Bank of Montreal ETF Protected Deposit, Retirement (Current Pay) Series 1

Transcription

1 Bank of Montreal ETF Protected Deposit, Retirement (Current Pay) Series 1 INVESTMENT HIGHLIGHTS Growth Opportunity: 100% exposure to a portfolio of certain BMO equity and fixed income ETFs. Even if the market suffers a significant decline, there is no risk of ejection except following an Extraordinary Event when the ETF Portfolio would be replaced by Notional Fixed Annuities Lifecycle Asset Allocation: Systematic rebalancing of the ETF Portfolio to become more conservative over time Reliable Cash Flow: During the term, investors will receive monthly principal repayments equal to $ (4% of the Deposit Amount per annum), regardless of market conditions. Variable Return: At Maturity, investors will receive an amount equal to the Note Value, which is comprised of the Deposit Balance of $40 and Variable Return, if any. The Variable Return is based on the total return (distributions and capital appreciation) of a portfolio of BMO ETFs over the approximately 15 year term. While the Variable Return is not subject to an upper limit, it may be zero. Annual ETF Portfolio Fee: 2.40% Principal Protection: By Bank of Montreal, as issuer, over the term of each Deposit Note if held to Maturity Daily Secondary Market: Subject to availability. BMO Capital Markets will use its reasonable efforts to provide as outlined in the Information Statement. An Early Trading Charge of up to 5.95% of Deposit Amount may apply. Selling Period: Until March 26, 2010 Closing Date: March 31, 2010 FundSERV: JHN837 BMO CAPITAL MARKETS CLIENT SERVICES Toll Free admin.dealerservices@bmonb.com The Deposit Notes are issued by and constitute direct, unconditional obligations of Bank of Montreal. This summary is issued for information purposes only to provide an overview of the Deposit Notes and does not constitute investment advice or an offer to sell or a solicitation to purchase. Details of certain risks of investing in the Deposit Notes, as well as complete disclosure of how the variable return, if any, on the Deposit Notes is calculated, is contained in the Information Statement which can be obtained through your financial advisor or on Capitalized terms used and not otherwise defined herein have the meanings given to them in the Information Statement. You should read the Information Statement carefully before investing and discuss the suitability of the investment with your financial advisor. The Deposit Notes may not be suitable for all types of investors; the prices, and value of the Deposit Notes may fluctuate and/or be adversely affected by a number of factors. The fluctuation of the performance of the ETFs will directly impact the variable return, if any payable, on the Deposit Notes at maturity. It is possible that no variable return will be paid on the Deposit Notes. Sales prior to maturity may be subject to an early sales charge. You should consult your tax advisors with respect to your particular circumstances if you plan to sell the deposit note prior to maturity. The Deposit Notes are not insured under the Canadian Deposit Insurance Corporation Act. Bank of Montreal makes no assurances, representations or warranties with respect to the accuracy, reliability or completeness of information provided by a third party. Furthermore, Bank of Montreal makes no recommendations concerning the index, the securities in the ETF, or equity investments as an asset class or the suitability of investing in securities generally or the Deposit Notes in particular. In connection with the issue and sales of Deposit Notes by Bank of Montreal, no person has been authorized to give any information or to make any representation not contained in the Information Statement relating to the Deposit Notes and Bank of Montreal does not accept any responsibility for any information not contained in the Information Statement.. BMO (M-bar roundel symbol), BMO and BMO Capital Markets are registered trade-marks of Bank of Montreal. Nesbitt Burns is a registered trade-mark of BMO Nesbitt Burns Corporation Limited used under license. Capitalized terms used and not otherwise defined herein have the meanings given to them in the Information Statement. 1

2 Overview The Deposit Notes have a term of approximately 15 years. During the term, all distributions on the Units will be notionally reinvested in additional Units of the applicable ETFs and the investor receives steady monthly cash flow. At Maturity, in addition to the Deposit Balance, the investor is entitled to Variable Return, if any. The Variable Return is based on 100% exposure to the performance of the ETF Portfolio, taking into account the monthly principal repayment amounts and applicable fees and expenses. Growth Potential - No Ejection Risk The ETF Portfolio consists of certain BMO equity and fixed income ETFs. During the term, investors will generally have 100% exposure to the performance of the ETF Portfolio. The monthly principal repayments and Annual ETF Portfolio Fees will be satisfied by notionally selling Units in the ETF Portfolio, thus reducing the value of the ETF Portfolio and Variable Return, if any. Even if the market suffers a significant decline, there is no risk of ejection except following an Extraordinary Event when the ETF Portfolio would be replaced by Notional Fixed Annuities with no exposure to the ETF Portfolio. If an Extraordinary Event occurs, investors will continue to receive monthly principal repayments of $ and the Note Program will no longer be subject to any further Annual ETF Portfolio Fees. (For more details, please see Description of the Deposit Notes Extraordinary Events in the Information Statement). Reliable Cash Flow During the term, investors receive monthly principal repayments equal to a pro rata portion of 4.00% of the Deposit Amount per annum ($ per month). The first principal repayment will occur on or about April 15, Regardless of market conditions or the performance of the ETF Portfolio, investors will continue to receive the monthly repayment amounts until Maturity. The monthly repayments will be satisfied by notionally selling Units in the ETF Portfolio, thus reducing the value of the ETF Portfolio and potential Variable Return, if any. Payment at Maturity At Maturity, in addition to the Deposit Balance of $40, investors will be entitled to Variable Return, if any. The Variable Return will be equal to the amount by which the Note Value at Maturity exceeds the Deposit Balance. Annual ETF Portfolio Fee An Annual ETF Portfolio Fee of 2.40% is charged to the ETF Portfolio. This Annual ETF Portfolio Fee is fixed, and will not increase or decrease during the term of the Deposit Notes. The Annual ETF Portfolio Fee includes costs associated with ongoing systematic asset allocation, and all other expenses of maintaining the Note Program including all trailer fees paid to advisors, and is in addition to management fees charged to the ETFs for the services provided by the ETF Manager. The Annual ETF Portfolio Fees will be satisfied by notionally selling Units in the ETF Portfolio, thus reducing the value of the ETF Portfolio and Variable Return, if any. Lifecycle Approach: ETF Portfolio Systematically Adjusts over Time The risk profile of the ETF Portfolio will become progressively more conservative, by systematically rebalancing the Equity Component and Fixed Income Component. The initial allocation will be 60% Equity Component and 40% Fixed Income Component. The ETF Portfolio will be systematically rebalanced annually such that the allocation to the Equity Component will be decreased while the allocation to the Fixed Income Component will be increased. In year 15, the allocation to the Equity Component will be 32% and the allocation to the Fixed Income Component will be 68%. 100% 90% 80% 70% 60% 50% 40% 30% 20% Fixed Income Component Equity Component 10% 0%

3 Return Calculation Examples The following examples are included for illustration purposes only. Each of the examples refers to a Holder holding a single Deposit Note until Maturity and assumes that no Extraordinary Event, Market Disruption Event, Fixed Income Substitution or replacement of an ETF has occurred. The Note Values from the Closing Date to the Final Valuation Date used to illustrate the different examples are hypothetical and are not estimates or forecasts of the performance of the ETF Portfolio, Note Value, ETF Portfolio Value, or Variable Return. It is possible that a Holder will not receive any return. Example 1: Positive Performance of the ETF Portfolio Note Value Aggregate Principal Repayment Amounts During the term: Holder receives $60 of Principal Repayment Amounts. At Maturity: The Note Value is $130. Holder is entitled to the Deposit Balance of $40 and a Variable Return of $90. Variable Return Therefore, In total, Holder receives $190 ($100 principal plus $90 Variable Return). Deposit Balance Example 2: Negative Performance of the ETF Portfolio Note Value Aggregate Principal Repayment Amounts During the term: Holder receives $60 of Principal Repayment Amounts. At Maturity: The Note Value is $40. Holder is entitled to the Deposit Balance of $40 and there will not be a Variable Return. Therefore, In total, Holder receives $100 ($100 principal and no Variable Return). $100 $40 Variable Return $4 Deposit Balance 3

4 ETF Portfolio The ETF Portfolio will be comprised of the Equity Component and the Fixed Income Component. The Equity Component will be comprised of Units of BMO Dow Jones Canada Titans 60 Index ETF (TSX: ZCN). Initially, the Fixed Income Component will be comprised of Units of BMO Short Federal Bond Index ETF (TSX: ZFS), BMO Short Provincial Bond Index ETF (TSX: ZPS) and BMO Short Corporate Bond Index ETF (TSX: ZCS). The Manager may, in its sole and absolute discretion, decide to make a Fixed Income Substitution and replace one or more (including all) of the ETFs in the Fixed Income Component with one or more substitute fixed income ETFs managed by the ETF Manager or an affiliate of Bank of Montreal. The ETFs in the Fixed Income Component will be in equal proportions on the Closing Date and rebalanced on an annual basis to equal proportions. Below are a brief description and highlights of each of the initial ETFs. BMO Dow Jones Canada Titans 60 Index ETF seeks to replicate, to the extent possible, the performance of the Dow Jones Canada Titans 60 Index, net of expenses. The investment strategy of BMO Dow Jones Canada Titans 60 Index ETF is to invest in and hold the Constituent Securities of the Dow Jones Canada Titans 60 Index in the same proportion as they are reflected in the Dow Jones Canada Titans 60 Index or securities intended to replicate the performance of the index. The ETF Manager may also use a sampling methodology in selecting investments for the ETF. Royal Bank of Canada 7.40% Suncor Energy Inc. 5.75% Toronto-Dominion Bank (The) 5.48% Bank of Nova Scotia (The) 4.60% Barrick Gold Corporation 4.01% Canadian Natural Resources Ltd 3.94% Manulife Financial Corporation 3.58% Potash Corp of Saskatchewan 3.52% Research In Motion Ltd. 3.31% Goldcorp Inc. 2.99% dings (as of September 30, 2009) BMO Short Federal Bond Index ETF seeks to replicate, to the extent possible, the performance of a short term federal bond index, net of expenses. Currently, the BMO Short Federal Bond Index ETF seeks to replicate the performance of the DEX Short Term Federal Bond Index. The ETF Manager may, in its discretion and without unitholder approval, change the DEX Short Term Federal Bond Index to another widely recognized short term federal bond index in order to provide investors with exposure to a short term federal bond index. The BMO Short Federal Bond Index ETF invests in a variety of debt securities primarily with a term to maturity between one and five years. Securities held in the index are generally issued or guaranteed by the Government of Canada, by various agencies of the Government of Canada, and by various instrumentalities that have been established or sponsored by the Government of Canada. Canada Housing Trust 4.55% December 15, % Government of Canada 3.50% June 1, % Government of Canada 3.00% June 1, % Government of Canada 5.25% June 1, % Government of Canada 3.75% September 1, % Canada Housing Trust 4.80% June 15, % Government of Canada 2.00% December 1, % Canada Housing Trust 3.15% June 15, % Canada Housing Trust 3.55% September 15, % Canada Housing Trust 4.05 % March 15, % investment made in Dow Jones Canada Titans 60 Index from December 31, 1999 to December 31, 2009 (assuming that all distributions on securities in the index were reinvested). $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $- $16,255 investment made in DEX Short Term Federal Bond Index from December 31, 1999 to December 31, 2009 (assuming that all distributions on securities in the index were reinvested). 20,000 15,000 10,000 5,000 - $17,093 Source: Bloomberg 4

5 BMO Short Provincial Bond Index ETF seeks to replicate, to the extent possible, the performance of a short term provincial bond index, net of expenses. Currently, the BMO Short Provincial Bond Index ETF seeks to replicate the performance of the DEX Short Term Provincial Bond Index. The ETF Manager may, in its discretion and without unitholder approval, change the DEX Short Term Provincial Bond Index to another widely recognized short term provincial bond index in order to provide investors with exposure to a short term provincial bond index. The BMO Short Provincial Bond Index ETF invests in a variety of debt securities primarily with a term to maturity between one and five years. Securities held in the index are generally issued or guaranteed by the provincial governments in Canada, by various agencies of the provincial governments, and by various instrumentalities that have been established or sponsored by provincial governments. The BMO Short Provincial Bond Index ETF may also invest in securities issued by Canadian municipal governments. Province of Ontario 5.00% March 8, % Province of Ontario 4.75% June 2, % Province of Quebec 6.00% October 1, % Province of Ontario 4.40% December 2, % Hydro-Quebec 6.50% February 15, % Province of Ontario 3.25% September 8, % Fin Quebec 3.25% June 1, % Province of British Columbia 4.25% June 18, % Province of British Columbia 5.75% January 9, % Province of New Brunswick 5.85% December 1, % BMO Short Corporate Bond Index ETF seeks to replicate, to the extent possible, the performance of a short term corporate bond index, net of expenses. Currently, the BMO Short Corporate Bond Index ETF seeks to replicate the performance of the DEX Short Term Corporate Bond Index. If the ETF Manager changes the DEX Short Term Corporate Bond Index, or any index replacing such Index, the ETF Manager will issue a press release identifying the new index. The BMO Short Corporate Bond Index ETF invests in a variety of debt securities primarily with a term to maturity between one and five years. Securities held in the index are generally corporate bonds issued domestically in Canada in Canadian dollars, with an investment grade rating. Canadian Imperial Bank of Commerce 5.00% September 10, % Bank of Nova Scotia 4.94% April 15, % Bank of Nova Scotia 4.58% February 15, % Royal Bank of Canada 5.20% August 15, % GE Capital Canada Funding Company 5.15% June 6, % Toronto-Dominion Bank 5.382% November 1, % TransCanada Pipelines 5.65% January 15, % Royal Bank of Canada 5.00% June 6, % Toronto-Dominion Bank 4.854% February 13, % Bank of Nova Scotia 5.04% April 8, % investment made in DEX Short Term Provincial Bond Index from December 31, 1999 to December 31, 2009 (assuming that all distributions on securities in the index were reinvested). $20, $15, $10, $5, $- investment made in DEX Short Term Corporate Bond Index from December 31, 1999 to December 31, 2009 (assuming that all distributions on securities in the index were reinvested). $20, $15, $10, $5, $- $17,428 $18,315 The information in the illustrations above is not intended to be, nor should it be construed to be, an indication as to the future returns, composition or volatility of the indices or ETFs or the potential return, if any, on the Deposit Notes. The performance information assumes that all distributions on securities in each index were reinvested. In contrast, distributions on each ETF may be reinvested or paid out to unitholders of each ETF. The total return generated by units of each ETF will be reduced by the management fee, plus applicable taxes, payable to the ETF Manager and expenses of the ETF including transaction costs incurred in adjusting the portfolio of securities held by the ETFs, whereas such transaction costs and expenses are not included in the calculation of the indices. The composition of the ETFs may deviate from the composition of their associated indices and the ETFs may not replicate the performance of the indices at any time. The performance of the Deposit Notes would further differ from the performance of the ETFs due to the fact that (i) distributions on the Units will be notionally reinvested in additional Units of the applicable ETFs; (ii) relative proportions of the Equity Component and the Fixed Income Component in the ETF Portfolio will be rebalanced on each Annual Rebalancing Date in accordance with the Risk Profile Proportions; (iii) relative proportions by value of the ETFs in the Fixed Income Component will be rebalanced on each Annual Rebalancing Date to equal proportions; and (iv) Monthly Payment Amounts and Annual ETF Portfolio Fees will be paid by notionally selling Units in the ETF Portfolio and accordingly will reduce the value of the ETF Portfolio. As a result of the foregoing, the performance of the ETF Portfolio and the Deposit Notes would have been lower than the past performance figures for the indices reflected above. Dow Jones, Titans SM and Dow Jones Canada Titans 60 Index SM are each service marks of Dow Jones & Company, Inc. ( Dow Jones ) and have been licensed for use for certain purposes by Bank of Montreal. Bank of Montreal s Deposit Notes based on the Dow Jones Canada Titans 60 Index SM are not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in such product. DEX Short Term Federal Bond Index, DEX Short Term Provincial Bond Index and DEX Short Term Corporate Bond Index are trademarks of TSX Inc. These marks have been sublicensed for use for certain purposes to Bank of Montreal by PC-BOND. The ETFs and the Deposit Notes are not sponsored, endorsed, sold or promoted by TSX Inc., PC-BOND, its affiliates (including TSX Group Inc.) or third party data suppliers. TSX Inc., PC-BOND, its affiliates (including TSX Group Inc.) and third party data suppliers make no representation, warranty, or condition regarding the advisability of investing in the ETFs and the Deposit Notes. 5

6 TERMS OF THE OFFERING Issuer CDIC Selling Period/ Issue Date Bank of Montreal ( BMO ). The Deposit Notes will not constitute deposits insured under the Canada Deposit Insurance Corporation Act Selling period until March 26, 2010 and will issue on or about March 31, Maturity Date/Term A term of approximately 15 years. The Deposit Notes will mature March 31, Minimum Purchase ETF Portfolio Monthly Payments Payment at Maturity Fees and Expenses Extraordinary Events and Market Disruption Events Secondary Market Early Trading Charge $2,000 (20 Deposit Notes). The ETF Portfolio will be comprised of the Equity Component and the Fixed Income Component. The Equity Component will be comprised of Units of BMO Dow Jones Canada Titans 60 Index ETF. Initially, the Fixed Income Component will be comprised of Units of BMO Short Corporate Bond Index ETF, BMO Short Provincial Bond Index ETF and BMO Short Federal Bond Index ETF. On each Annual Rebalancing Date, (i) the allocation between the Equity Component and Fixed Income Component will be adjusted based on the Risk Profile Proportions, and (ii) the relative proportions by value of the ETFs in the Fixed Income Component will be restored to equal proportions. The monthly payments and Annual ETF Portfolio Fees will be satisfied by notionally selling Units in the ETF Portfolio, thus reducing the value of the ETF Portfolio. During the term, Holders will receive monthly principal repayments in an amount equal to $ per Deposit Note (being equivalent to $4.00 per Deposit Note annually). BMO will make monthly principal repayments to Holders by the 10th business day of each month prior to Maturity. The first monthly payment will be made on or about April 15, On the Maturity Date, a Holder will receive the Deposit Balance and Variable Return, if any. The Variable Return is based on the performance of the Units in the ETF Portfolio. At Maturity, the Variable Return equals the amount, if any, by which Note Value at Maturity exceeds the Deposit Balance. Expenses of this offering of $5.00 (5.00%) per Deposit Note will be paid out of the proceeds of this offering to BMO Nesbitt Burns Inc. for its services as selling agent. The selling agent will pay all or a portion of this amount to qualified selling members for selling the Deposit Notes. An Annual ETF Portfolio Fee of 2.40% is charged to the assets in the ETF Portfolio. This includes all service fees paid to advisors, and is in addition to management fees charged directly to the ETFs units by the ETF manager. In certain circumstances described as an Extraordinary Event, which may include fundamental changes to one or more of the ETFs, BMO Capital Markets may determine that the ETF Portfolio will be replaced by Notional Fixed Annuities in which case (i) the entire value of the ETF Portfolio calculated as of the date of the Extraordinary Event will be invested in Notional Fixed Annuities, (ii) any positive returns on the units of the ETFs following the Extraordinary Event will not increase the value of the Deposit Notes, (iii) Holders will continue to be entitled to receive monthly repayments of principal prior to Maturity and Deposit Balance, and Variable Return, if any, at Maturity, and (iv) the possibility of receiving more than the Deposit Amount of the Deposit Notes, is significantly reduced. However, if an event occurs in respect of an ETF that would otherwise be an Extraordinary Event, then prior to making a determination that the ETF Portfolio will be replaced by Notional Fixed Annuities, BMO Capital Markets will use reasonable good faith efforts to replace the affected ETF with one or more other exchange-traded funds. If a Market Disruption Event exists on the Final Valuation Date, BMO Capital Markets may, as applicable, postpone the timing of and/or estimate the calculation of Variable Return, and postpone payment of Variable Return, if any. The Deposit Notes will not be listed on any stock exchange. Moreover, BMO does not have the right to redeem the Deposit Notes prior to Maturity and Holders do not have the right to require BMO to redeem the Deposit Notes prior to Maturity. However, BMO Capital Markets, in normal market conditions, will use reasonable efforts to maintain a secondary market for the Deposit Notes but reserves the right not to do so in the future, without providing prior notice to Holders. Secondary market redemption orders and settlements can be made through the FundSERV network. An Early Trading Charge equal to the applicable percentage of the Deposit Amount set out below will be applied to secondary market redemption orders: If sold within Thereafter Early Trading Charge 5.95% 4.45% 2.95% 2.20% 1.45% 0.70% Nil 6