Bank of Nova Scotia Issues $8.4 Million NVIDIA-Linked Autocallable Notes Due 2029

Structure and Payment Mechanics of the NVIDIA-Linked Securities

The Bank of Nova Scotia has structured these notes to provide returns based on the performance of NVIDIA's common stock, with multiple payment scenarios depending on whether the automatic call provision is triggered. The notes function as unsubordinated, unsecured debt obligations of the Bank, meaning all payments are subject to the Bank's creditworthiness. Unlike direct equity ownership, investors in these notes do not acquire voting rights, dividend entitlements, or any beneficial ownership of NVIDIA shares—the notes are purely derivative instruments based on NVIDIA's price return.

According to the filing, the initial estimated value of the notes at the time terms were set was $969.51 per $1,000 principal amount, compared to the original issue price of 100 percent ($1,000 per note). This $30.49 discount per note reflects internal pricing models incorporating the Bank's funding rate, underwriting commissions of 1.50 percent, and structuring costs. Scotia Capital (USA) Inc., an affiliate of the Bank, purchased the notes at principal amount and agreed to sell them to other broker-dealers at the discounted rate.

Automatic Call Provisions and Early Termination Scenarios

The notes feature an automatic call mechanism that terminates the investment early if NVIDIA's closing stock price meets or exceeds the initial value on any designated call observation date. When an automatic call is triggered, investors receive a cash payment equal to the principal amount plus any contingent coupon due on that date and any previously accrued but unpaid contingent coupons. The filing states that following an automatic call, no further payments are made on the notes, effectively ending the investor's exposure to future NVIDIA price movements.

This automatic call structure protects the Bank from unlimited upside exposure while providing investors with principal recovery if NVIDIA stock rebounds to its initial trading level. However, it also caps investor returns in a rising market scenario, as investors cannot participate in NVIDIA gains beyond the return to initial value. The specific call observation dates are referenced in the summary section of the pricing supplement but are not enumerated in the publicly available portions of the filing.

Contingent Coupon Payment Mechanics and Memory Features

The notes incorporate a contingent coupon mechanism that pays periodic interest only if NVIDIA's closing stock price meets or exceeds a specified contingent coupon barrier value on scheduled observation dates. According to the disclosure, if the closing value on any contingent coupon observation date equals or exceeds the barrier, a contingent coupon payment is made, along with any unpaid coupons from prior observation dates that did not trigger payment. This memory feature allows investors to accumulate missed coupon payments and receive them on the next date when the stock price barrier is exceeded.

Conversely, if the closing value falls below the contingent coupon barrier value on any observation date before the final valuation date, that coupon does not pay on its scheduled date and instead becomes an "unpaid contingent coupon" that carries forward. The filing emphasizes that the notes do not guarantee interest, and investors may receive no contingent coupons if NVIDIA's stock price remains below the barrier throughout the note term. The specific coupon percentage and barrier values are detailed in the summary section but are not disclosed in the filing excerpt provided.

Maturity Payment Terms and Barrier-Based Repayment

At maturity on July 26, 2029, if the notes have not been automatically called, investors receive payment based on NVIDIA's final stock price performance relative to a specified barrier level. The filing defines the final value as NVIDIA's closing stock price on the final valuation date. If this final value equals or exceeds the barrier value, investors receive the full principal amount of $1,000 per note, plus any contingent coupon due on the final observation date and any accumulated unpaid coupons.

However, if the final value falls below the barrier value at maturity and the notes remain uncalled, investors suffer a loss equal to the full depreciation of NVIDIA's stock from its initial level. The disclosure states explicitly that investors may lose up to 100 percent of the principal amount in this scenario. This downside exposure represents the most significant risk in the note structure—while the contingent coupon and automatic call features provide limited upside participation and interest income, the barrier-based repayment at maturity exposes investors to the full negative performance of NVIDIA stock if it declines substantially.

Estimated Value Discrepancy and Internal Pricing Models

The Bank disclosed that the initial estimated value of $969.51 per note was determined using the Bank's internal pricing models, which incorporate factors such as the Bank's internal funding rate on the trade date and assumptions about market parameters. The filing explains that the economic terms of the notes are based on the Bank's internal funding rate, defined as the rate the Bank would pay to borrow funds through issuing similar market-linked notes. This internal rate typically remains lower than the rates the Bank would pay for conventional fixed-rate debt, which reduces the economic return to investors in the structured notes.

The difference between the original issue price of 100 percent and the estimated value of 96.951 percent reflects underwriting commissions of 1.50 percent ($15 per note) and structuring costs. Additionally, Scotia Capital agreed to pay a structuring fee of $4.50 per note with respect to all notes distributed through third-party broker-dealers. The Bank retained discretion to reimburse investors a portion of estimated hedging costs over approximately three months following the original issue date, which may temporarily elevate secondary market prices above the trade-date estimated value.

Trade Terms and Settlement Information

The notes carry a trade date of July 22, 2026, with settlement scheduled for July 27, 2026. The offering targeted an approximate three-year term if not automatically called prior to maturity. The Bank set a minimum investment requirement of $1,000 per note, with subsequent purchases in integral multiples of $1,000. The notes are identified by CUSIP 063941CK2 and ISIN US063941CK20, making them searchable in financial databases and trading systems for secondary market transactions.

The total offering size was $8.377 million in principal amount, with Scotia Capital (USA) Inc. purchasing the notes at face value from the Bank and subsequently distributing them through other registered broker-dealers. The proceeds to the Bank after underwriting commissions totaled $8.251 million, or 98.50 percent of the original issue price. The filing makes clear that the notes will not be listed on any U.S. securities exchange or automated quotation system, limiting liquidity to over-the-counter transactions potentially facilitated by Scotia Capital or other affiliated dealers.

Credit Risk and Unsecured Debt Status

The notes represent unsubordinated and unsecured obligations of The Bank of Nova Scotia, meaning they are backed only by the general creditworthiness of the Bank and have no specific collateral pledged to secure repayment. All payments of principal and contingent coupons are subject to the Bank's credit risk, a material consideration for investors evaluating the investment. The Bank's credit quality directly affects the value and safety of note payments, independent of NVIDIA's stock price performance.

The filing emphasizes that investors should review the Bank's credit profile and risk factors disclosed in the accompanying prospectus and prospectus supplement. The notes are not insured by the Canada Deposit Insurance Corporation under Canadian law, nor are they covered by U.S. Federal Deposit Insurance Corporation protections or any other government insurance program in Canada, the United States, or other jurisdictions. This lack of deposit insurance protection distinguishes these structured notes from traditional bank deposits and increases the investor's reliance on the Bank's financial stability.

Secondary Market Considerations and Dealer Conflicts of Interest

Scotia Capital (USA) Inc., identified as an affiliate of the Bank, agreed to function as a market maker for the notes after initial distribution. The filing discloses that unless explicitly stated otherwise in the confirmation of sale, transactions in these notes should be presumed to be market-making transactions involving Scotia Capital or other Bank affiliates. This creates potential conflicts of interest, as the dealer facilitating secondary market trades is affiliated with the note issuer.

The Bank indicated that it may use the pricing supplement in connection with market-making activities, meaning secondary market prices quoted by Scotia Capital may differ significantly from both the initial estimated value and any theoretical fair value assessments. Investors purchasing notes in the secondary market should understand that affiliate dealers may widen bid-ask spreads and that liquidity may be limited given the notes are not exchange-listed. The filing recommends that investors refer to detailed disclosures regarding supplemental distribution arrangements and conflicts of interest in both the pricing supplement and accompanying product supplement.

Risk Factors and Investment Considerations

The disclosure document directs investors to comprehensive risk factor discussions spanning multiple pages of accompanying supplements and prospectuses. Key risks include the dependency on NVIDIA's stock price performance, the potential for total principal loss if the barrier is breached at maturity, the possibility of receiving no contingent coupons despite holding the notes to maturity, and the credit risk of the Bank itself. Investors should recognize that these are complex derivative instruments designed primarily for sophisticated investors with high risk tolerance and detailed understanding of structured product mechanics.

The filing explicitly states that the Notes involve certain risks and references detailed discussions beginning on page P-11 of the pricing supplement for additional risks, page PS-6 of the accompanying product supplement for note-specific risks, page S-2 of the prospectus supplement, and page 8 of the prospectus itself. The extent and complexity of risk disclosures across multiple documents underscore the sophisticated nature of the offering. Investors should conduct thorough due diligence on both NVIDIA as the reference asset and the Bank as the issuer before committing capital to these instruments.