Bank of Montreal Prices $200 Million Capped Buffer Enhanced Return Notes Linked to ACWI ex-U.S. ETF

Pricing and Issuance Details of the Structured Notes

Bank of Montreal established the pricing for the notes on July 17, 2026, with settlement scheduled for July 22, 2026. The total principal amount of the offering is $200,000, issued in minimum denominations of $1,000 and in integral multiples thereof. The notes carry a CUSIP number of 06376LPP5 and will not be listed on any securities exchange. BMO Capital Markets Corp., a subsidiary of Bank of Montreal, serves as the agent for the offering and as both the calculation agent and selling agent.

The price to public for the notes is set at 100 percent of par value, with BMO Capital Markets Corp. receiving a 2.25 percent agent's commission totaling $4,500. This results in net proceeds to Bank of Montreal of 97.75 percent of the total offering, or $195,500. The filing notes that the agent's commission and proceeds were established based on the aggregate amounts when Bank of Montreal established its hedge positions on or prior to the pricing date, which may have fluctuated depending on market conditions. Certain dealers who distributed the notes to fee-based advisory accounts may have foregone some or all of their selling concessions, with public offering prices for those accounts ranging between $977.50 and $1,000 per $1,000 in principal amount.

Reference Asset and Underlying Index Composition

The notes are linked to the iShares MSCI ACWI ex U.S. ETF, which trades under the ticker symbol ACWX. The underlying index is the MSCI ACWI ex USA Index, which provides exposure to developed and emerging market equities outside the United States. The Initial Level of the Reference Asset, established on the pricing date of July 17, 2026, was $74.01, representing the closing level of the shares on that date. This valuation will serve as the baseline against which performance will be measured through the Valuation Date of January 19, 2028.

The structure is designed to track percentage changes in the Reference Asset's value from its Initial Level to its Final Level on the Valuation Date. The Final Level will be determined by the closing level of the Reference Asset on January 19, 2028, which will then be used to calculate the Percentage Change using the formula (Final Level minus Initial Level) divided by the Initial Level, expressed as a percentage. All payments on the notes are subject to the credit risk of Bank of Montreal as the issuer.

Leverage and Maximum Return Characteristics

The notes feature an Upside Leverage Factor of 150 percent, meaning that positive movements in the Reference Asset will be amplified by a factor of 1.5. However, this amplified upside exposure is subject to a Maximum Return of 10 percent, which translates to a Maximum Redemption Amount of $1,100 per $1,000 in principal amount. This cap means that regardless of how much the Reference Asset appreciates, investors' returns are limited to this fixed ceiling. The filing provides an example showing that if the Reference Asset experiences a 10 percent positive change, the hypothetical return on the notes would equal the 10 percent maximum return.

For gains between zero and approximately 6.67 percent in the Reference Asset, investors will participate in the full 150 percent leveraged exposure. For example, a 5 percent gain in the Reference Asset would result in a 7.50 percent return on the notes (5 percent multiplied by 150 percent), and a 3 percent gain would yield a 4.50 percent return. The filing emphasizes that investing in the notes is not equivalent to a direct investment in the Reference Asset itself, and the notes do not bear interest.

Downside Protection Buffer and Loss Mechanisms

The notes incorporate a buffer mechanism designed to protect investors from modest declines in the Reference Asset. The Buffer Level is set at $59.21, representing 80 percent of the Initial Level of $74.01 (rounded to two decimal places). If the Final Level of the Reference Asset remains above this Buffer Level, investors will receive the full principal amount of $1,000 per note at maturity, with no additional return and no loss, even if the Reference Asset has declined by up to 20 percent from its Initial Level.

The filing illustrates this protection through a hypothetical scenario: if the Reference Asset experiences a negative 10 percent change, bringing it to 90 percent of the Initial Level, investors would still receive their full $1,000 principal. Similarly, if the Reference Asset declines to exactly the Buffer Level (a negative 20 percent change), investors would again receive the full principal amount of $1,000 with no loss. This 20 percent buffer represents a significant protection feature for investors during moderate market downturns in international equities.

Losses Beyond the Buffer Level and Maximum Downside Risk

If the Final Level of the Reference Asset falls below the Buffer Level of $59.21, investors will experience losses that accelerate beyond the initial 20 percent decline. The structure implements a one-to-one loss ratio for declines exceeding the buffer threshold. This means that for each additional 1 percent the Reference Asset declines below the Buffer Level, investors lose an additional 1 percent of their principal amount. The filing provides a concrete example: if the Reference Asset experiences a negative 30 percent change (declining to 70 percent of the Initial Level), which is 10 percentage points below the Buffer Level, investors would lose 10 percent of their principal and receive only $900 per $1,000 invested.

The maximum potential loss on these notes is substantial. If the Reference Asset declines by 80 percent or more from its Initial Level, falling to $14.80 or below, investors could lose up to 80 percent of their principal amount, receiving only $200 per $1,000 invested at maturity. The filing explicitly states that investors must be willing to accept that payment at maturity may not exceed the Maximum Redemption Amount and emphasizes that investors could lose up to 80 percent of their principal amount at maturity. This downside risk structure means that while the buffer provides protection against modest declines, investors bear substantial risk in scenarios of significant international equity market deterioration.

Valuation and Estimated Initial Value

The filing discloses that on the date of the pricing supplement, based on the terms set forth, the estimated initial value of the notes is $964.22 per $1,000 in principal amount. This valuation reflects a discount to par value and incorporates various risk factors including the time value of money, the limited upside capped at 10 percent, the credit risk of Bank of Montreal, and the potential for significant losses. The filing cautions that this estimated value cannot predict with accuracy the actual value of the notes at any time, as the actual value will reflect many factors and market conditions.

Investors should understand that the difference between the $1,000 par value and the $964.22 estimated value represents the cost of the embedded options and protections within the structure. The notes will not be subject to conversion into common shares of Bank of Montreal or any of its affiliates under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act. Settlement of the notes is scheduled for July 22, 2026, with valuation occurring on January 19, 2028, just five days before the maturity date on January 24, 2028.

Terms, Maturity, and Payment Mechanics

The notes are unsecured obligations of Bank of Montreal and will not be savings accounts or deposits insured by the Federal Deposit Insurance Corporation, the Canada Deposit Insurance Corporation, or any other governmental agency. The entire payment at maturity will be made in cash only, and investors will have no right to receive any shares of the Reference Asset. The notes do not bear interest, meaning investors will receive no periodic coupon payments during the approximately 18-month holding period from settlement to maturity.

The terms provide that if the Final Level of the Reference Asset is less than the Buffer Level, then for each $1,000 in principal amount, investors will receive an amount calculated as $1,000 plus [$1,000 multiplied by (Percentage Change of the Reference Asset plus Buffer Percentage)]. With the Buffer Percentage set at 20 percent, this formula ensures that the maximum loss scenario is capped at 80 percent of principal. The filing notes that both the Initial Level and Buffer Level are subject to adjustment in certain circumstances, including anti-dilution adjustments to the Reference Asset as an ETF, as described in the accompanying product supplement.

Risk Considerations and Investment Restrictions

The filing contains extensive warnings regarding the risks associated with these structured notes. Investors are directed to review the "Selected Risk Considerations" section of the pricing supplement, the "Additional Risk Factors Relating to the Notes" section in the product supplement dated March 25, 2025, and the "Risk Factors" sections in both the prospectus supplement and prospectus dated March 25, 2025. The filing emphasizes that the notes involve risks not associated with conventional debt securities and urges investors to consult with investment, legal, tax, accounting, and other advisers before investing.

The notes are subject to market disruption events, as described in the accompanying product supplement, which could affect the determination of the Final Level on the Valuation Date. Additionally, the notes carry full credit risk of Bank of Montreal as the obligor. The filing explicitly states that neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy of any documentation, and any representation to the contrary would constitute a criminal offense. Investors should recognize that international equity markets, particularly in emerging markets included in the MSCI ACWI ex USA Index, can experience substantial volatility that could trigger losses exceeding the 20 percent buffer protection.

Distribution and Market Access Arrangements

BMO Capital Markets Corp. serves as the sole selling agent and calculation agent for the notes, creating potential conflicts of interest in the offering, which the filing acknowledges would be detailed in the "Supplemental Plan of Distribution (Conflicts of Interest)" section of the prospectus. The offering represents a relatively modest capital raise of $200 million for a major financial institution, suggesting these notes may be targeted at specific investor segments or advisory platforms rather than constituting a material financing event for Bank of Montreal.

The notes will not be listed on any securities exchange, meaning they lack the liquidity and price transparency that exchange-traded securities provide. Investors seeking to exit their positions prior to maturity would need to negotiate secondary market trades directly with BMO Capital Markets Corp. or other dealers, potentially at substantial discounts to calculated fair value. This illiquidity is an important consideration for investors evaluating these structured products, as it restricts the ability to recover capital rapidly in changing market conditions.