· |
This pricing supplement relates an offering of Autocallable Cash-Settled Notes with Fixed Interest Payments linked to the Lesser Performing of the S&P 500® Index, the Russell 2000® Index, the VanEck Vectors® Gold Miners ETF and the iShares® MSCI Emerging Markets ETF (the “Underlying Assets”).
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· |
The notes are designed for investors who are seeking fixed periodic interest payments equal to 0.875% of the principal amount per month, as well as a return of principal if the Closing Level of each Underlying Asset on any Call Date beginning on July 13, 2018 is greater than 100% of its Initial Level (the “Call Level”). Investors should be willing to have their notes automatically redeemed prior to maturity and be willing to lose some or all of their principal at maturity.
|
· |
The notes will bear interest at a rate equal to 0.875% of the principal amount per month ($8.75 per $1,000 in principal amount). Any interest will be payable on the 18th day of each month or the next business day (if not a business day), beginning on February 19, 2018, until April 18, 2019, subject to the automatic redemption feature.
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· |
If on any Call Date beginning on July 13, 2018, the Closing Level of each Underlying Asset is greater than its Call Level, the notes will be automatically called. On the applicable Call Settlement Date, for each $1,000 principal amount, investors will receive the principal amount plus the applicable interest payment.
|
· |
The notes do not guarantee any return of principal at maturity. Instead, if the notes are not automatically called, the payment at maturity will be based on the Final Level of each Underlying Asset and whether the Closing Level of any Underlying Asset has declined from its Initial Level below its Trigger Level during the Monitoring Period (a “Trigger Event”), as described below.
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· |
If the notes are not automatically redeemed, and a Trigger Event occurs with respect to any Underlying Asset and the Final Level of any Underlying Asset is less than its Initial Level, investors will be subject to one-for-one loss of the principal amount of the notes for any percentage decrease in the Lesser Performing Underlying Asset from its Initial Level to its Final Level. In such a case, you will receive a cash amount at maturity that is less than the principal amount.
|
· |
The notes will not be listed on any securities exchange.
|
· |
All payments on the notes are subject to the credit risk of Bank of Montreal.
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· |
The offering is expected to price on or about January 16, 2018, and the notes are expected to settle through the facilities of The Depository Trust Company on or about January 19, 2018.
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· |
The notes are scheduled to mature on or about April 18, 2019.
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· |
The notes will be issued in minimum denominations of $1,000 and integral multiples of $1,000.
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· |
Our subsidiary, BMO Capital Markets Corp. (“BMOCM”), is the agent for this offering. See “Supplemental Plan of Distribution (Conflicts of Interest)” below.
|
Autocallable
Note Number |
Underlying Assets
|
Ticker
Symbols |
Initial
Levels |
Trigger Levels (% of the Initial Levels) |
CUSIP
|
Principal
Amount |
Price to
Public(1) |
Agent’s
Commission(1) |
Proceeds to
Bank of Montreal |
ARC340
|
S&P 500® Index
Russell 2000® Index
|
SPX
RTY
|
65.00%
65.00%
|
06367TX62
|
100.00%
|
0.25%
US$
|
99.75%
US$
|
||
VanEck Vectors® Gold Miners ETF
iShares® MSCI Emerging Markets ETF
|
GDX
EEM
|
65.00%
65.00%
|
|||||||
(1) Certain dealers who purchase the notes for sale to certain fee-based advisory accounts may forego some or all of their selling concessions, fees or commissions. The public offering price for investors purchasing the notes in these accounts may be between $997.50 and $1,000 per $1,000 in principal amount.
|
Investing in the notes involves risks, including those described in the “Selected Risk Considerations” section beginning on page P-5 of this pricing supplement, the “Additional Risk Factors Relating to the Notes” section beginning on page PS-6 of the product supplement, and the “Risk Factors” sections beginning on page S-1 of the prospectus supplement and on page 8 of the prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy of this pricing supplement, the product supplement, the prospectus supplement or the prospectus. Any representation to the contrary is a criminal offense.
The notes will be our unsecured obligations and will not be savings accounts or deposits that are insured by the United States Federal Deposit Insurance Corporation, the Deposit Insurance Fund, the Canada Deposit Insurance Corporation or any other governmental agency or instrumentality or other entity.
On the date of this preliminary pricing supplement, based on the terms set forth above, the estimated initial value of the notes is $974.80 per $1,000 in principal amount. The estimated initial value of the notes on the Pricing Date may differ from this value but will not be less than $965.00 per $1,000 in principal amount. However, as discussed in more detail in this pricing supplement, the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy.
|
Underlying Assets:
|
The S&P 500® Index (ticker symbol: SPX), the Russell 2000® Index (ticker symbol: RTY), the VanEck Vectors® Gold Miners ETF (ticker symbol: GDX) and the iShares® MSCI Emerging Markets ETF (ticker symbol: EEM). See the section below entitled “The Underlying Assets” for additional information about the Underlying Assets.
|
Interest Rate:
|
0.875% of the principal amount per month, unless earlier redeemed. Accordingly, each interest payment will equal $8.75 for each $1,000 in principal amount per month.
|
Interest Payment Dates:
|
Interest will be paid on the 18th day of each month or the next business day (if not a business day), beginning on February 19, 2018 until April 18, 2019, subject to the automatic redemption feature.
|
Automatic Redemption:
|
If, on any Call Date beginning on July 13, 2018, the Closing Level of each Underlying Asset is greater than its Call Level, the notes will be automatically redeemed.
|
Payment upon Automatic
Redemption: |
If the notes are automatically redeemed, then, on the applicable Call Settlement Date, for each $1,000 principal amount, investors will receive the principal amount plus the applicable interest payment.
|
Call Dates:
|
The 3rd business day prior to a Call Settlement Date, beginning on July 13, 2018. Each Call Date is subject to postponement, as set forth in the product supplement in the section “General Terms of the Notes—Market Disruption Events.”
|
Call Settlement Dates:
|
The 18th day of each month or the next business day (if not a business day), beginning on July 18, 2018. The call settlement date for the final Call Date will be the maturity date.
|
Payment at Maturity:
|
If the notes are not automatically redeemed, the payment at maturity for the notes is based on the performance of the Underlying Assets. You will receive $1,000 for each $1,000 in principal amount of the note, unless (a) a Trigger Event has occurred with respect to any Underlying Asset and (b) the Final Level of any Underlying Asset is less than its Initial Level.
|
If a Trigger Event has occurred with respect to any Underlying Asset, and if the Final Level of any Underlying Asset is less than its Initial Level, you will receive at maturity, for each $1,000 in principal amount of your notes, a cash amount equal to:
$1,000 + [$1,000 x (Percentage Change of the Lesser Performing Underlying Asset)]
This amount will be less than the principal amount of your notes, and may be zero.
You will also receive the final interest payment at maturity.
|
|
Trigger Event:
|
A Trigger Event will be deemed to occur with respect to an Underlying Asset if its Closing Level is less than its Trigger Level on any trading day during the Monitoring Period.
|
Monitoring Period:
|
The period from the Pricing Date to and including the Valuation Date.
|
Lesser Performing
Underlying Asset: |
The Underlying Asset that has the lowest Percentage Change.
|
Percentage Changes:
|
With respect to each Underlying Asset,
|
Final Level - Initial Level
|
, expressed as a percentage
|
|
Initial Level
|
Initial Levels:
|
With respect to each Underlying Asset, its Closing Level on the Pricing Date. The Initial Levels for the GDX and EEM are subject to adjustments in certain circumstances. See “General Terms of the Notes — Anti-Dilution Adjustments to an Underlying Asset that Is an ETF” in the product supplement for additional information about these adjustments.
|
Call Levels:
|
With respect to each Underlying Asset, 100% of its Initial Level.
|
Final Levels:
|
With respect to each Underlying Asset, its Closing Level on the Valuation Date.
|
Trigger Levels:
|
With respect to each Underlying Asset, 65.00% of its Initial Level.
|
Pricing Date:
|
On or about January 16, 2018
|
Settlement Date:
|
On or about January 19, 2018
|
Valuation Date:
|
On or about April 15, 2019
|
Maturity Date:
|
On or about April 18, 2019
|
Calculation Agent:
|
BMOCM
|
Selling Agent:
|
BMOCM
|
The Pricing Date and the settlement date are subject to change. The actual Pricing Date, settlement date, Call Dates, Interest Payment Dates, Call Dates, Valuation Date and maturity date for the notes will be set forth in the final pricing supplement.
|
· |
Product supplement dated May 1, 2017:
https://www.sec.gov/Archives/edgar/data/927971/000121465917002863/p427170424b5.htm |
· |
Prospectus supplement dated April 27, 2017:
https://www.sec.gov/Archives/edgar/data/927971/000119312517142764/d381374d424b5.htm |
· |
Prospectus dated April 27, 2017:
https://www.sec.gov/Archives/edgar/data/927971/000119312517142728/d254784d424b2.htm |
· |
Your investment in the notes may result in a loss. — The notes do not guarantee any return of principal. If the notes are not automatically redeemed, the payment at maturity will be based on whether a Trigger Event has occurred with respect to any Underlying Asset, and whether the Final Level of any Underlying Asset is less than its Initial Level. If a Trigger Event has occurred with respect to any Underlying Asset, and if the Final Level of any Underlying Asset is less than its Initial Level, you will be subject to a one-for-one loss of the principal amount of the notes for any Percentage Change of the Lesser Performing Underlying Asset from its Initial Level. In such a case, you will receive at maturity a cash payment that is less than the principal amount of the notes and may be zero. Accordingly, you could lose up to the entire principal amount of your notes.
|
· |
The protection provided by the Trigger Level of an Underlying Asset may terminate on any day during the Monitoring Period. — If the Closing Level of any Underlying Asset on any trading day during the Monitoring Period is less than its Trigger Level and the Final Level of any Underlying Asset is less than its Initial Level, you will be fully exposed at maturity to any decrease in the value of the Lesser Performing Underlying Asset. Under these circumstances, if the Percentage Change of the Lesser Performing Underlying Asset on the Valuation Date is less than zero, you will lose 1% (or a fraction thereof) of the principal amount of your investment for every 1% (or a fraction thereof) that the Final Level of the Lesser Performing Underlying Asset is less than its Initial Level. You will be subject to this potential loss of principal even if, after the Trigger Event occurs with respect to any Underlying Asset, the value of each Underlying Asset increases above its Trigger Level.
|
· |
Your notes are subject to automatic early redemption. — We will redeem the notes if the Closing Level of each Underlying Asset on any Call Date specified above is greater than its Call Level. Following an automatic redemption, you will not receive any additional interest payments on the notes, and you may not be able to reinvest your proceeds in an investment with returns that are comparable to the notes.
|
· |
Your return on the notes is limited to the interest payments, regardless of any appreciation in the value of any Underlying Asset. — You will not receive a payment at maturity with a value greater than your principal amount plus the final interest payment. In addition, if the notes are automatically called, you will not receive a payment greater than the principal amount plus the applicable interest payment, even if the Final Level of an Underlying Asset exceeds its Call Level by a substantial amount. Accordingly, your maximum return for each $1,000 in principal amount of the notes is equal to the 15 monthly payments of $8.75, or approximately $131.25, a return of 13.125%.
|
· |
Your investment is subject to the credit risk of Bank of Montreal. — Our credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on our ability to pay all amounts due on the notes, and therefore investors are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the notes.
|
· |
Your payment at maturity may be determined solely by reference to the Lesser Performing Underlying Asset, even if the other Underlying Asset performs better. — If a Trigger Event occurs with respect to any Underlying Asset and the Final Level of any Underlying Asset is less than its Initial Level, your payment at maturity will be determined by reference to the performance of the Lesser Performing Underlying Asset. Even if the other Underlying Asset has appreciated in value compared to its Initial Level, or has experienced a decline that is less than that of the Lesser Performing Underlying Asset, your return at maturity will only be determined by reference to the performance of the Lesser Performing Underlying Asset.
|
· |
The payments on the notes will be determined by reference to each Underlying Asset individually, not to a basket, and the payments on the notes will be based on the performance of the Lesser Performing Underlying Asset. — The payment at maturity if a Trigger Event occurs, will be determined only by reference to the performance of the Lesser Performing Underlying Asset, regardless of the performance of the other Underlying Asset. The notes are not linked to a weighted basket, in which the risk may be mitigated and diversified among each of the basket components. For example, in the case of notes linked to a weighted basket, the return would depend on the weighted aggregate performance of the basket components reflected as the basket return. As a result, the depreciation of one basket component could be mitigated by the appreciation of the other basket components, as scaled by the weighting of that basket component. However, in the case of the notes, the individual performance of each Underlying Asset would not be combined, and the depreciation of one Underlying Asset would not be mitigated by any appreciation of the other Underlying Assets. Instead, your return at maturity will depend solely on the Final Level of the Lesser Performing Underlying Asset if a Trigger Event occurs.
|
· |
Potential conflicts. — We and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation agent. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the notes. We or one or more of our affiliates may also engage in trading of shares of the Underlying Assets that are ETFs or the securities represented or held by the Underlying Assets on a regular basis as part of our general broker-dealer and other businesses, for proprietary accounts, for other accounts under management or to facilitate transactions for our customers. Any of these activities could adversely affect the value of an Underlying Asset and, therefore, the market value of the notes. We or one or more of our affiliates may also issue or underwrite other securities or financial or derivative instruments with returns linked or related to changes in the performance of the Underlying Assets. By introducing competing products into the marketplace in this manner, we or one or more of our affiliates could adversely affect the market value of the notes.
|
· |
Our initial estimated value of the notes will be lower than the price to public. — Our initial estimated value of the notes is only an estimate, and is based on a number of factors. The price to public of the notes will exceed our initial estimated value, because costs associated with offering, structuring and hedging the notes are included in the price to public, but are not included in the estimated value. These costs include the underwriting discount and selling concessions, the profits that we and our affiliates expect to realize for assuming the risks in hedging our obligations under the notes 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.
|
· |
Our initial estimated value does not represent any future value of the notes, and may also differ from the estimated value of any other party. — Our initial estimated value of the notes 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 Underlying Assets, dividend rates and interest rates. Different pricing models and assumptions could provide values for the notes 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 notes could change dramatically due to changes in market conditions, our creditworthiness, and the other factors set forth in this pricing supplement and the product supplement. These changes are likely to impact the price, if any, at which we or BMOCM would be willing to purchase the notes from you in any secondary market transactions. Our initial estimated value does not represent a minimum price at which we or our affiliates would be willing to buy your notes in any secondary market at any time.
|
· |
The terms of the notes are not determined by reference to the credit spreads for our conventional fixed-rate debt. — To determine the terms of the notes, 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 notes are less favorable to you than if we had used a higher funding rate.
|
· |
Certain costs are likely to adversely affect the value of the notes. — Absent any changes in market conditions, any secondary market prices of the notes will likely be lower than the price to public. This is because any secondary market prices will likely take into account our then-current market credit spreads, and because any secondary market prices are likely to exclude all or a portion of the agent’s commission and the hedging profits and estimated hedging costs that are included in the price to public of the notes and that may be reflected on your account statements. In addition, any such price is also likely to reflect a discount to account for costs associated with establishing or unwinding any related hedge transaction, such as dealer discounts, mark-ups and other transaction costs. As a result, the price, if any, at which BMOCM or any other party may be willing to purchase the notes from you in secondary market transactions, if at all, will likely be lower than the price to public. Any sale that you make prior to the maturity date could result in a substantial loss to you.
|
· |
Owning the notes is not the same as owning the Underlying Assets or their components or a security directly linked to the performance of the Underlying Assets or their components. — The return on your notes will not reflect the return you would realize if you actually owned the Underlying Assets or their components or a security directly linked to the performance of the Underlying Assets or their components and held that investment for a similar period. Your notes may trade quite differently from the Underlying Assets. Changes in the value of an Underlying Asset may not result in comparable changes in the market value of your notes. Even if the value of an Underlying Asset increases from its Initial Level during the term of the notes, the market value of the notes prior to maturity may not increase to the same extent. It is also possible for the market value of the notes prior to maturity to decrease while the value of an Underlying Asset increases.
|
· |
You will not have any shareholder rights and will have no right to receive any securities represented by the Underlying Assets at maturity. — Investing in your notes will not make you a holder of any securities represented by the Underlying Assets. Neither you nor any other holder or owner of the notes will have any voting rights, any right to receive dividends or other distributions or any other rights with respect to these securities.
|
· |
Adjustments to the Underlying Assets could adversely affect the value of the notes. S&P Dow Jones Indices LLC (“S&P”), the sponsor of the SPX, FTSE Russell, the sponsor of the RTY (each, an “Index Sponsor”), VanEck Associates, the investment advisor of the GDX, and BlackRock, Inc. (collectively with its affiliates, “BlackRock”), as the sponsor and advisor of the EEM, may add, delete or substitute the stocks represented or held by the Underlying Assets, or make other methodological changes. Further, these Index Sponsors and these investment advisors may discontinue or suspend calculation or publication of these indices or discontinue or suspend maintenance of these ETFs at any time, as applicable. Any of these actions could affect the value of and the return on the notes.
|
· |
We have no affiliation with either Index Sponsor (or the underlying index for any ETF) or the sponsor or investment advisor of any ETF and will not be responsible for any actions taken by them. — The sponsors of these indices and the sponsors or investment advisors of these ETFs are not our affiliates, and will not be involved in the offering of the notes in any way. Consequently, we have no control over the actions of these sponsors or the sponsors or investment advisors of the ETFs, including any actions of the type that would require the calculation agent to adjust the payments on the notes. None of these index sponsors or the sponsors or investment advisors of the ETFs has any obligation of any sort with respect to the notes. Thus, none of these index sponsors or the sponsors or investment advisors of the ETFs has any obligation to take your interests into consideration for any reason, including in taking any actions that might affect the value of the notes. None of our proceeds from the issuance of the notes will be delivered to either Index Sponsor or the sponsor or investment advisor of either ETF.
|
· |
The performance of each ETF may not correlate with the performance of its underlying index as well as the net asset value per share of that ETF. — The performance of an ETF is linked principally to the performance of its underlying index and the net asset value per share of that ETF. However, because of the potential discrepancies identified in more detail in the product supplement, the return on an ETF may correlate imperfectly with the return on its underlying index or the net asset value per share of that ETF.
|
· |
The ETFs are subject to management risks. — The ETFs are subject to management risk, which is the risk that the investment advisor’s investment strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. For example, the investment advisor may invest a portion of an ETF’s assets in securities not included in the relevant industry or sector but which the investment advisor believes will help that ETF track the relevant industry or sector.
|
· |
Lack of liquidity. — The notes will not be listed on any securities exchange. BMOCM may offer to purchase the notes in the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which you may be able to trade the notes is likely to depend on the price, if any, at which BMOCM is willing to buy the notes.
|
· |
Hedging and trading activities. — We or any of our affiliates may carry out hedging activities related to the notes, including purchasing or selling securities included in an Underlying Asset, or futures or options relating to an Underlying Asset, or other derivative instruments with returns linked or related to changes in the performance of an Underlying Asset. We or our affiliates may also engage in trading relating to an Underlying Asset from time to time. Any of these hedging or trading activities on or prior to the Pricing Date and during the term of the notes could adversely affect our payment to you at maturity.
|
· |
Many economic and market factors will influence the value of the notes. — In addition to the value of each Underlying Asset and interest rates on any trading day, the value of the notes will be affected by a number of economic and market factors that may either offset or magnify each other, and which are described in more detail in the product supplement.
|
· |
You must rely on your own evaluation of the merits of an investment linked to the Underlying Assets. — In the ordinary course of their businesses, our affiliates from time to time may express views on expected movements in the values of the Underlying Assets or the securities represented or held by the Underlying Assets. One or more of our affiliates have published, and in the future may publish, research reports that express views on the Underlying Assets or these securities. However, these views are subject to change from time to time. Moreover, other professionals who deal in the markets relating to the Underlying Assets at any time may have significantly different views from those of our affiliates. You are encouraged to derive information concerning the Underlying Assets from multiple sources, and you should not rely on the views expressed by our affiliates.
|
· |
An investment in the notes is subject to risks associated in investing in stocks with a small market capitalization. — The RTY consists of stocks issued by companies with relatively small market capitalizations. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies. As a result, the level of the RTY may be more volatile than that of a market measure that does not track solely small-capitalization stocks. Stock prices of small-capitalization companies are also generally more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded, and be less attractive to many investors if they do not pay dividends. In addition, small capitalization companies are typically less well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss of those individuals. Small capitalization companies tend to have lower revenues, less diverse product lines, smaller shares of their target markets, fewer financial resources and fewer competitive strengths than large-capitalization companies. These companies may also be more susceptible to adverse developments related to their products or services.
|
· |
An investment in the notes linked to the iShares® MSCI Emerging Markets ETF and the VanEck Vectors® Gold Miners ETF is subject to risks associated with foreign securities markets. — The underlying index of the EEM, the MSCI Emerging Markets Index, and the underlying index of the GDX, NYSE Arca Gold Miners Index, track the value of certain foreign equity securities. You should be aware that investments in securities linked to the value of foreign equity securities involve particular risks. The foreign securities markets comprising the MSCI Emerging Markets Index and the NYSE Arca Gold Miners Index may have less liquidity and may be more volatile than U.S. or other securities markets and market developments may affect foreign markets differently from U.S. or other securities markets. Direct or indirect government intervention to stabilize these foreign securities markets, as well as cross-shareholdings in foreign companies, may affect trading prices and volumes in these markets. Also, there is generally less publicly available information about foreign companies than about those U.S. companies that are subject to the reporting requirements of the U.S. Securities and Exchange Commission, and foreign companies are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies.
|
· |
An investment in the notes linked to the iShares® MSCI Emerging Markets ETF and the VanEck Vectors® Gold Miners ETF is subject to foreign currency exchange rate risk. — The share prices of the EEM and the GDX will fluctuate based upon its net asset value, which will in turn depend in part upon changes in the value of the currencies in which the stocks held by the EEM and the GDX are traded. Accordingly, investors in the notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the stocks held by the EEM and the GDX are traded. An investor’s net exposure will depend on the extent to which these currencies strengthen or weaken against the U.S. dollar. If the dollar strengthens against these currencies, the net asset value of the EEM and the GDX will be adversely affected and the prices of the EEM and the GDX may decrease.
|
· |
The holdings of the VanEck Vectors® Gold Miners ETF are concentrated in the gold and silver mining industries. — All or substantially all of the equity securities held by the GDX are issued by gold or silver mining companies. An investment in the notes 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 notes may have increased volatility as the share price of the GDX may be more susceptible to adverse factors that affect that industry or sector. Competitive pressures may have a significant effect on the financial condition of companies in these industries.
|
· |
Relationship to gold and silver bullion. — The GDX invests in shares of gold and silver mining companies, but not in gold bullion or silver bullion. The GDX may under- or over-perform gold bullion and/or silver bullion over the term of the notes.
|
· |
Significant aspects of the tax treatment of the notes are uncertain. — The tax treatment of the notes is uncertain. We do not plan to request a ruling from the Internal Revenue Service or from any Canadian authorities regarding the tax treatment of the notes, and the Internal Revenue Service or a court may not agree with the tax treatment described in this pricing supplement.
|
Hypothetical Final
Level of the Lesser Performing Underlying Asset |
Hypothetical Final Level of the
Lesser Performing Underlying Asset Expressed as a Percentage of the Initial Level |
Payment at Maturity (Excluding Any Interest Payment)
|
|
(i) if the Closing Level of each
Underlying Asset does not fall below its Trigger Level on any day during the Monitoring Period |
(ii) if the Closing Level of any
Underlying Asset falls below its Trigger Level on any day during the Monitoring Period |
||
150.00
|
150.00%
|
$1,000.00
|
$1,000.00
|
125.00
|
125.00%
|
$1,000.00
|
$1,000.00
|
110.00
|
110.00%
|
$1,000.00
|
$1,000.00
|
100.00
|
100.00%
|
$1,000.00
|
$1,000.00
|
90.00
|
90.00%
|
$1,000.00
|
$900.00
|
80.00
|
80.00%
|
$1,000.00
|
$800.00
|
70.00
|
70.00%
|
$1,000.00
|
$700.00
|
65.00
|
65.00%
|
$1,000.00
|
$650.00
|
60.00
|
60.00%
|
N/A
|
$600.00
|
50.00
|
50.00%
|
N/A
|
$500.00
|
25.00
|
25.00%
|
N/A
|
$250.00
|
0.00
|
0.00%
|
N/A
|
$0.00
|
Interest Rate
per Annum |
Treated as an
Interest Payment |
Treated as Payment
for the Put Option |
10.50%
|
[·]
|
[·]
|
· |
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.
|
(1) |
the weight of any single component security may not account for more than 20% of the total value of the Underlying Index;
|
(2) |
the component securities are split into two subgroups–-large and small, which are ranked by market capitalization weight in the 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 Underlying Index may not account for more than 45% of the total index value.
|
· |
defining the equity universe;
|
· |
determining the market investable equity universe for each market;
|
· |
determining market capitalization size segments for each market;
|
· |
applying index continuity rules for the MSCI Standard Index;
|
· |
creating style segments within each size segment within each market; and
|
· |
classifying securities under the Global Industry Classification Standard (the “GICS”).
|
· |
Identifying Eligible Equity Securities: the equity universe initially looks at securities listed in any of the countries in the MSCI Global Index Series, which will be classified as either Developed Markets (“DM”) or Emerging Markets (“EM”). All listed equity securities, or listed securities that exhibit characteristics of equity securities, except mutual funds, exchange traded funds, equity derivatives, limited partnerships, and most investment trusts, are eligible for inclusion in the equity universe. Real Estate Investment Trusts (“REITs”) in some countries and certain income trusts in Canada are also eligible for inclusion.
|
· |
Classifying Eligible Securities into the Appropriate Country: each company and its securities (i.e., share classes) are classified in only one country.
|
· |
Equity Universe Minimum Size Requirement: this investability screen is applied at the company level. In order to be included in a market investable equity universe, a company must have the required minimum full market capitalization.
|
· |
Equity Universe Minimum Free Float-Adjusted Market Capitalization Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security must have a free float-adjusted market capitalization equal to or higher than 50% of the equity universe minimum size requirement.
|
· |
DM and EM Minimum Liquidity Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security must have adequate liquidity. The twelve-month and three-month Annual Traded Value Ratio (“ATVR”), a measure that screens out extreme daily trading volumes and takes into account the free float-adjusted market capitalization size of securities, together with the three-month frequency of trading are used to measure liquidity. In the calculation of the ATVR, the trading volumes in depository receipts associated with that security, such as ADRs or GDRs, are also considered. A minimum liquidity level of 20% of three- and twelve-month ATVR and 90% of three-month frequency of trading over the last four consecutive quarters are required for inclusion of a security in a market investable equity universe of a DM, and a minimum liquidity level of 15% of three- and twelve-month ATVR and 80% of three-month frequency of trading over the last four consecutive quarters are required for inclusion of a security in a market investable equity universe of an EM.
|
· |
Global Minimum Foreign Inclusion Factor Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security’s Foreign Inclusion Factor (“FIF”) must reach a certain threshold. The FIF of a security is defined as the proportion of shares outstanding that is available for purchase in the public equity markets by international investors. This proportion accounts for the available free float of and/or the foreign ownership limits applicable to a specific security (or company). In general, a security must have an FIF equal to or larger than 0.15 to be eligible for inclusion in a market investable equity universe.
|
· |
Minimum Length of Trading Requirement: this investability screen is applied at the individual security level. For an initial public offering (“IPO”) to be eligible for inclusion in a market investable equity universe, the new issue must have started trading at least four months before the implementation of the initial construction of the index or at least three months before the implementation of a semi−annual index review (as described below). This requirement is applicable to small new issues in all markets. Large IPOs are not subject to the minimum length of trading requirement and may be included in a market investable equity universe and the Standard Index outside of a Quarterly or Semi−Annual Index Review.
|
· |
Investable Market Index (Large + Mid + Small);
|
· |
Standard Index (Large + Mid);
|
· |
Large Cap Index;
|
· |
Mid Cap Index; or
|
· |
Small Cap Index.
|
· |
defining the market coverage target range for each size segment;
|
· |
determining the global minimum size range for each size segment;
|
· |
determining the market size−segment cutoffs and associated segment number of companies;
|
· |
assigning companies to the size segments; and
|
· |
applying final size−segment investability requirements.
|
(i) |
Semi−Annual Index Reviews (“SAIRs”) in May and November of the Size Segment and Global Value and Growth Indices which include:
|
· |
updating the indices on the basis of a fully refreshed equity universe;
|
· |
taking buffer rules into consideration for migration of securities across size and style segments; and
|
· |
updating FIFs and Number of Shares (“NOS”).
|
(ii) |
Quarterly Index Reviews in February and August of the Size Segment Indices aimed at:
|
· |
including significant new eligible securities (such as IPOs that were not eligible for earlier inclusion) in the index;
|
· |
allowing for significant moves of companies within the Size Segment Indices, using wider buffers than in the SAIR; and
|
· |
reflecting the impact of significant market events on FIFs and updating NOS.
|
(iii) |
Ongoing Event−Related Changes: changes of this type are generally implemented in the indices as they occur. Significantly large IPOs are included in the indices after the close of the company’s tenth day of trading.
|
High
|
Low
|
|||
2008
|
First Quarter
|
1,447.16
|
1,273.37
|
|
Second Quarter
|
1,426.33
|
1,278.38
|
||
Third Quarter
|
1,305.32
|
1,106.39
|
||
Fourth Quarter
|
1,161.06
|
752.44
|
||
2009
|
First Quarter
|
934.70
|
676.53
|
|
Second Quarter
|
946.21
|
811.08
|
||
Third Quarter
|
1,071.66
|
879.13
|
||
Fourth Quarter
|
1,127.78
|
1,025.21
|
||
2010
|
First Quarter
|
1,174.17
|
1,056.74
|
|
Second Quarter
|
1,217.28
|
1,030.71
|
||
Third Quarter
|
1,148.67
|
1,022.58
|
||
Fourth Quarter
|
1,259.78
|
1,137.03
|
||
2011
|
First Quarter
|
1,343.01
|
1,256.88
|
|
Second Quarter
|
1,363.61
|
1,265.42
|
||
Third Quarter
|
1,353.22
|
1,119.46
|
||
Fourth Quarter
|
1,285.09
|
1,099.23
|
||
2012
|
First Quarter
|
1,416.51
|
1,277.06
|
|
Second Quarter
|
1,419.04
|
1,278.04
|
||
Third Quarter
|
1,465.77
|
1,334.76
|
||
Fourth Quarter
|
1,461.40
|
1,353.33
|
||
2013
|
First Quarter
|
1,569.19
|
1,457.15
|
|
Second Quarter
|
1,669.16
|
1,541.61
|
||
Third Quarter
|
1,725.52
|
1,614.08
|
||
Fourth Quarter
|
1,848.36
|
1,655.45
|
||
2014
|
First Quarter
|
1,878.04
|
1,741.89
|
|
Second Quarter
|
1,962.87
|
1,815.69
|
||
Third Quarter
|
2,011.36
|
1,909.57
|
||
Fourth Quarter
|
2,090.57
|
1,862.49
|
||
2015
|
First Quarter
|
2,117.39
|
1,992.67
|
|
Second Quarter
|
2,130.82
|
2,057.64
|
||
Third Quarter
|
2,128.28
|
1,867.61
|
||
Fourth Quarter
|
2,109.79
|
1,923.82
|
||
2016
|
First Quarter
|
2,063.95
|
1,829.08
|
|
Second Quarter
|
2,119.12
|
2,000.54
|
||
Third Quarter
|
2,190.15
|
2,088.55
|
||
Fourth Quarter
|
2,271.72
|
2,085.18
|
||
2017
|
First Quarter
|
2,395.96
|
2,257.83
|
|
Second Quarter
|
2,453.46
|
2,328.95
|
||
Third Quarter
|
2,519.36
|
2,409.75
|
||
Fourth Quarter
|
2,690.16
|
2,529.12
|
||
2018
|
First Quarter (through January 10, 2018)
|
2,751.29
|
2,695.81
|
High
|
Low
|
|||
2008
|
First Quarter
|
753.548
|
643.966
|
|
Second Quarter
|
763.266
|
686.073
|
||
Third Quarter
|
754.377
|
657.718
|
||
Fourth Quarter
|
671.590
|
385.308
|
||
2009
|
First Quarter
|
514.710
|
343.260
|
|
Second Quarter
|
531.680
|
429.158
|
||
Third Quarter
|
620.695
|
479.267
|
||
Fourth Quarter
|
634.072
|
562.395
|
||
2010
|
First Quarter
|
690.303
|
586.491
|
|
Second Quarter
|
741.922
|
609.486
|
||
Third Quarter
|
677.642
|
590.034
|
||
Fourth Quarter
|
792.347
|
669.450
|
||
2011
|
First Quarter
|
843.549
|
773.184
|
|
Second Quarter
|
865.291
|
777.197
|
||
Third Quarter
|
858.113
|
643.421
|
||
Fourth Quarter
|
765.432
|
609.490
|
||
2012
|
First Quarter
|
846.129
|
747.275
|
|
Second Quarter
|
840.626
|
737.241
|
||
Third Quarter
|
864.697
|
767.751
|
||
Fourth Quarter
|
852.495
|
769.483
|
||
2013
|
First Quarter
|
953.068
|
872.605
|
|
Second Quarter
|
999.985
|
901.513
|
||
Third Quarter
|
1,078.409
|
989.535
|
||
Fourth Quarter
|
1,163.637
|
1,043.459
|
||
2014
|
First Quarter
|
1,208.651
|
1,093.594
|
|
Second Quarter
|
1,192.964
|
1,095.986
|
||
Third Quarter
|
1,208.150
|
1,101.676
|
||
Fourth Quarter
|
1,219.109
|
1,049.303
|
||
2015
|
First Quarter
|
1,266.373
|
1,154.709
|
|
Second Quarter
|
1,295.799
|
1,215.417
|
||
Third Quarter
|
1,273.328
|
1,083.907
|
||
Fourth Quarter
|
1,204.159
|
1,097.552
|
||
2016
|
First Quarter
|
1,114.028
|
953.715
|
|
Second Quarter
|
1,188.954
|
1,089.646
|
||
Third Quarter
|
1,263.438
|
1,139.453
|
||
Fourth Quarter
|
1,388.073
|
1,156.885
|
||
2017
|
First Quarter
|
1,413.635
|
1,345.598
|
|
Second Quarter
|
1,425.985
|
1,345.244
|
||
Third Quarter
|
1,490.861
|
1,356.905
|
||
Fourth Quarter
|
1,548.926
|
1,464.095
|
||
2018
|
First Quarter (through January 10, 2018)
|
1,561.808
|
1,550.011
|
High (in $)
|
Low (in $)
|
|||
2008
|
First Quarter
|
56.29
|
46.50
|
|
Second Quarter
|
51.40
|
42.38
|
||
Third Quarter
|
50.84
|
27.95
|
||
Fourth Quarter
|
33.96
|
16.38
|
||
|
||||
2009
|
First Quarter
|
38.57
|
28.20
|
|
Second Quarter
|
44.55
|
30.95
|
||
Third Quarter
|
48.00
|
35.14
|
||
Fourth Quarter
|
54.78
|
41.87
|
||
|
||||
2010
|
First Quarter
|
50.17
|
40.22
|
|
Second Quarter
|
54.07
|
46.36
|
||
Third Quarter
|
56.66
|
47.09
|
||
Fourth Quarter
|
63.80
|
54.28
|
||
|
||||
2011
|
First Quarter
|
60.79
|
53.12
|
|
Second Quarter
|
63.95
|
51.80
|
||
Third Quarter
|
66.69
|
53.75
|
||
Fourth Quarter
|
63.32
|
50.07
|
||
|
||||
2012
|
First Quarter
|
57.47
|
48.75
|
|
Second Quarter
|
50.37
|
39.34
|
||
Third Quarter
|
54.81
|
40.70
|
||
Fourth Quarter
|
54.25
|
44.85
|
||
|
||||
2013
|
First Quarter
|
47.09
|
35.91
|
|
Second Quarter
|
37.45
|
22.22
|
||
Third Quarter
|
30.43
|
22.90
|
||
Fourth Quarter
|
26.52
|
20.39
|
||
|
||||
2014
|
First Quarter
|
27.73
|
21.27
|
|
Second Quarter
|
26.45
|
22.04
|
||
Third Quarter
|
27.46
|
21.35
|
||
Fourth Quarter
|
21.94
|
16.59
|
||
|
||||
2015
|
First Quarter
|
22.94
|
17.67
|
|
Second Quarter
|
20.82
|
17.76
|
||
Third Quarter
|
17.85
|
13.04
|
||
Fourth Quarter
|
16.90
|
13.08
|
||
|
|
|||
2016
|
First Quarter
|
20.86
|
12.47
|
|
Second Quarter
|
27.70
|
19.53
|
||
Third Quarter
|
31.32
|
25.45
|
||
Fourth Quarter
|
25.96
|
18.99
|
||
2017
|
First Quarter
|
25.57
|
21.14
|
|
Second Quarter
|
24.57
|
21.10
|
||
Third Quarter
|
25.49
|
21.21
|
||
Fourth Quarter
|
23.84
|
21.42
|
||
2018
|
First Quarter (through January 10, 2018)
|
23.82
|
23.11
|
High ($)
|
Low ($)
|
|||
2008
|
First Quarter
|
50.37
|
42.17
|
|
Second Quarter
|
51.70
|
44.43
|
||
Third Quarter
|
44.43
|
31.33
|
||
Fourth Quarter
|
33.90
|
18.22
|
||
2009
|
First Quarter
|
27.09
|
19.94
|
|
Second Quarter
|
34.64
|
25.65
|
||
Third Quarter
|
39.29
|
30.75
|
||
Fourth Quarter
|
42.07
|
37.56
|
||
2010
|
First Quarter
|
43.22
|
36.83
|
|
Second Quarter
|
43.98
|
36.16
|
||
Third Quarter
|
44.77
|
37.59
|
||
Fourth Quarter
|
48.58
|
44.77
|
||
2011
|
First Quarter
|
48.69
|
44.63
|
|
Second Quarter
|
50.21
|
45.50
|
||
Third Quarter
|
48.46
|
34.95
|
||
Fourth Quarter
|
42.80
|
34.36
|
||
2012
|
First Quarter
|
44.76
|
38.23
|
|
Second Quarter
|
43.54
|
36.68
|
||
Third Quarter
|
42.37
|
37.42
|
||
Fourth Quarter
|
44.35
|
40.14
|
||
2013
|
First Quarter
|
45.20
|
41.80
|
|
Second Quarter
|
44.23
|
36.63
|
||
Third Quarter
|
43.29
|
37.34
|
||
Fourth Quarter
|
43.66
|
40.44
|
||
2014
|
First Quarter
|
40.99
|
37.09
|
|
Second Quarter
|
43.95
|
40.82
|
||
Third Quarter
|
45.85
|
41.56
|
||
Fourth Quarter
|
42.44
|
37.73
|
||
2015
|
First Quarter
|
41.07
|
37.92
|
|
Second Quarter
|
44.09
|
39.04
|
||
Third Quarter
|
39.78
|
31.32
|
||
Fourth Quarter
|
36.29
|
31.55
|
||
2016
|
First Quarter
|
34.28
|
28.25
|
|
Second Quarter
|
35.26
|
31.87
|
||
Third Quarter
|
38.20
|
33.77
|
||
Fourth Quarter
|
38.10
|
34.08
|
||
2017
|
First Quarter
|
39.99
|
35.43
|
|
Second Quarter
|
41.93
|
38.81
|
||
Third Quarter
|
45.85
|
41.05
|
||
Fourth Quarter
|
47.81
|
44.82
|
||
2018
|
First Quarter (through January 10, 2018)
|
49.13
|
48.01
|