Bank of Montreal Issues $1.1 Million Structured Notes Linked to Three Global Stock Indices

Structure and Mechanics of the Contingent Yield Notes

Bank of Montreal's Trigger Callable Contingent Yield Notes represent a structured debt product that combines fixed income characteristics with derivative exposure to three major equity indices. The notes are senior unsecured debt securities of the issuer, meaning all payments depend on Bank of Montreal's creditworthiness and ability to meet its obligations. The disclosed offering totals $1.1 million at an original issue price of $10.00 per note, with a minimum investment requirement of $1,000 (representing 100 notes). The underwriting discount of $0.15 per note and proceeds to Bank of Montreal of $9.85 per note are specified in the filing.

The notes track the performance of three indices: the Russell 2000 Index, the S&P 500 Index, and the EURO STOXX 50 Index. On the trade date of July 20, 2026, the initial underlier values were disclosed as 2,942.429 for the Russell 2000, 7,443.28 for the S&P 500, and 6,227.40 for the EURO STOXX 50. The filing indicates that the estimated initial value of the notes is $9.94 per note, and this value is derived from a combination of a fixed-income debt component valued using Bank of Montreal's internal funding rate and derivative transactions, though the filing notes that actual value at any time cannot be predicted with accuracy and will reflect many factors.

Quarterly Coupon Payments and Observation Mechanics

The notes feature quarterly contingent coupon payments that depend on whether closing values of each underlying index meet specified coupon barriers on observation dates. The filing discloses that on each contingent coupon payment date, investors will receive a coupon payment only if the closing value of each underlier on the related observation date equals or exceeds its coupon barrier. If any single underlier's closing value falls below its respective coupon barrier, no contingent coupon is paid for that quarter. This all-or-nothing structure means that weakness in even one of the three indices can eliminate quarterly income.

The coupon barrier levels are set at 70 percent of each underlier's initial value. For the Russell 2000, the coupon barrier is 2,059.700; for the S&P 500, it is 5,210.30; and for the EURO STOXX 50, it is 4,359.18. The contingent coupon rates are disclosed in the pricing supplement as 10.80 percent per annum for the Russell 2000 component. The notes are subject to optional redemption by Bank of Montreal on any optional redemption date on a quarterly basis. If the issuer exercises this option, investors receive the principal amount plus any contingent coupon otherwise due, and all further payments cease.

Downside Exposure and Principal Repayment Features

The critical feature distinguishing these notes from conventional debt is the contingent repayment of principal at maturity. If Bank of Montreal does not redeem the notes prior to maturity and the final underlier value of each index on July 21, 2031 equals or exceeds its downside threshold, investors receive full repayment of principal plus any final contingent coupon. However, if the final underlier value of any index falls below its downside threshold, investors face significant losses on their initial investment. The downside thresholds are set at 50 percent of each underlier's initial value: 1,471.215 for the Russell 2000, 3,721.64 for the S&P 500, and 3,113.70 for the EURO STOXX 50.

The filing explicitly states that if any underlier closes below its downside threshold at maturity, the issuer will repay less than the principal amount, if anything. The percentage loss on the principal amount equals the negative return of the least performing underlier—the index with the lowest return among the three. The disclosure emphasizes that investors will have full downside exposure to this least performing underlier from its initial value to its final value, potentially losing a significant portion or all of their initial investment. This downside exposure represents a fundamental departure from traditional fixed-income securities and constitutes the key risk differentiator of the product.

Credit Risk and Issuer Obligations

All payments on these notes are subject to the credit risk of Bank of Montreal. The filing discloses that if Bank of Montreal defaults on its payment obligations, investors might not receive any amounts owed under the notes and could lose their entire investment. This credit risk exists in addition to the market risk tied to the three underlying indices. The notes are specifically identified as unsecured obligations, meaning they are not backed by collateral or any assets of the bank. The filing further clarifies that the notes are not insured by the Federal Deposit Insurance Corporation, the Deposit Insurance Fund, the Canada Deposit Insurance Corporation, or any other governmental agency.

The disclosure also addresses bail-in risk, stating that the notes are not bail-inable notes and are not subject to conversion into Bank of Montreal's common shares or the common shares of any of its affiliates under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act. This means that in a resolution or restructuring scenario, note holders would not be subject to mandatory conversion into equity. However, the fundamental point remains that the notes represent unsecured debt obligations of the issuer, and any default by Bank of Montreal would place note holders at risk of partial or total loss.

Risk Profile and Loss Potential

The filing emphasizes that these notes are significantly riskier than conventional debt instruments and explicitly states that investors may lose a significant portion or all of their initial investment. The document notes that investors may receive few or no contingent coupons during the term of the notes if any underlier fails to maintain its coupon barrier level on observation dates. Investors are exposed to the market risk of all three underliers simultaneously, with the important qualifier that a decline in one index is not offset or mitigated by a lesser decline or potential increase in another index.

The filing highlights that investors will not participate in any appreciation of the underlying indices and will not receive any dividends on the securities included in any index. The relationship between coupon rate and risk is also disclosed: generally, the higher the contingent coupon rate, the greater the risk of loss. The filing directs investors to review detailed risk factors beginning on page PS-9 of the pricing supplement and in accompanying product supplements and prospectuses before making a purchase decision.

Distribution and Pricing Information

The notes were distributed through BMO Capital Markets Corp., a subsidiary of Bank of Montreal, and UBS Financial Services Inc., serving as agents for the distribution. The trade date was July 20, 2026, and the settlement date was July 27, 2026. The total offering size of $1.1 million resulted in total underwriting discounts of $16,500.00 and net proceeds to Bank of Montreal of $1,083,500.00. The minimum investment increment of $1,000 per investor (representing 100 notes) establishes accessibility for individual and institutional investors with capital in this range.

The filing indicates that observation dates and optional redemption dates occur on a quarterly basis throughout the life of the notes, with specific dates subject to postponement as outlined in the terms of the notes. The final valuation date on July 21, 2031, and maturity date on July 28, 2031, establish the timeline for resolution of the contingent principal repayment feature. The filing notes that these Notes will not be listed on any securities exchange, meaning they are not traded on public exchanges and liquidity may be limited.

Valuation Methodology and Investor Considerations

Bank of Montreal's estimated initial value of the notes of $9.94 per note is derived from two hypothetical components: a fixed-income debt component with the same tenor as the notes, valued using the issuer's internal funding rate for structured notes, and one or more derivative transactions. The filing explicitly states that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy. This disclosure clarifies that the initial pricing does not guarantee any particular market value at subsequent points in time or at maturity.

The filing cautions that the regulatory authorities, including the Securities and Exchange Commission and state securities commissions, have not approved or disapproved the notes or passed upon the accuracy or adequacy of the pricing supplement or accompanying documentation. Investors evaluating these notes should carefully consider whether they understand and are comfortable with the significant risks involved. The product is explicitly positioned as suitable only for investors with knowledge of structured products, understanding of equity index behavior, and capacity to sustain total loss of investment.

Registration and Regulatory Framework

The pricing supplement was filed pursuant to Rule 424(b)(2) under registration statement number 333-285508. The notes are issued under a product supplement numbered ELN-1 dated March 25, 2025, an underlying supplement numbered ELN-1 dated March 25, 2025, a prospectus supplement dated March 25, 2025, and a base prospectus dated March 25, 2025. The layered prospectus structure is standard for structured products and allows for updates to pricing and specific terms while maintaining consistency with previously disclosed base terms and risk factors.

The filing emphasizes that the structured notes represent complex financial instruments requiring careful review of all available documentation. The prospectus, prospectus supplement, product supplement, underlying supplement, and pricing supplement together establish the complete disclosure package governing the notes. Investors are directed to review risk factors and other detailed information contained across these documents. The filing structure reflects regulatory requirements under the Securities Act of 1933 for distribution of these instruments to investors.