a227130424b2.htm
The information in this preliminary pricing supplement is not complete and may be changed. This preliminary pricing supplement is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Registration Statement No. 333-173924
Filed Pursuant to Rule 424(b)(2)

Subject to Completion, dated February 26, 2013
 
Pricing Supplement to the Prospectus dated June 22, 2011, the Prospectus Supplement
dated June 22, 2011 and the Product Supplement dated June 23, 2011
US$    l    
Senior Medium-Term Notes, Series B
Buffered Bullish Return Notes due March 18, 2015
Each Linked to a Single Exchange Traded Fund
 
·
This pricing supplement relates to two separate note offerings.  Each issue of the notes is linked to one, and only one, Underlying Asset named below.  You may participate in either offering or, at your election, both.  This pricing supplement does not, however, allow you to purchase a single note linked to a basket of the Underlying Assets below.
 
·
An investor in the notes may lose up to 80% of their principal amount at maturity.
 
·
The notes are designed for investors who seek a one-for-one positive return based on the appreciation in the share price of the applicable Underlying Asset.  Investors should be willing to accept a payment at maturity that is capped at the applicable Maximum Redemption Amount (as defined below), be willing to forgo periodic interest, and be willing to lose 1% of their principal amount for each 1% that the price of the applicable Underlying Asset decreases by more than 20% from its price on the Pricing Date.
 
·
Any payment at maturity is subject to the credit risk of Bank of Montreal.
 
·
The notes will be issued in minimum denominations of $1,000 and integral multiples of $1,000.
 
·
Our subsidiary, BMO Capital Markets Corp. (“BMOCM”), is the agent for this offering.  See “Supplemental Plan of Distribution (Conflicts of Interest)” below.
 
Common Terms for Each of the Notes:
 
Pricing Date:
On or about March 13, 2013
Maturity Date:
On or about March 18, 2015
       
Settlement Date:
On or about March 18, 2013
Buffer Percentage:
20%
       
Valuation Date:
On or about March 13, 2015
Buffer Level:
80% of the Initial Level
 
Specific Terms for Each of the Notes:
 
 
Underlying Asset
 
Cap*
 
Maximum
Redemption
Amount*
 
Initial
Level*
 
 
CUSIP
 
Principal
Amount*
 
Price to
Public(1)
 
Agent’s
Commission(1)
 
Proceeds to Bank
of Montreal
iShares® MSCI EAFE
Index Fund (EFA)
 
[15.50-18.50]%
 
$[1,155-1,185]
     
06366RMH5
 
US$●
 
100%
US$●
 
●%
US$●
 
●%
US$●
iShares® MSCI Emerging Markets
Index Fund (EEM)
 
[14.00-17.00]%
 
$[1,140-1,170]
     
06366RMJ1
 
US$●
 
100%
US$●
 
●%
US$●
 
●%
US$●
 
* The actual principal amount, Cap, Maximum Redemption Amount and Initial Level for each note will be set on the Pricing Date.
 
(1)  In addition to the agent’s commission, the price to the public specified above may include the profit that we would recognize earned by hedging our exposure under the notes.  The actual agent’s commission will be set forth in the final pricing supplement.
 
Investing in the notes involves risks, including those described in the “Selected Risk Considerations” section beginning on page P-5 of this pricing supplement, the “Additional Risk Factors Relating to the Notes” section beginning on page PS-5 of the product supplement, and the “Risk Factors” section beginning on page S-3 of the prospectus supplement and on page 7 of the prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these notes or passed upon the accuracy of this pricing supplement, the product supplement, the prospectus supplement or the prospectus.  Any representation to the contrary is a criminal offense.
The notes will be our unsecured obligations and will not be savings accounts or deposits that are insured by the United States Federal Deposit Insurance Corporation, the Bank Insurance Fund, the Canada Deposit Insurance Corporation or any other governmental agency or instrumentality or other entity.
We expect to deliver the notes through the facilities of The Depository Trust Company on or about March 18, 2013.
 
 
BMO CAPITAL MARKETS

 
 

 
 
 
Key Terms of Each of the Notes:
   
General:
This pricing supplement relates to two separate offerings of notes.  Each offering is a separate offering of notes linked to one, and only one, Underlying Asset.  If you wish to participate in both of the offerings, you must purchase each of the notes separately.  The notes offered by this pricing supplement do not represent notes linked to a basket of the Underlying Assets.
   
Payment at Maturity:
If the Percentage Change is greater than or equal to the applicable Cap, then the amount that the investors will receive at maturity for each $1,000 in principal amount of the notes will equal the applicable Maximum Redemption Amount.
 
If the Percentage Change is positive but is less than the applicable Cap, then the amount that the investors will receive at maturity for each $1,000 in principal amount of the notes will equal:
   
 
Principal Amount + [Principal Amount × Percentage Change]
   
 
If the Percentage Change is between 0% and -20% inclusive, then the amount that the investors will receive at maturity will equal the principal amount of the notes.
   
 
If the Percentage Change is less than -20%, then the payment at maturity will equal:
   
 
Principal Amount + [Principal Amount × (Percentage Change + Buffer Percentage)]
   
Initial Level:
The closing price of one share of the applicable Underlying Asset on the Pricing Date.
   
Final Level:
The closing price of one share of the applicable Underlying Asset on the Valuation Date.
   
Buffer Level:
80% of the Initial Level.
   
Buffer Percentage:
20%.  Accordingly, you will receive the principal amount of your notes at maturity only if the price of the applicable Underlying Asset does not decrease by more than 20%.  If the Final Level is less than the Buffer Level, you will receive less than the principal amount of your notes at maturity, and you could lose up to 80% of the principal amount of your notes.
   
Percentage Change:
Final Level – Initial Level, expressed as a percentage.
            Initial Level
   
Pricing Date:
On or about March 13, 2013
   
Settlement Date:
On or about March 18, 2013, as determined on the Pricing Date.
   
Valuation Date:
On or about March 13, 2015, as determined on the Pricing Date.
   
Maturity Date:
On or about March 18, 2015, as determined on the Pricing Date.
   
Automatic Redemption:
Not applicable.
   
Calculation Agent:
BMOCM
   
Selling Agent:
BMOCM
 

 
P-2

 
 
 
Key Terms of the Notes Linked to the iShares® MSCI EAFE Index Fund:
   
Underlying Asset:
iShares® MSCI EAFE Index Fund (NYSE Arca symbol: EFA).  See the section below entitled “The Underlying Asset— iShares® MSCI EAFE Index Fund” for additional information about the Underlying Asset.
   
Cap:
[15.50-18.50]%  (to be determined on the Pricing Date)
   
Maximum Redemption
Amount:
$[1,155-1,185] (to be determined on the Pricing Date)
   
CUSIP:
06366RMH5
   
   
Key Terms of the Notes Linked to the iShares® MSCI Emerging Markets Index Fund:
   
Underlying Asset:
iShares®  MSCI Emerging Markets Index Fund (NYSE Arca symbol: EEM).  See the section below entitled “The Underlying Asset— iShares® MSCI Emerging Markets Index Fund” for additional information about the Underlying Asset.
   
Cap:
[14.00-17.00]% (to be determined on the Pricing Date)
   
Maximum Redemption
Amount:
$[1,140-1,170] (to be determined on the Pricing Date)
   
CUSIP:
06366RMJ1
   
   
The Pricing Date and the Settlement Date are subject to change.  The actual Pricing Date, Settlement Date, Valuation Date, Maturity Date, Cap, Maximum Redemption Amount, Initial Level and Buffer Level for each of the notes will be set forth in the final pricing supplement.
 
We may use this pricing supplement in the initial sale of the notes.  In addition, BMO Capital Markets Corp. or another of our affiliates may use this pricing supplement in market-making transactions in any notes after their initial sale.  Unless our agent or we inform you otherwise in the confirmation of sale, this pricing supplement is being used in a market-making transaction.
    
 
 
P-3

 
 
Additional Terms of the Notes
 
You should read this pricing supplement together with the product supplement dated June 23, 2011, the prospectus supplement dated June 22, 2011 and the prospectus dated June 22, 2011.  This pricing supplement, together with the documents listed below, contains the terms of each of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours or the agent. You should carefully consider, among other things, the matters set forth in “Additional Risk Factors Relating to the Notes” in the product supplement, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
 
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
 
 
·
Product supplement dated June 23, 2011:
 
 
 
·
Prospectus supplement dated June 22, 2011:
 
 
 
·
Prospectus dated June 22, 2011:
 
 
Our Central Index Key, or CIK, on the SEC website is 927971.  As used in this pricing supplement, the “Company,” “we,” “us” or “our” refers to Bank of Montreal.
 
 
 
 
 
 
 
P-4

 
 
Selected Risk Considerations
 
An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the applicable Underlying Asset.  These risks are explained in more detail in the “Additional Risk Factors Relating to the Notes” section of the product supplement.
 
 
·
Your investment in the notes may result in a loss. — You may lose some or substantially all, of your investment in the notes. The minimum percentage of your principal that you are entitled to receive under the terms of the notes is only 20%. The payment at maturity will be based on the applicable Final Level, and whether the applicable Final Level of the applicable Underlying Asset on the Valuation Date is less than the applicable Buffer Level. You will lose 1% of the principal amount of your notes for each 1% that the Final Level is less than the Buffer Level. Accordingly, you could lose up to 80% of the principal amount of your notes.
 
 
·
Your return on the notes is limited to the applicable Maximum Redemption Amount, regardless of any appreciation in the share price of the applicable Underlying Asset. — You will not receive a payment at maturity with a value greater than the applicable Maximum Redemption Amount per $1,000 in principal amount of the notes. This will be the case even if the Percentage Change of the applicable Underlying Asset exceeds the applicable Cap.
 
 
·
Your investment is subject to the credit risk of Bank of Montreal. — Our credit ratings and credit spreads may adversely affect the market value of the notes. Investors are dependent on our ability to pay the amount due at maturity, and therefore investors are subject to our credit risk and to changes in the market’s view of our creditworthiness. Any decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the value of the notes.
 
 
·
Potential conflicts. — We and our affiliates play a variety of roles in connection with the issuance of the notes, including acting as calculation agent. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the notes. We or one or more of our affiliates may also engage in trading of shares of the Underlying Assets or securities included in the Underlying Assets on a regular basis as part of our general broker-dealer and other businesses, for proprietary accounts, for other accounts under management or to facilitate transactions for our customers. Any of these activities could adversely affect the prices of the Underlying Assets and, therefore, the market value of the notes. We or one or more of our affiliates may also issue or underwrite other securities or financial or derivative instruments with returns linked or related to changes in the performance of the Underlying Assets. By introducing competing products into the marketplace in this manner, we or one or more of our affiliates could adversely affect the market value of the notes.
 
 
·
The inclusion of the hedging profits, if any, in the initial price to public of the notes, as well as our hedging costs, is likely to adversely affect the price at which you can sell your notes. — Assuming no change in market conditions or any other relevant factors, the price, if any, at which BMOCM or any other party may be willing to purchase the notes in secondary market transactions may be lower than the initial price to public. The initial price to public will include, and any price quoted to you is likely to exclude, the hedging profits that we expect to earn with respect to hedging our exposure under the notes. In addition, any such price is also likely to reflect a discount to account for costs associated with establishing or unwinding any related hedge transaction, such as dealer discounts, mark-ups and other transaction costs.
 
 
·
Owning the notes is not the same as owning the applicable Underlying Asset or a security directly linked to the applicable Underlying Asset. — The return on your notes will not reflect the return you would realize if you actually owned the applicable Underlying Asset or a security directly linked to the performance of the applicable Underlying Asset and held that investment for a similar period.  Your notes may trade quite differently from the applicable Underlying Asset.  Changes in the price of the applicable Underlying Asset may not result in comparable changes in the market value of your notes.  Even if the price of the applicable Underlying Asset increases during the term of the notes, the market value of the notes prior to maturity may not increase to the same extent.  It is also possible for the market value of the notes to decrease while the price of the applicable Underlying Asset increases. In addition, any dividends or other distributions paid on the applicable Underlying Asset will not be reflected in the amount payable on the notes.
 
 
P-5

 
 
 
·
You will not have any shareholder rights and will have no right to receive any shares of the applicable Underlying Asset at maturity. Investing in your notes will not make you a holder of any shares of the applicable Underlying Asset or any securities held by the applicable Underlying Asset. Neither you nor any other holder or owner of the notes will have any voting rights, any right to receive dividends or other distributions or any other rights with respect to the applicable Underlying Asset or such other securities.
 
 
·
Changes that affect the applicable index underlying an Underlying Asset will affect the market value of the notes and the amount you will receive at maturity. —The policies of MSCI Inc. (the “Index Sponsor”) of the MSCI Emerging Markets Index and the MSCI EAFE Index and the Russell 2000 Index (each, the applicable  underlying index of the applicable Underlying Asset), concerning the calculation of the applicable underlying index, additions, deletions or substitutions of the components of the applicable underlying index and the manner in which changes affecting those components, such as stock dividends, reorganizations or mergers, may be reflected in the applicable underlying index, and therefore, could affect the share price of the applicable Underlying Asset, the amount payable on the notes at maturity, and the market value of the notes prior to maturity.  The amount payable on the notes and their market value could also be affected if the Index Sponsor changes these policies, for example, by changing the manner in which it calculates the applicable underlying index, or if the Index Sponsor discontinues or suspends the calculation or publication of the underlying index.
 
The Index Sponsors is not an affiliate of ours and will not be involved in any offerings of the notes in any way. Consequently, we have no control over the actions of the Index Sponsor, including any actions of the type that would require the calculation agent to adjust the payment to you at maturity. The Index Sponsor has no obligation of any sort with respect to any of the notes. Thus, the Index Sponsor has no obligation to take your interests into consideration for any reason, including in taking any actions that might affect the value of applicable the notes. None of our proceeds from any issuance of the applicable notes will be delivered the Index Sponsor.
 
 
·
An investment in the notes linked to either the iShares® MSCI EAFE Index Fund or the iShares® MSCI Emerging Markets Index Fund is subject to risks associated with foreign securities markets. —The underlying indices of these funds track the value of certain foreign equity securities.  You should be aware that investments in securities linked to the value of foreign equity securities involve particular risks.  The foreign securities markets comprising either of these Underlying Indices may have less liquidity and may be more volatile than U.S. or other securities markets and market developments may affect foreign markets differently from U.S. or other securities markets.  Direct or indirect government intervention to stabilize these foreign securities markets, as well as cross-shareholdings in foreign companies, may affect trading prices and volumes in these markets.  Also, there is generally less publicly available information about foreign companies than about those U.S. companies that are subject to the reporting requirements of the U.S. Securities and Exchange Commission, and foreign companies are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies.
 
Prices of securities in foreign countries are subject to political, economic, financial and social factors that apply in those geographical regions.  These factors, which could negatively affect those securities markets, include the possibility of recent or future changes in a foreign government’s economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to foreign companies or investments in foreign equity securities and the possibility of fluctuations in the rate of exchange between currencies, the possibility of outbreaks of hostility and political instability and the possibility of natural disaster or adverse public health developments in the region.  Moreover, foreign economies may differ favorably or unfavorably from the U.S. economy in important respects such as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
 
 
·
An investment in the notes linked to the iShares® MSCI EAFE Index Fund and the iShares® MSCI Emerging Markets Index Fund is subject to foreign currency exchange rate risk. — The share prices of these funds will fluctuate based upon their respective net asset value, which will in turn depend in part upon changes in the value of the currencies in which the stocks held by these funds are traded.  Accordingly, investors in the applicable notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the stocks held by these funds are traded.  An investor’s net exposure will depend on the extent to which these currencies strengthen or weaken against the U.S. dollar.  If the dollar strengthens against these currencies, the net asset value of these funds will be adversely affected and the price of the applicable Underlying Asset may decrease.
 
 
P-6

 
 
 
·
Adjustments to the applicable Underlying Asset could adversely affect the notes. — BlackRock, Inc. (collectively with its affiliates, “BlackRock”), in its role as the sponsor and advisor of the Underlying Assets, is responsible for calculating and maintaining each of the Underlying Assets. BlackRock can add, delete or substitute the stocks comprising the applicable Underlying Asset or make other methodological changes that could change the share price of the applicable Underlying Asset at any time.  If one or more of these events occurs, the calculation of the amount payable at maturity may be adjusted to reflect such event or events. Consequently, any of these actions could adversely affect the amount payable at maturity and/or the market value of the applicable notes.
 
 
·
We and our affiliates do not have any affiliation with the investment advisor of the Underlying Assets and are not responsible for its public disclosure of information. —We and our affiliates are not affiliated with BlackRock in any way and have no ability to control or predict its actions, including any errors in or discontinuance of disclosure regarding its methods or policies relating to any of the Underlying Assets. BlackRock is not involved in the offerings of the notes in any way and has no obligation to consider your interests as an owner of the applicable notes in taking any actions relating to the applicable Underlying Asset that might affect the value of those notes.  Neither we nor any of our affiliates has independently verified the adequacy or accuracy of the information about BlackRock or any of the Underlying Assets contained in any public disclosure of information.  You, as an investor in the applicable notes, should make your own investigation into the applicable Underlying Asset.
 
 
·
The correlation between the performance of the applicable Underlying Asset and the performance of the applicable underlying index may be imperfect. — The performance of the applicable Underlying Asset is linked principally to the performance of the applicable underlying index. However, because of the potential discrepancies identified in more detail in the product supplement, the return on the applicable Underlying Asset may correlate imperfectly with the return on the applicable underlying index.
 
 
·
The applicable Underlying Asset is subject to management risks. — The applicable Underlying Asset is subject to management risk, which is the risk that its investment strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. For example, BlackRock may invest a portion of the applicable Underlying Asset’s assets in securities not included in the relevant industry or sector but which the investment advisor believes will help the applicable Underlying Asset track the relevant industry or sector.
 
 
·
Lack of liquidity. — The notes will not be listed on any securities exchange.  BMOCM may offer to purchase the notes in the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Because other dealers are not likely to make a secondary market for the notes, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which BMOCM is willing to buy the notes.
 
 
·
Hedging and trading activities. — We or any of our affiliates may carry out hedging activities related to the notes, including purchasing or selling the securities included in the applicable Underlying Asset, or futures or options relating to the applicable Underlying Asset, or other derivative instruments with returns linked or related to changes in the performance of the applicable Underlying Asset. We or our affiliates may also engage in trading of shares of the applicable Underlying Asset or securities included in the applicable underlying index from time to time. Any of these hedging or trading activities on or prior to the pricing date and during the term of the notes could adversely affect our payment to you at maturity.
 
 
·
Many economic and market factors will influence the value of the notes. — In addition to the price of the applicable Underlying Asset and interest rates on any trading day, the value of the notes will be affected by a number of economic and market factors that may either offset or magnify each other, and which are described in more detail in the product supplement.
 
 
·
You must rely on your own evaluation of the merits of an investment linked to the applicable Underlying Asset.  —   In the ordinary course of their businesses, our affiliates from time to time may express views on expected movements in the price of the applicable Underlying Asset or the securities held by the applicable Underlying Asset.  One or more of our affiliates have published, and in the future may publish, research reports that express views on the applicable Underlying Asset or the applicable notes.  However, these views are subject to change from time to time.  Moreover, other professionals who deal in the markets relating to the applicable Underlying Asset at any time may have significantly different views from those of our affiliates.  You are encouraged to derive information concerning the applicable Underlying Asset from multiple sources, and you should not rely on the views expressed by our affiliates.
 
 
P-7

 
 
Neither the offering of the notes nor any views which our affiliates from time to time may express in the ordinary course of their businesses constitutes a recommendation as to the merits of an investment in the notes.
 
 
·
Significant aspects of the tax treatment of the notes are uncertain.  — The tax treatment of each of the notes is uncertain.  We do not plan to request a ruling from the Internal Revenue Service or from any Canadian authorities regarding the tax treatment of each of the notes, and the Internal Revenue Service or a court may not agree with the tax treatment described in this pricing supplement.
 
The Internal Revenue Service has issued a notice indicating that it and the Treasury Department are actively considering whether, among other issues, a holder should be required to accrue interest over the term of an instrument such as the notes even though that holder will not receive any payments with respect to the notes until maturity and whether all or part of the gain a holder may recognize upon sale or maturity of an instrument such as the notes could be treated as ordinary income.  The outcome of this process is uncertain and could apply on a retroactive basis.
 
Please read carefully the section entitled “U.S. Federal Tax Information” in this pricing supplement, the section entitled “Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations” in the accompanying product supplement, the section “United States Federal Income Taxation” in the accompanying prospectus and the section entitled “Certain Income Tax Consequences” in the accompanying prospectus supplement.  You should consult your tax advisor about your own tax situation.
 
 
 
 
 
 
 
P-8

 
 
Hypothetical Return on the Notes at Maturity
 
The following table and examples illustrate the hypothetical return at maturity on a $1,000 investment in the notes.  The “return,” as used in this section is the number, expressed as a percentage, which results from comparing the payment at maturity per $1,000 in principal amount of the notes to $1,000.  The hypothetical total returns set forth below are based on a hypothetical Initial Level of $100, a Buffer Percentage of 20% (the Buffer Level is 80% of the Initial Level), a hypothetical Cap of 17.00%, and a hypothetical Maximum Redemption Amount of $1,170.00.  The hypothetical returns set forth below are for illustrative purposes only and may not be the actual returns applicable to investors in the notes.  The numbers appearing in the following table and in the examples below have been rounded for ease of analysis.
 
Hypothetical Final Level
Percentage Change
Return on the Notes
$0.00
 
-100.00%
 
-80.00%
 
$50.00
 
-50.00%
 
-30.00%
 
$75.00
 
-25.00%
 
-5.00%
 
$80.00
 
-20.00%
 
0.00%
 
$95.00
 
-5.00%
 
0.00%
 
$100.00
 
0.00%
 
0.00%
 
$105.00
 
5.00%
 
5.00%
 
$110.00
 
10.00%
 
10.00%
 
$115.00
 
15.00%
 
15.00%
 
$120.00
 
20.00%
 
17.00%
 
$130.00
 
30.00%
 
17.00%
 
$150.00
 
50.00%
 
17.00%
 
$175.00
 
75.00%
 
17.00%
 
$200.00
 
100.00%
 
17.00%
 
 
Hypothetical Examples of Amounts Payable at Maturity for a $1,000 Investment in the Notes
 
The following examples illustrate how the returns set forth in the table above are calculated.
 
Example 1: The price of the Underlying Asset decreases from the hypothetical Initial Level of $100.00 to a hypothetical Final Level of $50.00, representing a Percentage Change of -50%.  Because the Percentage Change is negative and the hypothetical Final Level of $50.00 is less than the Initial Level by more than the Buffer Percentage of 20%, the investor receives a payment at maturity of $700 per $1,000 in principal amount of the notes, calculated as follows:
 
$1,000 + [$1,000 x (-50% + 20%)] = $700
 
Example 2: The price of the Underlying Asset decreases from the hypothetical Initial Level of $100.00 to a hypothetical Final Level of $95.00, representing a Percentage Change of -5%.  Although the Percentage Change is negative, because the hypothetical Final Level of $95.00 is less than the Initial Level by not more than the Buffer Percentage of 20%, the investor receives a payment at maturity of $1,000 per $1,000 in principal amount of the notes.
 
Example 3: The price of the Underlying Asset increases from the hypothetical Initial Level of $100.00 to a hypothetical Final Level of $110.00, representing a Percentage Change of 10%.  Because the hypothetical Final Level of $110.00 is greater than the Initial Level and the Percentage Change of 10% does not exceed the Cap, the investor receives a payment at maturity of $1,100 per $1,000 in principal amount of the notes, calculated as follows:
 
$1,000 + [$1,000 x 10%] = $1,100
 
Example 4: The price of the Underlying Asset increases from the hypothetical Initial Level of $100.00 to a hypothetical Final Level of $130.00, representing a Percentage Change of 30%.  Because the hypothetical Final Level of $130.00 is greater than the Initial Level and the Percentage Change of 30% exceeds the Cap, the investor receives a payment at maturity of $1,170.00 per $1,000 in principal amount of the notes, the Maximum Redemption Amount.
 
 
P-9

 
 
U.S. Federal Tax Information
 
By purchasing the notes, each holder agrees (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to treat each note as a pre-paid cash-settled derivative contract for U.S. federal income tax purposes.  However, the U.S. federal income tax consequences of your investment in the notes are uncertain and the Internal Revenue Service could assert that the notes should be taxed in a manner that is different from that described in the preceding sentence.  Please see the discussion (including the opinion of our counsel Morrison & Foerster LLP) in the product supplement under “Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations,” which applies to the notes.
 
A “dividend equivalent” payment is treated as a dividend from sources within the U.S. and such payments generally would be subject to a 30% U.S. withholding tax if paid to a non-United States holder (as defined in the product supplement).  Under recently proposed U.S. Treasury Department regulations, certain payments that are contingent upon or determined by reference to U.S. source dividends, including payments reflecting adjustments for extraordinary dividends, with respect to equity-linked instruments, including the notes, may be treated as dividend equivalents.  If enacted in their current form, the regulations will impose a withholding tax on payments made on the notes on or after January 1, 2014 that are treated as dividend equivalents.  In that case, we (or the applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect to amounts so withheld.  Further, non-United States holders may be required to provide certifications prior to, or upon the sale, redemption or maturity of the notes in order to minimize or avoid U.S. withholding taxes.
 
The Treasury Department has issued final regulations affecting the legislation enacted on March 18, 2010 and discussed in the product supplement under “Supplemental Tax Considerations—Supplemental U.S. Federal Income Tax Considerations—Legislation Affecting Taxation of Notes Held By or Through Foreign Entities.”  Pursuant to the final regulations, withholding requirements with respect to the notes will generally begin no earlier than January 1, 2014. Additionally, the withholding tax will not be imposed on payments pursuant to obligations outstanding on January 1, 2014.  Account holders subject to information reporting requirements pursuant to the legislation may include holders of the notes. Holders are urged to consult their own tax advisors regarding the implications of this legislation and subsequent guidance on their investment in the notes.
 
Supplemental Plan of Distribution (Conflicts of Interest)
 
BMOCM will purchase the notes from us at the purchase price set forth on the cover page of this pricing supplement, and will not receive a commission in connection with such sales.  BMOCM has informed us that, as part of its distribution of the notes, it will reoffer the notes to other dealers who will sell them.  Each such dealer, or further engaged by a dealer to whom BMOCM reoffers the notes, is expected to purchase the notes at a price equal to 100% of the principal amount.
 
We own, directly or indirectly, all of the outstanding equity securities of BMOCM, the agent for this offering. In accordance with FINRA Rule 5121, BMOCM may not make sales in this offering to any of its discretionary accounts without the prior written approval of the customer.
 
We reserve the right to withdraw, cancel or modify the offering of any of the notes and to reject orders in whole or in part.  You may cancel any order for the notes prior to its acceptance.
 
You should not construe the offering of any of the notes as a recommendation of the merits of acquiring an investment linked to the applicable Underlying Asset or as to the suitability of an investment in the notes.
 
BMOCM may, but is not obligated to, make a market in the notes.  BMOCM will determine any secondary market prices that it is prepared to offer in its sole discretion.
 
We may use this pricing supplement in the initial sale of notes.  In addition, BMOCM or another of our affiliates may use this pricing supplement in market-making transactions in any notes after their initial sale.  Unless BMOCM, or we inform you otherwise in the confirmation of sale, this pricing supplement is being used by BMOCM in a market-making transaction.
 
 
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The Underlying Assets
 
We have derived the following information regarding each of the applicable Underlying Assets from publicly available documents published by BlackRock. We have not independently verified the accuracy or completeness of the following information. We are not affiliated with any of the Underlying Assets and the Underlying Assets will have no obligation with respect to the applicable notes. This pricing supplement relates only to the applicable notes and does not relate to the shares of any of the Underlying Asset or any assets included in any of the Underlying Indices. Neither we nor BMOCM participates in the preparation of the publicly available documents described below. Neither we nor BMOCM has made any due diligence inquiry with respect to any of the Underlying Assets in connection with the offering of any of the notes. There can be no assurance that all events occurring prior to the date of this pricing supplement, including events that would affect the accuracy or completeness of the publicly available documents described below, that would affect the trading prices of the shares of any of the Underlying Assets have been or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material future events concerning any of the Underlying Assets could affect the value of the shares of the applicable Underlying Asset on the valuation date and therefore could affect the payment at maturity.
 
Information concerning each of the Underlying Assets filed with the SEC by iShares under the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to SEC file numbers 033-97598 and 811-09102, respectively. Information provided to or filed with the SEC can be inspected and copied at the public reference facility maintained by the SEC or through the SEC’s website at www.sec.gov. None of this publicly available information is incorporated by reference into this pricing supplement.
 
The selection of the applicable Underlying Asset relating to any of the notes is not a recommendation to buy or sell the shares of the applicable Underlying Assets. Neither we nor any of our affiliates make any representation to you as to the performance of the shares of any of the Underlying Assets.
 
iShares consists of numerous separate investment portfolios (the “iShares Funds”), including the applicable Underlying Asset. Each of the Underlying Assets seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of their respective Underlying Indices. The Underlying Assets typically earn income from dividends from securities held by the Underlying Assets. These amounts, net of expenses and taxes (if applicable), are passed along to the Underlying Assets’ shareholders as “ordinary income.” In addition, the Underlying Assets realizes capital gains or losses whenever they sell securities. Net long-term capital gains are distributed to their respective shareholders as “capital gain distributions.” However, because the applicable notes are linked only to the share price of the applicable Underlying Asset, you will not be entitled to receive income, dividend, or capital gain distributions from the applicable Underlying Asset or any equivalent payments.
 
“iShares®” and “BlackRock®” are registered trademarks of BlackRock. The notes are sponsored, endorsed, sold, or promoted by BlackRock, or by any of the iShares Funds. Neither BlackRock nor the iShares Funds make any representations or warranties to the owners of any of the notes or any member of the public regarding the advisability of investing in any of the notes. Neither BlackRock nor the iShares Funds shall have any obligation or liability in connection with the registration, operation, marketing, trading, or sale of any of the notes or in connection with our use of information about any of the Underlying Assets or any of the iShares Funds.
 
iShares® MSCI EAFE Index Fund
 
The iShares® MSCI EAFE Index Fund is intended to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI EAFE Index. This Underlying Asset trades on NYSE Arca under the ticker symbol “EFA”.
 
The MSCI EAFE Index is intended to measure equity market performance in developed market countries, excluding the U.S. and Canada. The MSCI EAFE Index is a free float-adjusted market capitalization equity index with a base date of December 31, 1969 and an initial value of 100. The MSCI EAFE Index is calculated daily in U.S. dollars and published in real time every 60 seconds during market trading hours. The MSCI EAFE Index currently consists of companies from the following 22 developed countries: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. As of February 26, 2013, the five largest country weights were the United Kingdom (21.64%), Japan (20.06%), Switzerland (9.13%), Australia (9.19%) and France (8.92%), .and the five largest sector weights were Financials (25.07%), Industrials (12.56%), Consumer Staples (11.83%), Consumer Discretionary (10.80%), and Health Care (10.00%).
 
 
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The MSCI EAFE Index is part of the MSCI Regional Equity Indices series and is an MSCI Global Investable Market Index, which is a family within the MSCI International Equity Indices. MSCI Inc. (“MSCI”) is the Index Sponsor of the MSCI EAFE Index.
 
iShares® MSCI Emerging Markets Index Fund
 
The iShares® MSCI Emerging Markets Index Fund is intended to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Emerging Markets Index. This Underlying Asset trades on NYSE Arca under the ticker symbol “EEM”.
 
The MSCI Emerging Markets Index is intended to measure equity market performance in the global emerging markets. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index with a base date of December 31, 1987 and an initial value of 100. The MSCI Emerging Markets Index is calculated daily in U.S. dollars and published in real time every 60 seconds during market trading hours. The MSCI Emerging Markets Index currently consists of the following 21 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia,  Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, South Korea, Taiwan, Thailand, and Turkey. As of February 26, 2013, the five largest country weights were China (17.61%), South Korea (15.06%), Brazil (12.55%), Taiwan (10.74%), and South Africa (7.30%), and the five largest sector weights were Financials (26.93%), Information Technology (14.00%), Energy (12.08%), Materials (11.15%), and Consumer Staples (8.95%).
 
The MSCI Emerging Markets Index is part of the MSCI Regional Equity Indices series and is an MSCI Global Investable Market Index, which is a family within the MSCI International Equity Indices. MSCI Inc. (“MSCI”) is the Index Sponsor of the MSCI Emerging Markets Index.
 
General - MSCI Indices
 
MSCI provides global equity indices intended to measure equity performance in international markets and the MSCI International Equity Indices are designed to serve as global equity performance benchmarks. In constructing these indices, MSCI applies its index construction and maintenance methodology across developed, emerging, and frontier markets.
 
MSCI enhanced the methodology used in its MSCI International Equity Indices. The MSCI Standard and MSCI Small Cap Indices, along with the other MSCI equity indices based on them, transitioned to the global investable market indices methodology described below. The transition was completed at the end of May 2008. The Enhanced MSCI Standard Indices are composed of the MSCI Large Cap and Mid Cap Indices. The MSCI Global Small Cap Index transitioned to the MSCI Small Cap Index resulting from the Global Investable Market Indices methodology and contains no overlap with constituents of the transitioned MSCI Standard Indices. Together, the relevant MSCI Large Cap, Mid Cap, and Small Cap Indices will make up the MSCI investable market index for each country, composite, sector, and style index that MSCI offers.
 
Constructing the MSCI Global Investable Market Indices.  MSCI undertakes an index construction process, which involves:
 
 
·
defining the equity universe;
 
 
·
determining the market investable equity universe for each market;
 
 
·
determining market capitalization size segments for each market;
 
 
·
applying index continuity rules for the MSCI Standard Index;
 
 
·
creating style segments within each size segment within each market; and
 
 
·
classifying securities under the Global Industry Classification Standard (the “GICS”).
 
Defining the Equity Universe.  The equity universe is defined by:
 
 
·
Identifying Eligible Equity Securities: the equity universe initially looks at securities listed in any of the countries in the MSCI Global Index Series, which will be classified as either Developed Markets (“DM”) or Emerging Markets (“EM”). All listed equity securities, or listed securities that exhibit characteristics of equity securities, except mutual funds, ETFs, equity derivatives, limited partnerships, and most investment trusts, are eligible for inclusion in the equity universe. Real Estate Investment Trusts (“REITs”) in some countries and certain income trusts in Canada are also eligible for inclusion.
 
 
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·
Classifying Eligible Securities into the Appropriate Country: each company and its securities (i.e., share classes) are classified in only one country.
 
Determining the Market Investable Equity Universes.  A market investable equity universe for a market is derived by applying investability screens to individual companies and securities in the equity universe that are classified in that market. A market is equivalent to a single country, except in DM Europe, where all DM countries in Europe are aggregated into a single market for index construction purposes. Subsequently, individual DM Europe country indices within the MSCI Europe Index are derived from the constituents of the MSCI Europe Index under the global investable market indices methodology.
 
The investability screens used to determine the investable equity universe in each market are as follows:
 
 
·
Equity Universe Minimum Size Requirement: this investability screen is applied at the company level. In order to be included in a market investable equity universe, a company must have the required minimum full market capitalization.
 
 
·
Equity Universe Minimum Free Float-Adjusted Market Capitalization Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security must have a free float-adjusted market capitalization equal to or higher than 50% of the equity universe minimum size requirement.
 
 
·
DM and EM Minimum Liquidity Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security must have adequate liquidity. The twelve-month and three-month Annual Traded Value Ratio (“ATVR”), a measure that screens out extreme daily trading volumes and takes into account the free float-adjusted market capitalization size of securities, together with the three-month frequency of trading are used to measure liquidity. In the calculation of the ATVR, the trading volumes in depository receipts associated with that security, such as ADRs or GDRs, are also considered. A minimum liquidity level of 20% of three- and twelve-month ATVR and 90% of three-month frequency of trading over the last four consecutive quarters are required for inclusion of a security in a market investable equity universe of a DM, and a minimum liquidity level of 15% of three- and twelve-month ATVR and 80% of three-month frequency of trading over the last four consecutive quarters are required for inclusion of a security in a market investable equity universe of an EM.
 
 
·
Global Minimum Foreign Inclusion Factor Requirement: this investability screen is applied at the individual security level. To be eligible for inclusion in a market investable equity universe, a security’s Foreign Inclusion Factor (“FIF”) must reach a certain threshold. The FIF of a security is defined as the proportion of shares outstanding that is available for purchase in the public equity markets by international investors. This proportion accounts for the available free float of and/or the foreign ownership limits applicable to a specific security (or company). In general, a security must have an FIF equal to or larger than 0.15 to be eligible for inclusion in a market investable equity universe.
 
 
·
Minimum Length of Trading Requirement: this investability screen is applied at the individual security level. For an initial public offering (“IPO”) to be eligible for inclusion in a market investable equity universe, the new issue must have started trading at least four months before the implementation of the initial construction of the index or at least three months before the implementation of a semi−annual index review (as described below). This requirement is applicable to small new issues in all markets. Large IPOs are not subject to the minimum length of trading requirement and may be included in a market investable equity universe and the Standard Index outside of a Quarterly or Semi−Annual Index Review.
 
Defining Market Capitalization Size Segments for Each Market.  Once a market investable equity universe is defined, it is segmented into the following size−based indices:
 
 
·
Investable Market Index (Large + Mid + Small);
 
 
·
Standard Index (Large + Mid);
 
 
·
Large Cap Index;
 
 
·
Mid Cap Index; or
 
 
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·
Small Cap Index.
 
Creating the size segment indices in each market involves the following steps:
 
 
·
defining the market coverage target range for each size segment;
 
 
·
determining the global minimum size range for each size segment;
 
 
·
determining the market size−segment cutoffs and associated segment number of companies;
 
 
·
assigning companies to the size segments; and
 
 
·
applying final size−segment investability requirements.
 
Index Continuity Rules for the Standard Indices.  In order to achieve index continuity, as well as to provide some basic level of diversification within a market index, and notwithstanding the effect of other index construction rules described in this section, a minimum number of five constituents will be maintained for a DM Standard Index and a minimum number of three constituents will be maintained for an EM Standard Index.
 
Creating Style Indices within Each Size Segment.  All securities in the investable equity universe are classified into value or growth segments using the MSCI Global Value and Growth methodology.
 
Classifying Securities under the Global Industry Classification Standard. All securities in the global investable equity universe are assigned to the industry that best describes their business activities. To this end, MSCI has designed, in conjunction with Standard & Poor’s, the GICS. Under the GICS, each company is assigned to one sub−industry according to its principal business activity. Therefore, a company can belong to only one industry grouping at each of the four levels of the GICS.
 
Index Maintenance
 
The MSCI global investable market indices are maintained with the objective of reflecting the evolution of the underlying equity markets and segments on a timely basis, while seeking to achieve index continuity, continuous investability of constituents and replicability of the indices, and index stability, and low index turnover. In particular, index maintenance involves:
 
 
(i)
Semi−Annual Index Reviews (“SAIRs”) in May and November of the Size Segment and Global Value and Growth Indices which include:
 
 
·
updating the indices on the basis of a fully refreshed equity universe;
 
 
·
taking buffer rules into consideration for migration of securities across size and style segments; and
 
 
·
updating FIFs and Number of Shares (“NOS”).
 
 
(ii)
Quarterly Index Reviews (“QIRs”) in February and August of the Size Segment Indices aimed at:
 
 
·
including significant new eligible securities (such as IPOs that were not eligible for earlier inclusion) in the index;
 
 
·
allowing for significant moves of companies within the Size Segment Indices, using wider buffers than in the SAIR; and
 
 
·
reflecting the impact of significant market events on FIFs and updating NOS.
 
 
(iii)
Ongoing Event−Related Changes: changes of this type are generally implemented in the indices as they occur. Significantly large IPOs are included in the indices after the close of the company’s tenth day of trading.
 
Neither we nor any of our affiliates, including BMOCM, accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in the MSCI EAFE Index or MSCI Emerging Markets Index, or any successor to either of the indices. MSCI does not guarantee the accuracy or the completeness of the MSCI EAFE Index or the MSCI Emerging Markets Index, or any data included in the indices. MSCI assumes no liability for any errors, omissions, or disruption in the calculation and dissemination of the MSCI EAFE Index or the MSCI Emerging Markets Index. MSCI disclaims all responsibility for any errors or omissions in the calculation and dissemination of the MSCI EAFE Index or the MSCI Emerging Markets Index, or the manner in which the indices are applied in determining the amount payable on the notes at maturity.
 
 
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Historical Information of the Underlying Assets
 
The following tables set forth the high and low closing prices for each Underlying Asset from the first quarter of 2010 through February 26, 2013.
 
The historical prices of the Underlying Assets are provided for informational purposes only. You should not take the historical prices of the applicable Underlying Asset as an indication of its future performance, which may be better or worse than the prices set forth below.
 
Closing Prices of the iShares® MSCI EAFE Index Fund
 
     
High ($)
 
Low ($)
 
             
 
2010
First Quarter
57.96
 
50.45
 
   
Second Quarter
58.03
 
46.29
 
   
Third Quarter
55.42
 
47.09
 
   
Fourth Quarter
59.46
 
54.25
 
             
 
2011
First Quarter
61.91
 
55.31
 
   
Second Quarter
63.87
 
57.10
 
   
Third Quarter
60.80
 
46.66
 
   
Fourth Quarter
55.57
 
46.45
 
             
 
2012
First Quarter
55.80
 
49.15
 
   
Second Quarter
55.51
 
46.55
 
   
Third Quarter
55.15
 
47.62
 
   
Fourth Quarter
56.88
 
51.96
 
             
 
2013
First Quarter (through February 26, 2013)
59.41
 
56.90
 
 

 
 
Closing Prices of the iShares® MSCI Emerging Markets Index Fund
 

     
High ($)
 
Low ($)
 
             
 
2010
First Quarter
43.22
 
36.83
 
   
Second Quarter
43.98
 
36.16
 
   
Third Quarter
44.77
 
37.59
 
   
Fourth Quarter
48.58
 
44.77
 
             
 
2011
First Quarter
48.69
 
44.63
 
   
Second Quarter
50.21
 
45.50
 
   
Third Quarter
48.46
 
34.95
 
   
Fourth Quarter
42.80
 
34.36
 
             
 
2012
First Quarter
44.76
 
38.23
 
   
Second Quarter
43.54
 
36.68
 
   
Third Quarter
42.37
 
37.42
 
   
Fourth Quarter
44.35
 
40.14
 
             
 
2013
First Quarter (through February 26, 2013)
45.20
 
42.70
 
 
 
 
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