Registration Statement No.333-264388
Filed Pursuant to Rule 424(b)(2)
Pricing Supplement dated July 12, 2024 to the Prospectus dated May 26, 2022,
the Prospectus Supplement dated May 26, 2022 and the Product Supplement dated July 22, 2022
US$238,000
Senior Medium-Term Notes, Series I
Callable Barrier Notes with Contingent Coupons due July 19, 2027
Linked to the Least Performing of the shares of Utilities Select Sector SPDR® Fund and the Russell 2000® Index and the S&P
500® Index
| · | The notes are designed for investors who are seeking monthly contingent periodic interest payments (as
described in more detail below), as well as a return of principal if the notes are redeemed prior to maturity. Investors should be willing
to have their notes redeemed prior to maturity, be willing to forego any potential to participate in any increase in the level of the
Reference Assets and be willing to lose some or all of their principal at maturity. |
| · | The notes will pay a Contingent Coupon on each Contingent Coupon Payment Date at the Contingent Interest
Rate of 0.758% per month (approximately 9.10% per annum) if the closing level of each of the Utilities Select Sector SPDR® Fund, the
Russell 2000® Index, and the S&P 500® Index (each, a "Reference Asset" and, collectively, the "Reference Assets")
on the applicable monthly Observation Date is greater than or equal to its Coupon Barrier Level. However, if the closing level of any
Reference Asset is less than its Coupon Barrier Level on an Observation Date, the notes will not pay the Contingent Coupon for that Observation
Date. |
| · | Beginning on October 16, 2024, Bank of Montreal may, in its discretion, elect to call the notes in whole,
but not in part, on any Observation Date (an "Issuer Call"). If Bank of Montreal elects to call the notes, investors will receive
their principal amount plus any Contingent Coupon otherwise due on the Contingent Coupon Payment Date following the Issuer Call (the "Call
Settlement Date"). After the notes are redeemed pursuant to an Issuer Call, investors will not receive any additional payments in
respect of the notes. |
| · | The notes do not guarantee any return of principal at maturity. Instead, if the notes are not redeemed
pursuant to an Issuer Call, the payment at maturity will be based on the Final Level of each Reference Asset and whether the Final Level
of any Reference Asset has declined from its Initial Level to below its Trigger Level on the Valuation Date (a “Trigger Event”),
as described below. |
| · | If the notes are not subject to an Issuer Call and a Trigger Event has occurred, investors will lose
1% of the principal amount for each 1% decrease in the level of the Least Performing Reference Asset (as defined below) from its Initial
Level to its Final Level. In such a case, you will receive a cash amount at maturity that is less than the principal amount. |
| · | Investing in the notes is not equivalent to a hypothetical direct investment in the Reference Assets. |
| · | The notes will not be listed on any securities exchange. |
| · | All payments on the notes are subject to the credit risk of Bank of Montreal. |
| · | The notes will be issued in minimum denominations of $1,000 and integral multiples of $1,000. |
| · | Our subsidiary, BMO Capital Markets Corp. (“BMOCM”), is the agent for this offering. See
“Supplemental Plan of Distribution (Conflicts of Interest)” below. |
| · | The notes will not be subject to conversion into our common shares or the common shares of any of our
affiliates under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act (the “CDIC Act”). |
Terms of the Notes:
Pricing Date: |
July 12, 2024 |
|
Valuation Date: |
July 14, 2027 |
Settlement Date: |
July 17, 2024 |
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Maturity Date: |
July 19, 2027 |
Specific Terms of the Notes:
Callable
Number |
Reference
Assets |
Ticker
Symbol |
Initial
Level |
Contingent
Interest Rate |
Coupon
Barrier
Level* |
Trigger
Level* |
CUSIP |
Principal
Amount |
Price to
Public1 |
Agent’s
Commission1 |
Proceeds to
Bank of
Montreal1 |
3677 |
The shares of Utilities Select Sector SPDR® Fund |
XLU |
$71.26 |
0.758% per month (approximately 9.10% per annum)
|
$49.88, 70.00% of its Initial Level |
$49.88, 70.00% of its Initial Level |
06376AZ37 |
$238,000.00 |
100% |
0.70%
$1,666.00
|
99.30%
$236,334.00
|
The Russell 2000® Index |
RTY |
2,148.267 |
1,503.787, 70.00% of its Initial Level |
1,503.787, 70.00% of its Initial Level |
The S&P 500® Index |
SPX |
5,615.35 |
3,930.75, 70.00% of its Initial Level |
3,930.75, 70.00% of its Initial Level |
1 The total “Agent’s Commission” and “Proceeds
to Bank of Montreal” specified above reflect the aggregate amounts at the time Bank of Montreal established its hedge positions
on or prior to the Pricing Date, which may have been variable and fluctuated depending on market conditions at such times. Certain dealers
who purchased the notes for sale to certain fee-based advisory accounts may have foregone some or all of their selling concessions, fees
or commissions. The public offering price for investors purchasing the notes in these accounts was between $993.00 and $1,000 per $1,000
in principal amount.
* Rounded to two decimal places with respect to XLU and SPX and rounded
to three decimal places with respect to RTY.
Investing in the notes involves risks, including
those described in the “Selected Risk Considerations” section beginning on page P-5 hereof, the “Additional Risk Factors
Relating to the Notes” section beginning on page PS-6 of the product supplement, and the “Risk Factors” section beginning
on page S-1 of the prospectus supplement and on page 8 of the prospectus.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these notes or passed upon the accuracy of this document, the product
supplement, the prospectus supplement or the prospectus. Any representation to the contrary is a criminal offense. The notes will be our
unsecured obligations and will not be savings accounts or deposits that are insured by the United States Federal Deposit Insurance Corporation,
the Deposit Insurance Fund, the Canada Deposit Insurance Corporation or any other governmental agency or instrumentality or other entity.
On the date hereof, based on the terms set forth
above, the estimated initial value of the notes is $980.16 per $1,000 in principal amount. However, as discussed in more detail below,
the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy.
BMO CAPITAL MARKETS
Key Terms of the Notes:
Reference Assets: |
The shares of Utilities Select Sector SPDR® Fund (ticker symbol "XLU") and the Russell 2000® Index (ticker symbol "RTY") and the S&P 500® Index (ticker symbol "SPX"). See "The Reference Assets" below for additional information. |
|
|
Underlying Index: |
With respect to Utilities Select Sector SPDR® Fund, the Utilities Select Sector Index. |
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|
Contingent Coupons: |
If the closing level of each Reference Asset on an Observation Date is greater than or equal to its Coupon Barrier Level, a Contingent Coupon will be paid on the corresponding Contingent Coupon Payment Date at the Contingent Interest Rate, subject to the Issuer Call feature. |
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|
Contingent Interest Rate: |
0.758% per month (approximately 9.10% per annum), if payable. Accordingly, each Contingent Coupon, if payable, will equal $7.58 for each $1,000 in principal amount. |
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|
Observation Dates:1 |
Three trading days prior to each scheduled Contingent Coupon Payment Date. |
|
|
Contingent Coupon Payment
Dates:1 |
Interest, if payable, will be paid on the 19th day of each month (or, if such day is not a business day, the next following business day), beginning on August 19, 2024 and ending on the Maturity Date, subject to the Issuer Call feature. |
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|
Issuer Call: |
Beginning on October 16, 2024, Bank of Montreal may, in its discretion, elect to call the notes in whole, but not in part, on any Observation Date. After the notes are redeemed pursuant to the Issuer Call, investors will not receive any additional payments in respect of the notes. If Bank of Montreal elects to call the notes, the Bank of Montreal will deliver notice to the trustee on or before the applicable Observation Date. |
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|
Payment upon Issuer Call: |
If Bank of Montreal elects to call the notes, investors will receive their principal amount plus any Contingent Coupon otherwise due on the Call Settlement Date. |
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|
Call Settlement Date:1 |
If Bank of Montreal elects to call the notes, the Contingent Coupon Payment Date immediately following the relevant Observation Date. |
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|
Payment at Maturity: |
If the notes are not subject to an Issuer Call, the payment at maturity
for the notes is based on the performance of the Reference Assets.
You will receive $1,000 for each $1,000 in principal amount of the note,
unless a Trigger Event has occurred.
If a Trigger Event has occurred, you will receive at maturity, for each
$1,000 in principal amount of your notes, a cash amount equal to:
$1,000 + [$1,000 x Percentage Change of the Least
Performing Reference Asset]
This amount will be less than the principal amount
of your notes, and may be zero.
You will also receive the final Contingent Coupon, if payable. |
|
|
Trigger Event:2 |
A Trigger Event will be deemed to occur if the Final Level of any Reference Asset is less than its Trigger Level on the Valuation Date. |
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|
Least Performing Reference Asset: |
The Reference Asset with the lowest Percentage Change. |
|
|
Percentage Change: |
With respect to each Reference Asset, the quotient, expressed as a percentage,
of the following formula:
(Final Level - Initial Level)
Initial Level |
|
|
Initial Level:2 |
As set forth on the cover hereof. |
|
|
Coupon Barrier Level:2 |
$49.88 with respect to XLU, 1,503.787 with respect to RTY, and 3,930.75
with respect to SPX, each of which is 70.00% of the respective Initial Level (rounded to two decimal places with respect to XLU and SPX
and rounded to three decimal places with respect to RTY). |
|
|
Trigger Level:2 |
$49.88 with respect to XLU, 1,503.787 with respect to RTY, and 3,930.75
with respect to SPX, each of which is 70.00% of the respective Initial Level (rounded to two decimal places with respect to XLU and SPX
and rounded to three decimal places with respect to RTY). |
|
|
Final Level: |
With respect to each Reference Asset, the closing level of that Reference Asset on the Valuation Date. |
Pricing Date: |
July 12, 2024 |
|
|
Settlement Date: |
July 17, 2024 |
|
|
Valuation Date:1 |
July 14, 2027 |
|
|
Maturity Date:1 |
July 19, 2027 |
|
|
Calculation Agent: |
BMOCM |
|
|
Selling Agent: |
BMOCM |
|
|
1 Subject to the occurrence of a market disruption event,
as described in the accompanying product supplement.
2 As determined by the calculation agent and subject to adjustment
in certain circumstances. See “General Terms of the Notes — Anti-dilution Adjustments to a Reference Asset that Is an Equity
Security (Including Any ETF)” and “— Adjustments to a Reference Asset that Is an ETF” in the product supplement
with respect to the Utilities Select Sector SPDR® Fund and "General Terms of the Notes - Adjustments to a Reference Asset that
is an Index" with respect to the Russell 2000® Index and the S&P 500® Index in the product supplement for additional
information.
Additional Terms of the Notes
You should read this document together with the product
supplement dated July 22, 2022, the prospectus supplement dated May 26, 2022 and the prospectus dated May 26, 2022. This document,
together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements
as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for
implementation, sample structures, fact sheets, brochures or other educational materials of ours or the agent. You should carefully
consider, among other things, the matters set forth in Additional Risk Factors Relating to the Notes in the product supplement, as the
notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and
other advisers before you invest in the notes.
You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Product supplement dated July 22, 2022:
https://www.sec.gov/Archives/edgar/data/927971/000121465922009102/r712220424b2.htm
Prospectus supplement dated May 26, 2022 and prospectus dated
May 26, 2022:
https://www.sec.gov/Archives/edgar/data/0000927971/000119312522160519/d269549d424b5.htm
Our Central Index Key, or CIK, on the SEC website
is 927971. As used in this document, "we", "us" or "our" refers to Bank of Montreal.
Selected Risk Considerations
An investment in the notes involves significant risks.
Investing in the notes is not equivalent to investing directly in the Reference Assets. These risks are explained in more detail in the
“Additional Risk Factors Relating to the Notes” section of the product supplement.
Risks Related to the Structure or Features of the Notes
| · | Your investment in the notes may result in a loss. — The notes do not guarantee any return of principal. If the notes
are not subject to an Issuer Call, the payment at maturity will be based on the Final Level of each Reference Asset and whether a Trigger
Event has occurred. If the Final Level of any Reference Asset is less than its Trigger Level, a Trigger Event will occur, and you will
lose 1% of the principal amount for each 1% that the Final Level of the Least Performing Reference Asset is less than its Initial Level.
In such a case, you will receive at maturity a cash payment that is less than the principal amount of the notes and may be zero. Accordingly,
you could lose your entire investment in the notes. |
| · | You may not receive any Contingent Coupons with respect to your notes. — We will not necessarily make periodic interest
payments on the notes. If the closing level of any Reference Asset on an Observation Date is less than its Coupon Barrier Level, we will
not pay you the Contingent Coupon applicable to that Observation Date. If the closing level of a Reference Asset is less than its Coupon
Barrier Level on each of the Observation Dates, we will not pay you any Contingent Coupons during the term of the notes, and you will
not receive a positive return on the notes. Generally, this non-payment of any Contingent Coupons will coincide with a greater risk of
principal loss on your notes. |
| · | We may elect to call the notes, and the notes are subject to reinvestment risk. — We may elect to call the notes at our
discretion prior to the Maturity Date. If we elect to call your notes early, you will not receive any additional Contingent Coupons on
the notes, and you may not be able to reinvest your proceeds in an investment with returns that are comparable to the notes. Further,
our right to call the notes may also adversely impact your ability to sell your notes in the secondary market. It is more likely that
we will elect to call the notes prior to maturity when the expected amounts payable on the notes are greater than the amount that would
be payable on other instruments issued by us of comparable maturity, terms and credit rating trading in the market. The greater likelihood
of us calling the notes in that environment increases the risk that you will not be able to reinvest the proceeds from the called notes
in an equivalent investment with similar potential returns. To the extent you are able to reinvest such proceeds in an investment comparable
to the notes, you may incur transaction costs such as dealer discounts and hedging costs built into the price of the new securities. We
are less likely to call the notes prior to maturity when the expected amounts payable on the notes are less than the amounts that would
be payable on other comparable instruments issued by us, which includes when a Reference Asset is performing unfavorably to you. Therefore,
the notes are more likely to remain outstanding when the expected amount payable on the notes is less than what would be payable on other
comparable instruments and when your risk of not receiving any positive return on your initial investment is relatively higher. |
| · | Your return on the notes is limited to the Contingent Coupons, if any, regardless of any increase in the level of any Reference
Asset. — You will not receive a payment at maturity with a value greater than your principal amount plus the final Contingent
Coupon, if payable. In addition, if the notes are subject to an Issuer Call, you will not receive a payment greater than the principal
amount plus any applicable Contingent Coupon. Accordingly, your maximum return on the applicable notes is limited to the potential return
represented by the Contingent Coupons. |
| · | Whether you receive any Contingent Coupons and your payment at maturity may be determined solely by reference to the least performing
Reference Asset, even if any other Reference Assets perform better. - We will only make each Contingent Coupon payment on the notes
if the closing level of each Reference Asset on the applicable Observation Date exceeds the applicable Coupon Barrier, even if the levels
of any other Reference Assets have increased significantly. Similarly, if a Trigger Event occurs with respect to any Reference Asset and
the Final Level of any Reference Asset is less than its Initial Level, your payment at maturity will be determined by reference to the
performance of the Least Performing Reference Asset. Even if the levels of any other Reference Assets have increased over the term of
the notes, or have experienced a decline that is less than that of the Least Performing Reference Asset, your return at maturity will
only be determined by reference to the performance of the Least Performing Reference Asset if a Trigger Event occurs. |
| · | The payments on the notes will be determined by reference to each Reference Asset individually, not to a basket, and the payments
on the notes will be based on the performance of the least performing Reference Asset. — Whether each Contingent Coupon is
payable, and the payment at maturity if a Trigger Event occurs, will be determined only by reference to the performance of the least performing
Reference Asset as of the applicable Observation Date and/or Valuation Date, regardless of the performance of any other Reference Assets.
The notes are not linked to a weighted basket, in which the risk may be mitigated and diversified among each of the basket components.
For example, in the case of notes linked to a weighted basket, the return would depend on the weighted aggregate performance of the basket
components reflected as the basket return. As a result, a decrease of the level of one basket component could be mitigated by the increase
of the level of the other basket components, as scaled by the weighting of that basket component. However, in the case of the notes, the
individual performance of each Reference Asset will not be combined, and the performance of one Reference Asset will not be mitigated
by any positive performance of any other Reference Assets. Instead, your receipt of Contingent Coupon payments on the notes will depend
on the level of each Reference Asset on each Observation Date, and your return at maturity will depend solely on the Final Level of the
Least Performing Reference Asset if a Trigger Event occurs. |
| · | Your return on the notes may be lower than the return on a conventional debt security of comparable maturity. — The
return that you will receive on your notes, which could be negative, may be less than the return you could earn on other investments.
The notes do not provide for fixed interest payments and you may not receive any Contingent Coupons over the term of the notes. Even if
you do receive one or more Contingent Coupons and your return on the notes is positive, your return may be less than the return you would
earn if you bought a conventional senior interest bearing debt security of ours with the same maturity or if you invested directly in
the Reference Assets. Your investment may not reflect the full opportunity cost to you when you take into account factors that affect
the time value of money. |
| · | A higher Contingent Interest Rate or lower Trigger Levels or Coupon Barrier Levels may reflect greater expected volatility of the
Reference Assets, and greater expected volatility generally indicates an increased risk of loss at maturity. — The economic
terms for the notes, including the Contingent Interest Rate, Coupon Barrier Levels and Trigger Levels, are based, in part, on the expected
volatility of the Reference Assets at the time the terms of the notes are set. “Volatility” refers to the frequency and magnitude
of changes in the level of a Reference Asset. The greater the expected volatility of the Reference Assets as of the Pricing Date, the
greater the expectation is as of that date that the closing level of a Reference Asset could be less than its Coupon Barrier Level on
any Observation Date and that a Trigger Event could occur and, as a consequence, indicates an increased risk of not receiving a Contingent
Coupon and an increased risk of loss, respectively. All things being equal, this greater expected volatility will generally be reflected
in a higher Contingent Interest Rate than the yield payable on our conventional debt securities with a similar maturity or on otherwise
comparable securities, and/or a lower Trigger Levels and/or Coupon Barrier Levels than those terms on otherwise comparable securities.
Therefore, a relatively higher Contingent Interest Rate may indicate an increased risk of loss. Further, relatively lower Trigger Levels
and/or Coupon Barriers may not necessarily indicate that the notes have a greater likelihood of a return of principal at maturity and/or
paying Contingent Coupons. You should be willing to accept the downside market risk of the Reference Assets and the potential to lose
a significant portion or all of your initial investment. |
Risks Related to the Reference Assets
| · | Owning the notes is not the same as owning shares of any Reference Assets, making a hypothetical direct investment in any Reference
Assets or owning a security directly linked to the Reference Assets. — The return on your notes will not reflect the return
you would realize if you actually owned shares of any Reference Assets, made a hypothetical direct investment in any Reference Assets
or the underlying securities of any Reference Assets, or owned a security directly linked to the performance of the Reference Assets or
the underlying securities of the Reference Assets and held that investment for a similar period. Your notes may trade quite differently
from the Reference Assets. Changes in the level of a Reference Asset may not result in comparable changes in the market value of your
notes. Even if the levels of the Reference Assets increase during the term of the notes, the market value of the notes prior to maturity
may not increase to the same extent. It is also possible for the market value of the notes to decrease while the levels of the Reference
Assets increase. In addition, any dividends or other distributions paid on a Reference Asset will not be reflected in the amount payable
on the notes. |
| · | You will not have any shareholder rights and will have no right to receive any shares of any Reference Asset (or any company included
in a Reference Asset) at maturity. — Investing in your notes will not make you a holder of any shares of any Reference Asset
or any securities held by or included in the Reference Assets. Neither you nor any other holder or owner of the notes will have any voting
rights, any right to receive dividends or other distributions, or any other rights with respect to any Reference Asset or such underlying
securities. |
| · | No delivery of shares of the Reference Assets. — The notes will be payable only in cash. You should not invest in the
notes if you seek to have the shares of a Reference Asset delivered to you at maturity. |
| · | Changes that affect an Underlying Index will affect the market value of the notes and the amount you will receive at maturity.
— With respect to a Reference Asset that is an ETF, the policies of the applicable index sponsor concerning the calculation
of the applicable Underlying Index, additions, deletions or substitutions of the components of the applicable Underlying Index and the
manner in which changes affecting those components, such as stock dividends, reorganizations or mergers, may be reflected in the applicable
Reference Asset and, therefore, could affect the share price of the Reference Asset, the amounts payable on the notes and the market value
of the notes prior to maturity. The amount payable on the notes and their market value could also be affected if the applicable index
sponsor changes these policies, for example, by changing the manner in which it calculates the applicable Underlying Index, or if the
applicable index sponsor discontinues or suspends the calculation or publication of the applicable Underlying Index. |
| · | We have no affiliation with any index sponsor and will not be responsible for any index sponsor's actions. — The sponsors
of any Reference Asset or Underlying Index, as applicable, are not our affiliates and will not be involved in the offering of the notes
in any way. Consequently, we have no control over the actions of any index sponsor, including any actions of the type that would require
the calculation agent to adjust the payment to you at maturity. The index sponsors have no obligation of any sort with respect to the
notes. Thus, the index sponsors have no obligation to take your interests into consideration for any reason, including in taking any actions
that might affect the value of the notes. None of our proceeds from the issuance of the notes will be delivered to any index sponsor of
any Reference Asset or any Underlying Index. |
| · | Adjustments to a Reference Asset that is an ETF could adversely affect the notes. — The sponsor and advisor of each
ETF Reference Asset is responsible for calculating and maintaining that Reference Asset. The sponsor and advisor of each ETF Reference
Asset can add, delete or substitute the stocks comprising that Reference Asset or make other methodological changes that could change
the share price of the applicable Reference Asset at any time. If one or more of these events occurs, the calculation of the amount payable
at maturity may be adjusted to reflect such event or events. Consequently, any of these actions could adversely affect the amount payable
at maturity and/or the market value of the notes. |
| · | Changes that affect a Reference Asset that is an index could adversely affect the notes. — The policies of the sponsor
of each index Reference Asset with respect to the applicable Reference Asset concerning the calculation of the applicable Reference Asset,
additions, deletions or substitutions of the components of the applicable Reference Asset and the manner in which changes affecting those
components, such as stock dividends, reorganizations or mergers, may be reflected in the applicable Reference Asset and, therefore, could
affect the level of the applicable Reference Asset, the amount payable on the notes at maturity and the market value of the notes prior
to maturity. The amount payable on the notes and their market value could also be affected if an index sponsor changes these policies,
for example, by changing the manner in which it calculates the applicable Reference Asset, or if an index sponsor discontinues or suspends
the calculation or publication of the applicable Reference Asset. If an index sponsor discontinues publication of a Reference Asset, the
calculation agent may select a successor index (and make any corresponding adjustments to the applicable Initial Level, Coupon Barrier
Level and Trigger Level) which will be used as a substitute for the relevant Reference Asset for all purposes with respect to the notes. |
| · | We and our affiliates do not have any affiliation with any applicable investment advisor or any Reference Asset Issuer and are
not responsible for their public disclosure of information. — The investment advisor of each ETF Reference Asset advises the
issuer of the applicable Reference Asset (each, a “Reference Asset Issuer” and, collectively, the “Reference Asset Issuers”)
on various matters, including matters relating to the policies, maintenance and calculation of the applicable Reference Asset. We and
our affiliates are not affiliated with the investment advisor of any Reference Asset or any Reference Asset Issuer in any way and have
no ability to control or predict their actions, including any errors in or discontinuance of disclosure regarding the methods or policies
relating to a Reference Asset. No investment advisor of a Reference Asset nor any Reference Asset Issuer is involved in the offerings
of the notes in any way and has no obligation to consider your interests as an owner of the notes in taking any actions relating to a
Reference Asset that might affect the value of the notes. Neither we nor any of our affiliates has independently verified the adequacy
or accuracy of the information about any investment advisor or any Reference Asset Issuer contained in any public disclosure of information.
You, as an investor in the notes, should make your own investigation into any Reference Asset Issuers. |
| · | The correlation between the performance of an ETF Reference Asset and the performance of the applicable Underlying Index may be
imperfect. — The performance of each ETF Reference Asset is linked principally to the performance of the applicable Underlying
Index. However, because of the potential discrepancies identified in more detail in the product supplement, the return on an ETF Reference
Asset may correlate imperfectly with the return on the applicable Underlying Index. |
| · | Any Reference Asset that is an ETF is subject to management risks. — Any Reference Asset that is an ETF is subject to
management risk, which is the risk that the applicable investment advisor’s investment strategy, the implementation of which is
subject to a number of constraints, may not produce the intended results. For example, the applicable investment advisor may invest a
portion of a Reference Asset Issuer’s assets in securities not included in the relevant industry or sector but which the applicable
investment advisor believes will help the applicable Reference Asset track the relevant industry or sector. |
| · | You must rely on your own evaluation of the merits of an investment linked to the Reference Assets. — In the ordinary
course of their businesses, our affiliates from time to time may express views on expected movements in the levels of the Reference Assets
or the prices of the securities held by or included in the Reference Assets. One or more of our affiliates have published, and in the
future may publish, research reports that express views on the Reference Assets or these securities. However, these views are subject
to change from time to time. Moreover, other professionals who deal in the markets relating to the Reference Assets at any time may have
significantly different views from those of our affiliates. You are encouraged to derive information concerning the Reference Assets from
multiple sources, and you should not rely on the views expressed by our affiliates. Neither the offering of the notes nor any views which
our affiliates from time to time may express in the ordinary course of their businesses constitutes a recommendation as to the merits
of an investment in the notes. |
Risks Relating to the Utilities Select Sector SPDR® Fund
| · | An investment in the notes is subject to risks associated with investments in securities with a concentration in the utilities
sector. — All or substantially all of the securities tracked by the Utilities Select Sector SPDR® Fund are stocks of companies
whose primary business is directly associated with the utilities sector. Because the value of the notes is linked to the performance of
the Utilities Select Sector SPDR® Fund , an investment in the notes exposes investors to risks associated with investments in securities
with a concentration in the utilities sector. Utility companies are affected by supply and demand, operating costs, government regulation,
environmental factors, liabilities for environmental damage and general civil liabilities and rate caps or rate changes. Although rate
changes of a regulated utility usually fluctuate in approximate correlation with financing costs, due to political and regulatory factors,
rate changes ordinarily occur only following a delay after the changes in financing costs. This factor will tend to favorably affect a
regulated utility company’s earnings and dividends in times of decreasing costs, but, conversely, will tend to adversely affect
earnings and dividends when costs are rising. The value of regulated utility equity securities may tend to have an inverse relationship
to the movement of interest rates. Certain utility companies have experienced full or partial deregulation in recent years. These utility
companies are frequently more similar to industrial companies in that they are subject to greater competition and have been permitted
by regulators to diversify outside of their original geographic regions and their traditional lines of business. These opportunities may
permit certain utility companies to earn more than their traditional regulated rates of return. Some companies, however, may be forced
to defend their core business and may be less profitable. In addition, natural disasters, terrorist attacks, government intervention or
other factors may render a utility company’s equipment unusable or obsolete and negatively impact profitability. Among the risks
that may affect utility companies are the following: risks of increases in fuel and other operating costs; the high cost of borrowing
to finance capital construction during inflationary periods; restrictions on operations and increased costs and delays associated with
compliance with environmental and nuclear safety regulations; and the difficulties involved in obtaining natural gas for resale or fuel
for generating electricity at reasonable prices. Other risks include those related to the construction and operation of nuclear power
plants, the effects of energy conservation and the effects of regulatory changes. The value of the notes may be subject to greater volatility
and be more adversely affected by a single economic, political or regulatory occurrence affecting the utilities sector than a different
investment linked to securities of a more broadly diversified group of issuers. |
Risks Relating to the Russell 2000® Index
| · | An investment in the notes is subject to risks associated in investing in stocks with a small market capitalization. —
The Russell 2000® Index consists of stocks issued by companies with relatively small market capitalizations. These companies often
have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies. As a result, the level
of the Russell 2000® Index may be more volatile than that of a market measure that does not track solely small-capitalization stocks.
Stock prices of small-capitalization companies are also generally more vulnerable than those of large-capitalization companies to adverse
business and economic developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive to many
investors if they do not pay dividends. In addition, small capitalization companies are typically less well-established and less stable
financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss
of those individuals. Small capitalization companies tend to have lower revenues, less diverse product lines, smaller shares of their
target markets, fewer financial resources and fewer competitive strengths than large-capitalization companies. These companies may also
be more susceptible to adverse developments related to their products or services. |
General Risk Factors
| · | Your investment is subject to the credit risk of Bank of Montreal. — Our credit ratings and credit spreads may adversely
affect the market value of the notes. Investors are dependent on our ability to pay any amounts due on the notes, and therefore investors
are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or
increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the notes. |
| · | Potential conflicts. — We and our affiliates play a variety of roles in connection with the issuance of the notes, including
acting as calculation agent. In performing these duties, the economic interests of the calculation agent and other affiliates of ours
are potentially adverse to your interests as an investor in the notes. We or one or more of our affiliates may also engage in trading
of shares of any Reference Asset that is an ETF or the securities held by or included in a Reference Asset on a regular basis as part
of our general broker-dealer and other businesses, for proprietary accounts, for other accounts under management or to facilitate transactions
for our customers. Any of these activities could adversely affect the level of the Reference Assets and, therefore, the market value of,
and the payments on, the notes. We or one or more of our affiliates may also issue or underwrite other securities or financial or derivative
instruments with returns linked or related to changes in the performance of the Reference Assets. By introducing competing products into
the marketplace in this manner, we or one or more of our affiliates could adversely affect the market value of the notes. |
| · | Our initial estimated value of the notes is lower than the price to public. — Our initial estimated value of the notes
is only an estimate, and is based on a number of factors. The price to public of the notes exceeds our initial estimated value, because
costs associated with offering, structuring and hedging the notes are included in the price to public, but are not included in the estimated
value. These costs include any underwriting discount and selling concessions, the profits that we and our affiliates expect to realize
for assuming the risks in hedging our obligations under the notes and the estimated cost of hedging these obligations. |
| · | Our initial estimated value does not represent any future value of the notes, and may also differ from the estimated value of any
other party. — Our initial estimated value of the notes as of the date hereof is derived using our internal pricing models.
This value is based on market conditions and other relevant factors, which include volatility of the Reference Assets, dividend rates
and interest rates. Different pricing models and assumptions could provide values for the notes that are greater than or less than our
initial estimated value. In addition, market conditions and other relevant factors after the Pricing Date are expected to change, possibly
rapidly, and our assumptions may prove to be incorrect. After the Pricing Date, the value of the notes could change dramatically due to
changes in market conditions, our creditworthiness, and the other factors set forth herein and in the product supplement. These changes
are likely to impact the price, if any, at which we BMOCM would be willing to purchase the notes from you in any secondary market transactions.
Our initial estimated value does not represent a minimum price at which we or our affiliates would be willing to buy your notes in any
secondary market at any time. |
| · | The terms of the notes were not determined by reference to the credit spreads for our conventional fixed-rate debt. —
To determine the terms of the notes, we used an internal funding rate that represents a discount from the credit spreads for our conventional
fixed-rate debt. As a result, the terms of the notes are less favorable to you than if we had used a higher funding rate. |
| · | Certain costs are likely to adversely affect the value of the notes. — Absent any changes in market conditions, any secondary
market prices of the notes will likely be lower than the price to public. This is because any secondary market prices will likely take
into account our then-current market credit spreads, and because any secondary market prices are likely to exclude all or a portion of
any underwriting discount and selling concessions, and the hedging profits and estimated hedging costs that are included in the price
to public of the notes and that may be reflected on your account statements. In addition, any such price is also likely to reflect a discount
to account for costs associated with establishing or unwinding any related hedge transaction, such as dealer discounts, mark-ups and other
transaction costs. As a result, the price, if any, at which BMOCM or any other party may be willing to purchase the notes from you in
secondary market transactions, if at all, will likely be lower than the price to public. Any sale that you make prior to the Maturity
Date could result in a substantial loss to you. |
| · | Lack of liquidity. — The notes will not be listed on any securities exchange. BMOCM may offer to purchase the notes in
the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow
you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which
you may be able to trade the notes is likely to depend on the price, if any, at which BMOCM is willing to buy the notes. |
| · | Hedging and trading activities. — We or any of our affiliates have carried out or may carry out hedging activities related
to the notes, including purchasing or selling shares of any Reference Assets that are ETFs or securities held by or included in the Reference
Assets, futures or options relating to the Reference Assets or securities held by or included in the Reference Assets or other derivative
instruments with returns linked or related to changes in the performance on the Reference Assets or securities held by or included in
the Reference Assets. We or our affiliates may also trade in any Reference Assets that are ETFs, such securities, or instruments related
to the Reference Assets or such securities from time to time. Any of these hedging or trading activities on or prior to the Pricing Date
and during the term of the notes could adversely affect the payments on the notes. |
| · | Many economic and market factors will influence the value of the notes. — In addition to the levels of the Reference
Assets and interest rates on any trading day, the value of the notes will be affected by a number of economic and market factors that
may either offset or magnify each other, and which are described in more detail in the product supplement. |
| · | Significant aspects of the tax treatment of the notes are uncertain. — The tax treatment of the notes is uncertain. We
do not plan to request a ruling from the Internal Revenue Service or from any Canadian authorities regarding the tax treatment of the
notes, and the Internal Revenue Service or a court may not agree with the tax treatment described herein.
The Internal Revenue Service has released a notice that may affect the taxation of holders of “prepaid forward contracts”
and similar instruments. According to the notice, the Internal Revenue Service and the U.S. Treasury are actively considering whether
the holder of such instruments should be required to accrue ordinary income on a current basis. While it is not clear whether the notes
would be viewed as similar to such instruments, it is possible that any future guidance could materially and adversely affect the tax
consequences of an investment in the notes, possibly with retroactive effect.
Please read carefully the section entitled "U.S. Federal Tax Information" herein, the section entitled "Supplemental Tax
Considerations–Supplemental U.S. Federal Income Tax Considerations" in the accompanying product supplement, the section entitled
"United States Federal Income Taxation" in the accompanying prospectus and the section entitled "Certain Income Tax Consequences"
in the accompanying prospectus supplement. You should consult your tax advisor about your own tax situation. |
Examples of the Hypothetical Payment at Maturity for a $1,000 Investment
in the Notes
The following table illustrates the hypothetical
payments on a note at maturity, assuming that the notes are not subject to an Issuer Call. The hypothetical payments are based on a $1,000
investment in the note, a hypothetical Initial Level of 100.00, a hypothetical Trigger Level of 70.00 (70.00% of the hypothetical Initial
Level), a range of hypothetical Final Levels and the effect on the payment at maturity.
The hypothetical examples shown below are intended
to help you understand the terms of the notes. If the notes are not subject to an Issuer Call, the actual cash amount that you will receive
at maturity will depend upon the Final Level of the Least Performing Reference Asset. If the notes are subject to an Issuer Call prior
to maturity, the hypothetical examples below will not be relevant, and you will receive on the applicable Call Settlement Date, for each
$1,000 principal amount, the principal amount plus any applicable Contingent Coupon.
As discussed in more detail above, your total return
on the notes will also depend on the number of Contingent Coupon Dates on which the Contingent Coupon is payable. It is possible that
the only payments on your notes will be the payment, if any, due at maturity. The payment at maturity will not exceed the principal amount,
and may be significantly less.
Hypothetical Final Level of the
Least Performing Reference Asset |
Hypothetical Final Level of the
Least Performing Reference Asset
Expressed as a Percentage of its
Initial Level |
Payment at Maturity (Excluding
Coupons) |
200.00 |
200.00% |
$1,000.00 |
180.00 |
180.00% |
$1,000.00 |
160.00 |
160.00% |
$1,000.00 |
140.00 |
140.00% |
$1,000.00 |
120.00 |
120.00% |
$1,000.00 |
100.00 |
100.00% |
$1,000.00 |
90.00 |
90.00% |
$1,000.00 |
80.00 |
80.00% |
$1,000.00 |
70.00 |
70.00% |
$1,000.00 |
69.99 |
69.99% |
$699.90 |
60.00 |
60.00% |
$600.00 |
40.00 |
40.00% |
$400.00 |
20.00 |
20.00% |
$200.00 |
0.00 |
0.00% |
$0.00 |
U.S. Federal Tax Information
By purchasing the notes, each holder agrees (in the
absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat each note as a pre-paid contingent
income-bearing derivative contract for U.S. federal income tax purposes. In the opinion of our counsel, Mayer Brown LLP, it would generally
be reasonable to treat the notes as pre-paid contingent income-bearing derivative contracts in respect of the Reference Assets for U.S.
federal income tax purposes. However, the U.S. federal income tax consequences of your investment in the notes are uncertain and the Internal
Revenue Service could assert that the notes should be taxed in a manner that is different from that described in the preceding sentence.
Please see the discussion in the accompanying product supplement under "Supplemental Tax Considerations—Supplemental U.S. Federal
Income Tax Considerations—Notes Treated as an Investment Unit Consisting of a Debt Portion and a Put Option, as a Pre-Paid Contingent
Income-Bearing Derivative Contract, or as a Pre-Paid Derivative Contract—Notes Treated as a Pre-Paid Contingent Income-Bearing Derivative
Contract," which applies to the notes, except the following disclosure which supplements, and to the extent inconsistent supersedes,
the discussion in the product supplement.
Under current Internal Revenue Service guidance,
withholding on "dividend equivalent" payments (as discussed in the product supplement), if any, will not apply to notes that
are issued as of the date of this pricing supplement unless such notes are "delta-one" instruments. Based on our determination
that the notes are not delta-one instruments, non-United States holders (as defined in the product supplement) should not generally be
subject to withholding on dividend equivalent payments, if any, under the notes.
Supplemental Plan of Distribution (Conflicts of Interest)
BMOCM will purchase the notes from us at a purchase
price reflecting the commission set forth on the cover hereof. BMOCM has informed us that, as part of its distribution of the notes, it
will reoffer the notes to other dealers who will sell them. Each such dealer, or each additional dealer engaged by a dealer to whom BMOCM
reoffers the notes, will receive a commission from BMOCM, which will not exceed the commission set forth on the cover page.
Certain dealers who purchase the notes for sale
to certain fee-based advisory accounts may forego some or all of their selling concessions, fees or commissions. The public offering price
for investors purchasing the notes in these accounts may be less than 100% of the principal amount, as set forth on the cover page of
this document. Investors that hold their notes in these accounts may be charged fees by the investment advisor or manager of that account
based on the amount of assets held in those accounts, including the notes.
We will deliver the notes on a date that is greater
than one business day following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), trades in the secondary market generally are required to settle in one business day, unless the parties to any such trade
expressly agree otherwise. Accordingly, purchasers who wish to trade the notes more than one business day prior to the issue date will
be required to specify alternative settlement arrangements to prevent a failed settlement.
We own, directly or indirectly, all of the outstanding
equity securities of BMOCM, the agent for this offering. In accordance with FINRA Rule 5121, BMOCM may not make sales in this offering
to any of its discretionary accounts without the prior written approval of the customer.
You should not construe the offering of the notes
as a recommendation of the merits of acquiring an investment linked to the Reference Assets or as to the suitability of an investment
in the notes.
BMOCM may, but is not obligated to, make a market
in the notes. BMOCM will determine any secondary market prices that it is prepared to offer in its sole discretion.
We may use this pricing supplement in the initial
sale of the notes. In addition, BMOCM or another of our affiliates may use this pricing supplement in market-making transactions in any
notes after their initial sale. Unless BMOCM or we inform you otherwise in the confirmation of sale, this pricing supplement is being
used by BMOCM in a market-making transaction.
For a period of approximately three months following
issuance of the notes, the price, if any, at which we or our affiliates would be willing to buy the notes from investors, and the value
that BMOCM may also publish for the notes through one or more financial information vendors and which could be indicated for the notes
on any brokerage account statements, will reflect a temporary upward adjustment from our estimated value of the notes that would otherwise
be determined and applicable at that time. This temporary upward adjustment represents a portion of (a) the hedging profit that we or
our affiliates expect to realize over the term of the notes and (b) any underwriting discount and the selling concessions paid in connection
with this offering. The amount of this temporary upward adjustment will decline to zero on a straight-line basis over the three-month
period.
The notes and the related offer to purchase notes
and sale of notes under the terms and conditions provided herein do not constitute a public offering in any non-U.S. jurisdiction, and
are being made available only to individually identified investors pursuant to a private offering as permitted in the relevant jurisdiction.
The notes are not, and will not be, registered with any securities exchange or registry located outside of the United States and have
not been registered with any non-U.S. securities or banking regulatory authority. The contents of this document have not been reviewed
or approved by any non-U.S. securities or banking regulatory authority. Any person who wishes to acquire the notes from outside the United
States should seek the advice or legal counsel as to the relevant requirements to acquire these notes.
British Virgin Islands. The notes have not
been, and will not be, registered under the laws and regulations of the British Virgin Islands, nor has any regulatory authority in the
British Virgin Islands passed comment upon or approved the accuracy or adequacy of this document. This pricing supplement and the related
documents shall not constitute an offer, invitation or solicitation to any member of the public in the British Virgin Islands for the
purposes of the Securities and Investment Business Act, 2010, of the British Virgin Islands.
Cayman Islands. Pursuant to the Companies
Law (as amended) of the Cayman Islands, no invitation may be made to the public in the Cayman Islands to subscribe for the notes by or
on behalf of the issuer unless at the time of such invitation the issuer is listed on the Cayman Islands Stock Exchange. The issuer is
not presently listed on the Cayman Islands Stock Exchange and, accordingly, no invitation to the public in the Cayman Islands is to be
made by the issuer (or by any dealer on its behalf). No such invitation is made to the public in the Cayman Islands hereby.
Dominican Republic. Nothing in this pricing
supplement constitutes an offer of securities for sale in the Dominican Republic. The notes have not been, and will not be, registered
with the Superintendence of Securities Market of the Dominican Republic (Superintendencia del Mercado de Valores), under Dominican Securities
Market Law No. 249-17 (“Securities Law 249-17”), and the notes may not be offered or sold within the Dominican Republic or
to, or for the account or benefit of, Dominican persons (as defined under Securities Law 249-17 and its regulations). Failure to comply
with these directives may result in a violation of Securities Law 249-17 and its regulations.
Israel. This pricing supplement is intended
solely for investors listed in the First Supplement of the Israeli Securities Law of 1968, as amended. A prospectus has not been prepared
or filed, and will not be prepared or filed, in Israel relating to the notes offered hereunder. The notes cannot be resold in Israel other
than to investors listed in the First Supplement of the Israeli Securities Law of 1968, as amended.
No action will be taken in Israel that would permit
an offering of the notes or the distribution of any offering document or any other material to the public in Israel. In particular, no
offering document or other material has been reviewed or approved by the Israel Securities Authority. Any material provided to an offeree
in Israel may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have
been provided directly by us or the selling agents.
Nothing in this pricing supplement or any other offering
material relating to the notes, should be considered as the rendering of a recommendation or advice, including investment advice or investment
marketing under the Law For Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management, 1995, to purchase
any note. The purchase of any note will be based on an investor’s own understanding, for the investor’s own benefit and for
the investor’s own account and not with the aim or intention of distributing or offering to other parties. In purchasing the notes,
each investor declares that it has the knowledge, expertise and experience in financial and business matters so as to be capable of evaluating
the risks and merits of an investment in the notes, without relying on any of the materials provided.
Mexico. The notes have not been registered
with the National Registry of Securities maintained by the Mexican National Banking and Securities Commission and may not be offered or
sold publicly in Mexico. This pricing supplement and the related documents may not be publicly distributed in Mexico. The notes may only
be offered in a private offering pursuant to Article 8 of the Securities Market Law.
Switzerland. This pricing supplement is not
intended to constitute an offer or solicitation to purchase or invest in any notes. Neither this pricing supplement nor any other offering
or marketing material relating to the notes constitutes a prospectus compliant with the requirements of articles 35 et seq. of the Swiss
Financial Services Act ("FinSA")) for a public offering of the notes in Switzerland and no such prospectus has been or will
be prepared for or in connection with the offering of the notes in Switzerland.
Neither this pricing supplement nor any other offering
or marketing material relating to the notes has been or will be filed with or approved by a Swiss review body (Prüfstelle). No application
has been or is intended to be made to admit the notes to trading on any trading venue (SIX Swiss Exchange or on any other exchange or
any multilateral trading facility) in Switzerland. Neither this pricing supplement nor any other offering or marketing material relating
to the notes may be publicly distributed or otherwise made publicly available in Switzerland.
The notes may not be publicly offered, directly or
indirectly, in Switzerland within the meaning of FinSA except (i) in any circumstances falling within the exemptions to prepare a prospectus
listed in article 36 para. 1 FinSA or (ii) where such offer does not qualify as a public offer in Switzerland, provided always that no
offer of notes shall require the Issuer or any offeror to publish a prospectus pursuant to article 35 FinSA in respect to such offer and
that such offer shall comply with the additional restrictions set out below (if applicable). The Issuer has not authorised and does not
authorise any offer of notes which would require the Issuer or any offeror to publish a prospectus pursuant to article 35 FinSA in respect
of such offer. For purposes of this provision "public offer" shall have the meaning as such term is understood pursuant to article
3 lit. g and h FinSA and the Swiss Financial Services Ordinance ("FinSO").
The notes do not constitute participations in a collective
investment scheme within the meaning of the Swiss Collective Investment Schemes Act. They are not subject to the approval of, or supervision
by, the Swiss Financial Market Supervisory Authority ("FINMA"), and investors in the notes will not benefit from protection
under CISA or supervision by FINMA.
Prohibition of Offer to Private Clients in Switzerland
- No Key Information Document pursuant to article 58 FinSA (Basisinformationsblatt für Finanzinstrumente) or equivalent document
under foreign law pursuant to article 59 para. 2 FinSA has been or will be prepared in relation to the notes. Therefore, the following
additional restriction applies: Notes qualifying as "debt securities with a derivative character" pursuant to article 86 para.
2 FinSO may not be offered within the meaning of article 58 para. 1 FinSA, and neither this pricing supplement nor any other offering
or marketing material relating to such notes may be made available, to any retail client (Privatkunde) within the meaning of FinSA in
Switzerland.
The notes may also be sold in the following jurisdictions,
provided, in each case, any sales are made in accordance with all applicable laws in such jurisdiction:
Additional Information Relating to the Estimated Initial Value of
the Notes
Our estimated initial value of the notes on the
date hereof that is set forth on the cover hereof, equals the sum of the values of the following hypothetical components:
| · | a fixed-income debt component with the same tenor as the notes, valued using our internal funding rate for structured notes; and |
| · | one or more derivative transactions relating to the economic terms of the notes. |
The internal funding rate used in the determination
of the initial estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. The value
of these derivative transactions is derived from our internal pricing models. These models are based on factors such as the traded market
prices of comparable derivative instruments and on other inputs, which include volatility, dividend rates, interest rates and other factors.
As a result, the estimated initial value of the notes on the Pricing Date was determined based on the market conditions on the Pricing
Date.
The Reference Assets
We have derived the following information from publicly
available documents. We have not independently verified the accuracy or completeness of the following information. We are not affiliated
with any Reference Asset Issuer or any sponsor of any Reference Asset or Underlying Index and no Reference Asset Issuer or any sponsor
of any Reference Asset or Underlying Index will have any obligations with respect to the notes. This document relates only to the notes
and does not relate to the Reference Assets, shares of the Reference Assets or any securities included in the Underlying Index or Reference
Assets. Neither we nor any of our affiliates participates in the preparation of the publicly available documents described below. Neither
we nor any of our affiliates has made any due diligence inquiry with respect to the Reference Assets in connection with the offering of
the notes. There can be no assurance that all events occurring prior to the date hereof, including events that would affect the accuracy
or completeness of the publicly available documents described below and that would affect the trading levels of the Reference Assets,
have been or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material future
events concerning the Reference Assets could affect the levels of the Reference Assets and therefore could affect the payments on the
notes. The information below regarding any Reference Asset or any Underlying Index reflects the policies of, and is subject to change
by, the applicable sponsors. The sponsors of an index, including any Reference Asset or Underlying Index, are under no obligation to continue
to publish, and may discontinue publication of, the index. Neither we nor BMO Capital Markets Corp. accepts any responsibility for the
calculation, maintenance or publication of any index referred to herein.
Information provided to or filed with the SEC under
the Exchange Act and the Investment Company Act of 1940 relating to any Reference Asset that is an ETF may be obtained through the SEC’s
website at http://www.sec.gov.
We encourage you to review recent levels of the Reference
Assets prior to making an investment decision with respect to the notes.
The Utilities Select Sector SPDR®
Fund (“XLU”)
The Utilities Select Sector SPDR®
Fund (the “XLU”) is an investment portfolio managed by SSgA Funds Management, Inc. (“SSFM”), the investment adviser
to the XLU. The XLU is an exchange-traded fund that trades on the NYSE Arca, Inc. ("NYSE Arca") under the ticker symbol “XLU.”
Information provided to or filed with the SEC by
the Select Sector SPDR® Trust can be located by reference to SEC file numbers 333-57791 and 811-08837, respectively, through the SEC’s
website at http://www.sec.gov.
Investment Objective
The XLU seeks to provide investment results
that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities of companies
in the utilities sector, as represented by the Utilities Select Sector Index (the “IXU”). The IXU measures the performance
of the utilities sector of the U.S. equity market and includes companies in the following industries: electric utilities; water utilities;
multi-utilities; independent power producers and energy traders; and gas utilities. The returns of the XLU may be affected by certain
management fees and other expenses, which are detailed in its prospectus.
Investment Strategy — Replication
The XLU pursues the indexing strategy of
“replication” in attempting to approximate the performance of IXU. The XLU will generally invest in substantially all
of the equity securities included in the IXU in approximately the same proportions as the IXU. There may, however, be instances where
SSFM may choose to overweight another stock in the IXU, purchase securities not included in the IXU that SSFM believes are appropriate
to substitute for a security included in the IXU or utilize various combinations of other available investment techniques in seeking to
track accurately the IXU. The XLU will normally invest at least 95% of its total assets in common stocks that comprise the IXU.
The XLU may invest its remaining assets in money market instruments (including repurchase contracts). Swaps, options and futures
contracts (and convertible securities and structured notes) may be used by the XLU in seeking performance that corresponds to the
IXU and managing cash flows. SSFM anticipates that, under normal circumstances, it may take several business days for additions and deletions
to the SPX to be reflected in the portfolio composition of the XLU. The Board of Trustees of the Select Sector SPDR® Trust
may change the XLU’s investment strategy and other policies without shareholder approval.
Correlation
The IXU is a theoretical financial calculation,
while the XLU is an actual investment portfolio. The performance of the XLU and the IXU will vary somewhat due to
transaction costs, asset valuations, market impact, corporate actions (such as mergers and spin-offs) and timing variances. A figure of
100% would indicate perfect correlation. Any correlation of less than 100% is called “tracking error.” The XLU, using
a replication strategy, can be expected to have a lesser tracking error than a fund using representative sampling strategy. Representative
sampling is a strategy in which a fund invests in a representative sample of securities in a tracking index.
The Utilities Select Sector Index
The IXU is a modified market capitalization-based
index, intended to provide an indication of the pattern of common stock price movements of companies that are components of the SPX and
are involved in the utilities industry. The IXU is one of the eleven Select Sector sub-indices of the SPX, each of which we refer to as
a “Select Sector Index.”
The Index is also sponsored and compiled by S&P
DJI. S&P DJI determines the composition of the Index and relative weightings of the securities in the Index based on the Index methodology
(as the “Index Compilation Agent”). S&P DJI also publishes information regarding the market value of the Index (as the
“Index Provider”). S&P DJI is not affiliated with the Fund or the Adviser. The composition and weighting of the stocks
included in the IXU will likely differ from the composition and weighting of stocks included in any similar Select Sector Index that is
published and disseminated by S&P. S&P’s only relationship to the Index Compilation Agent is the licensing of certain trademarks
and trade names of S&P and of the SPX which is determined, composed and calculated by S&P without regard to the Index Compilation
Agent.
The Select Sector Indices
Construction, Maintenance and Calculation of The
Select Sector Indices:
The Select Sector Index is developed and maintained
in accordance with the following criteria:
| · | Each of the component stocks in a Select Sector Index (the “Component Stocks”) has been selected from the universe of
companies defined by the SPX. |
| · | Each stock in the SPX is allocated to one and only one of the Select Sector Indices. |
| · | The Index Compilation Agent assigns each constituent stock of the S&P 500 Index to a Select Sector Index based on the Global Industry
Classification Standard (“GICS”). S&P DJI has sole control over the removal of stocks from the S&P 500 and the selection
of replacement stocks to be added to the S&P 500. |
| · | Each Select Sector Index is calculated using a base-weighted aggregate methodology; that means the level of the Select Sector Index
reflects the total market value of all of its Component Stocks relative to a particular base period. Statisticians refer to this type
of index, one with a set of combined variables (such as price and number of shares), as a composite index. |
| · | Each Select Sector Index is calculated using the same methodology utilized by S&P DJI in calculating the SPX, using a base-weighted
aggregate methodology. The daily calculation of each Select Sector Index is computed by dividing the total market value of the companies
in the Select Sector Index by a number called the “Index Divisor.” |
| · | Each Select Sector Index is weighted, on a quarterly basis, based on the float-adjusted market capitalization of each of the Component
Stocks, subject to the following asset diversification requirements: (i) the market capitalization-based weighted value of any single
Component Stock measured with prices as of the reference date and membership, shares outstanding and investable weight factors as of the
rebalancing effective date may not exceed 25% of the total value of its respective Select Sector Index; and (ii) the sum of the constituent
stocks with weight greater than 4.8% cannot exceed 50% of the total Index weight. |
| · | Rebalancing the Select Sector Indices to meet the asset diversification requirements will be the responsibility of S&P. If on
the second Friday of any calendar quarter-end month (a “Quarterly Qualification Date”), a Component Stock (or two or more
Component Stocks) approaches the maximum allowable value limits set forth above (the “Asset Diversification Limits”), the
percentage that such Component Stock (or Component Stocks) represents in the Select Sector Index will be reduced and the market capitalization-based
weighted value of such Component Stock (or Component Stocks) will be redistributed across the Component Stocks that do not closely approach
the Asset Diversification Limits in accordance with the following methodology: First, each Component Stock that exceeds 24% of the total
value of the Select Sector Index will be reduced to 23% of the total value of the Select Sector Index and the excess amount will be redistributed
proportionally across the remaining Component Stocks that each represent less than 23% of the total value of the Select Sector Index.
If as a result of this redistribution, another Component Stock then exceeds 23%, the redistribution will be repeated as necessary until
no company breaches the 23% weight cap. Second, if the sum of Component Stocks that each exceed 4.8% of the total value of the Select
Sector Index exceeds 50% of the total value of the Index, the Component Stocks will be ranked in descending order of their float-adjusted
market capitalization, and the first Component Stock to cause the 50% limit to be breached will be reduced to 4.5% and the excess amount
will be distributed proportionally across all remaining Component Stocks that represent less than 4.5% of the total value of the Select
Sector Index. This redistribution process will be repeated as necessary until at least 50% of the value of the Select Sector Index is
accounted for by Component Stocks representing no more than 4.8% of the total value of the Select Sector Index. If necessary, this reallocation
process may take place more than once to ensure that the Select Sector Index and the Select Sector SPDR Fund portfolio based upon it conform
to the requirements for qualification of the Select Sector SPDR Fund as a regulated investment company (“RIC”), under the
Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). |
This occurs at the closing prices of the second Friday of March,
June, September and December and becomes effective after the market close on the third Friday of March, June, September and December.
If, on the second to last business day of March, June, September,
or December a company has a weight greater than 24% or the sum of the companies with weights greater than 4.8% exceeds 50%, a secondary
rebalancing will be triggered with the rebalancing effective date being after the close of the last business day of the month. This secondary
rebalancing will use the closing prices as of the second to last business day of March, June, September, or December, and membership,
shares outstanding, and investable weight factors as of the rebalancing effective date.
The Index Compilation Agent at any time may determine
that a Component Stock which has been assigned to one Select Sector Index has undergone such a transformation in the composition of its
business that it should be removed from that Select Sector Index and assigned to a different Select Sector Index. In the event that the
Index Compilation Agent notifies the index calculation agent that a Component Stock’s Select Sector Index assignment should be changed,
the index calculation agent will disseminate notice of the change following its standard procedure for announcing index changes and will
implement the change in the affected Select Sector Indices on a date no less than one week after the initial dissemination of information
on the sector change to the maximum extent practicable. It is not anticipated that Component Stocks will change sectors frequently. Component
Stocks removed from and added to the SPX will be deleted from and added to the appropriate Select Sector Index on the same schedule used
by S&P for additions and deletions from the SPX insofar as practicable.
The Russell 2000® Index (“RTY”)
The Russell 2000® Index was developed by Russell
Investments (“Russell”) before FTSE International Limited (“FTSE”) and Russell combined in 2015 to create FTSE
Russell, which is wholly owned by London Stock Exchange Group. Russell began dissemination of the Russell 2000® Index (Bloomberg L.P.
index symbol “RTY”) on January 1, 1984. The Russell 2000® Index was set to 135 as of the close of business on December
31, 1986. FTSE Russell calculates and publishes the Russell 2000® Index. The Russell 2000® Index is designed to track the performance
of the small capitalization segment of the U.S. equity market. The Russell 2000® Index is a subset of the Russell 3000® Index
representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities
based on a combination of their market cap and current index membership. The Russell 3000® Index measures the performance of the largest
3,000 U.S. companies. The Russell 2000® Index is determined, comprised, and calculated by FTSE Russell without regard to the notes.
Selection of Stocks Comprising the Russell
2000® Index
All companies eligible for inclusion in the Russell
2000® Index must be classified as a U.S. company under FTSE Russell’s country-assignment methodology. If a company is incorporated,
has a stated headquarters location, and trades on a standard exchange in the same country (American Depositary Receipts and American Depositary
Shares are not eligible), then the company is assigned to its country of incorporation. If any of the three factors are not the same,
FTSE Russell defines three Home Country Indicators (“HCIs”): country of incorporation, country of headquarters, and country
of the most liquid exchange as defined by a two-year average daily dollar trading volume (“ADDTV”) from all exchanges within
a country. Using the HCIs, FTSE Russell cross-compares the primary location of the company’s assets with the three HCIs. If the
primary location of its assets matches any of the HCIs, then the company is assigned to its primary asset location. If there is insufficient
information to determine located company’s primary location of assets, FTSE Russell will use the primary location of the company’s
revenue for the same cross-comparison and assigns the company to the appropriate country in a similar fashion. FTSE Russell uses an average
of two years of assets or revenues data for analysis to reduce potential turnover. If conclusive country details cannot be derived from
assets or revenues data, FTSE Russell will assign the company to the country in which its headquarters are located unless the country
is a Benefit Driven Incorporation (BDI) country. If the country in which its headquarters are located is a BDI, the company is assigned
to the country of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize,
Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao, Faroe Islands, Gibraltar, Guernsey,
Isle of Man, Jersey, Liberia, Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and Turks and Caicos Islands. For any companies
incorporated or headquartered in a U.S. territory, including countries such as Puerto Rico, Guam, and U.S. Virgin Islands, a U.S. HCI
is assigned. “N-Shares” of companies controlled by entities in mainland China are not eligible for inclusion in the Russell
2000® Index.
All securities eligible for inclusion in the Russell
2000® Index must trade on an eligible U.S. exchange. Stocks must have a closing price at or above $1.00 (on its primary exchange)
on rank day in May of each year (timetable is announced each spring) to be eligible for inclusion during annual reconstitution. However,
in order to reduce unnecessary turnover, if an existing member’s closing price is less than $1.00 on rank day of May, it will be
considered eligible if the average of the daily closing prices (from its primary exchange) during the 30 days prior to the rank date is
equal to or greater than $1.00. FTSE Russell adds initial public offerings (IPOs) each quarter to ensure that new additions to the institutional
investing opportunity set are reflected in representative indexes. A stock added during the quarterly IPO process is considered a new
index addition, and therefore must have a closing price on its primary exchange at or above $1.00 on the last day of the eligibility period
in order to qualify for index inclusion. If an existing index member does not trade on the rank day, it must price at $1.00 or above on
another eligible U.S. exchange to remain eligible.
Royalty trusts, U.S. limited liability companies,
closed-end investment companies (companies that are required to report Acquired Fund Fees and Expenses, as defined by the SEC, including
business development companies, are not eligible for inclusion), blank check companies, special-purpose acquisition companies (SPACs),
Exchange Traded Funds (ETFs), mutual funds and limited partnerships are ineligible for inclusion. Preferred and convertible preferred
stock, redeemable shares, participating preferred stock, warrants, rights, depositary receipts, installment receipts and trust receipts
are not eligible for inclusion in the Russell 2000® Index.
Annual reconstitution is a process by which the Russell
2000® Index is completely rebuilt. On the rank day in May of each year, all eligible securities are ranked by their total market capitalization.
The largest 4,000 become the Russell 3000E Index, and the other FTSE Russell indexes are determined from that set of securities. If there
are not 4, 000 eligible securities in the U.S. market, the entire eligible set is include. Reconstitution of the Russell 2000® Index
occurs on the last Friday in June or, when the last Friday in June is the 29th or 30th, reconstitution occurs on the prior Friday. In
addition, FTSE Russell adds initial public offerings to the Russell 2000® Index on a quarterly basis based on total market capitalization
ranking within the market-adjusted capitalization breaks established during the most recent reconstitution.
After membership is determined, a security’s
shares are adjusted to include only those shares available to the public. This is often referred to as “free float.” The purpose
of the adjustment is to exclude from market calculations the capitalization that is not available for purchase and is not part of the
investable opportunity set.
License Agreement
“Russell 2000®” and “Russell
3000®” are trademarks of FTSE Russell and have been licensed for use by us.
The notes are not sponsored, endorsed, sold or promoted
by FTSE Russell. FTSE Russell makes no representation or warranty, express or implied, to the owners of the notes or any member of the
public regarding the advisability of investing in securities generally or in the notes particularly or the ability of the Russell 2000®
Index to track general stock market performance or a segment of the same. FTSE Russell's publication of the Russell 2000® Index in
no way suggests or implies an opinion by FTSE Russell as to the advisability of investment in any or all of the securities upon which
the Russell 2000® Index is based. FTSE Russell's only relationship to the Issuer is the licensing of certain trademarks and trade
names of FTSE Russell and of the Russell 2000® Index which is determined, composed and calculated by FTSE Russell without regard to
the Issuer or the notes. FTSE Russell is not responsible for and has not reviewed the notes nor any associated literature or publications
and FTSE Russell makes no representation or warranty express or implied as to their accuracy or completeness, or otherwise. FTSE Russell
reserves the right, at any time and without notice, to alter, amend, terminate or in any way change the Russell 2000® Index. FTSE
Russell has no obligation or liability in connection with the administration, marketing or trading of the notes.
FTSE RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR
THE COMPLETENESS OF THE RUSSELL 2000® INDEX OR ANY DATA INCLUDED THEREIN AND FTSE RUSSELL SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. FTSE RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER, INVESTORS,
OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RUSSELL 2000® INDEX OR ANY DATA INCLUDED THEREIN. FTSE RUSSELL
MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE RUSSELL 2000® INDEX OR ANY DATA INCLUDED HEREIN WITHOUT LIMITING ANY OF THE FOREGOING. IN NO EVENT SHALL
FTSE RUSSELL HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED
OF THE POSSIBILITY OF SUCH DAMAGES.
The S&P 500® Index (“SPX”)
The S&P 500® Index measures the performance
of the large-cap segment of the U.S. market. The S&P 500® Index includes 500 leading companies and covers approximately 80% of
available market capitalization. The calculation of the level of the S&P 500® Index is based on the relative value of the aggregate
market value of the common stocks of 500 companies as of a particular time compared to the aggregate average market value of the common
stocks of 500 similar companies during the base period of the years 1941 through 1943.
S&P calculates the S&P 500® Index by
reference to the prices of the constituent stocks of the S&P 500® Index without taking account of the value of dividends paid
on those stocks. As a result, the return on the notes will not reflect the return you would realize if you actually owned the constituent
stocks of the S&P 500® Index and received the dividends paid on those stocks.
Computation of the S&P 500® Index
While S&P currently employs the following methodology
to calculate the S&P 500® Index, no assurance can be given that S&P will not modify or change this methodology in a manner
that may affect the Payment at Maturity.
Historically, the market value of any component stock
of the S&P 500® Index was calculated as the product of the market price per share and the number of then outstanding shares of
such component stock. In March 2005, S&P began shifting the S&P 500® Index halfway from a market capitalization weighted formula
to a float-adjusted formula, before moving the S&P 500® Index to full float adjustment on September 16, 2005. S&P’s
criteria for selecting stocks for the S&P 500® Index did not change with the shift to float adjustment. However, the adjustment
affects each company’s weight in the S&P 500® Index.
Under float adjustment, the share counts used in
calculating the S&P 500® Index reflect only those shares that are available to investors, not all of a company’s outstanding
shares. Float adjustment excludes shares that are closely held by control groups, other publicly traded companies or government agencies.
In September 2012, all shareholdings representing
more than 5% of a stock’s outstanding shares, other than holdings by “block owners,” were removed from the float for
purposes of calculating the S&P 500® Index. Generally, these “control holders” will include officers and directors,
private equity, venture capital and special equity firms, other publicly traded companies that hold shares for control, strategic partners,
holders of restricted shares, ESOPs, employee and family trusts, foundations associated with the company, holders of unlisted share classes
of stock, government entities at all levels (other than government retirement/pension funds) and any individual person who controls a
5% or greater stake in a company as reported in regulatory filings. However, holdings by block owners, such as depositary banks, pension
funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension funds, investment funds of insurance
companies, asset managers and investment funds, independent foundations and savings and investment plans, will ordinarily be considered
part of the float.
Treasury stock, stock options, equity participation
units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares held in a trust to allow investors in
countries outside the country of domicile, such as depositary shares and Canadian exchangeable shares are normally part of the float unless
those shares form a control block.
For each stock, an investable weight factor (“IWF”)
is calculated by dividing the available float shares by the total shares outstanding. Available float shares are defined as the total
shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum threshold for control blocks. For
example, if a company’s officers and directors hold 3% of the company’s shares, and no other control group holds 5% of the
company’s shares, S&P would assign that company an IWF of 1.00, as no control group meets the 5% threshold. However, if a company’s
officers and directors hold 3% of the company’s shares and another control group holds 20% of the company’s shares, S&P
would assign an IWF of 0.77, reflecting the fact that 23% of the company’s outstanding shares are considered to be held for control.
As of July 31, 2017, companies with multiple share class lines are no longer eligible for inclusion in the S&P 500® Index. Constituents
of the S&P 500® Index prior to July 31, 2017 with multiple share class lines were grandfathered in and continue to be included
in the S&P 500® Index. If a constituent company of the S&P 500® Index reorganizes into a multiple share class line structure,
that company will remain in the S&P 500® Index at the discretion of the S&P Index Committee in order to minimize turnover.
The S&P 500® Index is calculated using a
base-weighted aggregate methodology. The level of the S&P 500® Index reflects the total market value of all 500 component stocks
relative to the base period of the years 1941 through 1943. An indexed number is used to represent the results of this calculation in
order to make the level easier to use and track over time. The actual total market value of the component stocks during the base period
of the years 1941 through 1943 has been set to an indexed level of 10. This is often indicated by the notation 1941-43 = 10. In practice,
the daily calculation of the S&P 500® Index is computed by dividing the total market value of the component stocks by the “index
divisor.” By itself, the index divisor is an arbitrary number. However, in the context of the calculation of the S&P 500®
Index, it serves as a link to the original base period level of the S&P 500® Index. The index divisor keeps the S&P 500®
Index comparable over time and is the manipulation point for all adjustments to the S&P 500® Index, which is index maintenance.
Index Maintenance
Index maintenance includes monitoring and completing
the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to
company restructuring or spinoffs. Some corporate actions, such as stock splits and stock dividends, require changes in the common shares
outstanding and the stock prices of the companies in the S&P 500® Index, and do not require index divisor adjustments.
To prevent the level of the S&P 500® Index
from changing due to corporate actions, corporate actions which affect the total market value of the S&P 500® Index require an
index divisor adjustment. By adjusting the index divisor for the change in market value, the level of the S&P 500® Index remains
constant and does not reflect the corporate actions of individual companies in the S&P 500® Index. Index divisor adjustments are
made after the close of trading and after the calculation of the S&P 500® Index closing level.
Changes in a company’s total shares outstanding
of 5% or more due to public offerings are made as soon as reasonably possible. Other changes of 5% or more (for example, due to tender
offers, Dutch auctions, voluntary exchange offers, company stock repurchases, private placements, acquisitions of private companies or
non-index companies that do not trade on a major exchange, redemptions, exercise of options, warrants, conversion of preferred stock,
notes, debt, equity participations, at-the-market stock offerings or other recapitalizations) are made weekly, and are generally announced
on Fridays for implementation after the close of trading the following Friday (one week later). If a 5% or more share change causes a
company’s IWF to change by five percentage points or more, the IWF is updated at the same time as the share change. IWF changes
resulting from partial tender offers are considered on a case-by-case basis.
License Agreement
We and S&P Dow Jones Indices LLC (“S&P”)
have entered into a non-exclusive license agreement providing for the license to us and certain of our affiliates, in exchange for a fee,
of the right to use the S&P 500® Index, in connection with certain securities, including the notes. The S&P 500® Index
is owned and published by S&P.
The license agreement between S&P and us provides
that the following language must be set forth in this pricing supplement:
The notes are not sponsored, endorsed, sold or promoted
by S&P Dow Jones Indices LLC, Dow Jones, Standard and Poor’s Financial Services LLC or any of their respective affiliates (collectively,
“S&P Dow Jones Indices”). S&P Dow Jones Indices make no representation or warranty, express or implied, to the holders
of the notes or any member of the public regarding the advisability of investing in securities generally or in the notes particularly
or the ability of the S&P 500® Index to track general market performance. S&P Dow Jones Indices’ only relationship to
us with respect to the S&P 500® Index is the licensing of the Index and certain trademarks, service marks and/or trade names of
S&P Dow Jones Indices and/or its third party licensors. The S&P 500® Index is determined, composed and calculated by S&P
Dow Jones Indices without regard to us or the notes. S&P Dow Jones Indices have no obligation to take our needs or the needs of holders
of the notes into consideration in determining, composing or calculating the S&P 500® Index. S&P Dow Jones Indices are not
responsible for and have not participated in the determination of the prices, and amount of the notes or the timing of the issuance or
sale of the notes or in the determination or calculation of the equation by which the notes are to be converted into cash. S&P Dow
Jones Indices have no obligation or liability in connection with the administration, marketing or trading of the notes. There is no assurance
that investment products based on the S&P 500® Index will accurately track index performance or provide positive investment returns.
S&P Dow Jones Indices LLC and its subsidiaries are not investment advisors. Inclusion of a security or futures contract within an
index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security or futures contract, nor is it considered
to be investment advice. Notwithstanding the foregoing, CME Group Inc. and its affiliates may independently issue and/or sponsor financial
products unrelated to the notes currently being issued by us, but which may be similar to and competitive with the notes. In addition,
CME Group Inc. and its affiliates may trade financial products which are linked to the performance of the S&P 500® Index. It is
possible that this trading activity will affect the value of the notes.
S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY,
ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P 500® INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING
BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES
SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO
RESULTS TO BE OBTAINED BY US, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500® INDEX OR WITH RESPECT
TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR
ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST
TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND US, OTHER THAN THE LICENSORS
OF S&P DOW JONES INDICES.
S&P® is a registered trademark of Standard
& Poor’s Financial Services LLC and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. These trademarks
have been licensed for use by Bank of Montreal. “Standard & Poor’s®”, “S&P 500®” and “S&P®”
are trademarks of S&P. The notes are not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation regarding
the advisability of investing in the notes.
Validity of the Notes
In the opinion of Osler, Hoskin & Harcourt LLP,
the issue and sale of the notes has been duly authorized by all necessary corporate action of the Bank in conformity with the Senior Indenture,
and when this pricing supplement has been attached to, and duly notated on, the master note that represents the notes, the notes will
have been validly executed and issued and, to the extent validity of the notes is a matter governed by the laws of the Province of Ontario,
or the laws of Canada applicable therein, and will be valid obligations of the Bank, subject to the following limitations (i) the enforceability
of the Senior Indenture may be limited by the Canada Deposit Insurance Corporation Act (Canada), the Winding-up and Restructuring Act
(Canada) and bankruptcy, insolvency, reorganization, receivership, moratorium, arrangement or winding-up laws or other similar laws affecting
the enforcement of creditors’ rights generally; (ii) the enforceability of the Senior Indenture may be limited by equitable principles,
including the principle that equitable remedies such as specific performance and injunction may only be granted in the discretion of a
court of competent jurisdiction; (iii) pursuant to the Currency Act (Canada) a judgment by a Canadian court must be awarded in Canadian
currency and that such judgment may be based on a rate of exchange in existence on a day other than the day of payment; and (iv) the enforceability
of the Senior Indenture will be subject to the limitations contained in the Limitations Act, 2002 (Ontario), and such counsel expresses
no opinion as to whether a court may find any provision of the Senior Debt Indenture to be unenforceable as an attempt to vary or exclude
a limitation period under that Act. This opinion is given as of the date hereof and is limited to the laws of the Provinces of Ontario
and the federal laws of Canada applicable thereto. In addition, this opinion is subject to customary assumptions about the trustee’s
authorization, execution and delivery of the Indenture and the genuineness of signatures and certain factual matters, all as stated in
the letter of such counsel dated May 26, 2022, which has been filed as Exhibit 5.3 to Bank of Montreal’s Form 6-K filed with the
SEC and dated May 26, 2022.
In the opinion of Mayer Brown LLP, when this pricing
supplement has been attached to, and duly notated on, the master note that represents the notes, and the notes have been issued and sold
as contemplated herein, the notes will be valid, binding and enforceable obligations of Bank of Montreal, entitled to the benefits of
the Senior Indenture, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts
of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing
and the lack of bad faith). This opinion is given as of the date hereof and is limited to the laws of the State of New York. Insofar as
this opinion involves matters governed by the laws of the Province of Ontario, or the laws of Canada applicable therein, Mayer Brown LLP
has assumed, without independent inquiry or investigation, the validity of the matters opined on by Osler, Hoskin & Harcourt LLP,
Canadian legal counsel for the issuer, in its opinion expressed above. This opinion is subject to customary assumptions about the trustee’s
authorization, execution and delivery of the Senior Indenture and the genuineness of signatures and to such counsel’s reliance on
the Bank of Montreal and other sources as to certain factual matters, all as stated in the legal opinion of Mayer Brown LLP dated May
26, 2022, which has been filed with the SEC as an exhibit to a report on Form 6-K by the Bank of Montreal on May 26, 2022.
19
Exhibit 107.1
The pricing supplement to which this Exhibit is attached is a final
prospectus for the related offering. The maximum aggregate offering price of that offering is $238,000.
Bank of Montreal (NYSE:BMO)
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Bank of Montreal (NYSE:BMO)
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