Registration Statement No.333-264388
Filed Pursuant to Rule 433
Subject to Completion, dated August 06,
2024
Pricing Supplement to the Prospectus dated May 26, 2022,
the Prospectus Supplement dated May 26, 2022 and the Product Supplement dated July 22, 2022
US$ [ ]
Senior Medium-Term Notes, Series I
Callable Barrier Notes with Contingent Coupons due August 16, 2027
Linked to the Least Performing of 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 0.765% per month (approximately 9.18% per annum) if the closing level of each of the Russell 2000® Index and the S&P 500®
Index (each, a "Reference Asset" and, collectively, the "Reference Assets") on the applicable monthly Coupon 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 Coupon Observation Date, the notes will not pay the Contingent Coupon for that Coupon Observation Date. |
| · | Beginning on February 12, 2025, Bank of Montreal may, in its discretion, elect to call the notes in whole,
but not in part, on any Call 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:1
| Pricing Date: |
August 12, 2024 |
|
Valuation Date: |
August 11, 2027 |
| Settlement Date: |
August 15, 2024 |
|
Maturity Date: |
August 16, 2027 |
1Expected. See “Key Terms of the Notes” below for additional
details.
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 |
| 3819 |
The Russell 2000® Index |
RTY |
[ ] |
0.765% per month (approximately 9.18% per annum) |
[ ], 70.00% of its Initial Level |
[ ], 60.00% of its Initial Level |
06376BEC8 |
[ ] |
100% |
Up to 0.75%
[ ] |
At least 99.25%
[ ] |
| The S&P 500® Index |
SPX |
[ ] |
[ ], 70.00% of its Initial Level |
[ ], 60.00% of its Initial Level |
1 The total “Agent’s Commission” and “Proceeds
to Bank of Montreal” to be specified above will reflect the aggregate amounts at the time Bank of Montreal establishes its hedge
positions on or prior to the Pricing Date, which may be variable and fluctuate depending on market conditions at such times. Certain
dealers who purchased 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 between $992.50 and $1,000
per $1,000 in principal amount. We or one of our affiliates may also pay a referral fee to certain dealers in connection with the distribution
of the notes.
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 $984.90 per $1,000 in principal amount. The estimated initial value of the notes on the Pricing Date may
differ from this value but will not be less than $935.00 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 Russell 2000® Index (ticker symbol "RTY") and the S&P 500® Index (ticker symbol "SPX"). See "The Reference Assets" below for additional information. |
| |
|
| Contingent Coupons: |
If the closing level of each Reference Asset on a Coupon 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. |
| |
|
| Contingent Interest Rate: |
0.765% per month (approximately 9.18% per annum), if payable. Accordingly, each Contingent Coupon, if payable, will equal $7.65 for each $1,000 in principal amount. |
| |
|
| Coupon 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 16th day of each month (or, if such day is not a business day, the next following business day), beginning on September 16, 2024 and ending on the Maturity Date, subject to the Issuer Call feature. |
| |
|
| Issuer Call: |
Beginning on February 12, 2025, Bank of Montreal may, in its discretion, elect to call the notes in whole, but not in part, on any Call 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 Call Date. |
| |
|
| 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. |
| |
|
| Call Dates:1 |
Beginning on February 12, 2025, each Coupon Observation Date scheduled to occur in February, May, August, and November |
| |
|
| Call Settlement Date:1 |
If Bank of Montreal elects to call the notes, the Contingent Coupon Payment Date immediately following the relevant Call Date. |
| |
|
| 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. |
| |
|
| 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 |
With respect to each Reference Asset, the closing level of that Reference Asset on the Pricing Date. |
| |
|
| Coupon Barrier Level:2 |
With respect to each Reference Asset, 70.00% of its Initial Level. |
| |
|
| Trigger Level:2 |
With respect to each Reference Asset, 60.00% of its Initial Level. |
| |
|
| Final Level: |
With respect to each Reference Asset, the closing level of that Reference Asset on the Valuation Date. |
| |
|
| Pricing Date:1 |
August 12, 2024 |
| |
|
| Settlement Date:1 |
August 15, 2024 |
| |
|
| Valuation Date:1 |
August 11, 2027 |
| Maturity Date:1 |
August 16, 2027 |
| |
|
| Calculation Agent: |
BMOCM |
| |
|
| Selling Agent: |
BMOCM |
1 Expected and subject to the occurrence of a market disruption event,
as described in the accompanying product supplement. If we make any change to the expected Pricing Date and Settlement Date, the Contingent
Coupon Payment Dates (and therefore the Coupon Observation Dates, Call Dates and potential Call Settlement Dates), the Valuation Date
and Maturity Date will be changed so that the stated term of the notes remains approximately the same.
2 As determined by the calculation agent and subject to adjustment in certain
circumstances. See "General Terms of the Notes - Adjustments to a Reference Asset that is an 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.
We have filed a registration statement (including a prospectus)
with the SEC for the offering to which this document relates. Before you invest, you should read the prospectus in that registration statement
and the other documents that we have filed with the SEC for more complete information about us and this offering. You may obtain these
documents free of charge by visiting the SEC's website at http://www.sec.gov. Alternatively, we will arrange to send to you the prospectus
(as supplemented by the prospectus supplement and product supplement) if you request it by calling our agent toll-free at 1-877-369-5412.
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 a Coupon Observation Date is less than its Coupon Barrier Level,
we will not pay you the Contingent Coupon applicable to that Coupon Observation Date. If the closing level of a Reference Asset is less
than its Coupon Barrier Level on each of the Coupon 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 Coupon 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 Coupon 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 Coupon 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 Coupon 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 a hypothetical direct investment in the Reference Assets or a security directly linked to the
Reference Assets. — The return on your notes will not reflect the return you would realize if you made a hypothetical direct
investment in the Reference Assets or the underlying securities of the Reference Assets or 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. |
| · | You will not have any shareholder rights and will have no right to receive any shares of any company included in a Reference Asset
at maturity. — Investing in your notes will not make you a holder of any securities 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 such underlying securities. |
| · | We have no affiliation with any index sponsor and will not be responsible for any index sponsor's actions. — The sponsors
of the Reference Assets 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. |
| · | 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 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 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 securities 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 will be 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 will exceed 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. The
initial estimated value of the notes may be as low as the amount indicated on the cover page hereof. |
| · | 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, and our estimated value as determined on
the Pricing Date will be, 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 or 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 are not determined by reference to the credit spreads for our conventional fixed-rate debt. —
To determine the terms of the notes, we will use 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 securities included in the Reference Assets, futures or options relating to the
Reference Assets or securities 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 included in the Reference Assets. We or our affiliates may also trade in the
securities included in the Reference Assets 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 60.00 (60.00% 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 |
| 60.00 |
60.00% |
$1,000.00 |
| 59.99 |
59.99% |
$599.90 |
| 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. We or one of our affiliates
may also pay a referral fee to certain dealers in connection with the distribution of the notes.
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.
We reserve the right to withdraw, cancel or modify the offering
of the notes and to reject orders in whole or in part. You may cancel any order for the notes prior to its acceptance.
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 the final pricing supplement relating to the notes in the initial sale
of the notes. In addition, BMOCM or another of our affiliates may use the final 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, the final 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, and
that will be set forth on the cover page of the final pricing supplement relating to the notes, 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 will be determined based on the market conditions on the Pricing Date.
The Reference Assets
All disclosures contained in this pricing supplement regarding
the Reference Assets, including, without limitation, their make-up, method of calculation, and changes in their components and their historical
closing levels, have been derived from publicly available information prepared by the applicable sponsors. The information reflects the
policies of, and is subject to change by, the sponsors. The sponsors own the copyrights and all rights to the Reference Assets. The sponsors
are under no obligation to continue to publish, and may discontinue publication of, the Reference Assets. Neither we nor BMO Capital Markets
Corp. accepts any responsibility for the calculation, maintenance or publication of any Reference Asset or any successor.
We encourage you to review recent levels of the Reference Assets
prior to making an investment decision with respect to the notes.
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
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