Bank of Montreal Issues $1.1 Million Trigger Callable Contingent Yield Notes Linked to Three Global Equity Indexes

Note Structure and Contingent Payment Mechanics

The Bank of Montreal Trigger Callable Contingent Yield Notes represent senior unsecured debt securities with payment mechanics tied to the performance of three distinct equity market indexes. The notes track the Russell 2000 Index, the S&P 500 Index, and the EURO STOXX 50 Index simultaneously. The issuer will distribute quarterly contingent coupon payments only if the closing value of each underlying index on the applicable observation date remains at or above its designated coupon barrier. The Russell 2000 Index coupon barrier was set at 2,059.700 (70% of its initial value of 2,942.429), while the S&P 500 coupon barrier was established at 5,210.30 (70% of its initial value of 7,443.28), and the EURO STOXX 50 coupon barrier was set at 4,359.18 (70% of its initial value of 6,227.40).

The contingent coupon feature creates a meaningful income distribution scenario only if all three indexes maintain values above their respective barriers. If any single index falls below its coupon barrier on an observation date, the issuer will not pay the contingent coupon for that quarter. This structure means investors receive no interest income whenever market weakness affects the least stable of the three indexes, regardless of how well the other two perform. The quarterly observation dates and corresponding optional redemption dates extend throughout the five-year term until the final valuation date of July 21, 2031.

Downside Risk and Principal Repayment at Maturity

The most significant feature of these notes involves the contingent repayment of principal at maturity, which exposes investors to full downside market risk of the least performing index. At maturity on July 28, 2031, if the closing value of each underlier remains at or above its downside threshold, Bank of Montreal will repay the full principal amount plus any final contingent coupon. However, if the closing value of any index falls below its downside threshold on the final valuation date, investors will receive less than the principal amount invested, or potentially nothing at all.

The downside thresholds were established at exactly 50% of each index's initial value: the Russell 2000 downside threshold is 1,471.215, the S&P 500 downside threshold is 3,721.64, and the EURO STOXX 50 downside threshold is 3,113.70. This means investors face a potential loss equal to the negative return of whichever index performs worst. If the Russell 2000 Index declines 55% from its initial value while the other two indexes perform better, investors will lose 55% of their principal investment. The filing explicitly states that investors may lose a significant portion or all of their initial investment if any underlier breaches its downside threshold.

Issuer's Optional Redemption Rights and Investor Implications

Bank of Montreal retains the right to redeem the notes at its option on any quarterly optional redemption date throughout the life of the securities. If the issuer exercises this redemption right prior to maturity, it will pay investors the principal amount plus any contingent coupon otherwise due, and no further payments will be made. This feature gives the issuer significant flexibility to manage its funding costs and liability position based on changing market conditions and interest rate environments.

From an investor perspective, the issuer's redemption right creates additional uncertainty regarding investment horizon and total return potential. If market conditions improve significantly and the indexes rise substantially above their initial values, the issuer may choose to redeem the notes early, capping the investor's upside and preventing participation in continued index appreciation. The disclosure notes that this is a call feature exercised entirely at the issuer's discretion, meaning investors cannot control whether the notes are held to maturity or redeemed early. Investors willing to accept this structural disadvantage should carefully weigh the quarterly coupon payments against the loss of upside participation.

Pricing, Distribution, and Initial Terms

The notes were priced at $10.00 per note with an underwriting discount of $0.15 per note, resulting in net proceeds to Bank of Montreal of $9.85 per note. The total offering raised $1.1 million in principal amount, with the underwriting discount totaling $16,500 and net proceeds to the issuer of $1,083,500. The trade date was July 20, 2026, with settlement occurring on July 27, 2026. The minimum investment required was $1,000, representing 100 notes. The estimated initial value of the notes at pricing was $9.94 per note, reflecting the present value of the fixed-income debt component valued using Bank of Montreal's internal funding rate.

The distribution of the notes was handled by BMO Capital Markets Corp., a subsidiary of Bank of Montreal, and UBS Financial Services Inc., acting as joint agents for the offering. The notes were issued under registration statement number 333-285508 and filed pursuant to Securities and Exchange Commission Rule 424(b)(2). The pricing supplement constitutes Amendment No. 1 dated July 27, 2026, to the original pricing supplement dated July 20, 2026, indicating that modifications to the offering terms occurred between the initial pricing date and final settlement. The notes carry CUSIP number 063929871 and ISIN US0639298712.

Credit Risk and Issuer Obligations

All payments on the notes, including the final principal repayment at maturity, are subject entirely to the credit risk of Bank of Montreal. The notes represent senior unsecured debt obligations, meaning they are not backed by specific collateral and rank pari passu with the issuer's other unsecured debt. If Bank of Montreal were to default on its payment obligations, note holders would have no priority claim on specific assets and would rank with other unsecured creditors in any bankruptcy or restructuring proceeding. The filing explicitly warns that investors could lose their entire investment if the issuer defaults.

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, despite Bank of Montreal being a major financial institution. Additionally, 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 affiliates under Canadian deposit insurance legislation. This means that in a severe financial distress scenario, investors have no automatic protection mechanism through government deposit insurance or forced conversion to equity, distinguishing these securities from certain bank deposits.

Lack of Index Diversification Protection and Dividend Exclusion

The structure of these notes provides no offsetting mechanism for unequal index performance. Investors are exposed to the market risk of all three underliers simultaneously, but any decline in the value of one underlier is not mitigated by stability or gains in the other two. The filing emphasizes that the "least performing" underlier determination means that if one index falls 30% while the other two are flat, investors experience a 30% loss regardless of how the other indexes behave. This creates a mathematical asymmetry where downside moves in any single index directly harm overall note value, while upside moves in any index provide no benefit to investors.

Additionally, note holders will not receive or participate in any dividend payments made by securities included in any of the three underlying indexes. Investors in the Russell 2000 Index, S&P 500 Index, or EURO STOXX 50 Index through direct ownership would capture dividend income, but note holders receive no dividend stream. This structural feature reduces the effective return on the notes compared to direct index ownership, particularly for the S&P 500 and EURO STOXX 50 Indexes, which have historically paid meaningful dividends. The combination of limited upside participation and no dividend income creates a return profile heavily weighted toward coupon payments when they are earned.

Market Risk Concentration and Coupon Barrier Design

The coupon barrier design creates meaningful risk that investors will receive no contingent coupon payments during the five-year term. Coupon barriers are set at 70% of each index's initial value on the trade date, meaning an index can decline 30% and still trigger a loss of that quarter's coupon payment. The Russell 2000 Index coupon barrier of 2,059.700 represents a 30% buffer below the initial value of 2,942.429. Given that the Russell 2000 Index has experienced 30% declines in certain historical periods, there is substantial probability that investors will face quarters with zero coupon payments.

The filing notes that investors may receive few or no contingent coupons during the term of the notes, and that the higher the contingent coupon rate, the greater the risk of loss. This inverse relationship between yield and safety is a standard principle in structured products. The Russell 2000 Index carries a 10.80% per annum contingent coupon rate, substantially higher than the rates for the S&P 500 and EURO STOXX 50 Indexes, reflecting the greater volatility and performance uncertainty of the smaller-capitalization Russell 2000. The lower coupon rates for the broader indexes reflect more stable historical performance but still provide no guarantee that coupon barriers will not be breached during market stress periods.

Valuation Methodology and Market Value Uncertainty

Bank of Montreal's estimated initial value of the notes equals the sum of 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, plus the value of the embedded contingent equity features. The estimated initial value of $9.94 per note at the $10.00 original issue price represents a discount reflecting the cost of the embedded option features and distribution expenses. This valuation methodology indicates that the $0.06 per note discount from the original issue price reflects the collective value of all option features, distribution costs, and the issuer's profit on the transaction.

The filing explicitly states that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy. The market value of the notes will fluctuate based on the performance of the underlying indexes, changes in interest rates, changes in the volatility of the underlying indexes, the credit spread of Bank of Montreal, and the time remaining to maturity. Unlike exchange-traded products or liquid securities, the notes are not listed on any securities exchange and will not benefit from continuous market pricing or trading liquidity. Investors seeking to exit positions prior to maturity would need to negotiate directly with Bank of Montreal or potential secondary market buyers, and pricing in secondary market transactions may differ substantially from the notes' intrinsic values.

Comparison to Conventional Debt and Regulatory Disclosures

The filing contains prominent warnings that the notes are significantly riskier than conventional debt instruments and that the issuer is not necessarily obligated to repay the full principal amount of the notes at maturity. This language reflects the structured product classification and distinguishes these securities from standard Bank of Montreal senior unsecured debt. The disclosure notes that the market risk of the least performing underlier is in addition to the credit risk inherent in purchasing a debt obligation of the issuer, creating a dual layer of risk that conventional bondholders do not face. Conventional corporate bonds from Bank of Montreal carry only credit risk and interest rate risk, while these notes add substantial equity market risk on top of issuer credit risk.

The Securities and Exchange Commission and state securities commissions have not approved or disapproved these notes and have not passed upon the accuracy or adequacy of the disclosure documents. The filing was made pursuant to Rule 424(b)(2) under the Securities Act of 1933, which relates to delayed or continuous offerings. The prospectus and product supplement provide extensive risk disclosures on pages referenced within the pricing supplement, including selected risk considerations beginning on page PS-9 of the pricing supplement itself. The disclosure documentation extends across multiple components: the product supplement, underlying supplement, prospectus supplement, and base prospectus, all incorporated by reference into the complete offering documentation.

Investment Suitability Considerations and Risk Summary

The bank explicitly cautions that investors should not purchase the notes if they do not understand or are not comfortable with the significant risks involved. The primary risks include the potential for complete loss of investment, potential receipt of no contingent coupon payments, full downside market exposure to the least performing index, no upside participation in index appreciation, no dividend income participation, and issuer credit risk. The combination of these risks creates a return profile fundamentally different from either conventional bonds or direct index ownership. An investor seeking current income faces the risk of receiving no income payments. An investor seeking capital appreciation faces structural exclusion from any upside participation. An investor seeking principal preservation faces downside exposure to a 50% decline in any index.

The notes represent a specialized investment vehicle suited only for investors with sophisticated understanding of structured products, equity index performance, and option-adjusted pricing methodologies. The five-year maturity and quarterly structure require investors to maintain positions through multiple market cycles while accepting that contingent coupon payments may be suspended if any index weakens. Bank of Montreal, as both the issuer and primary distributor of these notes through its subsidiary BMO Capital Markets Corp., has structured the offering to generate distribution revenues of $16,500 on the $1.1 million principal amount, creating a financial incentive to place the notes with investors despite the significant risks.