Bank of Nova Scotia Launches $16.89 Million S&P 500-Linked Structured Notes Maturing January 2028

Structure and Return Features of the Notes

The Bank of Nova Scotia's Capped Enhanced Participation Notes are derivative securities whose returns depend solely on the S&P 500 Index's performance from the trade date of July 16, 2026, to the valuation date of January 18, 2028. These notes do not pay interest or interim distributions before maturity. If the index closes above its initial level of 7,533.77 on the valuation date, investors receive returns amplified by a 300% participation rate on the index's percentage gain.

The payout is capped at $1,197.70 per $1,000 principal, meaning gains beyond approximately 19.77% in the index will not increase returns further. If the final index level matches the initial, investors get back their full principal. However, any decline in the index results in a proportional loss of principal, with no downside protection, exposing investors to the risk of losing their entire investment.

Offering Details, Pricing, and Underwriting

This offering was priced at par, generating gross proceeds of $16.89 million. Scotia Capital (USA) Inc. and Goldman Sachs & Co. LLC acted as underwriters and dealers, earning a combined commission of 1.13%, or about $190,857, resulting in net proceeds of approximately $16.70 million to the bank.

The initial estimated value at pricing was $974.00 per $1,000 principal, below the par issue price. This valuation reflects the bank's internal pricing models, which factor in its internal funding rate and prevailing market assumptions. The difference between the issue price and estimated value arises from the spread between the bank's funding costs and hedging economics.

Credit Risk and Issuer Obligations

Payments on these notes depend on the creditworthiness of The Bank of Nova Scotia. The notes are unsecured and unsubordinated obligations of the bank, lacking protection from deposit insurance schemes such as the Canada Deposit Insurance Corporation (CDIC) or the U.S. Federal Deposit Insurance Corporation (FDIC). Investors bear full credit risk over the two-year term.

Deterioration in the bank's financial health or credit rating could significantly affect the notes' value and maturity payout, regardless of S&P 500 performance. In insolvency, noteholders rank equally with other general creditors, exposing them to potential losses beyond market risks tied to index movements.

Secondary Market and Liquidity Considerations

Goldman Sachs & Co. LLC may provide market-making services post-issuance but is not obligated to do so. Initial secondary market prices would include a $25.00 per $1,000 principal adjustment, declining linearly to zero by October 15, 2026, after which pricing reflects estimated market value from dealer models.

The notes will not be listed on any U.S. securities exchange or automated quotation system, so secondary market transactions will occur over-the-counter via registered broker-dealers. Investors should expect bid-ask spreads and other costs that can reduce returns on sales prior to maturity.

Participation Rate and Performance Calculation

The 300% participation rate magnifies positive index returns by three times, subject to the maximum payout cap. The notes do not provide any dividends or interim income, focusing solely on the price return of the S&P 500 based on closing levels at the start and end of the term.

Investors do not own the underlying stocks and thus receive no dividend income or shareholder rights. The final return calculation ignores any interim index fluctuations.

No Ownership or Equity Rights

Purchasing these notes does not confer direct ownership or economic interest in the S&P 500 Index components. Investors hold no voting rights, dividend entitlements, or other shareholder privileges. The notes are purely derivative instruments providing exposure to index price changes within a capped payout and fixed maturity.

This structure prevents investors from participating in corporate actions like dividends, stock splits, or mergers affecting the index constituents.

Internal Funding and Valuation Approach

The bank's internal funding rate, typically lower than standard fixed-rate debt costs, underpins the pricing of these notes. The economic terms, including the 300% participation and payout cap, were designed considering this funding rate plus underwriting fees and hedging costs.

This approach results in terms less favorable to investors compared to pricing based on conventional debt borrowing rates, reducing the notes' value proposition relative to traditional fixed-income securities.

Downside Risks and Loss Potential

Investors risk losing their entire principal if the S&P 500 Index falls 100% from its initial 7,533.77 level. Any negative index return translates directly into proportional principal loss, with no downside protection or buffer. The offering documents emphasize that investors "may lose up to [their] entire principal amount" if the index declines.

These notes suit investors with a bullish outlook on the S&P 500 over the two-year term, given the absence of any minimum return guarantees.

Distribution and Potential Conflicts

Scotia Capital (USA) Inc., affiliated with the bank, purchased the notes for distribution through other registered broker-dealers. Scotia Capital and its affiliates may engage in market-making activities post-sale, using the pricing supplement in secondary market transactions. Unless otherwise disclosed, secondary market trades should be presumed to be market-making rather than principal purchases.

The bank may issue additional tranches with differing terms and pricing, potentially resulting in varied economic outcomes for investors purchasing at different times.

Regulatory Status and Investor Safeguards

The notes have not been approved or disapproved by the U.S. Securities and Exchange Commission or any state securities commission, nor has the accuracy of the offering documents been evaluated. They will not be listed on any U.S. exchange or automated quotation system, limiting transparency and standardized pricing.

These notes do not qualify for deposit insurance under CDIC or FDIC, exposing investors to full credit and market risk without government backing. Investors should carefully review the extensive risk disclosures in the prospectus and product supplement before investing.