Registration Statement
No. 333-217200
Pricing
Supplement to the Prospectus dated April 27, 2017, the Prospectus Supplement
Key Terms of the Notes:
Underlying Assets:
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The S&P 500® Index (ticker symbol: SPX) and the Russell 2000® Index (ticker symbol: RTY). See the section below entitled “The Underlying Assets” for additional information about the Underlying Assets.
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Payment at Maturity:
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(i) If the Percentage Change of the Lesser Performing Asset
is greater than its Initial Level, then the amount that the investors will receive at maturity for each $1,000 in principal amount
of the Notes will equal:
Principal Amount + [Principal Amount x (Percentage
Change of Lesser Performing Underlying Asset x Upside Leverage Factor)]
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(ii) If the Final Level of the Lesser Performing Underlying Asset is less than its Initial Level, but is not less than its Barrier Level, then the investors will receive their principal amount and no additional return.
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(iii) If the Final Level of the Lesser Performing Underlying Asset is less than its Initial Level, then the investors will receive a cash payment equal to:
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Principal Amount + (Principal Amount x Percentage
Change of the Lesser Performing Underlying Asset)
In this case, investors will lose 1% of their principal
for each 1% that the Final Level of the Lesser Performing Underlying Asset declines from its Initial Level. You may lose all
of the principal amount of your notes.
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Upside Leverage Factor:
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135%
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Initial Level:
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The respective closing level of each of the Underlying Assets on the pricing date.
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Final Level:
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The respective closing level of each of the Underlying Assets on the Valuation Date.
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Barrier Level:
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With respect to each Underlying Asset, 75% of its Initial Level.
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Lesser Performing
Underlying Asset:
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The Underlying Asset that has the lowest Percentage Change.
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Percentage Change:
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Final Level - Initial Level, expressed as a percentage.
Initial Level
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Pricing Date:
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On or about April 14, 2020.
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Settlement Date:
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On or about April 17, 2020, as determined on the pricing date.
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Valuation Date:
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On or about April 12, 2022, as determined on the pricing date.
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Maturity Date:
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On or about April 18, 2022, as determined on the pricing date.
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Automatic Redemption:
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Not applicable
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Calculation Agent:
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BMOCM
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Selling Agent:
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BMOCM
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The pricing date and the Settlement Date are subject to
change. The actual pricing date, Settlement Date, Valuation Date and Maturity Date will be set forth in the final pricing
supplement.
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Payoff Example
The following table shows
the hypothetical payout profile of an investment in the notes based on hypothetical Percentage Changes of the Lesser
Performing Underlying Asset, reflecting the 135% Upside Leverage Factor. Please see the hypothetical returns section
below for more detailed examples.
* Your return on the notes
will be determined solely by the Percentage Change of the Lesser Performing Underlying Asset.
Additional Terms of the Notes
You
should read this pricing supplement together with the product supplement dated May 1, 2017, the prospectus supplement dated September
23, 2018 and the prospectus dated April 27, 2017. This pricing supplement, 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):
Please note that references in
the product supplement to the prospectus supplement will be deemed to refer to the prospectus supplement dated September 23, 2018.
Our Central Index Key, or CIK,
on the SEC website is 927971. As used in this pricing supplement, “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 Underlying Assets or their components. These risks
are explained in more detail in the “Additional Risk Factors Relating to the Notes” section of the product supplement.
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Your investment in the notes may result in a loss. — The notes do not guarantee any return of principal. If the
Final Level of any Underlying Asset is less than its Barrier Level, you will be subject to a one-for-one loss of the principal
amount of the Notes for any Percentage Change of the Lesser Performing Underlying Asset from its Initial Level. Accordingly,
you could lose up to the entire principal amount of your notes.
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Your investment is subject to the credit risk of Bank of Montreal. — Our credit ratings and credit spreads may
adversely affect the market value of the notes. Investors are dependent on our ability to pay the amount due at maturity, and therefore
investors are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our
credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect
the value of the notes.
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Your return on the notes will be determined solely by reference to the Lesser Performing Underlying Asset, even if the other
Underlying Asset performs better. — Your payment at maturity will only be determined by reference to the performance
of the Lesser Performing Underlying Asset. Even if the other Underlying Asset has appreciated in value compared to its Initial
Level, or has experienced a decline that is less than that of the Lesser Performing Underlying Asset, your return at maturity will
only be determined by reference to the performance of the Lesser Performing Underlying Asset.
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Your return on the notes will be determined by reference to each Underlying Asset individually, not to a basket, and the
payments on the notes will be based on the performance of the Lesser Performing Underlying Asset. — The notes are not
linked to a weighted basket, in which the risk may be mitigated and diversified among each of the basket components. For example,
in the case of notes linked to a weighted basket, the return would depend on the weighted aggregate performance of the basket components
reflected as the basket return. As a result, the depreciation of one basket component could be mitigated by the appreciation of
the other basket component, as scaled by the weighting of that basket component. However, in the case of the notes, the individual
performance of each Underlying Asset would not be combined, and the depreciation of an Underlying Asset would not be mitigated
by any appreciation of the other Underlying Asset. Instead, your return at maturity will depend solely on the Final Level of the
Lesser Performing Underlying Asset.
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Potential conflicts. — We and our affiliates play a variety of roles in connection with the issuance of the notes,
including acting as calculation agent. In performing these duties, the economic interests of the calculation agent and other affiliates
of ours are potentially adverse to your interests as an investor in the notes. We or one or more of our affiliates may also engage
in trading of securities included in the Underlying Assets 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 levels of the Underlying Assets 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 Underlying Assets. By introducing competing products into the marketplace
in this manner, we or one or more of our affiliates could adversely affect the market value of the notes.
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Our initial estimated value of the notes will be lower than the price to public. — Our initial estimated value
of the notes is only an estimate, and is based on a number of factors. The price to public of the notes will exceed our initial
estimated value, because costs associated with offering, structuring and hedging the notes are included in the price to public,
but are not included in the estimated value. These costs include the 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 of this preliminary pricing supplement.
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Our initial estimated value does not represent any future value of the notes, and may also differ from the estimated value
of any other party. — Our initial estimated value of the notes as of the date of this preliminary pricing supplement
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 Underlying Assets, 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 in this pricing supplement and the product
supplement. These changes are likely to impact the price, if any, at which we or BMOCM would be willing to purchase the notes from
you in any secondary market transactions. Our initial estimated value does not represent a minimum price at which we or our affiliates
would be willing to buy your notes in any secondary market at any time.
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The terms of the notes are not determined by reference to the credit spreads for our conventional fixed-rate debt. —
To determine the terms of the notes, we will use an internal funding rate that represents a discount from the credit spreads for
our conventional fixed-rate debt. As a result, the terms of the notes are less favorable to you than if we had used a higher funding
rate.
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Certain costs are likely to adversely affect the value of the notes.
— Absent any changes in market conditions, any secondary market prices of the notes will likely be lower than the price to
public. This is because any secondary market prices will likely take into account our then-current market credit spreads, and because
any secondary market prices are likely to exclude all or a portion of the underwriting discount and selling concessions and the
hedging profits and estimated hedging costs that are included in the price to public of the notes and that may be reflected on
your account statements. In addition, any such price is also likely to reflect a discount to account for costs associated with
establishing or unwinding any related hedge transaction, such as dealer discounts, mark-ups and other transaction costs. As a result,
the price, if any, at which BMOCM or any other party may be willing to purchase the notes from you in secondary market transactions,
if at all, will likely be lower than the price to public. Any sale that you make prior to the maturity date could result in a substantial
loss to you.
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You will not have any shareholder rights and will have no right to receive any securities included in the Underlying Assets
at maturity. — Investing in your notes will not make you a holder of any shares of any company included in either of
the Underlying Assets. 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 those securities.
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An investment in the notes is subject to risks associated in investing in stocks with a small market capitalization.
— The RTY consists of stocks issued by companies with relatively small market capitalizations. These companies often have
greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies. As a result, the level
of the RTY may be more volatile than that of a market measure that does not track solely small-capitalization stocks. Stock prices
of small-capitalization companies are also generally more vulnerable than those of large-capitalization companies to adverse business
and economic developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive to many
investors if they do not pay dividends. In addition, small capitalization companies are typically less well-established and less
stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable
to loss of those individuals. Small capitalization companies tend to have lower revenues, less diverse product lines, smaller shares
of their target markets, fewer financial resources and fewer competitive strengths than large-capitalization companies. These companies
may also be more susceptible to adverse developments related to their products or services.
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Changes that affect an Underlying Asset may adversely affect the market value of the notes and the amount you will receive
at maturity. — The policies of S&P Dow Jones Indices LLC (“S&P”), the sponsor of the SPX, and FTSE
Russell, the sponsor of the RTY (each, an “Index Sponsor”), concerning the calculation of the applicable Underlying
Asset, additions, deletions or substitutions of the components of the applicable Underlying Asset and the manner in which changes
affecting those components, such as stock dividends, reorganizations or mergers, may be reflected in the applicable Underlying
Asset and, therefore, could affect the level of the applicable Underlying Asset, the amount payable on the notes at maturity 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 either Index Sponsor changes these policies, for example, by changing the manner in which it calculates the applicable Underlying
Asset, or if either Index Sponsor discontinues or suspends the calculation or publication of the applicable Underlying Asset.
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We have no affiliation with either Index Sponsor and will not be responsible for any actions taken by either Index Sponsor.
— Neither Index Sponsor is an affiliate of ours or will be involved in the offering of the notes in any way. Consequently,
we have no control over the actions of either Index Sponsor, including any actions of the type that would require the calculation
agent to adjust the payment to you at maturity. Neither Index Sponsor has any obligation of any sort with respect to the notes.
Thus, neither Index Sponsor has any 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 either
Index Sponsor.
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Lack of liquidity. — The notes will not be listed on any securities exchange. BMOCM may offer to purchase the
notes in the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity
to allow you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes,
the price at which you may be able to trade the notes is likely to depend on the price, if any, at which BMOCM is willing to buy
the notes.
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Hedging and trading activities. — We or any of our affiliates may carry out hedging activities related to the
notes, including purchasing or selling securities included in the Underlying Assets, or futures or options relating to the Underlying
Assets, or other derivative instruments with returns linked or related to changes in the performance of the Underlying Assets.
We or our affiliates may also engage in trading relating to the Underlying Assets 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 our payment to you at maturity.
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Many economic and market factors will influence the value of the notes. — In addition to the levels of the Underlying
Assets and interest rates on any trading day, the value of the notes will be affected by a number of economic and market factors
that may either offset or magnify each other, and which are described in more detail in the product supplement.
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You must rely on your own evaluation of the merits of an investment linked to the Underlying Assets. — In the
ordinary course of their businesses, our affiliates from time to time may express views on expected movements in the levels of
the Underlying Assets or the prices of the securities included in the Underlying Assets. One or more of our affiliates have published,
and in the future may publish, research reports that express views on the Underlying Assets 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 Underlying
Assets at any time may have significantly different views from those of our affiliates. You are encouraged to derive information
concerning each of the Underlying Assets from multiple sources, and you should not rely on the views expressed by our affiliates.
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Neither the offering of the notes nor any views which
our affiliates from time to time may express in the ordinary course of their businesses constitutes a recommendation as to the
merits of an investment in the notes.
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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 in this pricing supplement.
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The Internal Revenue Service has issued a notice
indicating that it and the Treasury Department are actively considering whether, among other issues, a holder should be required
to accrue interest over the term of an instrument such as the notes even though that holder will not receive any payments with
respect to the notes until maturity and whether all or part of the gain a holder may recognize upon sale or maturity of an instrument
such as the notes could be treated as ordinary income. The outcome of this process is uncertain and could apply on a retroactive
basis.
Please read carefully the section entitled “U.S.
Federal Tax Information” in this pricing supplement, 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.
Hypothetical Return on the Notes at Maturity
The following table and examples illustrate
the hypothetical returns at maturity on a $1,000 investment in the notes based on hypothetical Percentage Changes of the Lesser
Performing Underlying Asset. The hypothetical total returns set forth below are based a hypothetical Initial Level of 100.00 for
each Underlying Asset, a hypothetical Barrier Level of 75.00 for each Underlying Asset (75% of its hypothetical Initial Level),
an Upside Leverage Factor of 135%, and a range of hypothetical Final Levels of the Lesser Performing Underlying Asset.
The hypothetical returns set forth below
are for illustrative purposes only and may not be the actual returns applicable to investors in the notes. The numbers appearing
in the following table and in the examples below have been rounded for ease of analysis. We make no representation or warranty
as to which of the Underlying Assets will be the Lesser Performing Underlying Asset. It is possible that the Final Level of each
Underlying Asset will be less than its Barrier Level.
Hypothetical Final
Level of the
Lesser Performing
Underlying Asset
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Hypothetical Percentage Change
of the Lesser Performing
Underlying Asset
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Hypothetical Payment at Maturity
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Hypothetical Return on the Notes
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1,500.00
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50.00%
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$1,675.00
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67.50%
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1,300.00
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30.00%
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$1,405.00
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40.50%
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1,200.00
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20.00%
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$1,270.00
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27.00%
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1,100.00
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10.00%
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$1,135.00
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13.50%
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1,050.00
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5.00%
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$1,067.50
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6.75%
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1,000.00
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0.00%
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$1,000.00
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0.000%
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900.00
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-10.00%
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$1,000.00
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0.000%
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800.00
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-20.00%
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$1,000.00
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0.000%
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750.00
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-25.00%
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$1,000.00
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0.000%
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700.00
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-30.00%
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$700.00
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-30.00%
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600.00
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-40.00%
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$600.00
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-40.00%
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500.00
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-50.00%
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$500.00
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-50.00%
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400.00
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-60.00%
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$400.00
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-60.00%
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300.00
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-70.00%
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$300.00
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-70.00%
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200.00
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-80.00%
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$200.00
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-80.00%
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100.00
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-90.00%
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$100.00
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-90.00%
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0.00
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-100.00%
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$0.00
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-100.00%
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Hypothetical Examples of Amounts Payable at Maturity
The following examples illustrate how the
returns set forth in the table above are calculated.
Example 1: The level of the Lesser Performing Underlying
Asset decreases from the hypothetical Initial Level of 1,000.00 to a hypothetical Final Level of 500.00, representing a Percentage
Change of -50%. Because the Percentage Change of the Lesser Performing Underlying Asset is negative and its hypothetical Final
Level is less than its Barrier Level, the investor receives a payment at maturity of $500 per $1,000 in principal amount of the
notes, calculated as follows:
$1,000 + [$1,000 x -50%] = $500
Example 2: The level of the Lesser Performing Underlying
Asset decreases from the hypothetical Initial Level of 1,000.00 to a hypothetical Final Level of 950.00, representing a Percentage
Change of -5%. Although the Percentage Change of the Lesser Performing Underlying 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 of the Lesser Performing Underlying
Asset increases from the hypothetical Initial Level of 1,000.00 to a hypothetical Final Level of 1,050.00, representing a Percentage
Change of 5.00%. Because the hypothetical Final Level of the Lesser Performing Underlying Asset is greater than its hypothetical
Initial Level, the investor receives a payment at maturity of $1,067.50 per $1,000 in principal amount of the notes, calculated
as follows:
$1,000 + [$1,000 x (5% x 135%)] = $1,067.50
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 cash-settled derivative contract for U.S. federal income tax purposes. However, the U.S. federal
income tax consequences of your investment in the notes are uncertain and the Internal Revenue Service could assert that the notes
should be taxed in a manner that is different from that described in the preceding sentence. Please see the discussion (including
the opinion of our counsel Morrison & Foerster LLP) in the product supplement under “Supplemental Tax Considerations—Supplemental
U.S. Federal Income Tax Considerations,” which applies to the notes, except that the following disclosure supplements, and
to the extent inconsistent supersedes, the discussion in the product supplement. The discussions below and in the accompanying
product supplement do not apply to holders subject to special rules including holders subject to Section 451(b) of the Code.
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-U.S. holders should not generally be
subject to withholding on dividend equivalent payments, if any, under the notes.
Recently proposed
regulations indicate an intent to eliminate the requirement under FATCA of withholding on gross proceeds of the disposition of
financial instruments. The U.S. Treasury Department has indicated that taxpayers may rely on these proposed regulations pending
their finalization. Prospective investors are urged to consult with their own tax advisors regarding the possible implications
of FATCA on their investment in 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 page of this pricing supplement.
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. This commission includes a selling concession of
up to 1.60% of the principal amount that we or one of our affiliates will pay to one or more 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, 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 Underlying Assets
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 that 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) the
underwriting discount and 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 are not intended to be offered, sold or otherwise made available to, and should not be offered, sold or otherwise made available
to, any retail investor in the European Economic Area (the “EEA”) and the U.K. For these purposes, the expression “offer”
includes the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be
offered so as to enable an investor to decide to purchase or subscribe the notes, and a “retail investor” means a person
who is one (or more) of: (a) a retail client, as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID
II”); or (b) a customer, within the meaning of Directive (EU) 2016/97, as amended, where that customer would not qualify
as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (c) not a qualified investor as defined in Regulation
(EU) (2017/1129) (the “Prospectus Regulation”). Consequently, no key information document required by Regulation (EU)
No 1286/2014, as amended (the “PRIIPs Regulation”), for offering or selling the notes or otherwise making them available
to retail investors in the EEA and the U.K. has been prepared, and therefore, offering or selling the notes or otherwise making
them available to any retail investor in the EEA and the U.K. may be unlawful under the PRIIPs Regulation.
Additional
Information Relating to the Estimated Initial Value of the Notes
Our estimated initial value
of the notes on the date of this preliminary pricing supplement, and that will be set forth on the cover page of the final pricing
supplement relating to the notes, equals the sum of the values of the following hypothetical components:
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a fixed-income debt component with the same tenor as the notes, valued using our internal funding
rate for structured notes; and
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one or more derivative transactions relating to the economic terms of the notes.
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The internal
funding rate used in the determination of the initial estimated value generally represents a discount from the credit spreads for
our conventional fixed-rate debt. The value of these derivative transactions are 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 market conditions on the pricing date.
The Underlying Assets
All
disclosures contained in this pricing supplement regarding the Underlying Assets, including, without limitation, their make-up,
method of calculation, and changes in their components, have been derived from publicly available sources. The information reflects
the policies of, and is subject to change by, the applicable Index Sponsor. The Index Sponsors, who own the copyright and all
other rights to the applicable Underlying Asset, have no obligation to continue to publish, and may discontinue publication of,
the Underlying Assets. Neither we nor BMOCM accepts any responsibility for the calculation, maintenance or publication of any
Underlying Asset or any successor index.
We
encourage you to review recent levels of the Underlying Assets prior to making an investment decision with respect to the notes.
The
S&P 500® Index
The
S&P 500® Index is intended to provide an indication of the pattern of common stock price movement. The calculation
of the level of this Underlying Asset is based on the relative value of the aggregate market value of the common stocks of 500
companies as of a particular time compared to the aggregate average market value of the common stocks of 500 similar companies
during the base period of the years 1941 through 1943.
S&P
calculates this Underlying Asset by reference to the prices of the constituent stocks of this Underlying Asset without taking
account of the value of dividends paid on those stocks. As a result, the return on the notes will not reflect the return you would
realize if you actually owned the SPX constituent stocks and received the dividends paid on those stocks.
Computation
of the S&P 500® Index
While
S&P currently employs the following methodology to calculate the S&P 500® Index, no assurance can be given
that S&P will not modify or change this methodology in a manner that may affect the Payment at Maturity.
Historically,
the market value of any component stock of the S&P 500® Index was calculated as the product of the market price
per share and the number of then outstanding shares of such component stock. In March 2005, S&P began shifting the S&P
500® Index halfway from a market capitalization weighted formula to a float-adjusted formula, before moving the
S&P 500® Index to full float adjustment on September 16, 2005. S&P’s criteria for selecting stocks
for the S&P 500® Index did not change with the shift to float adjustment. However, the adjustment affects each
company’s weight in the S&P 500® Index.
Under
float adjustment, the share counts used in calculating the S&P 500® Index reflect only those shares that are
available to investors, not all of a company’s outstanding shares. Float adjustment excludes shares that are closely held
by control groups, other publicly traded companies or government agencies.
In
September 2012, all shareholdings representing more than 5% of a stock’s outstanding shares, other than holdings by “block
owners,” were removed from the float for purposes of calculating the S&P 500® Index. Generally, these
“control holders” will include officers and directors, private equity, venture capital and special equity firms, other
publicly traded companies that hold shares for control, strategic partners, holders of restricted shares, ESOPs, employee and
family trusts, foundations associated with the company, holders of unlisted share classes of stock, government entities at all
levels (other than government retirement/pension funds) and any individual person who controls a 5% or greater stake in a company
as reported in regulatory filings. However, holdings by block owners, such as depositary banks, pension funds, mutual funds and
ETF providers, 401(k) plans of the company, government retirement/pension funds, investment funds of insurance companies, asset
managers and investment funds, independent foundations and savings and investment plans, will ordinarily be considered part of
the float.
Treasury
stock, stock options, equity participation units, warrants, preferred stock, convertible stock, and rights are not part of the
float. Shares held in a trust to allow investors in countries outside the country of domicile, such as depositary shares and Canadian
exchangeable shares are normally part of the float unless those shares form a control block.
For
each stock, an investable weight factor (“IWF”) is calculated by dividing the available float shares by the total
shares outstanding. Available float shares are defined as the total shares outstanding less shares held by control holders. This
calculation is subject to a 5% minimum threshold for control blocks. For example, if a company’s officers and directors
hold 3% of the company’s shares, and no other control group holds 5% of the company’s shares, S&P would assign
that company an IWF of 1.00, as no control group meets the 5% threshold. However, if a company’s officers and directors
hold 3% of the company’s shares and another control group holds 20% of the company’s shares, S&P would assign
an IWF of 0.77, reflecting the fact that 23% of the company’s outstanding shares are considered to be held for control.
As of July 31, 2017, companies with multiple share class lines are no longer eligible for inclusion in the S&P 500®
Index. Constituents of the S&P 500® Index prior to July 31, 2017 with multiple share class lines will
be grandfathered in and continue to be included in the S&P 500® Index. If a constituent company of the S&P
500® Index reorganizes into a multiple share class line structure, that company will remain in the S&P 500®
Index at the discretion of the S&P Index Committee in order to minimize turnover.
The
S&P 500® Index is calculated using a base-weighted aggregate methodology. The level of the S&P 500®
Index reflects the total market value of all 500 component stocks relative to the base period of the years 1941 through
1943. An indexed number is used to represent the results of this calculation in order to make the level easier to use and track
over time. The actual total market value of the component stocks during the base period of the years 1941 through 1943 has been
set to an indexed level of 10. This is often indicated by the notation 1941-43 = 10. In practice, the daily calculation of the
S&P 500® Index is computed by dividing the total market value of the component stocks by the “index divisor.”
By itself, the index divisor is an arbitrary number. However, in the context of the calculation of the S&P 500®
Index, it serves as a link to the original base period level of the S&P 500® Index. The index divisor keeps
the S&P 500® Index comparable over time and is the manipulation point for all adjustments to the S&P 500®
Index, which is index maintenance.
Index
Maintenance
Index
maintenance includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits,
stock dividends, and stock price adjustments due to company restructuring or spinoffs. Some corporate actions, such as stock splits
and stock dividends, require changes in the common shares outstanding and the stock prices of the companies in the S&P 500®
Index, and do not require index divisor adjustments.
To
prevent the level of the S&P 500® Index from changing due to corporate actions, corporate actions which affect
the total market value of the S&P 500® Index require an index divisor adjustment. By adjusting the index divisor
for the change in market value, the level of the S&P 500® Index remains constant and does not reflect the corporate
actions of individual companies in the S&P 500® Index. Index divisor adjustments are made after the close of
trading and after the calculation of the S&P 500® Index closing level.
Changes
in a company’s total shares outstanding of 5% or more due to public offerings are made as soon as reasonably possible. Other
changes of 5% or more (for example, due to tender offers, Dutch auctions, voluntary exchange offers, company stock repurchases,
private placements, acquisitions of private companies or non-index companies that do not trade on a major exchange, redemptions,
exercise of options, warrants, conversion of preferred stock, notes, debt, equity participations, at-the-market stock offerings
or other recapitalizations) are made weekly, and are generally announced on Fridays for implementation after the close of trading
the following Friday (one week later). If a 5% or more share change causes a company’s IWF to change by five percentage
points or more, the IWF is updated at the same time as the share change. IWF changes resulting from partial tender offers are
considered on a case-by-case basis.
License
Agreement
We
and S&P have entered into a non-exclusive license agreement providing for the license to us and certain of our affiliates,
in exchange for a fee, of the right to use the S&P 500® Index, in connection with certain securities, including
the notes. The S&P 500® Index is owned and published by S&P.
The
license agreement between S&P and us provides that the following language must be set forth in this pricing supplement:
The
notes are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, Standard and Poor’s Financial
Services LLC or any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones
Indices make no representation or warranty, express or implied, to the holders of the notes or any member of the public regarding
the advisability of investing in securities generally or in the notes particularly or the ability of the Index to track general
market performance. S&P Dow Jones Indices’ only relationship to us with respect to the Index is the licensing of the
Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its third party licensors.
The Index is determined, composed and calculated by S&P Dow Jones Indices without regard to us or the notes. S&P Dow Jones
Indices have no obligation to take our needs or the needs of holders of the notes into consideration in determining, composing
or calculating the Index. S&P Dow Jones Indices are not responsible for and have not participated in the determination of
the prices, and amount of the notes or the timing of the issuance or sale of the notes or in the determination or calculation
of the equation by which the notes are to be converted into cash. S&P Dow Jones Indices have no obligation or liability in
connection with the administration, marketing or trading of the notes. There is no assurance that investment products based on
the Index will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC and its
subsidiaries are not investment advisors. Inclusion of a security or futures contract within an index is not a recommendation
by S&P Dow Jones Indices to buy, sell, or hold such security or futures contract, nor is it considered to be investment advice.
Notwithstanding the foregoing, CME Group Inc. and its affiliates may independently issue and/or sponsor financial products unrelated
to the notes currently being issued by us, but which may be similar to and competitive with the notes. In addition, CME Group
Inc. and its affiliates may trade financial products which are linked to the performance of the Index. It is possible that this
trading activity will affect the value of the notes.
S&P
DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED
THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS)
WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR
DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY US, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES
INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS
OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND US, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
S&P®
is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a registered
trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed for use by Bank of
Montreal. “Standard & Poor’s®”, “S&P 500®” and “S&P®”
are trademarks of S&P. The notes are not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation
regarding the advisability of investing in the notes.
The
Russell 2000® Index
The
RTY was developed by Russell Investments (“Russell”) before FTSE International Limited (“FTSE”) and Russell
combined in 2015 to create FTSE Russell, which is wholly owned by London Stock Exchange Group. Russell began dissemination of
the RTY (Bloomberg L.P. index symbol “RTY”) on January 1, 1984. The RTY was set to 135 as of the close of business
on December 31, 1986. FTSE Russell calculates and publishes the RTY. The RTY is designed to track the performance of the small
capitalization segment of the U.S. equity market. As a subset of the Russell 3000® Index, the RTY consists of the
smallest 2,000 companies included in the Russell 3000® Index. The Russell 3000® Index measures the
performance of the largest 3,000 U.S. companies. The RTY is determined, comprised, and calculated by FTSE Russell without regard
to the notes.
Selection
of Stocks Comprising the RTY
All
companies eligible for inclusion in the RTY must be classified as a U.S. company under FTSE Russell’s country-assignment
methodology. If a company is incorporated, has a stated headquarters location, and trades on a standard exchange in the same country
(American Depositary Receipts and American Depositary Shares are not eligible), then the company is assigned to its country of
incorporation. If any of the three factors are not the same, FTSE Russell defines three Home Country Indicators (“HCIs”):
country of incorporation, country of headquarters, and country of the most liquid exchange (as defined by a two-year average daily
dollar trading volume) (“ADDTV”) from all exchanges within a country. Using the HCIs, FTSE Russell compares the primary
location of the company’s assets with the three HCIs. If the primary location of its assets matches any of the HCIs, then
the company is assigned to the primary location of its assets. If there is insufficient information to determine the country in
which the company’s assets are primarily located, FTSE Russell will use the primary location of the company’s revenue
for the same cross-comparison and assigns the company to the appropriate country in a similar fashion. FTSE Russell uses the average
of two years of assets or revenues data to reduce potential turnover. If conclusive country details cannot be derived from assets
or revenues data, FTSE Russell will assign the company to the country in which its headquarters are located unless the country
is a Benefit Driven Incorporation “BDI” country. If the country in which its headquarters are located is a BDI, it
will be assigned to the country of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Aruba,
Bahamas, Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao, Faroe
Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and
Turks and Caicos Islands. For any companies incorporated or headquartered in a U.S. territory, including countries such as Puerto
Rico, Guam, and U.S. Virgin Islands, a U.S. HCI is assigned. “N shares” of companies controlled by entities or individuals
based in mainland China are not eligible for inclusion in the RTY.
All
securities eligible for inclusion in the RTY must trade on a major U.S. exchange. Stocks must have a closing price at or above
$1.00 on their primary exchange on the “rank day” in May of each year (timetable is announced each spring) to be eligible
for inclusion during annual reconstitution. However, in order to reduce unnecessary turnover, if an existing member’s closing
price is less than $1.00 on the last day of May, it will be considered eligible if the average of the daily closing prices (from
its primary exchange) during the month of May is equal to or greater than $1.00. FTSE Russell adds initial public offerings (IPOs)
each quarter to ensure that new additions to the institutional investing opportunity set are reflected in representative indexes.
A stock added during the quarterly IPO process is considered a new index addition, and therefore must have a closing price on
its primary exchange at or above $1.00 on the last day of the eligibility period in order to qualify for index inclusion. If an
existing index member does not trade on the rank day, it must price at $1.00 or above on another eligible U.S. exchange to remain
eligible.
Royalty
trusts, limited liability companies, closed-end investment companies (companies that are required to report Acquired Fund Fees
and Expenses, as defined by the SEC, including business development companies, are not eligible), blank check companies, special-purpose
acquisition companies, exchange traded funds, mutual funds and limited partnerships are ineligible for inclusion. Preferred and
convertible preferred stock, redeemable shares, participating preferred stock, warrants, rights, installment receipts and trust
receipts are not eligible for inclusion in the RTY.
Annual
reconstitution is a process by which the RTY is completely rebuilt. On the rank day of May, all eligible securities are ranked
by their total market capitalization. The largest 4,000 become the Russell 3000E Index, and the other FTSE Russell indexes are
determined from that set of securities. Reconstitution of the RTY occurs on the last Friday in June or, when the last Friday in
June is the 29th or 30th, reconstitution occurs on the prior Friday. In addition, FTSE Russell adds initial public offerings to
the RTY on a quarterly basis based on total market capitalization ranking within the market-adjusted capitalization breaks established
during the most recent reconstitution.
After
membership is determined, a security’s shares are adjusted to include only those shares available to the public. This is
often referred to as “free float.” The purpose of the adjustment is to exclude from market calculations the capitalization
that is not available for purchase and is not part of the investable opportunity set.
License
Agreement
“Russell
2000®” and “Russell 3000®” are trademarks of FTSE Russell and have been licensed
for use by us.
The
notes are not sponsored, endorsed, sold or promoted by FTSE Russell. FTSE Russell makes no representation or warranty, express
or implied, to the owners of the notes or any member of the public regarding the advisability of investing in securities generally
or in the notes particularly or the ability of the RTY to track general stock market performance or a segment of the same. FTSE
Russell's publication of the RTY in no way suggests or implies an opinion by FTSE Russell as to the advisability of investment
in any or all of the securities upon which the RTY is based. FTSE Russell's only relationship to the Issuer is the licensing of
certain trademarks and trade names of FTSE Russell and of the RTY which is determined, composed and calculated by FTSE Russell
without regard to the Issuer or the notes. FTSE Russell is not responsible for and has not reviewed the notes nor any associated
literature or publications and FTSE Russell makes no representation or warranty express or implied as to their accuracy or completeness,
or otherwise. FTSE Russell reserves the right, at any time and without notice, to alter, amend, terminate or in any way change
the RTY. FTSE Russell has no obligation or liability in connection with the administration, marketing or trading of the notes.
FTSE
RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE RTY OR ANY DATA INCLUDED THEREIN AND FTSE RUSSELL SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. FTSE RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS
TO RESULTS TO BE OBTAINED BY THE ISSUER, INVESTORS, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RTY
OR ANY DATA INCLUDED THEREIN. FTSE RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE RTY OR ANY DATA INCLUDED HEREIN WITHOUT LIMITING ANY OF THE FOREGOING.
IN NO EVENT SHALL FTSE RUSSELL HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
P-15
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