Issuer: |
Bank of Montreal. |
Market Measure: |
EURO STOXX 50® Index (the "Index"). |
Pricing Date: |
May 30, 2023. |
Issue Date: |
June 2, 2023. |
Original Offering
Price: |
$1,000 per security. |
Face Amount: |
$1,000 per security. References in this pricing supplement to a "security" are to a security with a face amount of $1,000. |
Automatic Call: |
If the closing level of the Index on
the call date is greater than or equal to the starting level, the securities will be automatically called, and on the call settlement
date, you will receive the face amount per security plus the call premium.
If the securities are automatically
called, the positive return on the securities will be limited to the call premium, and you will not participate in any appreciation of
the Index beyond the call premium, which may be significant. If the securities are automatically called, you will no longer have the opportunity
to participate in any appreciation of the Index at the upside participation rate.
If the securities are automatically called,
they will cease to be outstanding on the related call settlement date and you will have no further rights under the securities after such
call settlement date. You will not receive any notice from us if the securities are automatically called.
|
Call Date: |
June 3, 2024, subject to postponement. |
Call Premium: |
12.00% of the face amount, or $120.00 per $1,000 face amount of the
securities |
Call Settlement
Date: |
Five business days after the call date (as the call date may be postponed pursuant to “—Market Disruption Events and Postponement Provisions” below, if applicable). |
Maturity Payment
Amount: |
If the securities are not automatically
called on the call date, then on the stated maturity date, you will be entitled to receive a cash payment per security in U.S. dollars
equal to the maturity payment amount. The "maturity payment amount" per security will equal:
• if the ending level is
greater than the starting level: $1,000 plus:
$1,000 × index return ×
upside participation rate
• if the ending level is less
than or equal to the starting level, but greater than or equal to the threshold level: $1,000; or
• if the ending level is less
than the threshold level:
$1,000 + [$1,000 × (index return
+ buffer amount)]
|
If the securities are not automatically called, and the ending level is less than the threshold level, you will have 1-to-1 downside exposure to the decrease in the level of the Index in excess of the buffer amount and will lose some, and possibly up to 85%, of the face amount of your securities at maturity. |
Stated Maturity
Date:
|
June 2, 2026, subject to postponement. The securities are not subject
to repayment at the option of any holder of the securities prior to the stated maturity date. |
Starting Level: |
4,291.58, the closing level of the Index on the pricing date. |
Closing Level: |
Closing level has the meaning set forth under "General Terms of the Securities—Certain Terms for Securities Linked to an Index—Certain Definitions" in the accompanying product supplement. |
Ending Level: |
The "ending level" will be the closing level of the Index on the final calculation day. |
Threshold Level: |
3,647.843, which is equal to 85% of the starting level. |
Buffer Amount: |
15%. |
Upside
Participation Rate: |
150%. |
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Index Return: |
The "index return" is
the percentage change from the starting level to the ending level, measured as follows:
ending level – starting
level
starting level |
Final Calculation
Day: |
May 26, 2026, subject to postponement. |
Market Disruption
Events and
Postponement
Provisions: |
The call date and the final calculation
day are subject to postponement due to non-trading days and the occurrence of a market disruption event. In addition, the call payment
date and the stated maturity date will be postponed if the call date or the final calculation day, as applicable, is postponed, and will
be adjusted for non-business days.
For more information regarding adjustments
to the call date, the final calculation day, the call settlement date, and the stated maturity date, see "General Terms of the Securities—Consequences
of a Market Disruption Event; Postponement of a Calculation Day—Securities Linked to a Single Market Measure" and "—Payment
Dates" in the accompanying product supplement. For purposes of the product supplement, each of the call date and the final calculation
day is a "calculation day," and the call settlement date and the stated maturity date is a "payment date." In addition,
for information regarding the circumstances that may result in a market disruption event, see "General Terms of the Securities—Certain
Terms for Securities Linked to an Index—Market Disruption Events" in the accompanying product supplement. |
Calculation Agent: |
BMO Capital Markets Corp. ("BMOCM"). |
Material Tax
Consequences:
|
For a discussion of the material U.S. federal income and certain estate tax consequences and the Canadian federal income tax consequences of the ownership and disposition of the securities, see “United States Federal Tax Considerations" below, and the sections of the product supplement entitled "United States Federal Tax Considerations" and "Canadian Federal Income Tax Consequences." |
Agent: |
Wells Fargo Securities, LLC (“WFS”)
is the agent for the distribution of the securities. The agent will receive an agent discount of $25.75 per security. The agent may resell
the securities to other securities dealers at the original offering price of the securities less a concession not in excess of $20.00
per security. Such securities dealers may include Wells Fargo Advisors (“WFA”) (the trade name of the retail brokerage
business of WFS’s affiliates, Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC). In addition
to the concession allowed to WFA, WFS will pay $0.75 per security of the agent discount that it receives to WFA as a distribution expense
fee for each security sold by WFA.
In addition, in respect of certain
securities sold in this offering, BMOCM may pay a fee of up to $1.00 per security to selected securities dealers in consideration for
marketing and other services in connection with the distribution of the securities to other securities dealers.
WFS, BMOCM and/or one or more of
their respective affiliates expects to realize hedging profits projected by their proprietary pricing models to the extent they assume
the risks inherent in hedging our obligations under the securities. If WFS or any other dealer participating in the distribution of the
securities or any of their affiliates conduct hedging activities for us in connection with the securities, that dealer or its affiliates
will expect to realize a profit projected by its proprietary pricing models from those hedging activities. Any such projected profit
will be in addition to any discount, concession or fee received in connection with the sale of the securities to you. |
Denominations: |
$1,000 and any integral multiple of $1,000. |
CUSIP: |
06374VTP1 |
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Additional Information about the Issuer and the Securities |
You should read this pricing supplement together
with product supplement No. WF1 dated July 20, 2022, the prospectus supplement dated May 26, 2022 and the prospectus dated May 26, 2022
for additional information about the securities. Information included in this pricing supplement supersedes information in the product
supplement, prospectus supplement and prospectus to the extent it is different from that information. Certain defined terms used but not
defined herein have the meanings set forth in the product supplement, prospectus supplement or prospectus.
Our Central Index Key, or CIK, on the SEC website
is 927971. When we refer to “we,” “us” or “our” in this pricing supplement, we
refer only to Bank of Montreal.
You may access the product supplement, prospectus
supplement and prospectus on the SEC website www.sec.gov as follows (or if that address has changed, by reviewing our filing for the relevant
date on the SEC website):
| • | Product Supplement No. WF1 dated July 20, 2022: |
https://www.sec.gov/Archives/edgar/data/927971/000121465922009020/r715220424b5.htm
| • | Prospectus Supplement and prospectus dated May 26, 2022: |
https://www.sec.gov/Archives/edgar/data/927971/000119312522160519/d269549d424b5.htm
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Estimated
Value of the Securities |
Our estimated initial value of the securities on
the pricing date that is set forth on the cover page of this pricing supplement equals the sum of the values of the following hypothetical
components:
| · | a fixed-income debt component with the same tenor as the securities, valued using our internal funding
rate for structured notes; and |
| · | one or more derivative transactions relating to the economic terms of the securities. |
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 securities on the pricing date was determined based on market conditions at that time.
For more information about the estimated initial
value of the securities, see “Risk Factors” below.
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
The securities are not appropriate for all investors.
The securities may be an appropriate investment for investors who:
| § | seek a fixed return equal to the call premium
if the securities are automatically called on the call date; |
| § | understand that the securities may be automatically
called prior to the stated maturity and that the term of the securities may be as short as approximately one year; |
| § | seek 150% leveraged exposure to the upside performance
of the Index if the securities are not automatically called and the ending level is greater than the starting level; |
| § | desire to limit downside exposure to the Index
through the buffer amount; |
| § | are willing to accept the risk that, if the securities
are not automatically called and the ending level is less than the starting level by more than the buffer amount, they will lose some,
and possibly up to 85%, of the face amount per security at maturity; |
| § | are willing to forgo interest payments on the
securities and dividends on the securities included in the Index; and |
| § | are willing to hold the securities until maturity
or automatic call. |
The securities may not be an appropriate investment
for investors who:
| § | seek a liquid investment or are unable or unwilling
to hold the securities to maturity or automatic call; |
| § | seek a security with a fixed term; |
| § | are unwilling to accept the risk that the securities
will not be automatically called and the ending level of the Index may decrease from the starting level by more than the buffer amount; |
| § | seek full return of the face amount of the securities
at stated maturity; |
| § | are unwilling to purchase securities with an estimated value as of the
pricing date that is lower than the original offering price, as set forth on the cover page of this document; |
| § | seek current income over the term of the securities; |
| § | are unwilling to accept the risk of exposure
to the Index; |
| § | seek exposure to the Index but are unwilling
to accept the risk/return trade-offs inherent in the maturity payment amount for the securities; |
| § | are unwilling to accept the credit risk of Bank
of Montreal to obtain exposure to the Index generally, or to the exposure to the Index that the securities provide specifically; or |
| § | prefer the lower risk of fixed income investments
with comparable maturities issued by companies with comparable credit ratings. |
The considerations identified above are not exhaustive. Whether
or not the securities are an appropriate investment for you will depend on your individual circumstances, and you should reach an investment
decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the appropriateness of
an investment in the securities in light of your particular circumstances. You should also review carefully the "Selected Risk Considerations"
herein and the "Risk Factors" in the accompanying product supplement for risks related to an investment in the securities. For
more information about the Index, please see the section titled "EURO STOXX 50® Index" below.
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Determining
Timing and Amount of Payment on the Securities |
Whether the securities are automatically called on the call date for
the call premium will each be determined based on the closing level of the Index on the call date as follows:
If the securities have not been automatically called, then on the stated maturity
date, you will receive a cash payment per security (the maturity payment amount) calculated as follows:
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Selected Risk Considerations |
The securities have complex features and investing
in the securities will involve risks not associated with an investment in conventional debt securities. Some of the risks that apply to
an investment in the securities are summarized below, but we urge you to read the more detailed explanation of the risks relating to the
securities generally in the "Risk Factors" section of the accompanying product supplement. You should reach an investment decision
only after you have carefully considered with your advisors the appropriateness of an investment in the securities in light of your particular
circumstances.
Risks Relating To The Terms And Structure
Of The Securities
If The Securities Are Not Automatically Called
And The Ending Level Is Less Than The Threshold Level, You Will Lose Some, And Possibly Up To 85%, Of The Face Amount Of Your Securities
At Maturity.
If the securities are not automatically called,
we will not repay you a fixed amount on the securities on the stated maturity date. The maturity payment amount will depend on the direction
of and percentage change in the ending level of the Index relative to the starting level and the other terms of the securities. Because
the level of the Index will be subject to market fluctuations, the maturity payment amount may be more or less, and possibly significantly
less, than the face amount of your securities.
If the securities are not automatically called
and the ending level is less than the threshold level, the maturity payment amount will be less than the face amount and you will have
1-to-1 downside exposure to the decrease in the level of the Index in excess of the buffer amount, resulting in a loss of 1% of the face
amount for every 1% decline in the Index in excess of the buffer amount. The threshold level is 85% of the starting level. As a result,
if the ending level is less than the threshold level, you will lose some, and possibly up to 85%, of the face amount per security at maturity.
This is the case even if the level of the Index is greater than or equal to the starting level or the threshold level at certain times
during the term of the securities.
If the securities are not automatically called,
even if the ending level is greater than the starting level, the maturity payment amount may only be slightly greater than the face amount,
and your yield on the securities may be less than the yield you would earn if you bought a traditional interest-bearing debt security
of Bank of Montreal or another issuer with a similar credit rating with the same stated maturity date.
No Periodic Interest Will Be Paid On The Securities.
No periodic payments of interest will be made on
the securities. However, if the agreed-upon tax treatment is successfully challenged by the Internal Revenue Service (the "IRS"),
you may be required to recognize taxable income over the term of the securities. You should review the section of this pricing supplement
entitled "United States Federal Tax Considerations."
If The Securities Are Automatically Called,
Your Return Will Be Limited to the Call Premium.
If the securities are automatically called, the
positive return on the securities will be limited to the call premium, and you will not participate in any appreciation of the Index beyond
the call premium, which may be significant. Accordingly, if the securities are automatically called, the return on the securities may
be less than the return in a direct investment in the securities represented by the Index. If the securities are automatically called,
you will no longer have the opportunity to participate in any appreciation of the Index at the upside participation rate.
You Will Be Subject To Reinvestment Risk.
If your securities are automatically called, the
term of the securities may be reduced to as short as approximately one year. There is no guarantee that you would be able to reinvest
the proceeds from an investment in the securities at a comparable return for a similar level of risk in the event the securities are automatically
called prior to maturity.
The Securities Are Subject To Credit Risk.
The securities are our obligations and are not,
either directly or indirectly, an obligation of any third party. Any amounts payable under the securities are subject to our creditworthiness
and you will have no ability to pursue any securities included in the Index for payment. As a result, our actual and perceived creditworthiness
may affect the value of the securities and, in the event we were to default on our obligations under the securities, you may not receive
any amounts owed to you under the terms of the securities.
Significant Aspects Of The Tax Treatment Of
The Securities Are Uncertain.
The tax treatment of the securities is uncertain.
We do not plan to request a ruling from the IRS or from the Canada Revenue Agency regarding the tax treatment of the securities, and the
IRS, the Canada Revenue Agency or a court may not agree with the tax treatment described in this pricing supplement and/or the accompanying
product supplement.
The IRS has issued a notice indicating that it
and the U.S. Treasury Department are actively considering whether, among other issues, a holder should be required to accrue interest
over the term of an instrument such as the securities even though that holder will not receive any payments with respect to the securities
until maturity or earlier sale or exchange and whether all or part of the gain a holder may recognize upon sale, exchange or maturity
of an instrument such as the securities should be treated as ordinary income. The outcome of this process is uncertain and could apply
on a retroactive basis.
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Please read carefully the section entitled “United
States Federal Tax Considerations” in this pricing supplement, the section entitled “United States Federal Income Taxation”
in the accompanying prospectus and the section entitled “United States Federal Tax Considerations” in the accompanying product
supplement. You should consult your tax advisor about your own tax situation.
For a discussion of the Canadian federal income
tax consequences of investing in the securities, please read the section entitled “Certain Income Tax Consequences — Certain
Canadian Income Tax Considerations” in the accompanying prospectus supplement. You should consult your tax advisor about your own
tax situation.
The Call Settlement Date Or The Stated Maturity
Date May Be Postponed If The Call Date Or The Final Calculation Day Is Postponed.
The call date or the final calculation day will
be postponed if the originally scheduled call date or final calculation day is not a trading day or if the calculation agent determines
that a market disruption event has occurred or is continuing on that day. If such a postponement occurs with respect to the call date,
then the call settlement date will be postponed. If such a postponement occurs with respect to the final calculation day, the stated maturity
date will be the later of (i) the initial stated maturity date and (ii) three business days after the final calculation day as postponed.
Risks
Relating To The Estimated Value Of The Securities And Any Secondary Market
The Estimated Value Of The Securities On The
Pricing Date, Based On Our Proprietary Pricing Models, Is Less Than The Original Offering Price.
Our initial estimated value of the securities is
only an estimate, and is based on a number of factors. The original offering price of the securities exceeds our initial estimated value,
because costs associated with offering, structuring and hedging the securities are included in the original offering price, but are not
included in the estimated value. These costs include the agent discount and selling concessions, the profits that we and our affiliates
and/or the agent and its affiliates expect to realize for assuming the risks in hedging our obligations under the securities, and the
estimated cost of hedging these obligations.
The Terms Of The Securities Were Not Determined
By Reference To The Credit Spreads For Our Conventional Fixed-Rate Debt.
To determine the terms of the securities, 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 securities are less favorable to you than if we had used a higher funding rate.
The Estimated Value Of The Securities Is Not
An Indication Of The Price, If Any, At Which WFS Or Any Other Person May Be Willing To Buy The Securities From You In The Secondary Market.
Our initial estimated value of the securities as
of the date of this pricing supplement was derived using our internal pricing models. This value is based on market conditions and other
relevant factors, which include volatility of the Index, the exchange rate between the U.S. dollar and the euro, dividend rates and interest
rates. Different pricing models and assumptions, including those used by the agent, its affiliates or other market participants, could
provide values for the securities 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 securities could change dramatically due to changes in market conditions, our creditworthiness, and
the other factors set forth in this pricing supplement. These changes are likely to impact the price, if any, at which WFS or its affiliates
or any other party (including us or our affiliates) would be willing to purchase the securities from you in any secondary market transactions.
Our initial estimated value does not represent a minimum price at which WFS or any other party (including us or our affiliates) would
be willing to buy your securities in any secondary market at any time.
WFS has advised us that if it, WFA or any of their
affiliates makes a secondary market in the securities at any time, the secondary market price offered by it, WFA or any of their affiliates
will be affected by changes in market conditions and other factors described in the next risk factor. WFS has advised us that if it, WFA
or any of their affiliates makes a secondary market in the securities at any time up to the issue date or during the 3-month period following
the issue date, the secondary market price offered by it, WFA or any of its affiliates will be increased by an amount reflecting a portion
of the costs associated with selling, structuring and hedging the securities that are included in their original offering price. Because
this portion of the costs is not fully deducted upon issuance, WFS has advised us that any secondary market price it, WFA or any of their
affiliates offers during this period will be higher than it otherwise would be after this period, as any secondary market price offered
after this period will reflect the full deduction of the costs as described above. WFS has advised us that the amount of this increase
in the secondary market price will decline steadily to zero over this 3-month period. WFS has advised us that, if you hold the securities
through an account with WFS, WFA or any of their affiliates, WFS expects that this increase will also be reflected in the value indicated
for the securities on your brokerage account statement. If you hold your securities through an account at a broker-dealer other than WFS,
WFA or any of their affiliates, the value of the securities on your brokerage account statement may be different than if you held your
securities at WFS, WFA or any of their affiliates.
The Value Of The Securities Prior To Stated
Maturity Will Be Affected By Numerous Factors, Some Of Which Are Related In Complex Ways.
The value of the securities prior to stated maturity
will be affected by the then-current level of the Index, interest rates at that time and a number of other factors, some of which are
interrelated in complex ways. The effect of any one factor may be offset or magnified by the effect of another factor. The following factors,
which we refer to as the “derivative component factors,” and which are described in more detail in the accompanying
product supplement, are expected to affect the value of the securities: performance of the Index; interest rates; volatility of the Index;
time remaining to maturity; and dividend yields on the securities included in the Index; volatility of currency exchange rates; and correlation
between currency exchange rates and the Index. When we refer to the “value” of your security, we mean the value you
could receive for your security if you are able to sell it in the open market before the stated maturity date.
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
In addition to the derivative component factors,
the value of the securities will be affected by actual or anticipated changes in our creditworthiness. The value of the securities will
also be limited by the automatic call feature because if the securities are automatically called, your return will be limited to the call
premium, and you will not receive the potentially higher payment that may have been paid if you had held the securities until the stated
maturity date. You should understand that the impact of one of the factors specified above, such as a change in interest rates, may offset
some or all of any change in the value of the securities attributable to another factor, such as a change in the level of the Index. Because
numerous factors are expected to affect the value of the securities, changes in the level of the Index may not result in a comparable
change in the value of the securities.
The Securities Will Not Be Listed On Any Securities
Exchange And We Do Not Expect A Trading Market For The Securities To Develop.
The securities will not be listed or displayed
on any securities exchange or any automated quotation system. Although the agent and/or its affiliates may purchase the securities from
holders, they are not obligated to do so and are not required to make a market for the securities. There can be no assurance that a secondary
market will develop. Because we do not expect that any market makers will participate in a secondary market for the securities, the price
at which you may be able to sell your securities is likely to depend on the price, if any, at which the agent is willing to buy your securities.
If a secondary market does exist, it may be limited.
Accordingly, there may be a limited number of buyers if you decide to sell your securities prior to stated maturity. This may affect the
price you receive upon such sale. Consequently, you should be willing to hold the securities to stated maturity.
Risks Relating To The Index
An Investment In The Securities Is Subject To
Risks Associated With Foreign Securities Markets.
The EURO STOXX 50® Index tracks
the value of certain foreign equity securities. You should be aware that investments in securities linked to the value of foreign equity
securities involve particular risks. The foreign securities markets comprising this index may have less liquidity and may be more volatile
than U.S. or other securities markets and market developments may affect foreign markets differently from U.S. or other securities markets.
Direct or indirect government intervention to stabilize these foreign securities markets, as well as cross-shareholdings in foreign companies,
may affect trading prices and volumes in these markets. Foreign companies are subject to accounting, auditing and financial reporting
standards and requirements that differ from those applicable to U.S. reporting companies.
Prices of securities in foreign countries are subject
to political, economic, financial and social factors that apply in those geographical regions. These factors, which could negatively affect
those securities markets, include the possibility of recent or future changes in a foreign government’s economic and fiscal policies,
the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to foreign companies or investments
in foreign equity securities and the possibility of fluctuations in the rate of exchange between currencies, the possibility of outbreaks
of hostility and political instability and the possibility of natural disaster or adverse public health developments in the region. Moreover,
foreign economies may differ favorably or unfavorably from the U.S. economy in important respects such as growth of gross national product,
rate of inflation, capital reinvestment, resources and self-sufficiency.
The Securities Will Not Be Adjusted For Changes
In Exchange Rates.
Although the equity securities that comprise the
Index are traded in euro, and your securities are denominated in U.S. dollars, the amount payable on your securities at maturity, if any,
will not be adjusted for changes in exchange rates between the U.S. dollar and the euro. Changes in exchange rates, however, may also
reflect changes in the applicable no-U.S. economies that in turn may affect the level of the Index, and therefore your securities. The
amount we pay in respect of your securities will be determined solely in accordance with the procedures described in this pricing supplement
and the product supplement.
Whether The Securities Will Be Automatically
Called And The Maturity Payment Amount Will Depend Upon The Performance Of The Index And Therefore The Securities Are Subject To The Following
Risks, Each As Discussed In More Detail In The Accompanying Product Supplement.
| · | Investing In The Securities Is Not The Same
As Investing In The Index. Investing in the securities is not equivalent to investing in the Index. As an investor in the securities,
your return will not reflect the return you would realize if you actually owned and held the securities included in the Index for a period
similar to the term of the securities because you will not receive any dividend payments, distributions or any other payments paid on
those securities. As a holder of the securities, you will not have any voting rights or any other rights that holders of the securities
included in the Index would have. |
| · | Historical Levels Of The Index Should Not
Be Taken As An Indication Of The Future Performance Of The Index During The Term Of The Securities. |
| · | Changes That Affect The Index May Adversely
Affect The Value Of The Securities, Whether They Will Be Automatically Called And The Maturity Payment Amount. |
| · | We Cannot Control Actions By Any Of The Unaffiliated
Companies Whose Securities Are Included In The Index. |
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
| · | We And Our Affiliates Have No Affiliation
With The Index Sponsor And Have Not Independently Verified Its Public Disclosure Of Information. |
Risks Relating To Conflicts Of Interest
Our Economic Interests And Those Of Any Dealer
Participating In The Offering Are Potentially Adverse To Your Interests.
You should be aware of the following ways in which
our economic interests and those of any dealer participating in the distribution of the securities, which we refer to as a "participating
dealer," are potentially adverse to your interests as an investor in the securities. In engaging in certain of the activities
described below and as discussed in more detail in the accompanying product supplement, our affiliates or any participating dealer or
its affiliates may take actions that may adversely affect the value of and your return on the securities, and in so doing they will have
no obligation to consider your interests as an investor in the securities. Our affiliates or any participating dealer or its affiliates
may realize a profit from these activities even if investors do not receive a favorable investment return on the securities.
| · | The calculation agent is our affiliate
and may be required to make discretionary judgments that affect the return you receive on the securities. BMOCM, which is our
affiliate, will be the calculation agent for the securities. As calculation agent, BMOCM will determine any values of the Index and make
any other determinations necessary to calculate any payments on the securities. In making these determinations, BMOCM may be required
to make discretionary judgments that may adversely affect any payments on the securities. See the sections entitled "General Terms
of the Securities— Certain Terms for Securities Linked to an Index—Market Disruption Events,"—Adjustments to an
Index" and "—Discontinuance of an Index" in the accompanying product supplement. In making these discretionary judgments,
the fact that BMOCM is our affiliate may cause it to have economic interests that are adverse to your interests as an investor in the
securities, and our determinations as calculation agent may adversely affect your return on the securities. |
| · | The estimated value of the securities was
calculated by us and is therefore not an independent third-party valuation. |
| · | Research reports by our affiliates or any
participating dealer or its affiliates may be inconsistent with an investment in the securities and may adversely affect the level of
the Index. |
| · | Business activities of our affiliates or
any participating dealer or its affiliates with the companies whose securities are included in the Index may adversely affect the level
of the Index. |
| · | Hedging activities by our affiliates or
any participating dealer or its affiliates may adversely affect the level of the Index. |
| · | Trading activities by our affiliates or
any participating dealer or its affiliates may adversely affect the level of the Index. |
| · | A participating dealer or its affiliates
may realize hedging profits projected by its proprietary pricing models in addition to any selling concession and/or fee, creating a further
incentive for the participating dealer to sell the securities to you. |
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Hypothetical
Examples and Returns |
The payout profile, return table and examples below
illustrate hypothetical payments upon an automatic call or at stated maturity for a $1,000 face amount security on a hypothetical offering
of securities under various scenarios, with the assumptions set forth in the table below. The terms used for purposes of these hypothetical
examples do not represent the actual starting level or threshold level. The hypothetical starting level of 100.00 has been chosen for
illustrative purposes only and does not represent the actual starting level. The actual starting level and threshold level are set forth
under "Terms of the Securities" above. For historical data regarding the actual closing levels of the Index, see the historical
information set forth herein. The payout profile, return table and examples below assume that an investor purchases the securities for
$1,000 per security. These examples are for purposes of illustration only and the values used in the examples may have been rounded for
ease of analysis.
Call Premium: |
12.00% of the face amount |
Upside Participation Rate: |
150% |
Hypothetical Starting Level: |
100.00 |
Hypothetical Threshold Level: |
85.00 (85.00% of the hypothetical starting level) |
Buffer Amount: |
15% |
Hypothetical Payout Profile
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Hypothetical Returns
If the securities are automatically called:
If the securities are automatically called prior
to stated maturity, you will receive the face amount of your securities plus the call premium, resulting in a pre-tax total rate of return
of 12.00%.
If the securities are not automatically called:
Hypothetical
ending level |
Hypothetical
index return(1) |
Hypothetical
maturity payment amount per security |
Hypothetical
pre-tax total
rate of return(2) |
200.00 |
100.00% |
$2,500.00 |
150.00% |
175.00 |
75.00% |
$2,125.00 |
112.50% |
150.00 |
50.00% |
$1,750.00 |
75.00% |
140.00 |
40.00% |
$1,600.00 |
60.00% |
130.00 |
30.00% |
$1,450.00 |
45.00% |
120.00 |
20.00% |
$1,300.00 |
30.00% |
110.00 |
10.00% |
$1,150.00 |
15.00% |
105.00 |
5.00% |
$1,075.00 |
7.50% |
100.00 |
0.00% |
$1,000.00 |
0.00% |
90.00 |
-10.00% |
$1,000.00 |
0.00% |
85.00 |
-15.00% |
$1,000.00 |
0.00% |
84.00 |
-16.00% |
$990.00 |
-1.00% |
75.00 |
-25.00% |
$900.00 |
-10.00% |
70.00 |
-30.00% |
$850.00 |
-15.00% |
60.00 |
-40.00% |
$750.00 |
-25.00% |
50.00 |
-50.00% |
$650.00 |
-35.00% |
25.00 |
-75.00% |
$400.00 |
-60.00% |
0.00 |
-100.00% |
$150.00 |
-85.00% |
| (1) | The index return is equal to the percentage change from the starting level to the ending level (i.e.,
the ending level minus starting level, divided by starting level). |
| (2) | The hypothetical pre-tax total rate of return is the number, expressed as a percentage, that results from
comparing the maturity payment amount per security to the face amount of $1,000. |
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Hypothetical Examples Of Payment Upon An Automatic
Call Or At Stated Maturity
Example 1. The closing level of the Index
on the call date is greater than the starting level, and the securities are automatically called on the call date:
|
The Index |
Hypothetical starting level: |
100.00 |
Hypothetical closing level on call date: |
125.00 |
Because the hypothetical closing level
of the Index on the call date is greater than the hypothetical starting level, the securities are automatically called on the call date
and you will receive on the call settlement date the face amount of your securities plus a call premium of 12.00% of the face amount.
Even though the Index appreciated by 25.00% from its starting level to its closing level on the call date in this example, your return
is limited to the call premium of 12.00%.
On the call settlement date, you would
receive $1,120.00 per security.
Example 2. The securities are not automatically
called. The maturity payment amount is greater than the face amount:
|
The Index |
Hypothetical starting level: |
100.00 |
Hypothetical closing level on the call date: |
75.00 |
Hypothetical ending level: |
110.00 |
Hypothetical threshold level: |
85.00 |
Hypothetical index return
(ending level – starting level)/starting level: |
10.00% |
Because the hypothetical closing level
of the Index on the call date is less than the hypothetical starting level, the securities are not automatically called. Because the hypothetical
ending level is greater than the hypothetical starting level, the maturity payment amount per security would be equal to the face amount
of $1,000 plus a positive return equal to:
$1,000 × index return × upside
participation rate
$1,000 × 10.00% × 150.00%
= $150.00
On the stated maturity date you would receive $1,150.00
per security.
Example 3. The securities are not automatically
called. Maturity payment amount is equal to the face amount:
|
The Index |
Hypothetical starting level: |
100.00 |
Hypothetical closing level on the call date: |
75.00 |
Hypothetical ending level: |
95.00 |
Hypothetical threshold level: |
85.00 |
Hypothetical index return
(ending level – starting level)/starting level: |
-5.00% |
Because the hypothetical closing level
of the Index on the call date is less than the hypothetical starting level, the securities are not automatically called. Because the hypothetical
ending level is less than the hypothetical starting level, but not by more than the buffer amount, you would not lose any of the face
amount of your securities.
On the stated maturity date you would receive $1,000.00
per security.
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Example 4. The securities are not automatically
called. Maturity payment amount is less than the face amount:
|
The Index |
Hypothetical starting level: |
100.00 |
Hypothetical closing level on the call date: |
75.00 |
Hypothetical ending level: |
50.00 |
Hypothetical threshold level: |
85.00 |
Hypothetical index return
(ending level – starting level)/starting level: |
-50.00% |
Because the hypothetical closing level
of the Index on the call date is less than the hypothetical starting level, the securities are not automatically called. Because the hypothetical
ending level is less than the hypothetical starting level by more than the buffer amount, you would lose a portion of the face amount
of your securities and receive the maturity payment amount equal to:
$1,000 + [$1,000
× (index return + buffer amount)]
$1,000 + [$1,000
× (-50.00% + 15%)]
=
$650.00
On the stated maturity date you would receive $650.00
per security.
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Historical Information
We obtained the closing levels of the EURO STOXX
50® Index in the graph below from Bloomberg Finance L.P., without independent verification.
The following graph sets forth daily closing levels
of the EURO STOXX 50® Index for the period from January 1, 2018 to May 30, 2023. The closing level on May 30, 2023 was
4,291.58. The historical performance of the EURO STOXX 50® Index should not be taken as an indication of its future performance
during the term of the securities.
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Computation of the EURO STOXX 50® Index
All disclosures contained in this pricing supplement
regarding the SX5E Index, including, without limitation, its make up, method of calculation, and changes in its components, have been
derived from publicly available sources. The information reflects the policies of, and is subject to change by, its sponsor. None of us,
the agent or BMOCM accepts any responsibility for the calculation, maintenance or publication of the SX5E Index or any successor index.
The EURO STOXX 50® Index is an equity
index that is intended to provide a blue-chip representation of supersector leaders in the Eurozone equity markets.
In addition, information about the EURO STOXX 50®
Index may be obtained from other sources including, but not limited to, the EURO STOXX 50® Index sponsor’s website
(including information regarding the EURO STOXX 50® Index’s sector weightings). We are not incorporating by reference
into this pricing supplement the website or any material it includes. Neither we nor the agent makes any representation that such publicly
available information regarding the EURO STOXX 50® Index is accurate or complete.
EURO STOXX 50® Index Composition and Maintenance
For each of the 20 EURO STOXX regional supersector
indices, the stocks are ranked in terms of free-float market capitalization. The largest stocks are added to the selection list until
the coverage is close to, but still less than, 60% of the free-float market capitalization of the corresponding supersector index. If
the next highest-ranked stock brings the coverage closer to 60% in absolute terms, then it is also added to the selection list. All current
stocks in the SX5E are then added to the selection list. All of the stocks on the selection list are then ranked in terms of free-float
market capitalization to produce the final index selection list. The largest 40 stocks on the selection list are selected; the remaining
10 stocks are selected from the largest remaining current stocks ranked between 41 and 60; if the number of stocks selected is still below
50, then the largest remaining stocks are selected until there are 50 stocks. In exceptional cases, STOXX’s management board can
add stocks to and remove them from the selection list.
The SX5E stocks are subject to a capped maximum
index weight of 10%, which is applied on a quarterly basis.
The SX5E is composed of 50 component stocks of
market sector leaders from within the 20 EURO STOXX® Supersector indices, which represent the Eurozone portion of the STOXX
Europe 600® Supersector indices. The SX5E stocks have a high degree of liquidity and represent the largest companies across
a wide range of market sectors.
Composition and Maintenance of the EURO STOXX 50®
Index
The composition of the SX5E is reviewed annually,
based on the closing stock data on the last trading day in August. Changes in the composition of the SX5E are made to ensure that it includes
the 50 market sector leaders from within the Eurozone.
The free float factors for each component stock
used to calculate the SX5E, as described below, are reviewed, calculated, and implemented on a quarterly basis and are fixed until the
next quarterly review.
The SX5E is subject to a “fast exit rule.”
The SX5E stocks are monitored for any changes based on the monthly selection list ranking. A stock is deleted from the SX5E if: (a) it
ranks 75 or below on the monthly selection list and (b) it has been ranked 75 or below for a consecutive period of two months in the monthly
selection list. The highest-ranked stock that is not already an SX5E stock will replace it. Changes will be implemented on the close of
the fifth trading day of the month, and are effective the next trading day.
The SX5E is also subject to a “fast entry
rule.” All stocks on the latest selection lists and initial public offering (IPO) stocks are reviewed for a fast-track addition
on a quarterly basis. A stock is added, if (a) it qualifies for the latest STOXX blue-chip selection list generated end of February, May,
August or November and (b) it ranks within the “lower buffer” on this selection list.
The SX5E is also reviewed on an ongoing basis.
Corporate actions (including initial public offerings, mergers and takeovers, spin-offs, delistings, and bankruptcy) that affect the SX5E
composition are immediately reviewed. Any changes are announced, implemented, and effective in line with the type of corporate action
and the magnitude of the effect.
Calculation of the EURO STOXX 50® Index
The SX5E is calculated with the “Laspeyres
formula,” which measures the aggregate price changes in the SX5E stocks against a fixed base quantity weight. The formula for calculating
the SX5E value can be expressed as follows:
Index = free float market capitalization of the
SX5E at the time
divisor of the SX5E at the time
The “free float market capitalization of
the SX5E” is equal to the sum of the products of the closing price, number of shares, free float factor and the weighting cap factor
for each component company as of the time that the SX5E is being calculated.
The divisor of the SX5E is adjusted to maintain
the continuity of the SX5E’s values across changes due to corporate actions, such as the deletion and addition of stocks, the substitution
of stocks, stock dividends, and stock splits.
License Agreement
We have entered into a non-exclusive license agreement
with SX5E, which grants us a license in exchange for a fee to use the SX5E in connection with the issuance of certain securities, including
the securities.
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
STOXX and its licensors (the “Licensors”)
have no relationship with us or BMOCM, other than the licensing of the SX5E and the related trademarks for use in connection with the
securities.
STOXX and its Licensors do
not:
| · | sponsor, endorse, sell or promote the securities. |
| · | recommend that any person invest in the securities
or any other securities. |
| · | have any responsibility or liability for or make
any decisions about the timing, amount or pricing of the securities. |
| · | have any responsibility or liability for the
administration, management or marketing of the securities. |
| · | consider the needs of the securities or the owners
of the securities in determining, composing or calculating the SX5E or have any obligation to do so. |
STOXX and its Licensors will not have any liability
in connection with the securities. Specifically,
| · | STOXX and its Licensors do not make any warranty,
express or implied, and disclaim any and all warranty about: |
| § | the results to be obtained by the securities,
the owner of the securities or any other person in connection with the use of the SX5E and the data included in the SX5E; |
| § | the accuracy or completeness of the SX5E and
its data; |
| § | the merchantability and the fitness for a
particular purpose or use of the SX5E or its data; |
| · | STOXX and its Licensors will have no liability
for any errors, omissions or interruptions in the SX5E or its data; and |
| · | any lost profits or indirect, punitive, special
or consequential damages or losses, even if STOXX knows that they might occur. |
The licensing agreement among us, BMOCM and STOXX is solely for the
benefit of the parties thereto and not for the benefit of the owner of the securities or any other third parties.
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
United
States Federal Tax Considerations |
The following discussion supplements, and to the
extent applicable supersedes, the discussion in the accompanying product supplement under the caption “United States Federal Tax
Considerations.”
In the opinion of our special U.S. tax counsel,
Ashurst LLP, it would generally be reasonable to treat a security with terms described herein as a pre-paid cash-settled derivative contract
in respect of the Index for U.S. federal income tax purposes, and the terms of the securities require a holder (in the absence of a change
in law or an administrative or judicial ruling to the contrary) to treat the securities for all tax purposes in accordance with such characterization.
However, the U.S. federal income tax consequences of your investment in the securities are uncertain and the Internal Revenue Service
(the “IRS”) could assert that the securities should be taxed in a manner that is different from that described in the preceding
sentence. If this treatment is respected, a U.S. holder should generally recognize capital gain or loss upon the sale, exchange, redemption
or payment on maturity in an amount equal to the difference between the amount it received at such time and the amount that it paid for
its securities. Such gain or loss should generally be long-term capital gain or loss if the U.S. holder has held your securities for more
than one year. Non-U.S. holders should consult the section entitled "Tax Consequences to Non-U.S. Holders" in the underlying
product supplement.
Under Section 871(m) of the Code, a “dividend
equivalent” payment is treated as a dividend from sources within the United States. Such payments generally would be subject to
a 30% U.S. withholding tax if paid to a non-U.S. holder. Under U.S. Treasury Department regulations, payments (including deemed payments)
with respect to equity-linked instruments (“ELIs”) that are “specified ELIs” may be treated as dividend equivalents
if such specified ELIs reference, directly or indirectly, an interest in an “underlying security,” which is generally any
interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment with respect to such interest could give
rise to a U.S. source dividend. However, the IRS has issued guidance that states that the U.S. Treasury Department and the IRS intend
to amend the effective dates of the U.S. Treasury Department regulations to provide that withholding on dividend equivalent payments will
not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2025. Based on our determination
that the securities are not delta-one instruments, non-U.S. holders should not be subject to withholding on dividend equivalent payments,
if any, under the securities. However, it is possible that the securities could be treated as deemed reissued for U.S. federal income
tax purposes upon the occurrence of certain events affecting the Index or the securities (for example, upon the Index rebalancing), and
following such occurrence the securities could be treated as subject to withholding on dividend equivalent payments. Non-U.S. holders
that enter, or have entered, into other transactions in respect of the Index or the securities should consult their tax advisors as to
the application of the dividend equivalent withholding tax in the context of the securities and their other transactions. If any payments
are treated as dividend equivalents subject to withholding, we (or the applicable withholding agent) would be entitled to withhold taxes
without being required to pay any additional amounts with respect to amounts so withheld.
Market Linked Securities—Auto-Callable with Leveraged Upside Participation and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the EURO STOXX 50® Index due June 2, 2026 |
Validity of the Securities |
In the opinion of Osler, Hoskin & Harcourt LLP,
the issue and sale of the securities 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 securities
the securities will have been validly executed, authenticated, issued and delivered, to the extent that validity of the securities is
a matter governed by the laws of the Province of Ontario and the federal 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 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 therein.
In addition, this opinion is subject to certain assumptions about (i) the Trustees’ authorization, execution and delivery of the
senior indenture, (ii) the genuineness of signatures and (iii) certain other 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 Ashurst LLP, when the pricing
supplement has been attached to, and duly notated on, the master note that represents the securities, the securities will be executed,
authenticated, issued and delivered, and the securities have been issued and sold as contemplated by the prospectus supplement and the
prospectus, the securities will be valid, binding and enforceable obligations of the Bank, entitled to the benefits of the senior indenture,
subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights and subject to general principles of equity, public policy considerations and the discretion
of the court before which any suit or proceeding may be brought. This opinion is given as of the date hereof and is limited to the laws
of the State of New York. 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 and other sources as to certain
factual matters, all as stated in the legal opinion dated May 26, 2022, which has been filed as Exhibit 5.4 to the Bank’s Form 6-K
dated May 26, 2022.
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