Bank of Nova Scotia Issues Callable Contingent Coupon Notes Linked to Nasdaq-100, Russell 2000, and S&P 500 Indices

Structure and Contingent Payment Mechanics of the Notes

The notes represent unsubordinated and unsecured debt obligations of The Bank of Nova Scotia, with all payments subject to the Bank's creditworthiness. The disclosure states that contingent coupon payments will be made on specified contingent coupon payment dates only if the closing value of each of the three reference assets—the Nasdaq-100 Index, the Russell 2000 Index, and the S&P 500 Index—is equal to or greater than its respective contingent coupon barrier value on the corresponding contingent coupon observation date. This structure means that if even one index closes below its barrier on an observation date, investors will not receive the coupon payment for that period.

The notes do not guarantee interest payments, and investors should understand that they may not receive any contingent coupons throughout the five-year term. The announcement emphasizes that payments on the notes are based on the performance of all three reference assets, creating a multi-factor dependency for coupon receipt. The document explicitly states that the notes do not constitute a direct investment in any of the reference assets or their constituent stocks, and noteholders will not have any direct economic interest, claim, voting rights, or entitlement to dividends from the underlying index components.

The Bank's Issuer Call Right and Its Impact on Note Holders

A significant feature of these notes is the Bank's discretionary right to call the entire issue in whole, but not in part, on any potential call settlement date regardless of how the reference assets have performed. The filing discloses that if the Bank exercises this issuer call option, noteholders will receive a cash payment equal to the principal amount plus any contingent coupon otherwise payable on the corresponding contingent coupon payment date. This call feature gives the Bank substantial control over the life of the investment and introduces reinvestment risk for noteholders.

The ability to call the notes at the Bank's discretion means that if market conditions favor the issuer—such as when the reference assets are performing strongly and coupon payments would be attractive to investors—the Bank may choose to retire the notes early. Conversely, if market conditions are unfavorable to the Bank, it may allow the notes to remain outstanding. This asymmetric benefit structure is typical of callable securities and represents a cost to noteholders that is reflected in the initial estimated value of the notes being below par.

Maturity Payoff Structure Based on Least Performing Index

The maturity payment structure of these notes introduces complexity and downside risk for investors. The filing specifies that if the Bank does not call the notes prior to maturity, the payment at maturity will be based solely on the performance of the reference asset with the lowest percentage change from its initial value to its final value—designated as the "Least Performing Reference Asset." This means that even if two of the three indices perform well, the worst-performing index will determine the final payoff to investors.

If the final value of the least performing reference asset is equal to or greater than its barrier value at maturity, investors will receive the principal amount of their notes on the maturity date, in addition to any contingent coupon due on that date. However, if the final value of the least performing reference asset falls below its barrier value, investors will suffer a loss equal to the percentage depreciation of that index, potentially losing up to 100 percent of the principal amount. This structure creates substantial downside risk, as the notes provide no principal protection if any single index experiences a significant decline over the five-year term.

Pricing, Valuation, and Initial Estimated Value Range

The announcement discloses that the notes are being issued at an original issue price of 100 percent of the principal amount, with Scotia Capital (USA) Inc., an affiliate of the Bank, purchasing the notes at the principal amount and distributing them to other broker-dealers. The Bank may periodically pay third-party dealers a structuring fee of up to $4.50 per note. However, the initial estimated value of the notes at the time the terms are set on the trade date is expected to be between $947.66 and $977.66 per $1,000 principal amount—significantly below the 100 percent original issue price.

The filing explains that this difference between the original issue price and the initial estimated value reflects the Bank's internal funding rate, underwriting costs, and structuring fees. The Bank states that its internal funding rate is typically lower than the rate it would pay when issuing conventional fixed-rate debt securities, which reduces the economic terms to noteholders. The disclosure further notes that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy. The Bank indicates that assuming all relevant factors remain constant, SCUSA may initially buy or sell the notes in the secondary market at prices exceeding the estimated value on the trade date for approximately three months after the original issue date, as the Bank may elect to reimburse investors a portion of hedging and structuring costs.

Risks Associated with Credit Quality and Absence of Insurance Protection

All payments on the notes are subject to the credit risk of The Bank of Nova Scotia, an important consideration for noteholders evaluating their investment. The notes are unsubordinated and unsecured obligations of the Bank, meaning that in the event of financial distress, noteholders rank equally with other unsecured creditors and behind secured creditors in any claims on the Bank's assets. The filing does not disclose any credit enhancement, guarantees, or special protections for noteholders beyond the Bank's general creditworthiness.

The disclosure explicitly states that the notes are not insured by the Canada Deposit Insurance Corporation 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 any other jurisdiction. This absence of deposit insurance protection distinguishes these notes from traditional bank deposits and places full reliance on the Bank's ability and willingness to meet its obligations. Noteholders bear the full credit risk of the Bank over the five-year term.

Secondary Market Characteristics and Liquidity Considerations

The filing indicates that the notes will not be listed on any U.S. securities exchange or automated quotation system, which may significantly affect the liquidity and pricing of the notes in the secondary market. The Bank's affiliate, SCUSA, may engage in market-making transactions in the notes after their initial sale, but the filing does not guarantee continuous liquidity or narrow bid-ask spreads. The announcement notes that unless the Bank, SCUSA, or another affiliate informs noteholders otherwise in the confirmation of sale, the pricing supplement is being used in a market-making transaction.

The lack of exchange listing and reliance on market-making by affiliated entities create potential liquidity constraints for investors who wish to sell their notes before maturity. The value of the notes will depend on market demand and the Bank's or affiliates' willingness to buy or sell at any given time. Investors considering these notes should understand that secondary market trading may be limited or unavailable, potentially making it difficult to exit the investment before the maturity date or an issuer call date.

Investment Suitability and Derivative Product Nature

The notes are derivative products based on the price return of the least performing reference asset, and the Bank emphasizes that noteholders should refer to comprehensive risk disclosures beginning on pages P-10 and PS-6 of accompanying documents and page S-2 of the prospectus supplement and page 8 of the prospectus. The product combines multiple complexity layers: contingent coupon payments, an issuer call feature, a worst-of structure based on three indices, and downside exposure to index depreciation.

These notes are structured products designed for sophisticated investors with specific views on index performance, comfort with contingent income, and willingness to accept substantial downside risk. The filing does not recommend these notes as suitable for all investors and emphasizes the need to carefully review all risk factors. Potential investors should understand that they are not making a direct investment in any of the underlying indices or their constituent stocks and will have no voting rights or dividend entitlements from those constituents.

Expected Pricing Timeline and Settlement Details

The filing discloses that the notes are expected to price on July 24, 2026, with settlement anticipated on July 29, 2026, which will also serve as the initial valuation date for the indices. The notes will have an approximate five-year term if not called by the Bank prior to maturity. The minimum investment requirement is $1,000 per note, with additional investments in integral multiples of $1,000.

The CUSIP number for the notes is 063941DQ8, and the ISIN is US063941DQ80, allowing investors to track and identify the specific securities. The offering is being conducted under SEC registration number 333-282565 and is filed pursuant to Rule 424(b)(2), indicating that this is a preliminary pricing supplement subject to completion and final delivery of the pricing supplement before sales can occur. The Bank has noted that it is not yet selling the notes and is not soliciting offers to buy the notes in any state where such offer or sale is not permitted.

Market-Making and Secondary Distribution Arrangements

Scotia Capital (USA) Inc., the Bank's affiliate, will purchase the notes from the Bank at the principal amount and distribute them to other registered broker-dealers at the principal amount, with no underwriting commissions charged. This arrangement differs from traditional securities underwriting, as the affiliate effectively acts as a principal buyer and distributor rather than earning underwriting fees. The Bank may also periodically pay third-party dealers a structuring fee of up to $4.50 per note with respect to some or all of the notes distributed through those dealers.

The disclosure indicates a potential conflict of interest, as SCUSA, being an affiliate of the Bank, may use the pricing supplement to engage in market-making transactions in the notes after their initial sale. Noteholders should be aware that market prices quoted by SCUSA or other dealers in any secondary market may include markups or markdowns reflecting the dealer's costs and desired profit margins. The Bank's ability to manage aspects of the secondary market through its affiliate creates circumstances where the interests of dealers may not be fully aligned with the interests of note holders seeking to trade in the secondary market.