Bank of Montreal Issues $800,000 Intel-Linked Structured Notes With 121.30% Maximum Return

Structured Note Pricing and Distribution Details

Bank of Montreal established the pricing for the Intel-linked notes on July 24, 2026, with a public offering price of 100% per $1,000 in principal amount. The filing states that BMO Capital Markets Corp. (BMOCM), a subsidiary of Bank of Montreal, served as both the agent and selling agent for the offering. The agent's commission totaled $3,000, representing 0.375% of the aggregate principal amount, while Bank of Montreal retained proceeds of $797,000 after accounting for the commission. The disclosure notes that certain dealers who distributed the notes to fee-based advisory accounts may have foregone selling concessions, with public prices for those accounts ranging between $996.25 and $1,000 per $1,000 in principal amount.

The notes were issued in minimum denominations of $1,000 with integral multiples thereof, consistent with standard structured product distribution protocols. The settlement date occurred on July 29, 2026, just five business days after pricing, allowing for rapid capital deployment. The filing indicates that Bank of Montreal or one of its affiliates would also pay referral fees to certain dealers of up to 0.35% of the principal amount in connection with the note distribution. The CUSIP number assigned to the notes is 06376LQG4, enabling standardized tracking across securities systems.

Intel Stock Reference Asset and Initial Valuation

The notes are structured to track the performance of Intel Corporation's common stock (ticker symbol INTC) from an initial level established on the pricing date. The filing discloses that the Initial Level was set at $92.32 per share, representing the closing price of Intel stock on July 24, 2026. This baseline price serves as the reference point for calculating all percentage changes in Intel's stock performance over the approximately 18-month holding period through the valuation date of January 26, 2028. The Percentage Change metric, expressed as a simple formula of (Final Level minus Initial Level) divided by Initial Level, determines the note's payout at maturity.

The disclosure includes an estimated initial value of the notes calculated at $980.72 per $1,000 in principal amount on the pricing date, representing approximately a 1.93% discount to the par offering price. Bank of Montreal notes in the filing that this estimated value reflects many underlying factors and cannot be predicted with accuracy. The difference between the offering price and estimated value suggests pricing dynamics related to the embedded options and credit spread inherent in the structured product. Investors purchasing these notes assumed the risks associated with Intel's equity performance while simultaneously bearing the credit risk of Bank of Montreal as the note issuer.

Upside Participation and Return Limitations

The notes provide investors with 1-to-1 positive return exposure based on appreciation in Intel's common stock, subject to a defined maximum return constraint. The filing states that if Intel's stock price increases, investors participate in that appreciation at a 100% upside leverage factor, meaning they receive proportional gains in their note value. However, the Maximum Return is capped at 121.30% of the initial investment, translating to a Maximum Redemption Amount of $2,213.00 per $1,000 in principal amount invested. This cap limits the upside benefit if Intel's stock appreciates beyond approximately 121.30% from the initial level of $92.32.

The payment structure for positive percentage changes specifies that if the calculated return (Percentage Change multiplied by the Upside Leverage Factor) exceeds the maximum return threshold, investors receive the capped Maximum Redemption Amount rather than full appreciation. If the percentage change is positive but below the maximum return threshold, investors receive their principal plus the proportional gain, calculated as $1,000 plus $1,000 multiplied by the percentage change times the leverage factor. This structure provides meaningful upside participation while protecting Bank of Montreal from unlimited loss exposure on the short equity position inherent in the product design.

Downside Buffer and Loss Absorption Mechanism

The notes incorporate a 25% downside buffer designed to provide partial principal protection if Intel's stock declines modestly from its initial level. The Buffer Level is established at $69.24 per share, representing exactly 75% of the Initial Level of $92.32. The filing discloses that if Intel's stock price declines but remains at or above this buffer level, investors receive a positive return on their notes, even though the underlying stock has declined in value. Specifically, if the Final Level exceeds or equals the Buffer Level, the payout equals $1,000 plus $1,000 multiplied by negative one times the Percentage Change, effectively returning investors' principal plus a positive return equal to the stock's percentage decline.

The Maximum Downside Redemption Amount of $1,250.00 per $1,000 in principal represents the ceiling on positive returns when the reference asset declines. This means investors receive a maximum 25% gain on their capital even if Intel's stock price drops, provided the decline does not exceed 25%. The disclosure explains this feature as a "Contingent Risk Absolute Return Buffer" mechanism, allowing investors to profit from moderate stock declines while maintaining downside protection. This structure appeals to investors seeking return enhancement in sideways or modestly declining markets, though it requires accepting credit risk and unsecured debt status.

Substantial Loss Risk Below Buffer Level

If Intel's stock price declines below the Buffer Level of $69.24—representing a decline exceeding 25% from the initial $92.32 level—investors face significant principal erosion. The filing states that investors will lose 1% of their principal for each 1% that the Final Level of the Reference Asset declines from its Initial Level in excess of the 25% buffer percentage. This linear loss structure means that a 50% decline in Intel's stock from $92.32 to $46.16 would result in investors losing approximately 50% of their principal, receiving roughly $500 per $1,000 invested. In extreme scenarios, investors could lose up to 75% of their principal amount if Intel's stock falls to or below approximately $23.08 per share.

The filing emphasizes repeatedly that investors may lose a significant portion of the principal amount invested in these notes. The disclosure includes multiple risk warnings stating that the notes are unsecured obligations of Bank of Montreal, not insured deposits, and that all payments are subject to the bank's credit risk. The product supplement and prospectus referenced in the filing contain additional detailed risk factor discussions beginning on page P-5 and throughout the accompanying documents. This loss mechanism means that investors in these notes assume both equity market risk (tied to Intel's performance) and credit risk (tied to Bank of Montreal's financial stability).

Credit Risk and Lack of Insurance Protection

All payments on the notes are explicitly subject to the credit risk of Bank of Montreal, as disclosed prominently in the filing. Bank of Montreal is the principal obligor on these unsecured senior medium-term notes, meaning investors have no claim against Intel Corporation or any assets of Intel. The filing makes clear that the notes will not be savings accounts or deposits insured by the United States Federal Deposit Insurance Corporation, the Deposit Insurance Fund, the Canada Deposit Insurance Corporation (despite Bank of Montreal being a Canadian institution), or any other governmental agency or instrumentality. This absence of deposit insurance distinguishes these notes from traditional bank savings products, even though they are issued by a major global bank.

The disclosure states that 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. This clarification indicates that despite being issued by a bank, these notes do not benefit from any CDIC conversion protections that might apply to certain other bank obligations. Investors relying on payment at maturity depend entirely on Bank of Montreal's ability and willingness to fulfill its obligations. The credit risk consideration becomes particularly relevant if Bank of Montreal experiences financial stress during the approximately 18-month holding period, which could impair the bank's capacity to make full payments at maturity regardless of Intel's stock performance.

Valuation, Settlement Timeline, and Physical Delivery Terms

The notes follow a specific timeline for valuation and cash settlement. The Pricing Date was established as July 24, 2026, with settlement occurring five business days later on July 29, 2026. The Valuation Date, when Intel's closing stock price is observed to determine the Final Level, is set for January 26, 2028, approximately 18 months after pricing. The Maturity Date occurs five calendar days later on January 31, 2028, when Bank of Montreal makes the final cash payment to investors. The filing specifies that the Valuation Date and Maturity Date are subject to adjustment in the event of a market disruption event, as detailed in the accompanying product supplement.

The filing explicitly states that Bank of Montreal will only pay cash on the Maturity Date, and investors will have no right to receive any shares of Intel Corporation or any other physical delivery of the reference asset. This cash-settlement-only structure distinguishes the notes from convertible securities or warrant products that might result in equity ownership. The Calculation Agent, identified as BMOCM (BMO Capital Markets Corp.), is responsible for determining the Final Level and calculating all payment amounts at maturity. Investors must complete the entire approximately 18-month holding period to receive their final payment, with no interim payment or interest accrual occurring during the note's term.

Anti-Dilution Adjustments and Market Disruption Provisions

The filing references anti-dilution adjustment provisions that would apply if Intel Corporation undertakes certain corporate actions such as stock splits, dividend distributions, or other equity-related events. The specific anti-dilution adjustment methodology is detailed in the accompanying product supplement dated March 25, 2025, under the section titled "General Terms of the Notes — Anti-dilution Adjustments to a Reference Asset that Is an Equity Security (Including Any ETF)." These adjustments are designed to protect note investors from dilution of their economic exposure resulting from corporate actions undertaken by Intel after the Initial Level is established.

Market disruption event provisions also apply to these notes, allowing for adjustment or postponement of the Valuation Date and Maturity Date should specified market disruption conditions occur. The filing indicates that detailed definitions and procedures for market disruption events are contained in the product supplement. These provisions protect both Bank of Montreal and note investors from extreme market conditions or trading halts that might prevent accurate determination of Intel's stock price on the scheduled valuation date. The presence of these contingency provisions reflects standard practice in structured product documentation and provides procedural flexibility if exceptional market circumstances arise during the note's term.

Hypothetical Payment Examples and Return Scenarios

The filing includes a payoff example table illustrating how the notes would perform under various hypothetical Intel stock price scenarios. The disclosure presents a hypothetical percentage change of 126.30% in Intel's stock, which would trigger the maximum return cap, resulting in a 121.30% return on the notes (the capped maximum rather than the full 126.30% participation). At an 81% positive percentage change in Intel's stock, investors would receive an 81% return on the notes, representing full 1-to-1 participation. These scenarios demonstrate the uncapped upside participation below the maximum return threshold.

The filing's downside scenarios illustrate the buffer mechanism. At a negative 10% percentage change in Intel's stock (decline from $92.32 to approximately $83.09), the notes would provide a positive 10% return due to the buffer mechanism, with investors receiving approximately $1,100 per $1,000 principal invested. At a negative 35% percentage change (Intel declining from $92.32 to approximately $60.01, below the 75% buffer level), the notes would deliver a negative 10% return, with investors receiving approximately $900 per $1,000 principal invested, reflecting the 1x loss beyond the buffer level. These examples underscore the notes' asymmetric payoff structure, rewarding upside participation while offering downside mitigation only within the 25% buffer zone.

Important Investor Considerations and Risk Disclosures

The filing emphasizes that investing in the notes involves substantial risks, with detailed risk discussions provided in multiple sections of the accompanying documentation. The "Selected Risk Considerations" section begins on page P-5 of the pricing supplement, while additional risk factors are covered beginning on page PS-5 of the product supplement and page S-1 of the prospectus supplement. The main prospectus contains a comprehensive "Risk Factors" section beginning on page 8. These risk sections address the complex nature of structured products, the leverage and leverage cap mechanisms, the downside buffer limitations, and credit risk of Bank of Montreal as the obligor.

The filing states explicitly that investing in the notes is not equivalent to a direct investment in Intel Corporation common stock. Investors in the notes do not own Intel shares, do not receive dividend payments from Intel, and have no voting rights or ownership interest in Intel. The notes represent a contractual obligation of Bank of Montreal to make specific cash payments at maturity based on Intel's stock performance. The notes will not be listed on any securities exchange, limiting liquidity and secondary market trading opportunities. Investors must hold these notes to maturity or find counterparties willing to trade them off-exchange at potentially unfavorable pricing. These structural characteristics require careful consideration by investors evaluating whether the product aligns with their investment objectives and risk tolerance.