Bank of Nova Scotia Issues $5.71 Million Autocallable Notes Linked to Broadcom Stock Performance

Structured Product Design and Automatic Call Mechanism

The Bank of Nova Scotia designed the notes with an autocallable feature that triggers when the Closing Value of Broadcom common stock reaches or exceeds the Initial Value on any designated Call Observation Date. This mechanism allows the issuer to redeem the notes before maturity, which protects the bank's hedging position but may limit upside returns for investors who hold the notes through an automatic call event. The notes represent unsubordinated and unsecured debt obligations of the bank, meaning investors bear the full credit risk of the issuer alongside the market risk associated with Broadcom's stock performance.

The automatic call feature fundamentally shapes the risk-return profile of the investment. If Broadcom's stock price performs strongly and triggers a call event, investors will receive their principal returned early but will forego any additional gains beyond that point. Conversely, if the stock price declines or remains flat, the notes will remain outstanding and investors will face exposure to the negative performance of the underlying reference asset at maturity, subject to the barrier protection mechanism described in the offering terms.

Contingent Coupon Payments and Income Generation

The notes provide for contingent coupon payments on specified observation dates if the Closing Value of Broadcom's common stock equals or exceeds a designated Contingent Coupon Barrier Value on those dates. However, the offering documents emphasize that the notes do not guarantee interest payments, and investors may not receive any contingent coupons during the life of the notes if the barrier level is not breached. This conditional income feature creates uncertainty regarding the actual cash flow investors will receive and distinguishes these notes from conventional fixed-income securities that offer predetermined coupon schedules.

The structure places significant importance on Broadcom's stock performance relative to predefined barrier levels on multiple observation dates throughout the note term. Investors must monitor these specific valuation dates to understand whether coupon payments will be generated. The amount and timing of any contingent coupon payments remain dependent on Broadcom's closing stock price on each Contingent Coupon Observation Date, introducing timing and valuation complexity that differs substantially from traditional debt instruments.

Maturity Payoff Structure and Loss Potential

At maturity on July 5, 2029, the notes' payment depends on the Final Value of Broadcom's stock on the Final Valuation Date and whether the notes have been automatically called prior to that date. If the notes remain outstanding and the Final Value equals or exceeds the Barrier Value, investors will receive the Principal Amount of $1,000 per note plus any contingent coupon due on the maturity date. However, if the Final Value falls below the Barrier Value, the filing states that investors will suffer a loss equal to the depreciation of the reference asset and may lose up to 100 percent of the Principal Amount invested.

This loss mechanism creates substantial downside risk that differentiates the notes from principal-protected investments. The notes do not include a guarantee that investors will recover their initial investment if Broadcom's stock declines significantly over the approximately 3-year holding period. The potential for total loss of principal makes these notes speculative instruments suitable only for investors with significant risk tolerance and a positive outlook on Broadcom's stock performance relative to its value on the Trade Date of July 15, 2026.

Credit Risk and Issuer Dependencies

All payments on the notes are subject to the creditworthiness of The Bank of Nova Scotia, which means investors face the dual risk of both the bank's ability to pay and the performance of Broadcom's stock. The notes are unsubordinated and unsecured obligations of the bank, providing investors with no collateral backing or priority claim on the bank's assets in the event of financial distress. This structure prioritizes the bank's other senior creditors and equity holders ahead of noteholders in any insolvency scenario.

The filing emphasizes that the notes are not insured by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation, or any other government agency in Canada, the United States, or other jurisdictions. Investors relying on these notes must conduct thorough credit analysis of The Bank of Nova Scotia and maintain confidence in its ability to meet all payment obligations over the full 3-year term, regardless of Broadcom's stock performance or market conditions.

Pricing and Estimated Value Disclosure

The Bank of Nova Scotia disclosed an initial estimated value of $963.65 per $1,000 Principal Amount on the Trade Date, which is significantly less than the Original Issue Price of 100 percent, or $1,000 per note. This valuation gap reflects the bank's internal funding rate, underwriting commissions, and the economic cost of structuring and hedging the notes. The original issue price of $5.71 million represents a 100 percent offering price, with Scotia Capital (USA) Inc., the bank's affiliate, purchasing the notes at the Principal Amount and distributing them at a 2 percent discount to other registered broker-dealers.

The difference between estimated value and issue price indicates that investors are paying a premium above the bank's calculated fair value at inception. The bank's internal pricing models incorporate specific assumptions about market parameters and funding costs that may not align with secondary market valuations. Investors should recognize that this initial valuation gap may affect the secondary market price and liquidity of the notes, particularly during the first three months following the original issue date when the bank has indicated it may elect to reimburse a portion of estimated hedging and structuring costs.

Distribution Terms and Market-Making Activity

Scotia Capital (USA) Inc. has agreed to purchase the notes from The Bank of Nova Scotia at the Principal Amount and to distribute them to other registered broker-dealers at a discount of $20.00, or 2.00 percent, per $1,000 Principal Amount. This underwriting structure means the bank receives $5.595 million in proceeds after the underwriting commission, with the remaining $114,200 representing the total underwriting compensation. The bank's affiliate is permitted to engage in market-making transactions in the notes after their initial sale, though the offering documents emphasize that it is not obligated to do so.

The minimum investment for these notes is $1,000, with purchases permitted in integral multiples of $1,000 thereafter. The notes will not be listed on any U.S. securities exchange or automated quotation system, meaning any secondary market trading will occur over-the-counter through Scotia Capital or other dealers. Investors should understand that the secondary market for these notes may be limited and that bid-ask spreads in any secondary market could be substantial, particularly if Scotia Capital elects not to actively make markets in the notes.

Reference Asset and Derivative Structure Characteristics

The notes are derivative products based solely on the price return of Broadcom Inc. common stock and do not constitute a direct investment in Broadcom shares. Investors acquiring the notes do not obtain any direct economic or beneficial ownership of Broadcom stock, voting rights, rights to receive dividends, or entitlements to other distributions from the company. The reference asset serves only as a performance benchmark for calculating note returns, with all payments made in cash by The Bank of Nova Scotia rather than through physical delivery of Broadcom shares.

This derivative structure means investors are exposed purely to the price appreciation or depreciation of Broadcom's stock without any of the ownership benefits that accompany direct equity investment. The notes' returns depend exclusively on the closing prices of Broadcom's common stock on specified valuation dates, creating a purely synthetic exposure to the company's market performance. Investors should be aware that because the notes track only price returns, they do not benefit from any dividends Broadcom may declare and pay to its shareholders during the note term.

Settlement Timeline and Investor Considerations

The notes carry a Trade Date of July 15, 2026, and are scheduled to settle on July 20, 2026, according to the pricing supplement filed with the Securities and Exchange Commission. The term of approximately 3 years assumes the notes are not automatically called prior to the stated maturity date of July 5, 2029. This timeline gives investors a defined investment horizon, though the actual holding period may be shortened if Broadcom's stock performance triggers an automatic call event on any of the designated observation dates.

Investors considering these notes should carefully evaluate their investment timeline and risk tolerance over the expected holding period. The contingent nature of coupon payments and the potential for automatic call events introduce timing uncertainties that complicate portfolio planning. Additionally, the notes' value in the secondary market may fluctuate substantially based on changes in Broadcom's stock price, implied volatility, interest rates, and the bank's credit spreads, making early exit from the investment position a consideration for some investors.

Regulatory Status and Risk Documentation

The pricing supplement states 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. The notes are offered pursuant to Rule 424(b)(2) under the Securities Act of 1933, with a Registration No. 333-282565. The offering documents direct investors to comprehensive risk disclosures beginning on page P-10 of the pricing supplement, in the accompanying product supplement, in the accompanying prospectus supplement, and in the accompanying prospectus filed with the SEC.

The filing emphasizes multiple risk factors including credit risk of the issuer, market risk of the reference asset, estimated value and liquidity risks, and the potential for loss of principal. Investors are urged to review all risk documentation in the complete offering materials before making an investment decision. The Bank of Nova Scotia has structured the offering to ensure compliance with securities regulations while clearly delineating the complex risks associated with these autocallable derivative notes linked to Broadcom's stock performance.