Bank of Nova Scotia Issues $18.9 Million in Structured Investment Securities Linked to Arm Holdings

Security Structure and Underlying Reference Asset

The Bank of Nova Scotia has structured these contingent income auto-callable securities as senior unsecured debt obligations issued under its Senior Note Program, Series A. The securities derive their performance from American depositary receipts of Arm Holdings plc, trading under the Bloomberg ticker "ARM UW." Each security carries a stated principal amount of $1,000 and was offered at an issue price of $1,000 per security. The original issue date is set for July 22, 2026, which is three business days after the pricing date, establishing a T+3 settlement timeline that may require alternative settlement arrangements for secondary market trading prior to delivery.

The minimum investment threshold for these securities is $1,000, representing a single security unit. The aggregate principal amount for this offering totals $18,914,000, making this a mid-sized structured product issuance within BNS's capital markets operations. All payments on the securities remain subject to the credit risk of The Bank of Nova Scotia itself, meaning investors bear both the performance risk of the underlying Arm Holdings ADRs and the counterparty credit risk of the issuer bank.

Contingent Coupon Payment Mechanism and Memory Feature

The securities feature a contingent quarterly coupon structure that pivots on whether the closing price of the underlying stock meets or exceeds the downside threshold price on specified determination dates. If the closing price on any determination date is greater than or equal to the downside threshold price, investors receive a contingent quarterly coupon of $68.75 per security, equivalent to 27.50% per annum of the stated principal amount. This above-market coupon rate is the primary incentive for purchasing these principal-at-risk instruments.

A distinctive feature of these securities is the memory coupon mechanism, which allows unpaid contingent coupons to accumulate. If a contingent quarterly coupon is not paid on any determination date because the underlying stock price falls below the downside threshold price, that missed coupon remains outstanding and can be paid on a later contingent coupon payment date if the price subsequently rises back above the downside threshold. This memory feature provides a second opportunity for investors to receive accumulated unpaid coupons, though only if the underlying asset recovers sufficiently. However, the filing emphasizes that if the closing price on every determination date throughout the term remains below the downside threshold price, investors will receive no contingent quarterly coupons and will realize no positive return on their investment.

Determination Dates and Coupon Payment Schedule

The securities establish a quarterly determination schedule spanning the full life of the investment. Determination dates occur on October 19, 2026, January 19, 2027, April 19, 2027, July 19, 2027, October 18, 2027, January 18, 2028, April 17, 2028, July 17, 2028, October 17, 2028, January 17, 2029, April 17, 2029, and July 17, 2029. The final determination date is identified as July 17, 2029, and all determination dates are subject to postponement for non-trading days and certain market disruption events as described in the product supplement.

Corresponding contingent coupon payment dates are scheduled for October 22, 2026, January 22, 2027, April 22, 2027, July 22, 2027, October 21, 2027, January 21, 2028, April 20, 2028, July 20, 2028, October 20, 2028, January 22, 2029, April 20, 2029, and the maturity date. These payment dates may also be postponed for non-business days or other corporate calendar adjustments. The maturity date is fixed as July 20, 2029, subject to postponement for certain market disruption events.

Early Redemption Trigger and Call Threshold Structure

The securities include an automatic early redemption feature that activates if the closing price of the underlying stock reaches or exceeds the call threshold price on any determination date other than the final determination date. When this call threshold is breached, the securities are automatically redeemed on the first contingent coupon payment date immediately following that determination date, with no investor option to extend or decline the redemption. The early redemption payment is calculated as the stated principal amount plus the contingent quarterly coupon applicable to that determination date, plus any previously unpaid contingent quarterly coupons accumulated through the memory feature.

This early redemption structure caps the investor's upside potential in the securities. Once the call threshold is met and early redemption occurs, no further payments are made on the securities regardless of any subsequent appreciation of the underlying stock. Investors therefore participate in none of the appreciation beyond the structured coupon payments and redemption amount received. This design is typical of auto-callable structured products, where the issuer purchases embedded optionality that limits investor participation in strong market rallies in exchange for higher coupon rates.

Principal-at-Risk Maturity Provisions

The maturity payment structure distinguishes between two scenarios based on the final share price of the underlying Arm Holdings ADRs. If the final share price is greater than or equal to the downside threshold price at maturity, investors receive the stated principal amount of $1,000 per security plus the contingent quarterly coupon applicable to the final determination date and any previously unpaid contingent quarterly coupons accumulated through the memory feature. This represents a full return of principal plus accrued coupons.

However, if the final share price falls below the downside threshold price at maturity, the payment calculation changes fundamentally. Investors receive the stated principal amount multiplied by the share performance factor, which according to the filing will be less than 40.00% of the stated principal amount and could be as low as zero. In this scenario, investors experience a 1-to-1 decline with the underlying stock price relative to the initial share price and can lose a significant portion or potentially their entire investment. The filing explicitly warns that investors face the risk of receiving no principal return and sustaining complete loss of capital if the underlying stock declines substantially by the maturity date.

Downside Threshold Price and Capital Loss Mechanics

The downside threshold price is defined as 40.00% of the initial share price of the underlying Arm Holdings ADRs. This threshold determines both coupon eligibility and final maturity payment structure. If at any point the underlying stock price falls to or below this downside threshold, investors lose the right to receive contingent coupons for that period unless the price recovers above the threshold. The 40.00% threshold means investors can experience a 60% decline in the underlying stock price before capital repayment is reduced below the stated principal amount.

The securities are explicitly characterized as "principal at risk" investments, meaning the full $1,000 stated principal amount is not guaranteed. Investors who purchase these securities must have the financial capacity and risk tolerance to absorb the potential loss of their entire investment if the underlying Arm Holdings stock declines sharply and remains below the downside threshold through the maturity date. The filing makes clear that these securities do not guarantee repayment of principal and do not provide regular interest payments in the conventional sense.

Credit Risk and Unsecured Debt Status

The securities are issued as senior unsecured debt obligations of The Bank of Nova Scotia, meaning they are not secured by any collateral or pledge of underlying assets. Investors' rights are limited to claims against BNS's general creditworthiness, and these instruments rank pari passu with other senior unsecured debt obligations. All payments of principal and coupons are entirely dependent on BNS's ability and willingness to perform on its payment obligations. If BNS were to experience financial distress or default on its debt obligations, investors may receive nothing on their securities and could lose their entire investment despite the underlying Arm Holdings stock performing well.

The filing notes explicitly that investors will not have any security interest in, or access to, any underlying reference asset or assets. The securities do not represent ownership of Arm Holdings or any claim on the company's business, assets, or earnings. They are purely contractual obligations of the Bank of Nova Scotia to make specified payments contingent on the performance of an external reference asset to which the investor has no direct claim.

Secondary Market Settlement and Trading Considerations

The securities will initially settle in three business days (T+3) following the pricing date, placing them on a different settlement timeline than typical securities that settle in one business day (T+1) under standard market convention. For investors who wish to trade these securities in the secondary market prior to delivery, this T+3 settlement cycle requires careful coordination. Under Rule 15c6-1 of the Securities Exchange Act of 1934, secondary market trades generally must settle in T+1 unless parties agree otherwise. This timing mismatch means that purchasers seeking to trade prior to one business day before delivery must specify alternative settlement arrangements with their counterparties to prevent settlement failures.

Once the securities have been delivered and entered the secondary market, their trading characteristics will reflect both the performance of the underlying Arm Holdings ADRs and the market's assessment of BNS's creditworthiness. The price of these securities in the secondary market will fluctuate based on changes in the underlying stock price, interest rate movements, and credit spreads. Investors should recognize that secondary market liquidity for structured products can be limited, and bid-ask spreads may be wider than for conventional securities, potentially making it difficult or costly to exit positions before maturity.

Risk Factors and Investor Suitability

The Bank of Nova Scotia's disclosure emphasizes that these securities are appropriate only for investors willing to accept the risk of receiving no contingent quarterly coupons during the entire term of the investment and potentially losing a significant portion or all of their capital. The securities do not provide any guarantee of return beyond the contingent coupon payments, which are themselves conditioned on the underlying stock price performance. Investors will not participate in any appreciation of the underlying Arm Holdings stock beyond the early redemption threshold and will not realize any return beyond the contingent quarterly coupons if those coupons are actually paid.

The filing characterizes these securities as appropriate for "investors who are willing to risk their entire investment and seek an opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving no interest over the entire term of the securities." This language underscores that the 27.50% per annum coupon rate comes with extreme conditions. Investors must have substantial risk capacity and should clearly understand that market downturns affecting Arm Holdings could result in complete loss of capital, that coupon payments could be deferred or never paid if price thresholds are not met, and that credit risk of BNS itself could independently result in non-payment regardless of underlying stock performance.

Registration and Legal Framework

The securities are offered pursuant to BNS's registration statement No. 333-282565, with this pricing supplement dated July 17, 2026 filed under Rule 424(b)(2). The offering is made based on a prospectus dated November 8, 2024, a prospectus supplement dated November 8, 2024, and a product supplement dated November 8, 2024. The regulatory framework governing these securities establishes BNS as the responsible party for all disclosures and terms, and investors should review the complete prospectus and product supplement documents for comprehensive details regarding payment mechanics, market disruption events, valuation procedures, and other operational terms not summarized in the pricing supplement.

The filing indicates that market disruption events could trigger postponement of determination dates, coupon payment dates, and the maturity date itself, providing the issuer with flexibility to adjust timing if trading in the underlying Arm Holdings ADRs becomes impaired or disrupted. Investors should review the detailed definitions of market disruption events in the product supplement to understand the circumstances under which payment dates could be delayed and how extended delays might affect the return profile of their investment.