Specific Terms of the Notes:
Autocallable
Number
|
Reference
Asset
|
Ticker
Symbol
|
Initial
Level
|
Contingent
Interest Rate
|
Coupon
Barrier
Level
|
Trigger
Level
|
CUSIP
|
Principal
Amount
|
Price to
Public1
|
Agent’s
Commission1
|
Proceeds to
Bank of
Montreal1
|
2123
|
The S&P 500® Index
|
SPX
|
[ ]
|
2.213% per quarter (approximately 8.85% per annum)
|
[ ], 70.00% of its Initial Level
|
[ ], 70.00% of its Initial Level
|
06368GHS9
|
[ ]
|
100%
|
Up to 0.00%
[ ]
|
At least 100.00%
[ ]
|
1 We or one of our affiliates may also pay a referral fee to certain dealers
in connection with the distribution of the notes.
Investing in the notes involves risks, including those
described in the “Selected Risk Considerations” section beginning on page P-5 hereof, the “Additional Risk Factors Relating
to the Notes” section beginning on page PS-6 of the product supplement, and the “Risk Factors” section beginning on
page S-1 of the prospectus supplement and on page 8 of the prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these notes or passed upon the accuracy of this document, the product supplement,
the prospectus supplement or the prospectus. Any representation to the contrary is a criminal offense. The notes will be our unsecured
obligations and will not be savings accounts or deposits that are insured by the United States Federal Deposit Insurance Corporation,
the Deposit Insurance Fund, the Canada Deposit Insurance Corporation or any other governmental agency or instrumentality or other entity.
On the date hereof, based on the terms set forth above, the estimated
initial value of the notes is $989.00 per $1,000 in principal amount. The estimated initial value of the notes on the Pricing Date may
differ from this value but will not be less than $940.00 per $1,000 in principal amount. However, as discussed in more detail below, the
actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy.
BMO CAPITAL MARKETS
Key Terms of the Notes:
Reference Asset:
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The S&P 500® Index (ticker symbol "SPX"). See "The Reference Asset" below for additional information.
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Contingent Coupons:
|
If the closing level of the Reference Asset on an Observation Date is greater than its Coupon Barrier Level, a Contingent Coupon will be paid on the corresponding Contingent Coupon Payment Date at the Contingent Interest Rate, subject to the automatic redemption feature.
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|
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Contingent Interest Rate:
|
2.213% per quarter (approximately 8.85% per annum), if payable. Accordingly, each Contingent Coupon, if payable, will equal $22.13 for each $1,000 in principal amount.
|
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Observation Dates:1
|
Three trading days prior to each scheduled Contingent Coupon Payment Date.
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Contingent Coupon Payment
Dates:1
|
Interest, if payable, will be paid on the 3rd day of each May, August, November, and February (or, if such day is not a business day, the next following business day), beginning on May 03, 2022 and ending on the Maturity Date, subject to the automatic redemption feature.
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Automatic Redemption:
|
Beginning on July 29, 2022, if, on any Observation Date, 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.
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Payment upon Automatic
Redemption:
|
If the notes are automatically redeemed, then, on the Call Settlement Date, investors will receive their principal amount plus the Contingent Coupon otherwise due.
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Call Settlement Date:1
|
If the notes are automatically redeemed, the Contingent Coupon Payment Date immediately following the relevant Observation Date.
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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.
You will receive $1,000 for each $1,000 in principal amount of the note, unless a
Trigger Event has occurred.
If a Trigger Event has occurred, you will receive at maturity, for each $1,000 in
principal amount of your notes, a cash amount equal to:
$1,000 + [$1,000 x Percentage Change]
This amount will be less than the principal amount of your
note, and may be zero.
You will also receive the final Contingent Coupon, if payable.
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|
Trigger Event:2
|
A Trigger Event will be deemed to occur if the Final Level of the Reference Asset is less than its Trigger Level on the Valuation Date.
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Percentage Change:
|
The quotient, expressed as a percentage, of the following formula:
(Final Level - Initial Level)
Initial Level
|
|
|
Initial Level:2
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The closing level of the Reference Asset on the Pricing Date.
|
|
|
Coupon Barrier Level:2
|
70.00% of the Initial Level.
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Trigger Level:2
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70.00% of the Initial Level.
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Call Level:2
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100% of the Initial Level.
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Final Level:
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The closing level of the Reference Asset on the Valuation Date.
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Pricing Date:1
|
January 31, 2022
|
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Settlement Date:1
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February 03, 2022
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Valuation Date:1
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July 31, 2023
|
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Maturity Date:1
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August 03, 2023
|
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Calculation Agent:
|
BMOCM
|
1 Expected and subject to the occurrence of a market disruption event,
as described in the accompanying product supplement. If we make any change to the expected Pricing Date and Settlement Date, the Contingent
Coupon Payment Dates (and therefore the Observation Dates and potential Call Settlement Dates), the Valuation Date and Maturity Date will
be changed so that the stated term of the notes remains approximately the same.
2As determined by the calculation agent and subject to adjustment in certain
circumstances. See “General Terms of the Notes — Anti-dilution Adjustments” in the product supplement “General
Terms of the Notes — Adjustments to a Reference Asset that Is an Index” in the product supplement for additional information.
Additional Terms of the Notes
You should read this document together with the product supplement
dated June 18, 2021, the prospectus supplement dated May 27, 2021 and the prospectus dated April 20, 2020. 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 June 18, 2021:
https://www.sec.gov/Archives/edgar/data/927971/000121465921006735/d621210424b2.htm
Prospectus supplement dated May 27, 2021:
https://www.sec.gov/Archives/edgar/data/927971/000121465921006002/g526210424b5.htm
Prospectus dated April 20, 2020:
https://www.sec.gov/Archives/edgar/data/927971/000119312520112240/d903160d424b2.htm
Our Central Index Key, or CIK, on the SEC website is 927971. As
used in this document, "we", "us" or "our" refers to Bank of Montreal.
We have filed a registration statement (including a prospectus)
with the SEC for the offering to which this document relates. Before you invest, you should read the prospectus in that registration statement
and the other documents that we have filed with the SEC for more complete information about us and this offering. You may obtain these
documents free of charge by visiting the SEC's website at http://www.sec.gov. Alternatively, we will arrange to send to you the prospectus
(as supplemented by the prospectus supplement and product supplement) if you request it by calling our agent toll-free at 1-877-369-5412.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing
in the notes is not equivalent to investing directly in the Reference 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
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·
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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, the payment at maturity will be based on the Final Level and whether a Trigger Event has occurred. If
the Final Level is less than its Trigger Level, a Trigger Event will occur, and you will lose 1% of the principal amount for each 1% that
the Final Level 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.
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·
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You may not receive any Contingent Coupons with respect to your notes. — We will not necessarily make periodic interest
payments on the notes. If the closing level of the Reference Asset on an Observation Date is less than its Coupon Barrier Level, we will
not pay you the Contingent Coupon applicable to that Observation Date. If the closing level of the Reference Asset is less than its Coupon
Barrier Level on each of the Observation Dates, we will not pay you any Contingent Coupons during the term of the notes, and you will
not receive a positive return on the notes. Generally, this non-payment of any Contingent Coupons will coincide with a greater risk of
principal loss on your notes.
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·
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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 will not receive any additional Contingent
Coupons and 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.
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·
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Your return on the notes is limited to the Contingent Coupons, if any, regardless of any increase in the level of the Reference
Asset. — You will not receive a payment at maturity with a value greater than your principal amount plus the final Contingent
Coupon, if payable. In addition, if the notes are automatically redeemed, you will not receive a payment greater than the principal amount
plus the applicable Contingent Coupon, 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 Contingent Coupons.
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·
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Your return on the notes may be lower than the return on a conventional debt security of comparable maturity. — The
return that you will receive on your notes, which could be negative, may be less than the return you could earn on other investments.
The notes do not provide for fixed interest payments and you may not receive any Contingent Coupons over the term of the notes. Even if
you do receive one or more Contingent Coupons and your return on the notes is positive, your return may be less than the return you would
earn if you bought a conventional senior interest bearing debt security of ours with the same maturity or if you invested directly in
the Reference 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.
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·
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A higher Contingent Interest Rate or lower Trigger Level or Coupon Barrier Level may reflect greater expected volatility of the
Reference Asset, and greater expected volatility generally indicates an increased risk of loss at maturity. — The economic
terms for the notes, including the Contingent Interest Rate, Coupon Barrier Level and Trigger Level, are based, in part, on the expected
volatility of the Reference Asset at the time the terms of the notes are set. “Volatility” refers to the frequency and magnitude
of changes in the level of the Reference Asset. The greater the expected volatility of the Reference Asset as of the Pricing Date, the
greater the expectation is as of that date that the closing level of the Reference Asset could be less than its Coupon Barrier Level on
any Observation Date and that a Trigger Event could occur and, as a consequence, indicates an increased risk of not receiving a Contingent
Coupon and an increased risk of loss, respectively. All things being equal, this greater expected volatility will generally be reflected
in a higher Contingent Interest Rate than the yield payable on our conventional debt securities with a similar maturity or on otherwise
comparable securities, and/or a lower Trigger Level and/or Coupon Barrier Level than those terms on otherwise comparable securities. Therefore,
a relatively higher Contingent Interest Rate may indicate an increased risk of loss. Further, relatively lower Trigger Level and/or Coupon
Barrier may not necessarily indicate that the notes have a greater likelihood of a return of principal at maturity and/or paying Contingent
Coupons. You should be willing to accept the downside market risk of the Reference Asset and the potential to lose a significant portion
or all of your initial investment.
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Risks Related to Reference Assets
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·
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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 level of the Reference Asset increases 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
level of the Reference Asset increases.
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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.
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·
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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.
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·
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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 level 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.
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General Risk Factors
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·
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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.
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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 the 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.
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Our initial estimated value of the notes will be lower than the price to public. — Our initial estimated value of the
notes is only an estimate, and is based on a number of factors. The price to public of the notes will exceed our initial estimated value,
because costs associated with offering, structuring and hedging the notes are included in the price to public, but are not included in
the estimated value. These costs include the profits that we and our affiliates expect to realize for assuming the risks in hedging our
obligations under the notes and the estimated cost of hedging these obligations. The initial estimated value of the notes may be as low
as the amount indicated on the cover page hereof.
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·
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Our initial estimated value does not represent any future value of the notes, and may also differ from the estimated value of any
other party. — Our initial estimated value of the notes as of the date hereof is, and our estimated value as determined on
the Pricing Date will be, derived using our internal pricing models. This value is based on market conditions and other relevant factors,
which include volatility of the Reference 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.
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The terms of the notes are not determined by reference to the credit spreads for our conventional fixed-rate debt. —
To determine the terms of the notes, we will use an internal funding rate that represents a discount from the credit spreads for our conventional
fixed-rate debt. As a result, the terms of the notes are less favorable to you than if we had used a higher funding rate.
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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 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.
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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.
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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.
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·
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Many economic and market factors will influence the value of the notes. — In addition to the level 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.
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·
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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.
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Please read carefully the section entitled "U.S.
Federal Tax Information" herein, the section entitled "Supplemental Tax Considerations–Supplemental U.S. Federal Income
Tax Considerations" in the accompanying product supplement, the section entitled "United States Federal Income Taxation"
in the accompanying prospectus and the section entitled "Certain Income Tax Consequences" in the accompanying prospectus supplement.
You should consult your tax advisor about your own tax situation.
Examples of the Hypothetical Payment at Maturity for a $1,000 Investment in the
Notes
The following table illustrates the hypothetical payments on a
note at maturity, assuming that the notes are not automatically redeemed. The hypothetical payments are based on a $1,000 investment in
the note, a hypothetical Initial Level of $100.00, a hypothetical Trigger Level of $70.00 (70.00% of the hypothetical Initial Level),
a hypothetical Call Level of $100.00 (100.00% of the hypothetical Initial Level), a range of hypothetical Final Levels and the effect
on the payment at maturity .
The hypothetical examples shown below are intended to help you
understand the terms of the notes. If the notes are not 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 applicable Contingent Coupon.
As discussed in more detail above, your total return on the notes
will also depend on the number of Contingent Coupon Dates on which the Contingent Coupon is payable. It is possible that the only payments
on your notes will be the payment, if any, due at maturity. The payment at maturity will not exceed the principal amount, and may be significantly
less.
Hypothetical Final Level
|
Hypothetical Final Level Expressed
as a Percentage of the Initial Level
|
Payment at Maturity (Excluding
Coupons)
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$200.00
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200.00%
|
$1,000.00
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$180.00
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180.00%
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$1,000.00
|
$160.00
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160.00%
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$1,000.00
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$140.00
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140.00%
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$1,000.00
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$120.00
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120.00%
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$1,000.00
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$100.00
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100.00%
|
$1,000.00
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$90.00
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90.00%
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$1,000.00
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$80.00
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80.00%
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$1,000.00
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$70.00
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70.00%
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$1,000.00
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$69.99
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69.99%
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$699.90
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$60.00
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60.00%
|
$600.00
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$40.00
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40.00%
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$400.00
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$20.00
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20.00%
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$200.00
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$0.00
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0.00%
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$0.00
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U.S. Federal Tax Information
By purchasing the notes, each holder agrees (in the absence of
a change in law, an administrative determination or a judicial ruling to the contrary) to treat each note as a pre-paid contingent income-bearing
derivative contract for U.S. federal income tax purposes. 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 (including the opinion of our counsel Mayer Brown LLP) in the product supplement
dated June 18, 2021 under “Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations,” 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. We or one of our affiliates may also pay a referral fee to certain dealers in connection with
the distribution of 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.
We reserve the right to withdraw, cancel or modify the offering
of the notes and to reject orders in whole or in part. You may cancel any order for the notes prior to its acceptance.
You should not construe the offering of the notes as a recommendation
of the merits of acquiring an investment linked to the Reference 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 the final pricing supplement relating to the notes
in the initial sale of the notes. In addition, BMOCM or another of our affiliates may use the final pricing supplement in market-making
transactions in any notes after their initial sale. Unless BMOCM or we inform you otherwise in the confirmation of sale, the final pricing
supplement is being used by BMOCM in a market-making transaction.
For a period of approximately three months following issuance
of the notes, the price, if any, at which we or our affiliates would be willing to buy the notes from investors, and the value that BMOCM
may also publish for the notes through one or more financial information vendors and which could be indicated for the notes on any brokerage
account statements, will reflect a temporary upward adjustment from our estimated value of the notes that would otherwise be determined
and applicable at that time. This temporary upward adjustment represents a portion of the hedging profit that we or our affiliates expect
to realize over the term of the notes. 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, and
that will be set forth on the cover page of the final pricing supplement relating to the notes, equals the sum of the values of the following
hypothetical components:
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·
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a fixed-income debt component with the same tenor as the notes, valued using our internal funding rate for structured notes; and
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·
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one or more derivative transactions relating to the economic terms of the notes.
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The internal funding rate used in the determination of the initial
estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. The value of these derivative
transactions is derived from our internal pricing models. These models are based on factors such as the traded market prices of comparable
derivative instruments and on other inputs, which include volatility, dividend rates, interest rates and other factors. As a result, the
estimated initial value of the notes on the Pricing Date will be determined based on the market conditions on the Pricing Date.
The Reference 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 sponsors. The information reflects the
policies of, and is subject to change by, the sponsors. The sponsors own the copyrights and all rights to the Reference Asset. The sponsors
are 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 and 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.
We encourage you to review recent levels of the Reference Asset
prior to making an investment decision with respect to the notes.
The S&P 500® Index
The S&P 500® Index is intended to provide an indication
of the pattern of common stock price movement. The calculation of the level of this Reference Asset 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 this Reference Asset by reference to the prices
of the constituent stocks of this Reference Asset 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.
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