Pricing Supplement dated January 21, 2022 to the Prospectus dated
April 20, 2020,
the Prospectus Supplement dated May 27, 2021 and the Product Supplement dated June 18, 2021
* Rounded to two decimal places with respect to NDX and SX5E and rounded to three
decimal places with respect to RTY.
On the date hereof, based on the terms set forth above, the estimated
initial value of the notes is $930.75 per $1,000 in principal amount. However, as discussed in more detail below, the actual value of
the notes at any time will reflect many factors and cannot be predicted with accuracy.
You should read this document together with the product supplement
dated June 18, 2021, the prospectus supplement dated May 27, 2021 and the prospectus dated April 20, 2020. This document, together
with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as
well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation,
sample structures, fact sheets, brochures or other educational materials of ours or the agent. You should carefully consider, among
other things, the matters set forth in Additional Risk Factors Relating to the Notes in the product supplement, as the notes involve risks
not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before
you invest in the notes.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is 927971. As
used in this document, "we", "us" or "our" refers to Bank of Montreal.
An investment in the notes involves significant risks. Investing
in the notes is not equivalent to investing directly in the Reference Assets. These risks are explained in more detail in the “Additional
Risk Factors Relating to the Notes” section of the product supplement.
Additional Information Relating to the Estimated Initial Value of the Notes
Our estimated initial value of the notes on the date hereof that
is set forth on the cover hereof, equals the sum of the values of the following hypothetical components:
|
·
|
a fixed-income debt component with the same tenor as the notes, valued using our internal funding rate for structured notes; and
|
|
·
|
one or more derivative transactions relating to the economic terms of the notes.
|
The internal funding rate used in the determination of the initial
estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. The value of these derivative
transactions is derived from our internal pricing models. These models are based on factors such as the traded market prices of comparable
derivative instruments and on other inputs, which include volatility, dividend rates, interest rates and other factors. As a result, the
estimated initial value of the notes on the Pricing Date was determined based on the market conditions on the Pricing Date.
The Reference Assets
All disclosures contained in this pricing supplement regarding
the Reference Assets, including, without limitation, their make-up, method of calculation, and changes in their components and their historical
closing levels, have been derived from publicly available information prepared by the applicable sponsors. The information reflects the
policies of, and is subject to change by, the sponsors. The sponsors own the copyrights and all rights to the Reference Assets. The sponsors
are under no obligation to continue to publish, and may discontinue publication of, the Reference Assets. Neither we nor BMO Capital Markets
Corp. accepts any responsibility for the calculation, maintenance or publication of and Reference Asset or any successor. We encourage
you to review recent levels of the Reference Assets prior to making an investment decision with respect to the notes.
The NASDAQ 100® Index
The NASDAQ 100® Index is a modified market capitalization-weighted
index of 100 of the largest stocks of both U.S. and non-U.S. non-financial companies listed on The NASDAQ Stock Market based on market
capitalization. It does not contain securities of financial companies, including investment companies. The NASDAQ 100® Index, which
includes companies across a variety of major industry groups, was launched on January 31, 1985, with a base index value of 250.00. On
January 1, 1994, the base index value was reset to 125.00. The NASDAQ OMX Group, Inc. publishes the NASDAQ 100® Index. Current information
regarding the market value of the NASDAQ 100® Index is available from NASDAQ OMX Group, Inc. (“NASDAQ OMX”) as well as
numerous market information services.
The share weights of the component securities of the NASDAQ 100®
Index at any time are based upon the total shares outstanding in each of those securities and are additionally subject, in certain cases,
to rebalancing. Accordingly, each underlying stock’s influence on the level of the NASDAQ 100® Index is directly proportional
to the value of its share weight.
Index Calculation
At any moment in time, the level of the NASDAQ 100® Index
equals the aggregate value of the then-current share weights of each of the component securities, which are based on the total shares
outstanding of each such component security, multiplied by each such security’s respective last sale price on The NASDAQ Stock Market
(which may be the official closing price published by The NASDAQ Stock Market), and divided by a scaling factor (the “divisor”),
which becomes the basis for the reported level of the NASDAQ 100® Index. The divisor serves the purpose of scaling such aggregate
value to a lower order of magnitude, which is more desirable for reporting purposes.
Underlying Stock Eligibility Criteria and Annual Ranking Review
Initial Eligibility Criteria
To be eligible for initial inclusion in the NASDAQ 100® Index,
a security must be listed on The NASDAQ Stock Market and meet the following criteria:
|
·
|
the security’s U.S. listing must be exclusively on the NASDAQ Global Select Market or the NASDAQ Global Market;
|
|
·
|
the security must be issued by a non-financial company;
|
|
·
|
the security may not be issued by an issuer currently in bankruptcy proceedings;
|
|
·
|
the security must generally be a common stock, ordinary share, American Depositary Receipt, or tracking stock (closed-end funds, convertible
debentures, exchange traded funds, limited liability companies, limited partnership interests, preferred stocks, rights, shares or units
of beneficial interests, warrants, units and other derivative securities are not included in the NASDAQ 100® Index, nor are the securities
of investment companies);
|
|
·
|
the security must have a three-month average daily trading volume of at least 200,000 shares;
|
|
·
|
if the security is issued by an issuer organized under the laws of a jurisdiction outside the United States, it must have listed options
on a recognized market in the United States or be eligible for listed-options trading on a recognized options market in the United States;
|
|
·
|
the issuer of the security may not have entered into a definitive agreement or other arrangement which would likely result in the
security no longer being eligible;
|
|
·
|
the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn; and
|
|
·
|
the issuer of the security must have “seasoned” on the NASDAQ Stock Market or another recognized market (generally, a
company is considered to be seasoned if it has been listed on a market for at least three full months, excluding the first month of initial
listing).
|
Continued Eligibility Criteria
In addition, to be eligible for continued inclusion in the NASDAQ
100® Index the following criteria apply:
|
·
|
the security’s U.S. listing must be exclusively on the NASDAQ Global Select Market or the NASDAQ Global Market;
|
|
·
|
the security must be issued by a non-financial company;
|
|
·
|
the security may not be issued by an issuer currently in bankruptcy proceedings;
|
|
·
|
the security must have an average daily trading volume of at least 200,000 shares in the previous three-month trading period as measured
annually during the ranking review process described below;
|
|
·
|
if the issuer of the security is organized under the laws of a jurisdiction outside the United States, then such security must have
listed options on a recognized market in the United States or be eligible for listed-options trading on a recognized options market in
the United States, as measured annually during the ranking review process;
|
|
·
|
the issuer of the security may not have entered into a definitive agreement or other arrangement that would likely result in the security
no longer being eligible;
|
|
·
|
the security must have an adjusted market capitalization equal to or exceeding 0.10% of the aggregate adjusted market capitalization
of the NASDAQ 100® Index at each month-end. In the event that a company does not meet this criterion for two consecutive month-ends,
it will be removed from the NASDAQ 100® Index effective after the close of trading on the third Friday of the following month; and
|
|
·
|
the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn.
|
These eligibility criteria may be revised from time to time by NASDAQ OMX without
regard to the notes.
Annual Ranking Review
The component securities are evaluated on an annual basis (the
“Ranking Review”), except under extraordinary circumstances, which may result in an interim evaluation, as follows. Securities
that meet the applicable eligibility criteria are ranked by market value. Eligible securities that are already in the NASDAQ 100®
Index and that are ranked in the top 100 eligible securities (based on market capitalization) are retained in the NASDAQ 100® Index.
A security that is ranked 101 to 125 is also retained, provided that such security was ranked in the top 100 eligible securities as of
the previous Ranking Review or was added to the NASDAQ 100® Index subsequent to the previous Ranking Review. Securities not meeting
such criteria are replaced. The replacement securities chosen are those eligible securities not currently in the NASDAQ 100® Index
that have the largest market capitalization. The data used in the ranking includes end of October market data and is updated for total
shares outstanding submitted in a publicly filed SEC document via EDGAR through the end of November.
Replacements are made effective after the close of trading on
the third Friday in December. Moreover, if at any time during the year other than the Ranking Review, a component security is determined
by NASDAQ OMX to become ineligible for continued inclusion in the NASDAQ 100® Index, the security will be replaced with the largest
market capitalization security meeting the eligibility criteria listed above and not currently included in the NASDAQ 100® Index.
Index Maintenance
In addition to the Ranking Review, the securities in the NASDAQ
100® Index are monitored every day by NASDAQ OMX with respect to changes in total shares outstanding arising from corporate events,
such as stock dividends, stock splits and certain spin-offs and rights issuances. NASDAQ OMX has adopted the following quarterly scheduled
weight adjustment procedures with respect to those changes. If the change in total shares outstanding arising from a corporate action
is greater than or equal to 10%, that change will be made to the NASDAQ 100® Index as soon as practical, normally within ten days
of such corporate action. Otherwise, if the change in total shares outstanding is less than 10%, then all such changes are accumulated
and made effective at one time on a quarterly basis after the close of trading on the third Friday in each of March, June, September and
December.
In either case, the share weights for those component securities
are adjusted by the same percentage amount by which the total shares outstanding have changed in those securities. Ordinarily, whenever
there is a change in the share weights, a change in a component security, or a change to the price of a component security due to spin-off,
rights issuances or special cash dividends, NASDAQ OMX adjusts the divisor to ensure that there is no discontinuity in the level of the
NASDAQ 100® Index that might otherwise be caused by any of those changes. All changes will be announced in advance.
Index Rebalancing
Under the methodology employed, on a quarterly basis coinciding
with NASDAQ OMX’s quarterly scheduled weight adjustment procedures, the component securities are categorized as either “Large
Stocks” or “Small Stocks” depending on whether their current percentage weights (after taking into account scheduled
weight adjustments due to stock repurchases, secondary offerings or other corporate actions) are greater than, or less than or equal to,
the average percentage weight in the NASDAQ 100® Index (i.e., as a 100-stock index, the average percentage weight in the NASDAQ 100®
Index is 1%).
This quarterly examination will result in an index rebalancing
if it is determined that: (1) the current weight of the single largest market capitalization component security is greater than 24% or
(2) the “collective weight” of those component securities, the individual current weights of which are in excess of 4.5%,
when added together, exceed 48%. In addition, NASDAQ OMX may conduct a special rebalancing at any time if it is determined to be necessary
to maintain the integrity of the NASDAQ 100® Index.
If either one or both of these weight distribution requirements
are met upon quarterly review, or NASDAQ OMX determines that a special rebalancing is required, a weight rebalancing will be performed.
First, relating to weight distribution requirement (1) above, if the current weight of the single largest component security exceeds 24%,
then the weights of all Large Stocks will be scaled down proportionately towards 1% by enough of an amount for the adjusted weight of
the single largest component security to be set to 20%. Second, relating to weight distribution requirement (2) above, for those component
securities whose individual current weights or adjusted weights in accordance with the preceding step are in excess of 4.5%, if their
“collective weight” exceeds 48%, then the weights of all Large Stocks will be scaled down proportionately towards 1% by just
enough amount for the “collective weight,” so adjusted, to be set to 40%.
The aggregate weight reduction among the Large Stocks resulting
from either or both of the above rescalings will then be redistributed to the Small Stocks in the following iterative manner. In the first
iteration, the weight of the largest Small Stock will be scaled upwards by a factor which sets it equal to the average Index weight of
1.0%. The weights of each of the smaller remaining Small Stocks will be scaled up by the same factor, reduced in relation to each stock’s
relative ranking among the Small Stocks, such that the smaller the component security in the ranking, the less the scale-up of its weight.
This is intended to reduce the market impact of the weight rebalancing on the smallest component securities in the NASDAQ 100® Index.
In the second iteration, the weight of the second largest Small
Stock, already adjusted in the first iteration, will be scaled upwards by a factor which sets it equal to the average index weight of
1%. The weights of each of the smaller remaining Small Stocks will be scaled up by this same factor, reduced in relation to each stock’s
relative ranking among the Small Stocks, such that, once again, the smaller the component stock in the ranking, the less the scale-up
of its weight.
Additional iterations will be performed until the accumulated
increase in weight among the Small Stocks exactly equals the aggregate weight reduction among the Large Stocks from rebalancing in accordance
with weight distribution requirement (1) and/or weight distribution requirement (2).
Then, to complete the rebalancing procedure, once the final percent
weights of each of the component securities are set, the share weights will be determined anew based upon the last sale prices and aggregate
capitalization of the NASDAQ 100® Index at the close of trading on the last day in February, May, August and November. Changes to
the share weights will be made effective after the close of trading on the third Friday in March, June, September and December, and an
adjustment to the divisor will be made to ensure continuity of the NASDAQ 100® Index.
Ordinarily, new rebalanced weights will be determined by applying
the above procedures to the current share weights. However, NASDAQ OMX may from time to time determine rebalanced weights, if necessary,
by instead applying the above procedure to the actual current market capitalization of the component securities. In those instances, NASDAQ
OMX would announce the different basis for rebalancing prior to its implementation.
License Agreement
The notes are not sponsored, endorsed, sold or promoted by Nasdaq,
Inc. or its affiliates (NASDAQ, with its affiliates, are referred to as the “Corporations”). The Corporations have not passed
on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the notes. The Corporations
make no representation or warranty, express or implied to the owners of the notes or any member of the public regarding the advisability
of investing in securities generally or in the notes particularly, or the ability of the NASDAQ 100® Index to track general stock
market performance. The Corporations' only relationship to the Issuer (“Licensee”) is in the licensing of the Nasdaq®,
the NASDAQ 100® Index, and certain trade names of the Corporations and the use of the NASDAQ 100® Index which is determined, composed
and calculated by NASDAQ without regard to Licensee or the notes. NASDAQ has no obligation to take the needs of the Licensee or the owners
of the notes into consideration in determining, composing or calculating the NASDAQ 100®Index. The Corporations are not responsible
for and have not participated in the determination of the timing of, prices at, or quantities of the notes to be issued or in the determination
or calculation of the equation by which the notes are to be converted into cash. The Corporations have no liability in connection with
the administration, marketing or trading of the notes.
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED
CALCULATION OF NASDAQ 100® Index OR ANY DATA INCLUDED THEREIN, THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY LICENSEE, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NASDAQ 100® Index OR ANY DATA INCLUDED
THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ 100® Index OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING,
IN NO EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL
DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The Russell 2000® Index
The Russell 2000® Index was developed by Russell Investments
(“Russell”) before FTSE International Limited (“FTSE”) and Russell combined in 2015 to create FTSE Russell, which
is wholly owned by London Stock Exchange Group. Russell began dissemination of the Russell 2000® Index (Bloomberg L.P. index symbol
“RTY”) on January 1, 1984. The Russell 2000® Index was set to 135 as of the close of business on December 31, 1986. FTSE
Russell calculates and publishes the Russell 2000® Index. The Russell 2000® Index is designed to track the performance of the
small capitalization segment of the U.S. equity market. As a subset of the Russell 3000® Index, the Russell 2000® Index consists
of the smallest 2,000 companies included in the Russell 3000® Index. The Russell 3000® Index measures the performance of the largest
3,000 U.S. companies. The Russell 2000® Index is determined, comprised, and calculated by FTSE Russell without regard to the notes.
Selection of Stocks Comprising the Russell 2000® Index
All companies eligible for inclusion in the Russell 2000®
Index must be classified as a U.S. company under FTSE Russell’s country-assignment methodology. If a company is incorporated, has
a stated headquarters location, and trades on a standard exchange in the same country (American Depositary Receipts and American Depositary
Shares are not eligible), then the company is assigned to its country of incorporation. If any of the three factors are not the same,
FTSE Russell defines three Home Country Indicators (“HCIs”): country of incorporation, country of headquarters, and country
of the most liquid exchange (as defined by a two-year average daily dollar trading volume) (“ADDTV”) from all exchanges within
a country. Using the HCIs, FTSE Russell compares the primary location of the company’s assets with the three HCIs. If the primary
location of its assets matches any of the HCIs, then the company is assigned to the primary location of its assets. If there is insufficient
information to determine the country in which the company’s assets are primarily located, FTSE Russell will use the primary location
of the company’s revenue for the same cross-comparison and assigns the company to the appropriate country in a similar fashion.
FTSE Russell uses the average of two years of assets or revenues data to reduce potential turnover. If conclusive country details cannot
be derived from assets or revenues data, FTSE Russell will assign the company to the country in which its headquarters are located unless
the country is a Benefit Driven Incorporation “BDI” country. If the country in which its headquarters are located is a BDI,
it will be assigned to the country of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Aruba, Bahamas,
Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao, Faroe Islands, Gibraltar,
Guernsey, Isle of Man, Jersey, Liberia, Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and Turks and Caicos Islands. For
any companies incorporated or headquartered in a U.S. territory, including countries such as Puerto Rico, Guam, and U.S. Virgin Islands,
a U.S. HCI is assigned. “N-Shares” of companies controlled by entities in mainland China are not eligible for inclusion in
the Russell 2000® Index.
All securities eligible for inclusion in the Russell 2000®
Index must trade on a major U.S. exchange. Stocks must have a closing price at or above $1.00 on their primary exchange on the “rank
day” in May of each year (timetable is announced each spring) to be eligible for inclusion during annual reconstitution. However,
in order to reduce unnecessary turnover, if an existing member’s closing price is less than $1.00 on the last day of May, it will
be considered eligible if the average of the daily closing prices (from its primary exchange) during the month of May is equal to or greater
than $1.00. FTSE Russell adds initial public offerings (IPOs) each quarter to ensure that new additions to the institutional investing
opportunity set are reflected in representative indexes. A stock added during the quarterly IPO process is considered a new index addition,
and therefore must have a closing price on its primary exchange at or above $1.00 on the last day of the eligibility period in order to
qualify for index inclusion. If an existing index member does not trade on the rank day, it must price at $1.00 or above on another eligible
U.S. exchange to remain eligible.
Royalty trusts, limited liability companies, closed-end investment
companies (companies that are required to report Acquired Fund Fees and Expenses, as defined by the SEC, including business development
companies, are not eligible), blank check companies, special-purpose acquisition companies, exchange traded funds, mutual funds and limited
partnerships are ineligible for inclusion. Preferred and convertible preferred stock, redeemable shares, participating preferred stock,
warrants, rights, installment receipts and trust receipts are not eligible for inclusion in the Russell 2000® Index.
Annual reconstitution is a process by which the Russell 2000®
Index is completely rebuilt. On the rank day of July, all eligible securities are ranked by their total market capitalization. The largest
4,000 become the Russell 3000E Index, and the other FTSE Russell indexes are determined from that set of securities. Reconstitution of
the Russell 2000® Index occurs on the last Friday in June or, when the last Friday in June is the 29th or 30th, reconstitution occurs
on the prior Friday. In addition, FTSE Russell adds initial public offerings to the Russell 2000® Index on a quarterly basis based
on total market capitalization ranking within the market-adjusted capitalization breaks established during the most recent reconstitution.
After membership is determined, a security’s shares are
adjusted to include only those shares available to the public. This is often referred to as “free float.” The purpose of the
adjustment is to exclude from market calculations the capitalization that is not available for purchase and is not part of the investable
opportunity set.
License Agreement
“Russell 2000®” and “Russell 3000®”
are trademarks of FTSE Russell and have been licensed for use by us.
The notes are not sponsored, endorsed, sold or promoted by FTSE
Russell. FTSE Russell makes no representation or warranty, express or implied, to the owners of the notes or any member of the public
regarding the advisability of investing in securities generally or in the notes particularly or the ability of the Russell 2000® Index
to track general stock market performance or a segment of the same. FTSE Russell's publication of the Russell 2000® Index in no way
suggests or implies an opinion by FTSE Russell as to the advisability of investment in any or all of the securities upon which the Russell
2000® Index is based. FTSE Russell's only relationship to the Issuer is the licensing of certain trademarks and trade names of FTSE
Russell and of the Russell 2000® Index which is determined, composed and calculated by FTSE Russell without regard to the Issuer or
the notes. FTSE Russell is not responsible for and has not reviewed the notes nor any associated literature or publications and FTSE Russell
makes no representation or warranty express or implied as to their accuracy or completeness, or otherwise. FTSE Russell reserves the right,
at any time and without notice, to alter, amend, terminate or in any way change the Russell 2000® Index. FTSE Russell has no obligation
or liability in connection with the administration, marketing or trading of the notes.
FTSE RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE RUSSELL 2000® INDEX OR ANY DATA INCLUDED THEREIN AND FTSE RUSSELL SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. FTSE RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER, INVESTORS, OWNERS OF THE NOTES,
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RUSSELL 2000® INDEX OR ANY DATA INCLUDED THEREIN. FTSE RUSSELL MAKES NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT
TO THE RUSSELL 2000® INDEX OR ANY DATA INCLUDED HEREIN WITHOUT LIMITING ANY OF THE FOREGOING. IN NO EVENT SHALL FTSE RUSSELL HAVE
ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY
OF SUCH DAMAGES.
The EURO STOXX 50® Index
The EURO STOXX 50® Index was created by STOXX, a joint venture
between Deutsche Börse AG and SIX Group AG. Publication of the EURO STOXX 50® Index began in February 1998, based on an initial
Index level of 1,000 at December 31, 1991. On March 1, 2010, STOXX announced the removal of the “Dow Jones” prefix from all
of its indices, including the EURO STOXX 50® Index. Additional information about the EURO STOXX 50® Index is available on the
STOXX Limited website: stoxx.com. However, information included in that website is not included or incorporated by reference in this pricing
supplement.
EURO STOXX 50® Index Composition and Maintenance
For each of the 19 EURO STOXX regional supersector indices, the
stocks are ranked in terms of free-float market capitalization. The largest stocks are added to the selection list until the coverage
is close to, but still less than, 60% of the free-float market capitalization of the corresponding supersector index. If the next highest-ranked
stock brings the coverage closer to 60% in absolute terms, then it is also added to the selection list. All current stocks in the index
are then added to the selection list. All of the stocks on the selection list are then ranked in terms of free-float market capitalization
to produce the final index selection list. The largest 40 stocks on the selection list are selected; the remaining 10 stocks are selected
from the largest remaining current stocks ranked between 41 and 60; if the number of stocks selected is still below 50, then the largest
remaining stocks are selected until there are 50 stocks. In exceptional cases, STOXX’s management board can add stocks to and remove
them from the selection list.
The index stocks are subject to a capped maximum index weight
of 10%, which is applied on a quarterly basis.
The EURO STOXX 50® Index is composed of 50 component stocks
of market sector leaders from within the 19 EURO STOXX® Supersector indices, which represent the Eurozone portion of the STOXX Europe
600® Supersector indices. The index stocks have a high degree of liquidity and represent the largest companies across a wide range
of market sectors.
Composition and Maintenance of the EURO STOXX 50® Index
The composition of the EURO STOXX 50® Index is reviewed annually,
based on the closing stock data on the last trading day in August. Changes in the composition of the EURO STOXX 50® Index are made
to ensure that it includes the 50 market sector leaders from within the EURO STOXX Index.
The free float factors for each component stock used to calculate
the EURO STOXX 50® Index, as described below, are reviewed, calculated, and implemented on a quarterly basis and are fixed until the
next quarterly review.
The EURO STOXX 50® Index is subject to a “fast exit
rule.” The index stocks are monitored for any changes based on the monthly selection list ranking. A stock is deleted from the EURO
STOXX 50® Index if: (a) it ranks 75 or below on the monthly selection list and (b) it has been ranked 75 or below for a consecutive
period of two months in the monthly selection list. The highest-ranked stock that is not already an index stock will replace it. Changes
will be implemented on the close of the fifth trading day of the month, and are effective the next trading day.
The EURO STOXX 50® Index is also subject to a “fast
entry rule.” All stocks on the latest selection lists and initial public offering (IPO) stocks are reviewed for a fast-track addition
on a quarterly basis. A stock is added, if (a) it qualifies for the latest STOXX blue-chip selection list generated end of February, May,
August or November and (b) it ranks within the “lower buffer” on this selection list.
The EURO STOXX 50® Index is also reviewed on an ongoing basis.
Corporate actions (including initial public offerings, mergers and takeovers, spin-offs, delistings, and bankruptcy) that affect the EURO
STOXX 50® Index composition are immediately reviewed. Any changes are announced, implemented, and effective in line with the type
of corporate action and the magnitude of the effect.
Calculation of the EURO STOXX 50® Index
The EURO STOXX 50® Index is calculated with the “Laspeyres
formula,” which measures the aggregate price changes in the index stocks against a fixed base quantity weight. The formula for calculating
the EURO STOXX 50® Index value can be expressed as follows:
Index = free float market capitalization of the index at the
time
divisor of the index at the time
The “free float market capitalization of the index”
is equal to the sum of the products of the closing price, number of shares, free float factor and the weighting cap factor for each component
company as of the time that the EURO STOXX 50® Index is being calculated.
The divisor of the EURO STOXX 50® Index is adjusted to maintain
the continuity of the EURO STOXX 50® Index’s values across changes due to corporate actions, such as the deletion and addition
of stocks, the substitution of stocks, stock dividends, and stock splits.
License Agreement
We have entered into a non-exclusive license agreement with STOXX,
which grants us a license in exchange for a fee to use the EURO STOXX 50® Index in connection with the issuance of certain securities,
including the notes.
STOXX and its licensors (the “Licensors”) have no
relationship with us or BMOCM, other than the licensing of the EURO STOXX 50® Index and the related trademarks for use in connection
with the notes.
STOXX and its Licensors do not:
|
·
|
sponsor, endorse, sell or promote the notes.
|
|
·
|
recommend that any person invest in the notes or any other securities.
|
|
·
|
have any responsibility or liability for or make any decisions about the timing, amount or pricing of the notes.
|
|
·
|
have any responsibility or liability for the administration, management or marketing of the notes.
|
|
·
|
consider the needs of the notes or the owners of the notes in determining, composing or calculating the EURO STOXX 50® Index or
have any obligation to do so.
|
STOXX and its Licensors will not have any liability in connection
with the notes. Specifically,
|
·
|
STOXX and its Licensors do not make any warranty, express or implied, and disclaim any and all warranty about:
|
|
·
|
the results to be obtained by the notes, the owner of the notes or any other person in connection with the use of the EURO STOXX 50®
Index and the data included in the EURO STOXX 50® Index;
|
|
·
|
the accuracy or completeness of the EURO STOXX 50® Index and its data;
|
|
·
|
the merchantability and the fitness for a particular purpose or use of the EURO STOXX 50® Index or its data;
|
|
·
|
STOXX and its Licensors will have no liability for any errors, omissions or interruptions in the EURO STOXX 50® Index or its data;
and
|
|
·
|
any lost profits or indirect, punitive, special or consequential damages or losses, even if STOXX knows that they might occur.
|
The licensing agreement among us, BMOCM and STOXX is solely for
the benefit of the parties thereto and not for the benefit of the owner of the notes or any other third parties.