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An investment in the MAX^TM 4X Leveraged ETNs Linked to the S&P 500^® Index (4x 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 these 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 4x ETNs do not guarantee any return on your initial investment. The 4x ETNs are leveraged notes, which means they are exposed to the risk of four times any decrease in the level of the Index, compounded daily. Due to leverage, the 4x 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 reduce your final payment, the level of the Index, measured as a component of the Closing Indicative Note Value during the Final Measurement Period, Call Measurement Period or Redemption Measurement Period, will need to increase by an amount at least equal to the percentage of the principal amount represented by the Daily Investor Fee, the Daily Financing Charge 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 4x 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 4x 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 4x 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 4x ETNs.

Correlation and compounding risk - A number of factors may affect the 4x ETNs’ ability to achieve a high degree of correlation with the performance of the Index, and the 4x 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 4x ETNs is path dependent and you will be exposed to compounding of daily returns. As a result, the performance of the 4x ETNs for periods greater than one Index Business Day may be either greater than or less than four times the Index performance, before accounting for the Daily Investor Fee, the Daily Financing Charge and any Redemption Fee Amount.

Path dependence - The return on the 4x ETNs will be highly path dependent. Accordingly, even if the level of the Index increases or decreases over the term of the 4x ETNs, or over the term which you hold the 4x ETNs, the value of the 4x 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 4x 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 4x ETNs. It is possible that you will suffer significant losses in the 4x ETNs, even if the long-term performance of the Index is positive. Accordingly, the returns on the 4x ETNs may not correlate with returns on the Index over periods of longer than one day.

Long holding period risk - The 4x ETNs are intended to be daily trading tools for sophisticated investors and are designed to reflect a leveraged long exposure to the performance of the Index on a daily basis; however, their returns over different periods of time can, and most likely will, differ significantly from four times the return on a direct long investment in the Index. The performance of the 4x ETNs are very sensitive to changes in the level of the Index, and returns on the 4x ETNs may be negatively affected in complex ways by volatility of the Index on a daily or intraday basis. Accordingly, the 4x 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 investment results. Investors should actively and frequently monitor their investments in the 4x ETNs, even intra-day. It is possible that you will suffer significant losses in the 4x ETNs even if the long-term performance of the Index is positive (before taking into account the negative effect of the Daily Investor Fee and the Daily Financing Charge, and the Redemption Fee Amount, if applicable).

Potential total loss of value - If the Closing Indicative Note Value of the 4x ETNs is equal to or less than $0 on any Exchange Business Day, then the Closing Indicative Note Value on all future Exchange Business Days will be $0. If the Intraday Indicative Note Value of the 4x ETNs is equal to or less than $0 at any time on any Index Business Day, then both the Intraday Indicative Note Value of the 4x 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 4x ETNs are leveraged instruments and, as a result, the 4x ETNs will benefit, or result in losses, on a leveraged basis, based on the daily performance of the Index. Although the 4X ETNs provide four times leveraged participation in the daily performance of the Index, the effective intraday leverage of the 4x ETNs may be greater or less than 4.0 during any given Index Business Day, depending on whether the level of the Index increases or decreases. Volatility of the Index level may have a significant negative effect on the value of the 4x ETNs.

A trading market for the 4x ETNs may not develop - The 4x ETNs are listed on the NYSE Arca under the symbol “XXXX.” However, a trading market for the 4x ETNs may not develop. We are not required to maintain any listing of the 4x ETNs on the NYSE Arca or any other exchange.

The Intraday Indicative Note Value is not the same as the trading price of the 4x ETNs in the secondary market - The Intraday Indicative Note Value of the 4x ETNs will be calculated and published every 15 seconds on each Exchange Business Day during normal trading hours on Bloomberg under the ticker symbol XXXXIV so long as no Market Disruption Event has occurred or is continuing. The trading price of the 4x ETNs at any time is the price at which you may be able to sell your 4x ETNs in the secondary market at such time, if one exists. The trading price of the 4x ETNs at any time may vary significantly from the Intraday Indicative Note Value of the 4x ETNs at such time.

Paying a premium purchase price over the Intraday Indicative Note Value of the 4x ETNs could lead to significant losses in the event one sells such 4x ETNs at a time when such premium is no longer present in the marketplace or the 4x ETNs are called - Paying a premium purchase price over the Intraday Indicative Note Value of the 4x ETNs could lead to significant losses in the event one sells the 4x ETNs at a time when such premium is no longer present in the marketplace or if the 4x 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 4x ETNs during the Call Measurement Period. Before trading in the secondary market, you should compare the Intraday Indicative Note Value with the then-prevailing trading price of the 4x ETNs.

Call right - We may elect to redeem all or a portion of the outstanding 4x ETNs at any time. If we exercise our Call Right, the Call Settlement Amount may be less than the principal amount of your 4x ETNs. Any exercise by us of our Call Right could present a conflict between your interest in the 4x ETNs and our interests in determining whether to call the 4x ETNs.

Minimum redemption amount - You must elect to redeem at least 25,000 4x ETNs for us to repurchase your 4x ETNs, unless we determine otherwise or your broker or other financial intermediary bundles your 4x 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 4x ETNs may be limited.

Your redemption election is irrevocable - You will not be able to rescind your election to redeem your 4x 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. You will not know the Redemption Amount at the time that you submit your irrevocable redemption notice.

No interest payments or ownership rights - The 4x 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 reflected in the level of the Index.

Potential conflicts - We and our affiliates play a variety of roles in connection with the issuance of the 4x ETNs, including acting as an agent of the issuer for the offering of the 4x ETNs, making certain calculations and determinations that may affect the value of the 4x ETNs and hedging our obligations under the 4x 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 4x ETNs, which creates an additional incentive to sell the 4x 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 4x ETNs.

Uncertain tax treatment - Significant aspects of the tax treatment of the 4x 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.