On the date hereof, based on the terms set forth above, the estimated
initial value of the notes is $939.73 per $1,000 in principal amount. However, as discussed in more detail below, the actual value of
the notes at any time will reflect many factors and cannot be predicted with accuracy.
Key Terms of the Notes:
Reference Asset: |
The Russell 2000® Index (ticker symbol "RTY") . See "The Reference Asset" below for additional information. |
|
|
Automatic Redemption: |
On October 5, 2023, if the closing level of the Reference Asset is greater than its Call Level, the notes will be automatically redeemed. No further amounts will be owed to you under the Notes and you will not participate in any positive performance of the Reference Asset. |
|
|
Payment upon Automatic
Redemption: |
If the notes are automatically redeemed, then, on the corresponding Call Settlement Date, investors will receive their principal amount plus the applicable Call Amount. |
Observation Dates, Call Settlement |
Observation Dates |
Call Amounts (per Note) |
Potential Call Settlement Dates |
Date and Call Amounts:1,2 |
October 5, 2023 |
$135.00 |
October 10, 2023 |
|
The Call Amount represents a return of 13.50% per annum. |
Payment at Maturity: |
If the notes are not automatically redeemed, the payment at maturity for the notes
is based on the performance of the Reference Asset:
If the Final Level of the Reference Asset is greater than its Initial Level, then
the amount that investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
$1,000 + [$1,000 x (Percentage Change of the Reference Asset x
Upside Leverage Factor)]
If the Final Level of the Reference Asset is less than its Initial Level, but is not
less than its Barrier Level, then investors will, for each $1,000 in principal amount of the notes, receive the principal amount of $1,000
and no additional return.
If the Final Level of the Reference Asset is less than its Barrier Level, then the
amount that investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
$1,000 + ($1,000 x Percentage Change of the Reference Asset)
In this case, investors will lose 1% of their principal for each 1% that the Final
Level of the Reference Asset declines from its Initial Level. You may lose all of the principal amount of your notes. |
|
|
Upside Leverage Factor: |
150.00% |
|
|
Percentage Change: |
The quotient, expressed as a percentage, of the following formula:
(Final Level - Initial Level)
Initial Level |
|
|
Initial Level:2 |
1,715.243 with respect to RTY, which was the closing level of the Reference Asset on the Pricing Date. |
|
|
Call Level: |
100.00% of the Initial Level. |
|
|
Barrier Level:2 |
1,200.670 with respect to RTY, which is 70.00% of the Initial Level (rounded to three decimal places). |
|
|
Final Level: |
The closing level of the Reference Asset on the Valuation Date. |
|
|
Pricing Date: |
September 28, 2022 |
|
|
Settlement Date: |
October 03, 2022 |
|
|
Valuation Date:1 |
September 30, 2025 |
|
|
Maturity Date:1 |
October 03, 2025 |
|
|
Calculation Agent: |
BMOCM |
|
|
Selling Agent: |
BMOCM |
1 Subject to the occurrence of a market disruption event, as described
in the accompanying product supplement.
2As determined by the calculation agent and subject to adjustment in certain
circumstances. See “General Terms of the Notes — Adjustments to a Reference Asset that Is an Index” in the product supplement
for additional information.
Payoff Example
The following table shows the hypothetical payout profile of an
investment in the notes assuming the notes are not automatically redeemed, based on various hypothetical Final Levels (and the corresponding
Percentage Change) of the Reference Asset, reflecting the 150.00% Upside Leverage Factor and Barrier Level of 70.00% of the Initial Level.
Please see “Examples of the Hypothetical Payment at Maturity for a $1,000 Investment in the Notes” below for more detailed
examples. If the Notes are automatically redeemed, investors will receive their principal amount plus the applicable Call Amount. After
the notes are redeemed, investors will not receive any additional payments in respect of the notes and will not participate in any positive
performance of the Reference Asset.
Hypothetical Percentage Change
of the Reference Asset
|
Participation in Percentage
Change |
Hypothetical Return of the
Notes |
20%
10%
|
150% Upside Exposure
|
30%
15% |
0%
-30%
|
Barrier Level of 70% of Initial Level
|
0%
0% |
-40%
-50%
|
1x Loss Beyond Barrier Level
|
-40%
-50% |
Additional Terms of the Notes
You should read this document together with the product supplement
dated July 22, 2022, the prospectus supplement dated May 26, 2022 and the prospectus dated May 26, 2022. This document, together with
the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well
as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation,
sample structures, fact sheets, brochures or other educational materials of ours or the agent. You should carefully consider, among
other things, the matters set forth in Additional Risk Factors Relating to the Notes in the product supplement, as the notes involve risks
not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before
you invest in the notes.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Product supplement dated July 22, 2022:
https://www.sec.gov/Archives/edgar/data/927971/000121465922009101/b721223424b2.htm
Prospectus supplement dated May 26, 2022 and prospectus dated May 26, 2022:
https://www.sec.gov/Archives/edgar/data/0000927971/000119312522160519/d269549d424b5.htm
Our Central Index Key, or CIK, on the SEC website is 927971. As
used in this document, "we", "us" or "our" refers to Bank of Montreal.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing
in the notes is not equivalent to investing directly in the Reference Asset. These risks are explained in more detail in the “Additional
Risk Factors Relating to the Notes” section of the product supplement.
Risks Related to the Structure or Features of the Notes
| · | Your investment in the notes may result in a loss. — The notes do not guarantee any return of principal. If the notes
are not automatically redeemed and the Final Level is less than its Barrier Level, you will lose 1% of the principal amount for each 1%
that the Final Level is less than the Initial Level. In such a case, you will receive at maturity a cash payment that is less than the
principal amount of the notes and may be zero. Accordingly, you could lose your entire investment in the notes. |
| · | Your notes are subject to automatic early redemption. — We will redeem the notes if the closing level of the Reference
Asset on any Observation Date is greater than its Call Level. Following an automatic redemption, you may not be able to reinvest your
proceeds in an investment with returns that are comparable to the notes. Furthermore, to the extent you are able to reinvest such proceeds
in an investment with a comparable return for a similar level of risk, you may incur transaction costs such as dealer discounts and hedging
costs built into the price of the new notes. |
| · | If the notes are automatically redeemed, your return on the notes is limited to the potential Call Amount regardless of any increase
in the level of the Reference Asset. — If the notes are automatically redeemed, you will not receive a payment with a value
greater than your principal amount plus the applicable Call Amount, even if the Final Level of the Reference Asset exceeds its Call Level
by a substantial amount. Accordingly, your maximum return on the applicable notes is limited to the potential return represented by the
Call Amount if the notes are automatically redeemed. |
| · | If the notes are not automatically redeemed, your return may be less than if the notes were automatically redeemed and may be negative.
— If the notes are not automatically redeemed, the payment at maturity for the notes is based on the performance of the Reference
Asset over the term of the notes, which may be negative. If the level of the Reference Asset has performed positively over the term of
the notes, your return may still be less than the return represented by the Call Amount. Furthermore, even if the return you receive is
greater than the return represented by the Call Amount, such return may reflect a lower return on a per annum basis. If the notes are
not automatically redeemed and the Final Level is less than its Barrier Level, your return on the notes will be negative. Depending on
the Final level of the Reference Asset, the return you receive at maturity may be less than, and potentially significantly less than,
the return represented by the Call Amount. |
| · | Your return on the notes may be lower than the return on a conventional debt security of comparable maturity. — The
return that you will receive on your notes, which could be negative, may be less than the return you could earn on other investments.
The notes do not provide for interest payments and the payment you receive at maturity, if any, may be less than the principal amount
of the notes. Even if your return on the notes is positive, your return may be less than the return you would earn if you bought a conventional
senior interest bearing debt security of ours with the same maturity or if you invested directly in the Reference Asset. Your investment
may not reflect the full opportunity cost to you when you take into account factors that affect the time value of money. |
Risks Related to the Reference Asset
| · | Owning the notes is not the same as a hypothetical direct investment in the Reference Asset or a security directly linked to the
Reference Asset. — The return on your notes will not reflect the return you would realize if you made a hypothetical direct
investment in the Reference Asset or the underlying securities of the Reference Asset or a security directly linked to the performance
of the Reference Asset or the underlying securities of the Reference Asset and held that investment for a similar period. Your notes may
trade quite differently from the Reference Asset. Changes in the level of the Reference Asset may not result in comparable changes in
the market value of your notes. Even if the levels of the Reference Asset increase during the term of the notes, the market value of the
notes prior to maturity may not increase to the same extent. It is also possible for the market value of the notes to decrease while the
levels of the Reference Asset increase. |
| · | You will not have any shareholder rights and will have no right to receive any shares of any company included in the Reference
Asset at maturity. — Investing in your notes will not make you a holder of any securities included in the Reference Asset.
Neither you nor any other holder or owner of the notes will have any voting rights, any right to receive dividends or other distributions,
or any other rights with respect to such underlying securities. |
| · | We have no affiliation with the index sponsor and will not be responsible for the index sponsor's actions. — The sponsor
of the Reference Asset is not our affiliate and will not be involved in the offering of the notes in any way. Consequently, we have no
control over the actions of the index sponsor, including any actions of the type that would require the calculation agent to adjust the
payment to you at maturity. The index sponsor has no obligation of any sort with respect to the notes. Thus, the index sponsor has no
obligation to take your interests into consideration for any reason, including in taking any actions that might affect the value of the
notes. None of our proceeds from the issuance of the notes will be delivered to the index sponsor. |
| · | You must rely on your own evaluation of the merits of an investment linked to the Reference Asset. — In the ordinary
course of their businesses, our affiliates from time to time may express views on expected movements in the levels of the Reference Asset
or the prices of the securities included in the Reference Asset. One or more of our affiliates have published, and in the future may publish,
research reports that express views on the Reference Asset or these securities. However, these views are subject to change from time to
time. Moreover, other professionals who deal in the markets relating to the Reference Asset at any time may have significantly different
views from those of our affiliates. You are encouraged to derive information concerning the Reference Asset from multiple sources, and
you should not rely on the views expressed by our affiliates. Neither the offering of the notes nor any views which our affiliates from
time to time may express in the ordinary course of their businesses constitutes a recommendation as to the merits of an investment in
the notes. |
Risks Relating to the Russell 2000® Index
| · | An investment in the notes is subject to risks associated in investing in stocks with a small market capitalization. —
The Russell 2000® Index consists of stocks issued by companies with relatively small market capitalizations. These companies often
have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies. As a result, the level
of the Russell 2000® Index may be more volatile than that of a market measure that does not track solely small-capitalization stocks.
Stock prices of small-capitalization companies are also generally more vulnerable than those of large-capitalization companies to adverse
business and economic developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive to many
investors if they do not pay dividends. In addition, small capitalization companies are typically less well-established and less stable
financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss
of those individuals. Small capitalization companies tend to have lower revenues, less diverse product lines, smaller shares of their
target markets, fewer financial resources and fewer competitive strengths than large-capitalization companies. These companies may also
be more susceptible to adverse developments related to their products or services. |
General Risk Factors
| · | Your investment is subject to the credit risk of Bank of Montreal. — Our credit ratings and credit spreads may adversely
affect the market value of the notes. Investors are dependent on our ability to pay any amounts due on the notes, and therefore investors
are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or
increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the notes. |
| · | Potential conflicts. — We and our affiliates play a variety of roles in connection with the issuance of the notes, including
acting as calculation agent. In performing these duties, the economic interests of the calculation agent and other affiliates of ours
are potentially adverse to your interests as an investor in the notes. We or one or more of our affiliates may also engage in trading
of securities included in a Reference Asset on a regular basis as part of our general broker-dealer and other businesses, for proprietary
accounts, for other accounts under management or to facilitate transactions for our customers. Any of these activities could adversely
affect the level of the Reference Asset and, therefore, the market value of, and the payments on, the notes. We or one or more of our
affiliates may also issue or underwrite other securities or financial or derivative instruments with returns linked or related to changes
in the performance of the Reference Asset. By introducing competing products into the marketplace in this manner, we or one or more of
our affiliates could adversely affect the market value of the notes. |
| · | Our initial estimated value of the notes is lower than the price to public. — Our initial estimated value of the notes
is only an estimate, and is based on a number of factors. The price to public of the notes exceeds our initial estimated value, because
costs associated with offering, structuring and hedging the notes are included in the price to public, but are not included in the estimated
value. These costs include any underwriting discount and selling concessions, the profits that we and our affiliates expect to realize
for assuming the risks in hedging our obligations under the notes and the estimated cost of hedging these obligations. |
| · | Our initial estimated value does not represent any future value of the notes, and may also differ from the estimated value of any
other party. — Our initial estimated value of the notes as of the date hereof is derived using our internal pricing models.
This value is based on market conditions and other relevant factors, which include volatility of the Reference Asset, dividend rates and
interest rates. Different pricing models and assumptions could provide values for the notes that are greater than or less than our initial
estimated value. In addition, market conditions and other relevant factors after the Pricing Date are expected to change, possibly rapidly,
and our assumptions may prove to be incorrect. After the Pricing Date, the value of the notes could change dramatically due to changes
in market conditions, our creditworthiness, and the other factors set forth herein and in the product supplement. These changes are likely
to impact the price, if any, at which we or BMOCM would be willing to purchase the notes from you in any secondary market transactions.
Our initial estimated value does not represent a minimum price at which we or our affiliates would be willing to buy your notes in any
secondary market at any time. |
| · | The terms of the notes were not determined by reference to the credit spreads for our conventional fixed-rate debt. —
To determine the terms of the notes, we used an internal funding rate that represents a discount from the credit spreads for our conventional
fixed-rate debt. As a result, the terms of the notes are less favorable to you than if we had used a higher funding rate. |
| · | Certain costs are likely to adversely affect the value of the notes. — Absent any changes in market conditions, any
secondary market prices of the notes will likely be lower than the price to public. This is because any secondary market prices will likely
take into account our then-current market credit spreads, and because any secondary market prices are likely to exclude all or a portion
of any underwriting discount and selling concessions, and the hedging profits and estimated hedging costs that are included in the price
to public of the notes and that may be reflected on your account statements. In addition, any such price is also likely to reflect a discount
to account for costs associated with establishing or unwinding any related hedge transaction, such as dealer discounts, mark-ups and other
transaction costs. As a result, the price, if any, at which BMOCM or any other party may be willing to purchase the notes from you in
secondary market transactions, if at all, will likely be lower than the price to public. Any sale that you make prior to the Maturity
Date could result in a substantial loss to you. |
| · | Lack of liquidity. — The notes will not be listed on any securities exchange. BMOCM may offer to purchase the notes
in the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow
you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which
you may be able to trade the notes is likely to depend on the price, if any, at which BMOCM is willing to buy the notes. |
| · | Hedging and trading activities. — We or any of our affiliates have carried out or may carry out hedging activities related
to the notes, including purchasing or selling shares of securities included in the Reference Asset, futures or options relating to the
Reference Asset or securities included in the Reference Asset or other derivative instruments with return liked or related to changes
in the performance on the Reference Asset or securities included in the Reference Asset. We or our affiliates may also trade in the securities
included in the Reference Asset or instruments related to the Reference Asset or such securities from time to time. Any of these hedging
or trading activities on or prior to the Pricing Date and during the term of the notes could adversely affect the payments on the notes. |
| · | Many economic and market factors will influence the value of the notes. — In addition to the levels of the Reference
Asset and interest rates on any trading day, the value of the notes will be affected by a number of economic and market factors that may
either offset or magnify each other, and which are described in more detail in the product supplement. |
| · | Significant aspects of the tax treatment of the notes are uncertain. — The tax treatment of the notes is uncertain. We
do not plan to request a ruling from the Internal Revenue Service or from any Canadian authorities regarding the tax treatment of the
notes, and the Internal Revenue Service or a court may not agree with the tax treatment described herein. |
The Internal Revenue Service has released a notice that
may affect the taxation of holders of “prepaid forward contracts” and similar instruments. According to the notice, the Internal
Revenue Service and the U.S. Treasury are actively considering whether the holder of such instruments should be required to accrue ordinary
income on a current basis. While it is not clear whether the notes would be viewed as similar to such instruments, it is possible that
any future guidance could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive
effect.
Please read carefully the section entitled "U.S. Federal Tax Information"
herein, the section entitled "Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations" in
the accompanying product supplement, the section entitled "United States Federal Income Taxation" in the accompanying prospectus
and the section entitled "Certain Income Tax Consequences" in the accompanying prospectus supplement. You should consult your
tax advisor about your own tax situation.
Examples of the Hypothetical Payment at Maturity for a $1,000 Investment in the
Notes
The following table illustrates the hypothetical payments on a
note at maturity. The hypothetical payments are based on a $1,000 investment in the note, a hypothetical Initial Level of 100.00, a hypothetical
Barrier Level of 70.00 (70.00% of the hypothetical initial level), a Call Amount of $135.00 per note, a range of hypothetical Final Levels
and the effect on the payment at maturity.
The hypothetical examples shown below are intended to help you
understand the terms of the notes. If the notes are not automatically redeemed, the actual cash amount that you will receive at maturity
will depend upon the Final Level of the Reference Asset. If the notes are automatically redeemed prior to maturity, the hypothetical examples
below will not be relevant, and you will receive on the applicable Call Settlement Date, for each $1,000 principal amount, the principal
amount plus the Call Amount. You may lose some or all of the principal amount at maturity.
Hypothetical Final Level |
Hypothetical Final Level
Expressed as a Percentage of the
Initial Level |
Hypothetical Payment at
Maturity |
Hypothetical Return on the Notes |
200.00 |
200.00% |
$2,500.00 |
150.00% |
180.00 |
180.00% |
$2,200.00 |
120.00% |
160.00 |
160.00% |
$1,900.00 |
90.00% |
140.00 |
140.00% |
$1,600.00 |
60.00% |
120.00 |
120.00% |
$1,300.00 |
30.00% |
100.00 |
100.00% |
$1,000.00 |
0.00% |
95.00 |
95.00% |
$1,000.00 |
0.00% |
80.00 |
80.00% |
$1,000.00 |
0.00% |
70.00 |
70.00% |
$1,000.00 |
0.00% |
69.99 |
69.99% |
$699.90 |
-30.01% |
60.00 |
60.00% |
$600.00 |
-40.00% |
40.00 |
40.00% |
$400.00 |
-60.00% |
20.00 |
20.00% |
$200.00 |
-80.00% |
0.00 |
0.00% |
$0.00 |
-100.00% |
The following examples illustrate how the returns set forth in
the table above are calculated.
Example 1: The level of the Reference Asset decreases from the hypothetical Initial
Level of 100.00 to a hypothetical Final Level of 60.00, representing a Percentage Change of –40.00%. Because the Percentage
Change of the Reference Asset is negative and its hypothetical Final Level is less than its Barrier Level, the investor receives a payment
at maturity of $600.00 per $1,000 in principal amount of the notes, calculated as follows:
$1,000 + [$1,000 x –40.00%] = $600.00
Example 2: The level of the Reference Asset decreases from the hypothetical Initial
Level of 100.00 to a hypothetical Final Level of 95.00, representing a Percentage Change of –5%. Although the Percentage Change
of the Reference Asset is negative, because its hypothetical Final Level is greater than its Barrier Level, the investor receives a payment
at maturity equal to the principal amount of the notes.
Example 3: The level of the of the Reference Asset increases from the hypothetical
Initial Level of 100.00 to a hypothetical Final Level of 120.00, representing a Percentage Change of 20.00%. Because the hypothetical
Final Level of the Reference Asset is greater than its hypothetical Initial Level, the investor receives a payment at maturity of $1,300.00
per $1,000 in principal amount of the notes, calculated as follows:
$1,000 + $1,000 x (20.00% x 150.00%) = $1,300.00
U.S. Federal Tax Information
By purchasing the notes, each holder agrees (in the absence of
a change in law, an administrative determination or a judicial ruling to the contrary) to treat each note as a pre-paid derivative contract
for U.S. federal income tax purposes. In the opinion of our counsel, Mayer Brown LLP, it would generally be reasonable to treat the notes
as pre-paid derivative contracts in respect of the Reference Asset(s) for U.S. federal income tax purposes. However, the U.S. federal
income tax consequences of your investment in the notes are uncertain and the Internal Revenue Service could assert that the notes should
be taxed in a manner that is different from that described in the preceding sentence. Please see the discussion in the product supplement
dated July 22, 2022 under “Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations—Notes
Treated as Pre-Paid Derivative Contracts,” which applies to the notes.
Supplemental Plan of Distribution (Conflicts of Interest)
BMOCM will purchase the notes from us at a purchase price reflecting
the commission set forth on the cover hereof. BMOCM has informed us that, as part of its distribution of the notes, it will reoffer the
notes to other dealers who will sell them. Each such dealer, or each additional dealer engaged by a dealer to whom BMOCM reoffers the
notes, will receive a commission from BMOCM, which will not exceed the commission set forth on the cover page. We or one of our affiliates
will also pay a referral fee to certain dealers of up to 0.95% of the principal amount in connection with the distribution of the notes.
Certain dealers who purchase the notes for sale to certain fee-based
advisory accounts may forego some or all of their selling concessions, fees or commissions. The public offering price for investors purchasing
the notes in these accounts may be less than 100% of the principal amount, as set forth on the cover page of this document. Investors
that hold their notes in these accounts may be charged fees by the investment advisor or manager of that account based on the amount of
assets held in those accounts, including the notes.
We will deliver the notes on a date that is greater than two business
days following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree
otherwise. Accordingly, purchasers who wish to trade the notes more than two business days prior to the issue date will be required to
specify alternative settlement arrangements to prevent a failed settlement.
We own, directly or indirectly, all of the outstanding equity
securities of BMOCM, the agent for this offering. In accordance with FINRA Rule 5121, BMOCM may not make sales in this offering to any
of its discretionary accounts without the prior written approval of the customer.
You should not construe the offering of the notes as a recommendation
of the merits of acquiring an investment linked to the Reference Asset or as to the suitability of an investment in the notes.
BMOCM may, but is not obligated to, make a market in the notes.
BMOCM will determine any secondary market prices that it is prepared to offer in its sole discretion.
We may use this pricing supplement in the initial sale of the
notes. In addition, BMOCM or another of our affiliates may use this pricing supplement in market-making transactions in any notes after
their initial sale. Unless BMOCM or we inform you otherwise in the confirmation of sale, this pricing supplement is being used by BMOCM
in a market-making transaction.
For a period of approximately three months following issuance
of the notes, the price, if any, at which we or our affiliates would be willing to buy the notes from investors, and the value that BMOCM
may also publish for the notes through one or more financial information vendors and which could be indicated for the notes on any brokerage
account statements, will reflect a temporary upward adjustment from our estimated value of the notes that would otherwise be determined
and applicable at that time. This temporary upward adjustment represents a portion of (a) the hedging profit that we or our affiliates
expect to realize over the term of the notes and (b) any underwriting discount and the selling concessions paid in connection with this
offering. The amount of this temporary upward adjustment will decline to zero on a straight-line basis over the three-month period.
Additional Information Relating to the Estimated Initial Value of the Notes
Our estimated initial value of the notes on the date hereof that
is set forth on the cover hereof, equals the sum of the values of the following hypothetical components:
| · | a fixed-income debt component with the same tenor as the notes, valued using our internal funding rate for structured notes; and |
| · | one or more derivative transactions relating to the economic terms of the notes. |
The internal funding rate used in the determination of the initial
estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. The value of these derivative
transactions is derived from our internal pricing models. These models are based on factors such as the traded market prices of comparable
derivative instruments and on other inputs, which include volatility, dividend rates, interest rates and other factors. As a result, the
estimated initial value of the notes on the Pricing Date was determined based on the market conditions on the Pricing Date.
The Reference Asset
All disclosures contained in this pricing supplement regarding
the Reference Asset, including, without limitation, their make-up, method of calculation, and changes in their components and their historical
closing levels, have been derived from publicly available information prepared by the applicable sponsor. The information reflects the
policies of, and is subject to change by, the sponsor. The sponsor owns the copyrights and all rights to the Reference Asset. The sponsor
is under no obligation to continue to publish, and may discontinue publication of, the Reference Asset. Neither we nor BMO Capital Markets
Corp. accepts any responsibility for the calculation, maintenance or publication of the Reference Asset or any successor. We encourage
you to review recent levels of the Reference Asset prior to making an investment decision with respect to the notes.
The Russell 2000® Index
The Russell 2000® Index was developed by Russell Investments
(“Russell”) before FTSE International Limited (“FTSE”) and Russell combined in 2015 to create FTSE Russell, which
is wholly owned by London Stock Exchange Group. Russell began dissemination of the Russell 2000® Index (Bloomberg L.P. index symbol
“RTY”) on January 1, 1984. The Russell 2000® Index was set to 135 as of the close of business on December 31, 1986. FTSE
Russell calculates and publishes the Russell 2000® Index. The Russell 2000® Index is designed to track the performance of the
small capitalization segment of the U.S. equity market. The Russell 2000® Index is a subset of the Russell 3000® Index representing
approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on
a combination of their market cap and current index membership. The Russell 3000® Index measures the performance of the largest 3,000
U.S. companies. The Russell 2000® Index is determined, comprised, and calculated by FTSE Russell without regard to the notes.
Selection of Stocks Comprising the Russell 2000® Index
All companies eligible for inclusion in the Russell 2000®
Index must be classified as a U.S. company under FTSE Russell’s country-assignment methodology. If a company is incorporated, has
a stated headquarters location, and trades on a standard exchange in the same country (American Depositary Receipts and American Depositary
Shares are not eligible), then the company is assigned to its country of incorporation. If any of the three factors are not the same,
FTSE Russell defines three Home Country Indicators (“HCIs”): country of incorporation, country of headquarters, and country
of the most liquid exchange as defined by a two-year average daily dollar trading volume (“ADDTV”) from all exchanges within
a country. Using the HCIs, FTSE Russell cross-compares the primary location of the company’s assets with the three HCIs. If the
primary location of its assets matches any of the HCIs, then the company is assigned to its primary asset location. If there is insufficient
information to determine located company’s primary location of assets, FTSE Russell will use the primary location of the company’s
revenue for the same cross-comparison and assigns the company to the appropriate country in a similar fashion. FTSE Russell uses an average
of two years of assets or revenues data for analysis to reduce potential turnover. If conclusive country details cannot be derived from
assets or revenues data, FTSE Russell will assign the company to the country in which its headquarters are located unless the country
is a Benefit Driven Incorporation (BDI) country. If the country in which its headquarters are located is a BDI, the company is assigned
to the country of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize,
Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao, Faroe Islands, Gibraltar, Guernsey,
Isle of Man, Jersey, Liberia, Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and Turks and Caicos Islands. For any companies
incorporated or headquartered in a U.S. territory, including countries such as Puerto Rico, Guam, and U.S. Virgin Islands, a U.S. HCI
is assigned. “N-Shares” of companies controlled by entities in mainland China are not eligible for inclusion in the Russell
2000® Index.
All securities eligible for inclusion in the Russell 2000®
Index must trade on an eligible U.S. exchange. Stocks must have a closing price at or above $1.00 (on its primary exchange) on rank day
in May of each year (timetable is announced each spring) to be eligible for inclusion during annual reconstitution. However, in order
to reduce unnecessary turnover, if an existing member’s closing price is less than $1.00 on rank day of May, it will be considered
eligible if the average of the daily closing prices (from its primary exchange) during the 30 days prior to the rank date is equal to
or greater than $1.00. FTSE Russell adds initial public offerings (IPOs) each quarter to ensure that new additions to the institutional
investing opportunity set are reflected in representative indexes. A stock added during the quarterly IPO process is considered a new
index addition, and therefore must have a closing price on its primary exchange at or above $1.00 on the last day of the eligibility period
in order to qualify for index inclusion. If an existing index member does not trade on the rank day, it must price at $1.00 or above on
another eligible U.S. exchange to remain eligible.
Royalty trusts, U.S. limited liability companies, closed-end investment
companies (companies that are required to report Acquired Fund Fees and Expenses, as defined by the SEC, including business development
companies, are not eligible for inclusion), blank check companies, special-purpose acquisition companies (SPACs), Exchange Traded Funds
(ETFs), mutual funds and limited partnerships are ineligible for inclusion. Preferred and convertible preferred stock, redeemable shares,
participating preferred stock, warrants, rights, depositary receipts, installment receipts and trust receipts are not eligible for inclusion
in the Russell 2000® Index.
Annual reconstitution is a process by which the Russell 2000®
Index is completely rebuilt. On the rank day in May of each year, all eligible securities are ranked by their total market capitalization.
The largest 4,000 become the Russell 3000E Index, and the other FTSE Russell indexes are determined from that set of securities. If there
are not 4, 000 eligible securities in the U.S. market, the entire eligible set is include. Reconstitution of the Russell 2000® Index
occurs on the last Friday in June or, when the last Friday in June is the 29th or 30th, reconstitution occurs on the prior Friday. In
addition, FTSE Russell adds initial public offerings to the Russell 2000® Index on a quarterly basis based on total market capitalization
ranking within the market-adjusted capitalization breaks established during the most recent reconstitution.
After membership is determined, a security’s shares are
adjusted to include only those shares available to the public. This is often referred to as “free float.” The purpose of the
adjustment is to exclude from market calculations the capitalization that is not available for purchase and is not part of the investable
opportunity set.
License Agreement
“Russell 2000®” and “Russell 3000®”
are trademarks of FTSE Russell and have been licensed for use by us.
The notes are not sponsored, endorsed, sold or promoted by FTSE
Russell. FTSE Russell makes no representation or warranty, express or implied, to the owners of the notes or any member of the public
regarding the advisability of investing in securities generally or in the notes particularly or the ability of the Russell 2000® Index
to track general stock market performance or a segment of the same. FTSE Russell's publication of the Russell 2000® Index in no way
suggests or implies an opinion by FTSE Russell as to the advisability of investment in any or all of the securities upon which the Russell
2000® Index is based. FTSE Russell's only relationship to the Issuer is the licensing of certain trademarks and trade names of FTSE
Russell and of the Russell 2000® Index which is determined, composed and calculated by FTSE Russell without regard to the Issuer or
the notes. FTSE Russell is not responsible for and has not reviewed the notes nor any associated literature or publications and FTSE Russell
makes no representation or warranty express or implied as to their accuracy or completeness, or otherwise. FTSE Russell reserves the right,
at any time and without notice, to alter, amend, terminate or in any way change the Russell 2000® Index. FTSE Russell has no obligation
or liability in connection with the administration, marketing or trading of the notes.
FTSE RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE RUSSELL 2000® INDEX OR ANY DATA INCLUDED THEREIN AND FTSE RUSSELL SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. FTSE RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER, INVESTORS, OWNERS OF THE NOTES,
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RUSSELL 2000® INDEX OR ANY DATA INCLUDED THEREIN. FTSE RUSSELL MAKES NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT
TO THE RUSSELL 2000® INDEX OR ANY DATA INCLUDED HEREIN WITHOUT LIMITING ANY OF THE FOREGOING. IN NO EVENT SHALL FTSE RUSSELL HAVE
ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY
OF SUCH DAMAGES.
Validity of the Notes
In the opinion of Osler, Hoskin & Harcourt LLP, the issue
and sale of the notes has been duly authorized by all necessary corporate action of the Bank in conformity with the Senior Indenture,
and when this pricing supplement has been attached to, and duly notated on, the master note that represents the notes, the notes will
have been validly executed and issued and, to the extent validity of the notes is a matter governed by the laws of the Province of Ontario,
or the laws of Canada applicable therein, and will be valid obligations of the Bank, subject to the following limitations (i) the enforceability
of the Senior Indenture may be limited by the Canada Deposit Insurance Corporation Act (Canada), the Winding-up and Restructuring Act
(Canada) and bankruptcy, insolvency, reorganization, receivership, moratorium, arrangement or winding-up laws or other similar laws affecting
the enforcement of creditors’ rights generally; (ii) the enforceability of the Senior Indenture may be limited by equitable principles,
including the principle that equitable remedies such as specific performance and injunction may only be granted in the discretion of a
court of competent jurisdiction; (iii) pursuant to the Currency Act (Canada) a judgment by a Canadian court must be awarded in Canadian
currency and that such judgment may be based on a rate of exchange in existence on a day other than the day of payment; and (iv) the enforceability
of the Senior Indenture will be subject to the limitations contained in the Limitations Act, 2002 (Ontario), and such counsel expresses
no opinion as to whether a court may find any provision of the Senior Debt Indenture to be unenforceable as an attempt to vary or exclude
a limitation period under that Act. This opinion is given as of the date hereof and is limited to the laws of the Provinces of Ontario
and the federal laws of Canada applicable thereto. In addition, this opinion is subject to customary assumptions about the trustee’s
authorization, execution and delivery of the Indenture and the genuineness of signatures and certain factual matters, all as stated in
the letter of such counsel dated May 26, 2022, which has been filed as Exhibit 5.3 to Bank of Montreal’s Form 6-K filed with the
SEC and dated May 26, 2022.
In the opinion of Mayer Brown LLP, when this pricing supplement
has been attached to, and duly notated on, the master note that represents the notes, and the notes have been issued and sold as contemplated
herein, the notes will be valid, binding and enforceable obligations of Bank of Montreal, entitled to the benefits of the Senior Indenture,
subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness
and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of
bad faith). This opinion is given as of the date hereof and is limited to the laws of the State of New York. Insofar as this opinion involves
matters governed by the laws of the Province of Ontario, or the laws of Canada applicable therein, Mayer Brown LLP has assumed, without
independent inquiry or investigation, the validity of the matters opined on by Osler, Hoskin & Harcourt LLP, Canadian legal counsel
for the issuer, in its opinion expressed above. This opinion is subject to customary assumptions about the trustee’s authorization,
execution and delivery of the Senior Indenture and the genuineness of signatures and to such counsel’s reliance on the Bank of Montreal
and other sources as to certain factual matters, all as stated in the legal opinion of Mayer Brown LLP dated May 26, 2022, which has been
filed with the SEC as an exhibit to a report on Form 6-K by the Bank of Montreal on May 26, 2022.
14
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