Bank of Montreal Launches $2.43 Million S&P 500 Index-Linked Notes Maturing August 2027

Structured Product Features and Payoff Mechanics

The pricing supplement reveals that the notes are linked to the S&P 500 Index with threshold protection and leveraged downside exposure. On maturity, August 31, 2027, investors receive $1,098.50 per $1,000 principal if the final index level is at or above 6,758.28, or a reduced cash settlement if below that threshold. The initial underlier level on the trade date, July 21, 2026, was 7,509.20, establishing the baseline.

If the S&P 500 Index falls below 6,758.28, investors incur losses of approximately 1.1111% of principal for every 1% decline below this threshold. This leverage means a 10% index drop triggers losses at 111.11% on amounts below the 10% threshold, with the possibility of total principal loss if the index declines sufficiently.

Credit Risk and Unsecured Obligation Status

The notes are unsecured obligations of Bank of Montreal, making payments subject to the issuer's credit risk. Investors risk losing some or all of their investment if Bank of Montreal defaults. These notes are not insured by any government agency, including the FDIC or Canada Deposit Insurance Corporation.

Additionally, the notes are not bail-inable and will not convert into Bank of Montreal common shares or affiliates’ shares under the Canada Deposit Insurance Corporation Act. Investors are general creditors relying solely on Bank of Montreal's ability to fulfill cash payments.

Pricing and Distribution Economics

Priced at $1,000 per note on July 24, 2026, following the July 21 trade date, BMO Capital Markets Corp., a Bank of Montreal subsidiary, acted as distribution agent. An underwriting discount of $11.10 per note resulted in total fees of $27,017.40 on the $2.434 million principal, yielding net proceeds of approximately $2.406982 million, or $988.90 per note.

The estimated initial note value was $989.28 per $1,000 principal, below the issue price, reflecting embedded structured risks. Actual note values may vary and should not be relied upon as real-time market valuations.

Tax Implications and Regulatory Framework

Investors should review U.S. and Canadian federal tax consequences detailed in accompanying product supplements. The notes do not pay periodic interest; compensation depends on maturity appreciation or losses, which may have unique tax treatment. The filing includes disclaimers that no regulatory body has approved or disapproved the notes or verified the pricing supplement's accuracy.

The pricing supplement was filed under Rule 424(b)(2) of the Securities Act of 1933 as part of registration statement No. 333-285508, confirming the notes are registered securities.

Maturity Date and Determination Mechanics

The stated maturity date is August 31, 2027, with the final S&P 500 Index determination date on August 27, 2027, both subject to postponement due to market disruptions or non-business days. Postponements can delay final settlement beyond the stated maturity.

Market disruption provisions allow Bank of Montreal to postpone valuation if the index cannot be priced on the scheduled date, potentially extending investor uncertainty about cash flow timing.

Limitation of Upside and Buffer Structure

The notes cap returns at $1,098.50 per $1,000 principal (9.85% total return) if the index remains above 90% of the initial level through the determination date. Any appreciation beyond this threshold accrues solely to Bank of Montreal.

A buffer protects investors from losses if the index declines up to 10%, ensuring at least the return of principal. Declines beyond 10% trigger leveraged losses at 111.11% on amounts below the threshold.

Product Design and Holding Period Requirements

The notes will not be listed on any exchange and are intended to be held to maturity. Lack of secondary market liquidity means investors should plan to hold through August 31, 2027, as early exit may be difficult or result in unfavorable pricing.

This illiquidity reflects the structured nature of the notes, which are customized financial instruments unsuitable for active secondary trading.

Selected Risk Considerations for Investors

Risks include leveraged downside losses exceeding the index decline, capped upside limiting returns, and full credit risk of Bank of Montreal, potentially resulting in total loss if the issuer defaults. Market disruptions may delay settlement, and fixed nominal returns expose investors to inflation risk.

Investors are advised to carefully review all risk disclosures in the product supplement, prospectus supplement, and base prospectus before investing.

Distribution and Calculation Agency Arrangements

BMO Capital Markets Corp. acts as both distribution agent and calculation agent, responsible for determining final index levels and settlement amounts. This dual role presents potential conflicts of interest, though no conflict mitigation details are provided.

The notes carry CUSIP 06376LPK6 and ISIN US06376LPK60, are denominated in $1,000 principal amounts or multiples, and settle in U.S. dollars on maturity.

Regulatory Filing History and Reference Materials

The pricing supplement was filed under registration statement No. 333-285508 dated March 25, 2025, incorporating by reference multiple product and prospectus supplements dated the same day. In case of inconsistencies, the pricing supplement governs. Bank of Montreal's SEC Central Index Key is 927971 for accessing further filings.

Links to the product supplement, underlying supplement, prospectus supplement, and base prospectus are provided for comprehensive disclosure, emphasizing the importance of reviewing the full documentation before investing.