ADDITIONAL RISK FACTORS RELATING TO THE NOTES
An investment in the notes involves risks. This
section describes significant risks relating to the terms of the notes. Before investing in the notes, you should read the following information
about these risks, together with the other information contained in or incorporated by reference in the applicable pricing supplement,
this product supplement and the accompanying prospectus supplement and prospectus.
Risks Related to the Structure or Terms of the Notes
Your investment in the notes may result in a
loss. The notes do not guarantee any return of principal unless otherwise specified in the relevant pricing supplement. Unless otherwise
specified in the relevant pricing supplement, the amount payable on the notes at maturity will depend primarily on the Percentage Change
in the level of the Reference Asset from the Initial Level to the Final Level and may be less, and possibly significantly less, than the
principal amount. For notes without a buffer, if the Final Level is less than (or, in the case of bearish notes, greater than) the Initial
Level, the return on your notes will be less than the principal amount. For notes with a buffer, if the Final Level is less than (or,
in the case of bearish notes, greater than) the Buffer Level, the return on your notes will be less than the principal amount. In the
case of notes with a Downside Leverage Factor greater than 100%, your notes will participate in the downside performance (or, in the case
of bearish notes, upside performance) of the Reference Asset on a leveraged basis. Depending on the Downside Leverage Factor and the other
terms of your notes, you may lose all or a substantial portion of the amount that you invested to purchase the notes.
The notes do not pay interest and your return
may be lower than the return on a conventional debt security of comparable maturity. Unless otherwise specified in the applicable
pricing supplement, there will be no periodic interest payments on the notes as there would be on a conventional fixed-rate or floating-rate
debt security having the same maturity. The yield that you will receive on your notes, which could be negative, may be less than the yield
you could earn if you purchased a standard senior debt security of Bank of Montreal with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you take into account factors that affect the time value of money.
The appreciation potential of the notes may
be limited. If your notes are subject to a Maximum Redemption Amount, a Cap, or a Digital Return, they will provide less opportunity
to participate in the appreciation (or, in the case of bearish notes, depreciation) of the Reference Asset than an investment in a security
linked to the Reference Asset providing full participation in the appreciation (or, in the case of bearish notes, depreciation), because
the payment at maturity will not exceed the Maximum Redemption Amount or the principal amount plus the Digital Return, as applicable,
and the positive Percentage Change in the level of the Reference Asset will be limited to the Cap, if applicable. Accordingly, your return
on the notes may be less than your return would be if you made an investment in a security directly linked to the positive (or, in the
case of bearish notes, negative) performance of the Reference Asset.
The Initial Level may be determined after the
pricing date of the notes. If so specified in the relevant pricing supplement, the Initial Level will be determined based on the arithmetic
average of the closing levels of the Reference Asset on certain specified dates. One or more of these days may occur on or following the
pricing date or the issue date of the notes; as a result, the Initial Level may not be determined, and you may therefore not know such
value, until after the issue date. If there are any increases (or in the case of bearish notes, decreases) in the closing levels of the
Reference Asset on any relevant dates used to determine the Initial Level that occur after the pricing date, and such increases (or decreases)
result in the Initial Level being higher (or in the case of bearish notes, lower) than the closing level on the pricing date, this may
establish higher levels (or in the case of bearish notes, lower levels) that the Reference Asset must achieve for you to attain a positive
return on your investment or to avoid a loss of principal at maturity.
Payments on the notes are subject to our credit
risk, and changes in our credit ratings are expected to affect the market value of the notes. The notes are our senior unsecured debt
securities. As a result, your receipt of interest payments (if applicable) and the amount due on the Maturity Date are each dependent
upon our ability to repay our obligations at that time. This will be the case even if the level of the Reference Asset increases (or,
in the case of bearish notes, decreases) after the pricing date. No assurance can be given as to what our financial condition will be
at any time during the term of the notes.
The amount to be paid at maturity will not be
affected by all developments relating to the Reference Asset. Changes in the level of the Reference Asset during the term of the
notes before or between the relevant Valuation Date or Valuation Dates will not be reflected in the calculation of the payment at maturity,
except to the extent that the notes are subject to an automatic redemption. The calculation agent will calculate this amount by comparing
only the Final Level to the Initial Level (or the Buffer Level, as applicable). No other levels of the Reference Asset will be taken into
account. As a result, you may receive less than the principal amount of your notes, even if the level of the Reference Asset has increased
(or, in the case of bear notes, decreased) at certain times during the term of the notes before decreasing to a level below (or, in the
case of bearish notes, increasing to a level above) the Initial Level (or Buffer Level, as applicable) and, if applicable, below (or,
in the case of bearish notes, above) the Barrier Level as of the relevant dates.
Risks Related to Liquidity and the Secondary Market
The notes may not have an active trading market.
Your notes will not be listed on any securities exchange, and there may be little or no secondary market for your notes. Even if a secondary
market for your notes develops, it may not provide significant liquidity. We expect that transaction costs in any secondary market would
be high. As a result, the difference between bid and ask prices for your notes in any secondary market could be substantial. If you sell
your notes before maturity, you may have to do so at a substantial discount from the issue price, and as a result, you may suffer substantial
losses.
The market value of your notes may be influenced
by many unpredictable factors. The following factors, many of which are beyond our control, may influence the market value of your
notes:
| • | the level of the Reference Asset, including, in the case of notes that have a buffer or a barrier, whether the level of the Reference
Asset trades or closes at a level below (or in the case of bearish notes, above) the Buffer Level or Barrier Level, as applicable; |
| • | if your notes are subject to a Maximum Redemption Amount, a Cap, or a Digital Return, your potential return on the notes will be limited; |
| • | the volatility of the level of the Reference Asset; |
| • | the dividend rate on each Reference Asset that is an equity security or the stocks represented or held by any Reference Asset; |
| • | economic, financial, political, military, regulatory, legal and other events that affect the applicable securities markets and which
may affect the level of the Reference Asset; |
| • | if the Reference Asset includes one or more indices, commodities or other assets that have returns that are denominated in currencies
other than the U.S. dollar or prices in one or more non-U.S. markets, changes in, and the volatility of, the exchange rates between the
U.S. dollar and the relevant non-U.S. currency or currencies could have a negative impact on the payments due on your notes and their
market value; |
| • | interest rates in the market; and |
| • | the time remaining to maturity of the notes. |
These factors may influence the market value of
your notes if you sell your notes before maturity. Our creditworthiness, as represented by our credit ratings or as otherwise perceived
in the market will also affect the market value of your notes. If you sell your notes prior to maturity, you may receive less than the
principal amount of your notes.
Risks Related to Hedging and Conflicts of Interest
Our trading and other transactions relating
to any Reference Asset or related assets, and futures, options or other derivative products may adversely affect the market value of the
notes. As described below under “Use of Proceeds and Hedging,” we or one or more affiliates
may hedge our obligations under the notes by purchasing or selling shares of any Reference Asset or related assets, futures or options
relating to a Reference Asset, or other derivative instruments with returns linked or related to changes in the performance of a Reference
Asset. We or our affiliates may adjust these hedges by, among other things, purchasing or selling those assets at any time. Although they
are not expected to do so, any of these hedging activities may adversely affect the value of a Reference Asset, and therefore, the market
value of the notes, and the amounts payable at maturity. It is possible that we or one or more of our affiliates could receive substantial
returns from these hedging activities, even though the market value of the notes decreases.
We or one or more of our affiliates may also engage
in trading relating to 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, including block trades. Any of these activities
could adversely affect the level of one or more of the Reference Assets and therefore, the market value of 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 one or more 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 business activities or those of our affiliates
may create conflicts of interest. We and our affiliates expect to engage in trading activities related to one or more of the Reference
Assets that are not for the account of holders of the notes or on their behalf. These trading activities may present a conflict between
the holders’ interests in the notes and the interests we and our affiliates will have in their proprietary accounts, in facilitating
transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These
trading activities, if they influence the level of any Reference Asset, could be adverse to the interests of the holders of the notes.
We and one or more of our affiliates may, at the time that we offer any notes or any time thereafter, engage in business with the issuers
of a Reference Asset or issuers of the equity securities included in or held by a Reference Asset, including making loans to or providing
advisory services to those companies. These services could include investment banking and merger and acquisition advisory services. These
activities may present a conflict between our or one or more of our affiliates’ obligations and your interests as a holder of the
notes. Moreover, we and our affiliates may have published, and in the future expect to publish, research reports with respect to a Reference
Asset or the securities or other assets that it represents. This research is modified from time to time without notice and may express
opinions or provide recommendations that are inconsistent with purchasing or holding the notes. Any of these activities by us or one or
more of our affiliates may affect the level of one or more of the Reference Assets and therefore, the market value of the notes.
The calculation agent can postpone the determination
of the Final Level and/or other determinations with respect to the notes if a market disruption event occurs. The determination of
the Final Level may be postponed if the calculation agent determines that a market disruption event has occurred or is continuing on any
Valuation Date with respect to the Reference Asset. If such a postponement occurs, the calculation agent will use the closing level of
the Reference Asset on the first subsequent business day on which no market disruption event occurs or is continuing. In no event, however,
will any Valuation Date be postponed by more than ten trading days. As a result, if a market disruption event occurs or is continuing
on a Valuation Date, the Maturity Date for the notes could also be postponed, although not by more than ten trading days.
If the determination of the level of the Reference
Asset for any Valuation Date is postponed to the last possible day, but a market disruption event occurs or is continuing on that day,
that day will nevertheless be the date on which the level of the Reference Asset will be determined by the calculation agent. In such
an event, the calculation agent will make a good faith estimate in its sole discretion of the level that would have prevailed in the absence
of the market disruption event. See “General Terms of the Notes—Market Disruption Events.”
As calculation agent, BMO Capital Markets
Corp. will have the authority to make determinations that could affect the value of your notes and your payment at maturity. As
calculation agent for your notes, BMO Capital Markets Corp. will have discretion in making various determinations that affect your notes,
including determining the Final Level, market disruption events, and any amount payable on your notes. The calculation agent also has
discretion in making certain adjustments relating to mergers and certain other corporate transactions the issuer of a Reference Asset
may undertake and determining whether an anti-dilution adjustment is needed as to any equity securities or ETFs and whether any Reference
Asset that is an index has been materially changed. The exercise of this discretion by BMO Capital Markets Corp. could adversely affect
the value of your notes and may present BMO Capital Markets Corp., which is our wholly owned subsidiary, with a conflict of interest.
Risks Related to Taxation
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 in this product supplement.
Notes we intend to treat as indebtedness for U.S.
federal income tax purposes with a term that exceeds one year will likely be treated as debt instruments subject to special rules governing
contingent payment debt instruments. If you are a United States holder (as defined in the accompanying prospectus), you generally
will be required to pay taxes on ordinary income over the term of such notes based on the comparable yield for the notes, even though
you will not receive any payments from us until maturity or until an automatic redemption prior to maturity. This comparable
yield is determined solely to calculate the amounts you will be taxed on prior to maturity or prior to an automatic redemption prior to
maturity and is neither a prediction nor a guarantee of what the actual yield will be. Any gain you may recognize on the sale,
automatic redemption or maturity of the notes will be ordinary income in the case of notes with a term of more than one year. Any
loss you may recognize upon the sale, automatic redemption or maturity of notes with a term of more than one year will generally be ordinary
loss to the extent of the interest you included as income in the current or previous taxable years in respect of the notes and thereafter
will be capital loss. See the section entitled “Supplemental Tax Considerations – Supplemental U.S. Federal Income Tax Considerations—Notes
Treated as Indebtedness—Where the Term of the Notes Exceeds One Year” herein.
With respect to notes we intend to treat as pre-paid
derivative contracts for U.S. federal income tax purposes, to the extent that a Reference Asset is the type of financial asset described
in Section 1260 of the Code, while the matter is not entirely clear, unless otherwise specified in the applicable pricing supplement there
is a risk that an investment in such a note is, in whole or in part, a “constructive ownership transaction” to which Section
1260 of the Code applies. If Section 1260 of the Code applies, all or a portion of any long-term capital gain recognized by a United States
holder (as defined below) in respect of such a note will be recharacterized as ordinary income and certain interest charges may apply.
See the section entitled “Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations—Notes
Treated as Pre-Paid Derivative Contracts—Potential Application of Section 1260 of the Code” herein.
Moreover, the Internal Revenue Service has issued
a notice indicating that it and the Treasury Department are actively considering whether, among other issues, a holder of a “prepaid
forward contract” or similar instrument (which may include notes we intend to treat as pre-paid derivative contracts) should be
required to accrue interest over the term of such instrument even though that holder will not receive any payments with respect to such
instrument until maturity or upon an automatic redemption prior to maturity and whether all or part of the gain a holder may recognize
on the sale, automatic redemption or maturity of such instrument could be treated as ordinary income. The outcome of this process is uncertain
and could apply on a retroactive basis.
Please read carefully the section entitled “Supplemental
Tax Considerations” in this product supplement, the sections “United States Federal Income Taxation” and “Canadian
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.
Risks Related to ERISA
Employee benefit plans should carefully review
the legal issues of an investment in the notes. Any fiduciary of an “employee benefit plan” as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), subject to Title I of ERISA, a plan or
account subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), an entity whose underlying
assets include the assets of any of the foregoing (each of the foregoing, a “Benefit Plan Investor”) or any other plan which
is subject to any federal, state, local or other law that is substantially similar to the fiduciary responsibility and prohibited transaction
provisions of ERISA or Section 4975 of the Code (“Similar Law”) that is considering purchasing the notes with the assets
of such Benefit Plan Investor or plan subject to Similar Law, should consult with its counsel regarding whether the purchase or holding
of the notes is or could become a non-exempt “prohibited transaction” under ERISA or the Code or a violation of any Similar
Law. For additional information, please see the discussion under “Certain Considerations for ERISA and Other U.S. Employee Benefit
Plans” below.
Risks Relating to Reference Assets
Owning the notes is not the same as owning the
Reference Assets or their components or a security directly linked to the performance of the Reference Assets or their components.
The return on your notes will not reflect the return you would realize if you actually owned the Reference Assets or their components
or a security directly linked to the performance of the Reference Assets or their components and held that investment for a similar period.
For example, your return on the notes will not reflect the return you would receive if you actually owned the securities included in an
index or an ETF, and received the dividends or distributions paid on those securities. 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 level of a Reference Asset increases (or, in the case of bearish notes, decreases) from its Initial Level 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 prior to maturity to decrease while the value of a Reference Asset increases (or, in the case of bearish notes, decreases).
You must rely on your own evaluation of the
merits of an investment linked to the Reference Assets. In the ordinary course of their business, we
or our affiliates may have expressed views on expected movements in any Reference Asset or the securities that it holds or includes, and
may do so in the future. These views or reports may be communicated to our clients and clients of our affiliates. However, these views
are subject to change from time to time. Moreover, other professionals who transact business in markets relating to any Reference Asset
may at any time have significantly different views from our views or those of our affiliates. For these reasons, you are encouraged to
obtain information concerning the applicable Reference Assets from multiple sources, and you should not rely solely on views expressed
by us or our affiliates.
The historical performance of the Reference
Asset or its components should not be taken as an indication of their future performance. The level of the Reference Asset will determine
the amount to be paid on the notes at maturity. The historical performance of a Reference Asset or the securities held by or included
in a Reference Asset does not necessarily give an indication of future performance. As a result, it is impossible to predict whether the
level of the Reference Asset will rise or fall during the term of the notes. The level of the Reference Asset and its components will
be influenced by complex and interrelated political, economic, financial and other factors.
You will not have any shareholder rights and
will have no right to receive any securities represented by the Reference Assets at maturity. Investing in your notes will not make
you a holder of any securities represented by 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 these securities.
Adjustments to the Reference Assets could adversely
affect the value of the notes. The sponsors of the indices (the “Index Sponsors”) and the investment advisors of the ETFs
(the “Investment Advisors”) may add, delete or substitute the stocks represented or held by the Reference Assets, or make
other methodological changes. Further, the Index Sponsors and the Investment Advisors may discontinue or suspend calculation or publication
of the applicable indices or discontinue or suspend maintenance of the applicable ETFs at any time. Any of these actions could affect
the value of and the return on the notes.
We have no affiliation with the sponsor or investment
advisor of any ETF or any Index Sponsor and will not be responsible for any actions taken by them. Unless otherwise specified in
the relevant pricing supplement, no sponsor or investment advisor of any ETF or any Index Sponsor is an affiliate of ours or will be involved
in any offerings of the notes in any way. Consequently, we have no control over the actions of any sponsor or investment advisor of an
ETF or any Index Sponsor, including any actions of the type that would require the calculation agent to adjust the payment to you at maturity.
No sponsor or investment advisor of any ETF or any Index Sponsor has any obligation of any sort with respect to the notes. Thus, no sponsor
or investment advisor of any ETF or any Index Sponsor has any 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 any issuance of the notes will be delivered
to any sponsor or investment advisor of an ETF or any Index Sponsor, except to the extent that we are required to pay an Index Sponsor
licensing fees with respect to a Reference Asset that is an index.
Neither we nor any of our affiliates have undertaken
any independent review of, or made any due diligence inquiry with respect to, the information about a Reference Asset contained in any
public disclosure of information. You, as an investor in the notes, should make your own investigation into the Reference Assets.
You will have no rights against the sponsor
of any relevant ETF or any Index Sponsor. The notes are not sponsored, endorsed, sold or promoted by any sponsor of any ETF or any
Index Sponsor. No sponsor of the relevant ETF or any Index Sponsor has passed on the legality or suitability of, or the accuracy or adequacy
of descriptions and disclosures relating to, the notes. No sponsor of the relevant ETF or any Index Sponsor makes any representation or
warranty, express or implied, to you or any member of the public regarding the advisability of investing in securities generally or the
notes in particular, or the ability of the relevant ETF or index to track general market performance. The sponsor of that ETF or that
Index Sponsor has no obligation to take our needs or your needs into consideration in determining, composing or calculating that ETF or
index, or in making changes to that ETF or index. No sponsor of the relevant ETF or any Index Sponsor is responsible for, and none of
them has participated in the determination of, the timing, prices or quantities of the notes to be issued or in the determination or calculation
of the equation by which the amounts to be paid on the notes are to be determined. No sponsor of the relevant ETF or any Index Sponsor
has any liability in connection with the administration, marketing or trading of the notes.
The policies of the sponsor or investment advisor
of an ETF or an Index Sponsor, as applicable, and changes that affect the relevant Reference Asset could adversely affect the amount payable
on your notes and their market value. The policies of the sponsor or investment advisor of an ETF or an Index Sponsor, as applicable,
concerning the calculation of the ETF’s net asset value or the level of the index, additions, deletions or substitutions of securities
in the relevant Reference Asset and the manner in which changes affecting its components could affect the level of that Reference Asset
and, therefore, the amount payable on your notes on the Maturity Date and the market value of your notes before that date. The amount
payable on your notes and their market value could also be affected if the sponsor or investment advisor of an ETF or an Index Sponsor,
as applicable, changes these policies, for example, by changing the manner in which it calculates the ETF’s net asset value or the
level of the index, or if the sponsor or investment advisor of an ETF or an Index Sponsor, as applicable, discontinues or suspends calculation
or publication of the ETF’s net asset value or the level of the index, in which case it may become difficult to determine the market
value of the notes.
An investment in the notes may be subject to
risks associated with non-U.S. securities markets. A Reference Asset may include one or more equity securities that have been issued
by non-U.S. companies. An investment in securities linked to the value of non-U.S. equity securities involves particular risks. Non-U.S.
securities markets may be more volatile than U.S. securities markets, and market developments may affect non-U.S. securities markets differently
from the U.S. securities markets. Direct or indirect government intervention to stabilize these non-U.S. securities markets, as well as
cross shareholdings among non-U.S. companies, may affect trading prices and volumes in those markets. Also, there is generally less publicly
available information in the U.S. about non-U.S. companies than about those U.S. companies that are subject to the reporting requirements
of the SEC, and non-U.S. companies are subject to accounting, disclosure, auditing and financial reporting standards and requirements
that differ from those applicable to U.S. reporting companies.
Prices of securities in non-U.S. countries are
subject to political, economic, financial and social factors that may be unique to the particular country. These factors, which could
negatively affect the non-U.S. securities markets, include the possibility of recent or future changes in the economic and fiscal policies
of non-U.S. governments, the possible imposition of, or changes in, currency exchange laws or other non-U.S. laws or restrictions applicable
to non-U.S. companies or investments in non-U.S. equity securities, 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, the economies of certain foreign countries may differ favorably or unfavorably from the U.S. economy in important
respects, such as growth of gross national product, rate of inflation, trade surpluses or deficits, capital reinvestment, resources and
self-sufficiency.
Unless otherwise specified in the applicable
pricing supplement, we do not control the issuer of any Reference Asset or any company included in a Reference Asset and have not undertaken
any independent review of, or made any due diligence inquiry with respect to, any disclosure made by any other company. Neither we
nor any of our affiliates have the ability to control the actions of any of the companies included in a Reference Asset, nor have we independently
verified the adequacy or accuracy of any publicly available information about any of these companies, unless (and only to the extent that)
our securities or the securities of our affiliates are represented by or included in that Reference Asset. You should make your own investigation
into the companies represented by or included in the applicable Reference Asset.
We will not hold any asset comprising the Reference
Asset for your benefit. The indenture and the terms governing your notes do not contain any restriction on our ability or the ability
of any of our affiliates to sell, pledge or otherwise convey all or any portion of the securities, commodities or other assets that may
comprise the Reference Asset that we or they may acquire. Neither we nor our affiliates will pledge or otherwise hold any assets for your
benefit, including any assets included in a Reference Asset. Consequently, in the event of our bankruptcy, insolvency or liquidation,
any of those assets that we own will be subject to the claims of our creditors generally and will not be available for your benefit specifically.
Risks Relating to a Reference Asset that Is a Basket
If your notes are linked to a Basket, changes
in the level of one or more Basket Components may be offset by changes in the level of one or more other Basket Components. Your notes
may be linked to a Basket. In such a case, a change in the levels of one or more Basket Components may not correlate with changes in the
levels of one or more other Basket Components. The level of one or more Basket Components may increase, while the level of one or more
other Basket Components may not increase as much, or may even decrease. The opposite changes may occur in the case of bearish notes. Therefore,
in determining the level of the Basket as of any time, increases (or, in the case of bearish notes, decreases) in the level of one Basket
Component may be moderated, or wholly offset, by lesser increases or decreases (or, in the case of bearish notes, lesser decreases and
increases) in the level of one or more other Basket Components. If the weightings of the applicable Basket Components are not equal, changes
in the level of the Basket Components which are more heavily weighted could have a disproportionately adverse impact upon your notes.
Risks Relating to a Reference Asset that Is an Equity Security (Including
Any ETF)
You will have limited anti-dilution protection
with respect to a Reference Asset. The calculation agent will adjust the Initial Level, any Buffer Level or Barrier Level and/or any
other applicable level of a Reference Asset for stock splits, reverse stock splits, stock dividends, extraordinary dividends and other
events that affect the applicable issuer’s capital structure, but only in the situations we describe in “General Terms of
the Notes—Anti-dilution Adjustments to a Reference Asset that Is an Equity Security (Including Any ETF)” below. The calculation
agent will not be required to make an adjustment for every corporate event that may affect the relevant security. For example, the calculation
agent will not make any adjustments for events such as an offering by the issuer of a Reference Asset of equity securities or a tender
or exchange offer for less than all outstanding shares of that issuer by a third party. Those events or other actions by the applicable
issuer or a third party may nevertheless adversely affect the level of a Reference Asset, and adversely affect the value of your notes.
Risks Relating to a Reference Asset that Is an ADR
The value of a Reference Asset may not accurately
track the value of the common shares of the applicable company. If a Reference Asset is an ADR, each share of that Reference Asset
will represent shares of the relevant company (an “underlying company”). The trading patterns of the ADRs will generally reflect
the characteristics and valuations of the underlying common shares; however, the value of the ADRs may not completely track the value
of those shares. Trading volume and pricing on the applicable non-U.S. exchange may, but will not necessarily, have similar characteristics
as the ADRs. For example, certain factors may increase or decrease the public float of the ADRs and, as a result, the ADRs may have less
liquidity or lower market value than the common shares of the underlying company.
Adverse trading conditions in the applicable
non-U.S. market may negatively affect the value of a Reference Asset. Holders of the underlying company’s ADRs may usually surrender
the ADRs in order to receive and trade the underlying common shares. This provision permits investors in the ADRs to take advantage of
price differentials between markets. However, this provision may also cause the market prices of a Reference Asset to more closely correspond
with the values of the common shares in the applicable non-U.S. markets. As a result, a market outside of the U.S. for the underlying
common shares that is not liquid may also result in an illiquid market for the ADRs.
Risks Relating
to a Reference Asset that Is an ETF
The performance of an ETF may not correlate
with the performance of its underlying index as well as the net asset value per share of that ETF. The performance of an ETF is linked
principally to the performance of the ETF’s underlying index. However, the performance of an ETF may also be linked in part to shares
of other ETFs because some ETFs generally invest a specified percentage, e.g., 10% of their assets, in the shares of other ETFs. In addition,
while the performance of an ETF is linked principally to the performance of such ETF’s underlying index, ETFs generally invest in
a representative sample of the stocks included in such ETF’s underlying index and generally do not hold all or substantially all
of the stocks included in such ETF’s underlying index. Finally, the performance of an ETF and of the ETF’s underlying index
will generally vary due to transaction costs, certain corporate actions and timing variances.
Imperfect correlation between the stocks held by
an ETF and the stocks included in such ETF’s underlying index; the performance of the shares of other ETFs, if applicable; rounding
of prices; changes to an ETF’s underlying index; and changes to regulatory policies, may cause the performance of an ETF to differ
from the performance of the ETF’s underlying index, especially during periods of market volatility when the liquidity and the market
price of shares of the ETF and/or securities held by the ETF may be adversely affected, sometimes materially. In addition, because shares
of ETFs are traded on exchanges and are subject to market supply and investor demand, the market value of one share of an ETF may differ
from its net asset value per share and the shares of an ETF may trade at, above or below their net asset value per share.
Because of the potential discrepancies identified
above, the return on an ETF may correlate imperfectly with the return on the ETF’s underlying index.
There is no assurance that an active trading
market will continue for the shares of the relevant ETF or that there will be liquidity in the trading market. Although the shares
of an ETF to which your notes may be linked are listed for trading on various securities exchanges and a number of similar products have
been traded on other securities exchanges for varying periods of time, there is no assurance that an active trading market will continue
for the shares of such ETF or that there will be liquidity in the trading market.
An ETF is subject to management risks. Each
ETF is subject to management risk, which is the risk that the investment advisor’s investment strategy, the implementation of which
is subject to a number of constraints, may not produce the intended results. For example, an investment advisor may invest a portion of
the ETF’s assets in securities not included in the relevant industry or sector but which the investment advisor believes will help
the ETF track the relevant industry or sector.
Risks Relating
to Commodity-Based Reference Assets
You will not own the underlying commodities.
Investing in the notes is not the same as owning the applicable commodities or futures contracts relating to those commodities. You will
not have a right to receive delivery of any of the applicable commodities or futures contracts relating to those commodities. We will
not invest in any of the applicable commodities or futures contracts relating to those commodities on behalf or for the benefit of holders
of the notes.
Commodities prices are highly volatile due to
unpredictable factors that affect supply and demand. The following factors, which are beyond our control, may influence supply and
demand of the underlying commodities or any futures contracts of the underlying commodities, and therefore the level of the Reference
Asset and the market value of the notes:
| • | technological developments; |
| • | direct government activity (such as embargoes); and |
| • | other supply disruptions in major producing or consuming regions of the applicable commodity. |
Suspension or disruptions of market trading
in the commodity and related futures markets may adversely affect the value of your notes. The commodity markets are subject to temporary
distortions or other disruptions due to various factors, including the lack of liquidity in the markets, the participation of speculators
and government regulation and intervention.
Certain exchanges have regulations which limit
the amount of fluctuations in futures contracts that may occur during a single trading day. These limits are generally referred to as
“daily price fluctuation limits,” and the maximum or minimum price of a futures contract on any given day as a result of these
limits is referred to as a “limit price.” Once the limit price has been reached in a particular futures contract, no trades
may be made at a different price. Limit prices may have the effect of precluding trading in a particular futures contract or forcing the
liquidation of futures contracts at disadvantageous times or prices. These circumstances could affect the level of the Reference Asset
or the underlying commodities of the Reference Asset and could therefore adversely affect the market value of the notes.
The notes will not be regulated by the Commodity
Futures Trading Commission (the “CFTC”). Unlike a direct investment in futures contracts related to the underlying commodities,
your investment in the notes does not afford you the benefits of the regulatory protections of the CFTC. You will not benefit from the
CFTC’s or any other non-U.S. regulators’ regulatory protections that are afforded to persons who trade in futures contracts
through a registered futures merchant or operator.
Unlike an investment in notes linked to the performance
of an ETF that invests in one or more commodities, an investment in a collective investment vehicle that invests in futures contracts
on behalf of its participants may be regulated as a commodity pool and its operator may be required to be registered with and regulated
by the CFTC as a “commodity pool operator” (a “CPO”). Because the notes will not be interests in a commodity pool,
they will not be regulated by the CFTC as a commodity pool and you will not benefit from the CFTC’s or any non-U.S. regulatory authority’s
regulatory protections afforded to persons who trade in futures contracts or who invest in regulated commodity pools.
GENERAL
TERMS OF THE NOTES
This product supplement and the accompanying
prospectus dated May 26, 2022 relating to the notes, should be read together. Because the notes are part of a series of our senior debt
securities called Senior Medium-Term Notes, Series I, this product supplement and the accompanying prospectus should also be read together
with the accompanying prospectus supplement, dated May 26, 2022. Terms used but not defined in this product supplement have the meanings
given them in the accompanying prospectus or accompanying prospectus supplement, unless the context requires otherwise.
The notes will be issued in book-entry form through
The Depository Trust Company. Owners of beneficial interests in the notes should read the section entitled “Description of the Notes
We May Offer—Legal Ownership” in the accompanying prospectus supplement and “Description of the Debt Securities We May
Offer—Legal Ownership and Book-Entry Issuance” in the accompanying prospectus.
The notes are part of a series of senior debt securities
entitled “Senior Medium-Term Notes, Series I” that we may issue from time to time under the senior indenture, dated as of
January 25, 2010, as supplemented by the First Supplemental Indenture thereto, dated September 23, 2018, between Bank of Montreal and
Wells Fargo Bank, National Association and the Third Supplemental Indenture, dated as of May 26, 2022 Bank of Montreal, Computershare
Trust Company, N.A. (as successor to Wells Fargo Bank, National Association), and the Bank of New York Mellon. Terms that apply generally
to our medium term notes are described in “Description of the Notes We May Offer” in the accompanying prospectus supplement.
The terms described in this document supplement those described in the accompanying prospectus and the accompanying prospectus supplement,
and, if the terms described here are inconsistent with those described in those documents, the terms described in this product supplement
are controlling.
Unless otherwise set forth in the applicable pricing
supplement, we will not pay periodic interest payments on the notes. If any payment date, including the Maturity Date, falls on a day
that is not a business day, we will pay the required payment on the first subsequent business day, and no additional interest will accrue
on the notes as a result.
Payment at Maturity
Percentage Change. At maturity, subject
to our credit risk as issuer of the notes, you will receive a cash payment that is based on the performance of the Reference Asset as
measured by the Percentage Change of the Reference Asset unless otherwise set forth in the pricing supplement. Unless otherwise set forth
in the applicable pricing supplement, the Percentage Change will be calculated as follows (and expressed as a percentage):
Final Level – Initial
Level
Initial Level
However, if your notes are bearish notes, the Percentage
Change will be calculated as follows unless otherwise specified in the pricing supplement (and expressed as a percentage):
Initial Level – Final
Level
Initial Level
The relevant pricing supplement may specify that
the Percentage Change will be calculated by reference to a formula referencing variables other than the Initial Level or by reference
to a formula that includes the addition or subtraction of a fixed amount. The applicable pricing supplement may also specify several potential
definitions of Percentage Change depending on the applicable Final Level, in which case various potential definitions may be referred
to as an “adjusted percentage change”, “initial percentage change”, “final percentage change” and/or
similar terms.
Initial Level. The relevant pricing supplement
will set forth the Initial Level of the Reference Asset. Unless otherwise specified in the relevant pricing supplement, the Initial Level
of a single Reference Asset will be the closing level of that Reference Asset on the pricing date. The Initial Level may also be the arithmetic
average of the closing levels of the applicable Reference Asset on two or more specified trading days (each of which would be a Valuation
Date). In the case of a note linked to a Basket, the Initial Level will be a level specified in the applicable pricing supplement.
Final Level. Unless otherwise specified
in the relevant pricing supplement, the level of a Reference Asset on any Valuation Date will be its closing level on that date. Your
notes may provide for the Final Level to be based upon the arithmetic average of the closing levels of the applicable Reference Asset
on two or more Valuation Dates. In the case of a note linked to a Basket, the Final Level of the Basket will be the value of the Basket
on the Valuation Date, or the arithmetic average of the value of the Basket on each of the Valuation Dates, as applicable, determined
as described in more detail in the section entitled “—Notes Linked to a Basket” in this product supplement.
Payment at Maturity in Excess of Principal
The below include a few potential payment
scenarios which may apply to your notes if so specified in the applicable pricing supplement. The below list is not intended to describe
all potential payment scenarios or payment formulas that may be specified in the applicable pricing supplement. Please review the applicable
pricing supplement for the payment at maturity formulas which will apply to your notes.
General. If the Final Level is greater than
(or in the case of bearish notes, less than) the Initial Level, then, at maturity, you will receive an amount equal to:
Principal Amount + (Principal
Amount × Percentage Change × Upside Leverage Factor)
The Upside Leverage Factor represents the extent
to which your notes will participate in the upside performance (or in the case of bearish notes, downside performance) of the Reference
Asset. The Upside Leverage Factor may be less than, equal to, or greater than 100%. If the Upside Leverage Factor is less than 100%, your
notes will participate in less than the full upside performance (or in the case of bearish notes, downside performance) of the Reference
Asset. If the Upside Leverage Factor is greater than 100%, your notes will participate in the upside performance (or in the case of bearish
notes, downside performance) on a leveraged basis. The Upside Leverage Factor will be specified in the relevant pricing supplement, if
applicable. The applicable pricing supplement may also specify several potential definitions of Upside Leverage Factor depending on the
applicable Final Level, in which case various potential definitions may be referred to as an “adjusted upside leverage factor”,
“initial upside leverage factor”, “final upside leverage factor” and/or similar terms.
Digital Return Notes. Your notes may be
“Digital Return Notes.” For Digital Return Notes, unless otherwise set forth in the applicable pricing supplement, if the
Final Level is greater than (or in the case of bearish notes, less than) the Initial Level, the payment at maturity will be determined
as follows:
Principal Amount + (Principal Amount ×
Digital Return)
If your notes are Digital Return Notes, the positive
return on your notes may be limited to the Digital Return that will be specified in the applicable pricing supplement. The applicable
pricing supplement may also specify several potential definitions of Digital Return depending on the applicable Final Level.
Booster Notes. Your notes may be “Booster
Notes.” For Booster Notes, unless otherwise set forth in the applicable pricing supplement, if the Final Level is greater than (or
in the case of bearish notes, less than) the Initial Level, the payment at maturity will be determined as follows:
If the Percentage Change is greater than the Booster
Percentage, then the payment at maturity will equal:
Principal Amount + (Principal Amount × Percentage
Change)
If the Percentage Change is greater than or equal
to 0% but less than or equal to the Booster Percentage, then the payment at maturity will equal:
Principal Amount + (Principal Amount × Booster
Percentage)
The applicable pricing supplement may also specify
several potential definitions of Booster Percentage depending on the applicable Final Level.
For each of the above scenarios, the relevant pricing
supplement may modify the applicable threshold to receive a payment at maturity greater than principal (i.e., the relevant pricing supplement
may specify that the Final Level must be greater than, equal to or less than a specific value other than the Initial Level). The applicable
pricing supplement may also specify that one or more of the above scenarios will only apply with respect to a specific range of Final
Levels or that multiple scenarios will apply to the notes depending upon the applicable Final Level, in which case multiple different
meanings may be assigned to each of the defined variables (e.g. the Percentage Change, Upside Leverage Factor, Digital Return, and Booster
Percentage) with respect to each applicable range.
Payment at Maturity Less than or Equal to Principal
The below include a few potential payment
scenarios which may apply to your notes if so specified in the applicable pricing supplement. The below list is not intended to describe
all potential payment scenarios or payment formulas that may be specified in the applicable pricing supplement. Please review the applicable
pricing supplement for the payment at maturity formulas which will apply to your notes.
Notes Without a Buffer. If the Final Level
is less than (or in the case of bearish notes, greater than) or equal to the Initial Level, then, unless otherwise described in the applicable
pricing supplement, the payment at maturity will equal:
Principal Amount + (Principal Amount × Percentage
Change × Downside Leverage Factor)
In this case, if the Final Level is less than (or
in the case of bearish notes, greater than) the Initial Level, then, at maturity, you will receive less than the principal amount of your
notes.
The Downside Leverage Factor represents the extent
to which your notes will participate in the downside performance (or in the case of bearish notes, upside performance) of the Reference
Asset. The Downside Leverage Factor may be less than, equal to, or greater than 100%. If the Downside Leverage Factor is less than 100%,
your notes will participate in less than the full downside performance (or in the case of bearish notes, upside performance) of the Reference
Asset. If the Downside Leverage Factor is greater than 100%, your notes will participate in the downside performance (or in the case of
bearish notes, upside performance) on a leveraged basis. The Downside Leverage Factor will be specified in the relevant pricing supplement,
if applicable. The applicable pricing supplement may also specify several potential definitions of Downside Leverage Factor depending
on the applicable Final Level, in which case various potential definitions may be referred to as an “adjusted downside leverage
factor”, “initial downside leverage factor”, “final downside leverage factor” and/or similar terms. Depending
on the Downside Leverage Factor, you may lose all or a substantial portion of the amount that you invested to purchase the notes; however,
in no event will you lose more than your initial investment.
Notes with a Buffer. If the relevant pricing
supplement specifies that a “Buffer” is applicable to your notes, then, if the Final Level less than or equal to (or in the
case of bearish notes, greater than or equal to) the Initial Level, but is greater than or equal to (or in the case of bearish notes,
less than or equal to) the Buffer Level, then the payment at maturity will equal the principal amount of your notes.
However, if the Final Level is less than (or in
the case of bearish notes, greater than) the Buffer Level, then the payment at maturity will equal:
Principal Amount + [Principal Amount × (Percentage
Change + Buffer Percentage)
× Downside Leverage Factor]
The applicable Buffer Level and Buffer Percentage
will be set forth in the applicable pricing supplement. The applicable pricing supplement may also specify several potential definitions
of Buffer Percentage.
Notes with a Barrier Level. We may issue
notes that have a specified “Barrier Level.” For these notes, we will pay an amount at maturity that is less than the principal
amount of the notes only if (a) the Final Level is less than (or in the case of bearish notes, greater than) the applicable Initial Level
(or, if applicable, Buffer Level), as set forth above, and (b) a “Barrier Event” occurs. A “Barrier Event” will
be deemed to occur if the level of the Reference Asset (as set forth in the applicable pricing supplement) is less than (or in the case
of bearish notes, greater than) a Barrier Level during an observation period that will be specified in the applicable pricing supplement.
The provisions relating to the Barrier Level, together with any risk factors, will be set forth in the applicable pricing supplement.
For each of the above scenarios, the relevant pricing
supplement may modify the applicable threshold to receive a payment at maturity less than or equal to principal (i.e., the relevant pricing
supplement may specify that the Final Level must be greater than, equal to or less that a specific value other than the Initial Level).
The applicable pricing supplement may also specify that one or more of the above scenarios will only apply with respect to a specific
range of Final Levels or that multiple scenarios will apply to the notes depending upon the applicable Final Level, in which case multiple
different meanings may be assigned to each of the defined variables (e.g., the Percentage Change, Downside Leverage Factor, and Buffer
Percentage) with respect to each applicable range.
Notes Linked to a Basket
If your notes are linked to a Basket, each Basket
Component will be assigned a “Weighting Percentage” that will be set forth in the applicable pricing supplement. The sum of
the Weighting Percentages of the Basket Components will equal 100%. The Basket Components may or may not have equal Weighting Percentages.
The “Initial Basket Component Level”
of each Basket Component will be set forth in the applicable pricing supplement. Unless otherwise set forth in the applicable pricing
supplement, the value of any Basket Component on any trading day, including any Valuation Date, will be its closing level.
The Initial Level will be set forth in the applicable
pricing supplement. Unless otherwise set forth in the applicable pricing supplement, the “Final Level” will equal the Initial
Level multiplied by the Percentage Change. The Percentage Change for notes linked to a Basket will equal the sum of the “Weighted
Percentage Change” for each Basket Component. The “Weighted Percentage Change” will be equal to the product of (a) the
applicable Weighting Percentage and (b) the percentage change in the value of the Basket Component from its Initial Basket Component Level
set on the pricing date to its value on the Valuation Date. If there is more than one Valuation Date for your notes, the final value of
each Basket Component will be equal to the arithmetic average of the closing levels of that Basket Component on each of the Valuation
Dates.
When we refer to the level of a Basket during the
term of the notes, we are referring to the value that would be determined if the Percentage Change was calculated as of that day.
Valuation Date
Unless otherwise specified in the relevant pricing
supplement, the Valuation Date (if there is only one Valuation Date applicable to the notes) or the final Valuation Date (if there is
more than one Valuation Date applicable to the notes) will be the third trading day before the Maturity Date specified in the relevant
pricing supplement. If the calculation agent determines that a market disruption event occurs or is continuing on any Valuation Date applicable
to the notes, the Final Level will be determined according to the calculation in “—Market Disruption Events” below.
Maturity Date
Unless otherwise specified in the relevant pricing
supplement, the Maturity Date will be the third scheduled business day following the Valuation Date or the final Valuation Date, as applicable,
unless that date is not a business day, in which case the Maturity Date will be the next following business day. The Maturity Date will
be postponed by the same number of trading days as the Valuation Date or the final Valuation Date, as applicable, if a market disruption
event occurs or is continuing as described above. However, no interest will accrue past the Maturity Date specified in the relevant pricing
supplement.
Certain Definitions
Business Day. Unless otherwise set forth
in the applicable pricing supplement, “business day” means a day of the week other than Saturday or Sunday that is neither
a legal holiday nor a day on which banking institutions are authorized or obligated by law or executive order to close in New York City.
If any payment on the notes is scheduled to occur
on a day which is not a business day, such payment will be made on the next following business day unless otherwise set forth in the applicable
pricing supplement.
Trading Day. Unless otherwise set forth
in the applicable pricing supplement, “trading day” is any day, as determined by the calculation agent, (i) on which trading
is generally conducted on the primary market on which the securities included in a Reference Asset that is an index and (ii) on which
trading is generally conducted on the relevant primary U.S. exchange for a Reference Asset that is an equity security or an ETF.
Closing Level. Unless otherwise set forth
in the applicable pricing supplement, the closing level for a Reference Asset will be its official closing level (for a Reference Asset
that is an index) or closing price (for a Reference Asset that is an equity security or an ETF), as applicable.
Closing Price. Unless otherwise set forth
in the applicable pricing supplement, the closing price for a Reference Asset that is an equity security or ETF on any trading day will
equal the closing sale price or last reported sale price, regular way, for the security or ETF, on a per-share or other unit basis:
| · | on the principal national securities exchange on which that Reference Asset is listed for trading on that day; or |
| · | if that security or ETF is not quoted on any national securities exchange on that day, on any other market system or quotation system
that is the primary market for the trading of that Reference Asset. |
If a Reference Asset is not listed or traded as
described above, then the closing level for that Reference Asset on any trading day will be the average, as determined by the calculation
agent, of the bid prices for the applicable Reference Asset obtained from as many dealers in that Reference Asset selected by the calculation
agent, in its sole discretion, as will make those bid prices available to the calculation agent. The number of dealers need not exceed
three and may include the calculation agent or any of our other affiliates.
Automatic Call
If so specified in the applicable pricing supplement,
your notes will be subject to automatic redemption. The terms relating to any such redemption will be set forth in the applicable pricing
supplement.
Market Disruption Events
If the calculation agent determines that, on any
applicable observation date for your notes, which may include any Valuation Date, any call observation date or any other specified date
on which a level of the Reference Asset is to be observed, , a market disruption event has occurred or is continuing with respect to a
Reference Asset, the determination of the Final Level, closing level or any other relevant level of the applicable Reference Asset, as
applicable, may be postponed. If such a postponement occurs, the calculation agent will use the closing level of the applicable Reference
Asset on the first subsequent trading day on which no market disruption event occurs or is continuing. However, in no event will the determination
of the Final Level, closing level or any other relevant level of the applicable Reference Asset, as applicable, be postponed by more than
ten trading days.
If the determination of the Final Level, closing
level or any other applicable level of the applicable Reference Asset, is postponed to the last possible day, but a market disruption
event for the affected Reference Asset occurs or is continuing on that day, that day will be the date on which the Final Level, closing
level or other applicable level of the applicable Reference Asset, as applicable, will be determined by the calculation agent. In such
an event, the calculation agent will make a good faith estimate in its sole discretion of the Final Level, the closing level or other
applicable level of the applicable Reference Asset, that would have prevailed in the absence of the market disruption event.
For the avoidance of doubt, in the case of notes
linked to two or more Reference Assets (including, without limitation, notes linked to a Basket), if the calculation agent determines
that no market disruption event is occurring with respect to a particular Reference Asset or Basket Component, all determination with
respect to such Reference Asset or Basket Component will be made on the originally scheduled date irrespective of the occurrence of a
market disruption event with respect to one or more other Reference Assets or Basket Components.
If the Final Level and/or any other applicable
level of a Reference Asset will be determined over more than one Valuation Date and a market disruption event occurs or is continuing
on any scheduled Valuation Date other than the final Valuation Date with respect to a Reference Asset, the level of that Reference Asset
for that Valuation Date will equal the closing level of that Reference Asset on the next scheduled Valuation Date. For example, if a market
disruption event occurs or is continuing on the first and second scheduled Valuation Dates with respect to any Reference Asset, but not
on the third scheduled Valuation Date, then the closing level of that Reference Asset on the third scheduled Valuation Date will also
be deemed to be the closing level of that Reference Asset on the first and second scheduled Valuation Dates. If no further scheduled Valuation
Dates occur after a Valuation Date on which a market disruption event occurs or is continuing or if a market disruption event occurs or
is continuing on the final Valuation Date with respect to any Reference Asset, then the closing level of that Reference Asset for that
Valuation Date will be determined (or, if not determinable, estimated by the calculation agent in a manner which is considered to be commercially
reasonable under the circumstances) by the calculation agent on that final Valuation Date, regardless of the occurrence or continuation
of a market disruption event on that day. In such an event, the calculation agent will make a good faith estimate in its sole discretion
of the closing level of that Reference Asset that would have prevailed in the absence of the market disruption event.
For the avoidance of doubt, if any observation
date (including, without limitation, any Valuation Date or call observation date) is postponed due to a market disruption event, the relevant
payment date will be postponed by the same number of trading days. In the case of a note linked to two or more Reference Assets (including,
without limitation, notes linked to a Basket), the relevant payment date will be postponed to maintain the same number of trading days
between the last observation date as postponed and the relevant payment date as existed between the originally scheduled observation date
and payment date prior to any postponement.
A market disruption event for a particular offering
of the notes shall not necessarily be a market disruption event for any other offering of the notes.
As to a Reference Asset that is an index, a market
disruption event means any event, circumstance or cause which we determine, and the calculation agent confirms, has or will have a material
adverse effect on our ability to perform our obligations under the notes or to hedge its position in respect of its obligations to make
payment of amounts owing thereunder and more specifically includes the following events to the extent that they have such effect with
respect to any index:
| · | a suspension, absence or limitation of trading in index components constituting 20% or more, by weight, of that index; |
| · | a suspension, absence or limitation of trading in futures or options contracts relating to that index on their respective markets; |
| · | any event that disrupts or impairs, as determined by the calculation agent, the ability of market participants to (i) effect transactions
in, or obtain market values for, index components constituting 20% or more, by weight, of that index, or (ii) effect transactions in,
or obtain market values for, futures or options contracts relating to that index on their respective markets; |
| · | the closure on any day of the primary market for futures or options contracts relating to that index or index components constituting
20% or more, by weight, of that index on a scheduled trading day prior to the scheduled weekday closing time of that market (without regard
to after hours or any other trading outside of the regular trading session hours) unless such earlier closing time is announced by the
primary market at least one hour prior to the earlier of (i) the actual closing time for the regular trading session on such primary market
on such scheduled trading day for such primary market and (ii) the submission deadline for orders to be entered into the relevant exchange
system for execution at the close of trading on such scheduled trading day for such primary market; |
| · | any scheduled trading day on which (i) the primary markets for index components constituting 20% or more, by weight, of that index
or (ii) the exchanges or quotation systems, if any, on which futures or options contracts on that index are traded, fails to open for
trading during its regular trading session; or |
| · | any other event, if the calculation agent determines that the event interferes with our ability or the ability of any of our affiliates
to unwind all or a portion of a hedge with respect to the notes that we or our affiliates have effected or may effect as described below
under “Use of Proceeds and Hedging” in this product supplement. |
As to a Reference Asset that is an equity security
(including an ETF), any of the following will be a market disruption event, as determined by the calculation agent in its sole discretion:
| · | a suspension, absence or limitation of trading in (i) that security in its primary market, as determined
by the calculation agent, or (ii) futures or options contracts relating to that security in the primary market for those contracts, as
determined by the calculation agent; |
| · | any event that disrupts or impairs, as determined by the calculation agent, the ability of market participants
to (i) effect transactions in, or obtain market values for, the security in its primary market, or (ii) effect transactions in, or obtain
market values for, futures or options contracts relating to the security in its primary market; |
| · | the closure on any day of the primary market for that security on a scheduled trading day prior to the
scheduled weekday closing time of that market (without regard to after hours or any other trading outside of the regular trading session
hours) unless such earlier closing time is announced by the primary market at least one hour prior to the earlier of (i) the actual closing
time for the regular trading session on such primary market on such scheduled trading day for such primary market and (ii) the submission
deadline for orders to be entered into the relevant exchange system for execution at the close of trading on such scheduled trading day
for such primary market; |
| · | any scheduled trading day on which (i) the primary market for that security or (ii) the exchanges or quotation
systems, if any, on which futures or options contracts on that security are traded, fails to open for trading during its regular trading
session; or |
| · | any other event, if the calculation agent determines that the event interferes with our ability or the
ability of any of our affiliates to unwind all or a portion of a hedge with respect to the notes that we or our affiliates have effected
or may effect as described below under “Use of Proceeds and Hedging” in this product supplement. |
Adjustments to a Reference Asset that Is an
Index
If the Index Sponsor discontinues publication of
an index that is a Reference Asset and the Index Sponsor or another entity publishes a successor or substitute index that the calculation
agent determines, in its sole discretion, to be comparable to the discontinued index (such successor or substitute index being referred
to in this section as a “successor index”), then any subsequent index closing level will be determined by reference to the
published level of that successor index at the regular weekday close of trading on the applicable observation date.
Upon any selection by the calculation agent of
a successor index, the calculation agent will provide written notice to the trustee of the selection, and the trustee will furnish written
notice thereof, to each noteholder, or in the case of global notes, the depositary, as holder of the global notes.
If a successor index is selected by the calculation
agent, that successor index will be used as a substitute for the relevant index for all purposes, including for purposes of determining
whether a market disruption event exists with respect to that index.
If any Index Sponsor discontinues publication of
an index prior to, and that discontinuance is continuing on, any observation date, and the calculation agent determines, in its sole discretion,
that no successor index is available at that time, then the calculation agent will determine the level of that index for the relevant
date in accordance with the formula for and method of calculating that index last in effect prior to the discontinuance, without rebalancing
or substitution, using the closing level (or, if trading in the relevant underlying securities or components of that index have been materially
suspended or materially limited, its good faith estimate of the closing level that would have prevailed but for that suspension or limitation)
at the close of the principal trading session of the relevant exchange on that date of each security or component most recently comprising
that index.
If at any time the method of calculating a closing
level for an index or a successor index is changed in a material respect, or if an index is in any other way modified so that that index
does not, in the opinion of the calculation agent, fairly represent the level of that index had those changes or modifications not been
made, then, from and after that time, the calculation agent will, at the close of business in New York City on the applicable observation
date, make such calculations and adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive
at a level of an index comparable to that index as if those changes or modifications had not been made. Accordingly, if the method of
calculating an index is modified so that the value of that index is a fraction of what it would have been if it had not been modified
(e.g., due to a split in that index), then the calculation agent will adjust that index in order to arrive at a level of that index as
if it had not been modified (e.g., as if such split had not occurred).
Anti-dilution Adjustments to a Reference Asset
that Is an Equity Security (Including Any ETF)
The Initial Level, the Buffer Level and/or the
Barrier Level, as well as any other applicable level, of each Reference Asset will be specified in the applicable pricing supplement.
The calculation agent will adjust the Initial Level, the Buffer Level and/or the Barrier Level, as well as any other applicable level,
of a Reference Asset if any of the dilution events described below occurs with respect to that Reference Asset.
The calculation agent will adjust the Initial Level,
the Buffer Level, the Barrier Level and/or any other applicable level as described below, of a Reference Asset but only if an event below
under this section occurs with respect to that Reference Asset and only if the relevant event occurs during the period described under
the applicable subsection. The Initial Level, the Buffer Level, the Barrier Level and/or any other applicable level of each Reference
Asset will be subject to the adjustments described below, independently and separately, with respect to the dilution events that affect
the applicable Reference Asset.
If more than one anti-dilution event requiring
adjustment occurs with respect to the Initial Level, the Buffer Level, the Barrier Level and/or any other applicable level of a Reference
Asset, the calculation agent will adjust such Initial Level, Buffer Level, Barrier Level and/or any other applicable level for each event,
sequentially, in the order in which the events occur, and on a cumulative basis. Therefore, having adjusted the Initial Level, the Buffer
Level, the Barrier Level and/or any other applicable level of the affected Reference Asset for the first event, the calculation agent
will adjust such Initial Level, Buffer Level, Barrier Level and/or any other applicable level for the second event, applying the required
adjustment to such Initial Level, Buffer Level, Barrier Level and/or any other applicable level as already adjusted for the first event,
and so on for each event.
If an event requiring an anti-dilution adjustment
occurs, the calculation agent will make the adjustment in an attempt to offset, to the extent practical, any change in the economic position
of the holder and us, relative to your note, that results solely from that event. The calculation agent may, in its sole discretion, modify
the anti-dilution adjustments set forth in the section as necessary to ensure an equitable result.
Stock Splits and Stock Dividends
A stock split is an increase in the number of a
corporation’s outstanding shares of stock without any change in its stockholders’ equity. When a corporation pays a stock
dividend, it issues additional shares of its stock to all holders of its outstanding stock in proportion to the shares they own. Each
outstanding share will be worth less as a result of a stock split or stock dividend.
If a Reference Asset is subject to a stock split
or receives a stock dividend, then the calculation agent will adjust its Initial Level, Buffer Level, Barrier Level and/or any other applicable
level by dividing the prior Initial Level, Buffer Level, and/or Barrier Level, as applicable, before the stock split or stock dividend
by an amount equal to: (1) the number of shares of the applicable Reference Asset outstanding immediately after the stock split or stock
dividend becomes effective; divided by (2) the number of shares of the applicable Reference Asset outstanding immediately before the stock
split or stock dividend becomes effective. The Initial Level, Buffer Level, Barrier Level and/or any other applicable level of a Reference
Asset will not be adjusted, however, unless:
| · | in the case of a stock split, the first day on which the applicable Reference Asset trades without the
right to receive the stock split occurs after the pricing date and on or before the applicable observation date; or |
| · | in the case of a stock dividend, the ex-dividend date occurs after the pricing date and on or before the
applicable observation date. |
The ex-dividend date for any dividend or other
distribution with respect to a Reference Asset is the first day on which the applicable Reference Asset trades without the right to receive
that dividend or other distribution.
Reverse Stock Splits
A reverse stock split is a decrease in the number
of a corporation’s outstanding shares of stock without any change in its stockholders’ equity. Each outstanding share will
be worth more as a result of a reverse stock split.
If a Reference Asset is subject to a reverse stock
split, then the calculation agent will adjust its Initial Level, Buffer Level, Barrier Level and/or any other applicable level by multiplying
the prior Initial Level, Buffer Level, Barrier Level and/or any other applicable level by a number equal to: (1) the number of shares
of the applicable Reference Asset outstanding immediately before the reverse stock split becomes effective; divided by (2) the number
of shares of the applicable Reference Asset outstanding immediately after the reverse stock split becomes effective. The Initial Level,
Buffer Level, Barrier Level and/or any other applicable level of the affected Reference Asset will not be adjusted, however, unless the
reverse stock split becomes effective after the pricing date and on or before the applicable observation date.
Extraordinary Dividends
Any distribution or dividend on a Reference Asset
determined by the calculation agent to be a distribution or dividend that is not in the ordinary course of the issuer’s historical
dividend practices will be deemed to be an extraordinary dividend. The calculation agent will determine if the dividend is an extraordinary
dividend and, if so, the amount of the extraordinary dividend. Each outstanding share will be worth less as a result of an extraordinary
dividend.
If any extraordinary dividend occurs with respect
to a Reference Asset, the calculation agent will adjust its Initial Level, Buffer Level, Barrier Level and/or any other applicable level
to equal the product of: (1) the prior Initial Level, Buffer Level, Barrier Level and/or any other applicable level, times (2) a fraction,
the numerator of which is the amount by which the closing level of the applicable Reference Asset on the business day before the ex-dividend
date exceeds the extraordinary dividend amount and the denominator of which is the closing level of the applicable Reference Asset on
the business day before the ex-dividend date. The Initial Level, Buffer Level, Barrier Level and/or any other applicable level of a Reference
Asset will not be adjusted, however, unless the ex-dividend date occurs after the pricing date and on or before the applicable observation
date.
The extraordinary dividend amount with respect
to an extraordinary dividend for a Reference Asset equals:
| · | for an extraordinary dividend that is paid in lieu of a regular quarterly dividend, the amount of the
extraordinary dividend per share of the applicable Reference Asset minus the amount per share of the immediately preceding dividend, if
any, that was not an extraordinary dividend for the applicable Reference Asset; or |
| · | for an extraordinary dividend that is not paid in lieu of a regular quarterly dividend, the amount per
share of the extraordinary dividend. |
To the extent an extraordinary dividend is not
paid in cash, the value of the non-cash component will be determined by the calculation agent. A distribution on a Reference Asset that
is a stock dividend, an issuance of transferable rights or warrants or a spin-off event and also an extraordinary dividend will result
in an adjustment to the applicable Reference Asset’s Initial Level, Buffer Level, Barrier Level and/or any other applicable level
only as described under “— Stock Splits and Stock Dividends” above, “— Transferable Rights and Warrants”
below or “— Reorganization Events” below, as the case may be, and not as described here.
Transferable Rights and Warrants
If the issuer of a Reference Asset issues transferable
rights or warrants to all holders of that Reference Asset to subscribe for or purchase that Reference Asset at an exercise price per share
that is less than the closing level of that Reference Asset on the business day before the ex-dividend date for the issuance, then the
applicable Initial Level, Buffer Level, Barrier Level and/or any other applicable level will be adjusted by multiplying the prior Initial
Level, Buffer Level, Barrier Level and/or any other applicable level by the following fraction:
| · | the numerator will be the number of shares of the applicable Reference Asset outstanding at the close
of business on the day before that ex-dividend date plus the number of additional shares of the applicable Reference Asset that the aggregate
offering price of the total number of shares of the applicable Reference Asset so offered for subscription or purchase pursuant to the
transferable rights or warrants could purchase at the closing level on the trading day before the ex-dividend date, with that number of
additional shares being determined by multiplying the total number of shares so offered by the exercise price of those transferable rights
or warrants and dividing the resulting product by the closing level on the trading day before that ex-dividend date. |
| · | the denominator will be the number of shares of the applicable Reference Asset outstanding at the close
of business on the day before that ex-dividend date plus the number of additional shares of the applicable Reference Asset offered for
subscription or purchase under those transferable rights or warrants. |
The Initial Level, Buffer Level, Barrier Level
and/or any other applicable level will not be adjusted, however, unless the ex-dividend date described above occurs after the pricing
date and on or before the applicable observation date.
Reorganization Events
If the issuer of a Reference Asset undergoes a
reorganization event in which property other than that Reference Asset—e.g., cash and securities of another issuer—is distributed
in respect of that Reference Asset, then, for purposes of calculating the level of that Reference Asset, the calculation agent will determine
the closing level of the applicable Reference Asset on any applicable observation date to equal the value of the cash, securities and
other property distributed in respect of one share of the affected Reference Asset.
If the calculation agent determines that, by valuing
such cash, securities and other property, a commercially reasonable result is not achieved, then the calculation agent will, in its sole
discretion, substitute another stock for that Reference Asset.
Each of the following is a reorganization event
with respect to a Reference Asset:
| · | a Reference Asset is reclassified or changed; |
| · | the issuer of a Reference Asset has been subject to a merger, consolidation or other combination and either
is not the surviving entity or is the surviving entity but all the outstanding stock is exchanged for or converted into other property; |
| · | a statutory share exchange involving the outstanding stock and the securities of another entity occurs,
other than as part of an event described in the two bullet points above; |
| · | the issuer of a Reference Asset sells or otherwise transfers its property and assets as an entirety or
substantially as an entirety to another entity; |
| · | the issuer of a Reference Asset effects a spin-off—that is, issues to all holders of the affected
Reference Asset equity securities of another issuer, other than as part of an event described in the four bullet points above; |
| · | the issuer of a Reference Asset is liquidated, dissolved or wound up or is subject to a proceeding under
any applicable bankruptcy, insolvency or other similar law; or |
| · | another entity completes a tender or exchange offer for all of the outstanding stock of the issuer of
a Reference Asset. |
Valuation of Distribution Property
If a reorganization event occurs with respect to
a Reference Asset, and the calculation agent does not substitute another stock for that Reference Asset as described in “—
Substitution” below, then the calculation agent will determine the applicable closing level on each observation date so as to equal
the value of the property — whether it be cash, securities or other property — distributed in the reorganization event in
respect of one share of the affected Reference Asset, as that Reference Asset existed before the date of the reorganization. We refer
to the property distributed in a reorganization event as distribution property, a term we describe in more detail below. The calculation
agent will not make any determination for a reorganization event, however, unless the event becomes effective (or, if the event is a spin-off,
unless the ex-dividend date for the spin-off occurs) after the pricing date and on or before the applicable observation date.
For the purpose of making a determination required
by a reorganization event, the calculation agent will determine the value of each type of distribution property, in its sole discretion.
For any distribution property consisting of a security, the calculation agent will use the closing level for the security on the relevant
date. The calculation agent may value other types of property in any manner it determines, in its sole discretion, to be appropriate.
If a holder of the affected Reference Asset may elect to receive different types or combinations of types of distribution property in
the reorganization event, the distribution property will consist of the types and amounts of each type distributed to a holder that makes
no election, as determined by the calculation agent in its sole discretion.
If a reorganization event occurs and the calculation
agent adjusts the closing level of the affected Reference Asset on an observation date to equal the value of the distribution property
distributed in the event, as described above, the calculation agent will make further determinations for later events that affect the
distribution property considered in determining the closing level. The calculation agent will do so to the same extent that it would make
determinations if the applicable Reference Asset were outstanding and were affected by the same kinds of events.
For example, if the issuer of a Reference Asset
merges into another company and each share of that Reference Asset is converted into the right to receive two common shares of the surviving
company and a specified amount of cash, then on each observation date the closing level of a share of the applicable Reference Asset will
be determined to equal the value of the two common shares of the surviving company plus the specified amount of cash. The calculation
agent will further determine the common share component of such closing level to reflect any later stock split or other event, including
any later reorganization event, that affects the common shares of the surviving company, to the extent described in “— Anti-dilution
Adjustments to a Reference Asset that Is an Equity Security (Including Any ETF)” or as described above in this “— Reorganization
Events” section as if the common shares were the applicable Reference Asset. In that event, the cash component will not be redetermined
but will continue to be a component of the closing level.
When we refer to “distribution property”,
we mean the cash, securities and other property distributed in a reorganization event in respect of the applicable Reference Asset. If
an adjustment resulting from a prior reorganization had occurred, the “distribution property” will mean the cash, securities
and other property distributed in respect of any securities whose value determines the closing level on an observation date. In the case
of a spin-off, the distribution property also includes the Reference Asset in respect of which the distribution is made.
If a reorganization event occurs, the distribution
property distributed in the event will be substituted for the affected Reference Asset as described above. Consequently, in this product
supplement, when we refer to a Reference Asset, we mean any distribution property that is distributed in a reorganization event in respect
of a Reference Asset. Similarly, when we refer to the issuer of a Reference Asset, we mean any successor entity in a reorganization event.
Substitution
If the calculation agent determines that a commercially
reasonable result is not achieved by valuing distribution property with respect to a Reference Asset upon becoming subject to a reorganization
event, then the calculation agent will, in its sole discretion, substitute another stock for the affected Reference Asset. In such case,
the adjustments described above in “— Valuation of Distribution Property” will not apply.
If the calculation agent so determines, it may
choose, in its sole discretion, the stock of a different company listed on a national securities exchange or quotation system as a substitute
for the affected Reference Asset. For all purposes, the substitute stock will be deemed to be the affected Reference Asset for all purposes
under the notes hereof.
The calculation agent will determine, in its sole
discretion, the applicable Reference Asset’s Initial Level, Buffer Level, Barrier Level and/or any other applicable level and/or
the manner of valuation of the substitute stock. The calculation agent will have the right to make such adjustments to the calculation
of the individual stock performance as it determines in its sole discretion are necessary to preserve as nearly as possible our and your
relative economic position prior to the reorganization event.
Adjustments Relating to ADRs
A Reference Asset may consist of ADRs of the underlying
company. As a result, for purposes of this section, the calculation agent will consider the effect of any of the relevant events on the
holders of a Reference Asset. For example, if a holder of a Reference Asset receives an extraordinary dividend, the provisions described
in this section would apply to the applicable Reference Asset. On the other hand, if a spin-off occurs, and a Reference Asset represents
both the spun-off security as well as the existing Reference Asset, the calculation agent may determine not to effect the anti-dilution
adjustments set forth in this section. More particularly, the calculation agent may not make an adjustment (1) if holders of the applicable
Reference Asset are not eligible to participate in any of the events that would otherwise require anti-dilution adjustments as set forth
in this section or (2) to the extent that the calculation agent determines that the underlying company or the depositary for the ADRs
has adjusted the number of common shares of the underlying company represented by each share of the applicable Reference Asset so that
the market price of the applicable Reference Asset would not be affected by the corporate event in question.
If the underlying company or the depository for
the ADRs, in the absence of any of the events described in this section, elects to adjust the number of common shares of the underlying
company represented by each share of applicable Reference Asset, then the calculation agent may make the appropriate anti-dilution adjustments
to reflect such change. The depository for the ADRs may also make adjustments in respect of the ADRs for share distributions, rights distributions,
cash distributions and distributions other than shares, rights, and cash. Upon any such adjustment by the depository, the calculation
agent may adjust such terms and conditions of the notes as the calculation agent determines appropriate to account for that event.
Other Events and Adjustments
The calculation agent may make such adjustments
to the terms of the notes with respect to any of the events described above, as it deems in its discretion is necessary to ensure an equitable
result.
Delisting of ADRs or Termination of ADR Facility
If a Reference Asset is an ADR that is no longer
listed or admitted to trading on a U.S. securities exchange registered under the U.S. Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or included in the OTC Bulletin Board Service operated by FINRA, or if the ADR facility between the underlying
company and the ADR depositary is terminated for any reason, then, on and after the date that the applicable Reference Asset is no longer
so listed or admitted to trading or the date of such termination, as applicable (the “termination date”), the notes will be
deemed to be linked to the common shares of the underlying company, and the calculation agent will determine the payment at maturity by
reference to such common shares. Under such circumstances, the calculation agent may modify any terms of the notes as it deems necessary,
in its sole discretion, to ensure an equitable result. On and after the termination date, for all purposes, including the determination
of the Final Level, the closing level of the underlying company’s common shares on their primary exchange will be converted to U.S.
dollars using such exchange rate as the calculation agent, in its sole discretion, determines to be commercially reasonable.
Adjustments to an ETF
If an ETF is de-listed from the relevant exchange,
liquidated or otherwise terminated, the calculation agent will substitute an ETF that the calculation agent determines, in its sole discretion,
is comparable to the discontinued fund (such fund being referred to herein as a “successor ETF”). If the ETF (or a successor
ETF) is de-listed, liquidated or otherwise terminated and the calculation agent determines that no successor fund is available, then the
calculation agent will, in its sole discretion, calculate the appropriate closing level of one share of the ETF by a computation methodology
that the calculation agent determines will as closely as reasonably possible replicate the ETF. If a successor ETF is selected or the
calculation agent calculates the closing level by a computation methodology that the calculation agent determines will as closely as reasonably
possible replicate the ETF, that successor ETF or computation methodology will be substituted for the ETF (or such successor ETF) for
all purposes of the notes.
If the calculation agent determines that no substitute
ETF comparable to the original ETF, or no appropriate computation methodology exists, then the calculation agent will deem the closing
level of the original ETF on the trading day immediately prior to its delisting, liquidation or other termination to be the closing level
of the original ETF on every remaining trading day to, and including, the final Valuation Date.
The calculation agent also may determine that no
adjustment is required under this subsection by the modification of the method of calculation.
The calculation agent will be solely responsible
for the method of calculating the closing level of one share of the ETF (or any successor ETF) and of any related determinations and calculations,
and its related determinations and calculations will be conclusive in the absence of manifest error.
Adjustments Relating to Notes Linked to a Basket
If the calculation agent substitutes a successor
Reference Asset, or otherwise affects or modifies a Basket Component, then the calculation agent will make those calculations and adjustments
as, in judgment of the calculation agent, may be necessary in order to arrive at a basket comparable to the original Basket (including
without limitation changing the percentage weights of the Basket Components), as if those changes or modifications had not been made,
and will calculate the payment at maturity with reference to that basket or the successor basket (as described below), as adjusted.
In this event, the calculation agent will provide
written notice to the trustee of these calculations and adjustments, and the trustee will furnish written notice thereof to each noteholder,
or in the case of global notes, the depositary, as holder of the global notes.
In the event of the adjustment described above,
the newly composed basket is referred to in this section as the “successor basket” and will be used as a substitute for the
original Basket for all purposes.
If the calculation agent determines that the available
successor basket or basket components as described above do not fairly represent the value of the original Basket or Basket Components,
as the case may be, then the calculation agent will determine the level of the applicable Basket Components or the Basket level for any
Valuation Date as described in this product supplement.
Notwithstanding these alternative arrangements,
discontinuance of trading on the applicable exchanges or markets in any Basket Component may adversely affect the market value of the
notes.
Events of Default
Unless otherwise specified in the applicable pricing
supplement, in case an event of default with respect to the notes shall have occurred and be continuing, the amount declared due and payable
on the notes upon any acceleration of the notes will be determined by the calculation agent and will be an amount of cash equal to the
amount payable as described under the caption “—Payment at Maturity,” calculated as if the date of acceleration were
the Valuation Date or the final Valuation Date, as applicable, together with accrued and unpaid interest (if applicable to your notes)
through the date of acceleration.
If the maturity of the notes is accelerated because
of an event of default, we will, or will cause the calculation agent to, provide written notice to the trustee at its New York office,
on which notice the trustee may conclusively rely, and to the depositary, of the amount due with respect to the notes as promptly as possible
and in no event later than two business days after the date of acceleration.
Role of Calculation Agent
The calculation agent will make all determinations
regarding the level of the Reference Asset, business days, market disruption events, the default amount, and the amount payable on your
notes. Absent manifest error, all determinations of the calculation agent will be final and binding on you and us, without any liability
on the part of the calculation agent. You will not be entitled to any compensation from us for any loss suffered as a result of any of
the above determinations or confirmations by the calculation agent.
Please note that our affiliate, BMO Capital Markets
Corp., is expected to serve as the calculation agent for the notes. We may change the calculation agent for your notes at any time after
the date of this product supplement without notice and BMO Capital Markets Corp. may resign as calculation agent at any time upon 60 days
written notice to us.
Listing
Your notes will not be listed on any securities
exchange.
Supplemental U.S. Federal Income Tax Considerations
The following is a general description of certain
U.S. tax considerations relating to the notes. It does not purport to be a complete analysis of all tax considerations relating to the
notes. Prospective purchasers of the notes should consult their tax advisors as to the consequences under the tax laws of the country
of which they are resident for tax purposes and the tax laws of Canada and the United States of acquiring, holding and disposing of the
notes and receiving payments under the notes. This summary is based upon the law as in effect on the date of this product supplement and
is subject to any change in law that may take effect after such date.
The following disclosure has been prepared without
regard to any particular note that you may purchase in the future and, therefore, is provided solely as a matter of general information.
You should not rely upon the following disclosure, or the disclosure under “United States Federal Income Taxation” in the
prospectus or “Certain Income Tax Consequences—United States Federal Income Taxation” in the prospectus supplement,
with regard to an investment in any particular note because this disclosure does not take into account the terms of any particular note
or the tax consequences of investing in or holding any particular note unless the pricing supplement applicable to your notes indicates
that you may rely on the following disclosure. Any note that you purchase may have terms that would result in a tax treatment that is
significantly different from the treatment described below.
Consequently, any tax disclosure relevant to any
note you may purchase will be set forth only in the pricing supplement relating to your note, and, unless the pricing supplement indicates
otherwise, you should not rely on the tax disclosure below or in the prospectus supplement or prospectus in deciding whether to invest
in any note. Moreover, in all cases, you should consult with your own tax advisor concerning the consequences of investing in and holding
any particular note.
The following section supplements the discussion
of U.S. federal income taxation in the accompanying prospectus and prospectus supplement with respect to United States holders (as defined
in the accompanying prospectus). It applies only to those holders who are not excluded from the discussion of U.S. federal income taxation
in the accompanying prospectus. In addition to such exclusions, this discussion does not apply to holders subject to special rules under
Section 451(b) of the Code.
You should consult your tax advisor concerning
the U.S. federal income tax and other tax consequences of your investment in the notes in your particular circumstances, including the
application of state, local or other tax laws and the possible effects of changes in federal or other tax laws.
NO STATUTORY,
JUDICIAL OR ADMINISTRATIVE AUTHORITY DIRECTLY DISCUSSES HOW THE NOTES SHOULD BE TREATED FOR U.S. FEDERAL INCOME TAX PURPOSES. AS
A RESULT, THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES ARE UNCERTAIN. BECAUSE OF THE UNCERTAINTY, YOU SHOULD
CONSULT YOUR TAX ADVISOR IN DETERMINING THE U.S. FEDERAL INCOME TAX AND OTHER TAX CONSEQUENCES OF YOUR INVESTMENT IN THE NOTES, INCLUDING
THE APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
We will not attempt to ascertain whether any Reference
Asset or any of the entities whose stock is held by or included in any Reference Asset would be treated as a “passive foreign investment
company” within the meaning of Section 1297 of the Code or a “U.S. real property holding corporation” within the meaning
of Section 897 of the Code. If any Reference Asset or any of the entities whose stock is held by or included in any Reference Asset were
so treated, certain adverse U.S. federal income tax consequences could possibly apply. You should refer to any available information filed
with the SEC and other authorities by any Reference Asset and the entities whose stock is held by or included in any Reference Asset,
as applicable, and consult your tax advisor regarding the possible consequences to you in this regard.
Notes Treated as Indebtedness
We may treat certain offerings of notes as indebtedness for U.S. federal income tax purposes.
The applicable pricing supplement will indicate whether we intend to treat a note as indebtedness for U.S. federal income tax purposes.
To the extent we treat a note as indebtedness for U.S. federal income tax purposes, the U.S. federal income tax treatment of your notes
will depend on whether (i) the term of your notes exceeds one year, or (ii) the term of your notes will not exceed one year without regard
to the effect of an extension in the event of a market disruption event. Accordingly, we set forth a separate subsection for each of the
situations described in the previous sentence. In addition, the following discussion assumes that your notes (i) are purchased for an
amount equal to their issue price, as determined for U.S. federal income tax purposes, (ii) pay a minimum amount at maturity that is equal
to the principal amount, (iii) are denominated in U.S. dollars, and (iv) will not pay you interest during the term of the notes. The relevant
pricing supplement will discuss the tax consequences if the minimum payment on your notes is less than 100% of the principal amount, your
notes are not denominated in U.S. dollars, or your notes pay you interest during the term of the notes. Unless otherwise specified in
the relevant pricing supplement, Bank of Montreal intends to treat any interest with respect to the notes, as determined for U.S. federal
income tax purposes, as from sources within the United States.
Where the Term of the Notes Exceeds
One Year
Where the term of the notes exceeds one year, we intend to treat the notes as subject to the
special tax rules governing contingent payment debt instruments for U.S. federal income tax purposes. Under those rules, the amount of
interest you are required to take into account for each accrual period will be determined by constructing a projected payment schedule
for the notes, and applying the rules similar to those for accruing original issue discount on a hypothetical noncontingent debt instrument
with that projected payment schedule. This method is applied by first determining the yield at which we would issue a noncontingent fixed
rate debt instrument with terms and conditions similar to the notes (the “comparable yield”) and then determining a payment
schedule as of the issue date that would produce the comparable yield. A projected payment schedule with respect to a note generally
is a series of projected payments, the amount and timing of which would produce a yield to maturity on that note equal to the comparable
yield. This projected payment schedule will consist of the principal amount, any noncontingent payments provided under the terms of the
note, and a projection for tax purposes of each contingent payment. These rules generally will have the effect of requiring you to include
amounts as income in respect of the notes prior to your receipt of cash attributable to that income. If the notes provide for an automatic
redemption, it is not entirely clear how, under the Treasury regulations, the maturity date for debt instruments such as the notes should
be determined for purposes of computing the comparable yield and projected payment schedule. It would be reasonable, however, to compute
the comparable yield and projected payment schedule for your note based on the assumption that your note will remain outstanding until
the stated maturity date and the projected contingent payment will be made at that time, and we intend to make the computation in this
manner.
The amount of interest that you will be required
to include in income during each accrual period for the notes will equal the product of the adjusted issue price for the notes at the
beginning of the accrual period and the comparable yield for the notes for such period. The adjusted issue price of the notes will equal
the notes’ original offering price plus any interest deemed to be accrued on the notes (under the rules governing contingent payment
debt instruments) and decreased by the projected amount of any payments previously made on the notes.
To obtain the comparable yield and projected payment
schedule for your particular note, you should contact the Managing Director at the US Retail Investor Solutions Group via email at investor.solutions@bmo.com
or via mail at BMO Capital Markets US Retail Investor Solutions Group 151 West 42nd Street, New York, New York 10036. You are required
to use such comparable yield and projected payment schedule in determining your interest accruals in respect of your notes, unless you
timely disclose and justify on your federal income tax return the use of a different comparable yield and projected payment schedule.
The comparable yield and projected payment schedule
are not provided to you for any purpose other than the determination of your interest accruals in respect of the notes, and we make no
representations regarding the amount of contingent payments with respect to the notes.
If the contingent payment on the notes becomes
fixed on a day that is more than six months before the payment is due, applicable Treasury regulations provide that you should make adjustments
to the prior and future interest inclusions in respect of your notes over the remaining term for the notes in a reasonable manner. You
should consult your tax advisor as to what would be a “reasonable manner” in your particular situation.
You will recognize gain or loss on the sale, automatic
redemption or maturity of the notes in an amount equal to the difference, if any, between the amount of cash you receive at such time
and your adjusted basis in the notes. In general, your adjusted basis in the notes will equal the amount you paid for the notes, increased
by the amount of interest you previously accrued with respect to the notes (in accordance with the comparable yield for the notes), and
decreased by the projected amount of any payments previously made on your notes.
Any gain you recognize on the sale, automatic redemption
or maturity of the notes will be ordinary interest income. Any loss you recognize at such time will be ordinary loss to the extent of
interest you included as income in the current or previous taxable years in respect of the notes, and thereafter, capital loss. The deductibility
of capital losses is limited.
Where the Term of the Notes Will Not Exceed One Year Without
Regard to the Effect of an Extension in the Event of a Market Disruption Event
Where the term of the notes will not
exceed one year, we intend to treat such notes as contingent debt instruments with a term of one year or less. There are no specific rules
that govern contingent short-term debt. However, it is likely that the notes should be subject to the general rules that are applicable
to short-term debt as described under the heading “United States Federal Income Taxation—Tax Consequences to Holders of Our
Debt Securities—Original Issue Discount—Short-Term Debt Securities” in the accompanying prospectus. For purposes of
applying such rules, amounts should not be treated as having accrued on the notes until a holder is entitled to a fixed minimum positive
return.
If the term of your notes may exceed
one year in the event of a market disruption event, your notes may be treated as notes with a term in excess of one year. In such case,
your notes would be subject to the rules described under “—Where the Term of the Notes Exceeds One Year” above.
Notes Treated as Pre-Paid Derivative Contracts
We may treat certain offerings of notes as pre-paid
derivative contracts for U.S. federal income tax purposes. The applicable pricing supplement will indicate whether we intend to treat
a note as a pre-paid derivative contract for U.S. federal income tax purposes.
The following tax disclosure in this section assumes
that (i) any Reference Asset that is an equity security or shares of an exchange traded fund will be traded on a public exchange and is
not an interest in a “United States real property holding corporation” (as such term is defined in the Code); (ii) no periodic
payments of interest will be made on the notes; (iii) there is a significant possibility of a significant loss of principal on an investment
in the notes; (iv) initial purchasers will acquire the notes for an amount equal to their principal amount; and (v) there is a reasonable
likelihood that the Final Level will be greater than or equal to the Initial Level.
If the notes are properly treated as pre-paid derivative
contracts for U.S. federal income tax purposes, subject to the discussion below concerning the potential application of the “constructive
ownership” rules under Section 1260 of the Code, a United States holder should generally recognize capital gain or loss upon the
sale, automatic redemption or maturity of the notes in an amount equal to the difference between the amount a United States holder receives
at such time and the United States holder’s tax basis in the notes. In general, a United States holder’s tax basis in the
notes will be equal to the price the holder paid for the notes. Capital gain recognized by an individual United States holder is generally
taxed at preferential rates where the property is held for more than one year and is generally taxed at ordinary income rates where the
property is held for one year or less. The deductibility of capital losses is subject to limitations. The holding period for notes of
a United States holder who acquires the notes upon issuance will generally begin on the date after the issue date (i.e., the settlement
date) of the notes. If the notes are held by the same United States holder until maturity, that holder’s holding period will generally
include the Maturity Date. It is possible that the Internal Revenue Service could assert that a United States holder’s holding period
in respect of the notes should end on the date on which the amount the holder is entitled to receive upon the maturity of the notes is
determined, even though the holder will not receive any amounts from us in respect of the notes prior to the maturity of the notes. In
such case, a United States holder may be treated as having a holding period in respect of the notes that is one year or less even if the
holder receives cash upon maturity of the notes at a time that is more than one year after the beginning of its holding period.
Potential Application of Section 1260
of the Code
To the extent that a Reference Asset is the type
of financial asset described under Section 1260 of the Code (including, among others, any equity interest in pass-thru entities such as
ETFs, regulated investment companies, real estate investment trusts, partnerships, and passive foreign investment companies, each a “Section
1260 Financial Asset”), while the matter is not entirely clear, unless otherwise specified in the applicable pricing supplement,
there exists a substantial risk that an investment in a note is, in whole or in part, a “constructive ownership transaction”
to which Section 1260 of the Code applies. If Section 1260 of the Code applies, all or a portion of any long-term capital gain recognized
by a United States holder in respect of a note will be recharacterized as ordinary income (the “Excess Gain”). In addition,
an interest charge will also apply to any deemed underpayment of tax in respect of any Excess Gain to the extent such gain would have
resulted in gross income inclusion for the United States holder in taxable years prior to the taxable year of the sale, exchange, automatic
redemption or settlement (assuming such income accrued at a constant rate equal to the applicable federal rate as of the date of sale,
exchange, automatic redemption or settlement).
If an investment in a note is treated as a constructive
ownership transaction, it is not clear to what extent any long-term capital gain of a United States holder in respect of the note will
be recharacterized as ordinary income. It is possible, for example, that the amount of the Excess Gain (if any) that would be recharacterized
as ordinary income in respect of the note will equal the excess of (i) any long-term capital gain recognized by the United States holder
in respect of the note and attributable to Section 1260 Financial Assets, over (ii) the “net underlying long-term capital gain”
(as defined in Section 1260 of the Code) such United States holder would have had if such United States holder had acquired an amount
of the corresponding Section 1260 Financial Assets at fair market value on the original issue date for an amount equal to the portion
of the issue price of the note attributable to the corresponding Section 1260 Financial Assets and sold such amount of Section 1260 Financial
Assets upon the date of sale, exchange, automatic redemption or settlement of the note at fair market value (and appropriately taking
into account any leveraged upside exposure). To the extent any gain is treated as long-term capital gain after application of the recharacterization
rules of Section 1260 of the Code, such gain would be subject to U.S. federal income tax at the rates that would have been applicable
to the net underlying long-term capital gain. United States holders should consult their tax advisors regarding the potential application
of Section 1260 of the Code to an investment in the note.
Under Section 1260 of the Code, there is a presumption
that the net underlying long-term capital gain is zero (with the result that the recharacterization and interest charge described above
would apply to all of the gain from the notes that otherwise would have been long-term capital gain), unless the contrary is demonstrated
by clear and convincing evidence. Holders will be responsible for obtaining information necessary to determine the net underlying long-term
capital gain with respect to the corresponding Section 1260 Financial Assets, as we do not intend to supply holders with such information.
Holders should consult with their tax advisor regarding the application of the constructive ownership transaction to their notes and the
calculations necessary to comply with Section 1260 of the Code.
Alternative Treatments
Alternative tax treatments of the notes are also
possible and the Internal Revenue Service might assert that a treatment other than that described above is more appropriate. For example,
it would be possible to treat the notes, and the Internal Revenue Service might assert that the notes should be treated, as a single debt
instrument. If the notes have a term that exceeds one year, such a debt instrument would be subject to the special tax rules governing
contingent payment debt instruments, as described above under “—Notes Treated as Indebtedness—Where the Term of the
Notes Exceeds One Year.” If the notes are treated as a single debt instrument that has a term of no more than one year, the notes
would be treated as a single contingent short-term debt instrument, which would also result in tax consequences that are different from
those described above.
If the Reference Asset or a Basket Component periodically
rebalances, it is possible that the notes could be treated as a series of pre-paid derivative contracts, each of which matures on the
next rebalancing date. If the notes were properly characterized in such a manner, a United States holder would be treated as disposing
of the notes on each rebalancing date in return for new pre-paid derivative contracts that mature on the next rebalancing date, and a
holder would accordingly likely recognize capital gain or loss on each rebalancing date equal to the difference between the holder’s
basis in the notes (which would be adjusted to take into account any prior recognition of gain or loss) and the fair market value of the
notes on such date.
Because of the absence of authority regarding the
appropriate tax characterization of the notes, it is also possible that the Internal Revenue Service could seek to characterize the notes
in a manner that results in tax consequences that are different from those described above. For example, the Internal Revenue Service
could possibly assert that any gain or loss that a holder may recognize upon the sale, automatic redemption or maturity of the notes should
be treated as ordinary gain or loss.
The Internal Revenue Service has released a notice
that may affect the taxation of holders of the notes. According to the notice, the Internal Revenue Service and the U.S. Treasury Department
are actively considering whether the holder of an instrument such as the notes should be required to accrue ordinary income on a current
basis, and they sought taxpayer comments on the subject. It is not possible to determine what guidance they will ultimately issue, if
any. It is possible, however, that under such guidance, holders of the notes will ultimately be required to accrue income currently and
this could be applied on a retroactive basis. The Internal Revenue Service and the U.S. Treasury Department are also considering other
relevant issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital and whether
the special “constructive ownership rules” of Section 1260 of the Code might be applied to such instruments. Holders are urged
to consult their tax advisors concerning the significance, and the potential impact, of the above considerations. Unless stated otherwise
in the relevant pricing supplement, we intend to treat the notes for U.S. federal income tax purposes in accordance with the treatment
described in this product supplement unless and until such time as the U.S. Treasury Department and Internal Revenue Service determine
that some other treatment is more appropriate.
Non-United States Holders
The following discussion applies to non-United
States holders of the notes. A non-United States holder is a beneficial owner of a note that, for U.S. federal income tax purposes, is
a non-resident alien individual, a foreign corporation, or a foreign estate or trust.
Except as discussed below, and in the case of notes
treated as indebtedness for U.S. federal income tax purposes, subject to generally applicable exceptions set forth in the rules exempting
“portfolio interest” from U.S. withholding tax, a non-United States holder will generally not be subject to U.S. federal income
or withholding tax for amounts paid in respect of the notes, provided that (i) the holder complies with any applicable certification requirements,
(ii) the payment is not effectively connected with the conduct by the holder of a U.S. trade or business, and (iii) if the holder is a
non-resident alien individual, such holder is not present in the United States for 183 days or more during the taxable year of the sale,
automatic redemption or maturity of the notes. In the case of (ii) above, the holder generally would be subject to U.S. federal income
tax with respect to any income or gain in the same manner as if the holder were a United States holder and, in the case of a holder that
is a corporation, the holder may also be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable U.S.
income tax treaty) of a portion of its earnings and profits for the taxable year that are effectively connected with its conduct of a
trade or business in the United States, subject to certain adjustments.
As discussed above, alternative characterizations
of the notes for U.S. federal income tax purposes are possible. Should an alternative characterization, by reason of change or clarification
of the law, by regulation or otherwise, cause payments as to the notes to become subject to withholding tax, we will withhold tax at the
applicable statutory rate. The Internal Revenue Service has also indicated that it is considering whether income in respect of instruments
such as the notes should be subject to withholding tax. Prospective investors should consult their own tax advisors in this regard.
A “dividend equivalent” payment is
treated as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding tax
if paid to a non-United States 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 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, Internal
Revenue Service guidance provides 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. Except as otherwise set forth in any applicable pricing supplement, we expect
that the delta of a note with terms described in this product supplement with respect to the Reference Assets will not be one, and therefore,
we expect non-United States holders should not be subject to withholding on dividend equivalent payments, if any, under a note described
in this product supplement issued before January 1, 2025. However, it is possible that notes issued before January 1, 2025 could be treated
as deemed reissued for U.S. federal income tax purposes upon the occurrence of certain events affecting a Reference Asset or the notes,
and following such occurrence, such notes could be treated as subject to withholding on dividend equivalent payments. Non-United States
holders that enter, or have entered, into other transactions in respect of a Reference Asset or the notes should consult their tax advisors
as to the application of the dividend equivalent withholding tax in the context of the notes and their other transactions. If any payments
are treated as dividend equivalents subject to withholding, we (or the applicable paying agent) would be entitled to withhold taxes without
being required to pay any additional amounts with respect to amounts so withheld.
Backup Withholding and Information Reporting
Please see the discussion under “United States
Federal Income Taxation—Other Considerations—Backup Withholding and Information Reporting” in the accompanying prospectus
for a description of the applicability of the backup withholding and information reporting rules to payments made on your notes.
In the case of a non-United States holder, backup
withholding and information reporting will not apply to payments made if the non-United States holder provides the required certification
that it is not a United States person, or the non-United States holder otherwise establishes an exemption, provided that the payor or
withholding agent does not have actual knowledge or reason to know that the holder is a United States person, or that the conditions of
any exemption are not satisfied.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act imposes
a 30% U.S. withholding tax on certain U.S. source payments, including interest (and OID), dividends, other fixed or determinable annual
or periodical gain, profits, and income, and on the gross proceeds from a disposition of property of a type which can produce U.S. source
interest or dividends (“Withholdable Payments”), if paid to a foreign financial institution (including amounts paid to a foreign
financial institution on behalf of a holder), unless such institution enters into an agreement with the U.S. Treasury Department to collect
and provide to the U.S. Treasury Department substantial information regarding U.S. account holders, including certain account holders
that are foreign entities with U.S. owners, with such institution. The legislation also generally imposes a withholding tax of 30% on
Withholdable Payments made to a non-financial foreign entity unless such entity provides the withholding agent with a certification that
it does not have any substantial U.S. owners or a certification identifying the direct and indirect substantial U.S. owners of the entity.
Proposed regulations eliminate the requirement
of withholding on gross proceeds from the sale or disposition of financial instruments. The U.S. Treasury Department has indicated that
taxpayers may rely on these proposed regulations pending their finalization. If we (or an applicable withholding agent) determine withholding
is appropriate with respect to the notes, we (or such agent) will withhold tax at the applicable statutory rate, and we will not pay any
additional amounts in respect of such withholding. Account holders subject to information reporting requirements pursuant to the Foreign
Account Tax Compliance Act may include holders of the notes. Foreign financial institutions and non-financial foreign entities located
in jurisdictions that have an intergovernmental agreement with the United States governing the Foreign Account Tax Compliance Act may
be subject to different rules. Holders are urged to consult with their own tax advisors regarding the possible implications of this legislation
on their investment in the notes.
CERTAIN
CONSIDERATIONS FOR ERISA AND OTHER U.S. EMPLOYEE BENEFIT PLANS
Subject to the following discussion, the notes may
be purchased by an “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”), subject to Title I of ERISA, a plan or account subject to Section 4975 of the Internal Revenue Code
of 1986, as amended (the “Code”), an entity whose underlying assets include the assets of any of the foregoing (each of the
foregoing, a “Benefit Plan Investor”), or any other plan which is subject to any federal, state, local or other law that is
substantially similar to the fiduciary responsibility and prohibited transaction provisions of ERISA or Section 4975 of the Code (“Similar
Law”). A fiduciary of a Benefit Plan Investor subject to ERISA, should consider the fiduciary standards of ERISA in the context
of the plan’s particular circumstances before authorizing an investment in the notes. Among other factors, the fiduciary should
consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the
documents and instruments governing the plan, and whether the investment would involve a prohibited transaction under ERISA or the Code.
Section 406 of ERISA and Section 4975 of the Code
prohibit Benefit Plan Investors, from engaging in certain transactions involving “plan assets” with persons who are “parties
in interest” under ERISA or “disqualified persons” under the Code with respect to the Benefit Plan Investors. A violation
of these prohibited transaction rules may result in excise tax or other liabilities under ERISA or the Code for those persons, unless
exemptive relief is available under an applicable statutory, regulatory or administrative exemption. Employee benefit plans that are governmental
plans (as defined in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are not subject to the requirements
of Section 406 of ERISA or Section 4975 of the Code but may be subject to Similar Law.
The acquisition of notes by Benefit Plan Investor
with respect to which we or certain of our affiliates is or becomes a party in interest or disqualified person may result in a prohibited
transaction under ERISA or Section 4975 of the Code, unless the notes are acquired pursuant to an applicable exemption. The U.S. Department
of Labor has issued five prohibited transaction class exemptions, or “PTCEs”, that may provide exemptive relief if required
for direct or indirect prohibited transactions that may arise from the purchase or holding of notes. These exemptions are PTCE 84-14 (for
certain transactions determined by independent qualified professional asset managers), PTCE 90-1 (for certain transactions involving insurance
company pooled separate accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 95-60 (for transactions
involving certain insurance company general accounts), and PTCE 96-23 (for transactions managed by in-house asset managers). In addition,
ERISA Section 408(b)(17) and Section 4975(d)(20) of the Code provide an exemption for certain transactions between a Benefit Plan Investor
and persons who are parties in interest or disqualified persons solely by reason of providing services to the Benefit Plan Investor or
being affiliated with such service providers. There can be no assurance that these or any other exemption will be available with respect
to any particular transaction involving the notes, or that, if an exemption is available, it will cover all aspects of any particular
transaction.
Because we or our affiliates may be considered to
be a party in interest with respect to many plans, the notes may not be purchased, held or disposed of by any plan, unless such purchase,
holding or disposition is eligible for exemptive relief, including relief available under PTCE 96-23, 95-60, 91-38, 90-1, or 84-14 or
the service provider exemption, or any other applicable exemption. Except as otherwise set forth in any applicable pricing supplement,
by its purchase of any notes, each purchaser (whether in the case of the initial purchase or in the case of a subsequent transferee) will
be deemed to have represented and agreed by its purchase and holding of the notes offered hereby that either (i) it is not and it is not
acquiring the notes on behalf of, or with the assets of a Benefit Plan Investor or any other plan that is subject to Similar Law, or (ii)
its purchase, holding and disposition of the notes will not, in the case of a Benefit Plan Investor, result in a nonexempt prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code because an exemption is available with respect to such transactions
and all the conditions of such exemption have been satisfied (or, in the case of any other plan, result in a violation of Similar Law).
Supplemental
Plan of Distribution
With respect to each note to be issued, we will
agree to sell to BMO Capital Markets Corp., and BMO Capital Markets Corp. will agree to purchase from us, the principal amount of the
note specified, at the price specified in the applicable pricing supplement, less the indicated underwriting commission. BMO Capital Markets
Corp. may also resell the notes to other brokers or dealers in connection with any offering. BMO Capital Markets Corp. or another of our
affiliates may repurchase and resell outstanding notes in market-making transactions, with resales being made at prices related to prevailing
market prices at the time of resale or at negotiated prices. For more information about the plan of distribution, the distribution agreement
and possible market-making activities see “Supplemental Plan of Distribution” in the accompanying prospectus supplement.
The notes are not intended
to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor
in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a
retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); (ii) a customer within
the meaning of Directive (EU) 2016/97 (as amended), where that customer would not qualify as a professional client as defined in point
(10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (as amended). Consequently,
no key information document required by Regulation (EU) No 1286/2014 (as amended, the “EU PRIIPs Regulation”) for offering
or selling the notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling
the notes or otherwise making them available to any retail investor in the EEA may be unlawful under the EU PRIIPs Regulation.
The notes are not intended
to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor
in the United Kingdom (the “UK”). For these purposes, a retail investor in the UK means a person who is one (or more) of:
(i) a retail client as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of
the European Union (Withdrawal) Act 2018 (as amended, the “EUWA”); (ii) a customer within the meaning of the provisions of
the Financial Services and Markets Act 2000 (as amended, the “FSMA”) and any rules or regulations made under the FSMA to
implement Directive (EU) 2016/97 (as amended), where that customer would not qualify as a professional client, as defined in point (8)
of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of UK domestic law by virtue of the EUWA; or (iii) not a qualified investor
as defined in Article 2 of Regulation (EU) 2017/1129 (as amended) as it forms part of UK domestic law by virtue of the EUWA. Consequently,
no key information document required by the EU PRIIPs Regulation as it forms part of UK domestic law by virtue of the EUWA (the “UK
PRIIPs Regulation”) for offering or selling the notes or otherwise making them available to retail investors in the UK has been
prepared and therefore offering or selling the notes or otherwise making them available to any retail investor in the UK may be unlawful
under the UK PRIIPs Regulation.
PS-39