Registration Statement No.333-264388
Filed Pursuant to Rule 433
Subject to Completion,
dated June 21, 2023
Pricing Supplement to the Prospectus dated May 26, 2022,
the Prospectus Supplement dated May 26, 2022 and the Product Supplement dated September 22, 2022
![](https://content.edgar-online.com/edgar_conv_img/2023/06/21/0001214659-23-008690_bmologosm.jpg)
US$ [ ]
Senior Medium-Term Notes, Series I
Digital Return Buffer Notes due June 26, 2026
Linked to the shares of iShares® MSCI Emerging Markets ETF
| · | The notes are designed for investors who are seeking a potential 32.50% digital return (the "Digital
Return”) based on the performance of the shares of iShares® MSCI Emerging Markets ETF (the “Reference Asset”). The
Digital Return will be paid if the Final Level (as defined below) of the Reference Asset is greater than or equal to 100.00% of its level
on the Pricing Date (the “Initial Level”). |
| · | If the Reference Asset decreases by more than 20.00% from its Initial Level, 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 excess of 20.00%.
In such a case, you will receive a cash amount at maturity that is less than the principal amount, and may lose up to 80.00% of your principal
amount at maturity. |
| · | Investing in the notes is not equivalent to a direct investment in the Reference Asset. |
| · | The notes do not bear interest. The notes will not be listed on any securities exchange. |
| · | All payments on the notes are subject to the credit risk of Bank of Montreal. |
| · | The notes will be issued in minimum denominations of $1,000 and integral multiples of $1,000. |
| · | The CUSIP number of the notes is 06374VY42. |
| · | Our subsidiary, BMO Capital Markets Corp. (“BMOCM”), is the agent for this offering. See
“Supplemental Plan of Distribution (Conflicts of Interest)” below. |
| · | 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: |
June 20, 2023 |
|
|
|
Pricing Date: |
June 21, 2023 |
|
Valuation Date: |
June 23, 2026 |
Settlement Date: |
June 26, 2023 |
|
Maturity Date: |
June 26, 2026 |
1Expected. See “Key Terms of the Notes” below
for additional details.
|
Price to Public1 |
Agent’s Commission1 |
Proceeds to Bank of Montreal1 |
Per Note
Total |
100% |
Up to 0.10%
[ ] |
At least 99.90%
[ ] |
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 established its hedge
positions on or prior to the Pricing Date, which may have been variable and fluctuated 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 $999.00 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-5 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 $977.90 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 $930.00 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 shares of iShares® MSCI Emerging Markets ETF (ticker symbol "EEM"). See "The Reference Asset" below for additional information. |
|
|
Underlying Index: |
MSCI® Emerging Markets Index |
|
|
Payment at Maturity: |
If the Final Level of the Reference Asset is greater than or equal to
its Digital Barrier Level, then the amount that investors will receive at maturity for each $1,000 in principal amount of the notes will
equal:
$1,000 + ($1,000 x Digital Return)
If the Final Level of the Reference Asset is less than its Digital Barrier
Level, but is not less than its Buffer Level, then investors will, for each $1,000 in principal amount of the notes, receive the principal
amount of $1,000 and no additional return.
If the Final Level of the Reference Asset is less than its Buffer Level,
then the amount that investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
$1,000 + [$1,000 x (Percentage Change of the Reference
Asset + Buffer Percentage)]
In this case, investors will lose 1% of their principal for each
1% that the Final Level of the Reference Asset declines from its Initial Level in excess of 20.00%. You may lose up to 80.00% of the principal
amount of your notes.
|
|
|
Digital Return: |
32.50% |
|
|
Percentage Change: |
The quotient, expressed as a percentage, of the following formula:
(Final Level - Initial Level)
Initial Level
|
|
|
Initial Level:2 |
The closing level of the Reference Asset on the Strike Date. |
|
|
Digital Barrier Level: |
100.00% of the Initial Level. |
|
|
Buffer Level:2 |
80.00% of the Initial Level. |
|
|
Buffer Percentage:2 |
20.00% Accordingly, you will receive the principal amount of your notes at maturity only if the level of the Reference Asset does not decrease by more than 20.00% over the term of the notes. If the Final Level of the Reference Asset is less than its Buffer Level, you will receive less than the principal amount of your notes at maturity and you could lose up to 80.00% of the principal amount of your notes. |
|
|
Final Level: |
The closing level of the Reference Asset on the Valuation Date. |
|
|
Strike Date: |
June 20, 2023 |
|
|
Pricing Date:1 |
June 21, 2023 |
|
|
Settlement Date:1 |
June 26, 2023 |
|
|
Valuation Date:1 |
June 23, 2026 |
|
|
Maturity Date:1 |
June 26, 2026 |
|
|
Physical Delivery Amount: |
We will only pay cash on the Maturity Date, and you will have no right to receive any shares of the Reference Asset. |
|
|
Calculation Agent: |
BMOCM |
|
|
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
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)” and “— Adjustments to an ETF” in the product supplement for additional information.
Payoff Example
The following table shows the hypothetical payout
profile of an investment in the notes based on various hypothetical Final Levels (and the corresponding Percentage Change) of the Reference
Asset, reflecting the 32.50% Digital Return and Buffer Level of 80.00% of the Initial Level. Please see “Examples of the Hypothetical
Payment at Maturity for a $1,000 Investment in the Notes” below for more detailed examples.
Hypothetical Percentage Change
of the Reference Asset |
Participation in Percentage
Change |
Hypothetical Return of the Notes
|
30%
10%
|
32.50% Digital Return
|
32.50%
32.50% |
-10%
-20%
|
Buffer Level of 80.00% of Initial
Level
|
0%
0% |
-30%
-40%
|
1x Loss Beyond Buffer Level
|
-10%
-20% |
Additional Terms of the Notes
You should read this document together with the
product supplement dated September 22, 2022, the prospectus supplement dated May 26, 2022 and the prospectus dated May 26, 2022. This
document, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous
oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas,
structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours or the agent. You
should carefully consider, among other things, the matters set forth in Additional Risk Factors Relating to the Notes in the product supplement,
as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting
and other advisers before you invest in the notes.
You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Product supplement dated September 22, 2022:
https://www.sec.gov/Archives/edgar/data/927971/000121465922011396/j922220424b2.htm
Prospectus supplement 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
| · | Your investment in the notes may result in a loss. — The notes do not guarantee any return of principal. If the Final
Level is less than its Buffer Level, you will lose 1% of the principal amount for each 1% that the Final Level is less than the Initial
Level in excess of the Buffer Percentage. 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 significantly less than the principal amount of your notes. Accordingly, you could lose up to 80.00%
of the principal amount of your notes. |
| · | Your return on the notes is limited to the Digital Return, regardless of any appreciation in the level of the Reference Asset.
— The return on your notes will not be greater than the Digital Return. This will be the case even if the Percentage Change of the
Reference Asset, which reflects the increase or decrease in the level of the Reference Asset over the term of the notes, is significantly
greater than the Digital Return. You will only receive the Digital Return if the Final Level is greater than or equal to the Digital Barrier
Level. |
| · | Your return on the notes may be lower than the return on a conventional debt security of comparable maturity. — The
return that you will receive on your notes, which could be negative, may be less than the return you could earn on other investments.
The notes do not provide for interest payments and the payment you receive at maturity, if any, may be less than the principal amount
of the notes. Even if your return on the notes is positive, your return may be less than the return you would earn if you bought a conventional
senior interest bearing debt security of ours with the same maturity or if you invested directly in the Reference Asset. Your investment
may not reflect the full opportunity cost to you when you take into account factors that affect the time value of money. |
Risks Related to the Reference Asset
| · | Owning the notes is not the same as 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. |
| · | You will not have any shareholder rights and will have no right to receive any shares of the Reference Asset (or any company included
in the Reference Asset) at maturity. — Investing in your notes will not make you a holder of any shares of the Reference Asset
or any securities held by 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 the Reference Asset or such underlying securities. |
| · | No delivery of shares of the Reference Asset. — The notes will be payable only in cash. You should not invest in the
notes if you seek to have the shares of the Reference Asset delivered to you at maturity. |
| · | Changes that affect the applicable Underlying Index will affect the market value of the notes and the amount you will receive at
maturity. — The policies of the applicable index sponsor concerning the calculation of the applicable Underlying Index, additions,
deletions or substitutions of the components of the applicable Underlying Index and the manner in which changes affecting those components,
such as stock dividends, reorganizations or mergers, may be reflected in the applicable Reference Asset and, therefore, could affect the
share price of the Reference Asset, the amounts payable on the notes, and the market value of the notes prior to maturity. The amount
payable on the notes and their market value could also be affected if the applicable index sponsor changes these policies, for example,
by changing the manner in which it calculates the applicable Underlying Index, or if the applicable index sponsor discontinues or suspends
the calculation or publication of the applicable Underlying Index. |
| · | We have no affiliation with the index sponsor of the applicable Underlying Index and will not be responsible for its actions.
— The sponsor of the applicable Underlying Index 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 of the applicable Underlying Index, including any actions
of the type that would require the calculation agent to adjust the payment to you at maturity. The index sponsors have no obligation of
any sort with respect to the notes. Thus, the applicable 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 of the applicable Underlying Index. |
| · | Adjustments to the Reference Asset could adversely affect the notes. — The sponsor and advisor of the Reference Asset
is responsible for calculating and maintaining the Reference Asset. The sponsor and advisor of the Reference Asset can add, delete or
substitute the stocks comprising the Reference Asset or make other methodological changes that could change the share price of the Reference
Asset at any time. If one or more of these events occurs, the calculation of the amount payable at maturity may be adjusted to reflect
such event or events. Consequently, any of these actions could adversely affect the amount payable at maturity and/or the market value
of the notes. |
| · | We and our affiliates do not have any affiliation with the applicable investment advisor or the Reference Asset Issuer and are
not responsible for their public disclosure of information. — The investment advisor of the Reference Asset advises the issuer
of the Reference Asset (the “Reference Asset Issuer” ) on various matters, including matters relating to the policies, maintenance
and calculation of the Reference Asset. We and our affiliates are not affiliated with the applicable investment advisor or the Reference
Asset Issuer in any way and have no ability to control or predict its actions, including any errors in or discontinuance of disclosure
regarding the methods or policies relating to the Reference Asset. Neither the applicable investment advisor nor the Reference Asset Issuer
is involved in the offerings of the notes in any way and has no obligation to consider your interests as an owner of the notes in taking
any actions relating to the Reference Asset that might affect the value of the notes. Neither we nor any of our affiliates has independently
verified the adequacy or accuracy of the information about the applicable investment advisor or the Reference Asset contained in any public
disclosure of information. You, as an investor in the notes, should make your own investigation into the Reference Asset Issuer. |
| · | The correlation between the performance of the Reference Asset and the performance of the applicable Underlying Index may be imperfect.
— The performance of the Reference Asset is linked principally to the performance of the applicable Underlying Index. However, because
of the potential discrepancies identified in more detail in the product supplement, the return on the Reference Asset may correlate imperfectly
with the return on the applicable Underlying Index. |
| · | The Reference Asset is subject to management risks. — The Reference Asset is subject to management risk, which is the
risk that the applicable investment advisor’s investment strategy, the implementation of which is subject to a number of constraints,
may not produce the intended results. For example, the applicable investment advisor may invest a portion of the Reference Asset Issuer’s
assets in securities not included in the relevant industry or sector but which the applicable investment advisor believes will help the
Reference Asset track the relevant industry or sector. |
| · | 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 prices of the Reference Asset
or the prices of the securities held by the Reference Asset. One or more of our affiliates have published, and in the future may publish,
research reports that express views on the Reference Asset or these securities. However, these views are subject to change from time to
time. Moreover, other professionals who deal in the markets relating to the Reference Asset at any time may have significantly different
views from those of our affiliates. You are encouraged to derive information concerning the Reference Asset from multiple sources, and
you should not rely on the views expressed by our affiliates.
Neither the offering of the notes nor any views which our affiliates from time to time may express in the ordinary course of their businesses
constitutes a recommendation as to the merits of an investment in the notes. |
Risks Relating to iShares® MSCI Emerging Markets ETF
| · | The iShares® MSCI Emerging Markets ETF, and therefore an investment in the notes, is subject to foreign currency exchange rate
risk. — The share price of the iShares® MSCI Emerging Markets ETF will fluctuate based upon its net asset value, which will
in turn depend in part upon changes in the value of the currencies in which the stocks held by the iShares® MSCI Emerging Markets
ETF are traded. Accordingly, investors in the notes will be exposed to currency exchange rate risk with respect to each of these currencies.
An investor’s net exposure will depend on the extent to which these currencies strengthen or weaken against the U.S. dollar. If
the dollar strengthens against these currencies, the net asset value of the iShares® MSCI Emerging Markets ETF will be adversely affected
and the price of its shares may decrease. |
| · | The iShares® MSCI Emerging Markets ETF, and therefore an investment in the notes, is subject to risks associated with foreign
securities markets. — The Underlying Index of the iShares® MSCI Emerging Markets ETF tracks the value of certain foreign
equity securities. You should be aware that investments in securities linked to the value of foreign equity securities involve particular
risks. The foreign securities markets comprising the Underlying Index of the iShares® MSCI Emerging Markets ETF may have less liquidity
and may be more volatile than U.S. or other securities markets and market developments may affect foreign markets differently from U.S.
or other securities markets. Direct or indirect government intervention to stabilize these foreign securities markets, as well as cross-shareholdings
in foreign companies, may affect trading prices and volumes in these markets. Also, there is generally less publicly available information
about foreign companies than about those U.S. companies that are subject to the reporting requirements of the U.S. Securities and Exchange
Commission, and foreign companies are subject to accounting, auditing and financial reporting standards and requirements that differ from
those applicable to U.S. reporting companies.
Prices of securities in foreign countries are subject to political, economic, financial and social factors that apply in those geographical
regions. These factors, which could negatively affect those securities markets, include the possibility of recent or future changes in
a foreign government’s economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other
laws or restrictions applicable to foreign companies or investments in foreign equity securities and the possibility of fluctuations in
the rate of exchange between currencies, the possibility of outbreaks of hostility and political instability and the possibility of natural
disaster or adverse public health developments in the region. Moreover, foreign economies may differ favorably or unfavorably from the
U.S. economy in important respects such as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency. |
| · | The iShares® MSCI Emerging Markets ETF, and therefore an investment in the notes, is subject to risks associated with emerging
markets. — The Underlying Index of the iShares® MSCI Emerging Markets ETF consists of stocks issued by companies in countries
with emerging markets. Countries with emerging markets may have relatively unstable governments, may present the risks of nationalization
of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets, and may have less protection of property
rights than more developed countries. The economies of countries with emerging markets may be based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions (due to economic dependence upon commodity prices and international trade),
and may suffer from extreme and volatile debt burdens, currency devaluations or inflation rates. Local securities markets may trade a
small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation
of holdings difficult or impossible at times.
The shares tracked by the Underlying Index of the iShares® MSCI Emerging Markets ETF may be listed on a foreign stock exchange. A
foreign stock exchange may impose trading limitations intended to prevent extreme fluctuations in individual security prices and may suspend
trading in certain circumstances. These actions could limit variations in the levels of the of the iShares® MSCI Emerging Markets
ETF, which could, in turn, adversely affect the value of, and amount payable on, the notes. |
General Risk Factors
| · | Your investment is subject to the credit risk of Bank of Montreal. — Our credit ratings and credit spreads may adversely
affect the market value of the notes. Investors are dependent on our ability to pay any amounts due on the notes, and therefore investors
are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or
increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the notes. |
| · | Potential conflicts. — We and our affiliates play a variety of roles in connection with the issuance of the notes, including
acting as calculation agent. In performing these duties, the economic interests of the calculation agent and other affiliates of ours
are potentially adverse to your interests as an investor in the notes. We or one or more of our affiliates may also engage in trading
of shares of the Reference Asset or the securities held by 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. |
| · | 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. |
| · | 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. |
| · | 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. |
| · | Certain costs are likely to adversely affect the value of the notes. — Absent any changes in market conditions, any secondary
market prices of the notes will likely be lower than the price to public. This is because any secondary market prices will likely take
into account our then-current market credit spreads, and because any secondary market prices are likely to exclude all or a portion of
any underwriting discount and selling concessions, and the hedging profits and estimated hedging costs that are included in the price
to public of the notes and that may be reflected on your account statements. In addition, any such price is also likely to reflect a discount
to account for costs associated with establishing or unwinding any related hedge transaction, such as dealer discounts, mark-ups and other
transaction costs. As a result, the price, if any, at which BMOCM or any other party may be willing to purchase the notes from you in
secondary market transactions, if at all, will likely be lower than the price to public. Any sale that you make prior to the Maturity
Date could result in a substantial loss to you. |
| · | Lack of liquidity. — The notes will not be listed on any securities exchange. BMOCM may offer to purchase the notes in
the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow
you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which
you may be able to trade the notes is likely to depend on the price, if any, at which BMOCM is willing to buy the notes. |
| · | Hedging and trading activities. — We or any of our affiliates have carried out or may carry out hedging activities related
to the notes, including purchasing or selling shares of the Reference Asset or securities held by the Reference Asset, futures or options
relating to the Reference Asset or securities held by the Reference Asset or other derivative instruments with return liked or related
to changes in the performance on the Reference Asset or securities held by the Reference Asset. We or our affiliates may also trade in
the Reference Asset, such securities, or instruments related to the Reference Asset or such securities from time to time. Any of these
hedging or trading activities on or prior to the Pricing Date and during the term of the notes could adversely affect the payments on
the notes. |
| · | Many economic and market factors will influence the value of the notes. — In addition to the 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. |
| · | Significant aspects of the tax treatment of the notes are uncertain. — The tax treatment of the notes is uncertain. We
do not plan to request a ruling from the Internal Revenue Service or from any Canadian authorities regarding the tax treatment of the
notes, and the Internal Revenue Service or a court may not agree with the tax treatment described herein.
The Internal Revenue Service has released a notice that may affect the taxation of holders of “prepaid forward contracts”
and similar instruments. According to the notice, the Internal Revenue Service and the U.S. Treasury are actively considering whether
the holder of such instruments should be required to accrue ordinary income on a current basis. While it is not clear whether the notes
would be viewed as similar to such instruments, it is possible that any future guidance could materially and adversely affect the tax
consequences of an investment in the notes, possibly with retroactive effect.
Please read carefully the section entitled "U.S. Federal Tax Information" herein, the section entitled "Supplemental Tax
Considerations—Supplemental U.S. Federal Income Tax Considerations" in the accompanying product supplement, the section entitled
"United States Federal Income Taxation" in the accompanying prospectus and the section entitled "Certain Income Tax Consequences"
in the accompanying prospectus supplement. You should consult your tax advisor about your own tax situation. |
Examples of the Hypothetical Payment at Maturity for a $1,000 Investment
in the Notes
The following table illustrates the hypothetical
payments on a note at maturity. The hypothetical payments are based on a $1,000 investment in the note, a hypothetical Initial Level of
100.00, a hypothetical Digital Barrier Level of 100.00 (100.00% of the hypothetical Initial Level), a hypothetical Buffer Level of 80.00
(80.00% 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. The actual cash amount that you will receive at maturity will depend upon the Final Level
of the Reference Asset. You may lose some or all of the principal amount at maturity.
Hypothetical Final Level |
Hypothetical Final Level
Expressed as a Percentage of the
Initial Level |
Hypothetical Payment at
Maturity |
Hypothetical Return on the
Notes |
200.00 |
200.00% |
$1,325.00 |
32.50% |
180.00 |
180.00% |
$1,325.00 |
32.50% |
160.00 |
160.00% |
$1,325.00 |
32.50% |
140.00 |
140.00% |
$1,325.00 |
32.50% |
120.00 |
120.00% |
$1,325.00 |
32.50% |
100.00 |
100.00% |
$1,325.00 |
32.50% |
90.00 |
90.00% |
$1,000.00 |
0.00% |
80.00 |
80.00% |
$1,000.00 |
0.00% |
79.99 |
79.99% |
$999.90 |
-0.01% |
60.00 |
60.00% |
$800.00 |
-20.00% |
40.00 |
40.00% |
$600.00 |
-40.00% |
20.00 |
20.00% |
$400.00 |
-60.00% |
0.00 |
0.00% |
$200.00 |
-80.00% |
The following examples illustrate how the returns
set forth in the table above are calculated.
Example 1: The level of the Reference Asset decreases from the hypothetical
Initial Level of 100.00 to a hypothetical Final Level of 60.00, representing a Percentage Change of -40.00%. Because the Percentage
Change of the Reference Asset is negative and its hypothetical Final Level is less than its Buffer Level, the investor receives a payment
at maturity of $800.00 per $1,000 in principal amount of the notes, calculated as follows:
$1,000 + [$1,000 x (-40.00% + 20.00%)] = $800.00
Example 2: The level of the Reference Asset decreases from the hypothetical
Initial Level of 100.00 to a hypothetical Final Level of 90.00, representing a Percentage Change of -10.00%. Although the Percentage
Change of the Reference Asset is negative, because its hypothetical Final Level is greater than its Buffer Level, the investor receives
a payment at maturity equal to the principal amount of the notes.
Example 3: The level of the Reference Asset increases from the hypothetical
Initial Level of 100.00 to a hypothetical Final Level of 140.00, representing a Percentage Change of 40.00%. Because the hypothetical
Final Level of the Reference Asset is greater than its Digital Barrier Level, the investor receives a payment at maturity of $1,325.00
per $1,000 in principal amount of the notes, calculated as follows:
$1,000 + ($1,000 x 32.50%) = $1,325.00
If the Final Level is greater than or equal
to the Digital Barrier Level, you will receive a return equal to the Digital Return. Your potential return is limited to the Digital Return
regardless of any potential positive performance of the Reference Asset.
U.S. Federal Tax Information
By purchasing the notes, each holder agrees (in
the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat each note as a pre-paid
derivative contract for U.S. federal income tax purposes. In the opinion of our counsel, Mayer Brown LLP, it would generally be reasonable
to treat the notes as pre-paid derivative contracts in respect of the Reference Asset for U.S. federal income tax purposes. However, the
U.S. federal income tax consequences of your investment in the notes are uncertain and the Internal Revenue Service could assert that
the notes should be taxed in a manner that is different from that described in the preceding sentence. Please see the discussion in the
product supplement dated September 22, 2022 under “Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations—Notes
Treated as Pre-Paid Derivative Contracts,” which applies to the notes.
Supplemental Plan of Distribution (Conflicts of Interest)
BMOCM will purchase the notes from us at a purchase
price reflecting the commission set forth on the cover hereof. BMOCM has informed us that, as part of its distribution of the notes, it
will reoffer the notes to other dealers who will sell them. Each such dealer, or each additional dealer engaged by a dealer to whom BMOCM
reoffers the notes, will receive a commission from BMOCM, which will not exceed the commission set forth on the cover page. We or one
of our affiliates 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 or any securities included in the Underlying Index. 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 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.
iShares® MSCI Emerging Markets ETF
The iShares® MSCI Emerging Markets ETF is an
investment portfolio maintained and managed by iShares, Inc. and advised by BlackRock Fund Advisors. iShares is a registered investment
company that consists of numerous separate investment portfolios, including the iShares® MSCI Emerging Markets ETF. The iShares®
MSCI Emerging Markets ETF seeks investment results that correspond generally to the price and yield performance, before fees and expenses,
of the MSCI® Emerging Markets Index. Information about the iShares® MSCI Emerging Markets ETF filed with the SEC can be found
by reference to its SEC file numbers: 033-97598 and 811-09102 or its CIK Code: 0000930667. Shares of the iShares® MSCI Emerging Markets
ETF are listed on the NYSE Arca under ticker symbol "EEM."
The MSCI Emerging Markets Index
All information in this document regarding the MSCI
Emerging Markets Index, including, without limitation, its make-up, method of calculation and changes in its components, is derived from
publicly available information. Such information reflects the policies of, and is subject to change by, MSCI Inc. (“MSCI”).
Neither we nor any of our affiliates has undertaken any independent review or due diligence of such information. MSCI owns the copyright
and all other rights to the MSCI Emerging Markets Index. MSCI has no obligation to continue to publish, and may discontinue publication
of, the MSCI Emerging Markets Index.
The MSCI Emerging Markets Index is published by
MSCI and is intended to capture the large and mid cap representation across selected emerging markets countries and to capture approximately
85% of the free-float adjusted market capitalization in each selected emerging markets country. The MSCI Emerging Markets Index currently
consists of the following 24 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary,
India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey
and United Arab Emirates. The MSCI Emerging Markets Index has a base date of December 31, 1987 and an initial value of 100.
The MSCI Global Investable Market Indices
The MSCI Emerging Markets Index is an MSCI Global
Investable Market Index.
Constructing the MSCI Global Investable Market
Indices.
MSCI undertakes an index construction process, which
involves:
· |
defining the equity universe for each market; |
|
|
· |
determining the market investable equity universe for each market; |
|
|
· |
determining market capitalization size segments for each market; |
|
|
· |
applying index continuity rules for the MSCI Standard Index; |
|
|
· |
classifying securities under the Global Industry Classification Standard (the “GICS”); and |
|
|
· |
using a building block approach, regional and composite indexes can be created from the individual market indexes for each size-segment |
Defining the Equity Universe.
The equity universe is defined by:
· |
Identifying Eligible Equity Securities: the equity universe initially looks at securities listed in any of the countries in the MSCI Global Index Series, which will be classified as either Developed Markets (“DM”) or Emerging Markets (“EM”). All listed equity securities, or listed securities that exhibit characteristics of equity securities, except mutual funds, exchange traded funds, equity derivatives, limited partnerships, and most investment trusts, are eligible for inclusion in the equity universe. Real Estate Investment Trusts (“REITs”) in some countries and certain income trusts in Canada are also eligible for inclusion. |
· |
Classifying Eligible Securities into the Appropriate Country: each company and its securities (i.e., share classes) are classified in only one country. |
Determining the Market Investable Equity Universes.
A market investable equity universe for a market
is derived by (i) identifying eligible listings for each security in the equity universe; and (ii) applying investability screens to individual
companies and securities in the equity universe that are classified in that market. A market is generally equivalent to a single country.
A security may have a listing in the country where
it is classified (a “local listing”) and/or in a different country (a “foreign listing”). A security may be represented
by either a local listing or a foreign listing (including a depositary receipt) in the global investable equity universe. A security may
be represented by a foreign listing only if the security is classified in a country that meets the foreign listing materiality requirement
(as described below), and the security’s foreign listing is traded on an eligible stock exchange of a developed market country if
the security is classified in a developed market country or, if the security is classified in an emerging market country, an eligible
stock exchange of a developed market country or an emerging market country.
In order for a country to meet the foreign listing
materiality requirement, MSCI determines all securities represented by a foreign listing that would be included in the country’s
MSCI Country Investable Market Index if foreign listings were eligible from that country. The aggregate free-float adjusted market capitalization
for all such securities should represent at least (i) 5% of the free float-adjusted market capitalization of the relevant MSCI Country
Investable Market Index and (ii) 0.05% of the free-float adjusted market capitalization of the MSCI ACWI Investable Market Index. If a
country does not meet the foreign listing materiality requirement, then securities in that country may not be represented by a foreign
listing in the global investable equity universe.
The investability screens used to determine the
investable equity universe in each market are as follows:
· |
Equity Universe Minimum Size Requirement: this investability screen is applied at the company level. In order to be included in a market investable equity universe, a company must have the required minimum full market capitalization. |
|
|
· |
Equity Universe Minimum Free Float-Adjusted Market Capitalization Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security must have a free float-adjusted market capitalization equal to or higher than 50% of the equity universe minimum size requirement. |
|
|
· |
DM and EM Minimum Liquidity Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security must have at least one eligible listing with adequate liquidity. The twelve-month and three-month Annual Traded Value Ratio (“ATVR”), a measure that screens out extreme daily trading volumes and takes into account the free float-adjusted market capitalization size of securities, together with the three-month frequency of trading are used to measure liquidity. A minimum liquidity level of 20% of three- and twelve-month ATVR and 90% of three-month frequency of trading over the last four consecutive quarters, as well as 20% of 12-month ATVR are required for inclusion of a security in a market investable equity universe of a DM, and a minimum liquidity level of 15% of three- and twelve-month ATVR and 80% of three-month frequency of trading over the last four consecutive quarters, as well as 15% of 12-month ATVR are required for inclusion of a security in a market investable equity universe of an EM. |
|
|
· |
Global Minimum Foreign Inclusion Factor Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security’s Foreign Inclusion Factor (“FIF”) must reach a certain threshold. The FIF of a security is defined as the proportion of shares outstanding that is available for purchase in the public equity markets by international investors. This proportion accounts for the available free float of and/or the foreign ownership limits applicable to a specific security (or company). In general, a security must have an FIF equal to or larger than 0.15 to be eligible for inclusion in a market investable equity universe. |
|
|
· |
Minimum Length of Trading Requirement: this investability screen is applied at the individual security level. For an initial public offering (“IPO”) to be eligible for inclusion in a market investable equity universe, the new issue must have started trading at least three months before the implementation of a semi−annual index review (as described below). This requirement is applicable to small new issues in all markets. Large IPOs are not subject to the minimum length of trading requirement and may be included in a market investable equity universe and the Standard Index outside of a Quarterly or Semi−Annual Index Review. |
|
|
· |
Minimum Foreign Room Requirement: this investability screen is applied at the individual security level. For a security that is subject to a foreign ownership limit to be eligible for inclusion in a market investable equity universe, the proportion of shares still available to foreign investors relative to the maximum allowed (referred to as “foreign room”) must be at least 15%. |
Defining Market Capitalization Size Segments
for Each Market. Once a market investable equity universe is defined, it is segmented into the following size−based indices:
· |
Investable Market Index (Large + Mid + Small); |
|
|
· |
Standard Index (Large + Mid); |
|
|
· |
Large Cap Index; |
|
|
· |
Mid Cap Index; or |
|
|
· |
Small Cap Index. |
Creating the size segment indices in each market
involves the following steps:
· |
defining the market coverage target range for each size segment; |
|
|
· |
determining the global minimum size range for each size segment; |
|
|
· |
determining the market size−segment cutoffs and associated segment number of companies; |
|
|
· |
assigning companies to the size segments; and |
|
|
· |
applying final size−segment investability requirements. |
Index Continuity Rules for the Standard Indices.
In order to achieve index continuity, as well as
to provide some basic level of diversification within a market index, and notwithstanding the effect of other index construction rules
described in this section, a minimum number of five constituents will be maintained for a DM Standard Index and a minimum number of three
constituents will be maintained for an EM Standard Index.
Classifying Securities under the Global Industry
Classification Standard.
All securities in the global investable equity universe
are assigned to the industry that best describes their business activities. To this end, MSCI has designed, in conjunction with S&P
Dow Jones Indices, the GICS. The GICS currently consists of 11 Sectors, 24 Industry Groups, 69 Industries and 158 Sub-Industries. Under
the GICS, each company is assigned to one Sub−Industry according to its principal business activity. Therefore, a company can belong
to only one grouping at each of the four levels of the GICS.
Calculation Methodology for the MSCI® Emerging
Markets Index.
The performance of the underlying index is a free-float
weighted average of the U.S. dollar values of its component securities.
Prices used to calculate the component securities
are the official exchange closing prices or prices accepted as such in the relevant market. In the case of a market closure, or if a security
does not trade on a specific day or during a specific period, MSCI carries forward the previous day’s price (or latest available
closing price). In the event of a market outage resulting in any component security price to be unavailable, MSCI will generally use the
last reported price for such component security for the purpose of performance calculation unless MSCI determines that another price is
more appropriate based on the circumstances. Closing prices are converted into U.S. dollars, as applicable, using the closing exchange
rates calculated by WM/Reuters at 4:00PM London Time.
Index Maintenance
The MSCI Global Investable Market Indices are maintained
with the objective of reflecting the evolution of the underlying equity markets and segments on a timely basis, while seeking to achieve
index continuity, continuous investability of constituents and replicability of the indices, and index stability and low index turnover.
In particular, index maintenance involves:
Semi−Annual Index Reviews (“SAIRs”) in May
and November of the Size Segment and Global Value and Growth Indices which include:
· |
updating the indices on the basis of a fully refreshed equity universe; |
|
|
· |
taking buffer rules into consideration for migration of securities across size and style segments; and |
|
|
· |
updating FIFs and Number of Shares (“NOS”). |
Quarterly Index Reviews in February and August of the Size
Segment Indices aimed at:
· |
including significant new eligible securities (such as IPOs that were not eligible for earlier inclusion) in the index; |
|
|
· |
allowing for significant moves of companies within the Size Segment Indices, using wider buffers than in the SAIR; and |
· |
reflecting the impact of significant market events on FIFs and updating NOS. |
Ongoing Event−Related Changes: changes of this type
are generally implemented in the indices as they occur. Significantly large IPOs are included in the indices after the close of the company’s
tenth day of trading.
MSCI’s semi-annual index review is designed
to systematically reassess the component securities of the index. During each semi-annual index review, the universe of component securities
is updated and the global minimum size range for the index is recalculated. Then, the following index maintenance activities, among others,
are undertaken: the eligible equity securities are reviewed, minimum size requirements are reevaluated, and size-segment requirements
are reassessed. The results of the semi-annual index reviews are announced at least two weeks in advance of their effective implementation
date as of the close of the last business day of May and November.
MSCI’s quarterly index review process is designed
to ensure that the country indices continue to be an accurate reflection of evolving equity markets. This goal is achieved by timely reflecting
significant market driven changes that were not captured in each index at the time of their actual occurrence and that should not wait
until the semi-annual index review due to their importance. These quarterly index reviews may result in additions and deletions of component
securities from a country index (or a security being removed from one country listing and represented by a different country listing)
and changes in FIFs and in NOS.
These guidelines and the policies implementing the
guidelines are the responsibility of, and, ultimately, subject to adjustment by, MSCI.
Neither we nor any of our affiliates, including BMOCM, accepts any responsibility
for the calculation, maintenance, or publication of, or for any error, omission, or disruption in the MSCI® Emerging Markets Index,
or any successor to the index. MSCI does not guarantee the accuracy or the completeness of the MSCI® Emerging Markets Index, or any
data included in the index. MSCI assumes no liability for any errors, omissions, or disruption in the calculation and dissemination of
the MSCI® Emerging Markets Index. MSCI disclaims all responsibility for any errors or omissions in the calculation and dissemination
of the MSCI® Emerging Markets Index, or the manner in which the index is applied in determining the amount payable on the notes at
maturity.
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