Bank of Montreal Auto-Redeemable Advantage Minimum Y.I.E.L.D. Protected Deposit Notes, Series %-6.50% Potential Interest Payments

Transcription

1 Bank of Montreal Auto-Redeemable Advantage Minimum Y.I.E.L.D. Protected Deposit Notes, Series 1 Minimum Annual Interest Payments of 0.50% INVESTMENT HIGHLIGHTS 0.50%-6.50% Potential Interest Payments REFERENCE PORTFOLIO 100% Principal Protected if held to Maturity Term to Maturity 6 year term to maturity Automatic Redemption Feature: The Deposit Notes will be automatically redeemed by Bank of Montreal as issuer on the first interest payment date, where the interest then payable, together with interest paid on all previous dates is equal to or greater than $15.00 per Deposit Note. Annual Income Potential Annual interest ranging from the greater of 0.50% or 6.50% based on the price performance of a portfolio of securities of 10 Canadian issuers. The annual interest is determined each year on the Valuation Date and is equal to the average price return of the portfolio, measured from the date of issuance, where any positive performance of each security is deemed to be 6.50% for the purpose of the Interest Rate Formula* If the price performance of a security in the Reference Portfolio measured from the date of issuance to the applicable Valuation Date is zero or negative, the actual price performance of the security, subject to a lower limit of negative -10%, is used for the purpose of the Interest Rate Formula. 100% principal guaranteed by BMO as issuer if held to Maturity The Reference Portfolio will initially consist of the common shares of 10 issuers. While the securities in the Reference Portfolio had an average dividend or distribution yield of 3.99% and an average market capitalization of $12.38 billion CAD as of November 21, 2012 (Source: Bloomberg), investors in the Deposit Notes must be prepared to waive the aggregate dividend or distribution yield provided by the common shares of the issuers, representing approximately 26.46% over the 6-year term of the Deposit Notes, assuming the average dividend or distribution yield on such common shares remains constant at 3.99% each year and assuming dividends and distributions are reinvested in such common shares. The following provides an industry sector breakdown of the Reference Portfolio as well as information on each security, including the TSX ticker symbol and the indicated dividend or distribution yield and market capitalization as at November 21, 2012 (Source: Bloomberg). The information in the following table is not intended to be, nor should it be construed to be, an indication as to the future dividend or distribution yield of the securities. The Reference Portfolio will not include any dividends or distributions declared on the securities. FundSERV JHN981 Available until January 25, *The amount of annual interest paid is unlikely to mirror the price performance of the securities in the Reference Portfolio since the return cannot exceed 6.50% of the Deposit Amount. REFERENCE PORTFOLIO Issuer Symbol (TSX) Indicated Gross Dividend Yield Market Capitalization ($ millions) Agnico-Eagle Mines Limited AEM 1.45% 9, BCE Inc. BCE 5.43% 32, Canadian Oil Sands Ltd. COS 6.68% 10, Eldorado Gold Corporation ELD 0.80% 10, Pembina Pipeline Corporation PPL 5.83% 8, Shaw Communications, Inc. SJR/B 4.55% 9, Sun Life Financial Inc. SLF 5.33% 16, Tim Hortons, Inc. THI 1.80% 7, TransAlta Corporation TA 7.89% 3, Valeant Pharmaceuticals International, Inc. VRX 0.00% 16, SECTOR ALLOCATION Basic Materials Utilities Communications Financials Consumer, Non Cycl ical Consumer, Cycl ical Energy Source: Bloomberg as of November 21, For further information, please contact your Investment Advisor

2 RETURN EXAMPLES The following examples demonstrate the calculation of interest on each valuation date in accordance with the Interest Rate Formula and are included for illustration purposes only. The examples are based on hypothetical prices and changes in prices of the securities in the Reference Portfolio from the Closing Date to applicable Valuation Dates and are not intended as a forecast of future prices of the securities in the Reference Portfolio or as a forecast of any payments of interest that may be payable during the term of the Deposit Notes. Each of the scenarios refers to a Holder holding a single Deposit Note and assumes that no Extraordinary Event or Market Disruption Event has occurred. Automatic Redemption Example Positive Example where Deposit Notes are Automatically Redeemed In the above example, the Deposit Notes are subject to an Automatic Redemption prior to Maturity. A Holder would, in respect of a Deposit Note, be entitled to receive Interest of $6.50 and $5.70 on the first two Interest Payment Dates prior to the occurrence of the Automatic Redemption, and Interest of $3.95 on the Redemption Payment Date concurrent with the Automatic Redemption (even though such Interest amount, in addition to the Interest amounts paid on the two preceding Interest Payment Dates, exceeds the Redemption Level), representing a cumulative return of 16.15% of the Deposit Amount and an annually compounded rate of return of approximately 5.43%. In addition, on the Redemption Payment Date, a Holder would be entitled to receive the Deposit Amount of $100 per Deposit Note. The Deposit Notes are subject to an Automatic Redemption on the Redemption Payment Date (in this case, being the third Interest Payment Date) because the total cumulative Interest up to and including the third Interest Payment Date is $16.15 per Deposit Note, which exceeds the Redemption Level of $15.00 per Deposit Note.

3 RETURN EXAMPLES The following examples demonstrate the calculation of interest on each valuation date in accordance with the Interest Rate Formula and are included for illustration purposes only. The examples are based on hypothetical prices and changes in prices of the securities in the Reference Portfolio from the Closing Date to applicable Valuation Dates and are not intended as a forecast of future prices of the securities in the Reference Portfolio or as a forecast of any payments of interest that may be payable during the term of the Deposit Notes. Each of the scenarios refers to a Holder holding a single Deposit Note and assumes that no Extraordinary Event or Market Disruption Event has occurred. Positive Example Where Deposit Notes are not Automatically Redeemed In the above example, the Deposit Notes are not subject to an Automatic Redemption prior to Maturity because the total interest paid during the term of the Deposit Notes did not exceed the Redemption Level of $15.00 per Deposit Note. A Holder would, in respect of a Deposit Note, be entitled to receive Interest of $3.71, $5.00, $3.95, $0.50, $0.50 and $0.50, respectively, on the six annual Interest Payment Dates, representing a cumulative return of 14.16% of the Deposit Amount and an annually compounded rate of return of approximately 2.43%. In addition, on Maturity, a Holder would be entitled to receive the Deposit Amount of $100 per Deposit Note. Note that in this example, although the Actual Returns for certain Issuers exceeded 6.50% in several periods, the corresponding Effective Returns cannot exceed 6.50%.

4 RETURN EXAMPLES The following examples demonstrate the calculation of interest on each valuation date in accordance with the Interest Rate Formula and are included for illustration purposes only. The examples are based on hypothetical prices and changes in prices of the securities in the Reference Portfolio from the Closing Date to applicable Valuation Dates and are not intended as a forecast of future prices of the securities in the Reference Portfolio or as a forecast of any payments of interest that may be payable during the term of the Deposit Notes. Each of the scenarios refers to a Holder holding a single Deposit Note and assumes that no Extraordinary Event or Market Disruption Event has occurred. Negative Example Where Deposit Notes are not Automatically Redeemed In the above example, the Deposit Notes are not subject to an Automatic Redemption prior to Maturity because the total Interest paid during the term of the Deposit Notes did not exceed the Redemption Level of $15.00 per Deposit Note. A Holder would only be entitled to receive the minimum interest payment of $0.50 per Deposit Note on each Interest Payment Date, representing a cumulative return of 3.00% of the Deposit Amount and an annually compounded rate of return of approximately 0.50%. In addition, on Maturity, a Holder would be entitled to receive the Deposit Amount of $100 per Deposit Note.

5 Portfolio Description Agnico-Eagle Mines Limited is a gold producer with operations primarily in north-western Quebec, northern Mexico, northern Finland and Nunavut. The company also has exploration activities in Canada, Europe, Latin America, and the United States. BCE Inc. provides a full range of communication services to residential and business customers in Canada. The company's services include local, long distance and wireless phone services, high speed and wireless Internet access, IP-broadband services, value-added business solutions and direct-to-home satellite and VSDL television services. Sun Life Financial Inc. is an international financial services organization providing a diverse range of wealth accumulation and protection products and services. The company provides insurance, mutual funds, annuities, pensions, investment management, trust services, and banking services. The company serves individuals and corporate customers worldwide. Tim Hortons, Inc. franchises fast food restaurants. The company's restaurants serve coffee drinks, tea, soups, sandwiches, donuts, bagels, muffins, cookies, croissants, and pastries. Canadian Oil Sands Ltd. is an oil and gas exploration and production company. The company is focused on the Syncrude Project, and runs the day-to-day operations involving mining and upgrading bitumen from the Athabasca oil sands. TransAlta Corporation is a non-regulated electric generation and marketing company with its growth focused in developing coal and gas-fired generation. The Company is currently focused on Australia, Canada, the United States, and Mexico. Eldorado Gold Corporation acquires, explores, and develops mineral properties. The company currently has operating gold mines in Brazil, China, Turkey, Greece, and surrounding regions. Pembina Pipeline Corporation transports, stores and markets petroleum products. The company operates conventional and oil sands pipelines; stores oil; and gathers and processes natural gas. Valeant Pharmaceuticals International, Inc. develops and distributes drugs. The company develops drugs for unmet medical needs in central nervous system disorders; and distributes generic and branded generic drugs in Latin America and Eastern Europe. Shaw Communications, Inc. provides broadband cable television, Internet, and satellite television services. Source: Bloomberg

6 Issuer Rating Issue Price Bank of Montreal (the Bank ). Selling Period Until January 25, TERMS OF THE OFFERING As of the date of the Information Statement, the deposit liabilities of the Bank with a term to maturity of more than one year are rated AA by DBRS, A+ by Standard & Poor s and Aa2 by Moody s. On October 26, 2012, Moody's placed the long-term ratings (including the bank financial strength ratings, all senior debt, junior subordinated debt, and preferred stock ratings) of six Canadian banks, including the Bank, on review for downgrade.the Deposit Notes have not been rated and there is no assurance that, if the Deposit Notes were specifically rated by such rating agencies, they would have the same rating as the conventional deposit liabilities of the Bank. The Deposit Notes will not constitute deposits insured under the Canada Deposit Insurance Corporation Act or any other deposit insurance regime designed to ensure the payment of all or a portion of a deposit upon the insolvency of the deposit taking financial institution. $100 per Deposit Note (the Deposit Amount ). Issue Date On or about January 30, Maturity Date/Term The Deposit Notes will mature on January 30, 2019 ( Maturity or Maturity Date ), resulting in a term to maturity of approximately 6 years. Minimum Purchase Automatic Redemption Amounts Payable on Automatic Redemption Payment Date $2,000 (20 Deposit Notes). The Deposit Notes will be automatically redeemed (an Automatic Redemption ) on the first interest payment date (the Redemption Payment Date ), if any, on which interest then payable, together with interest paid on all previous interest payment dates is equal to or greater than $15.00 per Deposit Note (the Redemption Level ). Upon the occurrence of an Automatic Redemption, you will receive the Deposit Amount in addition to the interest then due (even if such interest then payable, together with interest paid on all previous interest payment dates exceeds the Redemption Level). On the Redemption Payment Date, the Deposit Notes will be cancelled and you will not be entitled to receive any subsequent payments in respect of the Deposit Notes. As a result of the Automatic Redemption, the return payable on the Deposit Notes is limited. The aggregate interest payments you can receive if the Deposit Notes are Automatically Redeemed will depend on the interest payments received up to and including the Redemption Payment Date and in any event will be less than $21.50 per Deposit Note but will not be less than $15.00 per Deposit Note. Interest Payments Annual interest on the Deposit Notes will be payable on or about January 30, 2014, January 30, 2015, January 30, 2016, January 30, 2017 and January 30, 2018 and at Maturity. The annual interest amount payable on any Interest Payment Date will not exceed 6.50% of the Deposit Amount and will not be less than 0.50% of the Deposit Amount and will be based on a simple average of the effective return of each security in the Reference Portfolio. The effective return of each security in the Reference Portfolio depends on its price performance (adjusted as indicated below) measured from the closing date to the date approximately three business days before the Interest Payment Date. If the price performance of a security is positive, then the effective return of the security for purposes of the Interest Rate Formula is deemed to be 6.50% regardless of the actual price performance of the security. If the price performance of a security is zero or negative, the effective return of the security for purposes of the Interest Rate Formula is its actual price performance, subject to a lower limit of negative 10%. If the effective rate of one or more of the securities in the Reference Portfolio is negative, this will offset positive effective returns of other securities in the Reference Portfolio, potentially resulting in only the minimum interest amount of 0.50% of the Deposit Amount being payable on each Interest Payment Date. If the Deposit Notes are Automatically Redeemed, the aggregate amount of Interest payable over the term of the Deposit Notes will be less than $21.50 per Deposit Note but will not be less than $15.00 per Deposit Note. While the securities in the Reference Portfolio have an average dividend or distribution yield of 3.99% and an average market capitalization of $12.38 billion as at November 21, 2012 (Source: Bloomberg), the amount of interest paid will not reflect any dividends or distributions declared on those securities. Payment at Maturity Subject to the occurrence of certain special circumstances, for each Deposit Note a Holder holds at Maturity, the Holder will receive (i) the Deposit Amount, and (ii) interest, if any, at the interest rate determined by applying the Interest Rate Formula as described under Interest Payments, above. Fees and Expenses of the Offering FundSERV Code Secondary Market Early Trading Charge Expenses of this offering of $2.50 (2.50%) 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. JHN981 The Deposit Notes will not be listed on any stock exchange. Moreover, the Bank does not have the right to redeem the Deposit Notes prior to Maturity and a Holder may not require the Bank to redeem the Deposit Notes prior to Maturity. However, BMO Capital Markets, will use reasonable efforts, subject to normal market conditions, to arrange for a secondary market for the sale of 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 using the FundSERV network. Sale of a Deposit Note prior to Maturity may result in a loss even if the performance of the securities in the Reference Portfolio has been positive. An Early Trading Charge will apply to secondary market redemption orders for Deposit Notes placed using the FundSERV network within the first 360 days from the Closing Date, determined as a percentage of the Deposit Amount as follows: If sold within 0-60 days days days days days days Thereafter Early Trading Charge 3.50% 2.90% 2.30% 1.70% 1.10% 0.50% Nil No CDIC The Deposit Notes are not insured under the Canada Deposit Insurance Corporation Act or any other deposit insurance regimes.