The following table shows the hypothetical payout
profile of an investment in the notes based on various hypothetical Final Levels (and the corresponding Percentage Change) of the Basket,
reflecting the 100.00% Upside Leverage Factor, and Maximum Return of 51.00%. Please see “Examples of the Hypothetical Payment at
Maturity for a $1,000 Investment in the Notes” below for more detailed examples.
You should read this document together with the
product supplement dated September 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):
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.
An investment in the notes involves significant
risks. Investing in the notes is not equivalent to investing directly in the Basket Components. These risks are explained in more detail
in the “Additional Risk Factors Relating to the Notes” section of the product supplement.
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 Basket Components
All disclosures contained in this pricing supplement regarding the Basket
Components, including, without limitation, their make-up, method of calculation, and changes in their components and their historical
closing levels, have been derived from publicly available information prepared by the applicable sponsors. The information reflects the
policies of, and is subject to change by, the sponsors. The sponsors own the copyrights and all rights to the Basket Components. The sponsors
are under no obligation to continue to publish, and may discontinue publication of, the Basket Components. Neither we nor BMO Capital
Markets Corp. accepts any responsibility for the calculation, maintenance or publication of any Basket Component or any successor. We
encourage you to review recent levels of the Basket Components prior to making an investment decision with respect to the notes.
The S&P 500® Index
The S&P 500® Index measures the performance
of the large-cap segment of the U.S. market. The S&P 500® Index includes 500 leading companies and covers approximately 80% of
available market capitalization. The calculation of the level of the S&P 500® Index is based on the relative value of the aggregate
market value of the common stocks of 500 companies as of a particular time compared to the aggregate average market value of the common
stocks of 500 similar companies during the base period of the years 1941 through 1943.
S&P calculates the S&P 500® Index by
reference to the prices of the constituent stocks of the S&P 500® Index without taking account of the value of dividends paid
on those stocks. As a result, the return on the notes will not reflect the return you would realize if you actually owned the constituent
stocks of the S&P 500® Index and received the dividends paid on those stocks.
Computation of the S&P 500® Index
While S&P currently employs the following methodology
to calculate the S&P 500® Index, no assurance can be given that S&P will not modify or change this methodology in a manner
that may affect the Payment at Maturity.
Historically, the market value of any component
stock of the S&P 500® Index was calculated as the product of the market price per share and the number of then outstanding shares
of such component stock. In March 2005, S&P began shifting the S&P 500® Index halfway from a market capitalization weighted
formula to a float-adjusted formula, before moving the S&P 500® Index to full float adjustment on September 16, 2005. S&P’s
criteria for selecting stocks for the S&P 500® Index did not change with the shift to float adjustment. However, the adjustment
affects each company’s weight in the S&P 500® Index.
Under float adjustment, the share counts used in
calculating the S&P 500® Index reflect only those shares that are available to investors, not all of a company’s outstanding
shares. Float adjustment excludes shares that are closely held by control groups, other publicly traded companies or government agencies.
In September 2012, all shareholdings representing
more than 5% of a stock’s outstanding shares, other than holdings by “block owners,” were removed from the float for
purposes of calculating the S&P 500® Index. Generally, these “control holders” will include officers and directors,
private equity, venture capital and special equity firms, other publicly traded companies that hold shares for control, strategic partners,
holders of restricted shares, ESOPs, employee and family trusts, foundations associated with the company, holders of unlisted share classes
of stock, government entities at all levels (other than government retirement/pension funds) and any individual person who controls a
5% or greater stake in a company as reported in regulatory filings. However, holdings by block owners, such as depositary banks, pension
funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension funds, investment funds of insurance
companies, asset managers and investment funds, independent foundations and savings and investment plans, will ordinarily be considered
part of the float.
Treasury stock, stock options, equity participation
units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares held in a trust to allow investors in
countries outside the country of domicile, such as depositary shares and Canadian exchangeable shares are normally part of the float unless
those shares form a control block.
For each stock, an investable weight factor (“IWF”)
is calculated by dividing the available float shares by the total shares outstanding. Available float shares are defined as the total
shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum threshold for control blocks. For
example, if a company’s officers and directors hold 3% of the company’s shares, and no other control group holds 5% of the
company’s shares, S&P would assign that company an IWF of 1.00, as no control group meets the 5% threshold. However, if a company’s
officers and directors hold 3% of the company’s shares and another control group holds 20% of the company’s shares, S&P
would assign an IWF of 0.77, reflecting the fact that 23% of the company’s outstanding shares are considered to be held for control.
As of July 31, 2017, companies with multiple share class lines are no longer eligible for inclusion in the S&P 500® Index. Constituents
of the S&P 500® Index prior to July 31, 2017 with multiple share class lines were grandfathered in and continue to be included
in the S&P 500® Index. If a constituent company of the S&P 500® Index reorganizes into a multiple share class line structure,
that company will remain in the S&P 500® Index at the discretion of the S&P Index Committee in order to minimize turnover.
The S&P 500® Index is calculated using a
base-weighted aggregate methodology. The level of the S&P 500® Index reflects the total market value of all 500 component stocks
relative to the base period of the years 1941 through 1943. An indexed number is used to represent the results of this calculation in
order to make the level easier to use and track over time. The actual total market value of the component stocks during the base period
of the years 1941 through 1943 has been set to an indexed level of 10. This is often indicated by the notation 1941-43 = 10. In practice,
the daily calculation of the S&P 500® Index is computed by dividing the total market value of the component stocks by the “index
divisor.” By itself, the index divisor is an arbitrary number. However, in the context of the calculation of the S&P 500®
Index, it serves as a link to the original base period level of the S&P 500® Index. The index divisor keeps the S&P 500®
Index comparable over time and is the manipulation point for all adjustments to the S&P 500® Index, which is index maintenance.
Index Maintenance
Index maintenance includes monitoring and completing
the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to
company restructuring or spinoffs. Some corporate actions, such as stock splits and stock dividends, require changes in the common shares
outstanding and the stock prices of the companies in the S&P 500® Index, and do not require index divisor adjustments.
To prevent the level of the S&P 500® Index
from changing due to corporate actions, corporate actions which affect the total market value of the S&P 500® Index require an
index divisor adjustment. By adjusting the index divisor for the change in market value, the level of the S&P 500® Index remains
constant and does not reflect the corporate actions of individual companies in the S&P 500® Index. Index divisor adjustments are
made after the close of trading and after the calculation of the S&P 500® Index closing level.
Changes in a company’s total shares outstanding
of 5% or more due to public offerings are made as soon as reasonably possible. Other changes of 5% or more (for example, due to tender
offers, Dutch auctions, voluntary exchange offers, company stock repurchases, private placements, acquisitions of private companies or
non-index companies that do not trade on a major exchange, redemptions, exercise of options, warrants, conversion of preferred stock,
notes, debt, equity participations, at-the-market stock offerings or other recapitalizations) are made weekly, and are generally announced
on Fridays for implementation after the close of trading the following Friday (one week later). If a 5% or more share change causes a
company’s IWF to change by five percentage points or more, the IWF is updated at the same time as the share change. IWF changes
resulting from partial tender offers are considered on a case-by-case basis.
License Agreement
We and S&P Dow Jones Indices LLC (“S&P”)
have entered into a non-exclusive license agreement providing for the license to us and certain of our affiliates, in exchange for a fee,
of the right to use the S&P 500® Index, in connection with certain securities, including the notes. The S&P 500® Index
is owned and published by S&P.
The license agreement between S&P and us provides
that the following language must be set forth in this pricing supplement:
The notes are not sponsored, endorsed, sold or promoted
by S&P Dow Jones Indices LLC, Dow Jones, Standard and Poor’s Financial Services LLC or any of their respective affiliates (collectively,
“S&P Dow Jones Indices”). S&P Dow Jones Indices make no representation or warranty, express or implied, to the holders
of the notes or any member of the public regarding the advisability of investing in securities generally or in the notes particularly
or the ability of the S&P 500® Index to track general market performance. S&P Dow Jones Indices’ only relationship to
us with respect to the S&P 500® Index is the licensing of the Index and certain trademarks, service marks and/or trade names of
S&P Dow Jones Indices and/or its third party licensors. The S&P 500® Index is determined, composed and calculated by S&P
Dow Jones Indices without regard to us or the notes. S&P Dow Jones Indices have no obligation to take our needs or the needs of holders
of the notes into consideration in determining, composing or calculating the S&P 500® Index. S&P Dow Jones Indices are not
responsible for and have not participated in the determination of the prices, and amount of the notes or the timing of the issuance or
sale of the notes or in the determination or calculation of the equation by which the notes are to be converted into cash. S&P Dow
Jones Indices have no obligation or liability in connection with the administration, marketing or trading of the notes. There is no assurance
that investment products based on the S&P 500® Index will accurately track index performance or provide positive investment returns.
S&P Dow Jones Indices LLC and its subsidiaries are not investment advisors. Inclusion of a security or futures contract within an
index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security or futures contract, nor is it considered
to be investment advice. Notwithstanding the foregoing, CME Group Inc. and its affiliates may independently issue and/or sponsor financial
products unrelated to the notes currently being issued by us, but which may be similar to and competitive with the notes. In addition,
CME Group Inc. and its affiliates may trade financial products which are linked to the performance of the S&P 500® Index. It is
possible that this trading activity will affect the value of the notes.
S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY,
ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P 500® INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING
BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES
SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO
RESULTS TO BE OBTAINED BY US, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500® INDEX OR WITH RESPECT
TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR
ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST
TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND US, OTHER THAN THE LICENSORS
OF S&P DOW JONES INDICES.
S&P® is a registered trademark of Standard
& Poor’s Financial Services LLC and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. These trademarks
have been licensed for use by Bank of Montreal. “Standard & Poor’s®”, “S&P 500®” and “S&P®”
are trademarks of S&P. The notes are not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation regarding
the advisability of investing in the notes.
The EURO STOXX 50® Index
The EURO STOXX 50® Index was created by STOXX
Limited, a joint venture between Deutsche Börse AG and SIX Group AG. Publication of the EURO STOXX 50® Index began in February
1998, based on an initial Index level of 1,000 at December 31, 1991. On March 1, 2010, STOXX announced the removal of the “Dow Jones”
prefix from all of its indices, including the EURO STOXX 50® Index. Additional information about the EURO STOXX 50® Index is available
on the STOXX Limited website: stoxx.com. However, information included in that website is not included or incorporated by reference in
this pricing supplement.
EURO STOXX 50® Index Composition and Maintenance
For each of the 20 EURO STOXX Supersector indices,
the stocks are ranked in terms of free-float market capitalization. The largest stocks are added to the selection list until the coverage
is close to, but still less than, 60% of the free-float market capitalization of the corresponding EURO STOXX TMI Supersector Index. If
the next highest-ranked stock brings the coverage closer to 60% in absolute terms, then it is also added to the selection list. All current
stocks in the index are then added to the selection list. All of the stocks on the selection list are then ranked in terms of free-float
market capitalization to produce the final index selection list. The largest 40 stocks on the selection list are selected; the remaining
10 stocks are selected from the largest remaining current stocks ranked between 41 and 60; if the number of stocks selected is still below
50, then the largest remaining stocks are selected until there are 50 stocks. In exceptional cases, STOXX Limited’s management board
can add stocks to and remove them from the selection list. The index stocks are subject to a capped maximum index weight of 10%, which
is applied on a quarterly basis.
The EURO STOXX 50® Index is composed of 50 component
stocks of market sector leaders from within the 20 EURO STOXX® Supersector indices, which represent the Eurozone portion of the STOXX
Europe 600® Supersector indices. The index stocks have a high degree of liquidity and represent the largest companies across a wide
range of market sectors.
Composition and Maintenance of the EURO STOXX 50® Index
The composition of the EURO STOXX 50® Index
is reviewed annually, based on the closing stock data on the last trading day in August. Changes in the composition of the EURO STOXX
50® Index are made to ensure that it includes the 50 market sector leaders from within the EURO STOXX Index.
The free float factors for each component stock
used to calculate the EURO STOXX 50® Index, as described below, are reviewed, calculated, and implemented on a quarterly basis and
are fixed until the next quarterly review.
The EURO STOXX 50® Index is subject to a “fast
exit rule.” The index stocks are monitored for any changes based on the monthly selection list ranking. A stock is deleted from
the EURO STOXX 50® Index if: (a) it ranks 75 or below on the monthly selection list and (b) it ranked 75 or below on the selection
list of the previous month. The highest-ranked non-component will be selected. Changes will be implemented on the close of the fifth trading
day of the month, and are effective the next trading day.
The EURO STOXX 50® Index is also subject to
a “fast entry rule.” All stocks on the latest selection lists and initial public offering (IPO) stocks are reviewed for a
fast-track addition on a quarterly basis. A stock is added, if (a) it qualifies for the latest blue-chip selection list generated end
of February, May, August or November and (b) it ranks within the “lower buffer” (ranks 1-25) on this selection list.
The EURO STOXX 50® Index is also reviewed on
an ongoing basis. Corporate actions (including initial public offerings, mergers and takeovers, spin-offs, delistings, and bankruptcy)
that affect the EURO STOXX 50® Index composition are immediately reviewed. Any changes are announced, implemented, and effective in
line with the type of corporate action and the magnitude of the effect.
Calculation of the EURO STOXX 50® Index
The EURO STOXX 50® Index is calculated with
the “Laspeyres formula,” which measures the aggregate price changes against a fixed base quantity weight. The formula for
calculating the EURO STOXX 50® Index value can be expressed as follows:
Index = free float market capitalization of the
index at the time
divisor of the index at the time
The “free float market capitalization of the
index” is equal to the sum of the products of the closing price, number of shares, free float factor and the weighting cap factor
for each component company as of the time that the EURO STOXX 50® Index is being calculated.
The divisor of the EURO STOXX 50® Index is adjusted
to maintain the continuity of the EURO STOXX 50® Index’s values across changes due to corporate actions, such as the deletion
and addition of stocks, the substitution of stocks, stock dividends, and stock splits. Changes in weights due to corporate actions are
distributed proportionally across all index components and equal an investment into the portfolio.
License Agreement
We have entered into a non-exclusive license agreement
with STOXX, which grants us a license in exchange for a fee to use the EURO STOXX 50® Index in connection with the issuance of certain
securities, including the notes.
STOXX and its licensors (the “Licensors”)
have no relationship with us or BMOCM, other than the licensing of the EURO STOXX 50® Index and the related trademarks for use in
connection with the notes.
STOXX and its Licensors do not:
| · | sponsor, endorse, sell or promote the notes. |
| · | recommend that any person invest in the notes or any other securities. |
| · | have any responsibility or liability for or make any decisions about the timing, amount or pricing of the notes. |
| · | have any responsibility or liability for the administration, management or marketing of the notes. |
| · | consider the needs of the notes or the owners of the notes in determining, composing or calculating the EURO STOXX 50® Index or
have any obligation to do so.
|
STOXX and its Licensors will not have any liability
in connection with the notes. Specifically,
| · | STOXX and its Licensors do not make any warranty, express or implied, and disclaim any and all warranty about: |
| · | the results to be obtained by the notes, the owner of the notes or any other person in connection with the use of the EURO STOXX 50®
Index and the data included in the EURO STOXX 50® Index; |
| · | the accuracy or completeness of the EURO STOXX 50® Index and its data; |
| · | the merchantability and the fitness for a particular purpose or use of the EURO STOXX 50® Index or its data; |
| · | STOXX and its Licensors will have no liability for any errors, omissions or interruptions in the EURO STOXX 50® Index or its data;
and |
| · | any lost profits or indirect, punitive, special or consequential damages or losses, even if STOXX knows that they might occur. |
The licensing agreement among us, BMOCM and STOXX
is solely for the benefit of the parties thereto and not for the benefit of the owner of the notes or any other third parties.
The NASDAQ-100® Index
The NASDAQ-100 Index® is a modified market capitalization-weighted
index of 100 of the largest stocks of both U.S. and non-U.S. non-financial companies listed on The NASDAQ Stock Market based on market
capitalization. It does not contain securities of financial companies, including investment companies. The NASDAQ-100 Index® which
includes companies across a variety of major industry groups, was launched on January 31, 1985, with a base index value of 250.00. On
January 1, 1994, the base index value was reset to 125.00. The NASDAQ-100 Index® composition is reviewed on an annual basis in December.
Nasdaq, Inc. publishes the NASDAQ-100 Index®. Current information regarding the market value of the Nasdaq-100 Index® is available
from Nasdaq, Inc. as well as numerous market information services.
The share weights of the component securities of
the Nasdaq-100 Index® at any time are based upon the total shares outstanding in each of those securities and are additionally subject,
in certain cases, to rebalancing. Accordingly, each underlying stock’s influence on the level of the NASDAQ-100 Index® is directly
proportional to the value of its share weight.
Index Calculation
At any moment in time, the level of the NASDAQ-100
Index® equals the aggregate value of the then-current share weights of each of the component securities, which are based on the total
shares outstanding of each such component security, multiplied by each such security’s respective last sale price on The NASDAQ
Stock Market (which may be the official closing price published by The NASDAQ Stock Market), and divided by a scaling factor (the “divisor”),
which becomes the basis for the reported level of the NASDAQ-100 Index®. The divisor serves the purpose of scaling such aggregate
value to a lower order of magnitude, which is more desirable for reporting purposes.
Underlying Stock Eligibility Criteria and Annual Ranking Review
Initial Eligibility Criteria
To be eligible for initial inclusion in the NASDAQ-100
Index®, a security must be listed on The NASDAQ Stock Market and meet the following criteria:
| · | the security’s U.S. listing must be exclusively on the NASDAQ Global Select Market or the NASDAQ Global Market; |
| · | the security must be issued by a non-financial company (any industry other than financials) according to the Industry Classification
Benchmark (ICB); |
| · | the security may not be issued by an issuer currently in bankruptcy proceedings; |
| · | the security must generally be a common stocks, ordinary shares, American Depositary Receipts (ADRs), or tracking stock (closed-end
funds, convertible debentures, exchange traded funds, limited liability companies, limited partnership interests, preferred stocks, rights,
shares or units of beneficial interests, warrants, units and other derivative securities are not included in the NASDAQ-100 Index®,
nor are the securities of investment companies). Companies organized as Real Estate Investment Trusts (“REITs”) are not eligible
for index inclusion. If the security is a depositary receipt representing a security of a non-U.S. issuer, then references to the "issuer"
are references to the underlying security and the total shares outstanding (“TSO”) is the actual depositary shares outstanding
as reported by the depositary banks; |
| · | the security must have a three-month average daily trading volume of at least 200,000 shares; |
| · | if the security is issued by an issuer organized under the laws of a jurisdiction outside the United States, it must have listed options
on a recognized market in the United States or be eligible for listed-options trading on a recognized options market in the United States; |
| · | the issuer of the security may not have entered into a definitive agreement or other arrangement that would make it ineligible for
index inclusion and where the transaction is imminent as determined by the Index Management Committee; |
| · | the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn; and |
| · | the issuer of the security must have “seasoned” on the NASDAQ Stock Market or another recognized market (generally, a
company is considered to be seasoned if it has been listed on a market for at least three full months, excluding the first month of initial
listing). |
Continued Eligibility Criteria
In addition, to be eligible for continued inclusion
in the NASDAQ-100 Index® the following criteria apply:
| · | the security’s U.S. listing must be exclusively on the NASDAQ Global Select Market or the NASDAQ Global Market; |
| · | the security must be issued by a non-financial company; |
| · | the security may not be issued by an issuer currently in bankruptcy proceedings; |
| · | the security must have an average daily trading volume of at least 200,000 shares in the previous three-month trading period as measured
annually during the ranking review process described below; |
| · | if the issuer of the security is organized under the laws of a jurisdiction outside the United States, then such security must have
listed options on a recognized market in the United States or be eligible for listed-options trading on a recognized options market in
the United States, as measured annually during the ranking review process; |
| · | the issuer of the security may not have entered into a definitive agreement or other arrangement that would likely result in the security
no longer being eligible; |
| · | the security must have an adjusted market capitalization equal to or exceeding 0.10% of the aggregate adjusted market capitalization
of the NASDAQ-100 Index® at each month-end. In the event that a company does not meet this criterion for two consecutive
month-ends, it will be removed from the NASDAQ-100 Index® effective after the close of trading on the third Friday of the
following month; and |
| · | the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn. |
These eligibility criteria may be revised from time to time by Nasdaq,
Inc. without regard to the notes.
Annual Ranking Review
The component securities are evaluated on an annual
basis (the “Ranking Review”), except under extraordinary circumstances, which may result in an interim evaluation, as follows.
Securities that meet the applicable eligibility criteria are ranked by market value. Eligible securities that are already in the NASDAQ-100
Index® and that are ranked in the top 100 eligible securities (based on market capitalization) are retained in the NASDAQ-100
Index®. A security that is ranked 101 to 125 is also retained, provided that such security was ranked in the top 100 eligible
securities as of the previous Ranking Review or was added to the NASDAQ-100 Index® subsequent to the previous Ranking Review.
Securities not meeting such criteria are replaced. The replacement securities chosen are those eligible securities not currently in the
NASDAQ-100 Index® that have the largest market capitalization. The data used in the ranking includes end of October market
data and is updated for total shares outstanding submitted in a publicly filed SEC document via EDGAR through the end of November.
Replacements are made effective after the close
of trading on the third Friday in December. Moreover, if at any time during the year other than the Ranking Review, a component security
is determined by NASDAQ OMX to become ineligible for continued inclusion in the NASDAQ-100 Index®, the security will be
replaced with the largest market capitalization security meeting the eligibility criteria listed above and not currently included in the
NASDAQ-100 Index®. Issuers that are added as a result of a spin-off are not replaced until after they have been included
in a reconstitution.
Index Maintenance
In addition to the Ranking Review, the securities
NASDAQ-100 Index® are monitored every day by Nasdaq, Inc. with respect to changes in total shares outstanding arising from corporate
events, such as stock dividends, stock splits and certain spin-offs and rights issuances. Nasdaq, Inc. has adopted the following quarterly
scheduled weight adjustment procedures with respect to those changes. If the change in total shares outstanding arising from a corporate
action is greater than or equal to 10%, that change will be made to the NASDAQ-100 Index® as soon as practical, normally within ten
days of such corporate action. Otherwise, if the change in total shares outstanding is less than 10%, then all such changes are accumulated
and made effective at one time on a quarterly basis after the close of trading on the third Friday in each of March, June, September and
December.
In either case, the share weights for those component
securities are adjusted by the same percentage amount by which the total shares outstanding have changed in those securities. Ordinarily,
whenever there is a change in the share weights, a change in a component security, or a change to the price of a component security due
to spin-off, rights issuances or special cash dividends, Nasdaq, Inc. adjusts the divisor to ensure that there is no discontinuity in
the level of the NASDAQ-100 Index® that might otherwise be caused by any of those changes. All changes will be announced in advance.
Index Rebalancing
Under the methodology employed, on a quarterly basis
coinciding with Nasdaq, Inc.’s quarterly scheduled weight adjustment procedures, the component securities are categorized as either
“Large Stocks” or “Small Stocks” depending on whether their current percentage weights (after taking into account
scheduled weight adjustments due to stock repurchases, secondary offerings or other corporate actions) are greater than, or less than
or equal to, the average percentage weight in the NASDAQ-100 Index® (i.e., as a 100-stock index, the average percentage weight in
the NASDAQ-100 Index® is 1%).
This quarterly examination will result in an index
rebalancing if it is determined that: (1) the current weight of the single largest market capitalization component security is greater
than 24% or (2) the “collective weight” of those component securities, the individual current weights of which are in excess
of 4.5%, when added together, exceed 48%. In addition, Nasdaq, Inc. may conduct a special rebalancing at any time if it is determined
to be necessary to maintain the integrity of the NASDAQ-100 Index®.
If either one or both of these weight distribution
requirements are met upon quarterly review, or Nasdaq, Inc. determines that a special rebalancing is required, a weight rebalancing will
be performed. First, relating to weight distribution requirement (1) above, if the current weight of the single largest component security
exceeds 24%, then the weights of all Large Stocks will be scaled down proportionately towards 1% by enough of an amount for the adjusted
weight of the single largest component security to be set to 20%. Second, relating to weight distribution requirement (2) above, for those
component securities whose individual current weights or adjusted weights in accordance with the preceding step are in excess of 4.5%,
if their “collective weight” exceeds 48%, then the weights of all Large Stocks will be scaled down proportionately towards
1% by just enough amount for the “collective weight,” so adjusted, to be set to 40%.
The aggregate weight reduction among the Large Stocks
resulting from either or both of the above rescalings will then be redistributed to the Small Stocks in the following iterative manner.
In the first iteration, the weight of the largest Small Stock will be scaled upwards by a factor which sets it equal to the average Index
weight of 1.0%. The weights of each of the smaller remaining Small Stocks will be scaled up by the same factor, reduced in relation to
each stock’s relative ranking among the Small Stocks, such that the smaller the component security in the ranking, the less the
scale-up of its weight. This is intended to reduce the market impact of the weight rebalancing on the smallest component securities in
the NASDAQ-100 Index®.
In the second iteration, the weight of the second
largest Small Stock, already adjusted in the first iteration, will be scaled upwards by a factor which sets it equal to the average index
weight of 1%. The weights of each of the smaller remaining Small Stocks will be scaled up by this same factor, reduced in relation to
each stock’s relative ranking among the Small Stocks, such that, once again, the smaller the component stock in the ranking, the
less the scale-up of its weight.
Additional iterations will be performed until the
accumulated increase in weight among the Small Stocks exactly equals the aggregate weight reduction among the Large Stocks from rebalancing
in accordance with weight distribution requirement (1) and/or weight distribution requirement (2).
Then, to complete the rebalancing procedure, once
the final percent weights of each of the component securities are set, the share weights will be determined anew based upon the last sale
prices and aggregate capitalization of the NASDAQ-100 Index® at the close of trading on the last day in February, May, August and
November. Changes to the share weights will be made effective after the close of trading on the third Friday in March, June, September
and December, and an adjustment to the divisor will be made to ensure continuity of the NASDAQ-100 Index®.
Ordinarily, new rebalanced weights will be determined
by applying the above procedures to the current share weights. However, Nasdaq, Inc. may from time to time determine rebalanced weights,
if necessary, by instead applying the above procedure to the actual current market capitalization of the component securities. In those
instances, Nasdaq, Inc. would announce the different basis for rebalancing prior to its implementation.
License Agreement
The notes are not sponsored, endorsed, sold or promoted
by Nasdaq, Inc. or its affiliates (NASDAQ, with its affiliates, are referred to as the “Corporations”). The Corporations have
not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the notes. The
Corporations make 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 NASDAQ-100 Index® to track general
stock market performance. The Corporations' only relationship to the Issuer (“Licensee”) is in the licensing of the Nasdaq®,
the NASDAQ-100 Index®, and certain trade names of the Corporations and the use of the NASDAQ-100 Index® which is determined, composed
and calculated by NASDAQ without regard to Licensee or the notes. NASDAQ has no obligation to take the needs of the Licensee or the owners
of the notes into consideration in determining, composing or calculating the NASDAQ-100 Index®. The Corporations are not responsible
for and have not participated in the determination of the timing of, prices at, or quantities of the notes to be issued or in the determination
or calculation of the equation by which the notes are to be converted into cash. The Corporations have no liability in connection with
the administration, marketing or trading of the notes.
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY
AND/OR UNINTERRUPTED CALCULATION OF NASDAQ-100 Index® OR ANY DATA INCLUDED THEREIN, THE CORPORATIONS MAKE NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NASDAQ-100
Index® OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ-100 Index® OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR
SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.