Registration Statement No.333-264388
Filed Pursuant to Rule 424(b)(2)
Pricing Supplement dated July 03, 2024 to the Prospectus dated May 26, 2022,
the Prospectus Supplement dated May 26, 2022 and the Product Supplement dated September 22, 2022
US$1,260,000
Senior Medium-Term Notes, Series I
Autocallable Barrier Enhanced Return Notes due July 09, 2026
Linked to the shares of iShares® 20+ Year Treasury Bond ETF
| · | The notes are designed for investors who are seeking 125.00% leveraged positive return based on any appreciation
in the level of the shares of iShares® 20+ Year Treasury Bond ETF (the “Reference Asset”) if the notes are not automatically
redeemed prior to maturity. Investors should be willing to have their notes automatically redeemed prior to maturity, be willing to forego
any potential to participate in any increase in the level of the Reference Asset if the notes are automatically redeemed, be willing to
forego any interest payments, and be willing to lose some or all of their principal at maturity if the notes are not automatically redeemed
prior to maturity. |
| · | On July 10, 2025, if the closing level of the Reference Asset is greater than 100.00% of its Initial
Level (its “Call Level”), the notes will be automatically redeemed. On the corresponding settlement date (the “Call
Settlement Date"), investors will receive their principal amount plus the applicable Call Amount (which represents a return of approximately
14.75% per annum). After the notes are redeemed, investors will not receive any additional payments in respect of the notes and will not
participate in any positive performance of the Reference Asset. |
| · | If the notes are not automatically redeemed and the Reference Asset decreases by more than 15.00% 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 such a case, you will receive a cash amount at maturity that is less than the principal amount, and may lose
up to 100% 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 06376AZ52. |
| · | Citigroup Global Markets Inc. (“Citigroup”), 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:
Pricing Date: |
July 03, 2024 |
|
Valuation Date: |
July 06, 2026 |
Settlement Date: |
July 09, 2024 |
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Maturity Date: |
July 09, 2026 |
|
Price to Public1 |
Agent’s Commission1 |
Proceeds to Bank of Montreal1 |
Per Note
Total |
100%
$1,260,000.00 |
1.75%
$22,050.00 |
98.25%
$1,237,950.00 |
1 The total “Agent’s Commission” and “Proceeds
to Bank of Montreal” specified above 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 have foregone some or all of their selling concessions, fees
or commissions. The public offering price for investors purchasing the notes in these accounts was between $982.50 and $1,000 per $1,000
in principal amount.
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 $965.23 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.
CITIGROUP GLOBAL MARKETS INC.
Key Terms of the Notes:
Reference Asset: |
The shares of iShares® 20+ Year Treasury Bond ETF (ticker symbol "TLT"). See "The
Reference Asset" below for additional information. |
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Underlying Index: |
ICE US Treasury 20+ Year Bond Index |
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Automatic Redemption: |
On July 10, 2025, if the closing level of the Reference Asset is greater than its Call Level, the notes will be automatically redeemed. No further amounts will be owed to you under the notes and you will not participate in any positive performance of the Reference Asset. |
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Payment upon Automatic
Redemption: |
If the notes are automatically redeemed, then, on the corresponding Call Settlement Date, investors will receive their principal amount plus the applicable Call Amount. |
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Observation Date, Call Settlement
Date and Call Amounts:1,2 |
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Observation Date |
Call Amounts (per Note) |
Potential Call Settlement Date |
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July 10, 2025 |
$147.50 |
July 15, 2025 |
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The Call Amounts represent a return of approximately 14.75% per annum. |
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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:
If the Final Level of the Reference Asset is greater than or equal to
its Initial Level, then the amount that investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
$1,000 + ($1,000 x Percentage Change of the Reference
Asset x Upside Leverage Factor)
If the Final Level of the Reference Asset is less than its Initial Level,
but is not less than its Barrier Level, then investors will, for each $1,000 in principal amount of the notes, receive the principal amount
of $1,000 and no additional return.
If the Final Level of the Reference Asset is less than its Barrier Level,
then the amount that investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
$1,000 + ($1,000 x Percentage Change of the Reference
Asset)
In this case, investors will lose 1% of their principal for each
1% that the Final Level of the Reference Asset declines from its Initial Level. You may lose all of the principal amount of your notes. |
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Upside Leverage Factor: |
125.00% |
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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 |
$91.80, which was the closing level of the Reference Asset on the Pricing Date. |
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Call Level:2 |
100.00% of the Initial Level. |
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Barrier Level:2 |
$78.03, which is 85.00% of the Initial Level (rounded to two decimal places). |
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Final Level: |
The closing level of the Reference Asset on the Valuation Date. |
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Pricing Date: |
July 03, 2024 |
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Settlement Date: |
July 09, 2024 |
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Valuation Date:1 |
July 06, 2026 |
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Maturity Date:1 |
July 09, 2026 |
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Calculation Agent: |
BMO Capital Markets Corp. |
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Selling Agent: |
Citigroup |
1 Subject to the occurrence of a market disruption event,
as described in the accompanying product supplement.
2As determined by the calculation agent and subject to adjustment
in certain circumstances. See “General Terms of the Notes — Anti-dilution Adjustments to a Reference Asset that Is an Equity
Security (Including Any ETF)” and “— Adjustments to Reference Asset that Is 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 assuming the notes are not automatically redeemed, based on various hypothetical Final Levels (and
the corresponding Percentage Change) of the Reference Asset, reflecting the 125.00% Upside Leverage Factor, and Barrier Level of 85.00%
of the Initial Level. Please see “Examples of the Hypothetical Payment at Maturity for a $1,000 Investment in the Notes” below
for more detailed examples. If the notes are automatically redeemed, investors will receive their principal amount plus the applicable
Call Amount. After the notes are redeemed, investors will not receive any additional payments in respect of the notes and will not participate
in any positive performance of the Reference Asset.
Hypothetical Percentage Change
of the Reference Asset
|
Participation in Percentage
Change |
Hypothetical Return of the
Notes |
20%
10%
|
125.00% Upside Exposure
|
25.00%
12.50% |
-10%
-15%
|
Barrier Level of 85% of Initial Level
|
0%
0% |
-25%
-35%
|
1x Loss Beyond Barrier Level
|
-25%
-35% |
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 dated May 26, 2022 and prospectus dated
May 26, 2022:
https://www.sec.gov/Archives/edgar/data/0000927971/000119312522160519/d269549d424b5.htm
Our Central Index Key, or CIK, on the SEC website
is 927971. As used in this document, "we", "us" or "our" refers to Bank of Montreal.
Selected Risk Considerations
An investment in the notes involves significant
risks. Investing in the notes is not equivalent to investing directly in the Reference Asset. These risks are explained in more detail
in the “Additional Risk Factors Relating to the Notes” section of the product supplement.
Risks Related to the Structure or Features of the Notes
| · | Your investment in the notes may result in a loss. — The notes do not guarantee any return of principal. If the notes
are not automatically redeemed and the Final Level is less than its Barrier Level, you will lose 1% of the principal amount for each 1%
that the Final Level is less than the Initial Level. In such a case, you will receive at maturity a cash payment that is less than the
principal amount of the notes and may be zero. Accordingly, you could lose your entire investment in the notes. |
| · | Your notes are subject to automatic early redemption. — We will redeem the notes if the closing level of the Reference
Asset on any Observation Date is greater than its Call Level. Following an automatic redemption, you may not be able to reinvest your
proceeds in an investment with returns that are comparable to the notes. Furthermore, to the extent you are able to reinvest such proceeds
in an investment with a comparable return for a similar level of risk, you may incur transaction costs such as dealer discounts and hedging
costs built into the price of the new notes. |
| · | If the notes are automatically redeemed, your return on the notes is limited to the potential Call Amount regardless of any increase
in the level of the Reference Asset. — If the notes are automatically redeemed, you will not receive a payment with a value
greater than your principal amount plus the applicable Call Amount, even if the Final Level of the Reference Asset exceeds its Call Level
by a substantial amount. Accordingly, your maximum return on the applicable notes is limited to the potential return represented by the
Call Amount if the notes are automatically redeemed. |
| · | If the notes are not automatically redeemed, your return may be less than if the notes were automatically redeemed and may be negative.
— If the notes are not automatically redeemed, the payment at maturity for the notes is based on the performance of the Reference
Asset over the term of the notes, which may be negative. If the level of the Reference Asset has performed positively over the term of
the notes, your return may still be less than the return represented by the Call Amount. Furthermore, even if the return you receive is
greater than the return represented by the Call Amount, such return may reflect a lower return on a per annum basis. If the notes are
not automatically redeemed and the Final Level is less than its Initial Level, your return on the notes will be negative. Depending on
the Final level of the Reference Asset, the return you receive at maturity may be less than, and potentially significantly less than,
the return represented by the Call Amount. |
| · | Your return on the notes may be lower than the return on a conventional debt security of comparable maturity. — The
return that you will receive on your notes, which could be negative, may be less than the return you could earn on other investments.
The notes do not provide for interest payments and the payment you receive at maturity, if any, may be less than the principal amount
of the notes. Even if your return on the notes is positive, your return may be less than the return you would earn if you bought a conventional
senior interest bearing debt security of ours with the same maturity or if you invested directly in the Reference Asset. Your investment
may not reflect the full opportunity cost to you when you take into account factors that affect the time value of money. |
Risks Related to the Reference Asset
| · | Owning the notes is not the same as 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, we, Citigroup, and our or their 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 us, Citigroup, and our or their
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 us, Citigroup, and our or their affiliates. You are encouraged
to derive information concerning the Reference Asset from multiple sources, and you should not rely on the views expressed by us, Citigroup,
and our or their affiliates.
Neither the offering of the notes nor any views which our affiliates from time to time may express in the ordinary course of their businesses
constitutes a recommendation as to the merits of an investment in the notes. |
Risks Relating to the iShares® 20+ Year Treasury Bond ETF
| · | An investment in the notes involves different considerations than a direct investment in the iShares®
20+ Year Treasury Bond ETF. The notes provide exposure to the
price performance of the iShares® 20+ Year Treasury Bond ETF (“TLT”), not its yield performance. The “price performance”
of the TLT will depend solely on changes in the value of the bonds held by the TLT (as reflected in the TLT’s market price) and
will exclude all distributions by the TLT of any interest payments on those bonds. By contrast, the overall performance of a direct investment
in the TLT would reflect changes in the value of the bonds held by the TLT as well as interest payments on those bonds. We refer to the
overall performance of a direct investment in the TLT, taking into account changes in bond values as well as interest payments, as its
“yield performance.” |
In
stable market conditions (i.e., conditions with stable interest rates and credit risks, resulting in stable bond values), the overall
return on a direct investment in the TLT would be expected to be attributable primarily, if not solely, to distributions by the TLT of
interest payments on its underlying bonds. In these conditions, the yield performance of the TLT would be positive, but its price performance,
which is the performance relevant to the securities, would be roughly zero. The price performance of the TLT would be expected to be positive
only if market conditions that affect bond values change in a direction that is favorable to bond values. The most significant market
conditions affecting bond values are prevailing market interest rates and credit risk. In general, bond values rise when prevailing market
interest rates fall and/or when perceptions of creditworthiness improve. Therefore, in order for TLT to have positive price performance,
and in order for the securities to produce a positive return, prevailing market interest rates would need to fall and/or the perceived
creditworthiness of the United States would need to improve over the term of the securities (in each case without a countervailing unfavorable
movement by any other relevant factor). If neither of these circumstances comes to pass, the TLT is unlikely to have positive price performance,
and if the opposite circumstances occur (i.e., if prevailing market interest rates rise and/or the perceived creditworthiness of
the United States deteriorates), the price performance of the TLT is likely to be negative. In any such case, the price performance of
the TLT may be zero or negative even though the yield performance of the TLT over the same period is positive.
| · | The notes are subject to significant risks associated with fixed-income securities, including interest rate-related risks and credit
risks. — The iShares® 20+ Year Treasury Bond ETF is a bond ETF that attempts to track the performance of an index composed
of fixed income securities. Investing in the notes linked indirectly to the iShares® 20+ Year Treasury Bond ETF differs significantly
from investing directly in bonds to be held to maturity as the values of the iShares® 20+ Year Treasury Bond ETF changes, at times
significantly, during each trading day based upon the current market prices of its underlying bonds. The market prices of these bonds
are volatile and significantly influenced by a number of factors, particularly the yields on these bonds as compared to current market
interest rates and the actual or perceived credit quality of the issuer of these bonds. |
In general, fixed-income securities are
significantly affected by changes in current market interest rates. As interest rates rise, the price of fixed-income securities, including
those underlying the iShares® 20+ Year Treasury Bond ETF, is likely to decrease. Securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than securities with shorter durations. The eligibility criteria
for the securities included in the indices that underlie the iShares® 20+ Year Treasury Bond ETF, which each mandate that each security
must have a minimum term remaining to maturity (ranging from one year to 20 years) for continued eligibility, means that, at any time,
only longer-term securities underlie the iShares® 20+ Year Treasury Bond ETF, which thereby increases the risk of price volatility
in the underlying securities and, consequently, the volatility in the value of the Underlying Index. As a result, rising interest rates
may cause the value of the bonds underlying the iShares® 20+ Year Treasury Bond ETF, the iShares® 20+ Year Treasury Bond ETF and
the Underlying Index to decline, possibly significantly.
Interest rates are subject to volatility
due to a variety of factors, including:
| · | sentiment regarding underlying strength in the U.S. and global economies; |
| · | expectations regarding the level of price inflation; |
| · | sentiment regarding credit quality in the U.S. and global credit markets; |
| · | central bank policies regarding interest rates; and |
| · | the performance of U.S. and foreign capital markets. |
The prices of the underlying bonds are
also significantly influenced by the creditworthiness of the issuers of the bonds (i.e., the U.S. government). The bonds underlying the
iShares® 20+ Year Treasury Bond ETF may have their credit ratings downgraded, or have their credit spreads widen significantly. Following
a ratings downgrade or the widening of credit spreads, some or all of the underlying bonds may suffer significant and rapid price declines.
| · | The notes are subject to concentration risks. — The iShares® 20+
Year Treasury Bond ETF invests in U.S. Treasury bonds that are all obligations of the United States with a similar remaining time to maturity.
As a result, the iShares® 20+ Year Treasury Bond ETF is concentrated in the performance of bonds issued by a single
issuer and having the same general tenor and terms. Although your investment in the notes will not result in the ownership or other direct
interest in the U.S. Treasury bonds held by the iShares® 20+ Year Treasury Bond ETF, the return on your investment
in the notes will be subject to certain risks similar to those associated with direct investment in a U.S. Treasury bonds. This increases
the risk that any downgrade of the credit ratings of the U.S. government from its current ratings, any increase in risk that the U.S.
Treasury may default on its obligations by the market (whether for credit or legislative process reasons) or any other market events that
create a decrease in demand for U.S. Treasury bonds would significantly adversely affect the iShares® 20+ Year Treasury
Bond ETF and may adversely affect the value of the notes. In addition, to the extent that any such decrease in demand is more concentrated
in particular U.S. Treasury bond maturities, the iShares® 20+ Year Treasury Bond ETF could be severely affected, which
may adversely affect the value of 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
and Citigroup and any of its affiliates are potentially adverse to your interests as an investor in the notes. We, Citigroup or one or
more of our or their 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, Citigroup or one or more of our or their 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, Citigroup or one or more of our or their
affiliates could adversely affect the market value of the notes. |
| · | Our initial estimated value of the notes is lower than the price to public. — Our initial estimated value of the notes
is only an estimate, and is based on a number of factors. The price to public of the notes exceeds our initial estimated value, because
costs associated with offering, structuring and hedging the notes are included in the price to public, but are not included in the estimated
value. These costs include any underwriting discount and selling concessions, the profits that we and our affiliates expect to realize
for assuming the risks in hedging our obligations under the notes and the estimated cost of hedging these obligations. |
| · | Our initial estimated value does not represent any future value of the notes, and may also differ from the estimated value of any
other party. — Our initial estimated value of the notes as of the date hereof is derived using our internal pricing models.
This value is based on market conditions and other relevant factors, which include volatility of the Reference Asset, dividend rates and
interest rates. Different pricing models and assumptions could provide values for the notes that are greater than or less than our initial
estimated value. In addition, market conditions and other relevant factors after the Pricing Date are expected to change, possibly rapidly,
and our assumptions may prove to be incorrect. After the Pricing Date, the value of the notes could change dramatically due to changes
in market conditions, our creditworthiness, and the other factors set forth herein and in the product supplement. These changes are likely
to impact the price, if any, at which we, Citigroup or any of our or their affiliates 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, Citigroup or our or
their affiliates would be willing to buy your notes in any secondary market at any time. |
| · | The terms of the notes were not determined by reference to the credit spreads for our conventional fixed-rate debt. —
To determine the terms of the notes, we used an internal funding rate that represents a discount from the credit spreads for our conventional
fixed-rate debt. As a result, the terms of the notes are less favorable to you than if we had used a higher funding rate. |
| · | Certain costs are likely to adversely affect the value of the notes. — Absent any changes in market conditions, any secondary
market prices of the notes will likely be lower than the price to public. This is because any secondary market prices will likely take
into account our then-current market credit spreads, and because any secondary market prices are likely to exclude all or a portion of
any underwriting discount and selling concessions, and the hedging profits and estimated hedging costs that are included in the price
to public of the notes and that may be reflected on your account statements. In addition, any such price is also likely to reflect a discount
to account for costs associated with establishing or unwinding any related hedge transaction, such as dealer discounts, mark-ups and other
transaction costs. As a result, the price, if any, at which we, Citigroup, or any of our or their affiliates 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. Citigroup or one or more of our or their
affiliates may offer to purchase the notes in the secondary market, but none of us, Citigroup or any of our or their affiliates is 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 we, Citigroup or one or more of our or their affiliates is willing to buy the notes. |
| · | Hedging and trading activities. — We, Citigroup, or any of our or their 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
returns linked or related to changes in the performance on the Reference Asset or securities held by the Reference Asset. We, Citigroup
or any of our or their 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 Upside Leverage Factor of 125.00%, a hypothetical Barrier Level of $85.00 (85.00% of the hypothetical initial
level), a range of hypothetical Final Levels and the effect on the payment at maturity.
The hypothetical examples shown below are intended
to help you understand the terms of the notes. If the notes are not automatically redeemed, the actual cash amount that you will receive
at maturity will depend upon the Final Level of the Reference Asset. If the notes are automatically redeemed prior to maturity, the hypothetical
examples below will not be relevant, and you will receive on the applicable Call Settlement Date, for each $1,000 principal amount, the
principal amount plus the Call Amount. You may lose some or all of the principal amount at maturity.
Hypothetical Final Level |
Hypothetical Final Level
Expressed as a Percentage of the
Initial Level |
Hypothetical Payment at
Maturity |
Hypothetical Return on the Notes |
$200.00 |
200.00% |
$2,250.00 |
125.00% |
$180.00 |
180.00% |
$2,000.00 |
100.00% |
$160.00 |
160.00% |
$1,750.00 |
75.00% |
$140.00 |
140.00% |
$1,500.00 |
50.00% |
$120.00 |
120.00% |
$1,250.00 |
25.00% |
$100.00 |
100.00% |
$1,000.00 |
0.00% |
$90.00 |
90.00% |
$1,000.00 |
0.00% |
$85.00 |
85.00% |
$1,000.00 |
0.00% |
$84.99 |
84.99% |
$849.90 |
-15.01% |
$80.00 |
80.00% |
$800.00 |
-20.00% |
$60.00 |
60.00% |
$600.00 |
-40.00% |
$40.00 |
40.00% |
$400.00 |
-60.00% |
$20.00 |
20.00% |
$200.00 |
-80.00% |
$0.00 |
0.00% |
$0.00 |
-100.00% |
The following examples illustrate how the returns
set forth in the table above are calculated.
Example 1: The level of the Reference Asset decreases from the hypothetical
Initial Level of $100.00 to a hypothetical Final Level of $80.00, representing a Percentage Change of –20.00%. Because the Percentage
Change of the Reference Asset is negative and its hypothetical Final Level is less than its Barrier Level, the investor receives a payment
at maturity of $800.00 per $1,000 in principal amount of the notes, calculated as follows:
$1,000 + ($1,000 x –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 Barrier 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 $120.00, representing a Percentage Change of 20.00%. Because the hypothetical
Final Level of the Reference Asset is greater than its hypothetical Initial Level, the investor receives a payment at maturity of $1,250.00
per $1,000 in principal amount of the notes, calculated as follows:
$1,000 + $1,000 x (20.00% x 125.00%) = $1,250.00
U.S. Federal Tax Information
By purchasing the notes, each holder agrees (in
the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat each note as a pre-paid
derivative contract for U.S. federal income tax purposes. In the opinion of our counsel, Mayer Brown LLP, it would generally be reasonable
to treat the notes as pre-paid derivative contracts in respect of the Reference Asset 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.
Under current Internal Revenue Service guidance,
withholding on "dividend equivalent" payments (as discussed in the product supplement), if any, will not apply to notes that
are issued as of the date of this pricing supplement unless such notes are "delta-one" instruments. Based on our determination
that the notes are not delta-one instruments, non-United States holders (as defined in the product supplement) should not generally be
subject to withholding on dividend equivalent payments, if any, under the notes.
Supplemental Plan of Distribution (Conflicts of Interest)
Citigroup will purchase the notes from us at a purchase
price reflecting the commission set forth on the cover hereof. Citigroup has informed us that, as part of its distribution of the notes,
it may reoffer the notes to other dealers who will sell them. Each such dealer, or each additional dealer engaged by a dealer to whom
Citigroup reoffers the notes, will receive a commission from Citigroup, which will not exceed the commission set forth on the cover page.
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 one business day 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 one business day, unless the parties to any such trade
expressly agree otherwise. Accordingly, purchasers who wish to trade the notes more than one business day prior to the issue date will
be required to specify alternative settlement arrangements to prevent a failed settlement.
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.
We, Citigroup or one or more of our or their affiliates
may, but is not obligated to, make a market in the notes. We, Citigroup and/or any of our or their affiliates will determine any secondary
market prices that it is prepared to offer in its sole discretion.
We, Citigroup or one or more of our or their affiliates
may use this pricing supplement in the initial sale of the notes. In addition, we, Citigroup or one of our or their affiliates may use
this pricing supplement in market-making transactions in any notes after their initial sale. Unless Citigroup or we or one of our or their
affiliates inform you otherwise in the confirmation of sale, this pricing supplement is being used 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 Citigroup or one of our or their affiliates would be willing to buy the notes
from investors, and the value that we, Citigroup or one of our or their affiliates 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. This pricing supplement is not
intended to constitute an offer or solicitation to purchase or invest in any notes. Neither this pricing supplement nor any other offering
or marketing material relating to the notes constitutes a prospectus compliant with the requirements of articles 35 et seq. of the Swiss
Financial Services Act ("FinSA")) for a public offering of the notes in Switzerland and no such prospectus has been or will
be prepared for or in connection with the offering of the notes in Switzerland.
Neither this pricing supplement nor any other offering
or marketing material relating to the notes has been or will be filed with or approved by a Swiss review body (Prüfstelle). No application
has been or is intended to be made to admit the notes to trading on any trading venue (SIX Swiss Exchange or on any other exchange or
any multilateral trading facility) in Switzerland. Neither this pricing supplement nor any other offering or marketing material relating
to the notes may be publicly distributed or otherwise made publicly available in Switzerland.
The notes may not be publicly offered, directly
or indirectly, in Switzerland within the meaning of FinSA except (i) in any circumstances falling within the exemptions to prepare a prospectus
listed in article 36 para. 1 FinSA or (ii) where such offer does not qualify as a public offer in Switzerland, provided always that no
offer of notes shall require the Issuer or any offeror to publish a prospectus pursuant to article 35 FinSA in respect to such offer and
that such offer shall comply with the additional restrictions set out below (if applicable). The Issuer has not authorised and does not
authorise any offer of notes which would require the Issuer or any offeror to publish a prospectus pursuant to article 35 FinSA in respect
of such offer. For purposes of this provision "public offer" shall have the meaning as such term is understood pursuant to article
3 lit. g and h FinSA and the Swiss Financial Services Ordinance ("FinSO").
The notes do not constitute participations in a
collective investment scheme within the meaning of the Swiss Collective Investment Schemes Act. They are not subject to the approval of,
or supervision by, the Swiss Financial Market Supervisory Authority ("FINMA"), and investors in the notes will not benefit from
protection under CISA or supervision by FINMA.
Prohibition of Offer to Private Clients in Switzerland
- No Key Information Document pursuant to article 58 FinSA (Basisinformationsblatt für Finanzinstrumente) or equivalent document
under foreign law pursuant to article 59 para. 2 FinSA has been or will be prepared in relation to the notes. Therefore, the following
additional restriction applies: Notes qualifying as "debt securities with a derivative character" pursuant to article 86 para.
2 FinSO may not be offered within the meaning of article 58 para. 1 FinSA, and neither this pricing supplement nor any other offering
or marketing material relating to such notes may be made available, to any retail client (Privatkunde) within the meaning of FinSA in
Switzerland.
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 that is set forth on the cover hereof, equals the sum of the values of the following hypothetical components:
| · | a fixed-income debt component with the same tenor as the notes, valued using our internal funding rate for structured notes; and |
| · | one or more derivative transactions relating to the economic terms of the notes. |
The internal funding rate used in the determination
of the initial estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. The value
of these derivative transactions is derived from our internal pricing models. These models are based on factors such as the traded market
prices of comparable derivative instruments and on other inputs, which include volatility, dividend rates, interest rates and other factors.
As a result, the estimated initial value of the notes on the Pricing Date was determined based on the market conditions on the Pricing
Date.
The Reference Asset
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, Citigroup
nor any of our or their 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.
The iShares® 20+ Year Treasury Bond ETF
The iShares® 20+ Year Treasury Bond ETF (“TLT”)
seeks to track the investment results of the ICE U.S. Treasury 20+ Year Bond Index (the “IDCOT20T”), which measures the performance
of public obligations of the U.S. Treasury that have a remaining maturity greater than twenty years. Prior to the selection of the IDCOT20T
on April 1, 2016, the TLT tracked the Bloomberg Barclays U.S. 20+ Year Treasury Bond Index. The
TLT trades on the Nasdaq Global Market under the ticker symbol “TLT.”
BlackRock® Fund Advisors (“BFA”),
the investment adviser of TLT, uses a “passive” or indexing approach to try to achieve the investment objective of TLT.
Information provided to or filed with the SEC pursuant
to the Securities Act and the Investment Company Act can be located by reference to SEC file numbers 333-92935 and 811-09729, respectively,
through the SEC’s website at www.sec.gov. Information from outside sources is not incorporated by reference in, and should not be
considered a part of, this document. In addition, information may be obtained from other sources including, but not limited to, press
releases, newspaper articles and other publicly disseminated documents.
Investment Objective and Strategy
The TLT generally invests at least 90% of its assets
in the bonds of the IDCOT20T and at least 95% of its assets in U.S. government bonds. TLT may invest up to 10% of its assets in U.S. government
bonds not included in the IDCOT20T, but which BFA believes will help TLT track the IDCOT20T. TLT also may invest up to 5% of its assets
in repurchase agreements collateralized by U.S. government obligations and in cash and cash equivalents, including shares of money market
funds advised by BFA or its affiliates. TLT seeks to track the investment results of the IDCOT20T before fees and expenses of TLT.
TLT may lend securities representing up to one-third
of the value of its total assets (including the value of any collateral received). The IDCOT20T is sponsored by ICE Data Indices, LLC
or its affiliates (the “IDI”), which is independent of TLT and BFA. The IDI determines the composition and relative weightings
of the securities in the IDCOT20T and publishes information regarding the market value of the IDCOT20T.
Representative Sampling
BFA uses a representative sampling indexing strategy
to manage the TLT. “Representative sampling” is an indexing strategy that involves investing in a representative sample of
securities that collectively has an investment profile similar to that of the IDCOT20T. The securities selected are expected to have,
in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental characteristics
(such as return variability, duration, maturity, credit ratings and yield) and liquidity measures similar to those of the IDCOT20T. The
TLT may or may not hold all of the securities in the IDCOT20T.
Industry Concentration Policy
TLT will concentrate its investments (i.e., hold
25% or more of its total assets) in a particular industry or group of industries to approximately the same extent that the IDCOT20T is
concentrated. For purposes of this limitation, securities of the U.S. government (including its agencies and instrumentalities), repurchase
agreements collateralized by U.S. government securities, and securities of state or municipal governments and their political subdivisions
are not considered to be issued by members of any industry.
The ICE U.S. Treasury 20+ Year Bond Index
All information contained in this underlying supplement
regarding the IDCOT20T is derived from publicly available information, without independent verification. This information reflects the
policies of, and is subject to change by, IDI, a subsidiary of Intercontinental Exchange, Inc. IDI has no obligation to continue to publish,
and may discontinue publication of, the IDCOT20T.
The ICE U.S. Treasury 20+ Year Bond Index is a market-value
weighted index that is designed to measure the performance of the U.S. dollar-denominated, fixed-rate U.S. Treasury market that has a
remaining maturity of greater than or equal to twenty years. The IDCOT20T was launched on December 31, 2015. The IDCOT20T is reported
by Bloomberg L.P. under the ticker symbol “IDCOT20.”
Index Eligibility Criteria and Inclusion Rules
The IDCOT20T consists of securities that meet the
criteria listed below (the “Eligible Bond universe”). The basis of the Eligible Bond universe are those securities for which
content is available daily, including evaluations and reference data, through ICE Data Pricing & Reference Data, LLC (“PRD”).
Maturity. Each security must have a
minimum remaining term to final maturity of greater than or equal to twenty years as of the last business day of the month (the “Rebalance
Date”). Treasury securities that have an announced call are removed from the IDCOT20T at the end of the month prior to the month
in which the call will take place.
Size. Each security is required to have
a minimum amount outstanding of U.S. $300 million. Amount outstanding is defined as the par amount outstanding of each U.S. Treasury security,
inclusive of any announced auctions or re-openings, less the par amount of that U.S. Treasury security held in the Federal Reserve System
Open Market Account or bought at issuance by the Federal Reserve. A new issuance bought at auction by the Federal Reserve is not included
in the Eligible Bond universe. Secondary market purchases or sales by the Federal Reserve that occur in the current month are reflected
in the Eligible Bond universe at the next rebalancing.
Coupon. The Eligible Bond universe includes
only fixed-rate securities, excluding zero coupon securities.
Currency. The Eligible Bond universe
includes only securities with principal and interest denominated in U.S. dollars.
Bond Type. Inflation-linked securities,
Treasury bills, floating-rate notes, cash-management bills and any government agency debt issued with or without a government guarantee
are excluded from the Eligible Bond universe.
Index Maintenance
The IDCOT20T is rebalanced monthly. Securities are
required to meet the IDCOT20T inclusion rules highlighted in the previous section to be considered for inclusion at the beginning of any
given month. This includes the availability of evaluated pricing and reference data through PRD.
Rebalancing. The IDCOT20T is rebalanced
at each month end. The new IDCOT20T for the next month is available three days prior to month end and is intended to reflect the constituent
changes from the prior rebalancing date based on index eligibility.
Reinvestment of Cash Flows. Cash that
has accrued intra-month from interest and principal payments by the securities included in the IDCOT20T earns no reinvestment return during
the month. Accumulated cash (from coupon and principal payments) is removed from the IDCOT20T at month-end, such that the cash is reinvested
pro rata across the entire IDCOT20T.
New Issues. Qualifying securities issued
on or before the rebalancing date may qualify for inclusion. Issued securities are included in the pro forma IDCOT20T with a price of
U.S. $100 until replaced with an evaluated price as soon as available after auction day.
Calculation
Returns and risk measures, such as yield duration,
are first calculated at the constituent level and then aggregated to the IDCOT20T level using its constituents’ market weights.
Constituent Level Calculations
, , , and and , , , and denote
the price, accrued interest, par amount, cumulative coupon payments and market values at date and
date , respectively. C denotes the coupon payments during the period
(excluding any coupon payment on date but including any coupon
payment on date ).
Coupon payments during the period are calculated
as follows:.
The market values at time and are: and ,
respectively.
The price return and
coupon return (whenever applicable) are defined as follows:
| o | Price return: return due to price appreciation over the return period: |
| o | Coupon return: return due to coupon accrual during the period: |
The total return is the sum of the price return
and the coupon return:
Index Level Calculations
The IDCOT20T had an initial level of 100 at the
inception date. As time passes, the IDCOT20T level is calculated in an iterative way as follows:
The IDCOT20T total return is calculated by aggregating
the constituent level total returns using market weights. To calculate the IDCOT20T total return for the period from dates and ,
market value weights at date are used. The total market value
of the IDCOT20T at time is plus
any intra-month cash from coupon payment or principal repayment and the weight for constituent security, which is calculated as follows:
The IDCOT20T’s level will be provided to four
decimal places.
Index Policies
Timing and Pricing Source.
The IDCOT20T’s level is calculated using 3:00
p.m. Eastern Standard Time evaluations from PRD. These evaluations are based upon methodologies designed to reflect the market upon which
the IDCOT20T is based.
PRD’s bid-side evaluations are market-based
measurements that are processed through a rules-based pricing application and represent its good faith determinations as to what the holder
would receive in an orderly transaction (for an institutional round lot position, typically $1,000,000 or greater current value in U.S.
dollars or local currency equivalent) under current market conditions. The rules based logic utilizes valuation techniques that may vary
by asset class and per methodology, maximize the use of relevant observable data including quoted prices for similar assets, benchmark
yield curves and market corroborated inputs. For example, its pricing applications are coded to review trades and bids to determine that
the lot size is representative of an institutional round lot, though smaller or retail sized lots may be considered, especially if this
is the only or primary trading information available.
PRD’s evaluators meet regularly to discuss
market movements and other macro-economic information. PRD evaluates U.S. Treasury securities by obtaining feeds continuously from a number
of live data sources including active market makers and inter-dealer brokers. Sources are reviewed on the basis of their historical accuracy
for individual issues and maturity ranges. As new information is received, it is compared against the previous evaluation as part of the
daily process. To provide additional transparency into its procedures, controls and governing processes, PRD adopted a code of conduct
which enables benchmark administrators, like IDI, to exercise oversight of the benchmark setting process in conformance with the IOSCO
Principles. IDI also maintains a verification process designed to identify price tolerance breaks for further investigation.
Calendar. The IDCOT20T follows the SIFMA
U.S. bond market holiday schedule. The IDCOT20T’s level is calculated daily at the end of each day on which SIFMA declares the U.S.
fixed income markets open. When the bond market closes early per the SIFMA schedule, the IDCOT20T’s level may be calculated at a
time in accordance with the recommended close. However, evaluated pricing from PRD must be available to calculate the IDCOT20T’s
level.
Exceptional Market Conditions and Corrections.
IDI retains the right to delay the publication of the level of the IDCOT20T. Furthermore, IDI retains the right to suspend the publication
of the level of the IDCOT20T if it believes that circumstances prevent the proper calculation of the IDCOT20T. If evaluated prices are
not available, the IDCOT20T will not be recalculated unless IDI decides otherwise. Reasonable efforts are made to ensure the correctness
and validity of data used in index calculations. Where errors have occurred in the determination or calculation of the IDCOT20T, the decision
to make a restatement will be assessed on a case by case basis. Such decision will take account of the significance, impact, age and scale
of the error.
In the event that there is a market-wide event
resulting in evaluated prices not being available, IDI will determine its approach on a case by case basis, taking into account information
and notifications provided by PRD. Market-wide events include, but are not limited to, technological problems or failures, natural disaster
or other business continuity planning-related event. IDI will communicate any issues with publication of the IDCOT20T during the day through
the regular client communication channels; in addition, IDI may also contact clients directly; post a notice on the IDI website; send
a message via the market data portal; or use other such forms of communication.
Expert Judgment. In cases which are not expressly
covered in the index rules, operational adjustments may take place along the lines of the aim of the IDCOT20T. Operational adjustments
may also take place if, in the opinion of IDI, it is desirable to do so to maintain the integrity of the IDCOT20T. Any such modifications
described under this section or exercise of expert judgment will be based upon the IDI’s Index Design Principles, which detail the
core design principles adhered to IDI in establishing an IDCOT20T determination specific to the IDCOT20T. “Expert Judgment”
refers to the exercise of discretion by the IDI with respect to the use of data in determining a benchmark. Expert Judgment includes extrapolating
values from prior or related transactions, adjusting values for factors that might influence the quality of data such as market events
or impairment of a buyer’s or seller’s credit quality or weighting firm bids or offers greater than a particular concluded
transaction. Any exercise of expert judgment will be overseen by the ICE Data Indices, LLC Governance Committee (for purposes of this
section, the “Index Committee”). The IDI Index Design Principles are available on request to PRD.
Index Reviews. IDI undertakes regular reviews
of the IDCOT20T, the methodology and the market which it represents to ensure it continues to meet the index objective, in accordance
with IDI’s policies and procedures. Should material changes to the IDCOT20T be required or proposed, this will be communicated to
stakeholders and subscribers in accordance with IDI’s consultation policy, where possible.
Consultations. IDI may from time to time
consult with stakeholders and subscribers on proposed material changes that affect the IDCOT20T in accordance with IDI’s consultation
process. These proposals will be published to stakeholders and subscribers and all feedback received will be considered by IDI. Any resulting
changes to the IDCOT20T will be announced prior to it being implemented.
Restatements. IDI reserves the right to restate
the IDCOT20T’s level based on its discretion. The IDCOT20T subscribers are notified prior to a restatement of data. Restatements
are typically communicated on the same day but may take longer depending on the volume of restatements required and other conditions.
Index Governance
The Index Committee is responsible for governance
and oversight of the IDCOT20T. The Index Committee provides oversight to IDI that has daily responsibilities for the development, issuance
and operation of the IDCOT20T.
The Index Committee will approve any necessary changes
in the IDCOT20T’s methodology. The IDI is then responsible for implementing the changes and notifying subscribers. Where a change
is material, IDI will consult with stakeholders and subscribers in accordance with the IDI consultation process. For other changes, advance
notice will be provided, where possible, to allow stakeholders and subscribers appropriate preparation to implement the change.
Validity of the Notes
In the opinion of Osler, Hoskin & Harcourt LLP,
the issue and sale of the notes has been duly authorized by all necessary corporate action of the Bank in conformity with the Senior Indenture,
and when this pricing supplement has been attached to, and duly notated on, the master note that represents the notes, the notes will
have been validly executed and issued and, to the extent validity of the notes is a matter governed by the laws of the Province of Ontario,
or the laws of Canada applicable therein, and will be valid obligations of the Bank, subject to the following limitations (i) the enforceability
of the Senior Indenture may be limited by the Canada Deposit Insurance Corporation Act (Canada), the Winding-up and Restructuring Act
(Canada) and bankruptcy, insolvency, reorganization, receivership, moratorium, arrangement or winding-up laws or other similar laws affecting
the enforcement of creditors’ rights generally; (ii) the enforceability of the Senior Indenture may be limited by equitable principles,
including the principle that equitable remedies such as specific performance and injunction may only be granted in the discretion of a
court of competent jurisdiction; (iii) pursuant to the Currency Act (Canada) a judgment by a Canadian court must be awarded in Canadian
currency and that such judgment may be based on a rate of exchange in existence on a day other than the day of payment; and (iv) the enforceability
of the Senior Indenture will be subject to the limitations contained in the Limitations Act, 2002 (Ontario), and such counsel expresses
no opinion as to whether a court may find any provision of the Senior Debt Indenture to be unenforceable as an attempt to vary or exclude
a limitation period under that Act. This opinion is given as of the date hereof and is limited to the laws of the Provinces of Ontario
and the federal laws of Canada applicable thereto. In addition, this opinion is subject to customary assumptions about the trustee’s
authorization, execution and delivery of the Indenture and the genuineness of signatures and certain factual matters, all as stated in
the letter of such counsel dated May 26, 2022, which has been filed as Exhibit 5.3 to Bank of Montreal’s Form 6-K filed with the
SEC and dated May 26, 2022.
In the opinion of Mayer Brown LLP, when this pricing
supplement has been attached to, and duly notated on, the master note that represents the notes, and the notes have been issued and sold
as contemplated herein, the notes will be valid, binding and enforceable obligations of Bank of Montreal, entitled to the benefits of
the Senior Indenture, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts
of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing
and the lack of bad faith). This opinion is given as of the date hereof and is limited to the laws of the State of New York. Insofar as
this opinion involves matters governed by the laws of the Province of Ontario, or the laws of Canada applicable therein, Mayer Brown LLP
has assumed, without independent inquiry or investigation, the validity of the matters opined on by Osler, Hoskin & Harcourt LLP,
Canadian legal counsel for the issuer, in its opinion expressed above. This opinion is subject to customary assumptions about the trustee’s
authorization, execution and delivery of the Senior Indenture and the genuineness of signatures and to such counsel’s reliance on
the Bank of Montreal and other sources as to certain factual matters, all as stated in the legal opinion of Mayer Brown LLP dated May
26, 2022, which has been filed with the SEC as an exhibit to a report on Form 6-K by the Bank of Montreal on May 26, 2022.
19
Exhibit 107.1
The pricing supplement to which this Exhibit is attached
is a final prospectus for the related offering. The maximum aggregate offering price of that offering is $1,260,000.
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