Bank of Nova Scotia Issues Equity-Linked Securities Tied to Performance of Four Payment Processing and Financial Technology Stocks

Structured Security Design Links Returns to Four Major Financial and Technology Companies

The Bank of Nova Scotia's equity-linked securities offering represents a structured product that measures performance exclusively against the lowest-performing underlying stock among four major financial and technology companies. This "worst performer" structure means that even if three of the four underlying stocks perform well, the securities' behavior will be determined entirely by whichever stock performs most poorly. The underlying stocks selected for this offering are American Express Company, Intel Corporation, Mastercard Incorporated, and Visa Inc., representing a mix of payment processors, financial services providers, and semiconductor technology sectors.

The securities are senior unsecured debt obligations issued by The Bank of Nova Scotia. According to the pricing supplement, the estimated value as determined by the Bank as of the pricing date was $928.62 per security, representing 92.862% of par. This valuation incorporates dealer spread and projected profit from hedging activities. The Bank notes in the disclosure that the inclusion of these components in the original offering price is likely to adversely affect secondary market prices for investors who may seek to sell the securities prior to maturity.

Contingent Coupon Payments with Memory Feature Create Conditional Income Stream

The securities incorporate a contingent coupon structure that distinguishes them fundamentally from conventional fixed-income instruments. The contingent coupon rate is 26.75% per annum, payable on a monthly basis, but only under specific conditions related to the lowest-performing underlying stock's closing price. Specifically, coupon payments are made only when the stock closing price of the lowest-performing underlying stock is greater than or equal to its coupon threshold price on the relevant monthly calculation date. The coupon threshold price for each underlying stock is established at 60% of its starting price.

The memory feature represents a significant characteristic of these securities. If the lowest-performing stock closes below its coupon threshold price on a given calculation day, investors do not receive the coupon payment for that month. However, if the stock subsequently recovers to reach or exceed the coupon threshold price on a later calculation date, investors receive both the current month's contingent coupon payment plus all previously unpaid contingent coupon payments accumulated since the stock first fell below the threshold. This memory feature continues until stated maturity or automatic call, whichever occurs first. If the lowest-performing stock remains below the coupon threshold price throughout the entire term, investors receive no contingent coupon payments whatsoever.

Automatic Call Provision Based on Starting Price Milestone

The securities include an automatic call feature that may terminate the investment prior to the stated maturity date of July 25, 2029. According to the disclosure, if the stock closing price of the lowest-performing underlying stock reaches or exceeds its starting price on any monthly calculation date from January 2027 through June 2029, inclusive, the securities will be automatically called. When automatically called, investors receive the face amount plus a final contingent coupon payment and any previously unpaid contingent coupon payments accumulated through the call date.

This automatic call structure creates an early termination scenario that limits upside participation for investors. Once the lowest-performing stock recovers to its starting price level, the securities are called away and the investment terminates, even if one or more of the other underlying stocks continue to appreciate significantly. The automatic call feature effectively caps returns for investors who might otherwise benefit from broader market strength among the other three underlying stocks.

Principal at Risk Structure Creates Significant Downside Exposure

Unlike conventional debt securities that typically provide repayment of principal at maturity, these equity-linked securities carry material principal at risk. If the securities are not automatically called prior to stated maturity, investors receive the face amount at stated maturity only if the stock closing price of the lowest-performing underlying stock on the final calculation date is greater than or equal to its downside threshold price. The downside threshold price for each underlying stock is set at 50% of its starting price.

The disclosure explicitly warns that if the lowest-performing stock closes below this 50% threshold on the final calculation date, investors will lose more than 50%, and potentially all, of their principal investment. In this scenario, investors have full downside exposure to the lowest-performing underlying stock from its starting price without any floor protection. The Bank's disclosure states that investors will not participate in any appreciation of the underlying stocks and will not receive any dividends. This asymmetric payoff structure means that investors benefit from contingent coupon payments and automatic call protection only if the lowest-performing stock maintains minimum performance thresholds, while bearing complete downside risk if that stock declines significantly.

Credit Risk Concentrated with The Bank of Nova Scotia

All payments on the securities, including contingent coupon payments, the face amount at maturity, and automatic call proceeds, are subject to the credit risk of The Bank of Nova Scotia. The securities are not insured by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation, or any other governmental agency in Canada, the United States, or any other jurisdiction. This means that if The Bank of Nova Scotia were to experience financial distress or insolvency, investors could lose their entire investment regardless of the performance of the underlying stocks.

The disclosure indicates that these are senior unsecured debt obligations, meaning that in a bankruptcy scenario, holders would rank above equity holders but below secured creditors in the claims hierarchy. However, senior unsecured status provides no guarantee of recovery. The Bank has made clear in the pricing supplement that investors should consider the issuer's creditworthiness as a critical component of their investment evaluation, as the structure's equity linkage provides no relief from issuer credit risk.

Offering Terms and Distribution Structure

The original offering price for the securities was established at $1,000.00 per security, according to the pricing supplement dated July 20, 2026. Scotia Capital (USA) Inc., an affiliate of The Bank of Nova Scotia, agreed to purchase the securities from the issuer for distribution to other registered broker dealers, including Wells Fargo Securities, LLC. The total offering amount was $1,719,000.00 in face amount, comprising 1,719 securities at the stated price per security.

The distribution structure includes an agent discount of $23.25 per security (2.325% of the original offering price), resulting in proceeds to The Bank of Nova Scotia of $976.75 per security. Wells Fargo Securities agreed to sell the securities to selected dealers at the discounted price and may provide selling concessions of $17.50 (1.75%) per security to those dealers. Wells Fargo Advisors may receive a distribution expense fee of $0.75 (0.075%) per security for securities sold through that channel. The Bank may also pay a fee of up to $3.00 per security to selected securities dealers for marketing and other services related to distribution to other dealers.

Complex Features Create Risks Beyond Traditional Debt Instruments

The Bank's disclosure emphasizes that these securities have complex features and involve risks not associated with conventional debt securities. The key complexity stems from the multi-layered conditional structure combining contingent coupons, automatic call provisions, and principal at risk, all evaluated against the single lowest-performing underlying stock. Investors must evaluate four separate stock performances simultaneously while understanding that only the worst performer determines the outcome at each calculation date.

The disclosure warns that investors will not benefit from favorable performance by any better-performing underlying stock and will be adversely affected if any underlying stock performs poorly, even if the others perform well. This "worst of" structure fundamentally differs from diversified investment approaches and creates concentrated downside risk. The Bank notes in the pricing supplement that selected risk considerations are detailed in the document, with additional risk factors provided in the accompanying product supplement, prospectus supplement, and prospectus, collectively spanning multiple pages of detailed risk disclosure.

Secondary Market and Valuation Considerations

The Bank explicitly states that the securities are not exchange-listed and are designed to be held to maturity. This lack of liquidity represents a significant limitation for investors who may need to exit the position prior to the maturity date of July 25, 2029. The disclosure indicates that Scotia Capital (USA) Inc. or its affiliates may use the pricing supplement in market-making transactions in securities after their initial sale, suggesting that some secondary market activity may occur, but no guaranteed liquidity or pricing transparency is provided.

The estimated value methodology disclosed by the Bank incorporates dealer spread and projected profit from hedging in the original offering price. The Bank explicitly cautions that this approach is likely to result in secondary market prices that are lower than the original offering price. Investors purchasing the securities in the secondary market may therefore pay less than the original offering price, but the Bank makes clear that the securities' complex features make secondary market pricing unpredictable and potentially disadvantageous for sellers seeking to liquidate positions before maturity.

Regulatory Status and Investor Responsibilities

The pricing supplement was filed pursuant to Rule 424(b)(2) under the Securities Act, referencing a registration statement and prior product supplement, prospectus supplement, and prospectus. The Bank notes that neither the Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved of the securities or passed upon the accuracy or adequacy of the pricing supplement or accompanying disclosure documents. The Bank includes a statement that any representation to the contrary would constitute a criminal offense.

The disclosure documents collectively provide detailed information about the terms, risks, and mechanics of the securities. Investors are expected to review not only the pricing supplement but also the accompanying product supplement, prospectus supplement, and base prospectus to obtain complete information about the offering. The multi-layered documentation structure reflects the complexity of the security and the extensive disclosure required for equity-linked instruments with contingent payment features and principal at risk.