[FWP] MicroSectors Energy 3x Leveraged ETNs Free Writing Prospectus

Rhea-AI Filing Summary

Bank of Montreal (Issuer) has filed a Free Writing Prospectus for a new structured product: Autocallable Barrier Notes with Contingent Coupons (CUSIP 06376ERW4). The notes link to the performance of the S&P 500 Index (SPX) and the Russell 2000 Index (RTY) and have an approximate 3-year term (settlement 23 Jul 2025, maturity 24 Jul 2028).

Key economic terms

• Contingent interest: ~7.00% p.a. (1.75% quarterly) paid only if, on an Observation Date, each reference asset is ≥ its 70% Coupon Barrier.
• Automatic call: From 21 Jul 2026 onward, if, on any Observation Date, each index closes ≥ its initial level (100%), the notes are redeemed at par plus the current coupon.
• Downside exposure: If not called and any index closes < 70% of its initial level on the Valuation Date, investors suffer a 1-for-1 loss on the worst-performing index, potentially losing the entire principal.
• Trigger/Coupon Barrier/Call levels: 70% / 70% / 100% of initial level for each index.
• Minimum investment: USD 1,000 in $1,000 increments; the notes are not exchange-listed; secondary liquidity, if any, will be provided by BMO Capital Markets.

Risk highlights

• Principal at risk and no guaranteed coupons.
• Returns depend solely on the least-performing index.
• Early redemption limits upside and reinvestment options.
• Credit exposure to Bank of Montreal as unsecured debt.

The FWP must be read alongside the preliminary pricing supplement dated 09 Jul 2025, product supplement, prospectus supplement, and base prospectus (all March 25 2025).

Positive

• 7% contingent coupon offers higher potential income than conventional 3-year investment-grade bonds.
• 30% downside buffer (Trigger/Coupon Barrier at 70%) provides limited protection against moderate index declines.
• Automatic redemption feature allows early return of principal plus coupon if both indices are at or above initial levels, potentially shortening duration.

Negative

• Full principal risk beyond a 30% decline in either index; losses track worst-performing asset 1-for-1.
• Income uncertainty; coupons paid only if both indices meet quarterly barrier, so investors may receive no interest.
• Upside capped; maximum return is limited to coupon payments, even if indices rally substantially.
• Early call risk at par blocks participation in future coupons, reducing effective yield.
• Unlisted security; secondary liquidity is dealer-driven and may be at a significant discount.
• Credit exposure to Bank of Montreal as senior unsecured debt.

Insights

Structured Products Analyst

TL;DR 7% contingent yield with 30% downside buffer but full principal risk; worst-of dual index and autocall greatly skew risk-reward.

The note offers an attractive headline coupon relative to prevailing rates, yet investors only receive it when both SPX and RTY stay above the 70% barrier on quarterly observations. The dual-trigger significantly lowers the probability of consistent income, especially given RTY’s higher historic volatility.

The 100% call level allows the issuer to redeem once both indices merely reclaim initial levels, capping any upside for noteholders while locking in low funding costs for BMO. Because redemption can occur after only one year, the effective yield may fall well below 7% if markets rise.

Principal protection is limited to a 30% buffer. A single 30%+ drop in either index at final valuation leads to a linear loss on the full notional. Historical drawdowns for both indices regularly exceed this threshold, underscoring material tail risk.

Liquidity is another concern: the notes are unlisted, and secondary bids from the dealer typically include hedging costs and fees, leading to discounts to theoretical value.

Credit & Risk Analyst

TL;DR Credit-linked, unsecured BMO debt with market and correlation risk; suitable only for sophisticated investors seeking enhanced income.

From a credit standpoint, Bank of Montreal is an investment-grade issuer, yet these obligations rank pari passu with other senior unsecured debt. In a stress scenario, recovery rates could be well below par.

The dual-index structure embeds correlation risk; divergent performance between large-cap (SPX) and small-cap (RTY) indices raises the likelihood that one underperforms, triggering losses even if the other performs.

A 7% contingent coupon implies elevated implied volatility and correlation assumptions. Investors are effectively short a down-and-in put on the worst-performing index while being long the issuer’s credit. Unless the buyer has a moderately bullish outlook on both indices and low default-probability conviction on BMO, the asymmetric payout is unattractive relative to traditional bonds or diversified equity exposure.

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Registration Statement No. 333-285508

Filed Pursuant to Rule 433

Dated July 10, 2025

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NEW ISSUE: Bank of Montreal’s Autocallable Barrier Notes with Contingent Coupons Linked to the Least Performing of Two Reference Assets These notes do not guarantee the return of your principal at maturity NOTE INFORMATION Issuer: Bank of Montreal Minimum Investment: $1,000 (and $1,000 increments thereafter) DATES Offering Period Closes: July 18, 2025 Pricing Date: On or about July 18, 2025 Settlement Date: On or about July 23, 2025 Valuation Date: On or about July 19, 2028 Maturity Date: On or about July 24, 2028 Term: Approximately 3 Years Issue: ARC - 5120 REFERENCE ASSETS S&P 500 Index ® (Bloomberg symbol: SPX) Russell 2000 Index ® (Bloomberg symbol: RTY) TERMS Contingent Interest Rate: Approximately 7.00% of the principal per annum (1.75% per quarter), if payable, unless earlier redeemed. Call Level: With respect to each Reference Asset, 100% of its Initial Level Trigger Level: With respect to each Reference Asset, 70% of its Initial Level Coupon Barrier Level: With respect to each Reference Asset, 70% of its Initial Level CUSIP 06376ERW4 Please see the following page for additional information about the terms included on this cover page, and how your investment ma y be impacted. Any capitalized term not defined herein shall have the meaning set forth in the preliminary pricing supplement to which the term sheet relates (se e h yperlink below). 1 SEC File No. 333 - 285508 | July 10, 2025 TERMS CONTINUED Contingent Coupons: If the closing level of each Reference Asset is greater than or equal to its Coupon Barrier Level as of the applicable Coupon Observation Date, a Contingent Coupon will be paid at the Contingent Interest Rate. Observation Dates: Three trading days prior to each scheduled Contingent Coupon Payment Date. Contingent Coupon Payment Dates: Interest, if payable, will be paid on the 24th day of each October, January, April, and July (or, if such day is not a business day, the next following business day), beginning on October 24, 2025 and ending on the Maturity Date, subject to the automatic redemption feature. Automatic Redemption: Beginning on July 21, 2026, if, on any Observation Date, the closing level of each Reference Asset is greater than its Call Level, the notes will be automatically redeemed. No further amounts will be owed to you under the Notes. Call Settlement Date: If the notes are automatically redeemed, the Contingent Coupon Payment Date immediately following the relevant Observation Date. Trigger Event: A Trigger Event will be deemed to occur if the Final Level of any Reference Asset is less than its Trigger Level on the Valuation Date. Payment Upon Automatic Redemption : If the notes are automatically redeemed, then, on the Call Settlement Date, investors will receive their principal amount plus the Contingent Coupon otherwise due. INVESTMENT OBJECTIVE The objective of the notes is to provide clients the potential to earn periodic income, subject to an automatic redemption, while offering limited downside protection against a slight to moderate decline in the Reference Assets over the term of the notes. As such, the notes may be suitable for investors with a moderately bullish view of the Reference Assets over the term of the notes. The performance of the notes may not be consistent with the investment objective. This term sheet, which gives a brief summary of the terms of the notes, relates to, and should be read in conjunction with, t he pricing supplement dated July 09, 2025, the Product Supplement dated March 25, 2025, the Prospectus Supplement dated March 25, 2025, and to the Prospectus dated March 25, 2025.

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2 Payment at Maturity (if held to the Maturity Date): If the notes are not automatically redeemed, the payment at maturity for the notes is based on the performance of the Reference Assets. You will receive $1,000 for each $1,000 in principal amount of the note, unless a Trigger Event has occurred. If a Trigger Event has occurred, you will receive at maturity, for each $1,000 in principal amount of your notes, a cash amount equal to: $1,000 + [$1,000 x (Percentage Change of the Least Performing Reference Asset)] This amount will be less than the principal amount of your notes, and may be zero. Least Performing Reference Asset: The Reference Asset that has the lowest Percentage Change. Percentage Change: The Percentage Change of each Reference Asset, expressed as a percentage, is calculated using the following formula: (Final Level – Initial Level) / Initial Level Initial Level: With respect to each Reference Asset, the closing level of such Reference Asset on the Pricing Date. Final Level: With respect to each Reference Asset, the closing level of such Reference Asset on the Valuation Date. Principal at Risk: Investors in these notes could lose all or a substantial portion of their investment at maturity if there has been a decline in the market value of any Reference Asset and the Final Level of any Reference Asset is less than its Trigger Level. We urge you to carefully review the documents described in “Additional Information” below, including the risk factors set forth and incorporated by reference therein, prior to making an investment decision. Secondary Market: The notes will not be listed on any securities exchange. Although not obligated to do so, BMO Capital Markets Corp. (or one of its affiliates), plans to maintain a secondary market in the notes after the Settlement Date. Proceeds from a sale of notes prior to maturity may be less than the principal amount initially invested.

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3 Selected Risk Considerations: The risks summarized below are some of the most important factors to be considered prior to any purchase of the notes. Investors are urged to read all the risk factors related to the notes in the pricing supplement and the product supplement to which this term sheet relates. • You could lose up to the entire principal amount of your notes, and your potential return on the notes is limited to any Contingent Coupon payments, if any. If the notes are not automatically redeemed and if a Trigger Event has occurred with respect to any Reference Asset, and if the Final Level of any Reference Asset is less than its Initial Level, you will lose 1% of the principal amount for each 1% that the Final Level of the Least Performing Reference Asset is less than its Initial Level. • You may not receive any Contingent Coupons with respect to your notes. • Your notes are subject to automatic early redemption. If the notes are so redeemed, you will not receive any additional Contingent Coupons, and you may not be able to invest the proceeds in a security with a similar return. • Your return on the notes is limited to the Contingent Coupons, if any, regardless of any increase in the level of any Reference Asset. • Whether you receive any Contingent Coupons and your payment at maturity may be determined solely by reference to the least performing Reference Asset, even if any other Reference Assets perform better. • The payments on the notes will be determined by reference to each Reference Asset individually, not to a basket, and the payments on the notes will be based on the performance of the least performing Reference Asset. • A higher Contingent Interest Rate or lower Trigger Levels or Coupon Barrier Levels may reflect greater expected volatility of the Reference Assets, and greater expected volatility generally indicates an increased risk of loss at maturity. • Your return on the notes may be lower than the return on a conventional debt security of comparable maturity. • The notes are unsecured debt obligations of the Issuer and your investment is subject to the credit risk of the Issuer. • Our and our affiliates’ activities may conflict with your interests and may also adversely affect the value of the notes. • Our initial estimated value of the notes will be lower than the price to public, does not represent any future value of the notes, and may also differ from the estimated value of any other party. • The terms of the notes are not determined by reference to the credit spreads for our conventional fixed - rate debt. • 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. • You will not have any shareholder rights and will have no right to receive any securities represented by the Reference Assets at maturity. • We have no affiliation with any index sponsor and will not be responsible for any index sponsor's actions. • Changes that affect each Reference Asset will affect the market value of the notes, whether the notes will be automatically called, and the amount you will receive at maturity. Adjustments to any Reference Asset could adversely affect the notes. The sponsor of any Reference Asset may make adjustments, discontinue or suspend calculations or publication of that Reference Asset, or discontinue of suspend maintenance of that Reference Asset at any time. • The notes will not be listed on any securities exchange. We or one of our affiliates may offer to purchase the notes in the secondary market, but are 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. • We and our affiliates may engage in hedging and trading activities related to the notes that could adversely affect our payment to you at maturity. • An investment in the notes is subject to risks associated in investing in stocks with a small market capitalization.

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4 Hypothetical Calculations for the Payment at Maturity: Examples of the Hypothetical Payment at Maturity for a $1,000 Investment in the notes The following table illustrates the hypothetical payments on a note at maturity, assuming that the notes are not automaticall y redeemed. The hypothetical payments are based on a $1,000 investment in the note, a hypothetical Initial Level of 100.00, a hypothetical Trigger Level of 70.00 for each Reference Asset (70.00% of the hypothetical Initial Level), a hypothetical Call Level of 100.00 (100.00% of the hypothetical Initial Level), a range of hypothetical Final Levels and the effect on the payme nt at maturity. The hypothetical examples shown below are intended to help you understand the terms of the notes. If the notes are not automatically redeemed, the actual cash amount that you will receive at maturity will depend upon the Final Level of the Least Performing Reference Asset. If the notes are automatically redeemed prior to maturity, the hypothetical examples below will not be relevant, and you will receive on the applicable Call Settlement Date, for each $1,000 principal amount, th e principal amount plus the applicable Contingent Coupon. As discussed in more detail above, your total return on the notes will also depend on the number of Contingent Coupon Dates on which the Contingent Coupon is payable. It is possible that the only payments on your notes will be the payment, if any, due at maturity. The payment at maturity will not exceed the principal amount, and may be significantly less. These examples do not give effect to any U.S. federal tax payments or brokerage commissions that you may be required to pay in connection with your purchase of the notes. Hypothetical Final Level of the Least Performing Reference Asset Hypothetical Final Level of the Least Performing Reference Asset Expressed as a Percentage of its Initial Level Payment at Maturity (Excluding Coupons) 200.00 200.00% $1,000.00 180.00 180.00% $1,000.00 160.00 160.00% $1,000.00 140.00 140.00% $1,000.00 120.00 120.00% $1,000.00 100.00 100.00% $1,000.00 90.00 90.00% $1,000.00 80.00 80.00% $1,000.00 70.00 70.00% $1,000.00 69.99 69.99% $699.90 60.00 60.00% $600.00 40.00 40.00% $400.00 20.00 20.00% $200.00 0.00 0.00% $0.00

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Additional Information The notes will not constitute deposits insured by the U.S. Federal Deposit Insurance Corporation or under the Canada Deposit Ins urance Corporation or by any other U.S. or Canadian governmental agency or instrumentality. The notes will not be subject to conversion into our common shares or the common shares of any of our affiliates under subsec tio n 39.2(2.3) of the Canada Deposit Insurance Corporation Act. Neither the U.S. Securities and Exchange Commission (the “SEC”), nor any state securities commission, has reviewed or approve d t hese notes, nor or otherwise passed upon the accuracy of this document, to which it relates or the accompanying product supplement , p rospectus supplement, or prospectus. Any representation to the contrary is a criminal offense. The Issuer has filed a registration statement with the SEC for the offerings to which this communication relates. Before you in vest, you should read the prospectus in that registration statement and the other documents discussed below that the Issuer has filed w ith the SEC for more complete information about the Issuer and these offerings. You may obtain these documents free of charge by visiting th e S EC’s web site at http://www.sec.gov . Alternatively, the Issuer will arrange to send to you the prospectus (as supplemented by the prospectus supplement, product supplement, and preliminary pricing supplement to which this term sheet relates) if you request it by cal lin g its agent toll - free on 1 - 877 - 369 - 5412 or emailing investor.solutions@bmo.com . The information in this term sheet is qualified in its entirety by the more detailed explanations set forth elsewhere in the Iss uer’s preliminary pricing supplement dated July 09, 2025 and the accompanying product supplement, prospectus supplement, and prospectus. Unless the context provides otherwise, capitalized terms used in this term sheet but not defined shall have the meaning assigned to them in the pricing supplement, product supplement, prospectus supplement, or prospectus, as applicable, to which this term sheet relates. Infor mat ion about retrieving these documents can be found elsewhere in this term sheet. 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): • Preliminary Pricing Supplement dated July 09, 2025: https://www.sec.gov/Archives/edgar/data/927971/000121465925010217/z79250fwp.htm • Product Supplement dated March 25, 2025: https://www.sec.gov/Archives/edgar/data/927971/000121465925004743/b324250424b2.htm • Prospectus Supplement dated March 25, 2025 and Prospectus dated March 25, 2025: https://www.sec.gov/Archives/edgar/data/927971/000119312525062081/d840917d424b5.htm Our Central Index Key, or CIK, on the SEC website is 927971. As used in this terms sheet, the “Issuer,” “we,” “us” or “our” r efe rs to Bank of Montreal, but not its consolidated subsidiaries. This term sheet contains no description or discussion of the United States tax consequences of the acquisition, holding or di spo sition of the notes. We urge you to carefully read the section entitled “U.S. Federal Tax Information” in the accompanying 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 “Cert ain Income Tax Consequences” in the accompanying prospectus supplement, in each case, to which this term sheet relates. You should consult your tax advisor about your own tax situation. 5

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FAQ

What is the contingent coupon rate on Bank of Montreal’s Autocallable Barrier Notes?

The notes pay a contingent 7.00% per annum (1.75% quarterly) only if both SPX and RTY close at or above 70% of their initial levels on each Observation Date.

When can the BMO notes be automatically redeemed?

Starting 21 Jul 2026, the notes are called if, on any Observation Date, each index is at or above 100% of its initial level; investors then receive par plus the current coupon.

How much principal protection do these notes provide?

Protection is limited to a 30% buffer. If, at final valuation, either index is below 70% of its initial level, principal is reduced 1% for every 1% decline in the worst-performing asset.

Are the Autocallable Barrier Notes listed on an exchange?

No. The notes are not exchange-listed. BMO Capital Markets may, but is not obligated to, make a secondary market.

What is the minimum investment for these structured notes?

The minimum purchase is USD 1,000, with additional investments in $1,000 increments.

Which indices underlie the BMO Autocallable Notes?

The notes reference the S&P 500 Index (SPX) and the Russell 2000 Index (RTY).