Bank of Nova Scotia Launches Autocallable Barrier Review Notes Linked to Russell 2000 and S&P 500 Indexes, Maturing July 2026

Structure and Core Terms of the Autocallable Barrier Review Notes

The Bank of Nova Scotia's newly disclosed structured notes are unsubordinated and unsecured debt obligations of the Bank itself, meaning investors bear the full credit risk of the issuing institution in addition to the market risk tied to the two reference indexes. The notes do not bear interest or pay coupons at any point prior to maturity, which distinguishes them from conventional fixed-income instruments. All payments under the notes will be made in cash, and the notes will not be listed on any U.S. securities exchange or automated quotation system.

According to the preliminary pricing supplement, the notes carry a minimum investment threshold of $1,000, with additional investments required in integral multiples of $1,000. The CUSIP number assigned to the notes is 063941CP1, with an ISIN of US063941CP17. The original issue price is set at 100% of the principal amount, while the underwriting commission is 2.00% per note, with proceeds to The Bank of Nova Scotia representing 98.00% of the principal amount. These terms establish the basic economic framework within which investors will evaluate the offering.

How the Automatic Call Mechanism Works Across Observation Dates

The autocall feature is central to understanding the risk and return profile of these notes. The filing states that if the closing value of each of the Russell 2000 Index and the S&P 500 Index equals or exceeds 100% of its respective initial value — referred to in the supplement as its "Call Value" — on any scheduled observation date, including the final observation date, the notes will be automatically called. Upon an automatic call, investors receive the applicable call payment amount for that observation date, and no further amounts will be owed on the notes.

The call payment amounts are based on a Call Return Rate of 11.30% per term and are structured to increase as of each observation date to reflect that rate of return. This escalating payment structure is intended to reward investors who remain in the notes longer before an automatic call occurs. However, if both indexes do not simultaneously meet or exceed their call values on any observation date throughout the life of the notes, the autocall does not trigger, and the investor remains exposed to the market risk of both indexes through to the final maturity date of July 29, 2030.

Barrier Protection at Maturity and the Downside Risk Scenario

If the notes are not automatically called before or at maturity, investors face one of two outcomes depending on the final values of the two reference indexes. The filing states that if the final value of each reference asset is equal to or greater than 70% of its initial value — defined as its "Barrier Value" — investors will receive back the full principal amount of $1,000 per note. This 70% barrier provides a buffer against moderate market declines in both indexes simultaneously.

However, the downside scenario is severe. If the notes are not automatically called and the final value of any reference asset falls below its barrier value at maturity, investors will be fully exposed to the negative performance of the least performing reference asset — defined in the supplement as the reference asset with the lowest percentage change from its initial value to its final value. In this scenario, investors may lose up to 100% of their principal amount. The filing is explicit that no partial protection applies once the barrier is breached; the full decline in the worst-performing index is passed through to the investor.

Dual-Index Exposure and the "Least Performing" Reference Asset Risk

A particularly important structural feature of these notes is the linkage to the least performing of two indexes rather than to a single benchmark. The two reference assets are the Russell 2000 Index, which tracks small-capitalization U.S. equities, and the S&P 500 Index, which tracks large-capitalization U.S. equities. By tying the worst-case outcome to the weaker performer of the two, the structure introduces a compounding risk: even if one index performs well, a significant decline in the other could eliminate the barrier protection entirely.

The filing further clarifies that by acquiring the notes, investors will not hold any direct economic or legal interest in the constituent stocks of either reference index. Investors will have no voting rights and no entitlement to dividends or other distributions paid by the underlying constituent companies. The notes are described as derivative products based solely on the price return of the least performing reference asset, making them fundamentally different from owning index funds, ETFs, or direct equity positions in either benchmark.

Initial Estimated Value Versus Original Issue Price

The preliminary pricing supplement discloses that the initial estimated value of the notes at the time terms are set on the trade date is expected to be between $927.06 and $957.06 per $1,000 principal amount. This range is meaningfully below the original issue price of $1,000 per note, a gap the Bank attributes to the underwriting commission, the costs of selling and structuring the notes, and the economic terms of related hedging arrangements. The Bank's use of its internal funding rate — rather than conventional fixed-rate debt borrowing rates — is cited as another factor that reduces the economic terms available to investors.

The filing notes that the Bank's internal funding rate is typically lower than the rate it would pay when issuing conventional fixed-rate debt securities, and this difference further contributes to the gap between estimated value and issue price. Investors should be aware that the price at which Scotia Capital (USA) Inc. — the Bank's affiliate and distributor — may initially buy or sell the notes in any secondary market could temporarily exceed the estimated value during an approximately three-month period after the original issue date. The Bank has disclosed that during this period it may effectively reimburse investors for a portion of estimated hedging costs, though this reimbursement is discretionary and may be discontinued or revised at any time.

Role of Scotia Capital (USA) Inc. in Distribution and Market-Making

Scotia Capital (USA) Inc., identified in the filing as an affiliate of The Bank of Nova Scotia, plays a dual role in this offering. First, SCUSA will purchase the notes from the Bank at the full principal amount and then sell them to other registered broker-dealers at a discount of $20.00, or 2.00%, per note. This affiliate distribution arrangement is a standard feature of structured note offerings but represents a potential conflict of interest that investors are encouraged to review in the supplemental plan of distribution disclosed within the filing.

Second, SCUSA may engage in market-making transactions in the notes after their initial sale. The filing is careful to note that SCUSA is not obligated to make a market in the notes, and that the notes will not be listed on any U.S. securities exchange or automated quotation system. If no secondary market develops or if SCUSA chooses not to make a market, investors may find it difficult or impossible to sell their notes prior to maturity. Additionally, the Bank may periodically pay any third-party dealer a structuring fee of up to $6.50 per note with respect to some or all of the notes sold, which is a further cost component disclosed in the supplement.

Credit Risk, Insurance Status, and Regulatory Disclosures

The filing is unambiguous that any payment on the notes is subject to the creditworthiness of The Bank of Nova Scotia. As unsubordinated and unsecured obligations, the notes rank equally with other unsecured debt of the Bank but carry no special protection in the event of the Bank's financial distress or insolvency. This credit risk layer is separate from and in addition to the market risk associated with the performance of the Russell 2000 and S&P 500 indexes.

The supplement explicitly states that the notes are not insured by the Canada Deposit Insurance Corporation under the CDIC Act, nor by the U.S. Federal Deposit Insurance Corporation, nor by any other government agency in Canada, the United States, or any other jurisdiction. This disclosure is significant for investors accustomed to the protection afforded to bank deposits and certificate-of-deposit products. The filing also notes that neither the SEC nor any state securities commission has approved or disapproved of the notes, or passed upon the accuracy or adequacy of the pricing supplement or related documents.

Pricing Timeline and Settlement Details Disclosed in the Supplement

According to the preliminary pricing supplement dated July 15, 2026, the notes are expected to price on July 24, 2026, with settlement anticipated on July 29, 2026. The maturity date, also July 29, 2030, would result in a term of approximately four years if the notes are not automatically called on any earlier observation date. The supplement is described as preliminary, with certain terms — including the total offering size and precise pricing details — remaining subject to completion and change before the final pricing supplement is delivered.

The preliminary nature of the supplement means that certain fields within the document, including the total aggregate principal amount and the total dollar figures for the original issue price, underwriting commissions, and proceeds to the Bank, were not specified with final numerical values at the time of this filing. The company did not disclose the total offering size in the preliminary supplement. The CUSIP and ISIN numbers, however, are confirmed at 063941CP1 and US063941CP17, respectively, providing identifiers that investors and market participants can use to track the notes upon final issuance.

Key Risks Highlighted for Prospective Investors in This Structured Product

The filing directs prospective investors to several sections detailing material risks, including "Additional Risks" beginning on page P-11 of the pricing supplement, "Additional Risk Factors Specific to the Notes" in the accompanying product supplement, and "Risk Factors" in both the accompanying prospectus supplement and the base prospectus. Among the most prominent risk categories are the potential for total loss of principal if either index falls below 70% of its initial value and is not recovered by maturity, and the credit risk of the Bank as the sole obligor on all note payments.

Additional risks disclosed relate to estimated value and liquidity. The filing warns that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy. The secondary market for the notes — if any develops at all — may be limited, and investors who need liquidity before the July 2030 maturity date may face unfavorable pricing or an inability to sell. The gap between the original issue price and the initial estimated value range of $927.06 to $957.06 per $1,000 principal amount underscores that investors begin the investment at an immediate economic discount relative to what the Bank considers the fair market value of the structured product on the trade date.