Bank of Nova Scotia Issues $10.3 Million Autocallable Notes Linked to S&P 500 and EURO STOXX 50 Indices

Structure and Automatic Call Mechanism

The Bank of Nova Scotia's newly issued notes incorporate an automatic call feature designed to potentially limit the issuer's downside exposure while capping investor upside. According to the disclosure, the notes will be automatically called if the closing value of each reference asset—the S&P 500 Index and the EURO STOXX 50 Index—equals or exceeds its initial value on any designated call observation date. Upon automatic call, investors receive a cash payment per note equal to the principal amount plus any contingent coupon otherwise payable on the corresponding contingent coupon payment date, along with any accrued unpaid contingent coupons. The filing states that following an automatic call, no further payments will be made on the notes.

The automatic call structure means that investors' upside is capped at the principal amount plus accrued coupons if either index recovers to its initial level. This design allows the bank to terminate its obligation under the notes early, potentially benefiting from favorable market conditions while limiting the notes' total return potential. The call observation dates are specified in the pricing supplement, though the filing does not list these dates in detail in the provided excerpt.

Contingent Coupon Payment Conditions

The notes feature a conditional coupon structure with memory provisions, meaning unpaid coupons can accrue for payment at a future date. The filing discloses that if the notes have not been automatically called and the closing value of each reference asset on any contingent coupon observation date equals or exceeds its contingent coupon barrier value, the notes will pay a contingent coupon for that date, plus any unpaid contingent coupons that have accrued and have not already been paid. This memory component ensures that investors may receive previously unpaid coupons on subsequent coupon payment dates, provided market conditions permit.

Conversely, if the closing value of any reference asset on a contingent coupon observation date prior to the final valuation date falls below its contingent coupon barrier value, the contingent coupon for that observation date will not be payable on the related payment date and will instead become an unpaid contingent coupon. This unpaid amount will remain in "memory" and potentially be paid on the next contingent coupon payment date on which a contingent coupon otherwise becomes payable, if such an opportunity occurs. The announcement emphasizes that the notes do not guarantee interest and investors may not receive any contingent coupons, highlighting the performance-dependent nature of coupon payments.

Final Valuation and Principal Repayment at Maturity

At maturity on July 26, 2029, if the notes have not been automatically called, the payment to investors depends on the performance of the "least performing reference asset"—defined as the reference asset with the lowest percentage change from its initial value to its final value. The filing explains that if the final value of the least-performing reference asset is equal to or greater than its barrier value, investors will receive the principal amount of their notes on the maturity date, in addition to any contingent coupon due with respect to the final valuation date and any accrued unpaid contingent coupons that have not yet been paid.

However, if the final value of the least-performing reference asset is less than its barrier value, investors will suffer a loss on the notes equal to the depreciation of that asset and may lose up to 100% of the principal amount. This feature creates significant downside risk for note holders, as the "worst performer" of the two indices determines the final payoff. If both indices decline substantially, investors could face substantial losses on their investment. The filing notes that the notes are unsubordinated and unsecured debt securities, meaning all payments are subject to the credit risk of the Bank of Nova Scotia.

Offering Terms and Settlement Details

The offering closed on July 21, 2026, with a trade date of July 21, 2026, and settlement scheduled for July 24, 2026. The notes will have an approximate 3-year term if not automatically called prior to maturity. The original issue price is 100.00% of the principal amount, meaning investors pay par value for each note. The minimum investment required is $1,000, with incremental investments in multiples of $1,000 in excess thereof.

The notes are assigned CUSIP number 063941BM9 and ISIN US063941BM94, identifiers used for tracking and trading purposes in secondary markets. The announcement states that the notes will not be listed on any U.S. securities exchange or automated quotation system, limiting liquidity and trading opportunities for investors. All payments on the notes are made in cash rather than physical settlement or stock delivery.

Underwriting Commission and Pricing Discount

The disclosure reveals the economic terms of the offering. The underwriting commission is 2.00% of the total issue amount, equating to $206,040 from the $10.302 million offering. Scotia Capital (USA) Inc., an affiliate of the Bank of Nova Scotia, purchased the notes at the original issue price and agreed to sell them to Citigroup Global Markets Inc. as part of the distribution process. The net proceeds to the bank totaled $10,095,960, representing 98.00% of the original issue price after deducting the underwriting commission.

The filing discloses that the initial estimated value of the notes at the time the pricing terms were set on the trade date was $971.85 per $1,000 principal amount, which is less than the original issue price of $1,000. This valuation gap reflects the bank's internal pricing models, which factor in the bank's internal funding rate, underwriting discount, and costs associated with selling and structuring the notes, including related hedging arrangements. The announcement notes that investors should be aware that the value of their notes at any time will reflect many factors and cannot be predicted with accuracy.

Estimated Value and Secondary Market Considerations

The Bank of Nova Scotia disclosed that its initial estimated value was determined by reference to internal pricing models taking into consideration factors such as the bank's internal funding rate on the trade date and the bank's assumptions about market parameters. According to the filing, the economic terms of the notes are based on the bank's internal funding rate—the rate the bank would pay to borrow funds through the issuance of similar market-linked notes—as well as the underwriting discount and costs associated with selling and structuring the notes, including related hedging arrangements. The bank's internal funding rate is typically lower than the rate the bank would pay when issuing conventional fixed-rate debt securities, a factor that reduces the economic terms offered to investors.

The announcement indicates that assuming all relevant factors remain constant after the trade date, the price at which Scotia Capital may initially buy or sell the notes in the secondary market may exceed the estimated value on the trade date for a temporary period expected to be approximately three months after the original issue date. This is because the bank may elect to effectively reimburse investors a portion of the estimated cost of hedging its obligations under the notes during this initial period. After this temporary window, secondary market pricing may more directly reflect the estimated value and market conditions.

Credit Risk and Insurance Coverage

The filing emphasizes that the notes are unsubordinated and unsecured debt obligations of The Bank of Nova Scotia, meaning they are not backed by collateral or specific assets. All payments on the notes are subject to the credit risk of the bank. If the bank experiences financial difficulties or becomes insolvent, investors could face delays in receiving coupon or principal payments, or potentially lose their investment entirely. The filing stresses that any payment on the notes depends on the bank's ability and willingness to pay.

The announcement explicitly states that the notes are not insured by the Canada Deposit Insurance Corporation pursuant to the Canada Deposit Insurance Corporation Act, nor are they insured by the U.S. Federal Deposit Insurance Corporation or any other government agency of Canada, the United States, or any other jurisdiction. This means investors have no government-backed protection for their investment, unlike deposits held at insured depository institutions. The lack of insurance protection increases the importance of evaluating the creditworthiness of the Bank of Nova Scotia before investing.

Reference Assets and Derivative Nature

The notes are derivative products based on the price return of the least-performing reference asset between the S&P 500 Index and the EURO STOXX 50 Index. The filing clarifies that by acquiring the notes, investors do not obtain a direct economic or other interest in, claim on, or entitlement to any reference asset or any constituent stocks of the reference assets. Investors have no legal or beneficial ownership of reference asset constituent stocks and possess no rights as holders of such stocks, including voting rights or rights to receive dividends or other distributions.

All payments on the notes will be made in cash rather than in shares of any underlying index or its constituent companies. The notes represent contractual obligations of the bank to pay cash amounts based on index performance, not actual ownership positions in the indices or their components. This distinction is critical for investors to understand, as it means they are assuming credit risk of the bank in addition to market risk tied to index performance.

Market-Making Activities and Affiliate Involvement

The disclosure reveals that Scotia Capital (USA) Inc., an affiliate of the Bank of Nova Scotia, may use the pricing supplement in market-making transactions in the notes after their initial sale. According to the filing, unless the bank, Scotia Capital, or another affiliate selling the notes informs investors otherwise in the confirmation of sale, the pricing supplement is being used in a market-making transaction. This means Scotia Capital may buy and sell notes from its own inventory at prices it determines, potentially creating conflicts of interest as the affiliate benefits from bid-ask spreads.

The involvement of affiliated entities in the distribution and potential secondary market-making activities creates situations where the bank and its affiliates have financial interests that may differ from those of note investors. The filing references supplemental plan of distribution documents discussing conflicts of interest more comprehensively, indicating that investors should review these disclosures to understand the full scope of affiliate involvement and potential conflicts.

Regulatory Approval and Investment Risks

The filing states clearly 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, accompanying product supplement, underlier supplement, prospectus supplement, or prospectus. Any representation to the contrary is identified as a criminal offense. This language protects the regulatory authorities from liability but does not provide investors with any substantive government endorsement or review of the offering terms.

The announcement emphasizes that investment in the notes involves certain risks, directing investors to review "Additional Risks" beginning on page P-11 of the pricing supplement, "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 filing explicitly notes risks relating to estimated value and liquidity, indicating that the secondary market for these notes may be limited and pricing may be difficult to determine without active trading.