Bank of Montreal Issues $2.43 Million in S&P 500 Index-Linked Notes Due August 2027

Structured Product Features and Payoff Mechanics

The pricing supplement discloses that the notes are linked to the S&P 500 Index and contain a threshold protection feature combined with leveraged downside exposure. On the stated maturity date of August 31, 2027, for each $1,000 principal amount, investors will receive either the threshold settlement amount of $1,098.50 if the final index level is at or above 6,758.28, or a cash settlement that declines below $1,000 if the index closes lower than that threshold. The filing states that the initial underlier level, measured on the trade date of July 21, 2026, was 7,509.20, establishing the baseline for performance calculations.

If the S&P 500 Index declines below the 6,758.28 threshold level, the filing indicates that investors will experience losses equal to approximately 1.1111 percent of principal for every 1 percent the final underlier level falls below the threshold. This leverage effect means that a 10 percent decline in the index from the initial level triggers leveraged losses on a 111.11 percent basis applied to the amount below the 10 percent threshold. In worst-case scenarios, the disclosure states that the cash settlement amount could decline to zero if the index falls sufficiently, representing total loss of principal.

Credit Risk and Unsecured Obligation Status

The filing explicitly states that the notes are the unsecured obligations of Bank of Montreal, making all payments subject to the credit risk of the issuer. The pricing supplement notes that if Bank of Montreal defaults on its obligations, investors could lose some or all of their investment. This credit risk distinction is material because the notes depend entirely on Bank of Montreal's ability and willingness to pay the settlement amount at maturity, independent of S&P 500 performance. The disclosure emphasizes that 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.

The filing further clarifies that 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 subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act. This means investors have no claim on Bank of Montreal equity in the event of financial distress at the issuer. The unsecured, non-convertible nature of these obligations means investors are general creditors with exposure only to Bank of Montreal's ability to meet cash payment obligations.

Pricing and Distribution Economics

Bank of Montreal priced the notes at $1,000 per note on the original issue date of July 24, 2026, following the trade date of July 21, 2026. The filing discloses that BMO Capital Markets Corp., a subsidiary of Bank of Montreal, served as the agent for distribution of the notes. An underwriting discount of $11.10 per note was applied, with total underwriting fees of $27,017.40 against the $2.434 million principal amount. Net proceeds to Bank of Montreal totaled approximately $2.406982 million after underwriting costs, or $988.90 per $1,000 principal per note.

The pricing supplement indicates that the estimated initial value of the notes, as determined by Bank of Montreal on the trade date, was $989.28 per $1,000 principal amount. This figure is below the original issue price of $1,000, suggesting that the estimated fair value incorporated the structured risks embedded in the product. The filing cautions that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy, and that investors should not rely on estimated value as a guide to real-time market valuation of these securities.

Tax Implications and Regulatory Framework

The disclosure notes that investors should review material U.S. federal income tax consequences and Canadian federal income tax consequences detailed in accompanying product supplement filings. The notes do not bear periodic interest; instead, all compensation comes from potential appreciation at maturity or losses thereof, which may have distinct tax treatment compared to conventional coupon-bearing debt. The filing directs investors to specific sections of the product supplement, prospectus supplement, and base prospectus for comprehensive tax analysis, signaling that tax consequences are material to the investment decision.

The filing states that neither the Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved of the notes or passed upon the accuracy or adequacy of the pricing supplement or accompanying documents. This standard regulatory disclaimer does not constitute an endorsement of the product or its terms. The pricing supplement was filed pursuant to Rule 424(b)(2) under the Securities Act of 1933, as part of registration statement No. 333-285508, indicating that the notes were registered securities offered under an effective registration statement.

Maturity Date and Determination Mechanics

The filing discloses that the stated maturity date is August 31, 2027, subject to postponement. The determination date, on which the final S&P 500 Index level is measured, is August 27, 2027, also subject to postponement. The pricing supplement indicates that the determination date may be postponed due to non-scheduled trading days and the occurrence of market disruption events. Similarly, the stated maturity date will be postponed if the determination date is postponed and will be adjusted for non-business days. This postponement mechanism means that final settlement could occur after August 31, 2027, if market conditions or holiday schedules interfere with normal trading.

The filing references market disruption event provisions in the accompanying product supplement that define circumstances under which the determination date may be delayed. Under these provisions, if the S&P 500 Index cannot be valued on the scheduled determination date due to market disruption, Bank of Montreal has the contractual right to postpone valuation until conditions normalize. Investors should note that extended postponement could delay access to their principal and any settlement amounts beyond the initially stated maturity date, creating uncertainty in cash flow timing.

Limitation of Upside and Buffer Structure

The notes feature a capped return structure with maximum payment of $1,098.50 per $1,000 principal, representing a 9.85 percent total return if the S&P 500 Index remains above the 90 percent threshold through the determination date. This cap is triggered if the final underlier level is greater than or equal to 6,758.28, which equals 90 percent of the initial underlier level of 7,509.20. The filing indicates that regardless of how much the S&P 500 Index rises above this threshold, investors receive only the fixed threshold settlement amount, meaning any appreciation beyond the threshold level is entirely captured by Bank of Montreal.

The buffer structure provides that if the final index level falls between 6,758.28 and 7,509.20 (between 90 and 100 percent of the initial level), investors break even or receive more than $1,000, with the amount declining linearly as the index approaches the threshold. The filing states that this buffer effectively allows investors to experience up to a 10 percent decline in the S&P 500 Index while still receiving at least $1,000 principal back, providing some downside protection within that 10 percent band. However, any index decline beyond 10 percent triggers losses at the 111.11 percent leverage rate described earlier.

Product Design and Holding Period Requirements

The filing explicitly states that the notes will not be listed on any securities exchange and are designed to be held to maturity. This disclosure indicates that Bank of Montreal does not intend for these securities to trade in secondary markets and that investors should plan on maintaining their positions through August 31, 2027. Without secondary market liquidity, investors who need to exit their positions before maturity may face difficulty in selling the notes or may be forced to accept unfavorable pricing from a limited buyer pool.

The lack of exchange listing and secondary market design reflects the structured nature of these securities. Unlike conventional corporate bonds that typically trade actively on the secondary market, these index-linked notes are customized financial instruments with embedded derivatives that do not lend themselves to standardized trading. Investors should view these securities as illiquid instruments suitable only for those who can commit capital through August 2027 without requiring access before that date.

Selected Risk Considerations for Investors

The filing identifies selected risk considerations beginning on page PS-9 of the pricing supplement and directs investors to additional risk factors in the product supplement, prospectus supplement, and base prospectus. The disclosure states that the notes involve risks not associated with an investment in conventional debt securities. These risks include leverage on the downside, which can result in losses exceeding the magnitude of the underlying index decline; the cap on upside potential, which limits returns if the S&P 500 Index rallies strongly; and the full credit risk of Bank of Montreal, which could result in complete loss if the issuer defaults.

Additional risks that the filing references but does not detail in the pricing supplement itself include market disruption events that could delay the determination date and settlement date, potentially extending the period of uncertainty for investors. The fixed threshold settlement amount of $1,098.50 also exposes investors to inflation risk, as the nominal return is fixed regardless of changes in purchasing power over the approximately 13-month holding period. The filing suggests that investors carefully review all referenced risk disclosures before purchasing these securities.

Distribution and Calculation Agency Arrangements

The filing discloses that BMO Capital Markets Corp., a subsidiary of Bank of Montreal, acts as both the agent for distribution and the calculation agent for the notes. The calculation agent is responsible for determining the final underlier level on the determination date and calculating the cash settlement amount due at maturity. This dual role creates a potential conflict of interest, as the same entity determining settlement amounts also earned the underwriting discount on the original issuance. However, the filing does not address conflict mitigation procedures or independent verification arrangements.

The CUSIP number for the notes is 06376LPK6 with corresponding ISIN US06376LPK60, enabling identification in settlement systems and clearance facilities. The notes are denominated in $1,000 principal amounts or any integral multiple thereof, providing flexibility for investors with varying capital commitments. Settlement of the notes will occur in U.S. dollars on the stated maturity date following final calculation of the cash settlement amount.

Regulatory Filing History and Reference Materials

The pricing supplement was filed pursuant to a registration statement dated March 25, 2025, as evidenced by registration statement No. 333-285508. The filing incorporates by reference the product supplement no. ELN-1 dated March 25, 2025, underlying supplement no. ELN-1 dated March 25, 2025, prospectus supplement dated March 25, 2025, and prospectus dated March 25, 2025. The disclosure indicates that to the extent any inconsistency exists between the pricing supplement and these other documents, the pricing supplement controls. Bank of Montreal's Central Index Key on the SEC website is 927971, allowing investors to locate additional company filings and disclosures.

The filing provides specific SEC website links to access the product supplement, underlying supplement, prospectus supplement, and base prospectus for investors seeking comprehensive disclosure beyond the pricing supplement. These documents contain detailed discussions of defined terms, risk factors, tax consequences, and general terms applicable to the notes. The reference structure indicates that this pricing supplement is one element of a comprehensive disclosure package that investors should review in full before making investment decisions.