Registration Statement No.333-264388
Filed Pursuant to Rule 433
Subject to Completion, dated September 21,
2022
Pricing Supplement to the Prospectus dated May 26, 2022,
the Prospectus Supplement dated May 26, 2022 and the Product
Supplement dated July 22, 2022

US$ [ ]
Senior Medium-Term Notes, Series I
Autocallable Notes with Contingent Coupons due September 30,
2025
Linked to the common stock of Tesla, Inc.
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The notes are designed for
investors who are seeking monthly contingent periodic interest
payments (as described in more detail below), as well as a return
of principal if the closing level of the common stock of Tesla,
Inc. (the “Reference Asset”) on any monthly Observation Date
beginning in December 2022 is greater than 100% of its Initial
Level (the “Call Level”). Investors should be willing to have their
notes automatically redeemed prior to maturity, be willing to
forego any potential to participate in the appreciation of the
Reference Asset and be willing to lose some or all of their
principal at maturity. |
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The notes will pay a Contingent
Coupon on each Contingent Coupon Payment Date at the Contingent
Interest Rate of 1.917% per month (approximately 23.00% per annum)
if the closing level of the Reference Asset on the applicable
monthly Observation Date is greater than its Coupon Barrier Level.
However, if the closing level of the Reference Asset is less than
or equal to its Coupon Barrier Level on an Observation Date, the
notes will not pay the Contingent Coupon for that Observation
Date. |
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Beginning on December 27, 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. On the following Contingent Coupon Payment Date (the
“Call Settlement Date"), investors will receive their principal
amount plus the Contingent Coupon otherwise due. After the notes
are redeemed, investors will not receive any additional payments in
respect of the notes. |
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The notes do not guarantee any
return of principal at maturity. Instead, if the notes are not
automatically redeemed, the payment at maturity will be based on
the Final Level of the Reference Asset and whether the Final Level
of that Reference Asset has declined from its Initial Level to
below its Trigger Level on the Valuation Date (a “Trigger Event”),
as described below. |
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If the notes are not automatically
redeemed and a Trigger Event has occurred, investors will lose 1%
of the principal amount for each 1% decrease in the level of the
Reference Asset from its Initial Level to its Final Level. In such
a case, you will receive a delivery of shares of the Reference
Asset (the “Physical Delivery Amount”) or, at our election, the
cash equivalent (calculated as described below, the “Cash Delivery
Amount”), which will be worth less than the principal amount. Any
fractional shares included in the Physical Delivery Amount will be
paid in cash. |
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Investing in the notes is not
equivalent to a direct investment in the Reference
Asset. |
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The notes will not be listed on
any securities exchange. |
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All payments on the notes are
subject to the credit risk of Bank of Montreal. |
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The notes will be issued in
minimum denominations of $1,000 and integral multiples of
$1,000. |
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Our subsidiary, BMO Capital
Markets Corp. (“BMOCM”), is the agent for this offering. See
“Supplemental Plan of Distribution (Conflicts of Interest)”
below. |
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The notes will not be subject to
conversion into our common shares or the common shares of any of
our affiliates under subsection 39.2(2.3) of the Canada Deposit
Insurance Corporation Act (the “CDIC Act”). |
Terms of the Notes:1
Strike
Date: |
September
20, 2022 |
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Pricing
Date: |
September 23,
2022 |
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Valuation
Date: |
September 25,
2025 |
Settlement
Date: |
September 28,
2022 |
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Maturity
Date: |
September 30,
2025 |
1Expected. See “Key Terms of the Notes” below for
additional details.
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 |
82 |
The common stock of Tesla,
Inc. |
TSLA |
[ ] |
1.917% per month (approximately
23.00% per annum) |
[ ], 65.00% of its Initial
Level |
[ ], 65.00% of its Initial
Level |
06369NDL2 |
[ ] |
100% |
Up to 3.00%
[ ]
|
At least 97.00%
[ ]
|
1 The total “Agent’s Commission” and “Proceeds to Bank
of Montreal” to be specified above will reflect the aggregate
amounts at the time Bank of Montreal establishes its hedge
positions on or prior to the Pricing Date, which may be variable
and fluctuate depending on market conditions at such times. Certain
dealers who purchased the notes for sale to certain fee-based
advisory accounts may forego some or all of their selling
concessions, fees or commissions. The public offering price for
investors purchasing the notes in these accounts may be between
$970.00 and $1,000 per $1,000 in principal amount. We or one of our
affiliates may also pay a referral fee to certain dealers in
connection with the distribution of the notes.
Investing in the notes involves risks, including those
described in the “Selected Risk Considerations” section beginning
on page P-5 hereof, the “Additional Risk Factors Relating to the
Notes” section beginning on page PS-6 of the product supplement,
and the “Risk Factors” section beginning on page S-1 of the
prospectus supplement and on page 8 of the prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these notes or
passed upon the accuracy of this document, the product supplement,
the prospectus supplement or the prospectus. Any representation to
the contrary is a criminal offense. The notes will be our unsecured
obligations and will not be savings accounts or deposits that are
insured by the United States Federal Deposit Insurance Corporation,
the Deposit Insurance Fund, the Canada Deposit Insurance
Corporation or any other governmental agency or instrumentality or
other entity.
On the date hereof, based on the terms set forth above, the
estimated initial value of the notes is $943.90 per $1,000 in
principal amount. The estimated initial value of the notes on the
Pricing Date may differ from this value but will not be less than
$895.00 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: |
The common stock of Tesla, Inc.
(ticker symbol “TSLA”) . 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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Contingent Interest Rate: |
1.917% per month (approximately 23.00% per annum), if payable.
Accordingly, each Contingent Coupon, if payable, will equal $19.17
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 last business day of
each month, beginning on October 31, 2022 and ending on the
Maturity Date, subject to the automatic redemption feature. |
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Automatic Redemption: |
Beginning on December 27, 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 number of shares
equal to the Physical Delivery Amount (or, at our election the Cash
Delivery Amount). Fractional shares will be paid in cash. The
Physical Delivery Amount will be less than the principal amount of
your notes, and may be zero.
You will also receive the final Contingent Coupon, if payable.
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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
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Initial Level:2 |
The closing level of the Reference Asset on the Strike
Date. |
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Coupon Barrier
Level:2 |
65.00% of the Initial Level. |
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Trigger Level:2 |
65.00% of the Initial Level. |
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Call Level:2 |
100% of the Initial Level. |
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Final Level: |
The closing level of the Reference Asset on the Valuation
Date. |
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Strike Date: |
September 20, 2022 |
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Pricing Date:1 |
September 23, 2022 |
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Settlement Date:1 |
September 28, 2022 |
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Valuation Date:1 |
September 25, 2025 |
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Maturity Date:1 |
September 30, 2025 |
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Physical Delivery
Amount:2 |
The number of shares of the Reference Asset equal to $1,000
divided by the Initial Level. Any fractional shares will be paid in
cash. |
Cash Delivery
Amount:2 |
The amount in cash equal to the product of
(1) the Physical Delivery Amount and (2) the Final Level of the
Reference Asset. |
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Calculation Agent: |
BMOCM |
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Selling Agent: |
BMOCM |
1 Expected and subject to the occurrence of a market
disruption event, as described in the accompanying product
supplement. If we make any change to the expected Pricing Date and
Settlement Date, the Contingent Coupon Payment Dates (and therefore
the 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 to a Reference Asset that Is an
Equity Security (Including Any ETF)” in the product supplement for
additional information.
Additional Terms of the Notes
You should read this document together with the product supplement
dated July 22, 2022, the prospectus supplement dated May 26, 2022
and the prospectus dated May 26, 2022. This document, together
with the documents listed below, contains the terms of the notes
and supersedes all other prior or contemporaneous oral statements
as well as any other written materials including preliminary or
indicative pricing terms, correspondence, trade ideas, structures
for implementation, sample structures, fact sheets, brochures or
other educational materials of ours or the agent. You should
carefully consider, among other things, the matters set forth in
Additional Risk Factors Relating to the Notes in the product
supplement, as the notes involve risks not associated with
conventional debt securities. We urge you to consult your
investment, legal, tax, accounting and other advisers before you
invest in the notes.
You may access these documents on the SEC website at www.sec.gov as
follows (or if such address has changed, by reviewing our filings
for the relevant date on the SEC website):
Product supplement dated July 22, 2022:
https://www.sec.gov/Archives/edgar/data/927971/000121465922009102/r712220424b2.htm
Prospectus supplement dated May 26, 2022 and prospectus dated May
26, 2022:
https://www.sec.gov/Archives/edgar/data/0000927971/000119312522160519/d269549d424b5.htm
Our Central Index Key, or CIK, on the SEC website is 927971. As
used in this document, "we", "us" or "our" refers to Bank of
Montreal.
We have filed a registration statement (including a prospectus)
with the SEC for the offering to which this document relates.
Before you invest, you should read the prospectus in that
registration statement and the other documents that we have filed
with the SEC for more complete information about us and this
offering. You may obtain these documents free of charge by visiting
the SEC's website at http://www.sec.gov. Alternatively, we will
arrange to send to you the prospectus (as supplemented by the
prospectus supplement and product supplement) if you request it by
calling our agent toll-free at 1-877-369-5412.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing in
the notes is not equivalent to investing directly in the Reference
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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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 delivery of shares of the
Reference Stock, or at our election the cash equivalent, which will
be worth 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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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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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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Your return on the notes is limited to the Contingent
Coupons, if any, regardless of any appreciation in the value of any
Reference Asset. — You will not receive a payment at maturity
with a value greater than your principal amount plus the final
Contingent Coupon, if payable. In addition, if the notes are
automatically redeemed, you will not receive a payment greater than
the principal amount plus the applicable Contingent Coupon, even if
the Final Level exceeds the 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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Any decline in the closing level of the Reference Asset from
the Valuation Date to the Maturity Date will reduce the value of
the Physical Delivery Amount. — If we deliver the Physical
Delivery Amount on the Maturity Date instead of paying the Cash
Delivery Amount, the number of shares deliverable will be
determined on the Valuation Date. The market value of the Physical
Delivery Amount on the Maturity Date may be less than the cash
equivalent of such shares determined on the Valuation Date due to
any decline in the closing level of the Reference Asset during the
period between the Valuation Date and the Maturity Date.
Conversely, if we pay the Cash Delivery Amount instead of
delivering the Physical Delivery Amount on the Maturity Date, the
Cash Delivery Amount will be determined on the Valuation Date and
the payment that you receive on the Maturity Date may be less than
the market value of such shares that you would have received had we
instead delivered such shares due to fluctuations in their market
value during the period between the Valuation Date and the Maturity
Date. |
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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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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 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, a 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. |
Risks Related to the Reference Asset
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Owning the notes is not the same as owning shares of 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 actually owned shares of the Reference
Asset or a security directly linked to the performance 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. In
addition, any dividends or other distributions paid on the
Reference Asset will not be reflected in the amount payable on the
notes. |
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You will not have any shareholder rights and will have no
right to receive any shares of the Reference Asset — Unless and
until we choose to deliver shares of the Reference Asset at
maturity, 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 the
Reference Asset. |
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No delivery of shares of the Reference Asset. — We may
choose, in our sole discretion, whether to deliver the Physical
Delivery Amount or pay the Cash Delivery Amount at maturity. You
should not invest in the notes if you wish to elect whether to
receive cash or shares at maturity. |
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Single equity risk. — The level of the Reference Asset
can rise or fall sharply due to factors specific to the Reference
Asset and the issuer of the Reference Asset (the “Reference Asset
Issuer”), such as stock price volatility, earnings, financial
conditions, corporate, industry and regulatory developments,
management changes and decisions and other events, as well as
general market factors, such as general stock market volatility and
levels, interest rates and economic and political conditions. We
urge you to review financial and other information filed
periodically with the SEC by the Reference Asset Issuer. We are not
affiliated with the Reference Asset Issuer and are not responsible
for the Reference Asset Issuer’s public disclosure of information,
whether contained in SEC filings or otherwise. We have not
undertaken any independent review or due diligence of the SEC
filings of the Reference Asset Issuer or of any other publicly
available information regarding the Reference Asset Issuer. |
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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. One or more of our affiliates have published, and in the
future may publish, research reports that express views on the
Reference Asset. 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. |
General Risk Factors
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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 shares of 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 any underwriting discount
and selling concessions, the profits that we and our affiliates
expect to realize for assuming the risks in hedging our obligations
under the notes and the estimated cost of hedging these
obligations. The initial estimated value of the notes may be as low
as the amount indicated on the cover page hereof. |
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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 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. |
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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 the
Reference Asset, futures or options relating to the Reference Asset
or other derivative instruments with return liked or related to
changes in the performance on the Reference Asset. We or our
affiliates may also trade in the Reference Asset or instruments
related to the Reference Asset 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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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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Significant aspects of the tax treatment of the notes are
uncertain. — The tax treatment of the notes is uncertain. We do
not plan to request a ruling from the Internal Revenue Service or
from any Canadian authorities regarding the tax treatment of the
notes, and the Internal Revenue Service or a court may not agree
with the tax treatment described herein.
The Internal Revenue Service has released a notice that may affect
the taxation of holders of “prepaid forward contracts” and similar
instruments. According to the notice, the Internal Revenue Service
and the U.S. Treasury are actively considering whether the holder
of such instruments should be required to accrue ordinary income on
a current basis. While it is not clear whether the notes would be
viewed as similar to such instruments, it is possible that any
future guidance could materially and adversely affect the tax
consequences of an investment in the notes, possibly with
retroactive effect.
Please read carefully the section entitled "U.S. Federal Tax
Information" herein, the section entitled "Supplemental Tax
Considerations–Supplemental U.S. Federal Income Tax Considerations"
in the accompanying product supplement, the section entitled
"United States Federal Income Taxation" in the accompanying
prospectus and the section entitled "Certain Income Tax
Consequences" in the accompanying prospectus supplement. You should
consult your tax advisor about your own tax situation. |
Examples of the Hypothetical Payment at Maturity for a $1,000
Investment in the Notes
The following table illustrates the hypothetical payments on a note
at maturity, assuming that the notes are not 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 $65.00 (65.00% 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 amount of cash or shares 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)* |
$200.00 |
200.00% |
$1,000.00 |
$180.00 |
180.00% |
$1,000.00 |
$160.00 |
160.00% |
$1,000.00 |
$140.00 |
140.00% |
$1,000.00 |
$120.00 |
120.00% |
$1,000.00 |
$100.00 |
100.00% |
$1,000.00 |
$90.00 |
90.00% |
$1,000.00 |
$80.00 |
80.00% |
$1,000.00 |
$70.00 |
70.00% |
$1,000.00 |
$65.00 |
65.00% |
$1,000.00 |
$64.99 |
64.99% |
$649.90 |
$60.00 |
60.00% |
$600.00 |
$40.00 |
40.00% |
$400.00 |
$20.00 |
20.00% |
$200.00 |
$0.00 |
0.00% |
$0.00 |
*
Represents the cash value of the Physical Delivery Amount on the
Valuation Date. We may elect to deliver either the Physical
Delivery Amount or the Cash Delivery Amount. If we elect to deliver
the Physical Delivery Amount, the actual value received and your
total return on the notes on the Maturity Date will depend on the
value of the Reference Asset on the Maturity Date.
U.S. Federal Tax Information
By purchasing the notes, each holder agrees (in the absence of a
change in law, an administrative determination or a judicial ruling
to the contrary) to treat each note as a pre-paid contingent
income-bearing derivative contract for U.S. federal income tax
purposes. In the opinion of our counsel, Mayer Brown LLP, it would
generally be reasonable to treat the notes as pre-paid contingent
income-bearing derivative contracts in respect of the Reference
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 accompanying product supplement under “Supplemental Tax
Considerations—Supplemental U.S. Federal Income Tax
Considerations—Notes Treated as an Investment Unit Consisting of a
Debt Portion and a Put Option, as a Pre-Paid Contingent
Income-Bearing Derivative Contract, or as a Pre-Paid Derivative
Contract—Notes Treated as a Pre-Paid Contingent Income-Bearing
Derivative Contract,” which applies to the notes.
Supplemental Plan of Distribution (Conflicts of
Interest)
BMOCM will purchase the notes from us at a purchase price
reflecting the commission set forth on the cover hereof. BMOCM has
informed us that, as part of its distribution of the notes, it will
reoffer the notes to other dealers who will sell them. Each such
dealer, or each additional dealer engaged by a dealer to whom BMOCM
reoffers the notes, will receive a commission from BMOCM, which
will not exceed the commission set forth on the cover page. We or
one of our affiliates may also pay a referral fee to certain
dealers in connection with the distribution of the notes.
Certain dealers who purchase the notes for sale to certain
fee-based advisory accounts may forego some or all of their selling
concessions, fees or commissions. The public offering price for
investors purchasing the notes in these accounts may be less than
100% of the principal amount, as set forth on the cover page of
this document. Investors that hold their notes in these accounts
may be charged fees by the investment advisor or manager of that
account based on the amount of assets held in those accounts,
including the notes.
We will deliver the notes on a date that is greater than 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 (a) the hedging profit
that we or our affiliates expect to realize over the term of the
notes and (b) any underwriting discount and the selling concessions
paid in connection with this offering. The amount of this temporary
upward adjustment will decline to zero on a straight-line basis
over the three-month period.
The notes and the related offer to purchase notes and sale of notes
under the terms and conditions provided herein do not constitute a
public offering in any non-U.S. jurisdiction, and are being made
available only to individually identified investors pursuant to a
private offering as permitted in the relevant jurisdiction. The
notes are not, and will not be, registered with any securities
exchange or registry located outside of the United States and have
not been registered with any non-U.S. securities or banking
regulatory authority. The contents of this document have not been
reviewed or approved by any non-U.S. securities or banking
regulatory authority. Any person who wishes to acquire the notes
from outside the United States should seek the advice or legal
counsel as to the relevant requirements to acquire these notes.
British Virgin Islands. The notes have not been, and will
not be, registered under the laws and regulations of the British
Virgin Islands, nor has any regulatory authority in the British
Virgin Islands passed comment upon or approved the accuracy or
adequacy of this document. This pricing supplement and the related
documents shall not constitute an offer, invitation or solicitation
to any member of the public in the British Virgin Islands for the
purposes of the Securities and Investment Business Act, 2010, of
the British Virgin Islands.
Cayman Islands. Pursuant to the Companies Law (as amended)
of the Cayman Islands, no invitation may be made to the public in
the Cayman Islands to subscribe for the notes by or on behalf of
the issuer unless at the time of such invitation the issuer is
listed on the Cayman Islands Stock Exchange. The issuer is not
presently listed on the Cayman Islands Stock Exchange and,
accordingly, no invitation to the public in the Cayman Islands is
to be made by the issuer (or by any dealer on its behalf). No such
invitation is made to the public in the Cayman Islands hereby.
Dominican Republic. Nothing in this pricing supplement
constitutes an offer of securities for sale in the Dominican
Republic. The notes have not been, and will not be, registered with
the Superintendence of Securities Market of the Dominican Republic
(Superintendencia del Mercado de Valores), under Dominican
Securities Market Law No. 249-17 (“Securities Law 249-17”), and the
notes may not be offered or sold within the Dominican Republic or
to, or for the account or benefit of, Dominican persons (as defined
under Securities Law 249-17 and its regulations). Failure to comply
with these directives may result in a violation of Securities Law
249-17 and its regulations.
Israel. This pricing supplement is intended solely for
investors listed in the First Supplement of the Israeli Securities
Law of 1968, as amended. A prospectus has not been prepared or
filed, and will not be prepared or filed, in Israel relating to the
notes offered hereunder. The notes cannot be resold in Israel other
than to investors listed in the First Supplement of the Israeli
Securities Law of 1968, as amended.
No action will be taken in Israel that would permit an offering of
the notes or the distribution of any offering document or any other
material to the public in Israel. In particular, no offering
document or other material has been reviewed or approved by the
Israel Securities Authority. Any material provided to an offeree in
Israel may not be reproduced or used for any other purpose, nor be
furnished to any other person other than those to whom copies have
been provided directly by us or the selling agents.
Nothing in this pricing supplement or any other offering material
relating to the notes, should be considered as the rendering of a
recommendation or advice, including investment advice or investment
marketing under the Law For Regulation of Investment Advice,
Investment Marketing and Investment Portfolio Management, 1995, to
purchase any note. The purchase of any note will be based on an
investor’s own understanding, for the investor’s own benefit and
for the investor’s own account and not with the aim or intention of
distributing or offering to other parties. In purchasing the notes,
each investor declares that it has the knowledge, expertise and
experience in financial and business matters so as to be capable of
evaluating the risks and merits of an investment in the notes,
without relying on any of the materials provided.
Mexico. The notes have not been registered with the National
Registry of Securities maintained by the Mexican National Banking
and Securities Commission and may not be offered or sold publicly
in Mexico. This pricing supplement and the related documents may
not be publicly distributed in Mexico. The notes may only be
offered in a private offering pursuant to Article 8 of the
Securities Market Law.
Switzerland. The notes may not be distributed to retail
investors in Switzerland. This pricing supplement shall not be
dispatched, copied to or otherwise made available to any person in
Switzerland, and the notes may not be offered for sale to any
person in Switzerland, except in accordance with Swiss law.
The notes are not offered, sold or advertised, directly or
indirectly, in, into or from Switzerland on the basis of a public
offering and will not be listed on the SIX Swiss Exchange or any
other offering or regulated trading facility in Switzerland.
Accordingly, neither this pricing supplement or any other marketing
material constitute a prospectus as defined in article 652a or
article 1156 of the Swiss Code of Obligations or a listing
prospectus as defined in article 32 of the Listing Rules of the SIX
Swiss Exchange or any other regulated trading facility in
Switzerland. Any sales or resales of the notes may only be
undertaken on a private basis to selected individual investors in
compliance with Swiss law. By accepting this pricing supplement or
by purchasing the notes, investors are deemed to have acknowledged
and agreed to abide by these restrictions.
The notes may also be sold in the following jurisdictions,
provided, in each case, any sales are made in accordance with all
applicable laws in such jurisdiction:
Additional Information Relating to the Estimated Initial Value
of the Notes
Our estimated initial value of the notes on the date hereof, and
that will be set forth on the cover page of the final pricing
supplement relating to the notes, equals the sum of the values of
the following hypothetical components:
|
· |
a fixed-income debt component with the same tenor as the notes,
valued using our internal funding rate for structured notes;
and |
|
· |
one or more derivative transactions relating to the economic
terms of the notes. |
The internal funding rate used in the determination of the initial
estimated value generally represents a discount from the credit
spreads for our conventional fixed-rate debt. The value of these
derivative transactions is derived from our internal pricing
models. These models are based on factors such as the traded market
prices of comparable derivative instruments and on other inputs,
which include volatility, dividend rates, interest rates and other
factors. As a result, the estimated initial value of the notes on
the Pricing Date will be determined based on the market conditions
on the Pricing Date.
The Reference Asset
We have derived the following information from publicly available
documents. We have not independently verified the accuracy or
completeness of the following information. We are not affiliated
with the Reference Asset Issuer and the Reference Asset Issuer will
have no obligations with respect to the notes. This document
relates only to the notes and does not relate to the shares of the
Reference Asset. Neither we nor any of our affiliates participates
in the preparation of the publicly available documents described
below. Neither we nor any of our affiliates has made any due
diligence inquiry with respect to the Reference Asset in connection
with the offering of the notes. There can be no assurance that all
events occurring prior to the date hereof, including events that
would affect the accuracy or completeness of the publicly available
documents described below and that would affect the trading price
of the shares of the Reference Asset, have been or will be publicly
disclosed. Subsequent disclosure of any events or the disclosure of
or failure to disclose material future events concerning the
Reference Asset could affect the price of the shares of the
Reference Asset on each Observation Date and on the Valuation Date,
and therefore could affect the payments on the notes.
The selection of the Reference Asset is not a recommendation to buy
or sell the shares of the Reference Asset. Neither we nor any of
our affiliates make any representation to you as to the performance
of the shares of the Reference Asset. Information provided to or
filed with the SEC under the Exchange Act and the Investment
Company Act of 1940 relating to the Reference Asset may be obtained
through the SEC’s website at http://www.sec.gov.
We encourage you to review recent levels of the Reference Asset
prior to making an investment decision with respect to the
notes.
Tesla, Inc. designs, develops, manufactures, sells and leases
electric vehicles and energy generation and storage systems and
offers related services. Information filed by the company with the
SEC can be located by reference to its SEC file number: 001-34756,
or its CIK Code: 0001318605. Its common stock is listed on the
Nasdaq Global Select Market under the ticker symbol "TSLA".
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