categories that investors should evaluate before purchasing the notes. The notes are subject to credit risk tied to the Bank's financial condition and ability to pay at maturity. In the event of the Bank's insolvency, note holders are unsecured creditors ranking pari passu with other unsecured obligations but behind secured creditors and depositors covered by deposit insurance. The notes are not insured by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation, or any other government agency.

Investors face market risk from semiconductor sector performance, as declines in the VanEck Semiconductor ETF directly erode note value. The 70 percent barrier protection is not absolute and provides no coupon protection if the ETF declines even modestly. Liquidity risk exists because the notes will not be listed on any U.S. securities exchange or automated quotation system, potentially limiting investors' ability to sell notes in secondary markets at attractive prices. The filing directs investors to additional risk disclosures beginning on pages P-16, PS-6, S-2, and page 8 of related prospectus documents for a more comprehensive risk analysis.

Observation Dates and Valuation Schedule

The filing establishes a specific schedule for observation dates throughout the note's term. Observation dates are expected to occur on the 28th calendar day of February, May, August, and November, beginning in November 2026 and ending in November 2027. The November 2027 observation date is expected to occur on November 29, 2027, which also serves as the final valuation date for maturity calculations. This schedule creates four observation periods during the approximately 16-month term of the notes, with automatic call opportunities commencing in February 2027 through August 2027, and a final maturity valuation in November 2027.

Each observation date serves a dual purpose: measuring reference asset performance to determine contingent coupon eligibility and checking whether the automatic call condition (initial price or higher) has been triggered. The timing of observation dates relative to the trade date (expected August 28, 2026) and maturity date (expected December 2, 2027) structures investor exposure across a defined schedule. Investors should monitor the semiconductor ETF's price performance on these specific dates, as pricing on non-observation dates is irrelevant to note economics.

Regulatory Status and Regulatory Filings

The pricing supplement was filed pursuant to Rule 424(b)(2) under registration number 333-282565. The filing carries a notation "Subject to Completion" dated July 29, 2026, indicating that the document represents a preliminary pricing supplement subject to further changes. The Bank noted that it may not sell the notes until the final pricing supplement is delivered, and that the offering is not being conducted in jurisdictions where the sale is not permitted.

The SEC and state securities commissions have not approved or disapproved the notes or evaluated the accuracy or adequacy of the pricing supplement, prospectus, prospectus supplement, or product supplement. The filing contains standard disclaimers that any representation that the SEC has approved the notes constitutes a criminal offense. Investors should review the complete registration statement and all related prospectus documents filed with the SEC before making investment decisions, as the pricing supplement alone does not contain all material information relevant to the notes.