Bank of Nova Scotia Issues Gold-Linked Capped Notes Due August 2027

Structure and Payment Terms of the Gold-Linked Notes

The Bank of Nova Scotia disclosed that the notes are unsubordinated and unsecured debt securities offering returns linked to the performance of SPDR Gold Trust shares. The filing states that investors will receive a return equal to any positive performance of the reference asset, subject to a capped maximum return of at least 12.72%. The notes do not bear interest or pay any coupons prior to maturity, with all payments made in cash solely at the maturity date of August 11, 2027. The disclosure indicates an approximate 54-week term, with an expected trade date of July 24, 2026, and settlement scheduled for July 29, 2026.

The filing clarifies the downside risk structure for investors. If the final value of the reference asset falls below the initial value, investors will lose 1% of the principal amount for each 1% decline in the final value. According to the disclosure, investors may lose up to 5% of the principal amount under this structure. The minimum investment requirement is $10,000, with additional investments in integral multiples of $1,000. The CUSIP and ISIN identifiers are listed as 063941DW5 and US063941DW58, respectively.

Pricing, Distribution, and Initial Valuation

The Bank of Nova Scotia set the original issue price at 100% of principal, with underwriting commissions of 1% per note. The filing states that Scotia Capital (USA) Inc., an affiliate of the bank, will purchase the notes at the original issue price and sell them to J.P. Morgan Securities LLC, which along with Scotia Capital will act as placement agents. The placement agents will receive a fee of 1% per note, though the disclosure indicates that fees will be forgone for sales to fiduciary accounts. The proceeds to the bank, after accounting for the 1% underwriting commission, are stated as 99% of the principal amount.

The filing discloses that the initial estimated value of the notes at the time the terms are set on the trade date is expected to fall between $958.48 and $988.48 per $1,000 principal amount. This valuation range is notably lower than the original issue price, which the bank attributes to various factors including internal funding rates, underwriting discounts, and structuring costs. The disclosure notes that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy. The bank's internal pricing models, which consider factors such as the internal funding rate on the trade date and assumptions about market parameters, were used to determine the estimated value range.

Credit Risk and Investment Considerations

The Bank of Nova Scotia emphasized in the filing that all payments on the notes are subject to the bank's creditworthiness. The disclosure explicitly states that the notes are unsubordinated and unsecured obligations of the bank and are derivative products based on the price return of the SPDR Gold Trust. Investors are cautioned that by acquiring the notes, they will not have a direct economic interest, claim, or entitlement to, or any legal or beneficial ownership of, the reference asset or any of its constituents, including any voting rights or rights to receive distributions.

The filing notes that the notes will not be listed on any U.S. securities exchange or automated quotation system, which may affect liquidity. The disclosure indicates that investment in the notes involves certain risks, with references to additional risk disclosures beginning on pages P-9 and PS-6 of the pricing supplement and the accompanying product supplement. The bank's filing also clarifies that neither the SEC nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or adequacy of the pricing supplement or related documents.

Market-Making Arrangements and Secondary Market Considerations

The filing discloses potential conflicts of interest related to market-making activities. According to the announcement, J.P. Morgan Securities and its affiliates will act as placement agents for the notes, while Scotia Capital (USA) Inc. may use the final pricing supplement to engage in market-making transactions in the notes after their initial sale. The disclosure states that unless the bank, Scotia Capital, or another affiliate explicitly informs investors otherwise in the confirmation of sale, the pricing supplement is being used in a market-making transaction.

The filing provides guidance on the potential price trajectory of the notes in the secondary market. The bank disclosed that, assuming all relevant factors remain constant after the trade date, the price at which Scotia Capital may initially buy or sell the notes may exceed the estimated value on the trade date for a temporary period expected to be approximately three months after the original issue date. This is because the bank may elect to effectively reimburse investors a portion of the estimated cost of hedging obligations and other costs in connection with the notes that will no longer be expected to incur over the term. The bank noted that the amount of estimated costs reimbursed may not be allocated ratably throughout the reimbursement period and may be discontinued or revised based on market conditions.

Regulatory Status and Deposit Insurance Exclusion

The Bank of Nova Scotia's filing clarifies the regulatory treatment and insurance status of the notes. The disclosure states that the notes are not insured by the Canada Deposit Insurance Corporation (CDIC) pursuant to the Canada Deposit Insurance Corporation Act, the U.S. Federal Deposit Insurance Corporation (FDIC), or any other government agency of Canada, the United States, or any other jurisdiction. This distinction is important for investors accustomed to protection on traditional bank deposits.

The filing emphasizes that the notes are filed pursuant to Rule 424(b)(2) under the Securities Act, with registration number 333-282565. The preliminary pricing supplement is dated July 21, 2026, and the disclosure notes that the information in the preliminary supplement is not complete and may be changed. The bank clarified that it is not selling the notes until the pricing supplement is delivered in final form, and that it is not soliciting offers to buy the notes in any state where such offer or sale is not permitted.

Internal Funding Rate and Economic Terms

The Bank of Nova Scotia disclosed that the economic terms of the notes are based on the bank's internal funding rate, which is defined as the rate the bank would pay to borrow funds through the issuance of similar market-linked notes. This rate, combined with the underwriting discount and costs associated with selling and structuring the notes, including hedging arrangements, determines the notes' economic terms. The filing states that the bank's internal funding rate is typically lower than the rate the bank would pay when issuing conventional fixed-rate debt securities, which results in reduced economic terms for investors.

The disclosure notes that the bank's use of its internal funding rate reduces the economic terms of the notes compared to what might otherwise be offered. This approach affects how the original issue price compares to the initial estimated value, as described in the pricing supplement. The filing clarifies that the estimated value range was determined by reference to these internal pricing models and the various economic factors incorporated into the structure.

Gold Trust Reference Asset Characteristics

The Bank of Nova Scotia's filing indicates that the reference asset for the notes is the SPDR Gold Trust, a publicly traded fund that primarily holds gold. However, the disclosure states that investors in the notes will not have direct ownership or economic interest in the gold held by the trust or any of its constituents. The notes represent derivative instruments whose value is derived from the price performance of the SPDR Gold Trust shares, rather than direct investments in the underlying asset.

The filing emphasizes that the notes do not constitute a hypothetical direct investment in the assets held by the reference asset. Investors acquire exposure to gold price movements through the structure of the notes rather than through direct ownership or claims on physical gold or the trust itself. This distinction is material for understanding the nature of the investment and the risks associated with indirect exposure to gold price movements.

Investor Suitability and Risk Disclosure Obligations

The Bank of Nova Scotia's filing emphasizes that investment in the notes involves certain risks requiring careful consideration. The disclosure urges investors to read the additional risks beginning on page P-9 of the pricing supplement and references additional risk factors specific to the notes in the accompanying product supplement and prospectus. The bank notes that specific risk factors are detailed beginning on page PS-6 of the product supplement and page S-2 of the prospectus supplement, with further information on page 8 of the prospectus.

The filing indicates that the notes are subject to various risks including credit risk of the issuer, market risk related to the reference asset, liquidity risk due to the notes not being exchange-listed, and estimated value risk. The bank's disclosure of the estimated initial value range significantly below the original issue price serves as a warning that investors should carefully evaluate the economic terms and risks before investing. The preliminary nature of the pricing supplement and the possibility of changes before final delivery add another layer of uncertainty that investors should monitor.

Fee Structure and Distribution Arrangements

The Bank of Nova Scotia disclosed a clear fee structure for the distribution of the notes. Scotia Capital will purchase the notes at the original issue price of 100% and sell them to J.P. Morgan Securities, with both entities acting as placement agents. The placement agents will receive a 1% fee per note from sales to accounts other than fiduciary accounts, with fees waived for fiduciary account sales. This structure means that the net proceeds to the bank from 99% of the principal amount must be evaluated alongside the economic value of the hedging and other costs incurred to structure the notes.

The filing states that the total fees represent the amount placement agents receive from sales to accounts other than fiduciary accounts. The disclosure of this fee structure provides transparency regarding distribution costs, though investors should be aware that these costs are factored into the pricing and represent a reduction in the economic value available to support the notes' returns. The inclusion of information about potential reimbursement of hedging costs over a temporary three-month period adds complexity to the valuation picture that investors should carefully consider.