Bank of Nova Scotia Issues Complex Auto-Callable Equity Index Linked Securities Due 2030

Three-Index Structure with Lowest Performer Determination

The Bank of Nova Scotia's newly issued securities are linked to the performance of three major stock market indices: the Russell 2000 Index, the S&P 500 Index, and the EURO STOXX 50 Index. A critical feature of these securities is that returns are determined exclusively by the lowest performing index on each calculation day, rather than an average or weighted combination of the three indices. The company disclosed that the lowest performing index on any calculation day is identified as the index with the lowest closing level expressed as a percentage of its starting level.

This structure creates a significant asymmetry in risk and return dynamics. Investors receive no benefit from the outperformance of any index and instead are penalized if any single index underperforms, regardless of how well the other two indices perform during the same period. The filing states that investors will have no participation in appreciation of any index and will not receive dividends on securities included in any index, further limiting upside potential while maintaining downside exposure.

Contingent Coupon Payment Mechanics and Thresholds

The securities will pay a contingent coupon on a quarterly basis, but only if the closing level of the lowest performing index on the calculation day for that quarter meets or exceeds the coupon threshold level. The Bank disclosed that the coupon threshold level for each index is set at 75% of its starting level, and the contingent coupon rate will be at least 10.55% per annum, determined on the pricing date of July 31, 2026. This means investors receive quarterly payments only when performance conditions are met.

The filing indicates that if the closing level of the lowest performing index falls below the coupon threshold on any calculation day, no contingent coupon payment will be made on the related quarterly contingent coupon payment date. More significantly, if the lowest performing index fails to meet the coupon threshold on every single calculation day throughout the security's term, investors will receive no contingent coupon payments at all. This contingent structure creates substantial uncertainty regarding actual income generation over the four-year holding period.

Automatic Call Provisions and Early Termination

The securities include automatic call provisions that allow the Bank to terminate the securities prior to their stated maturity of August 1, 2030. The filing discloses that if the closing level of the lowest performing index on any quarterly calculation day from January 2027 through April 2030 is greater than or equal to its starting level, the securities will be automatically called. When automatically called, investors receive the face amount of $1,000 per security plus a final contingent coupon payment.

This automatic call feature benefits the Bank but constrains investor upside potential. If markets perform well and the lowest performing index appreciates to or above its starting level, the Bank will exercise the call and terminate the investment, limiting investors' gains. The filing suggests that the automatic call could occur at any quarterly calculation day beginning January 2027, meaning the effective holding period for investors could be considerably shorter than the stated four-year maturity, depending on market performance across all three indices.

Principal at Risk and Downside Threshold Structure

The Bank disclosed that these are principal at risk securities, meaning investors may lose more than 25% of their investment if performance conditions are not met at maturity. If the securities are not automatically called prior to the August 1, 2030 stated maturity, investors will receive the full $1,000 face amount only if the closing level of the lowest performing index on the final calculation day is greater than or equal to its downside threshold level, which is set at 75% of the starting level.

If the lowest performing index closes below the 75% downside threshold on the maturity date, investors will have full downside exposure to that index from its starting level. The filing states that investors could potentially lose all of their principal in this scenario. This structure means that even if two of the three indices appreciate significantly, a decline in one index could result in substantial losses. The downside protection mechanism is limited to the 75% threshold; below that level, investors bear losses dollar-for-dollar with the index decline.

Credit Risk and Lack of Government Insurance Protection

The securities are structured as senior unsecured debt obligations of The Bank of Nova Scotia, and the filing explicitly states that all payments are subject to the credit risk of the Bank. This means that regardless of how the underlying indices perform, if the Bank encounters financial distress, its ability to make coupon payments or return principal could be impaired. The Bank's creditworthiness is therefore a critical consideration for investors evaluating these securities.

The filing provides important information about insurance coverage. The Bank disclosed that the securities are not insured by the Canada Deposit Insurance Corporation pursuant to the CDIC Act, nor are they insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency of Canada, the United States, or any other jurisdiction. This absence of government backing distinguishes these securities from traditional bank deposits and places investors at risk if the issuer defaults.

Estimated Value and Agent Discount Structure

The Bank disclosed that if the securities priced as described, the estimated value of the securities as determined by the Bank would be between $925.79 (92.579% of par) and $955.79 (95.579% of par) per security. This estimated value is substantially below the $1,000 original offering price, reflecting the cost of the embedded options and the dealer markup. The filing notes that this estimated value determination is made by the Bank itself and should be reviewed carefully by investors.

The offering structure includes substantial distribution costs. The filing states that Scotia Capital (USA) Inc. or one of the Bank's affiliates will purchase the securities and sell them to Wells Fargo Securities at a discount of up to $23.25 per security (2.325%). Wells Fargo Advisors may receive a selling concession of up to $17.50 per security (1.75%), plus an additional distribution expense fee of $0.75 (0.075%) per security. The Bank notes that it may also pay up to $1.00 per security to selected dealers for marketing and other distribution services. These costs are embedded in the offering price and are not transparent to individual investors.

Designation as Senior Unsecured Obligations Under Series A Program

The filing indicates that these securities are issued under The Bank of Nova Scotia's Senior Note Program, Series A, and are registered under Registration Statement No. 333-282565. The securities constitute senior unsecured debt obligations of the Bank and are subject to the terms described in the related product supplement, underlier supplement, prospectus supplement, and prospectus, all dated November 8, 2024. This formal registration structure places the securities within the Bank's established debt framework.

The filing specifies that Scotia Capital (USA) Inc., the Bank's affiliate, is purchasing the securities from the Bank for distribution, with Wells Fargo Securities, LLC serving as a co-distributing agent. The filing indicates that Scotia Capital or its affiliates may use this pricing supplement in market-making transactions after the initial sale period, creating potential conflicts of interest in secondary market trading. Investors should be aware that the Bank's affiliates may be on both sides of secondary market transactions in these securities.

Complex Product Risks and Investor Suitability Considerations

The Bank disclosed that the securities have complex features and that investing in them involves risks not associated with conventional debt securities. The filing directs investors to review detailed risk disclosures beginning on page P-10 of the pricing supplement and on pages PS-3 and S-2 of the accompanying product and prospectus supplements. These disclosures outline numerous risks specific to structured products, including market risk, index tracking risk, credit risk, and liquidity risk.

The filing emphasizes that the securities are designed to be held to maturity and are not listed on any exchange, limiting secondary market liquidity. The Bank notes that the estimated value range provided reflects dealer spreads and projected profits from hedging activities that are incorporated into the original offering price, and these factors are likely to adversely affect secondary market prices if investors attempt to sell before maturity. This information suggests that early liquidation of these positions could result in significant losses compared to the original purchase price.

Pricing Timeline and Issue Structure

The filing sets forth specific dates for the offering process. The pricing date is scheduled for July 31, 2026, and the issue date is scheduled for August 5, 2026. The amendment to the preliminary pricing supplement was filed on July 16, 2026, and supersedes the related preliminary pricing supplement in its entirety. This amendment status indicates that terms or conditions may have been modified from the preliminary version, though the filing does not specify what changes were made.

The face amount of each security is $1,000, and the original offering price is also $1,000 per security, before discounts to agents and dealers. The Bank discloses that proceeds to the Bank are $976.75 per security after the agent discount of $23.25, excluding any profits from hedging activities. This net proceeds figure represents the amount the Bank receives for each security sold through its distribution partners.

Secondary Market and Dealer Spread Implications

The filing contains important disclosure about the relationship between the original offering price and potential secondary market values. The Bank states that the inclusion of dealer spread and projected profit from hedging in the original offering price is likely to adversely affect secondary market prices. This disclosure indicates that investors who attempt to sell these securities in the secondary market before maturity may receive significantly less than they paid for them in the initial offering.

The filing also notes that Scotia Capital (USA) Inc. or any of its affiliates or agents may use the pricing supplement in market-making transactions after the initial sale, and that the final pricing supplement may be used in such transactions. This structure permits the Bank's affiliates to facilitate secondary market trading while potentially profiting from bid-ask spreads. Investors should understand that active secondary markets may not develop for these securities, and any attempted sale could result in substantial losses due to the embedded dealer spread and hedging costs.