·
|
The notes are designed for investors who seek a 200% leveraged return based on the appreciation in the share price of the iShares® MSCI EAFE Index Fund (the “Underlying Asset”). Investors should be willing to accept a payment at maturity that is capped at the Maximum Redemption Amount (as defined below), be willing to forgo periodic interest, and be willing to lose 1% of their principal amount for each 1% that the price of the Underlying Asset decreases by more than 20% from its price on the Pricing Date.
|
·
|
An investor in the notes may lose up to 80% of their principal amount at maturity.
|
·
|
The maximum return at maturity will be equal to the product of the Upside Leverage Factor of 200% and the Cap of [6.50%-8.00%] (to be determined on the Pricing Date). Accordingly, the Maximum Redemption Amount will be between [$1,130 and $1,160] for each $1,000 in principal amount (a [13%-16%] return).
|
·
|
Any payment at maturity is subject to the credit risk of Bank of Montreal.
|
·
|
The offering is expected to price on March 13, 2013 and the notes are expected to settle on or about March 18, 2013.
|
·
|
The notes are scheduled to mature on March 18, 2015.
|
·
|
The notes will be issued in minimum denominations of $1,000 and integral multiples of $1,000.
|
·
|
The CUSIP number of the notes is 06366RMK8.
|
·
|
Our subsidiary, BMO Capital Markets Corp. (“BMOCM”), is the agent for this offering. See “Supplemental Plan of Distribution (Conflicts of Interest)” below.
|
Investing in the notes involves risks, including those described in the “Selected Risk Considerations” section beginning on page P-4 of this pricing supplement, the “Additional Risk Factors Relating to the Notes” section beginning on page PS-5 of the product supplement, and the “Risk Factors” section beginning on page S-3 of the prospectus supplement and on page 7 of the prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these 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 Bank Insurance Fund, the Canada Deposit Insurance Corporation or any other governmental agency or instrumentality or other entity.
We expect to deliver the notes through the facilities of The Depository Trust Company on March 18, 2013.
|
|||
Price to Public(1)
|
Agent’s Commission(1)
|
Proceeds to Bank of Montreal
|
|
Per Note
|
US$1,000
|
US$0
|
US$ ●
|
Total
|
US$ ●
|
US$0
|
US$ ●
|
(1) The price to the public specified above is expected to include the profit that we would recognize earned by hedging our exposure under the notes.
|
|||
Key Terms of the Notes:
|
|
Underlying Asset:
|
iShares® MSCI EAFE Index Fund (Bloomberg symbol: EFA). See the section below entitled “The Underlying Asset” for additional information about the Underlying Asset.
|
Payment at Maturity:
|
If the Percentage Change is greater than or equal to the Cap, then the amount that the investors will receive at maturity for each $1,000 in principal amount of the notes will equal the Maximum Redemption Amount.
If the Percentage Change is positive but is less than the Cap, 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 x Upside Leverage Factor)]
|
|
If the Percentage Change is between 0% and -20% inclusive, then the amount that the investors will receive at maturity will equal the principal amount of the notes.
|
|
If the Percentage Change is less than -20%, then the payment at maturity will equal:
|
|
Principal Amount + [Principal Amount × (Percentage Change + Buffer Percentage)]
|
|
Upside Leverage Factor:
|
200%
|
Cap:
|
[6.50%-8.00%], to be determined on the Pricing Date.
|
Maximum Redemption
Amount:
|
The payment at maturity will not exceed the Maximum Redemption Amount of [$1,130-$1,160] per $1,000 in principal amount of the notes (to be determined on the Pricing Date).
|
Initial Level:
|
The closing price of one share of the Underlying Asset on the Pricing Date.
|
Final Level:
|
The closing price of one share of the Underlying Asset on the Valuation Date.
|
Buffer Level:
|
80% of the Initial Level.
|
Buffer Percentage:
|
20%. Accordingly, you will receive the principal amount of your notes at maturity only if the price of the Underlying Asset does not decrease by more than 20%. If the Final Level is less than the Buffer Level, you will receive less than the principal amount of your notes at maturity, and you could lose up to 80% of the principal amount of your notes.
|
Percentage Change:
|
Final Level – Initial Level, expressed as a percentage.
Initial Level
|
Pricing Date:
|
On or about March 13, 2013
|
Settlement Date:
|
On or about March 18, 2013, as determined on the Pricing Date.
|
Valuation Date:
|
On or about March 13, 2015, as determined on the Pricing Date.
|
Maturity Date:
|
On or about March 18, 2015, as determined on the Pricing Date.
|
Automatic Redemption:
|
Not applicable.
|
Calculation Agent:
|
BMOCM
|
Selling Agent:
|
BMOCM
|
The Pricing Date and the Settlement Date are subject to change. The actual 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 any 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 substantially all, of your investment in the notes. The minimum percentage of your principal that you are entitled to receive under the terms of the notes is only 20%. The payment at maturity will be based on the Final Level, and whether the Final Level of the Underlying Asset on the Valuation Date has declined from the Initial Level to a price that is less than the Buffer Level. You will lose 1% of the principal amount of your notes for each 1% that the Final Level is less than the Buffer Level. Accordingly, you could lose up to 80% of the principal amount of your notes.
|
|
·
|
Your return on the notes is limited to the Maximum Redemption Amount, regardless of any appreciation in the share price of the Underlying Asset. — You will not receive a payment at maturity with a value greater than the Maximum Redemption Amount per $1,000 in principal amount of the notes. This will be the case even if the Percentage Change exceeds the Cap.
|
|
·
|
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 Asset 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 is expected to include, and any price quoted to you would be 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 shareholder rights and will have no right to receive any shares of the Underlying Asset at maturity. — 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 such other securities.
|
|
·
|
Changes that affect the MSCI EAFE Index will affect the market value of the notes and the amount you will receive at maturity. — The policies of MSCI Inc. (“MSCI”), the sponsor of the MSCI EAFE Index (the “Underlying Index”), 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 MSCI changes these policies, for example, by changing the manner in which it calculates the Underlying Index, or if MSCI discontinues or suspends the calculation or publication of the Underlying Index.
|
|
·
|
An investment in the notes is subject to risks associated with foreign securities markets. — The Underlying Index is the MSCI EAFE Index, which 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.
|
|
·
|
An investment in the notes linked to the iShares® MSCI EAFE Index Fund is subject to foreign currency exchange rate risk. — The share price of the Underlying Asset 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 Underlying Asset 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 Underlying Asset 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 Underlying Asset 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 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 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 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 Underlying Asset 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 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.
|
|
·
|
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
|
Percentage Change
|
Return on the Notes
|
|||
$0.00
|
-100.00%
|
-80.00%
|
|||
$50.00
|
-50.00%
|
-30.00%
|
|||
$75.00
|
-25.00%
|
-5.00%
|
|||
$80.00
|
-20.00%
|
0.00%
|
|||
$90.00
|
-10.00%
|
0.00%
|
|||
$100.00
|
0.00%
|
0.00%
|
|||
$102.00
|
2.00%
|
4.00%
|
|||
$105.00
|
5.00%
|
10.00%
|
|||
$110.00
|
10.00%
|
14.50%
|
|||
$120.00
|
20.00%
|
14.50%
|
|||
$130.00
|
30.00%
|
14.50%
|
|||
$150.00
|
50.00%
|
14.50%
|
|||
$175.00
|
75.00%
|
14.50%
|
|||
$200.00
|
100.00%
|
14.50%
|
|
·
|
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 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.
|
|
·
|
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
|
|||||
2009
|
First Quarter
|
45.44
|
31.69
|
|||
Second Quarter
|
49.04
|
38.57
|
||||
Third Quarter
|
55.81
|
43.91
|
||||
Fourth Quarter
|
57.28
|
52.66
|
||||
2010
|
First Quarter
|
57.96
|
50.45
|
|||
Second Quarter
|
58.03
|
46.29
|
||||
Third Quarter
|
55.42
|
47.09
|
||||
Fourth Quarter
|
59.46
|
54.25
|
||||
2011
|
First Quarter
|
61.91
|
55.31
|
|||
Second Quarter
|
63.87
|
57.10
|
||||
Third Quarter
|
60.80
|
46.66
|
||||
Fourth Quarter
|
55.57
|
46.45
|
||||
2012
|
First Quarter
|
55.80
|
49.15
|
|||
Second Quarter
|
55.51
|
46.55
|
||||
Third Quarter
|
55.15
|
47.62
|
||||
Fourth Quarter
|
56.88
|
51.96
|
||||
2013
|
First Quarter (through February 26, 2013)
|
59.41
|
56.90
|