Bank of Montreal Issues $1.013 Million Autocallable Notes Linked to Three Major ETFs

Pricing Structure and Issue Parameters

Bank of Montreal established the pricing parameters for these notes on July 27, 2026, with a settlement date of August 3, 2026. The notes were issued at par ($1,000 per note) with a 2.00% agent commission paid to BMO Capital Markets Corp., the underwriting agent. The disclosure indicates that proceeds to Bank of Montreal totaled $992,740.00 on the $1,013,000 issuance after accounting for the agent commission and hedging costs incurred on or prior to the pricing date. The notes are offered in minimum denominations of $1,000 and integral multiples thereof, and will not be listed on any securities exchange.

According to the filing, the estimated initial value of the notes at pricing was $975.52 per $1,000 in principal amount, reflecting the embedded derivative characteristics and risk features of the structure. The document notes that actual value at any time will reflect numerous factors and cannot be predicted with accuracy. Certain dealers participating in fee-based advisory accounts were permitted to forego selling concessions, with public offering prices ranging between $980.00 and $1,000 per $1,000 in principal amount for those accounts.

Reference Assets and Initial Valuation Levels

The notes are linked to three major equity exchange-traded funds: the SPDR S&P 500 ETF Trust (ticker SPY) with an initial level of $739.09, the iShares Russell 2000 ETF (ticker IWM) with an initial level of $292.91, and the Invesco QQQ Trust, Series 1 (ticker QQQ) with an initial level of $682.12. The notes are structured to track the performance of the least performing of these three reference assets, meaning the ETF that declines the most (or appreciates the least) will determine the notes' payoff at maturity. The underlying indices tracked by these ETFs are the S&P 500 Index, the Russell 2000 Index, and the NASDAQ 100 Index, respectively.

The contingent coupon barriers and trigger levels for potential principal impairment are set uniformly at 65.00% of each reference asset's initial level. For SPY, this barrier stands at $480.41; for IWM, at $190.39; and for QQQ, at $443.38. These levels determine both the threshold for coupon payments and, critically, whether investors face the risk of receiving shares or cash equal to less than their principal investment at maturity.

Contingent Coupon Mechanics and Memory Feature

The notes feature a contingent coupon structure designed to provide quarterly income only when performance conditions are met. The contingent interest rate is 2.125% per quarter, translating to approximately 8.50% per annum if all coupons are paid. Each $1,000 note would receive $21.25 per coupon payment date if the contingency condition is satisfied. The contingency requires that the closing level of each reference asset on the quarterly observation date be greater than or equal to its coupon barrier level (65% of initial level).

The memory coupon feature distinguishes this offering from simpler coupon structures. Should a contingent coupon fail to pay on its scheduled date because one or more reference assets close below their coupon barrier levels, that unpaid coupon accrues and becomes payable on a subsequent contingent coupon payment date if all reference assets subsequently close above their barrier levels. This feature allows investors to recover previously skipped coupon payments. However, the filing clarifies that once a previously unpaid contingent coupon has been paid, it will not be paid again on subsequent dates. If reference assets remain below their coupon barrier levels across all observation dates, investors receive no contingent coupons during the note term.

Autocallable Redemption Feature and Call Schedule

A central feature of these notes is the autocallable mechanism, beginning on October 29, 2026 (the first observation date). On any quarterly observation date, if the closing level of each reference asset exceeds its corresponding call level, the notes will be automatically redeemed prior to maturity. The call levels follow a step-down structure, beginning at 100.00% of the initial level in October 2026 and declining by 2.50% each quarter. By the final observation date (the valuation date in July 2028), the call level reaches 82.50% of the initial level.

When notes are automatically redeemed, investors receive their principal amount plus the contingent coupon that would otherwise be due on the call settlement date. Following redemption, no additional payments are made on the notes. This feature means investors have limited upside potential; if all three reference assets appreciate or remain above the declining call thresholds, investors will receive their principal plus accrued coupons, capping their return. The disclosure emphasizes that investors should be willing to have their notes automatically redeemed prior to maturity and willing to forego participation in any appreciation of the reference assets beyond the call levels.

Principal Protection Contingencies and Potential Loss Scenarios

The notes do not guarantee a return of principal at maturity. If the notes are not automatically redeemed, the payment at maturity depends on whether a "Trigger Event" has occurred. A trigger event is defined as the final level of any reference asset declining from its initial level to below its trigger level (also set at 65% of initial) on the valuation date (July 27, 2028). If a trigger event has occurred and the notes have not been called, investors will not receive their full principal amount.

In the event of a trigger event, investors will receive either a physical delivery of shares in the least performing reference asset or, at Bank of Montreal's election, a cash equivalent. The value of these deliveries decreases by 1% for each 1% decline in the least performing reference asset from its initial level to its final level. For example, if the least performing asset declines 20% from its initial level, the value of shares or cash received would be 80% of the principal amount, resulting in a 20% principal loss. Any fractional shares are paid in cash. This loss scenario represents significant downside risk for investors who do not experience early redemption.

Credit Risk and Regulatory Status

All payments on the notes are subject to the credit risk of Bank of Montreal, as the notes constitute unsecured obligations of the bank. The disclosure explicitly states that the notes are not savings accounts or deposits insured by the United States Federal Deposit Insurance Corporation, the Deposit Insurance Fund, the Canada Deposit Insurance Corporation, or any other governmental agency. Investors relying on these notes bear the counterparty credit risk of Bank of Montreal for the entire two-year term.

The notes are not 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. The filing indicates that neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the notes, and any representation to the contrary would constitute a criminal offense. The notes will not be subject to listing on any securities exchange, meaning they will trade only in over-the-counter markets if secondary market trading occurs.

Risk Considerations and Investor Suitability

The disclosure document directs investors to review detailed risk considerations outlined in multiple sections, including "Selected Risk Considerations" and "Additional Risk Factors Relating to the Notes" in the product supplement, as well as "Risk Factors" in the prospectus supplement and prospectus. The filing emphasizes that investing in these notes is not equivalent to a direct investment in the reference assets themselves. Investors do not own the underlying ETFs and cannot vote, receive dividends, or exercise other shareholder rights associated with direct ownership.

Key risks highlighted include the potential for automatic redemption, which limits upside participation; the complexity of the coupon payment mechanics and memory feature, which may be difficult for retail investors to model or predict; the declining call levels, which make early redemption increasingly likely as the notes approach maturity; and the principal loss risk if a trigger event occurs without prior automatic redemption. The step-down call structure means that even moderate market declines could trigger automatic redemption at lower call levels, limiting investor returns if markets subsequently recover.

Settlement and Distribution Arrangements

The notes settled on August 3, 2026, three business days after the July 27, 2026 pricing date. BMO Capital Markets Corp. acted as the agent for this offering. The filing includes disclosure regarding potential conflicts of interest in the distribution, noting that BMOCM is a subsidiary of Bank of Montreal and that the subsidiary is the agent for the offering. Certain dealers purchasing the notes for sale to fee-based advisory accounts were permitted to structure their compensation differently, with adjusted public offering prices between $980.00 and $1,000 per $1,000 in principal amount for those accounts.

The specific CUSIP for these notes is 06370EJP4, and they are designated as Senior Medium-Term Notes, Series K. The notes mature on August 1, 2028, with a valuation date of July 27, 2028. First-quarter coupon observation and payment dates are scheduled for October 29, 2026, with subsequent quarterly observation dates and payment dates continuing through the maturity period, contingent on barrier performance.

Observation Schedule and Key Dates

The notes follow a regular quarterly observation schedule beginning October 29, 2026. Observation dates continue on January 29, 2027, April 28, 2027, July 29, 2027, October 29, 2027, January 31, 2028, April 28, 2028, and culminate at the valuation date of July 27, 2028. Corresponding contingent coupon payment dates occur five business days after each observation date. The call observation dates align with the coupon observation schedule, allowing for potential automatic redemption on the same dates that coupon decisions are made.

For investors holding these notes beyond early redemption, the final maturity date of August 1, 2028, represents the end of the investment term. At maturity, if neither automatic redemption nor a trigger event has occurred, investors receive their principal in full. If a trigger event has occurred, they receive the physical delivery or cash equivalent of the least performing reference asset, valued at a discount reflecting the magnitude of decline from initial to final levels.