Performance Notes on Raymond James Analysts’ Best Picks® for 2014 by Bank of Montreal

Performance Notes – Raymond James Analysts’ Best Picks® for 2014 priced on December 10, 2013 by Bank of Montreal 

Equity Markets have been rising for last two years and have reached post crisis highs. This performance is filtered into underlying stocks like Apple, JPM, Comcast and other. BMO has created a basket note tied to 13 different stocks that have been picked and considered to be part of Raymond James Analyst's best pick of 2014. This note has been deconstructed into its components to understand the mechanics of risk and reward for this note. 

This performance Note was priced by BMO for $1000.00 totaling a public offering of $185 million on the basket of 13 stocks with a maturity on December 19, 2014. The Basket is composed of 13 Reference Shares, which are the securities included in Raymond James Analysts’ Best Picks for 2014.  These 13 names belong to different sectors of the economy.

Advance Auto Parts, Inc	Copa Holdings, S.A.	Praxair, Inc.
Antero Resources Corporation	Ctrip.com International, Ltd.	Quintiles Transnational Holdings, Inc.
Apple Inc.	Intuit Inc.	Salesforce.com, Inc.
Cameron International Corporation	JPMorgan Chase & Co.	Newell Rubbermaid Inc
Comcast Corp.

 The advantage of this note is the 1-to-1 upside exposure to a basket of 13 stocks. Meaning each percentage moves up would result in a one percent increase in returns. The downside is the 1-to-1 downside exposure the return has should these 13 stocks fall in price. In this note, Investors need not worry about missing dividends like other structured notes as they are paid at the maturity. Investor is primarily receiving a diversification into 13 stocks to attain above market performance.

To replicate the note investors would need to need to long a basket call with a strike at $100. This should accelerate the returns 1-to-1. Main consideration for this basket option would be correlation among 13 stock returns. Investor is capturing this correlated performance through this note. On the down side, short a basket put option with a strike at 100.

The credit risk for this note is based on Bank of Montreal’s credit. The market risk is a reflection of underlying 13 single stock names performance. Here volatility of these stocks and correlation among then is very important.

Ending Basket Value	Redemption Amount per Unit	Total Rate of Return on the Notes
$60.00	$597.50	-41.85%
$70.00	$697.50	-32.12%
$80.00	$797.50	-22.38%
$90.00	$897.50	-12.65%
$100.00	$997.50	-2.92%
$103.00	$1027.50	-
$105.00	$1097.50	6.81%
$120.00	$1197.50	16.55%
$130.00	$1297.50	26.28%
$140.00	$1397.50	36.01%

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