|
|
Subject To Completion, dated May 31, 2023
PRICING SUPPLEMENT No. ELN1841 dated June __, 2023
(To Product Supplement No. WF1 dated
July 20, 2022,
Prospectus Supplement dated May 26, 2022
and Prospectus dated May 26, 2022)
|
Filed Pursuant to Rule 433
Registration Statement No. 333-264388
|
|
|
Bank of Montreal
Senior Medium-Term Notes, Series I
Equity Linked Securities
|
|
Market Linked Securities—Leveraged Upside Participation
to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the VanEck®
Gold Miners ETF due July 7, 2025 |
| n | Linked to the VanEck®
Gold Miners ETF (the "Fund") |
| n | Unlike ordinary debt securities, the
securities do not pay interest or repay a fixed amount of principal at maturity. Instead, the securities provide for a maturity payment
amount that may be greater than, equal to or less than the face amount of the securities, depending on the performance of the Fund from
the starting price to the ending price. The maturity payment amount will reflect the following terms: |
| n | If the price of the
Fund increases, you will receive the face amount plus a positive return equal to 150% of the percentage increase in the price of the
Fund from the starting price, subject to a maximum return at maturity of at least 34.00% (to be determined on the pricing date) of the
face amount. As a result of the maximum return, the maximum maturity payment amount will be at least $1,340.00 |
| n | If the price of the
Fund decreases, but the decrease is not more than the buffer amount of 20%, you will receive the face amount plus a positive return equal
to the absolute value of the percentage decline in the price of the Fund from the starting price, which will effectively be capped at
a positive return equal to 20% |
| n | If the price of the
Fund decreases by more than the buffer amount, you will receive less than the face amount and have 1-to-1 downside exposure to the decrease
in the price of the Fund in excess of the buffer amount |
| n | Investors may lose up to 80% of the face
amount |
| n | All payments on the securities are subject
to credit risk, and you will have no ability to pursue the Fund or any securities held by the Fund for payment; if Bank of Montreal defaults
on its obligations, you could lose some or all of your investment |
| n | No periodic interest payments or dividends |
| n | No exchange listing; designed to be held
to maturity |
On the date of this preliminary pricing supplement, the estimated
initial value of the securities is $952.20 per security. The estimated initial value of the securities on the pricing date may differ
from this value but will not be less than $912.20 per security. However, as discussed in more detail in this pricing supplement, the actual
value of the securities at any time will reflect many factors and cannot be predicted with accuracy. See “Estimated Value of the
Securities” in this pricing supplement.
The securities have complex features and investing in the
securities involves risks not associated with an investment in conventional debt securities. See "Selected Risk Considerations"
beginning on page PRS-8 herein and "Risk Factors" beginning on page PS-5 of the accompanying product supplement.
The securities are the unsecured obligations of Bank of
Montreal, and, accordingly, all payments on the securities are subject to the credit risk of Bank of Montreal. If Bank of Montreal defaults
on its obligations, you could lose some or all of your investment. The securities are not insured by the Federal Deposit Insurance Corporation,
the Deposit Insurance Fund, the Canada Deposit Insurance Corporation or any other governmental agency.
Neither the Securities and Exchange Commission nor any state
securities commission or other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy
of this pricing supplement or the accompanying product supplement, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
|
Original Offering Price
|
Agent Discount(1)(2)
|
Proceeds to Bank of Montreal
|
Per Security |
$1,000.00 |
$25.75 |
$974.25 |
Total |
|
|
|
| (1) | Wells Fargo Securities, LLC is the agent for the distribution of the securities and is acting as principal.
See “Terms of the Securities—Agent” and “Estimated Value of the Securities” in this pricing supplement for
further information. |
| (2) | In respect of certain securities sold in this offering, our affiliate, BMO Capital Markets Corp., may
pay a fee of up to $1.00 per security to selected securities dealers in consideration for marketing and other services in connection with
the distribution of the securities to other securities dealers. |
Wells Fargo Securities
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Issuer: |
Bank of Montreal. |
Market Measure: |
VanEck® Gold Miners ETF (the "Fund"). |
Fund Underlying
Index: |
With respect to the VanEck® Gold Miners ETF, NYSE® Arca Gold Miners Index® |
Pricing Date*: |
June 30, 2023. |
Issue Date*: |
July 6, 2023. |
Original Offering
Price: |
$1,000 per security. |
Face Amount: |
$1,000 per security. References in this pricing supplement to a "security" are to a security with a face amount of $1,000. |
Maturity Payment
Amount: |
On the stated maturity date, you will be entitled to
receive a cash payment per security in U.S. dollars equal to the maturity payment amount. The "maturity payment amount"
per security will equal:
• if the ending price is greater than the
starting price: $1,000 plus the lesser of:
(i) $1,000 × fund return × upside participation
rate; and
(ii) the maximum return;
• if the ending price is less than or equal
to the starting price, but greater than or equal to the threshold price: $1,000 +($1,000 x absolute value of fund return); or
• if the ending price is less than the threshold
price:
$1,000 + [$1,000 × (fund return + buffer amount)]
|
If the ending price is less than the threshold price, you will have 1-to-1 downside exposure to the decrease in the price of the Fund in excess of the buffer amount and will lose some, and possibly up to 80%, of the face amount of your securities at maturity. |
Stated Maturity
Date*:
|
July 7, 2025, subject to postponement. The securities are not subject to redemption by Bank of Montreal or repayment at the option of any holder of the securities prior to the stated maturity date. |
Starting Price: |
$ , the fund closing price of the Fund on the pricing date. |
Fund Closing Price: |
The fund closing price, closing price and adjustment factor have the meanings set forth under "General Terms of the Securities—Certain Terms for Securities Linked to a Fund—Certain Definitions" in the accompanying product supplement. |
Ending Price: |
The "ending price" will be the fund closing price of the Fund on the calculation day. |
Maximum Return: |
The “maximum return” will be determined on the pricing date and will be at least 34.00% of the face amount per security ($340.00 per security). As a result of the maximum return, the maximum maturity payment amount will be at least $1,340.00 per security. |
Threshold Price: |
$ , which is equal to 80% of the starting price. |
Buffer Amount: |
20% |
Upside
Participation Rate: |
150%. |
Fund Return: |
The "fund return" is the percentage
change from the starting price to the ending price, measured as follows:
ending price – starting price
starting price
For example, if the fund return is equal to -5%, the absolute value
of the fund return would be 5%.
|
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Calculation Day*: |
June 27, 2025, subject to postponement. |
Market Disruption
Events and
Postponement
Provisions: |
The calculation day is subject to postponement due
to non-trading days and the occurrence of a market disruption event. In addition, the stated maturity date will be postponed if the calculation
day is postponed and will be adjusted for non-business days.
For more information regarding adjustments to the calculation
day and the stated maturity date, see "General Terms of the Securities—Consequences of a Market Disruption Event; Postponement
of a Calculation Day—Securities Linked to a Single Market Measure" and "—Payment Dates" in the accompanying
product supplement. In addition, for information regarding the circumstances that may result in a market disruption event, see "General
Terms of the Securities—Certain Terms for Securities Linked to a Fund—Market Disruption Events" in the accompanying product
supplement.
|
Calculation Agent: |
BMO Capital Markets Corp. ("BMOCM"). |
Material Tax
Consequences:
|
For a discussion of the material U.S. federal income and certain estate tax consequences and the Canadian federal income tax consequences of the ownership and disposition of the securities, see “United States Federal Tax Considerations" below, and the sections of the product supplement entitled "United States Federal Tax Considerations" and "Canadian Federal Income Tax Consequences." |
Agent: |
Wells Fargo Securities, LLC (“WFS”)
is the agent for the distribution of the securities. The agent will receive an agent discount of up to $25.75 per security. The agent
may resell the securities to other securities dealers at the original offering price of the securities less a concession not in excess
of $20.00 per security. Such securities dealers may include Wells Fargo Advisors (“WFA”) (the trade name of the retail
brokerage business of WFS’s affiliates, Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC). In
addition to the concession allowed to WFA, WFS may pay $0.75 per security of the agent discount that it receives to WFA as a distribution
expense fee for each security sold by WFA.
In addition, in respect of certain securities sold
in this offering, BMOCM may pay a fee of up to $1.00 per security to selected securities dealers in consideration for marketing and other
services in connection with the distribution of the securities to other securities dealers.
WFS, BMOCM and/or one or more of their respective affiliates
expects to realize hedging profits projected by their proprietary pricing models to the extent they assume the risks inherent in hedging
our obligations under the securities. If WFS or any other dealer participating in the distribution of the securities or any of their affiliates
conduct hedging activities for us in connection with the securities, that dealer or its affiliates will expect to realize a profit projected
by its proprietary pricing models from those hedging activities. Any such projected profit will be in addition to any discount, concession
or fee received in connection with the sale of the securities to you.
|
Denominations: |
$1,000 and any integral multiple of $1,000. |
CUSIP: |
06374VW93 |
| * | To the extent that we make any change to the expected pricing date or expected
issue date, the calculation day and stated maturity date may also be changed in our discretion to ensure that the term of the securities
remains the same. |
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Additional Information about the Issuer and the Securities |
You should read this pricing supplement together with product
supplement No. WF1 dated July 20, 2022, the prospectus supplement dated May 26, 2022 and the prospectus dated May 26, 2022 for additional
information about the securities. Information included in this pricing supplement supersedes information in the product supplement, prospectus
supplement and prospectus to the extent it is different from that information. Certain defined terms used but not defined herein have
the meanings set forth in the product supplement, prospectus supplement or prospectus.
Our Central Index Key, or CIK, on the SEC website is 927971.
When we refer to “we,” “us” or “our” in this pricing supplement, we refer only
to Bank of Montreal.
You may access the product supplement, prospectus supplement
and prospectus on the SEC website www.sec.gov as follows (or if such address has changed, by reviewing our filing for the relevant date
on the SEC website):
| • | Product Supplement No. WF1 dated July 20, 2022: |
https://www.sec.gov/Archives/edgar/data/927971/000121465922009020/r715220424b5.htm
| • | Prospectus Supplement and prospectus dated May 26, 2022: |
https://www.sec.gov/Archives/edgar/data/927971/000119312522160519/d269549d424b5.htm
We have filed a registration statement (including a prospectus)
with the SEC for the offering to which this document relates. Before you invest, you should read the prospectus in that registration statement
and the other documents that we have filed with the SEC for more complete information about us and this offering. You may obtain these
documents free of charge by visiting the SEC’s website at http://www.sec.gov. Alternatively, we will arrange to send to you the
prospectus (as supplemented by the prospectus supplement if you request it by calling BMOCM toll-free at 1-877-369-5412.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Estimated Value of the Securities |
Our estimated initial value of the securities on the date of
this preliminary pricing supplement, and that will be set forth on the cover page of the final pricing supplement relating to the securities,
equals the sum of the values of the following hypothetical components:
| · | a fixed-income debt component with the same tenor as the securities, valued using our internal funding
rate for structured notes; and |
| · | one or more derivative transactions relating to the economic terms of the securities. |
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 securities on the pricing date will be determined based on market conditions at that time.
For more information about the estimated initial value of the
securities, see “Risk Factors” below.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
The securities are not appropriate for all investors. The
securities may be an appropriate investment for investors who:
| § | seek 150% leveraged exposure to the upside performance of the
Fund if the ending price is greater than the starting price, subject to the maximum return at maturity of at least 34.00% (to be determined
on the pricing date) of the face amount; |
| § | understand that any positive return based on the decrease in
the price of the Fund will be limited to 20%, and that any decrease in the price of the Fund by more than 20% will result in a loss, rather
than a positive return, on the securities; |
| § | desire to limit downside exposure to the Fund through the buffer
amount; |
| § | are willing to accept the risk that, if the ending price is
less than the starting price by more than the buffer amount, they will lose some, and possibly up to 80%, of the face amount per security
at maturity; |
| § | are willing to forgo interest payments on the securities and
dividends on the shares of the Fund and securities held by the Fund; and |
| § | are willing to hold the securities until maturity. |
The securities may not be an appropriate investment for investors
who:
| § | seek a liquid investment or are unable or unwilling to hold
the securities to maturity; |
| § | are unwilling to accept the risk that the ending price may
decrease from the starting price by more than the buffer amount; |
| § | seek uncapped exposure to the upside performance of the Fund; |
| § | seek full return of the face amount of the securities at stated
maturity; |
| § | are unwilling to purchase securities with an estimated value
as of the pricing date that is lower than the original offering price and that may be as low as the lower estimated value set forth on
the cover page; |
| § | seek current income over the term of the securities; |
| § | are unwilling to accept the risk of exposure to the Fund; |
| § | seek exposure to the Fund but are unwilling to accept the risk/return
trade-offs inherent in the maturity payment amount for the securities; |
| § | are unwilling to accept the credit risk of Bank of Montreal
to obtain exposure to the Fund generally, or to the exposure to the Fund that the securities provide specifically; or |
| § | prefer the lower risk of fixed income investments with comparable
maturities issued by companies with comparable credit ratings. |
The considerations identified above are not exhaustive. Whether
or not the securities are an appropriate investment for you will depend on your individual circumstances, and you should reach an investment
decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the appropriateness of
an investment in the securities in light of your particular circumstances. You should also review carefully the "Selected Risk Considerations"
herein and the "Risk Factors" in the accompanying product supplement for risks related to an investment in the securities. For
more information about the Fund, please see the section titled "The VanEck® Gold Miners ETF" below.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Determining Payment at Stated Maturity |
On the stated maturity date, you will receive a cash payment
per security (the maturity payment amount) calculated as follows:
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Selected Risk Considerations |
The securities have complex features and investing in the securities
will involve risks not associated with an investment in conventional debt securities. Some of the risks that apply to an investment in
the securities are summarized below, but we urge you to read the more detailed explanation of the risks relating to the securities generally
in the "Risk Factors" section of the accompanying product supplement. You should reach an investment decision only after you
have carefully considered with your advisors the appropriateness of an investment in the securities in light of your particular circumstances.
Risks Relating To The Terms And Structure Of The Securities
If The Ending Price Is Less Than The Threshold Price, You
Will Lose Some, And Possibly Up To 80%, Of The Face Amount Of Your Securities At Maturity.
We will not repay you a fixed amount on the securities on the
stated maturity date. The maturity payment amount will depend on the direction of and percentage change in the ending price relative to
the starting price and the other terms of the securities. Because the price of the Fund will be subject to market fluctuations, the maturity
payment amount may be more or less, and possibly significantly less, than the face amount of your securities.
If the ending price is less than the threshold price, the maturity
payment amount will be less than the face amount and you will have 1-to-1 downside exposure to the decrease in the price of the Fund in
excess of the buffer amount, resulting in a loss of 1% of the face amount for every 1% decline in the Fund in excess of the buffer amount.
The threshold price is 80% of the starting price. As a result, if the ending price is less than the threshold price, you will lose some,
and possibly up to 80%, of the face amount per security at maturity. This is the case even if the price of the Fund is greater than or
equal to the starting price or the threshold price at certain times during the term of the securities.
Even if the ending price is greater than the starting price,
the maturity payment amount may only be slightly greater than the face amount, and your yield on the securities may be less than the yield
you would earn if you bought a traditional interest-bearing debt security of Bank of Montreal or another issuer with a similar credit
rating with the same stated maturity date.
No Periodic Interest Will Be Paid On The Securities.
No periodic payments of interest will be made on the securities.
However, if the agreed-upon tax treatment is successfully challenged by the Internal Revenue Service (the "IRS"), you
may be required to recognize taxable income over the term of the securities. You should review the section of this pricing supplement
entitled "United States Federal Tax Considerations."
Your Return Will Be Limited To The Maximum Return And May
Be Lower Than The Return On A Direct Investment In The Fund.
The opportunity to participate in the possible increases in the
price of the Fund through an investment in the securities will be limited because any positive return on the securities will not exceed
the maximum return. Therefore, your return on the securities may be lower than the return on a direct investment in the Fund. Furthermore,
the effect of the upside participation rate will be progressively reduced for all ending prices exceeding the ending price at which the
maximum return is reached.
Any Positive Return Based On The Depreciation Of The Fund
Is Effectively Capped.
Any positive return based on the depreciation of the Fund will
be capped at 20% because the contingent absolute return feature is only operative if the ending price of the Fund does not decline by
more than 20% from the starting price. Any depreciation of the Fund from the starting price to the ending price by more than 20% will
result in a loss, rather than a positive return, on the securities.
The Securities Are Subject To Credit Risk.
The securities are our obligations and are not, either directly
or indirectly, an obligation of any third party. Any amounts payable under the securities are subject to creditworthiness and you will
have no ability to pursue the Fund or any securities held by the Fund for payment. As a result, our actual and perceived creditworthiness
may affect the value of the securities and, in the event we were to default on our obligations under the securities, you may not receive
any amounts owed to you under the terms of the securities.
Significant Aspects Of The Tax Treatment Of The Securities
Are Uncertain.
The tax treatment of an investment in the securities is uncertain.
We do not plan to request a ruling from the IRS or from the Canada Revenue Agency regarding the tax treatment of the securities, and the
IRS, the Canada Revenue Agency or a court may not agree with the tax treatment described in this pricing supplement and/or the accompanying
product supplement.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
The IRS has issued a notice indicating that it and the U.S. Treasury
Department are actively considering whether, among other issues, a holder should be required to accrue interest over the term of an instrument
such as the securities even though that holder will not receive any payments with respect to the securities until maturity or earlier
sale or exchange and whether all or part of the gain a holder may recognize upon sale, exchange or maturity of an instrument such as the
securities should be treated as ordinary income. The outcome of this process is uncertain and could apply on a retroactive basis.
Please read carefully the section entitled “United States
Federal Tax Considerations” in this pricing supplement, the section entitled “United States Federal Income Taxation”
in the accompanying prospectus and the section entitled “United States Federal Tax Considerations” in the accompanying product
supplement. You should consult your tax advisor about your own tax situation.
For a discussion of the Canadian federal income tax consequences
of investing in the securities, please read the section entitled “Certain Income Tax Consequences — Certain Canadian Income
Tax Considerations” in the accompanying prospectus supplement. You should consult your tax advisor about your own tax situation.
The Stated Maturity Date May Be Postponed If The Calculation
Day Is Postponed.
The calculation day will be postponed if the originally scheduled
calculation day is not a trading day or if the calculation agent determines that a market disruption event has occurred or is continuing
on the calculation day. If such a postponement occurs, the stated maturity date will be the later of (i) the initial stated maturity date
and (ii) three business days after the calculation day as postponed.
Risks Relating To
The Estimated Value Of The Securities And Any Secondary Market
The Estimated Value Of The Securities On The Pricing Date,
Based On Our Proprietary Pricing Models, Will Be Less Than The Original Offering Price.
Our initial estimated value of the securities is only an estimate,
and is based on a number of factors. The original offering price of the securities may exceed our initial estimated value, because costs
associated with offering, structuring and hedging the securities are included in the original offering price, but are not included in
the estimated value. These costs include the agent discount and selling concessions, the profits that we and our affiliates and/or the
agent and its affiliates expect to realize for assuming the risks in hedging our obligations under the securities, and the estimated cost
of hedging these obligations. The initial estimated value may be as low as the amount indicated on the cover page of this pricing supplement.
The Terms Of The Securities Are Not Determined By Reference
To The Credit Spreads For Our Conventional Fixed-Rate Debt.
To determine the terms of the securities, we will use an internal
funding rate that represents a discount from the credit spreads for our conventional fixed-rate debt. As a result, the terms of the securities
are less favorable to you than if we had used a higher funding rate.
The Estimated Value Of The Securities Is Not An Indication
Of The Price, If Any, At Which WFS Or Any Other Person May Be Willing To Buy The Securities From You In The Secondary Market.
Our initial estimated value of the securities as of the date
of this preliminary pricing supplement is, and our estimated value as determined on the pricing date will be, derived using our internal
pricing models. This value is based on market conditions and other relevant factors, which include volatility of the Fund, dividend rates
and interest rates. Different pricing models and assumptions, including those used by the agent, its affiliates or other market participants,
could provide values for the securities that are greater than or less than our initial estimated value. In addition, market conditions
and other relevant factors after the pricing date are expected to change, possibly rapidly, and our assumptions may prove to be incorrect.
After the pricing date, the value of the securities could change dramatically due to changes in market conditions, our creditworthiness,
and the other factors set forth in this pricing supplement. These changes are likely to impact the price, if any, at which WFS or its
affiliates or any other party (including us or our affiliates) would be willing to purchase the securities from you in any secondary market
transactions. Our initial estimated value does not represent a minimum price at which WFS or any other party (including us or our affiliates)
would be willing to buy your securities in any secondary market at any time.
WFS has advised us that if it, WFA or any of their affiliates
makes a secondary market in the securities at any time, the secondary market price offered by it, WFA or any of their affiliates will
be affected by changes in market conditions and other factors described in the next risk factor. WFS has advised us that if it, WFA or
any of their affiliates makes a secondary market in the securities at any time up to the issue date or during the three-month period following
the issue date, the secondary market price offered by it, WFA or any of its affiliates will be increased by an amount reflecting a portion
of the costs associated with selling, structuring and hedging the securities that are included in their original offering price. Because
this portion of the costs is not fully deducted upon issuance, WFS has advised us that any secondary market price it, WFA or any of their
affiliates offers during this period will be higher than it otherwise would be after this period, as any secondary market price offered
after this period will reflect the full deduction of the costs as described above. WFS has advised us that the amount of this increase
in the secondary market price will decline steadily to zero over this three-month period. WFS has advised us that, if you hold the securities
through an account with WFS, WFA or any of their affiliates, WFS expects that this increase will also be reflected in the value indicated
for the securities on your brokerage account statement. If you hold your securities through an account at a broker-dealer other than WFS,
WFA or any of their affiliates, the value of the securities on your brokerage account statement may be different than if you held your
securities at WFS, WFA or any of their affiliates.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
The Value Of The Securities Prior To Stated Maturity Will
Be Affected By Numerous Factors, Some Of Which Are Related In Complex Ways.
The value of the securities prior to stated maturity will be
affected by the then-current price of the Fund, interest rates at that time and a number of other factors, some of which are interrelated
in complex ways. The effect of any one factor may be offset or magnified by the effect of another factor. The following factors, which
we refer to as the “derivative component factors,” and which are described in more detail in the accompanying product
supplement, are expected to affect the value of the securities: performance of the Fund; interest rates; volatility of the Fund; time
remaining to maturity; and dividend yields on securities held by the Fund. When we refer to the “value” of your security,
we mean the value you could receive for your security if you are able to sell it in the open market before the stated maturity date.
In addition to the derivative component factors, the value of
the securities will be affected by actual or anticipated changes in our creditworthiness. You should understand that the impact of one
of the factors specified above, such as a change in interest rates, may offset some or all of any change in the value of the securities
attributable to another factor, such as a change in the price of the Fund. Because numerous factors are expected to affect the value of
the securities, changes in the price of the Fund may not result in a comparable change in the value of the securities. We anticipate that
the value of the securities will always be at a discount to the face amount plus the maximum return.
The Securities Will Not Be Listed On Any Securities Exchange
And We Do Not Expect A Trading Market For The Securities To Develop.
The securities will not be listed or displayed on any securities
exchange or any automated quotation system. Although the agent and/or its affiliates may purchase the securities from holders, they are
not obligated to do so and are not required to make a market for the securities. There can be no assurance that a secondary market will
develop. Because we do not expect that any market makers will participate in a secondary market for the securities, the price at which
you may be able to sell your securities is likely to depend on the price, if any, at which the agent is willing to buy your securities.
If a secondary market does exist, it may be limited. Accordingly,
there may be a limited number of buyers if you decide to sell your securities prior to stated maturity. This may affect the price you
receive upon such sale. Consequently, you should be willing to hold the securities to stated maturity.
Risks Relating To The Fund
The Maturity Payment Amount Will Depend Upon The Performance
Of The Fund And Therefore The Securities Are Subject To The Following Risks, Each As Discussed In More Detail In The Accompanying Product
Supplement.
| · | Investing In The Securities Is Not The Same
As Investing In The Fund. Investing in the securities is not equivalent to investing in the Fund. As an investor in the securities,
your return will not reflect the return you would realize if you actually owned and held the securities held by the Fund for a period
similar to the term of the securities because you will not receive any dividend payments, distributions or any other payments paid on
those securities. As a holder of the securities, you will not have any voting rights or any other rights that holders of the securities
held by the Fund would have. |
| · | Historical Prices Of The Fund Should Not Be
Taken As An Indication Of The Future Performance Of The Fund During The Term Of The Securities. |
| · | Changes That Affect A Fund Or Its Fund Underlying
Index May Adversely Affect The Value Of The Securities And Any Payments On The Securities. |
| · | We Cannot Control Actions By Any Of The Unaffiliated
Companies Whose Securities Are Included In A Fund Or Its Fund Underlying Index. |
| · | We And Our Affiliates Have No Affiliation
With Any Fund Sponsor Or Fund Underlying Index Sponsor And Have Not Independently Verified Their Public Disclosure Of Information. |
| · | An Investment Linked To The Shares Of A Fund
Is Different From An Investment Linked To Its Fund Underlying Index. |
| · | There Are Risks Associated With A Fund. |
| · | Anti-dilution Adjustments Relating To The
Shares Of A Fund Do Not Address Every Event That Could Affect Such Shares. |
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
The Holdings Of The Fund Are Concentrated In The Gold And
Silver Mining Industries.
All or substantially all of the equity securities held by the
Fund are issued by gold or silver mining companies. An investment in the securities will be exposed to risks in the gold and silver mining
industries. As a result of being linked to a single industry or sector, the securities may have increased volatility as the share price
of the Fund may be more susceptible to factors that affect that industry or sector. Competitive pressures may have a significant effect
on the financial condition of companies in these industries.
In addition, these companies are highly dependent on the price
of gold or silver, as applicable. These prices fluctuate widely and may be affected by numerous factors. Factors affecting gold prices
include economic factors, including, among other things, the structure of and confidence in the global monetary system, expectations of
the future rate of inflation, the relative strength of, and confidence in, the U.S. dollar (the currency in which the price of gold is
generally quoted), interest rates and gold borrowing and lending rates, and global or regional economic, financial, political, regulatory,
judicial or other events. Gold prices may also be affected by industry factors such as industrial and jewelry demand, lending, sales and
purchases of gold by the official sector, including central banks and other governmental agencies and multilateral institutions which
hold gold, levels of gold production and production costs, and short-term changes in supply and demand because of trading activities in
the gold market. Factors affecting silver prices include general economic trends, technical developments, substitution issues and regulation,
as well as specific factors including industrial and jewelry demand, expectations with respect to the rate of inflation, the relative
strength of the U.S. dollar (the currency in which the price of silver is generally quoted) and other currencies, interest rates, central
bank sales, forward sales by producers, global or regional political or economic events, and production costs and disruptions in major
silver producing countries such as Mexico and Peru. The supply of silver consists of a combination of new mine production and existing
stocks of bullion and fabricated silver held by governments, public and private financial institutions, industrial organizations and private
individuals. In addition, the price of silver has on occasion been subject to very rapid short-term changes due to speculative activities.
From time to time, above-ground inventories of silver may also influence the market.
You Will Not Have Any Shareholder Rights And Will Have No
Right To Receive Any Shares Of The Fund at Maturity.
Investing in the securities will not make you a holder of any
shares of the Fund. You will not have any voting rights, any right to receive dividends or other distributions or any other rights with
respect to the Fund.
The Securities Are Subject To Exchange Rate Risk
Because securities held by the Fund are traded in currencies
other than U.S. dollars, and the securities are denominated in U.S. dollars, the amount payable on the securities at maturity may be exposed
to fluctuations in the exchange rate between the U.S. dollar and each of the currencies in which those securities are denominated. These
changes in exchange rates may reflect changes in various non-U.S. economies that in turn may affect the payment on the securities at maturity.
An investor’s net exposure will depend on the extent to which the currencies in which the relevant securities are denominated either
strengthen or weaken against the U.S. dollar and the relative weight of each security.
The Price Of The Fund May Be Disproportionately Affected By The Performance Of
A Small Number Of Stocks.
As of the date of this document, more than forty percent of the Fund was invested
in only six stocks. As a result, a decline in the prices of one or more of these stocks, including as a result of events negatively affecting
one or more of these companies, may have the effect of significantly lowering the price of the Fund even if none of the other stocks held
by the Fund are affected by such events.
Risks Relating To Conflicts Of Interest
Our Economic Interests And Those Of Any Dealer Participating
In The Offering Are Potentially Adverse To Your Interests.
You should be aware of the following ways in which our economic
interests and those of any dealer participating in the distribution of the securities, which we refer to as a "participating dealer,"
are potentially adverse to your interests as an investor in the securities. In engaging in certain of the activities described below and
as discussed in more detail in the accompanying product supplement, our affiliates or any participating dealer or its affiliates may take
actions that may adversely affect the value of and your return on the securities, and in so doing they will have no obligation to consider
your interests as an investor in the securities. Our affiliates or any participating dealer or its affiliates may realize a profit from
these activities even if investors do not receive a favorable investment return on the securities.
| · | The calculation agent is our affiliate and may be required
to make discretionary judgments that affect the return you receive on the securities. BMOCM, which is our affiliate, will be the
calculation agent for the securities. As calculation agent, BMOCM will determine any values of the Fund and make any other determinations
necessary to calculate any payments on the securities. In making these determinations, BMOCM may be required to make discretionary judgments
that may adversely affect any payments on the securities. See the sections entitled "General Terms of the Securities— Certain
Terms for Securities Linked to a Fund—Market Disruption Events" and "—Anti-dilution Adjustments Relating to a Fund;
Alternate Calculation" in the accompanying product supplement. In making these discretionary judgments, the fact that BMOCM is our
affiliate may cause it to have economic interests that are adverse to your interests as an investor in the securities, and BMOCM's determinations
as calculation agent may adversely affect your return on the securities. |
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
| · | The estimated value of the securities was calculated
by us and is therefore not an independent third-party valuation. |
| · | Research reports by our affiliates or any participating
dealer or its affiliates may be inconsistent with an investment in the securities and may adversely affect the price of the Fund. |
| · | Business activities of our affiliates or any participating
dealer or its affiliates with the companies whose securities are held by the Fund may adversely affect the price of the Fund. |
| · | Hedging activities by our affiliates or any participating
dealer or its affiliates may adversely affect the price of the Fund. |
| · | Trading activities by our affiliates or any participating
dealer or its affiliates may adversely affect the price of the Fund. |
| · | A participating dealer or its affiliates may realize
hedging profits projected by its proprietary pricing models in addition to any selling concession and/or fee, creating a further incentive
for the participating dealer to sell the securities to you. |
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Hypothetical Examples and Returns |
The payout profile, return table and examples below illustrate
the maturity payment amount for a $1,000 face amount security on a hypothetical offering of securities under various scenarios, with the
assumptions set forth in the table below. The terms used for purposes of these hypothetical examples do not represent the actual starting
price or threshold price. The hypothetical starting price of 100.00 has been chosen for illustrative purposes only and does not represent
the actual starting price. The actual starting price and threshold price will be determined on the pricing date and will be set forth
under "Terms of the Securities" above in the final pricing supplement. For historical data regarding the actual closing prices
of the Fund, see the historical information set forth herein. The payout profile, return table and examples below assume that an investor
purchases the securities for $1,000 per security. These examples are for purposes of illustration only and the values used in the examples
may have been rounded for ease of analysis. The actual maturity payment amount and resulting pre-tax total rate of return will depend
on the actual terms of the securities.
Upside Participation Rate: |
150% |
Hypothetical Maximum Return: |
34.00% or $340.00 per security (the lowest maximum return that may be determined on the pricing date) |
Hypothetical Starting Price: |
$100.00 |
Hypothetical Threshold Price: |
$80.00 (80% of the hypothetical starting price) |
Buffer Amount: |
20% |
Hypothetical Payout Profile
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Hypothetical Returns
Hypothetical
ending price |
Hypothetical
fund return(1) |
Hypothetical
maturity payment
amount per security |
Hypothetical
pre-tax total
rate of return(2) |
$200.00 |
100.00% |
$1,340.00 |
34.00% |
$175.00 |
75.00% |
$1,340.00 |
34.00% |
$150.00 |
50.00% |
$1,340.00 |
34.00% |
$130.00 |
30.00% |
$1,340.00 |
34.00% |
$122.67 |
22.67% |
$1,340.00 |
34.00% |
$120.00 |
20.00% |
$1,300.00 |
30.00% |
$110.00 |
10.00% |
$1,150.00 |
15.00% |
$105.00 |
5.00% |
$1,075.00 |
7.50% |
$100.00 |
0.00% |
$1,000.00 |
0.00% |
$95.00 |
-5.00% |
$1,050.00 |
5.00% |
$90.00 |
-10.00% |
$1,100.00 |
10.00% |
$80.00 |
-20.00% |
$1,200.00 |
20.00% |
$79.00 |
-21.00% |
$990.00 |
-1.00% |
$70.00 |
-30.00% |
$900.00 |
-10.00% |
$60.00 |
-40.00% |
$800.00 |
-20.00% |
$50.00 |
-50.00% |
$700.00 |
-30.00% |
$25.00 |
-75.00% |
$450.00 |
-55.00% |
$0.00 |
-100.00% |
$200.00 |
-80.00% |
| (1) | The fund return is equal to the percentage change from the starting price to the ending price (i.e., the
ending price minus the starting price, divided by the starting price). |
| (2) | The hypothetical pre-tax total rate of return is the number, expressed as a percentage, that results from
comparing the maturity payment amount per security to the face amount of $1,000. |
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Hypothetical Examples
Example 1. Maturity payment amount is greater than the
face amount and reflects a return that is less than the maximum return:
|
The Fund |
Hypothetical starting price: |
$100.00 |
Hypothetical ending price: |
$110.00 |
Hypothetical threshold price: |
$80.00 |
Hypothetical fund return
(ending price – starting price)/starting price: |
10.00% |
Because the hypothetical ending price is greater
than the hypothetical starting price, the maturity payment amount per security would be equal to the face amount of $1,000 plus
a positive return equal to the lesser of:
(i) $1,000
× fund return × upside participation rate
$1,000 × 10.00% × 150.00%
= $150.00; and
(ii) the
maximum return of $340.00
On the stated maturity date you would receive $1,150.00 per security.
Example 2. Maturity payment amount is greater than the
face amount and reflects a return equal to the maximum return:
|
The Fund |
Hypothetical starting price: |
$100.00 |
Hypothetical ending price: |
$150.00 |
Hypothetical threshold price: |
$80.00 |
Hypothetical fund return
(ending price – starting price)/starting price: |
50.00% |
Because the hypothetical ending price is greater
than the hypothetical starting price, the maturity payment amount per security would be equal to the face amount of $1,000 plus
a positive return equal to the lesser of:
(i) $1,000
× fund return × upside participation rate
$1,000 × 50.00% × 150.00%
= $750.00; and
(ii) the
maximum return of $340.00
On the stated maturity date you would receive $1,340.00 per security,
which is the maximum maturity payment amount.
In addition to limiting your return on the securities, the maximum
return limits the positive effect of the upside participation rate. If the ending price is greater than the starting price, you will participate
in the performance of the Fund at a rate of 150% up to a certain point. However, the effect of the upside participation rate will be progressively
reduced for ending prices that are greater than approximately 122.67% of the starting price (assuming a maximum return of 34.00% or $340.00
per security, the lowest maximum return that may be determined on the pricing date) since your return on the securities for any ending
price greater than approximately 122.67% of the starting price will be limited to the maximum return.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Example 3. The maturity payment amount is greater than the
face amount and reflects a return equal to the absolute value of the fund return:
|
Fund |
Hypothetical starting price: |
$100.00 |
Hypothetical ending price: |
$90.00 |
Hypothetical threshold price: |
$80.00 |
Hypothetical fund return
(ending price – starting price)/starting price: |
-10.00% |
Because the hypothetical ending price is less than the starting price,
but is not less than the threshold price, you will receive a positive return on the securities equal to the absolute value of the fund
return, even though the fund return is negative. You will receive a maturity payment amount equal to:
$1,000 + ($1,000 × absolute
value of the fund return)
$1,000 + ($1,000 × 10.00%)
= $1,100.00
On the stated maturity date, you would receive $1,100.00 per
security.
Example 4. Maturity payment amount is less than the face amount:
|
The Fund |
Hypothetical starting price: |
$100.00 |
Hypothetical ending price: |
$50.00 |
Hypothetical threshold price: |
$80.00 |
Hypothetical fund return
(ending price – starting price)/starting price: |
-50.00% |
Because the hypothetical ending price is less than
the hypothetical starting price by more than the buffer amount, you would lose a portion of the face amount of your securities and receive
the maturity payment amount equal to:
$1,000 + [$1,000 × (fund
return + buffer amount)]
$1,000 + [$1,000 × (-50.00%
+ 20%)]
= $700.00
On the stated maturity date you would receive $700.00 per security.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
The VanEck® Gold Miners ETF |
Historical Information
We obtained the closing prices of the VanEck®
Gold Miners ETF in the graph below from Bloomberg Finance L.P., without independent verification.
The following graph sets forth daily closing prices of the Fund
for the period from January 1, 2018 to May 25, 2023. The closing price on May 25, 2023 was $30.26. The historical performance of the Fund
should not be taken as an indication of its future performance of the during the term of the securities.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
We have derived the following information regarding the Fund and the Fund
Underlying Index from publicly available documents. We have not independently verified the accuracy or completeness of the following information.
Neither we nor our affiliates have made any due diligence inquiry with respect to the Fund or the Fund Underlying Index in connection
with the offering of the securities.
The selection of the Fund and the Fund Underlying Index is not a recommendation
to invest in this asset. Neither we nor any of our affiliates make any representation to you as to the performance of the Fund or the
Fund Underlying Index. Information provided to or filed with the SEC under the Securities Exchange Act of 1934 and the Investment Company
Act of 1940 relating to the Fund may be obtained through the SEC’s website at http://www.sec.gov.
VanEck® Gold Miners ETF
The Fund is an investment portfolio maintained, managed and advised by Van
Eck Associates Corporation ("Van Eck"). The VanEck ETF Trust is a registered open-end investment company that consists of numerous
separate investment portfolios, including the Fund.
The Fund is an exchange traded fund that trades on NYSE Arca under the ticker symbol
“GDX.”
The Fund seeks to seeks to replicate as closely as possible, before fees and
expenses, the price and yield performance of the Fund Underlying Index. The Fund, using a “passive” or indexing investment
approach, attempts to approximate the investment performance of the Fund Underlying Index by investing in a portfolio of securities that
generally replicates the Fund Underlying Index. The Fund will normally invest at least 80% of its total assets in common stocks that comprise
the Fund Underlying Index.
The securities are not sponsored, endorsed, sold or promoted by Van Eck. Van
Eck makes no representations or warranties to the owners of the securities or any member of the public regarding the advisability of investing
in the securities. Van Eck has no obligation or liability in connection with the operation, marketing, trading or sale of the securities.
The Fund Underlying Index
We have derived all information contained in this pricing supplement regarding
the Fund Underlying Index, including, without limitation, its make-up, method of calculation and changes in its components, from publicly
available information and information supplied by ICE Data Indices, LLC (the “index sponsor”), the index sponsor and the index
administrator. The index sponsor is responsible for the day-to-day management of the Fund Underlying Index, including retaining primary
responsibility for all aspects of the Fund Underlying Index determination process, including implementing appropriate governance and oversight.
The NYSE Arca has no obligation to continue to publish, and may discontinue the publication of, the Fund Underlying Index.
The Fund Underlying Index includes common stocks, ADRs and GDRs of selected
companies that are involved primarily in mining for gold or silver and that are listed for trading and electronically quoted on a major
stock market that is accessible by foreign investors. Generally, this will include exchanges in most developed markets and major emerging
markets, and will include companies that are cross-listed, e.g., both U.S. and Canadian listings. The index sponsor will use its discretion
to avoid exchanges and markets that are considered “frontier” in nature or have major restrictions to foreign ownership. The
Fund Underlying Index includes companies that derive at least 50% of their revenues from gold mining and related activities (40% for companies
already in the Fund Underlying Index). Also, the Fund Underlying Index maintains exposure to companies with a significant revenue exposure
to silver mining in addition to gold mining, which will not exceed 20% of the Fund Underlying Index weight at each rebalance.
Only companies with market capitalizations greater than $750 million, an average
daily volume of at least 50,000 shares over the past three months and an average daily value traded of at least $1 million over the past
three months are eligible for inclusion in the Fund Underlying Index. For companies already in the Fund Underlying Index, the market capitalization
requirement is greater than $450 million, the average daily volume requirement is at least 30,000 shares over the past three months and
the average daily value traded requirement is at least $600,000 over the past three months. The index sponsor has the discretion to not
include all companies that meet the minimum criteria for inclusion.
Only one listing is permitted per company and the listing representing the
company’s ordinary shares is generally used. If an ADR, GDR, or U.S. cross-listing is available for a given stock and it satisfies
the minimum liquidity requirements, that ADR, GDR, or U.S. cross-listing will be used instead of the locally listed ordinary share. If
multiple share classes are available for a particular listing line, the shares outstanding for each class will be added up and be attributed
to the most liquid class.
Calculation of the Fund Underlying Index. The Fund Underlying Index
is calculated by NYSE Arca on a net total return basis. A net total return index measures the period to period change in the value of
its components due to changes in the valuation (price in U.S. dollars) of those components plus (by means of an adjustment to the divisor)
any income produced by those components net of dividend withholding taxes. As the index level is expressed in U.S. dollars, the Fund Underlying
Index converts non-U.S. currencies into U.S. dollars using currency exchange rates. The calculation is based on the current modified market
capitalization divided by a divisor. The divisor was determined on the initial capitalization base of the Fund Underlying Index and the
base level and may be adjusted as a result of corporate actions and composition changes, as described below.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
Index Maintenance. The Fund Underlying Index is reviewed quarterly.
The general aim of the quarterly rebalance of the Fund Underlying Index is to ensure that the selection and weightings of the components
continues to reflect as closely as possible the Fund Underlying Index's objective of measuring the performance of highly capitalized companies
in the gold mining industry. The index sponsor reserves the right to, at any time, change the number of stocks comprising the Fund Underlying
Index by adding or deleting one or more stocks, or replacing one or more stocks contained in the Fund Underlying Index with one or more
substitute stocks of its choice, if in the index sponsor's discretion such addition, deletion or substitution is necessary or appropriate
to maintain the quality and/or character of the index. The rebalances become effective at the open of the first trading after the third
Friday of March, June, September and December.
Components will be removed from the Fund Underlying Index during the quarterly
review if (1) the market capitalization is less than $450 million, or (2) the average daily volume for the previous three months is less
than 30,000 shares and the average daily value traded for the previous three months is less than $600,000.
At the time of the quarterly rebalance, the component security quantities
will be modified to conform to the following asset diversification requirements:
| (1) | the weight of any single component security may not account for more than 20% of the total value of the
Fund Underlying Index; |
| (2) | the component securities are split into two subgroups – large and small, which are ranked by market
capitalization weight in the Fund Underlying Index. Large securities are defined as having a starting index weight greater than or equal
to 5%. Small securities are defined as having a starting index weight below 5%; and |
| (3) | the final aggregate weight of those component securities which individually represent more than 4.5%
of the total value of the Fund Underlying Index may not account for more than 45% of the total index value. |
The weights of the components securities (taking into account expected component
changes and share adjustments) are modified in accordance with the Fund Underlying Index’s diversification rules.
Diversification Rule 1: If any component stock exceeds 20% of the total value of the
Fund Underlying Index, then all stocks greater than 20% of the Fund Underlying Index are reduced to represent 20% of the value of the
Fund Underlying Index. The aggregate amount by which all component stocks are reduced is redistributed proportionately across the remaining
stocks that represent less than 20% of the index value. After this redistribution, if any other stock then exceeds 20%, the stock is set
to 20% of the index value and the redistribution is repeated.
Diversification Rule 2: If the components with a starting index weight of 5% or greater
exceeds 45% of the total value of the Fund Underlying Index (after any adjustments for Diversification Rule 1), the components are sorted
into two groups, large are components with a starting index weight of 5% or greater and small are components with a weight of under 5%.
The large group will represent in the aggregate 45% and the small group will represent 55% in the aggregate of the final index weight.
This will be adjusted through the following process: The weight of each of the large stocks will be scaled down proportionately (with
a floor of 5%) so that the aggregate weight of the large components will be reduced to represent 45% of the Fund Underlying Index. If
any large component stock falls below a weight equal to the product of 5% and the proportion by which the stocks were scaled down following
this distribution, then the weight of the stock is set equal to 5% and the components with weights greater than 5% will be reduced proportionately.
The weight of each of the small components will be scaled up proportionately from the redistribution of the large components. If any small
component stock exceeds a weight equal to the product of 4.5% and the proportion by which the stocks were scaled down following this distribution,
then the weight of the stock is set equal to 4.5%. The redistribution of weight to the remaining stocks is repeated until the entire amount
has been redistributed.
The inclusion of new companies in the Fund Underlying Index will typically only occur
during the quarterly reconstitutions or rebalances, although there could be exceptions based on a specific corporate action affecting
a current constituent. The inclusion of the new company at the quarterly rebalances/reconstitutions will be announced at least six trading
days before the effective date of the actual inclusion. Components would be removed from the Fund Underlying Index as a result of periodic
corporate actions as well as the results of the quarterly rebalances/reconstitutions. All removals in the quarterly rebalances/reconstitutions
will be announced at least six trading days before the effective date of the removal. The new composition of the Fund Underlying Index,
including the companies to be a part of the index and their corresponding new index shares, will be announced at least six trading days
before the effective date.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
In case of an event that could affect one or more constituents, the index sponsor
will inform the market about the intended treatment of the event in the Fund Underlying Index shortly after the firm details have become
available and have been confirmed. When possible, the corporate action will be announced, even if not all information is known, at least
one trading day before the effective date of the action. Once the corporate action has been effectuated, the index sponsor will confirm
the changes in a separate announcement.
Changes to the index methodology will be announced by the index sponsor. Generally,
the index sponsor shall announce rule changes prior to them being implemented.
Market Linked Securities—Leveraged Upside Participation to a Cap with Contingent Absolute Return and Fixed Percentage Buffered Downside Principal at Risk Securities Linked to the VanEck® Gold Miners ETF due July 7, 2025 |
United States Federal Tax Considerations |
The following discussion supplements, and to the extent applicable
supersedes, the discussion in the accompanying product supplement under the caption “United States Federal Tax Considerations.”
In the opinion of our special U.S. tax counsel, Ashurst LLP,
it would generally be reasonable to treat a security with terms described herein as a pre-paid cash-settled derivative contract in respect
of the Fund for U.S. federal income tax purposes, and the terms of the securities require a holder (in the absence of a change in law
or an administrative or judicial ruling to the contrary) to treat the securities for all tax purposes in accordance with such characterization.
However, the U.S. federal income tax consequences of your investment in the securities are uncertain and the Internal Revenue Service
(the “IRS”) could assert that the securities should be taxed in a manner that is different from that described in the preceding
sentence. If this treatment is respected, a U.S. holder should generally recognize capital gain or loss upon the sale, exchange, redemption
or payment on maturity in an amount equal to the difference between the amount it received at such time and the amount that it paid for
its securities. Such gain or loss should generally be long-term capital gain or loss if the U.S. holder has held your securities for more
than one year. Non-U.S. holders should consult the section entitled "Tax Consequences to Non-U.S. Holders" in the underlying
product supplement.
Under Section 871(m) of the Code, a “dividend equivalent”
payment is treated as a dividend from sources within the United States. Such payments generally would be subject to a 30% U.S. withholding
tax if paid to a non-U.S. holder. Under U.S. Treasury Department regulations, payments (including deemed payments) with respect to equity-linked
instruments (“ELIs”) that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference,
directly or indirectly, an interest in an “underlying security,” which is generally any interest in an entity taxable as a
corporation for U.S. federal income tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend.
However, the IRS has issued guidance that states that the U.S. Treasury Department and the IRS intend to amend the effective dates of
the U.S. Treasury Department regulations to provide that withholding on dividend equivalent payments will not apply to specified ELIs
that are not delta-one instruments and that are issued before January 1, 2025. Based on our determination that the securities are not
delta-one instruments, non-U.S. holders should not be subject to withholding on dividend equivalent payments, if any, under the securities.
However, it is possible that the securities could be treated as deemed reissued for U.S. federal income tax purposes upon the occurrence
of certain events affecting the Fund or the securities (for example, upon the Fund rebalancing), and following such occurrence the securities
could be treated as subject to withholding on dividend equivalent payments. Non-U.S. holders that enter, or have entered, into other transactions
in respect of the Fund or the securities should consult their tax advisors as to the application of the dividend equivalent withholding
tax in the context of the securities and their other transactions. If any payments are treated as dividend equivalents subject to withholding,
we (or the applicable withholding agent) would be entitled to withhold taxes without being required to pay any additional amounts with
respect to amounts so withheld.
PRS-21
MicroSectors FANG Index ... (AMEX:FNGD)
Historical Stock Chart
From Mar 2024 to Apr 2024
MicroSectors FANG Index ... (AMEX:FNGD)
Historical Stock Chart
From Apr 2023 to Apr 2024