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An investment in the ETNs involves risks. Key risks are summarized here, but we urge you to read the more detailed explanation of risks described under “Risk Factors” in Bank of Montreal’s pricing supplement for the applicable securities. Capitalized terms used but not defined herein have the meanings set forth in such pricing supplement.

You may lose some or all of your principal – The ETNs do not guarantee any return on your initial investment. The ETNs are leveraged notes, which means they are exposed on a leveraged basis to the risk of any increase or decrease in the level of the Index, compounded daily. Due to leverage, the ETNs are very sensitive to changes in the level of the Index and the path of such changes. Because the Daily Investor Fee and the Daily Financing Charge (or any negative Daily Interest, in the case of inverse leveraged ETNs) reduce your final payment, the level of the Index, measured as a component of the closing Indicative Note Value during the relevant measurement period or date, as applicable, will need to increase (or decrease, as applicable) by an amount at least equal to the percentage of the principal amount represented by the Daily Investor Fee, the Daily Financing Charge (or any negative Daily Interest, in the case of inverse leveraged ETNs) and any Redemption Fee Amount in order for you to receive an aggregate amount at maturity, upon a call or redemption, that is equal to at least the principal amount. You may lose some or all of your investment at maturity or call, or upon early redemption.

Credit of issuer – The ETNs are senior unsecured debt obligations of the issuer, Bank of Montreal, and are not, either directly or indirectly, an obligation of any third party. Any payment to be made on the ETNs, including any payment at maturity, call or upon early redemption, depends on the ability of Bank of Montreal to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of Bank of Montreal will affect the market value, if any, of the ETNs prior to maturity, call or early redemption. In addition, in the event Bank of Montreal defaults on its obligations, you may not receive any amounts owed to you under the terms of the ETNs.

Correlation and compounding risk – A number of factors may affect the ETNs’ ability to achieve a high degree of correlation with the performance of the Index, and the ETNs are not expected to achieve a high degree of correlation with the performance of the Index over periods longer than one day. The leverage is reset daily, the return on the ETNs is path dependent and you will be exposed to compounding of daily returns. As a result, the performance of the ETNs for periods greater than one Index Business Day may be either greater than or less than the applicable multiple of the Index performance, before accounting for the Daily Investor Fee, the Daily Financing Charge (or any negative Daily Interest, in the case of inverse leveraged ETNs) and any Redemption Fee Amount.

Path dependence – The return on the ETNs will be highly path dependent. Accordingly, even if the level of the Index increases or decreases over the term of the ETNs, or over the term which you hold the ETNs, the value of the ETNs will increase or decrease not only based on any change in the level of the Index over a given time period, but also based on the volatility of the Index over that time period. The value of the ETNs will depend not only upon the level of the Index at maturity, upon call or upon early redemption, but also on the performance of the Index over each day that you hold the ETNs. It is possible that you will suffer significant losses in the ETNs, even if the long-term performance of the Index is positive (or negative, in the case of inverse leveraged ETNs). Accordingly, the returns on the ETNs may not correlate with returns on the Index over periods of longer than one day.

Long holding period risk – The ETNs are intended to be daily trading tools for sophisticated investors and are designed to reflect a leveraged long or inverse exposure to the performance of the Index, as applicable, on a daily basis; however, their returns over different periods of time can, and most likely will, differ significantly from the indicated multiple of the return on a direct long or inverse investment in the Index, as applicable. The performance of the ETNs are very sensitive to changes in the level of the Index, and returns on the ETNs may be negatively affected in complex ways by volatility of the Index on a daily or intraday basis. Accordingly, the ETNs should be purchased only by knowledgeable investors who understand the potential consequences of investing in the Index and of seeking daily compounding leveraged long or inverse investment results, as applicable. Investors should actively and frequently monitor their investments in the ETNs, even intra-day. It is possible that you will suffer significant losses in the ETNs even if the long-term performance of the Index is positive or negative, as applicable (before taking into account the negative effect of the Daily Investor Fee and the Daily Financing Charge (or negative Daily Interest, in the case of inverse leveraged ETNs), and the Redemption Fee Amount, if applicable).

Potential total loss of value – If the closing Indicative Note Value of the ETNs is equal to or less than $0 on any Exchange Business Day, then the Indicative Note Value on all future Exchange Business Days will be $0. If the Intraday Indicative Value of the ETNs is equal to or less than $0 at any time on any Index Business Day, then both the Intraday Indicative Value of the ETNs and the closing Indicative Note Value on that Exchange Business Day, and on all future Exchange Business Days, will be $0. If the Indicative Note Value is $0, the Cash Settlement Amount will be $0.

Leverage risk – The ETNs are leveraged instruments and, as a result, the ETNs will benefit, or result in losses, on a leveraged basis, based on the daily performance of the Index. However, the leverage of the ETNs may be greater or less the amount set forth in the name of the ETN during any given Index Business Day. Volatility of the Index level may have a significant negative effect on the value of the ETNs.

The applicable Index may have a limited performance history – The Index to which your ETNs are linked may be of recent origin, and have only limited historical information. Accordingly, your investment in the ETNs may involve a greater risk than investing in securities linked to one or more indices with a more established record of performance.

The applicable Index may be concentrated in a specific sector – The Index to which your ETNs are linked may be concentrated in only one, or a limited number of, sectors. As a result, an investment in the ETNs may not benefit from the diversification that could result from an investment linked to multiple economic sectors.

We may replace the applicable Index with a different Index – If so specified in the applicable pricing supplement, we may substitute a different index for the Index to which your ETNs are linked. The performance of any new index to which your ETNs are linked may perform differently than the original Index over the remaining term of the ETNs. Any such replacement index may have risks that are different from, or additional to, the Index. Accordingly, if we exercise this right, the payments on the ETNs may be adversely affected.

A trading market for the ETNs may not develop – The ETNs are listed on the NYSE Arca under the applicable trading symbol. However, a trading market for the ETNs may not develop. We are not required to maintain any listing of the ETNs on the NYSE Arca or any other exchange.

The Intraday Indicative Value is not the same as the trading price of the ETNs in the secondary market – The Intraday Indicative Value of the ETNs will be calculated and published every 15 seconds on each Exchange Business Day during normal trading hours on Bloomberg, so long as no Market Disruption Event has occurred or is continuing. The trading price of the ETNs at any time is the price at which you may be able to sell your ETNs in the secondary market at such time, if one exists. The trading price of the ETNs at any time may vary significantly from the Intraday Indicative Value of the ETNs at such time.

Paying a premium purchase price over the Intraday Indicative Value of the ETNs could lead to significant losses in the event one sells such ETNs at a time when such premium is no longer present in the market place or the ETNs are called – Paying a premium purchase price over the Intraday Indicative Value of the ETNs could lead to significant losses in the event one sells the ETNs at a time when such premium is no longer present in the market place or if the ETNs are called, in which case investors will receive a cash payment in an amount based on the arithmetic mean of the closing Indicative Note Value of the ETNs during the Call Measurement Period. Before trading in the secondary market, you should compare the Intraday Indicative Value with the then-prevailing trading price of the ETNs.

Call right – We may elect to redeem all or a portion of the outstanding ETNs at any time. If we exercise our Call Right, the Call Settlement Amount may be less than the principal amount of your ETNs. Any exercise by us of our Call Right could present a conflict between your interest in the ETNs and our interests in determining whether to call the ETNs.

Minimum redemption amount – You must elect to redeem at least the number of ETNs specified in the applicable pricing supplement for us to repurchase your ETNs, unless we determine otherwise or your broker or other financial intermediary bundles your ETNs for redemption with those of other investors to reach this minimum requirement, and there can be no assurance that they can or will do so. Therefore, your ability to elect redemption of the ETNs may be limited.

Your redemption election is irrevocable – You will not be able to rescind your election to redeem your ETNs after your redemption notice is received by us. Accordingly, you will be exposed to market risk if the level of the Index decreases after we receive your offer and the Redemption Amount is determined on the relevant measurement period or date, as applicable. You will not know the Redemption Amount at the time that you submit your irrevocable redemption notice.

No interest payments or ownership rights – The ETNs do not pay any interest. You will not have any ownership rights in the Index constituents, nor will you have any right to receive dividends or other distributions paid to holders of the Index constituents, except as may be reflected in the level for the applicable Index.

Potential conflicts – We and our affiliates play a variety of roles in connection with the issuance of the ETNs, including acting as an agent of the issuer for the offering of the ETNs, making certain calculations and determinations that may affect the value of the ETNs and hedging our obligations under the ETNs. Any profit in connection with such hedging activities will be in addition to any other compensation that we and our affiliates receive for the sale of the ETNs, which creates an additional incentive to sell the ETNs to you. In performing these activities, our economic interests and those of our affiliates are potentially adverse to your interests as an investor in the ETNs.

Uncertain tax treatment – Significant aspects of the tax treatment of the ETNs are uncertain. You should consult your own tax advisor about your own tax situation.

Bank of Montreal and its affiliates do not provide tax advice, and nothing contained herein should be construed as tax advice. Please be advised that any discussion of U.S. tax matters contained herein (including any attachments): (i) is not intended or written to be used, and cannot be used, by you for the purposes of avoiding U.S. tax-related penalties, and (ii) was written to support the promotion of marketing of the transactions or other matters addressed herein. Accordingly, you should seek advice based on your particular circumstances from your independent tax advisor.