Bank of Nova Scotia Issues $32.6 Million Autocallable Notes Linked to Technology-Software ETF

Structure and Redemption Terms of the Autocallable Notes

The Bank of Nova Scotia's structured notes represent an unsubordinated, unsecured obligation of the bank and are designed with a dual-outcome maturity profile. The notes incorporate an autocall feature that activates on December 14, 2027, provided the closing price of the iShares Expanded Tech-Software Sector ETF reaches or exceeds 85% of the initial price of $93.63 set on the trade date of July 14, 2026. If the autocall condition is met, noteholders receive $1,000 principal plus a call premium of 17.55% per $1,000 invested, payable on December 16, 2027. This two-stage maturity structure allows the bank to potentially reduce its obligation early while providing investors with enhanced returns in a stable market environment.

Should the notes not be automatically called, they mature on December 18, 2028, with final payouts determined by the reference asset's performance measured from July 14, 2026 to December 14, 2028. The pricing supplement discloses that if the final price is greater than or equal to 85% of the initial price, noteholders receive the maximum payment amount of $1,351.00 per $1,000 principal. However, if the final price falls between 85% and 100% of the initial price, or even if it rises above the initial price, the maximum payment remains capped at $1,351.00. This structure provides a cushion for modest declines in the underlying ETF while limiting upside potential.

Principal Protection Buffer and Loss Mechanisms

The notes incorporate a 15% buffer mechanism that protects noteholders from principal erosion in the event of moderate declines in the reference asset. The filing states that investors will receive the maximum payment amount as long as the final price does not decline more than 15% from the initial price. This buffer means that if the iShares Expanded Tech-Software Sector ETF declines from $93.63 to $79.59 (a 15% drop), noteholders would still receive the full $1,351.00 maximum payment per $1,000 principal at maturity. The buffered structure differentiates these notes from traditional equity-linked products that provide no downside protection.

Beyond the 15% buffer threshold, the notes employ a leveraged loss formula that amplifies losses during sharp declines in the underlying ETF. The pricing supplement discloses that investors lose approximately 1.1765% for every 1% the reference asset declines below 85% of the initial price. This means that in a severe downturn scenario, potential losses exceed the percentage decline in the underlying index. For instance, if the reference asset declines 25% from the initial price, noteholders would experience losses of approximately 29.4% of principal investment. The possibility of losing the entire principal amount is explicitly disclosed in the offering document, representing the maximum downside exposure for investors.

Underlying Reference Asset and Performance Linkage

The notes are linked exclusively to the price performance of the iShares Expanded Tech-Software Sector ETF, not to the S&P North American Expanded Technology Software Index on which the ETF is based. This distinction is material because the notes track only the price return of the reference asset and do not include dividends, distributions, or total return components that the underlying ETF may generate. Investors acquire exposure to the technology and software sector through a derivative contract rather than direct ownership of the ETF's holdings, meaning they have no voting rights, dividend entitlements, or shareholder claims against any of the companies represented in the index.

The initial price of $93.63, established as the closing price of the iShares Expanded Tech-Software Sector ETF on the trade date of July 14, 2026, serves as the baseline for all performance calculations throughout the note's life. The valuation date of December 14, 2028 marks the final measurement point for determining maturity payouts. By linking to a specific ETF rather than an index or basket of individual stocks, the Bank of Nova Scotia transfers the complexities of index tracking and rebalancing to the ETF's sponsor, while investors bear the systematic and sector-specific risks inherent in technology and software equities.

Pricing, Distribution, and Estimated Value Considerations

The notes were issued at par with an original issue price of 100%, generating total gross proceeds of $32.625 million. Scotia Capital (USA) Inc. and Goldman Sachs & Co. LLC served as underwriters, with Scotia Capital (USA) Inc. acting as the distribution intermediary to other registered broker-dealers. The filing discloses underwriting commissions of 1.81%, amounting to $590,512.50, resulting in net proceeds to the Bank of Nova Scotia of $32,034,487.50. The proceeds net of underwriting fees represent the bank's principal capital raised before accounting for hedging costs and the bank's internal funding rate reflected in the note's economic terms.

The Bank of Nova Scotia provided an initial estimated value of $953.25 per $1,000 principal amount, representing a $46.75 discount to the original issue price of $1,000. The filing states that this estimated value was determined by the bank's internal pricing models incorporating the bank's internal funding rate on the trade date and assumptions about market parameters. The pricing supplement explicitly notes that the original issue price exceeds the initial estimated value, reflecting the bank's internal funding cost, underwriting discount, and hedging arrangement costs. This valuation gap is significant because it indicates that noteholders pay a premium relative to the bank's cost basis, a factor explicitly identified in the risk disclosure section.

Credit Risk and Counterparty Obligations

The notes are unsubordinated, unsecured obligations of The Bank of Nova Scotia, meaning all payments depend entirely on the bank's creditworthiness and ability to meet its obligations at maturity or upon automatic call. The pricing supplement explicitly discloses that any payment on the notes is subject to the credit risk of the Bank of Nova Scotia. Unlike traditional bank deposits, these notes do not carry protection from the Canada Deposit Insurance Corporation (CDIC) under the Canada Deposit Insurance Corporation Act, nor are they insured by the U.S. Federal Deposit Insurance Corporation or any other government agency in Canada, the United States, or other jurisdictions. This lack of deposit insurance protection exposes noteholders to full counterparty risk in the event of bank failure or financial distress.

The subordination status and lack of insurance protection distinguish these structured notes from conventional bank savings products. Noteholders have no secured claim against the bank's assets and rank pari passu with other unsecured creditors. In a stress scenario where the underlying ETF experiences a sharp decline simultaneously with deterioration in the bank's creditworthiness, investors would face a compounded loss scenario: both the leveraged downside exposure to the technology sector and potential credit loss from the bank. The filing provides no quantitative assessment of the probability or magnitude of credit events, emphasizing that investors should carefully evaluate the Bank of Nova Scotia's financial stability before committing capital.

Market-Making Arrangements and Secondary Market Liquidity

Goldman Sachs & Co. LLC has agreed to engage in market-making activities for the notes in the secondary market on a voluntary basis, though the pricing supplement clarifies that Goldman Sachs is not obligated to maintain a secondary market. Unless otherwise explicitly stated in the sales confirmation, the pricing supplement indicates that transactions following the initial sale will be conducted as market-making transactions. Goldman Sachs' estimated market value, excluding customary bid-ask spreads, will serve as the basis for account statements and pricing. However, the absence of a guaranteed liquidity provider or mandatory bid means investors may face difficulty liquidating positions prior to maturity if market conditions deteriorate or demand for the notes diminishes.

The notes will not be listed on any U.S. securities exchange or automated quotation system, further limiting transparency and price discovery mechanisms available to investors. Without exchange listing, noteholders depend on broker-dealer market-making networks for execution and pricing information. The Bank of Nova Scotia or its affiliates may purchase or sell additional notes after the initial offering date at different original issue prices and commission terms, which could affect secondary market pricing and liquidity for the initial tranche. Investors should assess their liquidity needs carefully, as the notes' derivative nature and lack of conventional market infrastructure may restrict exit opportunities before the maturity or call date.

Risk of Leverage in Downside Performance and Redemption Uncertainty

The structured note mechanism incorporates leveraged losses during significant declines in the underlying technology-software ETF, creating asymmetric risk-return profile. While the maximum upside is capped at 35.1% if not called (calculated as ($1,351 − $1,000) / $1,000), the downside loss acceleration multiplier of approximately 1.1765 means that portfolio losses can exceed the underlying ETF's negative returns. A 30% decline in the ETF below the 85% threshold would result in approximately 35.3% principal loss for noteholders, effectively wiping out gains from the call premium and call feature while extending into principal erosion. This loss asymmetry is inherent to buffered autocallable structures and reflects the trade-off between downside protection and limited upside participation.

The automatic call feature introduces redemption uncertainty that may disadvantage investors in rising market environments. If the technology-software sector experiences strong performance and the ETF appreciates significantly above the 85% autocall threshold before December 14, 2027, the notes will be redeemed at the fixed call premium of 17.55%, capping returns despite ongoing sector strength. Investors who anticipated extended technology sector appreciation would receive only the predetermined call premium rather than participating in the ETF's full upside. Conversely, the 15% downside buffer may prove insufficient if the technology sector experiences a sustained bear market, as the buffer is measured as a fixed percentage decline from the trade date price rather than a dynamic or inflation-adjusted protection level.

Investor Suitability and Risk Disclosure Framework

The Bank of Nova Scotia's pricing supplement directs investors to additional risk disclosures located in the accompanying product supplement, prospectus supplement, and prospectus for comprehensive understanding of the investment risks. The filing identifies investment in the notes as involving certain risks and refers readers to detailed risk discussions beginning on page P-14 of the pricing supplement. These risks include derivative product complexity, leverage in loss calculations, absence of deposit insurance, credit risk of the bank, and market liquidity constraints. The pricing supplement explicitly warns that the value of notes at any time will reflect many factors and cannot be predicted with accuracy, acknowledging the uncertainty inherent in structured products tied to equity market performance.

The initial estimated value discount relative to original issue price signals that noteholders are paying a premium relative to the bank's internal cost basis. This pricing structure is typical in structured notes but represents a material economic consideration for investors evaluating risk-adjusted returns. The pricing supplement notes that the Bank of Nova Scotia's internal funding rate is typically lower than the rate the bank would pay when issuing conventional fixed-rate debt, meaning the economic terms of the notes reflect rates favorable to the bank rather than market-competitive pricing. Potential noteholders should independently assess whether the call premium of 17.55%, maximum maturity payment of $1,351, and 15% downside buffer adequately compensate for credit risk, liquidity constraints, and leveraged loss exposure inherent in the structured product.

Regulatory Status and Absence of Government Endorsement

The pricing supplement includes the standard disclosure that neither the United States 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 offering documents. This disclosure is required by securities law and reflects the regulatory framework for structured products, which are offered through registered broker-dealers but do not require explicit SEC product approval prior to issuance. The notes are offered pursuant to Securities Act registration statement number 333-282565, indicating the offering follows established regulatory procedures for market-linked securities. The pricing supplement dated July 14, 2026 constitutes the offer document under which the notes were marketed to qualified investors.

Investors should not interpret the absence of SEC disapproval as an endorsement or implicit approval of the notes' terms or risk profile. The SEC's role in structured product offerings is limited to ensuring disclosure completeness and accuracy rather than evaluating product suitability or fairness of pricing. The regulatory framework relies on investor knowledge, broker-dealer compliance standards, and issuer disclosure accuracy rather than prospective regulatory product approval. Noteholders bear full responsibility for evaluating the investment merits, pricing, and risk-reward characteristics of the structured notes independent of regulatory proceedings.