Bank of Montreal Launches $4.92 Million Autocallable Barrier Notes Tied to Energy, S&P 500, and Nasdaq-100 Technology Indexes

Diversified Exposure Across Energy, Broad Market, and Technology Sectors with Scheduled Observations

The notes offer exposure to three distinct market sectors through their reference assets. The State Street Energy Select Sector SPDR ETF (XLE) tracks the energy sector with an initial pricing level of $58.50. The S&P 500 Index (SPX) provides broad market exposure starting at 7,509.20, while the Nasdaq-100 Technology Sector Index (NDXT) offers focused exposure to large-cap technology stocks at 16,934.43. This diversified basket requires all three assets to exceed specified thresholds to trigger automatic redemption.

Observation dates begin roughly one year post-settlement and occur semiannually on July 27, 2027; January 19, 2028; July 19, 2028; January 19, 2029; and the final valuation date on July 19, 2029. On these dates, if all reference assets are at or above 85% of their initial levels, the notes may be automatically redeemed, giving investors multiple opportunities for early exit and principal protection.

Step-Up Call Amounts Enhance Annual Return Potential

The notes feature escalating call amounts increasing with each observation date, creating a step-up return structure. The initial call amount on July 27, 2027, is $142.00 per note, reflecting an annual return of approximately 14.20%. This rises to $213.00 on January 19, 2028; $284.00 on July 19, 2028; $355.00 on January 19, 2029; and culminates at $426.00 on the final valuation date, July 19, 2029. These increments compensate investors for time and reflect compounding of the targeted annual return.

Bank of Montreal priced these notes at par (100%), with a minimum denomination of $1,000 per note. The agent’s commission was 0.50%, totaling $24,600 on the aggregate offering, leaving net proceeds of $4,895,400. Fee-based advisory clients received pricing between $995 and $1,000 per $1,000 principal, with some dealers waiving portions of their selling concessions. The estimated initial value was $974.18 per $1,000 principal, indicating embedded derivative costs and issuer credit risk of about $25.82 per $1,000.

Principal Protection and Trigger Event Thresholds

Two critical thresholds govern the notes’ performance. The call level, set at 85% of each reference asset's initial level, determines eligibility for automatic redemption. These levels are $49.73 for XLE, 6,382.82 for SPX, and 14,394.27 for NDXT. If all three meet or exceed these on an observation date, the notes redeem early with principal plus the call amount.

The trigger level is set at 60% of each initial level—$35.10 for XLE, 4,505.52 for SPX, and 10,160.66 for NDXT. Should any reference asset fall below its trigger level on the valuation date, a trigger event occurs, causing investors to lose principal proportionally to the worst performing asset’s decline. This asymmetric risk exposes investors to potential total principal loss if the worst asset falls to zero, while upside is capped by the call amounts.

Determining the Least Performing Asset and Payment Calculation

The least performing reference asset is identified by the lowest percentage change from initial to final level at valuation. This asset dictates investor outcomes if a trigger event occurs. For example, if XLE declines 25%, SPX 15%, and NDXT rises 10%, the 25% fall in XLE results in investors receiving $750 per $1,000 principal rather than full repayment. This "basket worst" structure concentrates risk on the weakest sector over the investment term.

Percentage change is calculated as (final level - initial level) / initial level. Positive changes result in full principal repayment; negative changes trigger proportional losses. BMO Capital Markets Corp. acts as calculation agent, responsible for determining closing levels and final payments, with adjustments possible for corporate actions or index changes.

Issuer Credit Risk and Unsecured Obligations

All payments depend on Bank of Montreal’s creditworthiness, exposing investors to issuer default risk alongside market risk. The notes are unsecured obligations and not insured by any government deposit insurance, such as the FDIC or Canada Deposit Insurance Corporation. Investors become unsecured creditors if Bank of Montreal defaults, with no priority claim on insured deposits.

The notes are not convertible into Bank of Montreal or affiliate common shares under Canadian deposit insurance regulations, clarifying their classification but not mitigating credit risk. Investors should monitor Bank of Montreal’s credit ratings and financial health through the July 24, 2029 maturity.

Distribution and Agent Compensation Details

BMO Capital Markets Corp., a Bank of Montreal subsidiary, serves as both agent and selling agent, presenting potential conflicts of interest disclosed in the pricing supplement. The agent’s 0.50% commission ($24,600) was based on aggregate amounts at hedge establishment on or before July 21, 2026. Commission levels may vary with market conditions. Additionally, certain dealers receive referral fees up to 0.45% of principal to incentivize distribution.

Dealers selling to fee-based advisory accounts negotiated reduced or waived selling concessions, offering pricing between $995 and $1,000 per $1,000 principal. This differentiated pricing reflects recognition of embedded derivative costs and competitive advisory relationships. Investors outside these arrangements pay full par price and bear full embedded costs.

Trading Restrictions and Liquidity Considerations

The notes will not be listed on any securities exchange, limiting liquidity and public pricing transparency. Investors cannot trade through standard brokerage platforms and must rely on Bank of Montreal or private secondary transactions for liquidity before maturity or redemption. This illiquidity restricts flexibility and complicates fair value assessment during the holding period.

Issued in minimum denominations of $1,000 and multiples thereof, the notes target retail and small-to-mid-sized institutional investors. The lack of exchange listing and relatively small denomination suggest these notes are intended as buy-and-hold investments until automatic redemption or maturity.

Settlement Timeline and Valuation Schedule

Priced on July 21, 2026, the notes settled on July 24, 2026, marking the start of the three-year term ending July 24, 2029. The valuation date is July 19, 2029, five days before maturity, allowing final calculations of reference asset levels and payment amounts.

Observation dates for potential early redemption are July 27, 2027; January 19, 2028; July 19, 2028; January 19, 2029; and the valuation date. Corresponding call settlement dates occur shortly after each observation, enabling early redemption payments if conditions are met.

Investor Risk Factors

Investors face multiple risks including market risk, as any reference asset dropping below 60% of its initial level triggers principal loss tied to the worst performing asset. The notes provide no downside protection below this barrier. The targeted 14.20% annual call amount only applies if automatic redemption occurs and does not protect against losses.

Opportunity cost and reinvestment risk are also considerations, since the notes pay no interest during their term. Early redemption requires reinvesting principal in potentially different market conditions. Issuer credit risk remains significant despite Bank of Montreal’s established reputation; any credit deterioration could impact secondary market value.

Investors should review the "Additional Risk Factors Relating to the Notes" section and accompanying product supplement for detailed risk disclosures before investing.