Filed Pursuant to Rule 424(b)(5)
File No. 333-173924
Prospectus
Supplement to Prospectus dated June 22, 2011
US$15,000,000,000
Senior Medium-Term Notes, Series B
Terms of
Sale
We may from time to time offer and sell notes with various
terms, including the following:
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fixed or floating interest rate, zero-coupon or
issued with original issue discount; a floating interest rate
may be based on:
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commercial paper rate
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U.S. prime rate
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LIBOR
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EURIBOR
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treasury rate
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CMT rate
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CMS rate
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CD rate
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CPI rate
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federal funds rate
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ranked as senior indebtedness of Bank of Montreal
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maturity payment or interest may be determined by
reference to the performance, price, level or value of one or
more of the following:
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securities of one or more issuers, including debt or
equity securities of a third party;
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one or more currencies;
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one or more formulas;
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one or more commodities;
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any other financial, economic or other measure or
instrument, including the occurrence or
non-occurrence
of any event or circumstance; or
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one or more indices or baskets of the items
described above
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book-entry form through The Depository Trust
Company, Euroclear, Clearstream or any other clearing system or
financial institution named in the relevant pricing supplement
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redemption at the option of the Bank or repayment at
the option of the holder
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interest paid monthly, quarterly, semi-annually or
annually
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denominations of at least $1,000 and integral
multiples of $1,000
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denominated in U.S. dollars, a currency other than
U.S. dollars or in a composite currency
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settlement in immediately available funds or by
physical delivery
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The final terms of each note will be included in a pricing
supplement and, if applicable, a product supplement. The notes
will be issued at 100% of their principal amount unless
otherwise specified in the relevant pricing supplement. We will
receive between 92% and 100% of the aggregate proceeds from the
sale of the notes, after paying the agents commissions of
between 0% and 8% of the aggregate proceeds. See
Supplemental Plan of Distribution (Conflicts of
Interest)
beginning on
page S-31
for additional information about the agents commissions.
The aggregate principal amount of the notes is subject to
reduction as a result of the Banks sale of other
securities pursuant to a separate prospectus supplement to the
accompanying prospectus.
See Risk Factors beginning on
page S-3
to read about factors you should consider before investing in
any notes.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the notes
or passed upon the adequacy or accuracy of this prospectus
supplement and the accompanying prospectus. Any representation
to the contrary is a criminal offense.
These 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 may sell the notes directly or through one or more agents or
dealers, including the agent listed below. The agents are not
required to sell any particular amount of the notes.
We may use this prospectus supplement in the initial sale of any
notes. In addition, we or any of our affiliates, including BMO
Capital Markets Corp., may use this prospectus supplement in a
market-making or other transaction in any note after its initial
sale.
Unless we or our agent informs the purchaser
otherwise in the confirmation of sale or pricing supplement,
this prospectus supplement and the accompanying prospectus are
being used in a market-making transaction.
The date of
this prospectus supplement is June 22, 2011.
TABLE OF
CONTENTS
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Prospectus Supplement
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S-3
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S-3
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S-9
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S-10
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S-31
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S-31
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S-33
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Prospectus
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S-2
ABOUT
THIS PROSPECTUS SUPPLEMENT
This prospectus supplement, the accompanying prospectus and, if
applicable, a product supplement, provide you with a general
description of the notes we may offer. Each time we sell notes
we will provide a pricing supplement containing specific
information about the terms of the notes being offered. Each
pricing supplement or product supplement may include a
discussion of any risk factors or other special considerations
that apply to those notes. The pricing supplement or any product
supplement may also add, update or change the information in
this prospectus supplement. If there is any inconsistency
between the information in this prospectus supplement and any
pricing supplement or any product supplement, you should rely on
the information in that pricing supplement or product
supplement, whichever is most recent.
RISK
FACTORS
General
Risks Relating to the Notes
Our
Credit Ratings May Not Reflect All Risks of an Investment in the
Notes
The credit ratings of our medium-term note program may not
reflect the potential impact of all risks related to structure
and other factors on any trading market for, or trading value
of, your notes. In addition, real or anticipated changes in our
credit ratings will generally affect any trading market for, or
trading value of, your notes.
Credit
of Bank of Montreal
An investment in the notes is subject to the credit risk of Bank
of Montreal, and the actual or perceived creditworthiness of
Bank of Montreal may affect the market value of the notes.
Non-Conventional
Debt Securities
Notes offered under this prospectus may not be conventional debt
securities. If specified in the relevant pricing supplement or
product supplement, the notes may provide no assurance that any
of the principal amount of the notes will be paid at or before
maturity. In addition, the notes may not provide holders with a
return or income stream prior to maturity calculated by
reference to a fixed or floating rate of interest determinable
prior to maturity. The notes, unlike traditional debt
obligations of Canadian chartered banks, may be speculative or
uncertain in that they could produce no return on a
holders original investment or not repay any principal
amount at or before maturity. Prospective purchasers are
directed to the relevant pricing supplement and, if applicable,
product supplement for the specific terms of the relevant
securities, including any risk factors set out therein.
Market
for Notes
Unless otherwise specified in the relevant pricing supplement or
product supplement, there may be no market through which the
notes may be sold and holders may not be able to sell notes.
This may affect the pricing of the notes in the secondary
market, the transparency and availability of trading prices, the
liquidity of the notes, and the extent of issuer regulations.
No
Deposit Insurance
The notes will not constitute savings accounts, deposits or
other obligations that are insured by the Federal Deposit
Insurance Corporation, the Bank Insurance Fund or any other
governmental agency or under the Canada Deposit Insurance
Corporation Act, the Bank Act (Canada) or any other deposit
insurance regime designed to ensure the payment of all or a
portion of a deposit upon the insolvency of the deposit taking
financial institution. Therefore, you will not be entitled to
insurance from the Federal Deposit Insurance Corporation or the
Canada Deposit Insurance Corporation or other such protection,
and as a result, you could lose all or a portion of your
investment.
Risks
Relating to Indexed Notes
We use the term
indexed notes
to mean notes
whose value is linked to an underlying property or index.
Indexed notes may present a high level of risk, and those who
invest in indexed notes may lose all or a portion of their
investment and may receive no interest on their investment. In
addition, the treatment of indexed notes for U.S. federal income
tax purposes is often unclear due to the absence of any
authority specifically addressing the issues presented by any
particular indexed note. Thus, if you propose to invest in
indexed notes, you should independently evaluate the federal
income tax consequences of purchasing an indexed note that apply
in your particular circumstances. You should also read
Certain
S-3
Income Tax Consequences United States Federal
Income Taxation
in this prospectus supplement, as well
as
United States Federal Income Taxation
in
the accompanying prospectus, for a discussion of U.S. tax
matters. In addition, interest in respect of an indexed note, or
any portion of the principal amount of an indexed note in excess
of its issue price, may be subject to Canadian non-resident
withholding tax. See
Canadian Taxation
Debt Securities
in the accompanying prospectus. Bank
of Montreal or the applicable paying agent will deduct or
withhold from a payment on a note any Canadian non-resident
withholding tax exigible and will not pay any additional amounts
to offset such deduction or withholding unless specified in the
relevant pricing supplement. See
Description of the
Notes We May Offer
Withholding
in this prospectus supplement.
Investors
in Indexed Notes Could Lose Their Investment
The amount of principal and/or interest payable on an indexed
note and the cash and/or physical settlement value will be
determined by reference to the price, value or level of one or
more securities, currencies, commodities or other properties,
any other financial, economic or other measure or instrument,
including the occurrence or non-occurrence of any event or
circumstance, and/or one or more indices or baskets of any of
these items. We refer to each of these as an
index.
The direction and magnitude of the
change in the price, value or level of the relevant index will
determine the amount of principal and/or interest payable on the
indexed note, and the cash and/or physical settlement value of
an indexed note. The terms of a particular indexed note may or
may not include a guaranteed return of a percentage of the face
amount at maturity or a minimum interest rate. Thus, if you
purchase a particular indexed note that does not include a
guaranteed return of the face amount or other amount, you may
lose all or a portion of the principal or other amount you
invest and may receive no interest on your investment.
The
Return on Indexed Notes May Be Below the Return on Similar
Notes
Depending on the terms of an indexed note, as specified in the
applicable pricing supplement, you may not receive any periodic
interest payments or receive only very low payments on such
indexed note. As a result, the overall return on such indexed
note may be less than the amount you would have earned by
investing the principal or other amount you invest in such
indexed note in a non-indexed debt security that bears interest
at a prevailing market fixed or floating rate.
The
Issuer of a Security or Currency That Serves as an Index Could
Take Actions That May Adversely Affect an Indexed
Note
The issuer of a security that serves as an index or part of an
index for an indexed note will have no involvement in the offer
and sale of the indexed note and no obligations to the holder of
the indexed note. The issuer may take actions, such as a merger
or sale of assets, without regard to the interests of the holder
of the indexed note. Any of these actions could adversely affect
the value of a note indexed to that security or to an index of
which that security is a component.
If the index for an indexed note includes a
non-U.S.
dollar currency or other asset denominated in a
non-U.S.
dollar currency, the government that issues that currency will
also have no involvement in the offer and sale of the indexed
note and no obligations to the holder of the indexed note. That
government may take actions that could adversely affect the
value of the note. See
Risks Relating to
Notes Denominated or Payable in a
Non-U.S.
Dollar Currency
below for more information about these
kinds of government actions.
Investors
in Indexed Notes Will Have No Ownership of the Underlying
Securities
Investing in an indexed note will not entitle a holder to any
direct or indirect ownership or entitlement to the underlying
securities, except as specified in the relevant pricing
supplement or, if applicable, product supplement. A holder will
not be entitled to the rights and benefits of a holder of the
underlying securities, including any right to receive any
distributions or dividends or to vote at or attend any meetings
of holders of the underlying securities.
An
Indexed Note May Be Linked to a Volatile Index, Which Could
Hurt Your Investment
Some indices are highly volatile, which means that their value
may change significantly, up or down, over a short period of
time. The amount of principal and/or interest that can be
expected to become payable on an indexed note may vary
substantially from time to time. Because the amounts payable
with respect to an indexed note are generally calculated based
on the value or level of the relevant index on a specified date
or over a limited period of time, volatility in the index
increases the risk that the return on the indexed note may be
adversely affected by a fluctuation in the level of the relevant
index. The volatility of an index may be affected by political
or economic events, including governmental actions, or by the
activities of participants in the relevant markets. Any of these
events or activities could adversely affect the value of an
indexed note.
S-4
An
Index to Which a Note Is Linked Could Be Changed or Become
Unavailable
Some indices sponsored by us or our affiliates or third parties
may consist of or refer to several or many different securities,
commodities or currencies or other instruments or measures. The
sponsor of such an index typically reserves the right to alter
the composition of the index and the manner in which the value
or level of the index is calculated. An alteration may result in
a decrease in the value of or return on an indexed note that is
linked to the index. The indices for our indexed notes may
include published indices of this kind or customized indices
developed by us or our affiliates in connection with particular
issues of indexed notes.
A published index may become unavailable, or a customized index
may become impossible to calculate in the normal manner, due to
events such as war, natural disasters, cessation of publication
of the index, a suspension or disruption of trading in one or
more securities, commodities or currencies or other instruments
or measures on which the index is based or any other market
disruption event described in the relevant pricing supplement or
product supplement. If an index becomes unavailable or
impossible to calculate in the normal manner, the terms of a
particular indexed note may allow us to delay determining the
amount payable as principal or premium or interest on an indexed
note, or we may use an alternative method to determine the value
of the unavailable index. Alternative methods of valuation are
generally intended to produce a value similar to the value
resulting from reference to the relevant index. However, it is
unlikely that any alternative method of valuation we use will
produce a value identical to the value that the actual index
would have produced. If we use an alternative method of
valuation for a note linked to an index of this kind, the value
of the note, or the rate of return on it, may be lower than it
otherwise would be.
Some indexed notes are linked to indices that are not commonly
used or that have been developed only recently. The lack of a
trading history may make it difficult to anticipate the
volatility or other risks associated with an indexed note of
this kind. In addition, trading in these indices or their
underlying stocks, commodities or currencies or other
instruments or measures, or options or futures contracts on
these stocks, commodities or currencies or other instruments or
measures, may be limited, which could increase their volatility
and decrease the value of the related indexed notes or the rates
of return on them.
Pricing
Information About the Property Underlying a Relevant Index May
Not Be Available
Special risks may also be presented because of differences in
time zones between the United States and the market for the
property underlying the relevant index, such that the underlying
property is traded on a foreign exchange that is not open when
the trading market for the notes in the United States, if any,
is open or where trading occurs in the underlying property
during times when the trading market for the notes in the United
States, if any, is closed. In such cases, holders of the notes
may have to make investment decisions at a time when current
pricing information regarding the property underlying the
relevant index is not available.
We May
Engage in Hedging Activities that Could Adversely Affect an
Indexed Note
In order to hedge an exposure on a particular indexed note, we
may, directly or through our affiliates or other agents, enter
into transactions involving the securities, commodities or
currencies or other instruments or measures that underlie the
index for the note, or involving derivative instruments, such as
swaps, options or futures, on the index or any of its component
items. To the extent that we enter into hedging arrangements
with a non-affiliate, including a non-affiliate agent, such
non-affiliate may enter into similar transactions. Engaging in
transactions of this kind could adversely affect the value of an
indexed note. It is possible that we or the hedging counterparty
could achieve substantial returns and/or fees from our hedging
transactions while the value of the indexed note may decline.
However, neither we nor any of our affiliates or other agents
will be obliged to hedge our exposure under an indexed note nor
is there any assurance that any hedging transaction will be
maintained or successful.
Information
About Indices May Not Be Indicative of Future
Performance
If we issue an indexed note, we may include historical
information about the relevant index in the relevant pricing
supplement. Any information about indices that we may provide
will be furnished as a matter of information only, and you
should not regard the information as indicative of the range of,
or trends in, fluctuations in the relevant index that may occur
in the future or indicative of any payment of principal or
interest to be paid on the indexed notes.
We May
Have Conflicts of Interest Regarding an Indexed
Note
BMO Capital Markets Corp. and our other affiliates may have
conflicts of interest with respect to some indexed notes. BMO
Capital Markets Corp. and our other affiliates may engage in
trading, including trading for hedging purposes,
S-5
for their proprietary accounts or for other accounts under their
management, in indexed notes and in the securities, commodities
or currencies or other instruments or measures on which the
index is based or in other derivative instruments related to the
index or its component items. These trading activities could
adversely affect the value of indexed notes. We and our
affiliates may also issue or underwrite securities or derivative
instruments that are linked to the same index as one or more
indexed notes. By introducing competing products into the
marketplace in this manner, we could adversely affect the value
of a particular indexed note.
BMO Capital Markets Corp. or another of our affiliates may serve
as calculation agent for the indexed notes and may have
considerable discretion in calculating the amounts payable in
respect of the notes. To the extent that BMO Capital Markets
Corp. or another of our affiliates calculates or compiles a
particular index, it may also have considerable discretion in
performing the calculation or compilation of the index.
Exercising discretion in this manner could adversely affect the
value of an indexed note based on the index or the rate of
return on the note.
Risks
Relating to Floating Rate Notes
Floating
Rates of Interest are Uncertain and Could be 0.0%
If your notes are floating rate notes or otherwise directly
linked to a floating rate for some portion of the notes
term, no interest will accrue on the notes with respect to any
interest period for which the applicable floating rate specified
in the applicable pricing supplement is zero on the related
interest rate reset date. Floating interest rates, by their very
nature, fluctuate, and may be as low as 0.0%. Also, in certain
economic environments, floating rates of interest may be less
than fixed rates of interest for instruments with a similar
credit quality and term. As a result, the return you receive on
your notes may be less than a fixed rate security issued for a
similar term by a comparable issuer.
Changes
in Banks Inter-bank Lending Rate Reporting Practices or
the Method Pursuant to which LIBOR is Determined May Adversely
Affect the Value of Securities to which LIBOR
Relates
Concerns have been expressed that some of the member banks
surveyed by the British Bankers Association (the
BBA) in 2008 in connection with the calculation of
daily LIBOR rates may have been under-reporting the inter-bank
lending rate applicable to them in order to avoid an appearance
of capital insufficiency or adverse reputational or other
consequences that may result from reporting higher interbank
lending rates. As a result, the LIBOR rate-fixing process was
changed by increasing the number of banks surveyed to set a
LIBOR rate. The BBA is continuing its consideration of ways to
strengthen the oversight of the process. Future changes adopted
by the BBA in the method pursuant to which the LIBOR rates are
determined may result in a sudden or prolonged increase or
decrease in the reported LIBOR rates, which may adversely affect
the level of interest payments and the value of the notes.
Risks
Relating to Notes Denominated or Payable in a
Non-U.S.
Dollar Currency
If you intend to invest in a
non-U.S.
dollar note
i.e.
, a note denominated in a
non-U.S.
dollar currency or a note whose principal and/or interest is
payable in a currency other than U.S. dollars or that may be
settled by delivery of a
non-U.S.
dollar currency or property denominated in a
non-U.S.
dollar currency you should consult your own
financial and legal advisors as to the currency risks entailed
by your investment. Notes of this kind may not be an appropriate
investment for investors who are unsophisticated with respect to
non-U.S.
dollar currency transactions. The information in this prospectus
supplement is directed primarily at investors who are U.S.
residents. Investors who are not U.S. residents should consult
their own financial and legal advisors about currency-related
risks particular to their investments.
An
Investment in a
Non-U.S.
Dollar Note Involves Currency-Related Risks
An investment in a
non-U.S.
dollar note entails significant risks that are not associated
with a similar investment in a note that is payable solely in
U.S. dollars and where settlement value is not otherwise based
on a
non-U.S.
dollar currency. These risks include the possibility of
significant changes in rates of exchange between the U.S. dollar
and the various
non-U.S.
dollar currencies or composite currencies and the possibility of
the imposition or modification of foreign exchange controls or
other conditions by either the United States or
non-U.S.
governments. These risks generally depend on factors over which
we have no control, such as economic and political events and
the supply of, and demand for, the relevant currencies in the
global markets.
Changes
in Currency Exchange Rates Can Be Volatile and
Unpredictable
Rates of exchange between the U.S. dollar and many other
currencies have been highly volatile, and this volatility may
continue and perhaps spread to other currencies in the future.
Fluctuations in currency exchange rates could
S-6
adversely affect an investment in a note denominated in a
specified currency other than U.S. dollars. Depreciation of the
specified currency against the U.S. dollar could result in a
decrease in the U.S. dollar-equivalent value of payments on the
note, including the principal payable at maturity. That in turn
could cause the market value of the note to fall. Depreciation
of the specified currency against the U.S. dollar could result
in a loss to the investor on a U.S. dollar basis.
We
Will Not Adjust
Non-U.S.
Dollar Notes to Compensate for Changes in Currency Exchange
Rates
Except as described above or in the relevant pricing supplement
or any applicable product supplement, we will not make any
adjustment or change in the terms of a
non-U.S.
dollar note in the event of any change in exchange rates for the
relevant currency, whether in the event of any devaluation,
revaluation or imposition of exchange or other regulatory
controls or taxes or in the event of other developments
affecting that currency, the U.S. dollar or any other currency.
Consequently, investors in
non-U.S.
dollar notes will bear the risk that their investment may be
adversely affected by these types of events.
Government
Policy Can Adversely Affect Currency Exchange Rates and, as a
Result, the Return on an Investment in
Non-U.S.
Dollar Notes
Currency exchange rates can either float or be fixed by
sovereign governments. From time to time, governments use a
variety of techniques, such as intervention by a countrys
central bank or imposition of regulatory controls or taxes, to
affect the exchange rate of their currencies. Governments may
also issue a new currency to replace an existing currency or
alter the exchange rate or exchange characteristics by
devaluation or revaluation of a currency. Thus, a special risk
in purchasing
non-U.S.
dollar notes is that their yields or payouts could be
significantly and unpredictably affected by governmental
actions. Even in the absence of governmental action directly
affecting currency exchange rates, political or economic
developments in the country issuing the specified currency for a
non-U.S.
dollar note or elsewhere could lead to significant and sudden
changes in the exchange rate between the U.S. dollar and the
specified currency. These changes could affect the value of the
non-U.S.
dollar note as participants in the global currency markets move
to buy or sell the specified currency or U.S. dollars in
reaction to these developments.
Governments have imposed from time to time and may in the future
impose exchange controls or other conditions, including taxes,
with respect to the exchange or transfer of a specified currency
that could affect exchange rates, as well as the availability of
a specified currency for a security at its maturity or on any
other payment date. In addition, the ability of a holder to move
currency freely out of the country in which payment in the
currency is received or to convert the currency at a freely
determined market rate could be limited by governmental actions.
Non-U.S.
Dollar Notes May Permit Us to Make Payments in U.S. Dollars
or Delay Payment If We Are Unable to Obtain the Specified
Currency
Non-U.S.
dollar notes may provide that, if the specified currency is
subject to convertibility, transferability, market disruption or
other conditions affecting its availability at or about the time
when a payment on the notes comes due because of circumstances
beyond our control, we will be entitled to make the payment in
U.S. dollars or delay making the payment. These circumstances
could include the imposition of exchange controls or our
inability to obtain the specified currency because of a
disruption in the currency markets. If we made payment in U.S.
dollars, the exchange rate we would use would be determined in
the manner described below under
Description of
Notes We May Offer
under the subheading
Payment Mechanics How We Will Make Payments
Due in Other Currencies When the Specified Currency
Is Not Available.
A determination of this kind may be
based on limited information and would involve discretion on the
part of our exchange rate agent, which may be an affiliate of
ours. As a result, the value of the payment in U.S. dollars an
investor would receive on the payment date may be less than the
value of the payment the investor would have received in the
specified currency if it had been available, or may be zero. In
addition, a government may impose extraordinary taxes on
transfers of a currency. If that happens we will be entitled to
deduct these taxes from any payment on securities payable in
that currency.
In a
Lawsuit for Payment on a
Non-U.S.
Dollar Note, an Investor May Bear Currency Exchange
Risk
The notes will be governed by New York law. Under
Section 27 of the New York Judiciary Law, a state court in
the State of New York rendering a judgment on a
non-U.S.
dollar note would be required to render the judgment in the
specified currency. However, the judgment would be converted
into U.S. dollars at the exchange rate prevailing on the date of
entry of the judgment. Consequently, in a lawsuit for payment on
a
non-U.S.
dollar note, investors would bear currency exchange risk until
judgment is entered, which may take a significant period of time.
S-7
In courts outside of New York, investors may not be able to
obtain judgment in a specified currency other than U.S. dollars.
For example, a judgment for money in an action based on a
non-U.S.
dollar note in many other U.S. federal or state courts
ordinarily would be enforced in the United States only in U.S.
dollars. The date used to determine the rate of conversion of
the currency in which any particular security is denominated
into U.S. dollars will depend upon various factors, including
which court renders the judgment.
Information
About Exchange Rates May Not Be Indicative of Future
Performance
If we issue a
non-U.S.
dollar note, we may include with the relevant pricing supplement
a currency supplement that provides information about historical
exchange rates for the specified currency or currencies. Any
information about exchange rates that we may provide will be
furnished as a matter of information only, and you should not
regard the information as indicative of the range of, or trends
in, fluctuations in currency exchange rates that may occur in
the future. That rate will likely differ from the exchange rate
used under the terms that apply to a particular note.
Determinations
Made by the Exchange Rate Agent
All determinations made by the exchange rate agent will be made
in its sole discretion (except to the extent expressly provided
in this prospectus or in the applicable prospectus supplement
that any determination is subject to approval by Bank of
Montreal). In the absence of manifest error, its determinations
will be conclusive for all purposes and will bind all holders
and us. The exchange rate agent will not have any liability for
its determinations.
Non-U.S.
Investors May Be Subject to Certain Additional Risks
If we issue a U.S. dollar note and you are a
non-U.S.
investor who purchased such notes with a currency other than
U.S. dollars, changes in rates of exchange may have an adverse
effect on the value, price or income of your investment.
This prospectus supplement contains a general description of
certain tax consequences relating to the notes. If you are a
non-U.S.
investor, you should consult your tax advisors as to the
consequences, under the tax laws of the country where you are
resident for tax purposes, of acquiring, holding and disposing
of notes and receiving payments of principal or other amounts
under the notes.
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USE OF
PROCEEDS
Except as otherwise set forth in the relevant pricing
supplement, the Bank will use the net proceeds of the offering
for general banking purposes. The Bank and/or its affiliates may
use all or any portion of the proceeds in transactions intended
to hedge the Banks obligations under the notes, including
forward and option contracts.
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DESCRIPTION
OF THE NOTES WE MAY OFFER
You should carefully read the description of the terms and
provisions of our debt securities and our senior indenture under
Description of Debt Securities We May Offer
in the accompanying prospectus. That section, together with this
prospectus supplement and the relevant pricing supplement and
any applicable product supplement, summarizes all the material
terms of our senior indenture and your note. They do not,
however, describe every aspect of our senior indenture and your
note. For example, in this section entitled
Description
of the Notes We May Offer,
the accompanying
prospectus, the relevant pricing supplement and any applicable
product supplement, we use terms that have been given special
meanings in our senior indenture, but we describe the meanings
of only the more important of those terms. The specific terms of
any series of notes will be described in the relevant pricing
supplement and any applicable product supplement. As you read
this section, please remember that the specific terms of your
note as described in the relevant pricing supplement and any
applicable product supplement will supplement, and may modify or
replace, the general terms described in this section. If a
relevant pricing supplement or product supplement is
inconsistent with this prospectus supplement or the accompanying
prospectus, the later supplement will control with regard to
your note. Thus, the statements we make in this section may not
apply to your note.
General
The notes will be issued under our senior indenture, dated as of
January 25, 2010, between Bank of Montreal and Wells Fargo
Bank, National Association, as trustee, as amended from time to
time, which we may refer to as the
indenture.
The notes constitute a single series of debt securities of Bank
of Montreal issued under the indenture. The term
debt
securities,
as used in this prospectus supplement,
refers to all senior debt securities, including the notes,
issued and issuable from time to time under the indenture. The
indenture is subject to, and governed by, the
Trust Indenture Act of 1939, as amended. The indenture is
more fully described below in this section. Whenever we refer to
specific provisions or defined terms in the indenture, those
provisions or defined terms are incorporated in this prospectus
supplement by reference. Capitalized terms which are not
otherwise defined shall have the meanings given to them in the
indenture.
The notes will be limited to an aggregate initial offering price
of up to US$15,000,000,000 or, at our option, if so specified in
the relevant pricing supplement or any applicable product
supplement, the equivalent of this amount in any other currency
or currency unit, and will be our direct, unsecured and
unsubordinated obligations. This aggregate initial offering
price is subject to reduction as a result of the sale by us of
other securities pursuant to a separate prospectus supplement to
the accompanying prospectus. The notes will not constitute
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 will offer the notes on a continuous basis through one or
more agents listed in the section entitled
Supplemental
Plan of Distribution (Conflicts of Interest)
in this
prospectus supplement. The indenture does not limit the
aggregate principal amount of senior notes that we may issue. We
may, from time to time, without the consent of the holders of
the notes, provide for the issuance of notes or other debt
securities under the indenture in addition to the
US$15,000,000,000 aggregate initial offering price of notes
noted on the cover of this prospectus supplement. Each note
issued under this prospectus supplement will mature as specified
in the relevant pricing supplement and may be subject to
redemption or repayment before its stated maturity. Notes may be
issued at significant discounts from their principal amount due
on the stated maturity (or on any prior date on which the
principal or an installment of principal of a note becomes due
and payable, whether by the declaration of acceleration, call
for redemption at our option, repayment at the option of the
holder or otherwise), and some notes may not bear interest. We
may from time to time, without the consent of the existing
holders of the relevant notes, create and issue further notes
having the same terms and conditions as such notes in some or
all respects.
Unless we specify otherwise in any note and the relevant pricing
supplement or product supplement, currency amounts in this
prospectus supplement are expressed in U.S. dollars. Unless we
specify otherwise in any note and the relevant pricing
supplement or product supplement, the notes will be denominated
in U.S. dollars and payments of principal and any premium and
interest on the notes will be made in U.S. dollars. If any note
is to be denominated other than exclusively in U.S. dollars, or
if the principal of, and any premium or any interest on, the
note is to be paid in one or more currencies (or currency units
or in amounts determined by reference to an index or indices)
other than that in which that note is denominated, additional
information (including authorized denominations and related
exchange rate information) will be provided in any note and the
relevant pricing supplement or product supplement. Unless we
specify
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otherwise in any note and the relevant pricing supplement or
product supplement, notes denominated in U.S. dollars will be
issued in minimum denominations of $1,000 and integral multiples
of $1,000.
Interest or other amounts payable on the notes may differ
depending upon, among other factors, the aggregate principal
amount of notes purchased in any single transaction. Notes with
different variable terms other than interest rates may also be
offered concurrently to different investors. We may change the
formulas used to calculate interest rates and other terms of
notes from time to time, but no change of terms will affect any
note we have previously issued or as to which we have accepted
an offer to purchase.
Unless we specify otherwise in any note and the relevant pricing
supplement or product supplement, each note will be issued as a
book-entry note in fully registered form without coupons. Each
note issued in book-entry form may be represented by a global
note that we deposit with and register in the name of a
financial institution that we select, or its nominee. The
financial institution that we select for this purpose is called
the
depositary.
Unless we specify otherwise
in the relevant pricing supplement or product supplement, The
Depository Trust Company, New York, New York
(
DTC
), will be the depositary for all notes
in global form. Except as discussed in the accompanying
prospectus under
Description of Debt Securities We May
Offer Legal Ownership and Book-Entry
Issuance,
owners of beneficial interests in book-entry
notes will not be entitled to physical delivery of notes in
certificated form. We will make payments of principal of, and
any premium and interest on, the notes through the applicable
trustee to the depositary for the notes.
Legal
Ownership
Street
Name and Other Indirect Holders
Investors who hold their notes in accounts at banks or brokers
will generally not be recognized by us as registered holders of
notes (except as required by law). This is called holding in
street name. Instead, we would recognize only the bank or
broker, or the financial institution the bank or broker uses to
hold its notes (except as required by law). These intermediary
banks, brokers and other financial institutions pass along
principal, interest and other payments on the notes, either
because they agree to do so in their customer agreements or
because they are legally required to do so. If you hold your
notes in street name, you should check with your own institution
to find out:
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how it handles note payments and notices;
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whether it imposes fees or charges;
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how it would handle voting if it were ever required;
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whether and how you can instruct it to send you notes registered
in your own name so you can be a direct holder as described
below; and
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how it would pursue rights under the notes if there were a
default or other event triggering the need for holders to act to
protect their interests.
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Direct
Holders
Our obligations, as well as the obligations of the trustee and
those of any third parties employed by us or the trustee, under
the notes run only to persons who are registered as holders of
notes. As noted above, we generally do not have obligations to
you if you hold in street name or other indirect means, either
because you choose to hold your notes in that manner or because
the notes are issued in the form of global securities as
described below. For example, once we make payment to the
registered holder we have no further responsibility for that
payment, even if that holder is legally required to pass the
payment along to you as a street name customer but does not do
so.
Global
Notes
A global note is a special type of indirectly held security, as
described above under
Street Name and Other Indirect
Holders.
If we choose to issue notes in the form of
global notes, the ultimate beneficial owners of global notes can
only be indirect holders. As described above under
Street Name and Other Indirect Holders,
we
require that the global note be registered in the name of the
depositary we select, or its nominee.
We also require that the notes included in the global note not
be transferred to the name of any other direct holder except in
the special circumstances described in the accompanying
prospectus in the section
Description of Debt
Securities We May Offer Legal Ownership and
Book-Entry Issuance.
Any person wishing to own a
global note must do so indirectly by virtue of an account with a
broker, bank or other financial institution that in turn has an
account with the
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depositary. The relevant pricing supplement or product
supplement will indicate whether your series of notes will be
issued only in the form of global notes.
Further details of legal ownership are discussed in the
accompanying prospectus in the section
Description of
Debt Securities We May Offer Legal Ownership and
Book-Entry Issuance.
Types of
Notes
We may issue the four types of notes described below. A note may
have elements of each of the four types of notes described
below. For example, a note may bear interest at a fixed rate for
some periods and at a floating rate for other periods.
Similarly, a note may provide for a payment of principal at
maturity linked to an index and bear interest at a fixed or
floating rate.
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Fixed Rate Notes.
A note of this type will
bear interest at a fixed rate described in the relevant pricing
supplement. This type includes zero-coupon notes, which bear no
interest and are instead issued at a price lower than the
principal amount. See
Original Issue
Discount Notes
below for more information about
original issue discount notes.
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Floating Rate Notes.
A note of this type will
bear interest at rates that are determined by reference to an
interest rate formula. In some cases, the rates may also be
adjusted by adding or subtracting a spread or multiplying by a
spread multiplier and may be subject to a minimum rate or a
maximum rate. The various interest rate formulas and these other
features are described below in
Interest
Rates Floating Rate Notes.
If your note is
a floating rate note, the formula and any adjustments that apply
to the interest rate will be specified in the relevant pricing
supplement.
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Indexed Notes.
A note of this type provides
that any principal amount payable at its maturity, and/or the
amount of interest payable on an interest payment date, will be
determined by reference to:
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one or more securities;
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one or more currencies;
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one or more commodities;
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any other financial, economic or other measures or instruments,
including the occurrence or non-occurrence of any event or
circumstance; and/or
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indices or baskets of any of these items.
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If you are a holder of an indexed note, you may receive an
amount at maturity that is greater than or less than the face
amount of your note depending upon the value of the applicable
index at maturity, and if the note is not principal protected,
you may receive nothing at all. That value may fluctuate over
time. If you purchase an indexed note the relevant pricing
supplement will include information about the relevant index and
how amounts that are to become payable will be determined by
reference to that index. In addition, the relevant pricing
supplement will specify whether your note will be payable in
cash or exchangeable for securities of an issuer other than Bank
of Montreal or other property. In some cases, interest on
indexed notes may be subject to Canadian non-resident
withholding tax. See
Canadian Taxation Debt
Securities
in the accompanying prospectus. The
relevant pricing supplement will indicate whether Canadian
non-resident withholding tax is exigible and whether there are
additional Canadian federal income tax considerations relevant
to the acquisition of indexed notes. Before you purchase any
indexed note, you should read carefully the section entitled
Risk Factors Risks Relating to Indexed
Notes
above.
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Convertible or Exchangeable Notes.
A note of
this type will be convertible or exchangeable, at our option or
the option of the holder, into securities of an issuer other
than the Bank or into other property. The convertible or
exchangeable notes may or may not bear interest or be issued
with original issue discount or at a premium. The general terms
of the convertible or exchangeable notes are described below.
The relevant pricing supplement will indicate whether there are
additional Canadian federal income tax considerations relevant
to the acquisition of convertible or exchangeable notes.
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Optionally Convertible or Exchangeable
Notes.
The holder of an optionally convertible or
exchangeable note may, during a specified period or at specific
times, exchange the note for the underlying property at a
specified rate of exchange. If specified in the relevant pricing
supplement or product supplement, we will have the option to
redeem the optionally convertible or exchangeable note prior to
maturity. If the holder of an optionally convertible or
exchangeable note does not
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elect to convert or exchange the note prior to maturity or on
any redemption date, the holder will receive the principal
amount of the note (and any premium) plus any accrued interest
at maturity or upon redemption.
Mandatorily Convertible or Exchangeable
Notes.
At maturity, the holder of a mandatorily
convertible or exchangeable note must, under certain
circumstances, convert or exchange the note for the underlying
property at a specified rate of conversion or exchange, and,
therefore, depending upon the value of the underlying property
at maturity, the holder of a mandatorily convertible or
exchangeable note may receive less than the principal amount of
the note at maturity. If so indicated in the relevant pricing
supplement or product supplement, the specified rate at which a
mandatorily convertible or exchangeable note may be converted or
exchanged may vary depending on the value of the underlying
property so that, upon conversion or exchange, the holder
participates in a percentage, which may be less than, equal to,
or greater than 100% of the change in value of the underlying
property. Mandatorily convertible or exchangeable notes may
include notes where we have the right, but not the obligation,
to require holders of notes to convert or exchange their notes
for the underlying property.
Payments upon Conversion or Exchange.
A
relevant pricing supplement or product supplement will specify
if upon conversion or exchange, at maturity or otherwise, the
holder of a convertible or exchangeable note may receive, at the
specified exchange rate, either the underlying property or the
cash value of the underlying property. The underlying property
may be the securities of either U.S. or foreign entities or
both. The convertible or exchangeable notes may or may not
provide for protection against fluctuations in the exchange rate
between the currency in which that security is denominated and
the currency or currencies in which the market prices of the
underlying security or securities are quoted. Convertible or
exchangeable notes may have other terms, which will be specified
in the relevant pricing supplement or product supplement.
Special Requirements for Conversion or Exchange of Global
Notes.
If an optionally convertible or
exchangeable note is represented by a global note, the
depositarys nominee will be the holder of that note and
therefore will be the only entity that can exercise a right to
convert or exchange. In order to ensure that the
depositarys nominee will timely exercise a right to
convert or exchange a particular optionally convertible or
exchangeable note or any portion of that particular note, the
beneficial owner of the note must instruct the broker or other
direct or indirect participant through which it holds an
interest in that note to notify the depositary of its desire to
exercise a right to convert or exchange. Different firms have
different deadlines for accepting instructions from their
customers. Each beneficial owner should consult the broker or
other participant through which it holds an interest in an
optionally convertible or exchangeable note in order to
ascertain the deadline for ensuring that timely notice will be
delivered to the depositary.
Payments upon Acceleration of Maturity or upon Tax
Redemption.
If the principal amount payable at
maturity of any convertible or exchangeable note is declared due
and payable prior to maturity, the amount payable on:
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an optionally convertible or exchangeable note will equal the
face amount of the note (and any premium) plus accrued interest,
if any, to but excluding the date of payment, except that if a
holder has converted or exchanged an optionally convertible or
exchangeable note prior to the date of declaration or tax
redemption without having received the amount due upon exchange,
the amount payable will be an amount of cash equal to the amount
due upon conversion or exchange and will not include any accrued
but unpaid interest; and
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a mandatorily convertible or exchangeable note will equal an
amount (and any premium) determined as if the date of
declaration or tax redemption were the maturity date plus
accrued interest, if any, to but excluding the date of payment.
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Original
Issue Discount Notes
A fixed rate note, a floating rate note or an indexed note may
be an original issue discount note. A note of this type is
issued at a price lower than its principal amount and provides
that, upon redemption or acceleration of its maturity, an amount
less than its principal amount will be payable. An original
issue discount note may be a zero-coupon note. A note issued at
a discount to its principal amount may, for U.S. federal income
tax purposes, be considered an original issue discount note,
regardless of the amount payable upon redemption or acceleration
of maturity. See
United States Federal Income
Taxation Original Issue Discount
in the
accompanying prospectus for a brief description of the U.S.
federal income tax consequences of owning an original issue
discount note.
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Information
in the Additional Supplements
The relevant pricing supplement (together with any applicable
product supplement) will describe some or all of the following
terms of your note:
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the stated maturity;
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the specified currency or currencies for principal and interest,
if not U.S. dollars;
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the price at which we originally issue your note, expressed as a
percentage of the principal amount, and the original issue date;
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whether your note is a fixed rate note, a floating rate note, an
indexed note or a convertible or exchangeable note;
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if your note is a fixed rate note, the yearly rate at which your
note will bear interest, if any, and the interest payment dates;
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if your note is a floating rate note, the interest rate basis,
which may be one of the eight interest rate bases described in
Interest Rates Floating Rate
Notes
below; any applicable index currency or
maturity, spread or spread multiplier or initial, maximum or
minimum rate; and the interest reset, determination, calculation
and payment dates, all of which we describe under
Interest Rates Floating Rate
Notes
below;
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if your note is an indexed note, the principal amount, if any,
we will pay you at maturity; the amount of interest, if any, we
will pay you on an interest payment date or the formula we will
use to calculate these amounts, if any; and whether your note
will be convertible into or exchangeable for cash, securities of
an issuer other than Bank of Montreal or other property;
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if your note is a convertible or exchangeable note, the
securities or property into which the note may be converted or
for which it may be exchanged; whether the note is convertible
or exchangeable at your option or at the Banks option; and
the other items described in
Types of Notes
Convertible or Exchangeable Notes
above;
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if your note is an original issue discount note, the yield to
maturity;
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if applicable, the circumstances under which your note may be
redeemed at our option before the stated maturity, including any
redemption commencement date, redemption price(s) and redemption
period(s);
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if applicable, the circumstances under which you may demand
repayment of your note before the stated maturity, including any
repayment commencement date, repayment price(s) and repayment
period(s);
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any additional Canadian or United States federal income tax
consequences of the purchase, ownership or disposition of a
particular issuance of notes;
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the use of proceeds, if materially different than those
discussed in this prospectus supplement; and
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any other terms of your note, which could be different from
those described in this prospectus supplement.
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Market-Making
Transactions
If you purchase your note in a market-making transaction, you
will receive information about the price you pay and your trade
and settlement dates in a separate confirmation of sale. A
market-making transaction is one in which BMO Capital Markets
Corp. or another of our affiliates resells a note that it has
previously acquired from another holder. A market-making
transaction in a particular note occurs after the original sale
of the note. See
Plan of Distribution (Conflicts of
Interest)
in the accompanying prospectus and
Supplemental Plan of Distribution (Conflicts of
Interest)
below.
Redemption
at the Option of the Bank; No Sinking Fund
If an initial redemption date is specified in the relevant
pricing supplement, we may redeem the particular notes prior to
their stated maturity date at our option on any date on or after
that initial redemption date in whole or from time to time in
part in increments of any authorized denomination specified in
the relevant pricing supplement (provided that any remaining
principal amount thereof shall be at least the minimum
authorized denomination applicable thereto), at the applicable
redemption price (as defined below), together with any unpaid
interest accrued thereon to the date of redemption. We must give
written notice to registered holders of the particular notes to
be redeemed at our option not more than 45 nor less than 30
calendar days prior to the date of redemption.
Redemption price,
with respect to a note,
means an amount equal to the initial redemption percentage
specified in the relevant pricing supplement (as adjusted by the
annual redemption percentage reduction, if applicable)
multiplied by the unpaid principal amount thereof to be
redeemed. The initial redemption percentage, if any, applicable
to a note normally shall decline at each anniversary of the
initial
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redemption date by an amount equal to the applicable annual
redemption percentage reduction, if any, until the redemption
price is equal to 100% of the unpaid principal amount thereof to
be redeemed.
Unless otherwise specified in the relevant pricing supplement or
product supplement, the notes will not be subject to, or
entitled to the benefit of, any sinking fund.
Repayment
at the Option of the Holder
If one or more optional repayment dates are specified in the
relevant pricing supplement, registered holders of the
particular notes may require us to repay those notes prior to
their stated maturity date on any optional repayment date in
whole or from time to time in part in increments of any
authorized denomination specified in the relevant pricing
supplement (provided that any remaining principal amount thereof
shall be at least the minimum authorized denomination applicable
thereto), at the repayment price or prices specified in that
pricing supplement, together with unpaid interest accrued
thereon to the date of repayment. A registered holders
exercise of the repayment option will be irrevocable.
For any note to be repaid, the trustee must receive, at its
corporate trust office in the Borough of Manhattan, The City of
New York, not more than 60 nor less than 30 calendar days prior
to the date of repayment, the particular notes to be repaid and,
in the case of a book-entry note, repayment instructions from
the depositary. Only the depositary may exercise the repayment
option in respect of global notes representing book-entry notes.
Accordingly, beneficial owners of global notes that desire to
have all or any portion of the book-entry notes represented
thereby repaid must instruct the participant through which they
own their interest to direct the depositary to exercise the
repayment option on their behalf by forwarding the repayment
instructions to the trustee as described above. In order to
ensure that these instructions are received by the trustee on a
particular day, the beneficial owner must so instruct the
participant through which it owns its interest before that
participants deadline for accepting instructions for that
day. Different firms may have different deadlines for accepting
instructions from their customers. Accordingly, beneficial
owners should consult their participants for the respective
deadlines. In addition, at the time repayment instructions are
given, each beneficial owner shall cause the participant through
which it owns its interest to transfer the beneficial
owners interest in the global note representing the
related book-entry notes, on the depositarys records, to
the trustee.
If applicable, we will comply with the requirements of
Section 14(e) of the Securities Exchange Act of 1934, as
amended (the
Exchange Act
), and the rules
promulgated thereunder, and any other securities laws or
regulations in connection with any repayment of notes at the
option of the registered holders thereof.
We may at any time purchase notes at any price or prices in the
open market or otherwise. Notes so purchased by us may, at our
discretion, be held, resold or surrendered to the trustee for
cancellation.
Interest
Each interest-bearing note will bear interest from its date of
issue at the rate per annum, in the case of a fixed rate note,
or based on the interest rate formula, in the case of a floating
rate note, in each case as specified in the relevant pricing
supplement, until the principal thereof is paid. Unless
otherwise specified in the relevant pricing supplement or
product supplement, we will make interest payments in respect of
fixed rate notes and floating rate notes in an amount equal to
the interest accrued from and including the immediately
preceding interest payment date in respect of which interest has
been paid or from and including the date of issue, if no
interest has been paid, to but excluding the applicable interest
payment date or the maturity date, as the case may be (each, an
interest period
).
Interest on fixed rate notes and floating rate notes will be
payable in arrears on each interest payment date and on the
maturity date (unless otherwise specified in the relevant
pricing supplement or product supplement). The first payment of
interest on any note originally issued between a regular record
date and the related interest payment date will be made on the
interest payment date immediately following the next succeeding
regular record date to the registered holder on the next
succeeding regular record date. Unless we specify otherwise in
the relevant pricing supplement or product supplement, the
regular record date
shall be the fifteenth
calendar day, whether or not a business day, immediately
preceding the related interest payment date.
Business
day
is defined below under
Interest
Rates Special Rate Calculation Terms.
For
the purpose of determining the holder at the close of business
on a regular record date when business is not being conducted,
the close of business will mean 5:00 P.M., New York City
time, on that day.
Interest
Rates
This subsection describes the different kinds of interest rates
that may apply to your note, if it bears interest.
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Fixed
Rate Notes
The relevant pricing supplement will specify the interest
payment dates for a fixed rate note. Interest on fixed rate
notes will be computed on the basis of a
360-day
year
consisting of twelve
30-day
months or such other day count convention as may be set forth in
the pricing supplement. For the purposes of disclosure under the
Interest Act (Canada), and without affecting the interest
payable on any fixed rate note, whenever the interest rate on
any fixed rate note is to be calculated on the basis of a period
of less than a calendar year, the yearly interest rate
equivalent for such interest rate will be the interest rate
multiplied by the actual number of days in the relevant calendar
year and divided by the number of days used in calculating the
specified interest rate.
If any interest payment date or the maturity date of a fixed
rate note falls on a day that is not a business day, we will
make the required payment of principal and any premium and
interest on the next succeeding business day, and no additional
interest will accrue in respect of the payment made on that next
succeeding business day.
Floating
Rate Notes
In this subsection, we use several specialized terms relating
to the manner in which floating interest rates are calculated.
These terms appear in
bold, italicized
type the first
time they appear, and we define these terms in Special
Rate Calculation Terms at the end of this subsection.
The following will apply to floating rate notes.
Interest Rate Basis.
We currently expect to
issue floating rate notes that bear interest at rates based on
one or more of the following interest rate bases:
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commercial paper rate;
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U.S. prime rate;
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LIBOR;
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EURIBOR;
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treasury rate;
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CMT rate;
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CMS rate;
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CD rate;
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consumer price index (
CPI
) rate; and/or
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federal funds rate.
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We describe each of the interest rate bases in further detail
below in this subsection. If you purchase a floating rate note,
the relevant pricing supplement or product supplement will
specify the interest rate basis that applies to your note.
Calculation of Interest.
Calculations relating
to floating rate notes will be made by the calculation agent, an
institution that we appoint as our agent for this purpose. That
institution may include any affiliate of ours, such as BMO
Capital Markets Corp. The pricing supplement for a particular
floating rate note will name the institution that we have
appointed to act as the calculation agent for that note as of
its original issue date. We may appoint a different institution
to serve as calculation agent from time to time after the
original issue date of the note without your consent and without
notifying you of the change.
For each floating rate note, the calculation agent will
determine, on the corresponding interest calculation date or on
the interest determination date, as described below, the
interest rate that takes effect on each interest reset date. In
addition, the calculation agent will calculate the amount of
interest that has accrued during each interest
period that is, the period from and including the
original issue date, or the last date to which interest has been
paid or made available for payment, to but excluding the payment
date. For each interest period, the calculation agent will
calculate the amount of accrued interest by multiplying the face
or other specified amount of the floating rate note by an
accrued interest factor for the interest period. This factor
will equal the sum of the interest factors calculated for each
day during the interest period. The interest factor for each day
will be expressed as a decimal and will be calculated by
dividing the interest rate, also expressed as a decimal,
applicable to that day by 360 or by the actual number of days in
the year, as specified in the relevant pricing supplement. For
the purposes of disclosure under the Interest Act (Canada), and
without affecting the interest payable on any floating rate
note, whenever the interest rate on any floating rate note is to
be calculated on the
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basis of a period of less than a calendar year, the yearly
interest rate equivalent for such interest rate will be the
interest rate multiplied by the actual number of days in the
relevant calendar year and divided by the number of days used in
calculating the specified interest rate.
Upon the request of the holder of any floating rate note, the
calculation agent will provide for that note the interest rate
then in effect and, if determined, the interest rate
that will become effective on the next interest reset date. The
calculation agents determination of any interest rate, and
its calculation of the amount of interest for any interest
period, will be final and binding in the absence of manifest
error.
All percentages resulting from any calculation relating to a
note will be rounded upward or downward, as appropriate, to the
next higher or lower one hundred-thousandth of a percentage
point,
e.g.
, 9.876541% (or .09876541) being rounded down
to 9.87654% (or .0987654) and 9.876545% (or .09876545) being
rounded up to 9.87655% (or .0987655). All amounts used in or
resulting from any calculation relating to a floating rate note
will be rounded upward or downward, as appropriate, to the
nearest cent, in the case of U.S. dollars, or to the nearest
corresponding hundredth of a unit, in the case of a currency
other than U.S. dollars, with one-half cent or one-half of a
corresponding hundredth of a unit or more being rounded upward.
In determining the interest rate basis that applies to a
floating rate note during a particular interest period, the
calculation agent may obtain rate quotes from various banks or
dealers active in the relevant market, as discussed below. Those
reference banks and dealers may include the calculation agent
itself and its affiliates, as well as any agent participating in
the distribution of the relevant floating rate notes and its
affiliates, and they may include our affiliates.
Initial Interest Rate.
For any floating rate
note, the interest rate in effect from the original issue date
to the first interest reset date will be the initial interest
rate. We will specify the initial interest rate or the manner in
which it is determined in the relevant pricing supplement.
Spread or Spread Multiplier.
In some cases,
the interest rate basis for a floating rate note may be adjusted:
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by adding or subtracting a specified number of basis points,
called the spread, with one basis point being 0.01%; or
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by multiplying the interest rate basis by a specified
percentage, called the spread multiplier.
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If you purchase a floating rate note, the relevant pricing
supplement will indicate whether a spread or spread multiplier
will apply to your note and, if so, the amount of the spread or
spread multiplier.
Maximum and Minimum Rates.
The actual interest
rate, after being adjusted by the spread or spread multiplier,
may also be subject to either or both of the following limits:
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a maximum rate
i.e.,
a specified upper limit
that the actual interest rate in effect at any time may not
exceed; and/or
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a minimum rate
i.e.,
a specified lower limit
that the actual interest rate in effect at any time may not fall
below.
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If you purchase a floating rate note, the relevant pricing
supplement will indicate whether a maximum rate and/or minimum
rate will apply to your note and, if so, what those rates are.
Whether or not a maximum rate applies, the interest rate on a
floating rate note will in no event be higher than the maximum
rate permitted by New York law, as it may be modified by U.S.
law of general application, and the Criminal Code (Canada).
Under current New York law, the maximum rate of interest, with
some exceptions, for any loan in an amount less than $250,000 is
16% and for any loan in the amount of $250,000 or more but less
than $2,500,000 is 25% per year on a simple interest basis.
These limits do not apply to loans of $2,500,000 or more. The
Criminal Code (Canada) limits the effective annual interest rate
to 60%, although any amounts payable in excess of this limit
would be paid out over time to ensure that such payments do not
exceed 60% per year.
The rest of this subsection describes how the interest rate and
the interest payment dates will be determined, and how interest
will be calculated, on a floating rate note.
Interest Reset Dates.
The rate of interest on
a floating rate note will be reset, by the calculation agent
described below, daily, weekly, monthly, quarterly,
semi-annually or annually. The date on which the interest rate
resets and the reset rate becomes effective is called the
interest reset date. Except as otherwise specified in the
relevant pricing supplement, the interest reset date will be as
follows:
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for floating rate notes that reset daily, each business day;
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for floating rate notes that reset weekly and are not treasury
rate notes, the Wednesday of each week;
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for treasury rate notes that reset weekly, the Tuesday of each
week;
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for floating rate notes that reset monthly, the third Wednesday
of each month;
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for floating rate notes that reset quarterly, the third
Wednesday of each of the four months of each year as specified
in the relevant pricing supplement;
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for floating rate notes that reset semi-annually, the third
Wednesday of each of the two months of each year as specified in
the relevant pricing supplement; and
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for floating rate notes that reset annually, the third Wednesday
of one month of each year as specified in the relevant pricing
supplement.
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For a floating rate note, the interest rate in effect on any
particular day will be the interest rate determined with respect
to the latest interest reset date that occurs on or before that
day. There are several exceptions, however, to the reset
provisions described above.
If any interest reset date for a floating rate note would
otherwise be a day that is not a business day, the interest
reset date will be postponed to the next day that is a business
day. For a LIBOR or EURIBOR note, however, if that business day
is in the next succeeding calendar month, the interest reset
date will be the immediately preceding business day.
Interest Determination Dates.
The interest
rate that takes effect on an interest reset date will be
determined by the calculation agent by reference to a particular
date called an interest determination date. Except as otherwise
indicated in the relevant pricing supplement:
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for commercial paper rate, federal funds rate and U.S. prime
rate notes, the interest determination date relating to a
particular interest reset date will be the business day
preceding the interest reset date;
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for LIBOR notes, the interest determination date relating to a
particular interest reset date, which we refer to as a LIBOR
interest determination date, will be the second
London
business day
preceding the interest reset date, unless
the
index currency
is pounds sterling, in which
case the interest determination date will be the interest reset
date;
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for EURIBOR notes, the interest determination date relating to a
particular interest reset date, which we refer to as a EURIBOR
interest determination date, will be the second
euro
business day
preceding the interest reset date;
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for treasury rate notes, the interest determination date
relating to a particular interest reset date, which we refer to
as a treasury interest determination date, will be the day of
the week in which the interest reset date falls on which
treasury bills
i.e.,
direct obligations of
the U.S. government would normally be auctioned.
Treasury bills are usually sold at auction on the Monday of each
week, unless that day is a legal holiday, in which case the
auction is usually held on the Tuesday of that week, except that
the auction may be held on the preceding Friday. If as the
result of a legal holiday an auction is held on the preceding
Friday, that Friday will be the treasury interest determination
date relating to the interest reset date occurring in the next
succeeding week; and
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for CD rate, CMS rate, CMT rate and CPI rate notes, the interest
determination date relating to a particular interest reset date
will be the second business day preceding the interest reset
date.
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The interest determination date pertaining to a floating rate
note the interest rate of which is determined with reference to
two or more interest rate bases will be the latest business day
which is at least two business days before the related interest
reset date for the applicable floating rate note on which each
interest rate basis is determinable.
Interest Calculation Dates.
As described
above, the interest rate that takes effect on a particular
interest reset date will be determined by reference to the
corresponding interest determination date. Except for LIBOR
notes and EURIBOR notes, however, the determination of the rate
will actually be made on a day no later than the corresponding
interest calculation date. Except as specified in the relevant
pricing supplement, the interest calculation date will be the
earlier of the following:
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the tenth calendar day after the interest determination date or,
if that tenth calendar day is not a business day, the next
succeeding business day; and
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the business day immediately preceding the interest payment date
or the maturity, whichever is the day on which the next payment
of interest will be due.
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The calculation agent need not wait until the relevant interest
calculation date to determine the interest rate if the rate
information it needs to make the determination is available from
the relevant sources sooner.
Interest Payment Dates.
The interest payment
dates for a floating rate note will depend on when the interest
rate is reset and, unless we specify otherwise in the relevant
pricing supplement, will be as follows:
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for floating rate notes that reset daily, weekly or monthly, the
third Wednesday of each month;
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for floating rate notes that reset quarterly, the third
Wednesday of each of the four months of each year as specified
in the relevant pricing supplement;
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for floating rate notes that reset semi-annually, the third
Wednesday of each of the two months of each year as specified in
the relevant pricing supplement; or
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for floating rate notes that reset annually, the third Wednesday
of the month as specified in the relevant pricing supplement.
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Regardless of these rules, if a note is originally issued after
the regular record date and before the date that would otherwise
be the first interest payment date, the first interest payment
date will be the date that would otherwise be the second
interest payment date.
In addition, the following special provision will apply to a
floating rate note with regard to any interest payment date
other than one that falls on the maturity date. If the interest
payment date would otherwise fall on a day that is not a
business day, then the interest payment date will be the next
day that is a business day. If the maturity date of a floating
rate note falls on a day that is not a business day, we will
make the required payment of principal and any premium and
interest on the next succeeding business day, and no additional
interest will accrue in respect of the payment made on that next
succeeding business day. However, unless otherwise specified in
the relevant pricing supplement, if the floating rate note is a
LIBOR note or a EURIBOR note and the next business day falls in
the next calendar month, then the interest payment date or the
date that the payment of principal and any premium will be made
will be the immediately preceding business day.
Calculation Agent.
We have initially appointed
BMO Capital Markets Corp. as our calculation agent for the
notes. See
Calculation of Interest
above for
details regarding the role of the calculation agent.
The following are summaries of anticipated interest rate bases:
Commercial Paper Rate Notes.
If you purchase a
commercial paper rate note, your note will bear interest at an
interest rate equal to the commercial paper rate and adjusted by
the spread or spread multiplier, if any, indicated in the
relevant pricing supplement.
The commercial paper rate will be the
money market
yield
of the rate, for the relevant interest
determination date, for commercial paper having the
index
maturity
indicated in the relevant pricing supplement,
as published in
H.15(519)
under the heading
Commercial Paper Nonfinancial.
If the commercial paper rate cannot be determined as described
above, the following procedures will apply.
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If the rate described above does not appear in H.15(519) at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from that source at that time, then the
commercial paper rate will be the rate, for the relevant
interest determination date, for commercial paper having the
index maturity specified in the relevant pricing supplement, as
published in
H.15 daily update
or any other
recognized electronic source used for displaying that rate,
under the heading
Commercial Paper
Nonfinancial.
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If the rate described above does not appear in H.15(519), H.15
daily update or another recognized electronic source at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from one of those sources at that time, the
commercial paper rate will be the money market yield of the
arithmetic mean of the following offered rates for U.S. dollar
commercial paper that has the relevant index maturity and is
placed for an industrial issuer whose bond rating is
AA,
or the equivalent, from a nationally
recognized rating agency: the rates offered as of
11:00 A.M., New York City time, on the relevant interest
determination date, by three leading U.S. dollar commercial
paper dealers in New York City selected by the calculation agent.
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If fewer than three dealers selected by the calculation agent
are quoting as described above, the commercial paper rate for
the new interest period will be the commercial paper rate in
effect for the prior interest period. If the
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initial interest rate has been in effect for the prior interest
period, however, it will remain in effect for the new interest
period.
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U.S. Prime Rate Notes.
If you purchase a U.S.
prime rate note, your note will bear interest at an interest
rate equal to the U.S. prime rate and adjusted by the spread or
spread multiplier, if any, indicated in the relevant pricing
supplement.
The U.S. prime rate will be the rate, for the relevant interest
determination date, published in H.15(519) under the heading
Bank Prime Loan.
If the U.S. prime rate
cannot be determined as described above, the following
procedures will apply.
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If the rate described above does not appear in H.15(519) at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from that source at that time, then the U.S.
prime rate will be the rate, for the relevant interest
determination date, as published in H.15 daily update or another
recognized electronic source used for the purpose of displaying
that rate, under the heading
Bank Prime Loan.
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If the rate described above does not appear in H.15(519), H.15
daily update or another recognized electronic source at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from one of those sources at that time, then
the U.S. prime rate will be the arithmetic mean of the following
rates as they appear on
Reuters screen US PRIME 1
page
: the rate of interest publicly announced by each
bank appearing on that page as that banks prime rate or
base lending rate, as of 11:00 A.M., New York City time, on
the relevant interest determination date.
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If fewer than four of these rates appear on Reuters screen US
PRIME 1 page, the U.S. prime rate will be the arithmetic mean of
the prime rates or base lending rates, as of the close of
business on the relevant interest determination date, of three
major banks in New York City selected by the calculation agent.
For this purpose, the calculation agent will use rates quoted on
the basis of the actual number of days in the year divided by a
360-day
year.
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If fewer than three banks selected by the calculation agent are
quoting as described above, the U.S. prime rate for the new
interest period will be the U.S. prime rate in effect for the
prior interest period. If the initial interest rate has been in
effect for the prior interest period, however, it will remain in
effect for the new interest period.
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LIBOR Notes.
If you purchase a LIBOR note,
your note will bear interest at an interest rate equal to LIBOR,
which will be the London interbank offered rate for deposits in
U.S. dollars or any other index currency, as noted in the
relevant pricing supplement. In addition, when LIBOR is the
interest rate basis the applicable LIBOR rate will be adjusted
by the spread or spread multiplier, if any, indicated in the
relevant pricing supplement. LIBOR will be determined in the
following manner:
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the offered rate appearing on
Reuters screen LIBOR01
page;
or
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the arithmetic mean of the offered rates appearing on
Bloomberg page BBAM1
unless that page by its
terms cites only one rate, in which case that rate;
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in either case, as of 11:00 A.M., London time, on the
relevant LIBOR interest determination date, for deposits of the
relevant index currency having the relevant index maturity
beginning on the relevant interest reset date. The relevant
pricing supplement will indicate the index currency, the index
maturity and the reference page that apply to your LIBOR note.
If no reference page is mentioned in the relevant pricing
supplement, Reuters screen LIBOR01 page will apply to your LIBOR
note.
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If Reuters screen LIBOR01 page applies and the rate described
above does not appear on that page, or if Bloomberg
page BBAM1 applies and fewer than two of the rates
described above appears on that page or no rate appears on any
page on which only one rate normally appears, then LIBOR will be
determined on the basis of the rates, at approximately
11:00 A.M., London time, on the relevant LIBOR interest
determination date, at which deposits of the following kind are
offered to prime banks in the London interbank market by four
major banks in that market selected by the calculation agent:
deposits of the index currency having the relevant index
maturity, beginning on the relevant interest reset date, and in
a
representative amount
. The calculation agent
will request the principal London office of each of these banks
to provide a quotation of its rate. If at least two quotations
are provided, LIBOR for the relevant LIBOR interest
determination date will be the arithmetic mean of the quotations.
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If fewer than two quotations are provided as described above,
LIBOR for the relevant LIBOR interest determination date will be
the arithmetic mean of the rates for loans of the following kind
to leading European banks quoted, at approximately
11:00 A.M., in the applicable
principal financial
center
for the country of the index currency, on that
LIBOR interest determination date, by three major banks in that
financial center selected by the calculation agent: loans of the
index currency having the relevant index maturity, beginning on
the relevant interest reset date and in a representative amount.
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If fewer than three banks selected by the calculation agent are
quoting as described above, LIBOR for the new interest period
will be LIBOR in effect for the prior interest period. If the
initial interest rate has been in effect for the prior interest
period, however, it will remain in effect for the new interest
period.
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EURIBOR Notes.
If you purchase a EURIBOR note,
your note will bear interest at an interest rate equal to the
interest rate for deposits in euro, designated as
EURIBOR and sponsored jointly by the European
Banking Federation and ACI the Financial Market
Association, or any company established by the joint sponsors
for purposes of compiling and publishing that rate. In addition,
when EURIBOR is the interest rate basis the EURIBOR base rate
will be adjusted by the spread or spread multiplier, if any,
specified in the relevant pricing supplement. EURIBOR will be
determined in the following manner:
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EURIBOR will be the offered rate for deposits in euros having
the index maturity specified in the relevant pricing supplement,
beginning on the second euro business day after the relevant
EURIBOR interest determination date, as that rate appears on
Reuters screen EURIBOR01 page
as of
11:00 A.M., Brussels time, on the relevant EURIBOR interest
determination date.
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If the rate described above does not appear on Reuters screen
EURIBOR01 page, EURIBOR will be determined on the basis of the
rates, at approximately 11:00 A.M., Brussels time, on the
relevant EURIBOR interest determination date, at which deposits
of the following kind are offered to prime banks in the
euro-zone
interbank market by the principal
euro-zone office of each of four major banks in that market
selected by the calculation agent: euro deposits having the
relevant index maturity, beginning on the relevant interest
reset date, and in a representative amount. The calculation
agent will request the principal euro-zone office of each of
these banks to provide a quotation of its rate. If at least two
quotations are provided, EURIBOR for the relevant EURIBOR
interest determination date will be the arithmetic mean of the
quotations.
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If fewer than two quotations are provided as described above,
EURIBOR for the relevant EURIBOR interest determination date
will be the arithmetic mean of the rates for loans of the
following kind to leading euro-zone banks quoted, at
approximately 11:00 A.M., Brussels time on that EURIBOR
interest determination date, by three major banks in the
euro-zone selected by the calculation agent: loans of euros
having the relevant index maturity, beginning on the relevant
interest reset date, and in a representative amount.
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If fewer than three banks selected by the calculation agent are
quoting as described above, EURIBOR for the new interest period
will be EURIBOR in effect for the prior interest period. If the
initial interest rate has been in effect for the prior interest
period, however, it will remain in effect for the new interest
period.
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Treasury Rate Notes.
If you purchase a
treasury rate note, your note will bear interest at an interest
rate equal to the treasury rate and adjusted by the spread or
spread multiplier, if any, indicated in the relevant pricing
supplement.
The treasury rate will be the rate for the auction, on the
relevant treasury interest determination date, of treasury bills
having the index maturity specified in the relevant pricing
supplement, as that rate appears on
Reuters screen
USAUCTION10 or USAUCTION11 page
under the heading
Investment Rate.
If the treasury rate cannot
be determined in this manner, the following procedures will
apply.
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If the rate described above does not appear on either page at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from that source at that time, the treasury
rate will be the
bond equivalent yield
of the
rate, for the relevant treasury interest determination date, for
the type of treasury bill described above, as published in H.15
daily update, or another recognized electronic source used for
displaying that rate, under the heading
U.S. Government
Securities/Treasury Bills/Auction High.
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If the rate described in the prior paragraph does not appear in
H.15 daily update or another recognized electronic source at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from one of those sources at that time, the
treasury rate will be the bond equivalent
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yield of the auction rate, for the relevant treasury interest
determination date and for treasury bills of the kind described
above, as announced by the U.S. Department of the Treasury.
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If the auction rate described in the prior paragraph is not so
announced by 3:00 P.M., New York City time, on the relevant
interest calculation date, or if no such auction is held for the
relevant week, then the treasury rate will be the bond
equivalent yield of the rate, for the relevant treasury interest
determination date and for treasury bills having a remaining
maturity closest to the specified index maturity, as published
in H.15(519) under the heading
U.S. Government
Securities/Treasury Bills/Secondary Market.
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If the rate described in the prior paragraph does not appear in
H.15(519) at 3:00 P.M., New York City time, on the relevant
interest calculation date, unless the calculation is made
earlier and the rate is available from one of those sources at
that time, then the treasury rate will be the rate, for the
relevant treasury interest determination date and for treasury
bills having a remaining maturity closest to the specified index
maturity, as published in H.15 daily update, or another
recognized electronic source used for displaying that rate,
under the heading
U.S. Government Securities/Treasury
Bills/Secondary Market.
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If the rate described in the prior paragraph does not appear in
H.15 daily update or another recognized electronic source at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from one of those sources at that time, the
treasury rate will be the bond equivalent yield of the
arithmetic mean of the following secondary market bid rates for
the issue of treasury bills with a remaining maturity closest to
the specified index maturity: the rates bid as of approximately
3:30 P.M., New York City time, on the relevant treasury
interest determination date, by three primary U.S. government
securities dealers in New York City selected by the calculation
agent.
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If fewer than three dealers selected by the calculation agent
are quoting as described in the prior paragraph, the treasury
rate in effect for the new interest period will be the treasury
rate in effect for the prior interest period. If the initial
interest rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
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CD Rate Notes.
If you purchase a CD rate note,
your note will bear interest at an interest rate equal to the CD
rate and adjusted by the spread or spread multiplier, if any,
indicated in the relevant pricing supplement.
The CD rate will be the rate, on the relevant interest
determination date, for negotiable U.S. dollar certificates of
deposit having the index maturity specified in the relevant
pricing supplement, as published in H.15(519) under the heading
CDs (Secondary Market)
. If the CD rate cannot
be determined in this manner, the following procedures will
apply.
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If the rate described above does not appear in H.15(519) at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from that source at that time, then the CD
rate will be the rate, for the relevant interest determination
date, described above as published in H.15 daily update, or
another recognized electronic source used for displaying that
rate, under the heading
CDs (Secondary
Market)
.
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If the rate described above does not appear in H.15(519), H.15
daily update or another recognized electronic source at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from one of those sources at that time, the CD
rate will be the arithmetic mean of the following secondary
market offered rates for negotiable U.S. dollar certificates of
deposit of major U.S. money market banks with a remaining
maturity closest to the specified index maturity, and in a
representative amount: the rates offered as of 10:00 A.M.,
New York City time, on the relevant interest determination date,
by three leading non-bank dealers in negotiable U.S. dollar
certificates of deposit in New York City, as selected by the
calculation agent.
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If fewer than three dealers selected by the calculation agent
are quoting as described above, the CD rate in effect for the
new interest period will be the CD rate in effect for the prior
interest period. If the initial interest rate has been in effect
for the prior interest period, however, it will remain in effect
for the new interest period.
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CMT Rate Notes.
If you purchase a CMT rate
note, your note will bear interest at an interest rate equal to
the CMT rate and adjusted by the spread or spread multiplier, if
any, indicated in the relevant pricing supplement.
S-22
The CMT rate will be the following rate displayed on the
designated CMT Reuters page
under the heading
. . .
Treasury Constant Maturities . . . Federal
Reserve Board Release H.15 Mondays Approximately
3:45 P.M.
, under the column for the
designated CMT index maturity
:
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if the designated CMT Reuters page is Reuters screen FRBCMT
page, the rate for the relevant interest determination date; or
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if the designated CMT Reuters page is Reuters screen FEDCMT
page, the weekly or monthly average, as specified in the
relevant pricing supplement, for the week that ends immediately
before the week in which the relevant interest determination
date falls, or for the month that ends immediately before the
month in which the relevant interest determination date falls,
as applicable.
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If the CMT rate cannot be determined in this manner, the
following procedures will apply.
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If the applicable rate described above is not displayed on the
relevant designated CMT Reuters page at 3:00 P.M., New York
City time, on the relevant interest calculation date, unless the
calculation is made earlier and the rate is available from that
source at that time, then the CMT rate will be the applicable
treasury constant maturity rate described above
i.e.,
for the designated CMT index maturity and for
either the relevant interest determination date or the weekly or
monthly average, as applicable as published in
H.15(519).
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If the applicable rate described above does not appear in
H.15(519) at 3:00 P.M., New York City time, on the relevant
interest calculation date, unless the calculation is made
earlier and the rate is available from one of those sources at
that time, then the CMT rate will be the treasury constant
maturity rate, or other U.S. treasury rate, for the designated
CMT index maturity and with reference to the relevant interest
determination date, that:
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is published by the Board of Governors of the Federal Reserve
System, or the U.S. Department of the Treasury; or
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as is otherwise announced by the Federal Reserve Bank of New
York for the week or month, as applicable, ended immediately
preceding the week or month, as applicable, in which the CMT
rate interest determination date falls; and
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in either case, is determined by the calculation agent to be
comparable to the applicable rate formerly displayed on the
designated CMT Reuters page and published in H.15(519).
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If the rate described in the prior paragraph does not appear at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from one of those sources at that time, then
the CMT rate will be the yield to maturity of the arithmetic
mean of the following secondary market bid rates for the most
recently issued treasury notes having an original maturity of
approximately the designated CMT index maturity and a remaining
term to maturity of not less than the designated CMT index
maturity minus one year, and in a representative amount: the bid
rates, as of approximately 3:30 P.M., New York City time,
on the relevant interest determination date, of three primary
U.S. government securities dealers in New York City selected by
the calculation agent. In selecting these bid rates, the
calculation agent will request quotations from five of these
primary dealers and will disregard the highest quotation (or, if
there is equality, one of the highest) and the lowest quotation
(or, if there is equality, one of the lowest). Treasury notes
are direct, non-callable, fixed rate obligations of the U.S.
government.
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If the calculation agent is unable to obtain three quotations of
the kind described in the prior paragraph, the CMT rate will be
the yield to maturity of the arithmetic mean of the following
secondary market bid rates for treasury notes with an original
maturity longer than the designated CMT index maturity, with a
remaining term to maturity closest to the designated CMT index
maturity and in a representative amount: the bid rates, as of
approximately 3:30 P.M., New York City time, on the
relevant interest determination date, of three primary U.S.
government securities dealers in New York City selected by the
calculation agent. In selecting these bid rates, the calculation
agent will request quotations from five of these primary dealers
and will disregard the highest quotation (or, if there is
equality, one of the highest) and the lowest quotation (or, if
there is equality, one of the lowest). If two treasury notes
with an original maturity longer than the designated CMT index
maturity have remaining terms to maturity that are equally close
to the designated CMT index maturity, the calculation agent will
obtain quotations for the treasury note with the shorter
remaining term to maturity.
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S-23
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If fewer than five but more than two of these primary dealers
are quoting as described in the prior paragraph, then the CMT
rate for the relevant interest determination date will be based
on the arithmetic mean of the bid rates so obtained, and neither
the highest nor the lowest of those quotations will be
disregarded.
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If two or fewer primary dealers selected by the calculation
agent are quoting as described above, the CMT rate in effect for
the new interest period will be the CMT rate in effect for the
prior interest period. If the initial interest rate has been in
effect for the prior interest period, however, it will remain in
effect for the new interest period.
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CPI Rate Notes.
If you purchase a CPI rate
note, your note will bear interest at an interest rate equal to
the CPI rate and adjusted by the spread or spread multiplier, if
any, indicated in the relevant pricing supplement.
Except as otherwise specified in the relevant pricing
supplement, the CPI rate will be the rate, determined as of the
relevant interest determination date, expressed as a percentage
and calculated in accordance with the following formula:
where
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C
means the CPI (as defined below) applicable
for the calendar month which is one month preceding the month of
the relevant interest determination date;
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P
means the CPI applicable for the calendar
month which is twelve months immediately preceding the calendar
month for which C is determined; and
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CPI
means the non-seasonally adjusted U.S.
City Average All Items Consumer Price Index for All Urban
Consumers, published monthly by the Bureau of Labor Statistics
of the U.S. Department of Labor. For reference purposes only,
the CPI is available on Bloomberg page CPURNSA or any successor
service. In the event of an inconsistency between the CPI
published on Bloomberg page CPURNSA and the CPI published
by the Bureau of Labor Statistics, the CPI shall be the CPI
published by the Bureau of Labor Statistics.
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CMS Rate Notes.
If you purchase a CMS rate
note, your note will bear interest at an interest rate equal to
the CMS rate and adjusted by the spread or spread multiplier, if
any, indicated in the relevant pricing supplement.
The CMS rate will be the rate, on the relevant interest
determination date, displayed on the
Reuters screen
ISDAFIX 1 page
(or any page that may replace that page)
by 11:00 A.M., New York City time.
If the CMS rate cannot be determined in this manner, the
following procedures will apply.
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If the above rate is no longer displayed on the relevant page,
or if not displayed by 11:00 A.M., New York City time, on
the relevant interest calculation date, unless the calculation
is made earlier and the rate is available from that source at
that time, then the CMS rate will be the rate for U.S. dollar
swaps with a maturity of the index maturity designated in the
relevant pricing supplement, expressed as a percentage, which
appears on the
Bloomberg ISDAFIX 1 page
as of
11:00 A.M., New York City time, on the relevant interest
determination date.
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If that information is no longer displayed by 11:00 A.M.,
New York City time, on the relevant interest calculation date,
unless the calculation is made earlier and the rate is available
from that source at that time, then the CMS rate will be a
percentage determined on the basis of the mid-market semi-annual
swap rate quotations provided by five leading swap dealers in
the New York City interbank market at approximately
11:00 A.M., New York City time, on the relevant interest
determination date. For this purpose, the semi-annual swap rate
means the mean of the bid and offered rates for the semi-annual
fixed leg, calculated on a 30/360 day count basis, of a
fixed-for-floating
U.S. dollar interest rate swap transaction with a term equal to
the index maturity designated in the relevant pricing supplement
commencing on that interest determination date with an
acknowledged dealer of good credit in the swap market, where the
floating leg, calculated on an Actual/360 day count basis,
is equivalent to the LIBOR rate with a maturity of three months.
The calculation agent will select the five swap dealers after
consultation with us and will request the principal New York
City office of each of those dealers to provide a quotation of
its rate. If at least three quotations are provided, the CMS
rate for that interest determination date will be the arithmetic
mean of the quotations, eliminating the highest and lowest
quotations or, in the event of equality, one of the highest and
one of the lowest quotations.
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If fewer than three leading swap dealers selected by the
calculation agent are quoting as described above, the CMS rate
will be the CMS rate in effect for the prior interest period. If
the initial interest rate has been in effect for the prior
interest period, however, it will remain in effect for the new
interest period.
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S-24
Federal Funds Rate Notes.
If you purchase a
federal funds rate note, your note will bear interest at an
interest rate equal to the federal funds rate and adjusted by
the spread or spread multiplier, if any, indicated in the
relevant pricing supplement.
The federal funds rate will be the rate for U.S. dollar federal
funds on the relevant interest determination date, as published
in H.15(519) under the heading
Federal Funds
(Effective)
, as that rate is displayed on
Reuters screen FEDFUNDS1 page
. If the federal
funds rate cannot be determined in this manner, the following
procedures will apply.
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If the rate described above is not displayed on Reuters screen
FEDFUNDS1 page at 3:00 P.M., New York City time, on the
relevant interest calculation date, unless the calculation is
made earlier and the rate is available from that source at that
time, then the federal funds rate, for the relevant interest
determination date, will be the rate described above as
published in H.15 daily update, or another recognized electronic
source used for displaying that rate, under the heading
Federal Funds (Effective)
.
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If the rate described above is not displayed on Reuters screen
FEDFUNDS1 page and does not appear in H.15(519), H.15 daily
update or another recognized electronic source at
3:00 P.M., New York City time, on the relevant interest
calculation date, unless the calculation is made earlier and the
rate is available from one of those sources at that time, the
federal funds rate will be the arithmetic mean of the rates for
the last transaction in overnight, U.S. dollar federal funds
arranged, before 9:00 A.M., New York City time, on the
relevant interest determination date, by three leading brokers
of U.S. dollar federal funds transactions in New York City
selected by the calculation agent.
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If fewer than three brokers selected by the calculation agent
are quoting as described above, the federal funds rate in effect
for the new interest period will be the federal funds rate in
effect for the prior interest period. If the initial interest
rate has been in effect for the prior interest period, however,
it will remain in effect for the new interest period.
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Special Rate Calculation Terms.
In this
subsection entitled
Interest Rates,
we use
several terms that have special meanings relevant to calculating
floating interest rates. We define these terms as follows:
The term
bond equivalent yield
means a yield
expressed as a percentage and calculated in accordance with the
following formula:
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bond equivalent yield =
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D x N
360
- (D x M)
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x 100
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where
D
means the annual rate for treasury bills
quoted on a bank discount basis and expressed as a decimal;
N
means 365 or 366, as the case may be; and
M
means the actual number of days in the
applicable interest reset period.
The term
business day
means, for any note, a
day that meets all the following applicable requirements:
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for all notes, is a Monday, Tuesday, Wednesday, Thursday or
Friday that is neither a legal holiday nor a day on which
banking institutions are authorized or obligated by law or
executive order to close in New York City or Toronto;
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if the note is a LIBOR note, is also a London business day;
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if the note has a specified currency other than U.S. dollars or
euros, is also a day on which banking institutions are not
authorized or obligated by law or executive order to close in
the applicable principal financial center; and
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if the note is a EURIBOR note or has a specified currency of
euros, or is a LIBOR note for which the index currency is euros,
is also a euro business day.
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Bloomberg ISDAFIX 1 page
means Bloomberg
screen ISDAFIX 1 page or any replacement page or pages on which
CMS rates are displayed.
Bloomberg page BBAM1
means the Bloomberg
screen BBAM1 page or any replacement page or pages on which
LIBOR rates are displayed.
S-25
The term
designated CMT index maturity
means
the index maturity for a CMT rate note and will be the original
period to maturity of a U.S. treasury security
either 1, 2, 3, 5, 7, 10, 20 or 30 years
specified in the relevant pricing supplement.
The term
designated CMT Reuters page
means
the Reuters page mentioned in the relevant pricing supplement
that displays treasury constant maturities as reported in
H.15(519). If no Reuters page is so specified, then the
applicable page will be Reuters screen FEDCMT page. If Reuters
screen FEDCMT page applies but the relevant pricing supplement
does not specify whether the weekly or monthly average applies,
the weekly average will apply.
The term
euro business day
means any day on
which the Trans-European Automated Real-Time Gross Settlement
Express Transfer (TARGET) System, or any successor system, is
open for business.
The term
euro-zone
means, at any time, the
region comprised of the member states of the European Economic
and Monetary Union that, as of that time, have adopted a single
currency in accordance with the Treaty on European Union of
February 1992, as it may be amended from time to time.
H.15(519)
means the weekly statistical
release entitled
Statistical Release
H.15(519)
, or any successor publication, published by
the Board of Governors of the Federal Reserve System.
H.15 daily update
means the daily update of
H.15(519) available through the Internet website of the Board of
Governors of the Federal Reserve System, at
http://www.federalreserve.gov/releases/h15/update,
or any successor site or publication.
The term
index currency
means, with respect
to a LIBOR note, the currency specified as such in the relevant
pricing supplement. The index currency may be U.S. dollars or
any other currency, and will be U.S. dollars unless another
currency is specified in the relevant pricing supplement.
The term
index maturity
means, with respect
to a floating rate note, the period to maturity of the
instrument or obligation on which the interest rate formula is
based, as specified in the relevant pricing supplement.
London business day
means any day on which
dealings in the relevant index currency are transacted in the
London interbank market.
The term
money market yield
means a yield
expressed as a percentage and calculated in accordance with the
following formula:
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money market yield =
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D x N
360
- (D x M)
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x 100
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where
D
means the annual rate for commercial paper
quoted on a bank discount basis and expressed as a decimal;
N
means 365 or 366, as the case may be; and
M
means the actual number of days in the
relevant interest reset period.
The term
principal financial center
means the
capital city of the country to which an index currency relates
(or the capital city of the country issuing the specified
currency, as applicable), except that with respect to U.S.
dollars, Australian dollars, Canadian dollars, South African
rands and Swiss francs, the
principal financial
center
means The City of New York, Sydney, Toronto,
Johannesburg and Zurich, respectively, and with respect to
euros, the principal financial center means London.
The term
representative amount
means an
amount that, in the calculation agents judgment, is
representative of a single transaction in the relevant market at
the relevant time.
Reuters screen EURIBOR01 page
means Reuters
screen EURIBOR01 page or any replacement page or pages on which
EURIBOR rates are displayed.
Reuters screen FEDFUNDS1 page
means Reuters
screen FEDFUNDS1 page or any replacement page or pages on which
U.S. dollar federal funds rates are displayed.
Reuters screen ISDAFIX 1 page
means Reuters
screen ISDAFIX 1 page or any replacement page or pages on which
CMS rates are displayed.
Reuters screen LIBOR01 page
means Reuters
screen LIBOR01 page or any replacement page or pages on which
London interbank rates of major banks for the relevant index
currency are displayed.
S-26
Reuters screen USAUCTION10 or USAUCTION11
page
means Reuters screen USAUCTION10 page or Reuters
screen USAUCTION11 page or any replacement page or pages on
which U.S. Treasury auction rates are displayed.
Reuters screen US PRIME 1 page
means the
display on the
US PRIME 1
page on the Reuters
Monitor Money Rates Service, or any successor service, or any
replacement page or pages on that service, for the purpose of
displaying prime rates or base lending rates of major U.S. banks.
If, when we use the terms Bloomberg ISDAFIX 1 page, Bloomberg
page BBAM1, designated CMT Reuters page, H.15(519), H.15
daily update, Reuters screen EURIBOR01 page, Reuters screen
FEDFUNDS1 page, Reuters screen ISDAFIX 1 page, Reuters screen
LIBOR01 page, Reuters screen USAUCTION10 or USAUCTION11 page or
Reuters screen US PRIME 1 page, or, we refer to a particular
heading or headings on any of those pages, those references
include any successor or replacement heading or headings as
determined by the calculation agent.
Payment
Mechanics
Who
Receives Payment?
If interest is due on a note on an interest payment date, we
will pay the interest to the person or entity in whose name the
note is registered at the close of business on the regular
record date relating to the interest payment date. If interest
is due at maturity but on a day that is not an interest payment
date, we will pay the interest to the person or entity entitled
to receive the principal of the note. If principal or another
amount besides interest is due on a note at maturity, we will
pay the amount to the holder of the note against surrender of
the note at a proper place of payment (or, in the case of a
global note, in accordance with the applicable policies of the
depositary).
How We
Will Make Payments Due in U.S. Dollars
We will follow the practice described in this subsection when
paying amounts due in U.S. dollars. Payments of amounts due in
other currencies will be made as described in the next
subsection.
Payments on Global Notes.
We will make
payments on a global note directly to the registered holder,
which will be the depositary or its nominee, and otherwise in
accordance with the applicable policies of the depositary as in
effect from time to time. We will not make payments to any
indirect holders who own beneficial interests in the global
note. An indirect holders right to receive those payments
will be governed by the rules and practices of the depositary
and its participants, as described under
Global
Notes
and in the accompanying prospectus in the
section
Description of Debt Securities We May
Offer Legal Ownership and Book-Entry
Issuance.
Payments on Non-Global Notes.
We will make
payments on a note in non-global form as follows. We will pay
interest that is due on an interest payment date by check mailed
on the interest payment date to the holder at his or her address
shown on the trustees records as of the close of business
on the regular record date. We will make all other payments by
check at the paying agent described below, against surrender of
the note in the case of principal and any other amounts due at
maturity. All payments by check will be made in
next-day
funds
i.e.
, funds that become available on
the day after the check is cashed.
Alternatively, if a non-global note has a face amount of at
least $1,000,000 and the holder asks us to do so, we will pay
any amount that becomes due on the note by wire transfer of
immediately available funds to an account at a bank in New York
City, on the due date. To request wire payment, the holder must
give the paying agent appropriate wire transfer instructions at
least five business days before the requested wire payment is
due. In the case of any interest payment due on an interest
payment date, the instructions must be given by the person or
entity who is the holder on the relevant regular record date. In
the case of any other payment, payment will be made only after
the note is surrendered to the paying agent. Any wire
instructions, once properly given, will remain in effect unless
and until new instructions are given in the manner described
above.
Book-entry and other indirect holders should consult their
banks or brokers for information on how they will receive
payments on their notes.
How We
Will Make Payments Due In Other Currencies
We will follow the practice described in this subsection when
paying amounts that are due in a specified currency other than
U.S. dollars.
Payments on Global Notes.
We will make
payments on a global note in accordance with the relevant
policies as in effect from time to time of the depositary,
which, unless otherwise specified in the relevant pricing
supplement or product
S-27
supplement, will be DTC, Euroclear or Clearstream. Unless we
specify otherwise in the relevant pricing supplement or product
supplement, DTC will be the depositary for all notes in global
form. We understand that DTCs policies, as currently in
effect, are as follows.
Unless otherwise indicated in the relevant pricing supplement or
product supplement, if you are an indirect holder of global
notes denominated in a specified currency other than U.S.
dollars and if you elect to receive payments in that other
currency, you must notify the participant through which your
interest in the global note is held of your election:
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on or before the applicable regular record date, in the case of
a payment of interest, or
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on or before the 16th day prior to stated maturity, or on or
before any redemption or repayment date, in the case of payment
of principal or any premium.
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You may elect to receive all or only a portion of any interest,
principal or premium payment in a specified currency other than
U.S. dollars.
Your participant must, in turn, notify DTC of your election on
or before the third DTC business day after that regular record
date, in the case of a payment of interest, and on or before the
12th DTC business day prior to stated maturity, or on the
redemption or repayment date if your note is redeemed or repaid
earlier, in the case of a payment of principal or any premium.
DTC, in turn, will notify the paying agent of your election in
accordance with DTCs procedures.
If complete instructions are received by the participant and
forwarded by the participant to DTC, and by DTC to the paying
agent, on or before the dates noted above, the paying agent, in
accordance with DTCs instructions will make the payments
to you or your participant by wire transfer of immediately
available funds to an account maintained by the payee with a
bank located in the country issuing the specified currency or in
another jurisdiction acceptable to us and the paying agent.
If the foregoing steps are not properly completed, we expect DTC
to inform the paying agent that payment is to be made in U.S.
dollars. In that case, we or our agent will convert the payment
to U.S. dollars in the manner described below under
Conversion to U.S. Dollars.
We expect that we
or our agent will then make the payment in U.S. dollars to DTC
and that DTC in turn will pass it along to its participants.
Indirect holders of a global note denominated in a currency
other than U.S. dollars should consult their banks or brokers
for information on how to request payment in the specified
currency.
Payments on Non-Global Notes.
Except as
described in the last paragraph under this heading, we will make
payments on notes in non-global form in the applicable specified
currency. We will make these payments by wire transfer of
immediately available funds to any account that is maintained in
the applicable specified currency at a bank designated by the
holder that is acceptable to us and the trustee. To designate an
account for wire payment, the holder must give the paying agent
appropriate wire instructions at least five business days before
the requested wire payment is due. In the case of any interest
payment due on an interest payment date, the instructions must
be given by the person or entity who is the holder on the
regular record date. In the case of any other payment (including
payments of principal and any other amounts due at maturity),
the payment will be made only after the note is surrendered to
the paying agent. Any instructions, once properly given, will
remain in effect unless and until new instructions are properly
given in the manner described above.
If a holder fails to give instructions as described above, we
will notify the holder at the address in the trustees
records and will make the payment within five business days
after the holder provides appropriate instructions. With respect
to payments of interest, if the holder fails to give appropriate
instructions for payment within 30 days after the notice
described above has been delivered, we may, but are not required
to, at our option, make such interest payment by check mailed to
the holder at his or her address shown on the trustees
records as of the close of business on the applicable regular
record date. Any late payment made in these circumstances will
be treated under the indenture as if made on the due date, and
no interest will accrue on the late payment from the due date to
the date paid.
Although a payment on a note in non-global form may be due in a
specified currency other than U.S. dollars, we will make the
payment in U.S. dollars if the holder asks us to do so. To
request U.S. dollar payment, the holder must provide appropriate
written notice to the trustee at least five business days before
the next due date for which payment in U.S. dollars is
requested. In the case of any interest payment due on an
interest payment date, the request must be made by the person or
entity who is the holder on the regular record date. Any
request, once properly made, will remain in effect unless and
until revoked by notice properly given in the manner described
above.
S-28
Book-entry and other indirect holders of a note with a
specified currency other than U.S. dollars should contact their
banks or brokers for information about how to receive payments
in the specified currency or in U.S. dollars.
Conversion to U.S. Dollars.
When we are asked
by a holder to make payments in U.S. dollars of an amount due in
another currency, either on a global note or a non-global note
as described above, the exchange rate agent described below will
calculate the U.S. dollar amount the holder receives in the
exchange rate agents discretion.
A holder that requests payment in U.S. dollars will bear all
associated currency exchange costs, which will be deducted from
the payment.
When the Specified Currency is Not
Available.
If we are obligated to make any
payment in a specified currency other than U.S. dollars, and the
specified currency or any successor currency is not available to
us due to circumstances beyond our control such as
the imposition of exchange controls or a disruption in the
currency markets we will be entitled to satisfy our
obligation to make the payment in that specified currency by
making the payment in U.S. dollars, on the basis of the exchange
rate determined by the exchange rate agent described below, in
its discretion.
The foregoing will apply to any note, whether in global or
non-global form, and to any payment, including a payment at
maturity. Any payment made under the circumstances and in a
manner described above will not result in a default under any
note or the relevant indenture.
Exchange Rate Agent.
If we issue a note in a
specified currency other than U.S. dollars, we will appoint a
financial institution to act as the exchange rate agent and will
name the institution initially appointed when the note is
originally issued in the relevant pricing supplement or product
supplement. We may select BMO Capital Markets Corp. or another
of our affiliates to perform this role. We may change the
exchange rate agent from time to time after the original issue
date of the note without your consent and without notifying you
of the change.
All determinations made by the exchange rate agent will be at
its sole discretion unless we state in the relevant pricing
supplement or product supplement that any determination requires
our approval. In the absence of manifest error, those
determinations will be conclusive for all purposes and binding
on you and us, without any liability on the part of the exchange
rate agent.
Payment
When Offices Are Closed
If any payment is due on a note on a day that is not a business
day, we will make the payment on the next day that is a business
day. Payments postponed to the next business day in this
situation will be treated under the indenture as if they were
made on the original due date. Postponement of this kind will
not result in a default under any note or the indenture, and no
interest will accrue on the postponed amount from the original
due date to the next day that is a business day. The term
business day has a special meaning, which we describe above
under
Interest Rates Special Rate
Calculation Terms.
Paying
Agent
We may appoint one or more financial institutions to act as our
paying agents, at whose designated offices notes in non-global
form may be surrendered for payment at their maturity. We call
each of those offices a paying agent. We are required to appoint
a paying agent in each place of payment for the notes. We may
add, replace or terminate paying agents from time to time. We
may also choose to act as our own paying agent. We have
appointed Wells Fargo Bank, National Association as the initial
paying agent. We must notify you of changes in the paying agents.
Unclaimed
Payments
Regardless of who acts as paying agent, all money paid by us to
a paying agent that remains unclaimed at the end of two years
after the amount is due to a holder will be repaid to us. After
that two-year period, the holder may look only to us for payment
and not to the relevant trustee, any other paying agent or
anyone else.
Notices
Notices to be given to holders of a global note will be given
only to the depositary, in accordance with its applicable
policies as in effect from time to time. Notices to be given to
holders of notes not in global form will be sent by mail to the
respective addresses of the holders as they appear in the
relevant trustees records, and will be deemed given when
mailed.
Neither the failure to give any notice to a particular holder,
nor any defect in a notice given to a particular holder, will
affect the sufficiency of any notice given to another holder.
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Book-entry and other indirect holders should consult their banks
or brokers for information on how they will receive notices.
Withholding
The Bank or the applicable paying agent will deduct or withhold
from a payment on a note any present or future tax, duty,
assessment or other governmental charge that the Bank determines
is required by law or the interpretation or administration
thereof to be deducted or withheld. Payments on a note will not
be increased by any amount to offset such deduction or
withholding, unless otherwise specified in the relevant pricing
supplement and/or product supplement.
Other
Provisions; Addenda
Any provisions relating to the notes, including the
determination of the interest rate basis, calculation of the
interest rate applicable to a floating rate note, its interest
payment dates, any redemption or repayment provisions, or any
other term relating thereto, may be modified and/or supplemented
by the terms as specified under
Other
Provisions
on the face of the applicable notes or in
an addendum relating to the applicable notes, if so specified on
the face of the applicable notes, and, in each case, in the
relevant pricing supplement and/or product supplement.
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CERTAIN
INCOME TAX CONSEQUENCES
Certain
Canadian Income Tax Considerations
Investors should read carefully the summary of principal
Canadian federal income tax considerations of holding debt
securities under Canadian Taxation in the
accompanying prospectus. The relevant pricing supplement will
indicate whether there are additional Canadian federal income
tax considerations.
United
States Federal Income Taxation
Investors should read carefully the description of material
United States federal income tax consequences of owning debt
securities under
United States Federal Income
Taxation
in the accompanying prospectus. It is the
opinion of Sullivan & Cromwell LLP, United States tax
counsel to Bank of Montreal, that commercial paper rate notes,
U.S. prime rate notes, LIBOR notes, EURIBOR notes, treasury rate
notes, CMT rate notes, CMS rate notes, CD rate notes and federal
funds rate notes generally will be treated as variable rate debt
securities under the rules described under
United
States Federal Income Taxation Original Issue
Discount Variable Rate Debt Securities
in
the accompanying prospectus, provided that (i) such notes
meet the principal payments requirement discussed therein;
(ii) the spread multiplier, if any, satisfies the
restrictions discussed therein; and (iii) the maximum and
minimum rates, if any, satisfy the restrictions discussed
therein.
SUPPLEMENTAL
PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
We and BMO Capital Markets Corp., as the agent, have entered
into a distribution agreement with respect to the notes. Subject
to certain conditions, the agent has agreed to use its
reasonable efforts to solicit purchases of the notes. We have
the right to accept offers to purchase notes and may reject any
proposed purchase of the notes. The agent may also reject any
offer to purchase notes. We will pay the agent a commission on
any notes sold through the agent. The commission is expected to
range from 0% to 3% of the principal amount of the notes for
fixed rate and floating rate notes, depending on the stated
maturity of the notes. The commission is expected to range from
1% to 5% of the principal amount of the notes for indexed and
other structured notes, or such other amount as may be agreed
between the agent and Bank of Montreal. Under no circumstances
will underwriting compensation exceed 8% of the offering
proceeds.
We may also sell notes to the agent, who will purchase the notes
as principal for its own account. In that case, the agent will
purchase the notes at a price equal to the issue price specified
in the relevant pricing supplement, less any discount or
commission to be agreed with us at the time of the offering.
The agent may resell any notes it purchases as principal to
other brokers or dealers at a discount, which may include all or
part of the discount the agent received from us. If all the
notes are not sold at the initial offering price, the agent may
change the offering price and the other selling terms.
We may also sell notes directly to investors. We will not pay
commissions on notes we sell directly.
We have reserved the right to withdraw, cancel or modify the
offer made by this prospectus supplement without notice and may
reject orders in whole or in part whether placed directly with
us or with an agent. No termination date has been established
for the offering of the notes.
The agent, whether acting as agent or principal, may be deemed
to be an
underwriter
within the meaning of
the Securities Act of 1933, as amended (the
Securities
Act
). We have agreed to indemnify the agent against
certain liabilities, including liabilities under the Securities
Act, or to contribute to payments made in respect of those
liabilities.
If the agent sells notes to dealers who resell to investors and
the agent pays the dealers all or part of the discount or
commission they receive from us, those dealers may also be
deemed to be
underwriters
within the meaning
of the Securities Act.
Unless otherwise indicated in any additional applicable
supplement, payment of the purchase price of notes, other than
notes denominated in a
non-U.S.
dollar currency, will be required to be made in funds
immediately available in The City of New York. The notes will be
in the Same Day Funds Settlement System at DTC and, to the
extent the secondary market trading in the notes is effected
through the facilities of such depositary, such trades will be
settled in immediately available funds.
We may appoint agents, other than or in addition to BMO Capital
Markets Corp., with respect to the notes. Any other agents will
be named in the relevant pricing supplements and those agents
will enter into the distribution agreement referred to above.
The other agents may be affiliates or customers of Bank of
Montreal and may engage in transactions
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with and perform services for Bank of Montreal in the ordinary
course of business. BMO Capital Markets Corp. may resell notes
to or through another of our affiliates, as selling agent.
The notes are a new issue of securities, and there will be no
established trading market for any note before its original
issue date. We do not plan to list the notes on a securities
exchange or quotation system. If we do plan to list particular
notes on a securities exchange or quotation system, the relevant
pricing supplement or an applicable product supplement will
state so. We have been advised by BMO Capital Markets Corp. that
it intends to make a market in the notes. However, neither BMO
Capital Markets Corp. nor any of our other affiliates nor any
other agent named in the relevant pricing supplement that makes
a market is obligated to do so, and any of them may stop doing
so at any time without notice. No assurance can be given as to
the liquidity or trading market for the notes.
This prospectus supplement may be used by BMO Capital Markets
Corp. in connection with offers and sales of the notes in
market-making transactions. In a market-making transaction, BMO
Capital Markets Corp. may resell a note it acquires from other
holders after the original offering and sale of the note.
Resales of this kind may occur in the open market or may be
privately negotiated, at prevailing market prices at the time of
resale or at related or negotiated prices. In these
transactions, BMO Capital Markets Corp. may act as principal or
agent, including as agent for the counterparty in a transaction
in which BMO Capital Markets Corp. acts as principal, or as
agent for both counterparties in a transaction in which BMO
Capital Markets Corp. does not act as principal. BMO Capital
Markets Corp. may receive compensation in the form of discounts
and commissions, including from both counterparties in some
cases. Other affiliates of Bank of Montreal may also engage in
transactions of this kind and may use this prospectus supplement
for this purpose.
The aggregate initial offering price specified on the cover of
this prospectus supplement relates to the initial offering of
new notes we may issue on and after the date of this prospectus
supplement. This amount does not include notes that may be
resold in market-making transactions. The latter includes notes
that we may issue going forward as well as notes we have
previously issued.
Bank of Montreal does not expect to receive any proceeds from
market-making transactions. Bank of Montreal does not expect
that BMO Capital Markets Corp. or any other affiliate that
engages in these transactions will pay any proceeds from its
market-making resales to Bank of Montreal.
Information about the trade and settlement dates, as well as the
purchase price, for a market-making transaction will be provided
to the purchaser in a separate confirmation of sale.
Unless Bank of Montreal or an agent informs you in your
confirmation of sale that your note is being purchased in its
original offering and sale, you may assume that you are
purchasing your note in a market-making transaction.
In this prospectus supplement, the term
this
offering
means the initial offering of the notes made
in connection with their original issuance. This term does not
refer to any subsequent resales of notes in market-making
transactions.
The agent may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids
in accordance with Regulation M under the Exchange Act.
Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve
purchases of the notes in the open market after the distribution
has been completed in order to cover syndicate short positions.
Penalty bids permit reclaiming a selling concession from a
syndicate member when the notes originally sold by such
syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. Such stabilizing
transactions, syndicate covering transactions and penalty bids
may stabilize, maintain or otherwise affect the market price of
the notes, which may be higher than it would otherwise be in the
absence of such transactions. The agents are not required to
engage in these activities, and may end any of these activities
at any time.
In addition to offering notes through the agents as discussed
above, other medium-term notes that have terms substantially
similar to the terms of the notes offered by this prospectus
supplement may in the future be offered, concurrently with the
offering of the notes, on a continuing basis by Bank of
Montreal. Any of these notes sold pursuant to the distribution
agreement or sold by Bank of Montreal directly to investors may
reduce the aggregate amount of notes which may be offered by
this prospectus supplement.
Conflicts
of Interest
BMO Capital Markets Corp., is an affiliate of Bank of Montreal
and, as such, has a conflict of interest in this
offering within the meaning of FINRA Rule 5121, as
administered by the Financial Industry Regulatory Authority, or
FINRA. Consequently, this offering is being conducted in
compliance with the applicable provisions of Rule 5121. In
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general, under that rule, no qualified independent underwriter
is expected to be required. BMO Capital Markets Corp. is not
permitted to sell notes in this offering to accounts over which
it exercises discretionary authority without the prior specific
written approval of the account holder.
Selling
Restrictions Outside the United States
Bank of Montreal has taken no action that would permit a public
offering of the notes or possession or distribution of this
prospectus supplement or the accompanying prospectus or any
other offering material in any jurisdiction outside the United
States where action for that purpose is required other than as
described below. Accordingly, the agent has agreed, and each
other agent will be required to agree, that:
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it will comply with all applicable laws and regulations in force
in any jurisdiction in which it purchases, offers or sells notes
or possesses or distributes this prospectus supplement or the
accompanying prospectus or any other offering material and will
obtain any consent, approval or permission required by it for
the purchase, offer or sale by it of notes under the laws and
regulations in force in any jurisdiction to which it is subject
or in which it makes such purchases, offers or sales and Bank of
Montreal shall have no responsibility in relation to this; and
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it will not offer or sell any notes purchased by it, directly or
indirectly, in Canada or to any resident of Canada without the
consent of Bank of Montreal, and further agrees that it will
include a comparable provision in any
sub-underwriting,
banking group or selling group agreement or similar arrangement
with respect to any notes that may be entered into by such agent.
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With regard to each note, the relevant purchaser will be
required to comply with those restrictions that Bank of Montreal
and the relevant purchaser shall agree and as shall be set out
in the relevant pricing supplement.
DOCUMENTS
FILED AS PART OF THE REGISTRATION STATEMENT
In addition to the documents specified in the accompanying
prospectus under
Incorporation of Certain Information
by Reference,
the following documents will be filed
with the Securities and Exchange Commission and incorporated by
reference as part of the registration statement to which this
prospectus supplement relates (the
Registration
Statement
): (i) the Distribution Agreement, dated
June 22, 2011, between us and the agent, (ii) the
Calculation Agency Agreement, dated as of June 22, 2011,
between us and BMO Capital Markets Corp., and (iii) the
Exchange Rate Agency Agreement, dated as of June 22, 2011,
between us and BMO Capital Markets Corp. Such documents will not
be incorporated by reference into this prospectus supplement or
the accompanying prospectus. Additional exhibits to the
Registration Statement to which this prospectus supplement
relates may be subsequently filed in reports on
Form 40-F
or on
Form 6-K
that specifically state that such materials are incorporated by
reference as exhibits in Part II of the Registration
Statement.
No dealer, salesman or other person has been authorized to
give any information or to make any representation not contained
in this prospectus supplement, the accompanying prospectus, any
additional applicable supplement or any free writing prospectus
that we have authorized, and, if given or made, such information
or representation must not be relied upon as having been
authorized by Bank of Montreal or the agent. This prospectus
supplement, the accompanying prospectus, any additional
applicable supplement and any free writing prospectus that we
authorize do not constitute an offer to sell or a solicitation
of an offer to buy any securities other than the securities
described in the relevant pricing supplement nor do they
constitute an offer to sell or a solicitation of an offer to buy
the securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such
jurisdiction. The delivery of this prospectus supplement, the
accompanying prospectus, any additional applicable supplement
and any free writing prospectus that we authorize at any time
does not imply that the information they contain is correct as
of any time subsequent to their respective dates.
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US$15,000,000,000
Senior Medium-Term Notes,
Series B
June 22, 2011