·
|
This pricing supplement relates to an offering of Contingent Risk Absolute Return Notes linked to the iShares® MSCI Emerging Markets Index Fund.
|
·
|
An investor in the notes may lose all or a portion of their principal amount at maturity.
|
·
|
The notes are designed for investors who seek a 1-to-1 return based on the appreciation in the share price of the Underlying Asset. In addition, if a Barrier Event (as defined below) does not occur, and if the Final Level of the Underlying Asset is less than its Initial Level, you will receive a positive return on your notes equal to the percentage by which that price declines.
|
·
|
If a Barrier Event occurs, and the Final Level is less than the Initial Level, investors will lose 1% of their principal amount for each 1% decrease in the price of the Underlying Asset from the pricing date to the valuation date.
|
·
|
A “Barrier Event” will occur if the closing price of the Underlying Asset on any trading day from the pricing date to the valuation date is less than the Barrier Level (as defined below), which is expressed as a percentage of the price of the Underlying Asset on the pricing date.
|
·
|
The notes will not bear interest.
|
·
|
Any payment at maturity is subject to the credit risk of Bank of Montreal.
|
·
|
Investing in the notes is not the equivalent of investing in the shares of the Underlying Asset.
|
·
|
The notes will be issued in minimum denominations of $1,000 and integral multiples of $1,000.
|
·
|
The notes are expected to price on or about March 13, 2013, and to be issued on or about March 18, 2013.
|
·
|
Our subsidiary, BMO Capital Markets Corp. (“BMOCM”), is the agent for this offering. See “Supplemental Plan of Distribution (Conflicts of Interest)” below.
|
Underlying Asset
|
Principal
Amount*
|
Barrier Level (%
of Initial Level)*
|
Initial
Level*
|
CUSIP
|
Price to Public(1)
|
Agent’s
Commission(1)
|
Proceeds to Bank
of Montreal
|
|||||||
iShares® MSCI Emerging
Markets Index Fund (EEM)
|
US$●
|
[72 – 76]%
|
06366RML6
|
100%
US$●
|
0%
US$0
|
%
US$●
|
Key Terms of the Notes:
|
|
Payment at Maturity:
|
If the Percentage Change is positive, then the amount that the investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
Principal Amount + (Principal Amount × Percentage Change)
If the Percentage Change is less than or equal to zero, and a Barrier Event has not occurred, then the amount that the investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
Principal Amount + (-1 × Principal Amount × Percentage Change)
|
In this case, subject to our credit risk, investors will receive a positive return on the notes, even though the price of the Underlying Asset has declined since the pricing date.
If the Percentage Change is less than or equal to zero, and a Barrier Event has occurred, then the amount that the investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
|
|
Principal Amount + (Principal Amount × Percentage Change)
In this case, investors will lose all or a portion of the principal amount of the notes.
|
|
Initial Level:
|
The closing price of one share of the Underlying Asset on the pricing date. The Initial Level for the Underlying Asset will be set forth in the final pricing supplement for the notes. The Initial Level is subject to adjustment if certain events occur relating to the Underlying Asset.
|
Final Level:
|
The closing price of one share of the Underlying Asset on the valuation date.
|
Percentage Change:
|
Final Level – Initial Level, expressed as a percentage
Initial Level
|
Barrier Event:
|
A Barrier Event will be deemed to occur if the closing price of the Underlying Asset on any trading day during the Monitoring Period is less than the Barrier Level.
|
Pricing Date: | On or about March 13, 2013. |
Settlement Date: | On or about March 18, 2013. |
Valuation Date: | On or about March 13, 2015, subject to adjustments. |
Maturity Date: | On or about March 18, 2015, subject to adjustments, resulting in a term to maturity of approximately twenty-four months. |
Monitoring Period: | Each trading day from the Pricing Date to, and including, the Valuation Date, excluding any trading day on which a market disruption event has occurred or is continuing. |
Monitoring Method: | Close of trading day |
Calculation Agent: | BMOCM |
Selling Agent:
|
BMOCM
|
The pricing date, settlement date, valuation date and maturity date are subject to change. The actual Initial Level, Barrier Level, pricing date, settlement date, valuation date and maturity date for the notes will be set forth in the final pricing supplement.
We may use this pricing supplement in the initial sale of the notes. In addition, BMOCM or another of our affiliates may use this pricing supplement in market-making transactions in the notes after their initial sale. Unless our agent or we inform you otherwise in the confirmation of sale, this pricing supplement is being used in a market-making transaction.
|
|
·
|
Product supplement dated June 23, 2011:
|
|
·
|
Prospectus supplement dated June 22, 2011:
|
|
·
|
Prospectus dated June 22, 2011:
|
|
·
|
Your investment in the notes may result in a loss. — You may lose some or all of your investment in the notes. The payment at maturity will be based on the Final Level, and whether a Barrier Event occurs. If the closing price of the Underlying Asset is less than the Barrier Level during the Monitoring Period, a Barrier Event will have occurred, and the protection provided by that Barrier Level will terminate. Under these circumstances, you could lose some or all of the principal amount of your notes.
|
|
·
|
The protection provided by a Barrier Level may terminate on any day during the Monitoring Period. — If the closing price of the Underlying Asset on any trading day during the Monitoring Period is less than the Barrier Level, you will be fully exposed at maturity to any decrease in the price of the Underlying Asset. Under these circumstances, if the Percentage Change 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 Percentage Change is less than the Initial Level. You will be subject to this potential loss of principal even if, after the Barrier Event, the level of the Underlying Asset increases above the Barrier Level.
|
|
·
|
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 the amount due at maturity, 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.
|
|
·
|
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 Asset or securities included in the Underlying Index (as defined below) 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 price of the 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 Asset. 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.
|
|
·
|
The inclusion of hedging profits, if any, in the initial price to public of the notes, as well as our hedging costs, is likely to adversely affect the price at which you can sell your notes. — Assuming no change in market conditions or any other relevant factors, the price, if any, at which BMOCM or any other party may be willing to purchase the notes in secondary market transactions may be lower than the initial price to public. The initial price to public will include, and any price quoted to you is likely to exclude, the hedging profits that we expect to earn with respect to hedging our exposure under the notes. 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.
|
|
·
|
Owning the notes is not the same as owning the Underlying Asset or a security directly linked to the Underlying Asset. — The return on your notes will not reflect the return you would realize if you actually owned the Underlying Asset or a security directly linked to the performance of the Underlying Asset and held that investment for a similar period. Your notes may trade quite differently from the Underlying Asset. Changes in the price of the Underlying Asset may not result in comparable changes in the market value of your notes. Even if the price of the Underlying Asset increases 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 to decrease while the price of the Underlying Asset increases. In addition, any dividends or other distributions paid on the Underlying Asset will not be reflected in the amount payable on the notes.
|
|
·
|
You will not have any ownership rights in the Underlying Asset or any securities held by the Underlying Asset and will have no right to receive any of those shares or other distributions on those securities. — Investing in your notes will not make you a holder of any shares of the Underlying Asset, or any securities held by the Underlying Asset. 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 the Underlying Asset or those securities held by the Underlying Asset.
|
|
·
|
Changes that affect the index underlying an Underlying Asset will affect the market value of the notes and the amount you will receive at maturity. — The policies of the sponsor (the “Index Sponsor”) of the MSCI Emerging Markets Index (the “Underlying Index” of the Underlying Asset) concerning the calculation of the Underlying Index, additions, deletions or substitutions of the components of the Underlying Index and the manner in which changes affecting those components, such as stock dividends, reorganizations or mergers, may be reflected in the Underlying Index, and therefore, could affect the share price of the Underlying Asset, the amount payable on the notes at maturity, and the market value of the notes prior to maturity. The amount payable on the notes and their market value could also be affected if the Index Sponsor changes these policies, for example, by changing the manner in which it calculates the Underlying Index, or if the Index Sponsor discontinues or suspends the calculation or publication of the Underlying Index.
|
|
The Index Sponsor is not an affiliate of ours or will not be involved in any offerings of the notes in any way. Consequently, we have no control over the actions of the Index Sponsor, including any actions of the type that would require the calculation agent to adjust the payment to you at maturity. The Index Sponsor has no obligation of any sort with respect to the notes. Thus, the Index Sponsor has no 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 any issuance of the notes will be delivered the Index Sponsor.
|
|
·
|
An investment in the notes linked to the iShares® MSCI Emerging Markets Index Fund is subject to risks associated with foreign securities markets. —The Underlying Index tracks 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 Underlying 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.
|
|
|
Prices of securities in foreign countries are subject to political, economic, financial and social factors that apply in those geographical regions. These factors, which could negatively affect those securities markets, include the possibility of recent or future changes in a foreign government’s economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to foreign companies or investments in foreign equity securities and the possibility of fluctuations in the rate of exchange between currencies, the possibility of outbreaks of hostility and political instability and the possibility of natural disaster or adverse public health developments in the region. Moreover, foreign economies may differ favorably or unfavorably from the U.S. economy in important respects such as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
|
|
·
|
An investment in the notes linked to the iShares® MSCI Emerging Markets Index Fund is subject to foreign currency exchange rate risk. — The share prices of this fund 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 this fund 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 this fund 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 this fund will be adversely affected and the price of the Underlying Asset may decrease.
|
|
·
|
Adjustments to the Underlying Asset could adversely affect the notes. — BlackRock, Inc. (collectively with its affiliates, “BlackRock”), in its role as the sponsor and advisor of the Underlying Asset, is responsible for calculating and maintaining the Underlying Asset. BlackRock can add, delete or substitute the stocks comprising the Underlying Asset or make other methodological changes that could change the share price of the Underlying Asset at any time. If one or more of these events occurs, the calculation of the amount payable at maturity may be adjusted to reflect such event or events. Consequently, any of these actions could adversely affect the amount payable at maturity and/or the market value of the notes.
|
|
·
|
We and our affiliates do not have any affiliation with the investment advisor of the Underlying Asset and are not responsible for its public disclosure of information. —We and our affiliates are not affiliated with BlackRock in any way and have no ability to control or predict its actions, including any errors in or discontinuance of disclosure regarding its methods or policies relating to the Underlying Asset. BlackRock is not involved in the offering of the notes in any way and has no obligation to consider your interests as an owner of the notes in taking any actions relating to the Underlying Asset that might affect the value of the notes. Neither we nor any of our affiliates has independently verified the adequacy or accuracy of the information about BlackRock or the Underlying Asset contained in any public disclosure of information. You, as an investor in the notes, should make your own investigation into the Underlying Asset.
|
|
·
|
The correlation between the performance of the Underlying Asset and the performance of the Underlying Index may be imperfect. — The performance of the Underlying Asset is linked principally to the performance of the Underlying Index. However, because of the potential discrepancies identified in more detail in the product supplement, the return on the Underlying Asset may correlate imperfectly with the return on the Underlying Index.
|
|
·
|
The Underlying Asset is subject to management risks. — The Underlying Asset is subject to management risk, which is the risk that its investment strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. For example, BlackRock may invest a portion of the Underlying Asset’s assets in securities not included in the relevant industry or sector but which the investment advisor believes will help the Underlying Asset 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 your 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 the securities included in the Underlying Asset, or futures or options relating to the Underlying Asset, or other derivative instruments with returns linked or related to changes in the performance of the Underlying Asset. We or our affiliates may also engage in trading of shares of the Underlying Asset or securities included in the Underlying Index 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 price of the 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 Asset. — In the ordinary course of their businesses, our affiliates from time to time may express views on expected movements in the price of the Underlying Asset or the securities held by the Underlying Asset. One or more of our affiliates have published, and in the future may publish, research reports that express views on the Underlying Asset or the notes. However, these views are subject to change from time to time. Moreover, other professionals who deal in the markets relating to the Underlying Asset at any time may have significantly different views from those of our affiliates. You are encouraged to derive information concerning the Underlying Asset from multiple sources, and you should not rely on the views expressed by our affiliates.
|
|
|
Neither the offering of the notes nor any views which our affiliates from time to time may express in the ordinary course of their businesses constitutes a recommendation as to the merits of an investment in 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.
|
If a Barrier Event has Not Occurred
|
If a Barrier Event has Occurred
|
|||||||||
Hypothetical
Final Level
|
Percentage
Change
|
Return on the
Notes
|
Payment at
Maturity
|
Return on the
Notes
|
Payment at
Maturity
|
|||||
10.00
|
-90.00%
|
N/A
|
N/A
|
-90.00%
|
$100.00
|
|||||
20.00
|
-80.00%
|
N/A
|
N/A
|
-80.00%
|
$200.00
|
|||||
30.00
|
-70.00%
|
N/A
|
N/A
|
-70.00%
|
$300.00
|
|||||
40.00
|
-60.00%
|
N/A
|
N/A
|
-60.00%
|
$400.00
|
|||||
50.00
|
-50.00%
|
N/A
|
N/A
|
-50.00%
|
$500.00
|
|||||
60.00
|
-40.00%
|
N/A
|
N/A
|
-40.00%
|
$600.00
|
|||||
70.00
|
-30.00%
|
N/A
|
N/A
|
-30.00%
|
$700.00
|
|||||
74.00
|
-26.00%
|
26.00%
|
$1,260.00
|
-26.00%
|
$740.00
|
|||||
75.00
|
-25.00%
|
25.00%
|
$1,250.00
|
-25.00%
|
$750.00
|
|||||
80.00
|
-20.00%
|
20.00%
|
$1,200.00
|
-20.00%
|
$800.00
|
|||||
90.00
|
-10.00%
|
10.00%
|
$1,100.00
|
-10.00%
|
$900.00
|
|||||
100.00
|
0.00%
|
0.00%
|
$1,000.00
|
0.00%
|
$1,000.00
|
|||||
110.00
|
10.00%
|
10.00%
|
$1,100.00
|
10.00%
|
$1,100.00
|
|||||
120.00
|
20.00%
|
20.00%
|
$1,200.00
|
20.00%
|
$1,200.00
|
|||||
130.00
|
30.00%
|
30.00%
|
$1,300.00
|
30.00%
|
$1,300.00
|
|||||
140.00
|
40.00%
|
40.00%
|
$1,400.00
|
40.00%
|
$1,400.00
|
|||||
150.00
|
50.00%
|
50.00%
|
$1,500.00
|
50.00%
|
$1,500.00
|
|
·
|
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, ETFs, 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 (“QIRs”) 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
|
|||||
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 (through February 26, 2013)
|
45.20
|
42.70
|