As filed with the Securities and Exchange Commission on October 23, 2018
Securities Act Registration No. 033-48907
Investment Company Act Registration No. 811-58433
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
BMO FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
|
111 East Kilbourn Avenue, Suite 200 Milwaukee, Wisconsin |
53202 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, including Area Code: (800) 236-3863
John M. Blaser
111 East Kilbourn Avenue, Suite 200
Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Copies to:
Michael P. O’Hare, Esq.
Stradley, Ronon, Stevens & Young, LLP
2005 Market Street, Suite 2600
Philadelphia, PA 19103
It is proposed that this filing will become effective (check appropriate box):
| ☒ | immediately upon filing pursuant to paragraph (b) of Rule 485 | |
| ☐ | On (date) pursuant to paragraph (b) of Rule 485 | |
| ☐ | 60 days after filing pursuant to paragraph (a)(1) of Rule 485 | |
| ☐ | on (date) pursuant to paragraph (a)(1) of Rule 485 | |
| ☐ | 75 days after filing pursuant to paragraph (a)(2) of Rule 485 | |
| ☐ | On (date) pursuant to paragraph (a)(2) of Rule 485 |
October 23,
2018
BMO
Funds
BMO
Funds
Prospectus
| BMO Global Long/Short Equity Fund |
Institutional
Class
(Class I) BGIQX |
Advisor
Class
(Class A) BGAQX |
Retirement
Class
(Class R6) ticker (1) |
| (1) | Not yet offered for sale. |
Shares of the Fund are not bank
deposits or other obligations of, or issued, endorsed or guaranteed by, BMO Harris Bank N.A. or any of its affiliates. Shares of the Fund, like shares of all mutual funds, are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation (FDIC), or any other government agency, and may lose value.
As with all mutual funds, the Securities and Exchange
Commission (SEC) and Commodity Futures Trading Commission (CFTC) have not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
BMO Global Long/Short Equity Fund
Investment Objective:
To provide capital appreciation.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A shares of certain BMO Funds. More information about these and other
discounts is available from your financial professional and under “How to Buy Shares
–
Purchase of Class A Shares
–
Class A Shares
–
Sales Charge” on page 11 of this Prospectus and under “How to Buy Shares
–
Class A Shares
–
Waivers and Reductions of Sales Charges” beginning on page
11 of this Prospectus and “How to Buy Shares” beginning on page B-38 of the Fund’s Statement of Additional Information.
| Shareholder Fees (fees paid directly from your investment) | Class I | Class A | Class R6 |
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | None | 5.00% | None |
| Maximum Deferred Sales Charge (Load) (as a percentage of shares redeemed within 18 months of purchase) (1) | None | 1.00% | None |
| Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days) | 2.00% | 2.00% | 2.00% |
| Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) | |||
| Management Fees | 1.00% | 1.00% | 1.00% |
| Distribution (12b-1) Fees | None | 0.25% | None |
| Other Expenses (2) | 2.98% | 2.98% | 2.83% |
| Acquired Fund Fees and Expenses (3) | 0.04% | 0.04% | 0.04% |
| Total Annual Fund Operating Expenses | 4.02% | 4.27% | 3.87% |
| Fee Waiver and Expense Reimbursement (4) | (2.63)% | (2.63)% | (2.63)% |
| Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement (4) | 1.39% | 1.64% | 1.24% |
| (1) | The Maximum Deferred Sales Charge on Class A shares is applied only to purchases of $1,000,000 or more that are redeemed within 18 months of purchase. |
| (2) | Other Expenses have been restated to reflect current fees. Other Expenses for Class R6 shares are based on estimated amounts for the current fiscal year. |
| (3) | Acquired Fund Fees and Expenses represent the pro rata expense indirectly incurred by the Fund as a result of its investment in other investment companies. Total Annual Fund Operating Expenses shown will not correlate to the Fund’s ratio of expenses to average net assets appearing in the Financial Highlights tables, which do not include Acquired Fund Fees and Expenses. |
| (4) | BMO Asset Management Corp. (Adviser) has agreed to waive or reduce its investment advisory fee and reimburse expenses to the extent necessary to prevent total annual operating expenses (excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business, and Acquired Fund Fees and Expenses) from exceeding 1.35% for Class I, 1.60% for Class A, and 1.20% for Class R6 through December 31, 2019. This expense limitation agreement may not be terminated prior to December 31, 2019 without the consent of the Fund’s Board of Directors, unless terminated due to the termination of the investment advisory agreement. |
Example
This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated, whether you redeem all of your shares at the end of those periods or not. The example also
assumes that your investment has a 5% return each year and that the Fund’s operating expenses are as shown in the table and remain the same. The costs in the one-year example and for the first year of the three-, five-, and ten-year examples
reflect the Adviser’s agreement to waive fees and reimburse expenses through December 31, 2019. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:
| Class I | Class A | Class R6 | |
| 1 Year | $ 142 | $ 658 | $ 126 |
| 3 Years | $ 722 | $1,257 | $ 676 |
| 5 Years | $1,602 | $2,137 | $1,529 |
| 10 Years | $3,879 | $4,392 | $3,745 |
Portfolio Turnover
The Fund incurs transaction costs, such as commissions, when
it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are
not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 42% of the average value of its portfolio.
Principal Investment Strategies
The Fund invests at least 80% of its net assets in equity
securities or equity-related securities, including both long and short positions and derivative instruments that provide exposure to equity securities. The Fund plans to implement its investment strategy by purchasing securities to establish long
positions and entering into a total return swap that provides
| 2 | Alternative Funds |
BMO Global Long/Short Equity Fund (cont.)
exposure to short equity security positions. The Fund also may take short
positions in securities directly and may include exposure to long equity positions in a total return swap.
The Fund normally invests at least 40% of its net assets in
equity securities, equity-related securities, or derivative instruments that provide exposure to equity securities of companies located outside the United States, including emerging market countries, and will be diversified among at least three
countries.
Equity securities in which the Fund may
invest or seek exposure to include common stock, preferred stock, depositary receipts, rights, warrants, and exchange-traded funds (ETFs). In determining where a company is located, the Adviser primarily relies on the country where the company is
incorporated, but also may consider the country where the company’s revenues are derived and the primary market listing for the class of shares to be purchased. The Fund may invest in companies across all market capitalizations and may at
times focus its investments in one or more sectors.
The Adviser makes its investment decisions by combining a
quantitative approach with a fundamental bottom-up (company-specific) and top-down (market-level) analysis that seeks to provide the Fund with lower downside risk and meaningful upside participation relative to the MSCI All Country World Index, the
Fund’s primary benchmark index. When entering into a swap for purposes of obtaining exposure to equity securities, the Adviser provides the counterparty with the list of positions that will comprise the reference basket of securities upon
which the swap is based. The swap generally will be rebalanced every 30-45 days.
The Fund’s Adviser focuses on companies for
“long” positions that it believes are fundamentally strong, have attractive valuations, possess growing investor interest, and may outperform the overall equity market. Using a unique approach which combines the use of proprietary
analytical tools and the qualitative judgments of the investment team, the Adviser selects equity securities that it believes will provide higher returns than its benchmark index. As part of this process, the Adviser considers numerous factors
including (but not limited to) valuation, earnings quality, earnings growth potential, and earnings and price momentum. The Adviser invests in those securities it believes will provide a better return relative to their risk than other securities.
The Adviser may sell a security for numerous reasons, including if a company’s fundamentals deteriorate or the Adviser believes a company’s fundamentals will deteriorate, if another security appears to provide the potential for a better
return relative to its risk, if the Adviser believes the security is no longer attractively valued, or if the Adviser believes the security will no longer help the Fund achieve its investment objective. The Adviser also may sell a
security to manage the size of a holding or sector weighting or to fund
redemptions.
The Fund’s Adviser focuses on
companies for “short” positions that it believes are fundamentally challenged, are overvalued, are experiencing deteriorating investor interest, and may underperform the overall equity market. The Adviser uses essentially the same
approach described above to identify potential short opportunities, but augments its process to account for securities that are difficult to short due to size and availability of securities and to eliminate short positions with risk profiles the
Adviser considers unattractive.
In addition to using a
total return swap to implement its investment strategy, the Fund may invest in various other derivatives instruments for purposes of pursuing its investment objective, for risk management, portfolio management, earning income, managing target
duration, gaining exposure to a particular asset class, or hedging its exposure to particular investments or non-U.S. currencies. Such derivative instruments may include: (i) currency futures, forwards, options, and swaps; (ii) index futures,
forwards, options, and swaps; (iii) equity futures, forwards, options, and swaps; and (iv) forward foreign currency exchange contracts.
The Adviser’s long/short exposure will vary over time
based on the Adviser’s assessments of market conditions and other factors. In implementing the investment strategies, the Adviser may engage in frequent trading.
From time to time, the Fund maintains a portion of its assets
in cash. The Fund may increase its cash holdings in response to market conditions or in the event attractive investment opportunities are not available.
Principal Risks
The Fund cannot assure that it will achieve its investment
objective. An investment in the Fund is not a deposit of BMO Harris Bank N.A., or any of its affiliates, and is not insured or guaranteed by the FDIC or any other government agency. The net asset value of the Fund will vary and you could lose money
by investing in the Fund. In addition, the Fund is subject to the following risks.
Asset Segregation Risks.
As a
series of an investment company registered with the SEC, the Fund must segregate liquid assets, or engage in other measures to “cover” open positions with respect to certain kinds of derivatives and short sales. The Fund may hold may
incur losses on derivatives and other leveraged investments (including the entire amount of the Fund’s investment in such investments) even if they are covered.
Common Stock Risks.
Common
stocks are susceptible to general stock market fluctuations and to volatile increases and
| Alternative Funds | 3 |
BMO Global Long/Short Equity Fund (cont.)
decreases in value as market confidence in, and perceptions of, their issuers
change. Holders of common stocks are generally subject to greater risk than holders of preferred stocks and debt obligations of the same issuer because common stockholders generally have inferior rights to receive payments from issuers in comparison
with the rights of preferred stockholders, bondholders, and other creditors.
Company Size Risks.
Generally,
the smaller the market capitalization of a company, the fewer the number of shares traded daily, the less liquid its stock and the more volatile its price. Companies with smaller market capitalizations also tend to have unproven track records, a
limited product or service base, and limited access to capital. These factors also increase risks and make these companies more likely to fail than companies with larger market capitalizations.
Currency Risks.
To the extent
that the Fund invests directly in foreign (non-U.S.) currencies or in securities denominated in, or that trade in, foreign (non-U.S.) currencies, it is subject to the risk that those currencies will decline in value relative to the U.S. dollar or,
in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged.
Derivatives Risks.
The
performance of derivative instruments depends largely on the performance of the underlying reference instrument and an Adviser’s ability to predict correctly the direction of securities prices, interest rates, currency exchange rates, and/or
other economic factors. Derivatives involve additional costs and can create economic leverage in the Fund’s portfolio which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that
exceeds the Fund’s initial investment. Other risks include liquidity due to possible lack of a secondary market, mispricing or improper valuation of the derivative instrument, and imperfect correlation between the value of the derivative and
the underlying instrument so that the Fund may not realize the intended benefits. When used for hedging, the change in value of the derivative also may not correlate specifically with the currency, security, or other risk being hedged. With
over-the-counter (OTC) derivatives, a risk exists that the other party to the transaction will fail to perform. Specific types of derivative securities also are subject to a number of additional risks, such as:
| • | Counterparty Risk. A loss may be sustained as a result of the failure of another party to the contract to make required payments or otherwise fulfill its obligations under the contract’s terms. This risk is heightened for the Fund because a significant portion of its total exposure may be obtained through an OTC swap contract with a single counterparty. If a counterparty to the Fund fails to make payments or otherwise fulfill its obligations under the terms of a swap or other derivative instrument, including |
| because of the counterparty’s bankruptcy or insolvency, the Fund could incur substantial losses. In addition, changes in the credit quality of a company that serves as a counterparty to the Fund in a derivative instrument will affect the value of that instrument, which could result in a loss to the Fund. By entering into an OTC derivative such as a swap, the Fund assumes the risk that its counterparty could experience financial hardships or otherwise fail to perform. Counterparty risk may be somewhat mitigated to the extent that mark-to-market payments are made on a daily basis, but it is not eliminated entirely. | |
| • | Forward Foreign Currency Exchange Contracts Risks. Forward foreign currency exchange contracts are subject to currency risks. A forward foreign currency exchange contract also may result in losses in the event of a default or bankruptcy of the counterparty. Forward foreign currency exchange contracts may limit potential gain from a positive change in the relationship between the U.S. dollar and foreign currencies. |
| • | Forward Contracts Risks. Forward contracts are not currently exchange-traded and, therefore, no clearinghouse or exchange stands ready to meet the obligations of the contracts. Thus, the Fund faces the risk that its counterparties may not perform their obligations. Non-deliverable forwards are considered swaps and may in the future be required to be centrally cleared and traded on public facilities. |
| • | Options and Futures Risks. Options and futures contracts may be more volatile than investments directly in the underlying securities, involve additional costs, and may involve a small initial investment relative to the risk assumed. |
| • | Swap Agreements Risks. A swap agreement may not be assigned without the consent of the counterparty and may result in losses in the event of a default or bankruptcy of the counterparty. In addition, with respect to the Fund’s total return swap, the Fund can lose money if the positions selected by the Adviser that comprise the swap decrease in value in the aggregate. |
Emerging Markets Risks.
Investments in emerging markets can involve risks in addition to, and greater than, those generally associated with investing in more developed foreign markets, which may make emerging market securities more volatile and potentially less liquid than
securities issued in more developed markets.
Exchange-Traded Funds Risks.
By investing in an ETF, a risk exists that the value of the underlying securities of the ETF may decrease. In addition, the market price of ETF shares may trade at a discount to their net asset value or an active trading market
| 4 | Alternative Funds |
BMO Global Long/Short Equity Fund (cont.)
for ETF shares may not develop or be maintained. ETFs in which the Fund
invests typically will not be able to replicate exactly the performance of the indices they track. The Fund also will bear its proportionate share of the ETF’s fees (including management and advisory fees) and expenses.
Foreign Securities Risks.
Investing in foreign securities may involve additional risks, including currency-rate fluctuations, political and economic instability, differences in financial reporting standards, less-strict regulation of the securities markets, and possible
imposition of foreign withholding taxes. Furthermore, the Fund may incur higher costs and expenses when making foreign investments, which will affect the Fund’s total return.
Management Risks.
The
Adviser’s judgments about the attractiveness, value, and potential appreciation of the Fund’s investments may prove to be incorrect. Accordingly, no guarantee exists that the investment techniques used by the Fund’s managers will
produce the desired results.
Market Direction
Risks.
Because the Fund will typically hold both long and short positions, the Fund’s results will suffer both when a general market advance occurs and the Fund holds significant “short” positions
or when a general market decline occurs and the Fund holds significant “long” positions.
Portfolio Turnover Risks.
A
high portfolio turnover rate (100% or more) may result in the realization and distribution to shareholders of a greater amount of capital gains than if the Fund had a low portfolio turnover rate. A higher tax liability may result. High portfolio
turnover also may result in higher transaction costs, which may negatively affect Fund performance.
Sector Risks.
Companies with
similar characteristics, such as those within similar industries, may be grouped together in broad categories called sectors. To the extent the Fund invests its assets in a particular sector, the Fund’s performance may be more susceptible to
any economic, business, or other developments that generally affect that sector.
Short Sales Risks.
The risk on
a short sale is the risk of loss if the value of a security sold short increases prior to the delivery date, since the Fund must pay more for the security than it received from the purchaser in the short sale. In addition, it is possible that the
Fund’s securities held long will decline in value at the same time that the value of the securities sold short increase in value, increasing the potential for loss. Therefore, the risk of loss may be theoretically unlimited.
Stock Market Risks.
The Fund
is subject to fluctuations in the stock market, which has periods of increasing and decreasing values. Stocks are more volatile than debt securities. The value of equity securities purchased by the Fund may decline if the financial condition of the
companies in which the Fund invests
declines or if overall market and economic conditions deteriorate. If the
value of the Fund’s investments goes down, you may lose money. U.S. and international markets have experienced significant volatility in recent years, which may increase the risks of investing in the securities held by the Fund. Policy changes
by the U.S. government and/or Federal Reserve, such as raising interest rates, also could cause increased volatility in financial markets and higher levels of shareholder redemptions, which could have a negative impact on the Fund. Adverse market
events also may lead to increased shareholder redemptions, which could cause the Fund to experience a loss or difficulty in selling investments to meet such redemptions.
Fund Performance
The bar chart and table show the historical performance of the
Fund’s shares and provide some indication of the risks of investing in the Fund. The bar chart shows the Fund’s total returns for the 2016 calendar year, while the table compares the Fund’s average annual total returns to the
returns of a broad measure of market performance and an index of funds with similar investment objectives. Please keep in mind that past performance, before and after taxes, does not represent how the Fund will perform in the future. Investors may
obtain updated performance information for the Fund at www.bmofundsus.com.
Class I
—
Annual Total Returns
(calendar year 2016)
The return for the Class I
shares of the Fund from January 1, 2017 through September 30, 2017 was 11.96%.
During the periods shown in the bar chart for the Fund:
| Quarter Ended | Returns | |
| Best quarter | 12/31/2016 | 5.07% |
| Worst quarter | 6/30/2016 | (1.15)% |
Average Annual Total Returns
through 12/31/16
(1)
| 1 Year |
Since
Inception |
|
| Class I (Inception 9/17/2015) | ||
| Return Before Taxes | 11.35% | 10.39% |
| Return After Taxes on Distributions | 10.70% | 9.89% |
BMO Global Long/Short Equity Fund (cont.)
| 1 Year |
Since
Inception |
|
| Return After Taxes on Distributions and Sale of Fund Shares | 6.44% | 7.72% |
| Class A (Inception 9/17/2015) | ||
| Return Before Taxes | 5.52% | 5.79% |
| MSCI All Country World Index (reflects no deduction for fees, expenses or taxes) | 8.48% | 7.13% |
| LALSEFI (reflects deduction of fees and no deduction for sales charges or taxes) | 3.91% | 2.18% |
| (1) | Because Class R6 shares have not yet commenced operations, no performance data is available. Class R6 shares are expected to have substantially similar annual returns as Class I shares because the shares are invested in the same portfolio of securities. The performance of Class R6 shares is expected to be higher than Class I shares because Class R6 shares have lower Total Annual Fund Operating Expenses. |
After-tax returns are calculated using the highest historical
individual marginal federal income tax rates and do not reflect the effect of any applicable state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not
relevant to investors holding shares through tax-deferred programs, such as IRAs or 401(k) plans. After-tax returns are shown only for Class I and after-tax returns for Class A and Class R6 will vary.
The Return After Taxes on Distributions and Sale of Fund
Shares may be higher than other return figures when a capital loss is realized on the sale of Fund shares which provides an assumed tax benefit to the shareholder that increases the after-tax return.
The MSCI All Country World Index is a free float-adjusted
market capitalization index that is designed to measure the equity market performance of developed and emerging markets.
The Lipper Alternative Long/Short Equity Funds Index (LALSEFI)
tracks the total return performance of the 30 largest mutual funds included in this Lipper category.
Management of the Fund
Adviser.
BMO Asset Management
Corp.
Portfolio Managers.
Jay Kaufman, Ernesto Ramos, Ph.D., and David Rosenblatt have co-managed the Fund since its inception in 2015. Mr. Kaufman, a Director and Portfolio Manager of the Adviser, joined the Adviser in 2010. Dr. Ramos, Head of
Quantitative Equity Strategy and a Managing Director of the Adviser, joined the Adviser in 2005. Mr. Rosenblatt, a Director and Portfolio Manager of the Adviser, joined the Adviser in 2012.
Purchase and Sale of Fund Shares
Minimums.
To open an account,
your first investment must be at least $1,000 for Class A shares and $1,000,000 for Class I shares. For Class A, the minimum subsequent purchase amount
is $50. Eligible retirement plans and fee-based wrap programs generally may
open an account and purchase Class R6 shares by contacting BMO Funds U.S. Services.
Sale of Fund Shares.
Please
contact your plan administrator or recordkeeper in order to sell (redeem) Class R6 shares from your retirement plan.You may sell (redeem) your Class A or Class I shares of the Fund on any day the New York Stock Exchange is open for business using
one of the following methods, depending on the elections you made in your account application:
Phone.
Call 1-800-236-FUND
(3863).
Wire/Electronic Transfer.
Upon written request sent to the address below under “Mail,” redemption proceeds can be directly deposited by Electronic Funds Transfer or wired to your previously designated domestic commercial
bank.
Mail.
Send
a written request, indicating your name, the Fund name, your account number, and the number of shares or the dollar amount you want to redeem, to: BMO Funds U.S. Services, P.O. Box 55931, Boston, MA 02205-5931.
Systematic Withdrawal Program.
If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.
BMO Funds Website.
Go to
www.bmofundsus.com.
Tax
Information
The Fund intends to make distributions that
may be taxed as ordinary income or capital gains for federal income tax purposes.
Payments to Broker-Dealers and Other Financial
Intermediaries
If you purchase shares of the Fund
through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
| 6 | Alternative Funds |
Additional Information Regarding Principal
Investment Strategies and Risks
The Fund’s investment objective is non-fundamental and may be changed
without shareholder approval. Additional information regarding the investment techniques used by the Fund and the risks associated with various investment strategies is provided below.
Investment Techniques
Securities Lending.
Although securities lending is not a principal investment strategy, the Fund may lend portfolio securities to borrowers that the Adviser deems creditworthy. In return, the Fund receives cash or
liquid securities from the borrower as collateral. The borrower must furnish additional collateral if the market value of the loaned securities increases. Also, the borrower must pay the Fund the equivalent of any dividends or interest received on
the loaned securities. Any dividend equivalent payments will not be treated as “qualified dividend income” for federal income tax purposes and will generally be taxable as ordinary income for federal income tax purposes.
The Fund will reinvest cash collateral in securities that
qualify as an acceptable investment for the Fund. However, the Fund must pay interest to the borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or
the borrower. The Fund will not have the right to vote on securities while they are on loan, but it may terminate a loan in anticipation of any important vote. The Fund may pay administrative and custodial fees in connection with a loan and may pay
a negotiated portion of the interest earned on the cash collateral to a securities lending agent or broker. Securities lending activities are subject to interest rate risks and credit risks. In addition, the Fund may be affected adversely if the
borrower is unable to furnish additional collateral or return the loaned portfolio securities when requested as required under the securities lending agreement.
Temporary Defensive Investments.
To minimize potential losses and maintain liquidity to meet shareholder redemptions during adverse market, economic, political, or other conditions, or when it receives large cash inflows, the
Fund may temporarily use a different investment strategy by investing up to 100% of its assets in cash or short-term, high quality money market instruments (for example, commercial paper and repurchase agreements). This may cause the Fund to
temporarily forgo greater investment returns for the safety of principal. When so invested, the Fund may not achieve its investment objective.
Additional Principal Risk Information
Cybersecurity Risks.
With the increased use of technologies such as the Internet to conduct business, the Fund is
susceptible to operational, information security, and related risks. In
general, cyber incidents can result from deliberate attacks or unintentional events. Cyber attacks include, but are not limited to, gaining unauthorized access to digital systems (e.g., through “hacking” or malicious software coding) for
purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber attacks also may be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service
attacks on websites (i.e., efforts to make network services unavailable to intended users).
Cyber incidents affecting the Fund or its service providers
have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with the Fund’s ability to calculate its NAV, impediments to trading, the inability of shareholders to transact
business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. Similar adverse consequences could result from cyber incidents
affecting issuers of securities in which the Fund invests, counterparties with which the Fund engages in transactions, governmental and other regulatory authorities, exchange and other financial market operators, banks, brokers, dealers, insurance
companies and other financial institutions (including financial intermediaries and service providers for shareholders) and other parties.
In addition, substantial costs may be incurred to prevent any
cyber incidents in the future. While the Fund’s service providers have established business continuity plans in the event of, and risk management systems to prevent, such cyber incidents, inherent limitations exist in such plans and systems
including the possibility that certain risks have not been identified. Furthermore, the Fund cannot control the cyber security plans and systems put in place by its service providers or any other third parties whose operations may affect the Fund or
its shareholders. As a result, the Fund and its shareholders could be negatively affected.
Portfolio Turnover Risks.
The Fund’s portfolio turnover rate may vary from year to year. A high portfolio rate (100% or more) may result in the realization and distribution to shareholders of a greater amount of
capital gains than if the Fund had a low portfolio turnover rate. A higher tax liability may result. High portfolio turnover also may result in higher transaction costs (such as brokerage commissions), which may negatively affect the Fund’s
performance.
Regulatory Risks.
Future regulatory developments applicable to mutual funds and financial institutions could limit or restrict the ability of the Fund to use certain instruments as a part of its
Additional Information Regarding Principal
Investment Strategies and Risks (cont.)
investment strategies. On July 21, 2015, rules implementing
Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Volcker Rule) went into effect. The Volcker Rule prohibits banking entities, such as the Bank of Montreal (BMO) and its affiliates, including the Adviser, from engaging in
proprietary trading of certain instruments and limits such entities’ investments in and relationships with “covered funds,” as defined in the rules.
Regulation Under the Commodity Exchange Act.
The Adviser is registered as a “commodity pool operator” (CPO) under the Commodity Exchange Act (CEA) and the rules of the CFTC and is subject to CFTC regulation with respect to its
management of the Fund. The CFTC has adopted rules regarding the disclosure, reporting, and recordkeeping requirements that will apply with respect to the Fund as a result of the Adviser’s registration as a CPO. Generally, these rules allow
for substituted compliance with CFTC disclosure and shareholder reporting requirements, based on the Adviser’s compliance with comparable SEC requirements. This means that for most of the CFTC’s disclosure and shareholder reporting
applicable to the Adviser as the Fund’s CPO, the Adviser’s compliance with SEC disclosure and shareholder reporting will be deemed to fulfill the Adviser’s CFTC compliance obligations. However, as a result of CFTC regulation with
respect to the Fund, the Fund may incur additional compliance and other expenses. The Adviser also is registered as a “commodity trading advisor” (CTA), but relies on an exemption from CTA regulation available for a CTA that also serves
as the Fund’s CPO. The CFTC has neither reviewed nor approved the Fund, its investment strategies, or this prospectus.
How to Buy Shares
Who Can Invest in the BMO
Funds?
Only adult U.S. citizens/residents or a U.S. entity may invest in the BMO Funds, as long as they have a valid U.S. taxpayer identification (social security or employer identification)
number. You may not place transactions in your account for the benefit of any person other than yourself (except for a transfer of shares to another account). If the Fund determines that the registered owner of an account has permitted another
person or entity who is not the registered or beneficial owner of the account to hold shares through that account, the Fund may reject future purchases in that account and any related accounts.
Shares of the Fund are qualified for sale only in the United
States and its territories and possessions. The Fund generally does not sell shares to investors residing outside the United States, even if they are U.S. citizens or lawful permanent residents, except to investors with U.S. military APO or FPO
addresses.
How Do I Purchase Shares?
You may purchase shares through a broker/dealer, investment professional, or financial institution (Authorized Dealers). Some Authorized Dealers may charge a transaction fee for this service.
Consult your Authorized Dealer or service provider for more information, including applicable fees. You also may purchase shares directly from the Fund by the methods described below under the “Fund Purchase Easy Reference Table” and
sending your payment to the Fund by check or wire. In connection with opening an account, you will be requested to provide information that will be used by the Fund to verify your identity, as described in more detail under “Important
Information About Procedures for Opening a New Account” below.
The minimum investment for each class of shares is listed in
the “Fund Purchase Easy Reference Table” below. In certain circumstances, the minimum investments listed in the table may be waived or lowered at the Fund’s discretion. You may meet the minimum investment amount for Class A or
Class I shares by aggregating multiple accounts with common ownership or discretionary control within the Fund, including accounts held at Authorized Dealers. If approved in advance by Fund management, clients of a financial adviser or institutional
consultant may qualify to purchase Class A or Class I shares if the aggregate amount invested by the adviser or consultant in a Fund meets the minimum investment amount. Different minimums may apply to accounts opened through third parties. Call
your Authorized Dealer for any additional limitations.
The minimum initial investment amount for Class I shares is $1
million per Fund. This requirement may be met by investments through financial intermediary omnibus accounts. In addition, no minimum initial investment amount exists for certain
employer-sponsored retirement plans (operated pursuant to Code sections
401(a), 401(k), 403(b), and 457) where a financial intermediary provides retirement recordkeeping services to plan participants with the use of omnibus accounts held on the books of a Fund. Also, if approved in advance by Fund management, the
minimum investment amount for Class I shares may be waived for (i) broker-dealer managed account or wrap programs that charge an asset-based fee; (ii) registered investment adviser mutual fund wrap programs or other accounts that charge a fee for
advisory, investment, consulting or similar services; or (iii) private bank and trust company managed accounts or wrap programs that charge an asset-based fee.
The minimum investment for Class I shares does not apply to
current employees of BMO Financial Corp. and/or its affiliates, the spouse or domestic partner or children of a current employee of BMO Financial Corp. or its affiliates, or to the directors of the BMO Funds, provided such persons purchase shares
directly from the BMO Funds. Persons investing in Class I shares in this manner are not eligible to participate in the Systematic Investment Program or Checkwriting described in the tables below.
If you purchase shares of the Fund through a program of
services offered or administered by an Authorized Dealer or other service provider, you should read the program materials, including information relating to fees and investment minimums, in conjunction with the Fund’s Prospectus. Certain
features of the Fund may not be available or may be modified in connection with the program of services provided.
Once you have opened an account, you may purchase additional
Fund shares by contacting BMO Funds U.S. Services at 1-800-236-FUND (3863) if you have pre-authorized the telephone purchase privilege.
The Fund reserves the right to reject any purchase request. It
is the responsibility of BMO Funds U.S. Services, any Authorized Dealer, or other service provider that has entered into an agreement with the Fund, its distributor, or its administrative or shareholder services agent to promptly submit purchase
orders to the Fund.
You are not the owner of Fund shares
(and therefore will not receive distributions) until payment for the shares is received in “good funds.” Wires are generally “good funds” on the day received and checks are “good funds” when deposited with the
Funds’ custodian, normally the next business day after receipt. Checks sent to the BMO Funds to purchase shares must be made payable to the “BMO Funds.”
When Can Shares Be Purchased?
You can buy the shares of the Fund on any day the New York Stock Exchange (NYSE) is open for regular session trading. The NYSE is closed on
| How to Buy Shares | 9 |
How to Buy Shares (cont.)
weekends and the following holidays: New Year’s Day, Martin Luther
King, Jr. Day, President’s Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
When you deliver your transaction request in proper form and
it is accepted by the Fund, or its authorized agent, your transaction is processed at the next determined net asset value (NAV) plus any applicable sales charge. The NAV is calculated for the Fund at the end of regular trading (normally 3:00 p.m.
Central Time) each day the NYSE is open. All purchase orders received in proper form and accepted by the time the Fund’s NAV is calculated will receive that day’s NAV, regardless of when the order is processed.
How is NAV Calculated?
Each class’s NAV per share is the value of a single share of the class. It is computed for each class of the Fund by totaling the class’s pro rata share of the value of the
Fund’s investments, cash, and other assets, subtracting the class’s pro rata share of the value of the Fund’s general liabilities and the liabilities specifically allocated to the class, then dividing the result by the number of
shares of that class outstanding. For purposes of calculating the NAV, securities transactions and shareholder transactions are accounted for no later than one business day after the trade date. The Fund’s NAV per share for each class is
readily available at www.bmo.com/gam/funds/g/us/home/daily-historical-pricing.
In determining the NAV for the Fund, listed equity securities
are valued each trading day at the last sale price or official closing price reported on a national securities exchange, including NASDAQ. Securities listed on a foreign exchange are valued each trading day at the last closing price on the principal
exchange on which they are traded immediately prior to the time for determination of NAV or at fair value as discussed below.
Equity securities without a reported trade, U.S. government
securities, listed corporate bonds, other fixed income and asset-backed securities with maturities of 60 days or more, unlisted securities, and private placement securities are generally valued at the mean of the latest bid and asked price as
furnished by an independent pricing service. Fixed income securities that are not exchange traded are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and
any other factors or market data the pricing service deems relevant. Fixed income securities with remaining maturities of 60 days or less at the time of purchase generally are valued at amortized cost, which approximates fair value. Investments in
other open-end registered investment companies are valued at net asset value. Investments in ETFs are valued at market prices.
Securities or other assets for which market valuations are not readily
available, or are deemed to be inaccurate, are valued at fair value as determined in good faith using methods approved by the Board. The Board oversees a Pricing Committee, which is responsible for determinations of fair value, subject to the
supervision of the Board. In determining fair value, the Pricing Committee takes into account all information available and any factors it deems appropriate. Consequently, the price of securities used by the Fund to calculate its NAV may differ from
quoted or published prices for the same securities. Fair value pricing involves subjective judgments. It is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that
security and the difference may be material to the NAV of the Fund.
Certain securities held by the Fund may be listed on foreign
exchanges that trade on days when the Fund does not calculate its NAV. As a result, the market value of the Fund’s investments may change on days when you cannot purchase or sell Fund shares. In addition, a foreign exchange may not value its
listed securities at the same time that the Fund calculates its NAV. Most foreign markets close well before the Fund values its securities, generally 3:00 p.m. (Central Time). The earlier close of these foreign markets gives rise to the possibility
that significant events, including broad market moves, may occur in the interim, which may affect a security’s value.
The Pricing Committee may determine that a security needs to
be fair valued if, among other things, it believes the value of the security might have been materially affected by events occurring after the close of the market in which the security was principally traded, but before the time for determination of
the NAV (a subsequent event). A subsequent event might include a company-specific development (for example, announcement of a merger that is made after the close of the foreign market), a development that might affect an entire market or region (for
example, weather related events), or a potentially global development (such as a terrorist attack that may be expected to have an effect on investor expectations worldwide). The Board has retained an independent fair value pricing service to assist
in valuing foreign securities when a subsequent event has occurred. The service uses statistical data based on historical performance of securities and markets and other data in developing factors used to estimate fair value for that day.
Redemption
Fee.
Your redemption or exchange proceeds may be reduced by a redemption fee of 2.00% if you redeem or exchange shares of the Fund less than 30 days after the purchase of such shares. The
redemption fee is paid to the Fund. The purpose of the fee is to offset the costs associated with short-term trading in the Fund’s shares. See “How to Redeem and Exchange Shares
—
Will I Be Charged a Fee for
| 10 | How to Buy Shares |
How to Buy Shares (cont.)
Redemptions?,” “Additional Conditions for Redemption
— Exchange Privilege,” and “Additional Conditions for Redemptions
—
Frequent Traders” below.
Purchase of Class A Shares
Class A Shares
–
Sales Charge.
The applicable sales charge for the purchase of Class A shares is set forth in the following table:
| Purchase Amount |
Sales
Charge as a % of Public Offering Price* |
Sales
Charge as a % of NAV |
Typical
Dealer Concession as a % of Public Offering Price |
| Under $50,000 | 5.00% | 5.26% | 5.00% |
| $50,000-$99,999 | 4.00 | 4.17 | 4.00 |
| $100,000-$249,999 | 3.25 | 3.36 | 3.25 |
| $250,000-$499,999 | 2.50 | 2.56 | 2.50 |
| $500,000-$999,999 | 1.75 | 1.78 | 1.75 |
| $1,000,000-$4,999,999 | 0.00 | 0.00 | 1.00 |
| $5,000,000-$9,999,999 | 0.00 | 0.00 | 0.75 |
| $10,000,000-$49,999,999 | 0.00 | 0.00 | 0.50 |
| $50,000,000 and above | 0.00 | 0.00 | 0.25 |
| * | For purchases of $1,000,000 and above, a Contingent Deferred Sales Charge (CDSC) of 1.00% will apply to shares redeemed within 18 months of purchase. |
Class A Shares
–
Waivers and Reductions of Sales Charges.
Investments of $1,000,000 or More.
No initial sales charge exists on a lump sum Class A share purchase of the Fund of $1,000,000 or more, nor on any purchase into a Class A account with an accumulated value of $1,000,000 or more. However, if you have
taken advantage of this waiver and redeem your shares within 18 months of purchase, a CDSC of 1.00% may be imposed on such shares based on the lesser of original cost or current market value, determined on a first-in, first-out basis. The CDSC
generally will not apply if you are otherwise entitled to a waiver of the initial sales charge as listed in “Waivers of Sales Charges” below. Also, the CDSC generally will not apply if you are entitled to a waiver as listed in
“Contingent Deferred Sales Charge Waivers” below.
Waivers of Sales Charges.
For
the following categories of investors and circumstances, Class A shares may be purchased at net asset value, without payment of any front-end sales charge that would otherwise apply:
| • | Banks, broker-dealers, and other financial institutions (including registered investment advisors and financial planners) that have entered into an agreement with the Distributor or one of its affiliates, purchasing shares on |
| behalf of clients participating in a fund supermarket or in a wrap program, asset allocation program, or other program in which the clients pay an asset-based fee; | |
| • | Registered representatives and other employees of affiliated or unaffiliated selling agents having a selling agreement with the Distributor; |
| • | Employer-sponsored defined contribution – type plans, including 401(k) plans, 457 plans, 403(b) plans, profit-sharing and money purchase pension plans, defined benefit plans and non-qualified deferred compensation plans, and individual retirement account (IRA) rollovers involving retirement plan assets invested in the Funds and transferred in-kind to an IRA held at a financial intermediary that has an agreement with the Distributor to service such accounts; |
| • | State sponsored college savings plans established under Section 529 of the Internal Revenue Code of 1986, as amended (Code); |
| • | Direct rollovers (i.e., a rollover of Fund shares and not a reinvestment of redemption proceeds) from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same Fund or another BMO Fund; |
| • | Trustees or other fiduciaries purchasing Class A shares for employee benefit plans of employers with ten or more employees; |
| • | Reinvested dividends and capital gain distributions; or |
| • | In the Fund’s discretion, shares issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which the Fund is a party. |
Other purchases of Class A shares may be made without a sales
charge from time to time in the Fund’s sole discretion. In addition, purchases of Class A shares may be made without a sales charge if your Authorized Dealer agrees to a waiver of such sales charges. Whether a sales charge waiver is available
for your retirement plan or charitable account depends on the policies and procedures of your Authorized Dealer. Please consult your Authorized Dealer for more information.
Reductions of Sales Charges.
The following accounts are eligible for account value aggregation for purposes of the right of accumulation and letters of intent:
| • | Individual or joint accounts; |
| • | Roth and traditional IRAs, Simplified Employee Pension accounts (SEPs), and Savings Investment Match Plans for Employees of Small Employers accounts (SIMPLEs); |
| • | Tax Sheltered Custodial Accounts (TSCAs); |
| How to Buy Shares | 11 |
How to Buy Shares (cont.)
| • | Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors (UTMA) accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; |
| • | Revocable trust accounts for which you or an immediate family member, individually, is the beneficial owner/grantor; |
| • | Accounts held in the name of your, your spouse’s, or your domestic partner’s sole proprietorship or single owner limited liability company or S corporation; |
| • | Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan; and |
| • | Investments in wrap accounts. |
The following
accounts are not eligible for account value aggregation:
| • | Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); and |
| • | Accounts invested in Class I and Class R6 shares of the Fund. |
Contingent Deferred Sales Charge Waivers.
In the following circumstances, the CDSC will not be charged upon the redemption of Class A shares:
| • | In the event of the shareholder’s death; |
| • | For which no sales commission or transaction fee was paid to an authorized selling agent at the time of purchase; |
| • | Purchased through reinvestment of dividend and capital gain distributions; |
| • | In an account that has been closed because it falls below the minimum account balance; |
| • | That result from required minimum distributions taken from retirement accounts upon the shareholder’s attainment of age 70 1/2. |
| • | That result from returns of excess contributions made to retirement plans or IRAs, so long as the selling agent returns the applicable portion of any commission paid by the Distributor; |
| • | Shares initially purchased by an employee benefit plan; or |
| • | In the Fund’s discretion, shares issued in connection with plans of reorganization, including but not limited to mergers, asset acquisitions and exchange offers, to which the Fund is a party. |
Class A Shares
–
Letter Of Intent
A
shareholder may sign a letter of intent committing to purchase a certain amount of the same Class A shares within a 13-month period to combine such purchases in calculating the applicable sales charge. The Fund’s custodian will hold shares in
escrow equal to the maximum applicable sales charge. If the shareholder completes the commitment, the escrowed shares will be released to his/her account. If the commitment is not completed within 13 months, the custodian will redeem an appropriate
number of escrowed shares to pay for the applicable sales charge.
While this letter of intent will not obligate the shareholder
to purchase the Class A shares, each purchase during the period will be at the sales charge applicable to the total amount intended to be purchased. At the time a letter of intent is established, current balances in accounts in any Class A shares of
any BMO Fund, excluding money market funds, will be aggregated to provide a purchase credit towards fulfillment of the letter of intent. The letter may be dated as of a prior date to include any purchase made within the past 90 days. Prior trade
prices will not be adjusted.
Class A Shares
–
Rights of Accumulation
The sales charge you pay to purchase Class A shares of the
Fund may be reduced or eliminated by:
| • | combining concurrent purchases of Class A shares by you, your spouse, and your children under age 21; |
| • | combining concurrent purchases of Class A shares of two or more BMO Funds; |
| • | accumulating purchases (in calculating the sales charge on an additional purchase, you may count the current NAV of previous Class A share purchases still invested in the BMO Fund); |
| • | signing a letter of intent to purchase a specific dollar amount of Class A shares within 13 months (call your investment representative for an application and more information); or |
| • | accumulating purchases of shares of other BMO Funds with subsequent purchases of the BMO Funds’ Class A shares that do not otherwise qualify for the Funds’ reduced sales charges. |
If your investment qualifies for a reduced sales charge due to
accumulation of purchases, including due to accumulation of investments in other mutual funds held at BMO Financial Corp.,
| 12 | How to Buy Shares |
How to Buy Shares (cont.)
you or your investment representative must notify BMO Funds at the time of
purchase of the existence of other accounts and/or holdings eligible to be aggregated to reduce or eliminate the sales charge. You may be required to provide information or records to verify your eligibility for a sales charge reduction. This may
include account statements of family members and information regarding shares held in accounts with your financial professional or another BMO entity. Additional information concerning sales load breakpoints is available in the SAI. Sales load and
breakpoint discount information is also available, free of charge and in a clear and prominent format, on the Fund’s website at www.bmofundsus.com.
Purchase of Class R Shares.
Class R6 shares are available generally to retirement plans established under Code sections 401(a) (including 401(k) plans), 403(b) or 457, and to nonqualified deferred compensation plans and
certain voluntary employee benefit association and post-retirement benefit plans. Class R6 shares also are available generally to retirement plans where plan level or omnibus accounts are held on the books of BMO Harris Bank N.A. Class R6 shares
also are available generally to fee-based wrap programs or through retirement plan intermediaries that have an agreement with the Fund’s distributor specifically for the sale of such shares and to other registered investment companies. Class
R6 shares generally are not available to retail nonretirement accounts, traditional and Roth individual retirement accounts (IRAs), Coverdell Education Savings Accounts, SEPs, SARSEPs, and SIMPLE IRAs.
Class R6 shares are sold without any initial sales charge or
CDSC and are not subject to 12b-1, shareholder servicing, or administrative services fees.
Rule 12b-1
Plan.
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay an annual fee equal to a maximum of 0.25% of the Class A assets to the distributor and financial intermediaries for the
sale and distribution of the Fund’s Class A shares and for services provided to shareholders of that class.
Such activities include, but are not necessarily limited to, compensating
brokers, dealers, financial intermediaries, and sales personnel for distribution and shareholder services, recordkeeping, printing and mailing prospectuses to persons other than current shareholders, printing and mailing sales literature, and
advertising. Because Rule 12b-1 fees are ongoing, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
Important Information About Procedures for Opening a New
Account.
The Fund is required to comply with various anti-money laundering laws and regulations. To help the government fight the funding of terrorism and money laundering activities,
federal law requires all financial institutions, including mutual funds, to obtain, verify, and record information that identifies each person who opens an account. Consequently, when you open an account, the Fund must obtain certain personal
information, including your full name, address, date of birth, social security number, and other information that will allow the Fund to identify you. The Fund also may ask for other identifying documents or information. If you do not provide this
information, the Fund may be unable to open an account for you and your purchase order will not be in proper form. In the event the Fund is unable to verify your identity from the information provided, the Fund may, without prior notice to you,
close your account within five business days and redeem your shares at the NAV next determined after the account is closed. Any delay in processing your order due to your failure to provide all required information will affect the purchase price you
receive for your shares. The Fund is not liable for fluctuations in value experienced as a result of such delays in processing. If at any time the Fund detects suspicious behavior or if certain account information matches government lists of
suspicious persons, the Fund may determine not to open an account, may reject additional purchases, may close an existing account, may file a suspicious activity report or may take other appropriate action.
| How to Buy Shares | 13 |
How to Buy Shares (cont.)
Fund Purchase Easy Reference Table
| Minimum Investments | ||
| Class I | ||
| • To open an account – $1,000,000 | ||
| Class A | ||
| • To open an account – $1,000 | ||
| • To add to an account (including through a Systematic Investment Program) – $50 | ||
| Class R6 | ||
| • To open an account – Contact an Authorized Dealer |
| Phone 1-800-236-FUND (3863) | ||
| • Contact BMO Funds U.S. Services. | ||
| • Complete an application for a new account. | ||
| • Once you have opened an account and if you authorized telephone privileges on your account application or by subsequently completing an authorization form, you may purchase additional shares or exchange shares from another BMO Fund having an identical shareholder registration. |
| • To open an account, send your completed account application and check payable to “BMO Funds” to the following address: | ||
|
BMO
Funds U.S. Services
P.O. Box 55931 Boston, MA 02205-5931 |
||
| • To add to your existing Fund account, send in your check, payable to “BMO Funds,” to the same address. Indicate your Fund account number on the check. |
| Wire | ||
| • Notify BMO Funds U.S. Services and request wire instructions at 1-800-236-FUND (3863). | ||
| • Mail a completed account application to the Fund at the address above under “Mail.” | ||
| • Your bank may charge a fee for wiring funds. Wire orders are accepted only on days when the Fund and the Federal Reserve wire system are open for business. |
| 14 | How to Buy Shares |
How to Buy Shares (cont.)
| Systematic Investment Program | ||
| • You can have money automatically withdrawn from your checking account ($50 minimum) on predetermined dates and invest it in the Fund at the next Fund share price determined after BMO Funds U.S. Services receives the order. | ||
| • Call BMO Funds U.S. Services at 1-800-236-FUND (3863) to apply for this program. |
| BMO Funds Website | ||
| • You may purchase Fund shares at www.bmofundsus.com if you have not opted out of this feature included as part of telephone privileges on the account application. |
| Additional Information About Checks and Automated Clearing House (ACH) Transactions Used to Purchase Shares | ||
| • If your check or ACH purchase does not clear, your purchase will be canceled and you will be charged a $15 fee and held liable for any losses incurred by the Fund. | ||
| • If you purchase shares by check or ACH, you may not be able to receive proceeds from a redemption for up to seven days. | ||
| • All checks should be made payable to “BMO Funds.” | ||
| • The maximum ACH purchase amount is $100,000. |
| Employer-Sponsored Retirement Plans | |
| • Eligible retirement plans may open an account and purchase Class R6 shares by contacting an Authorized Dealer. Additional shares may be purchased through the plan’s administrator or recordkeeper. |
| How to Buy Shares | 15 |
How to Redeem and Exchange Shares
How Do I Redeem
Shares?
You may redeem your Fund shares by several methods, described below under the “Fund Redemption Easy Reference Table.” You should note that redemptions will be made only
on days when the Fund computes its NAV. When your redemption request is received in proper form, it is processed at the next determined NAV.
Clients of BMO Harris Bank or BMO Harris Financial Advisors
should contact their account officer to make redemption requests. Telephone or written requests for redemptions must be received in proper form, as described below, and can be made through BMO Funds U.S. Services or any Authorized Dealer. It is the
responsibility of BMO Funds U.S. Services, any Authorized Dealer or other service provider to promptly submit redemption requests to the Fund.
Redemption requests for the Fund must be received in proper
form by the close of trading on the NYSE, generally 3:00 p.m. (Central Time), for shares to be redeemed at that day’s NAV. Different cut-off times for redemption requests through an Authorized Dealer may be imposed by the Authorized Dealer.
Please contact your Authorized Dealer for more information.
All redemption requests received in proper form by the time
the Fund’s NAV is calculated will receive that day’s NAV, regardless of when the request is processed. Redemption proceeds will normally be mailed, or wired if by written request, the following business day, but in no event more than
seven days, after the request is received, regardless of the method by which the redemption proceeds are paid. The Fund will meet
redemption requests with cash on hand, by selling portfolio securities, or by
utilizing a line of credit or interfund lending arrangement. The Fund also may meet redemption requests by redeeming shares in-kind, although the Fund does not intend to do so.
Will I Be Charged a Fee for Redemptions?
A contingent deferred sales charge (CDSC) applies to Class A shares of the Fund redeemed within 18 months of purchase for purchases of $1,000,000 or more in an amount of 1.00% of the amount
redeemed. The CDSC is based on the lesser of original cost or current market value of the shares being redeemed. You may be charged a transaction fee if you redeem Fund shares through an Authorized Dealer or service provider (other than BMO Funds
U.S. Services or BMO Harris Bank), or if you are redeeming by wire. Consult your Authorized Dealer or service provider for more information, including applicable fees. You may be charged a transaction fee if you redeem Fund shares through an
Authorized Dealer or service provider (other than BMO Funds U.S. Services or BMO Harris Bank), or if you are redeeming by wire. Consult your Authorized Dealer or service provider for more information, including applicable fees. You will be charged a
2.00% short-term redemption fee on shares that have been held for less than 30 days when redeemed (other than shares acquired through reinvestments of net capital gain or net investment income distributions), determined on a first-in, first-out
basis. See “Additional Conditions for
Redemptions
—
Frequent Traders” below.
Fund Redemption Easy Reference
Table
Certain redemption requests may require a
medallion guarantee. See “Additional Conditions for Redemption
–
Medallion Guarantee” below for details.
| Phone 1-800-236-FUND (3863) | ||
| • Contact BMO Funds U.S. Services. | ||
| • If you have not opted out of the telephone redemption privilege in your account application or by a subsequent authorization form, you may redeem shares by telephone. If you are a customer of an Authorized Dealer, you must contact your account representative. | ||
| • Not available to retirement accounts, for which redemptions must be done in writing. |
| 16 | How to Redeem and Exchange Shares |
How to Redeem and Exchange Shares (cont.)
| • Send in your written request to the following address, indicating your name, the Fund name, your account number, and the number of shares or the dollar amount you want to redeem to: | ||
|
BMO
Funds U.S. Services
P.O. Box 55931 Boston, MA 02205-5931 |
||
| • For additional assistance, call BMO Funds U.S. Services at 1-800-236-FUND (3863). |
| Wire/Electronic Transfer | ||
| • Upon written request sent to the address above under “Mail,” redemption proceeds can be directly deposited by Electronic Funds Transfer or wired directly to a domestic commercial bank previously designated by you in your account application or by subsequent form. | ||
| • Wires of redemption proceeds will only be made on days on which the Fund and the Federal Reserve wire system are open for business. | ||
| • Each wire transfer is subject to a $10 fee. | ||
| • Wire-transferred redemptions may be subject to an additional fee imposed by the bank receiving the wire. |
| Systematic Withdrawal Program | ||
| • If you have a Fund account balance of at least $10,000, you can have predetermined amounts of at least $100 automatically redeemed from your Fund account on predetermined dates on a monthly or quarterly basis. | ||
| • Contact BMO Funds U.S. Services to apply for this program. |
| BMO Funds Website | ||
| • You may redeem Fund shares at www.bmofundsus.com if you have not opted out of this feature included as part of telephone privileges on the account application. |
| Employer-Sponsored Retirement Plans | |
| • Shares held in eligible retirement plans may be sold through the plan’s administrator or recordkeeper. |
| How to Redeem and Exchange Shares | 17 |
Additional Conditions for Redemption
Medallion
Guarantees.
In the following instances, you must have a medallion guarantee on written redemption requests:
| • | when you want a redemption to be sent to an address other than the one you have on record with the Fund; |
| • | when you want the redemption payable to someone other than the shareholder of record; or |
| • | when your redemption is to be sent to an address of record that was changed within the last 30 days. |
Your signature can be guaranteed by any federally insured
financial institution (such as a bank or credit union) or a broker/dealer that is a domestic stock exchange member, but not by a notary public.
Limitations on Redemption Proceeds.
Redemption proceeds normally are wired or mailed within one business day after accepting a request in proper form. However, delivery of payment may be delayed up to seven days:
| • | to allow your purchase payment to clear; |
| • | during periods of market volatility; or |
| • | when a shareholder’s trade activity or amount adversely impacts the Fund’s ability to manage its assets. |
You will not accrue interest or dividends on uncashed checks
from the Fund. If those checks are undeliverable and returned to the Fund, the proceeds will be reinvested in shares of the Fund that were redeemed.
Corporate Resolutions.
Corporations, trusts, and institutional organizations are required to furnish evidence of the authority of persons designated on the account application to effect transactions on behalf of the
organizations.
Redemption in Kind.
The Fund has reserved the right to pay the redemption price in whole or in part by a distribution of the Fund’s portfolio securities. This means that the Fund is obligated to pay share
redemptions to any one shareholder in cash only up to the lesser of $250,000 or 1.00% of the Fund’s net assets represented by such share class during any 90-day period. Generally, any share redemption payment greater than this amount will be
paid in cash unless the Adviser determines that payment should be in kind. Securities received in kind may remain exposed to market risk until sold and shareholders may incur brokerage costs when converting these securities to cash. Redemptions in
kind are taxable for federal income tax purposes in the same manner as redemptions for cash. The subsequent sale of securities received in kind may result in taxable gains or realized losses for federal income tax purposes.
Exchange Privilege.
You may exchange shares of the Fund for shares of the same class of any of the other BMO Funds free of charge (and with respect to Class A shares, if you have previously paid a sales charge),
provided you meet the
investment minimum of the Fund and you reside in a jurisdiction where Fund
shares may be lawfully offered for sale. An exchange of shares of the Fund, if less than 30 days after purchase, may be subject to a 2.00% short-term redemption fee. See “Will I Be Charged a Fee for Redemptions?” An exchange is treated
as a redemption and a subsequent purchase, and is therefore a taxable transaction for federal income tax purposes.
Signatures must be guaranteed if you request an exchange into
another Fund with a different shareholder registration. The exchange privilege may be modified or terminated at any time.
Exchanges by Telephone.
If you have completed the telephone authorization section on your account application or an authorization form obtained through BMO Funds U.S. Services, you may telephone instructions to BMO
Funds U.S. Services to exchange between Fund accounts that have identical shareholder registrations. Customers of broker/dealers, financial institutions, or service providers should contact their account representatives. Telephone exchange
instructions must be received by the Fund before the close of trading on the NYSE, generally 3:00 p.m. (Central Time), for shares to be exchanged at the NAV calculated that day and to receive a dividend of the Fund into which you exchange, if
applicable.
The Fund will record your telephone
instructions. The Fund will not be liable for losses due to unauthorized or fraudulent telephone instructions as long as reasonable security procedures are followed. You will be notified of changes to telephone transaction privileges.
Conversion Privilege.
Shareholders of the Fund may elect on a voluntary basis to convert their shares in one class of the Fund into shares of a different class of the same Fund, subject to satisfying the eligibility
requirements for investment in the new share class. You may be required to provide sufficient information to establish eligibility to convert the new share class. A share conversion within the same Fund should not result in a capital gain or loss
for federal income tax purposes. However, please consult your own tax advisor regarding tax considerations. The Fund may change, suspend, or terminate this conversion feature at any time.
Frequent
Traders.
The Fund’s management or the Adviser may determine from the amount, frequency, and pattern of exchanges or redemptions that a shareholder is engaged in excessive trading that
is detrimental to the Fund or its other shareholders. Such short-term or excessive trading into and out of the Fund may harm all shareholders by disrupting investment strategies, increasing brokerage, administrative, and other expenses, decreasing
tax efficiency, and diluting the value of shares held by long-term shareholders.
| 18 | Additional Conditions for Redemption |
Additional Conditions for Redemption (cont.)
The Board has approved policies that seek to discourage frequent purchases
and redemptions and curb the disruptive effects of frequent trading (the Market Timing Policy). Pursuant to the Market Timing Policy, the Fund may decline to accept an application or may reject a purchase request, including an exchange, from an
investor who, in the sole judgment of the Adviser, has a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The Fund, the Adviser, and affiliates thereof are prohibited from entering into
arrangements with any shareholder or other person to permit frequent purchases and redemptions of Fund shares.
The Fund monitors and enforces the Market Timing Policy
through:
| • | the termination of a shareholder’s purchase and/or exchange privileges; |
| • | selective monitoring of trade activity; and |
| • | the imposition of a 2.00% short-term redemption fee for redemptions or exchanges of shares of the Fund within 30 days after purchase of such shares, determined on a first-in, first-out basis. |
The redemption fee is deducted from redemption proceeds and is
paid directly to the Fund.
A redemption of shares
acquired as a result of reinvesting distributions is not subject to the redemption fee. The redemption fee may not apply to shares redeemed in the case of death, through an automatic, nondiscretionary rebalancing or asset allocation program, trade
error correction, and involuntary redemptions imposed by the Fund or a financial intermediary. In addition, the redemption fee will not apply to certain transactions, including redemptions due to disability or hardship, forfeitures, required minimum
distributions, systematic withdrawals, shares purchased through a systematic purchase plan, return of excess contributions, and loans, in (i) retirement accounts (for example, IRA accounts and qualified employee benefit plans); (ii) broker-dealer
managed account or wrap programs that charge an asset-based fee; (iii) registered investment adviser mutual fund wrap programs or other accounts that charge a fee for advisory, investment, consulting or similar services; or (iv) private bank and
trust company
managed accounts or wrap programs that charge an asset-based fee. The
Fund’s officers may, in their sole discretion, authorize waivers of the short-term redemption fee in other limited circumstances that do not indicate market timing strategies. All waivers authorized by the officers are reported to the
Board.
Although the Fund seeks to detect and deter
market timing activity, its ability to monitor trades that are placed by individual shareholders through omnibus accounts is limited because the Fund may not have direct access to the underlying shareholder account information. Omnibus accounts are
accounts maintained by financial intermediaries on behalf of multiple beneficial shareholders. Due to policy, operational or system requirements and limitations, omnibus account holders, including qualified employee benefit plans, may use criteria
and methods for tracking, applying, or calculating the redemption fee that may differ from those utilized by the Fund’s transfer agent. In addition, the Fund may rely on a financial intermediary’s market timing policy, even if those
policies are different from the Fund’s policy, when the Fund believes that the policy is reasonably designed to prevent excessive trading practices that are detrimental to the Fund. If you purchase Fund shares through a financial intermediary,
you should contact your financial intermediary for more information on how the redemption fee is applied to redemptions or exchanges of your shares.
The Fund may request that financial intermediaries furnish the
Fund with trading and identifying information relating to beneficial shareholders, such as social security and account numbers, in order to review any unusual patterns of trading activity discovered in the omnibus account. The Fund also may request
that the financial intermediaries take action to prevent a particular shareholder from engaging in excessive trading and to enforce the Fund’s or their market timing policies. Legal and technological limitations on the ability of financial
intermediaries may exist to restrict the trading practices of their clients and they may impose restrictions or limitations that are different from the Fund’s policies. As a result, the Fund’s ability to monitor and discourage excessive
trading practices in omnibus accounts may be limited.
| Additional Conditions for Redemption | 19 |
Account and Share Information
Fund Transactions Through BMO Funds Website.
If you have previously established an account with the Fund, you may purchase, redeem, or exchange shares through the BMO Funds’ website at www.bmofundsus.com. You also may check your Fund
account balance(s) and historical transactions through the website. You cannot, however, establish a new Fund account through the website
—
you may only establish a new Fund account under the methods described in the “How to Buy Shares” section.
Online Conditions.
Because of security concerns and costs associated with maintaining the website, purchases, redemptions, and exchanges through the website are subject to the following daily minimum and maximum
transaction amounts:
| Minimum | Maximum | |
| Purchases: | $50 | $100,000 |
| Redemptions: |
By
ACH: $50
By wire: $1,000 |
By
ACH: $50,000
By wire: $50,000 |
| Exchanges: | $50 | $100,000 |
Your transactions through the
website are effective at the time they are accepted by the Fund and are subject to all of the conditions and procedures described in this Prospectus.
You may not change your address of record, registration, or
wiring instructions through the website. The website privilege may be modified at any time, but you will be notified in writing of any termination of the privilege.
Online
Risks.
If you utilize the website for account histories or transactions, you should be aware that the Internet is an unsecured, unregulated, and unpredictable environment. Your ability to
use the website for transactions is dependent upon the Internet and equipment, software, systems, data, and services provided by various vendors and third parties (including telecommunications carriers, equipment manufacturers, firewall providers,
and encryption system providers). While the Fund and its service providers have established certain security procedures, the Fund and its transfer agent cannot assure you that inquiries or trading activity will be completely secure. There also may
be delays, malfunctions, or other inconveniences generally associated with this medium. There may be times when the website is unavailable for Fund transactions, which may be due to the Internet or the actions or omissions of a third party
—
should this happen, you should consider purchasing, redeeming, or
exchanging shares by another method. The Fund, its transfer agent, and BMO Funds U.S. Services are not responsible for any such delays or malfunctions and are not responsible for
wrongful acts by third parties as long as reasonable security procedures are
followed.
Confirmations and Account Statements.
You will receive confirmation of purchases, redemptions, and exchanges (except for systematic program transactions). In addition, you will receive annual account statements reporting all account
activity, including systematic program transactions and distributions of net investment income and net capital gains. You may request copies of historical account statements for a fee of $10 per Fund per year requested.
Distributions of Net Investment Income and Net Capital Gains.
A distribution of net investment income is the money or shares paid to shareholders that a mutual fund has earned from the income on its investments after paying any Fund expenses. A net capital
gain distribution is the money or shares paid to shareholders from a mutual fund’s net profit realized from the sales of portfolio securities. Provided that your order is received in proper form, payment in “good funds” is received
and your order is accepted by the time a Fund’s NAV is calculated, you will receive distributions declared that day. You will continue to receive distributions declared through, and including, the day you redeem your shares.
Distributions of net investment income, if any, of the Fund
are declared and paid annually. Distributions of net investment income are paid to all shareholders on the record date, which is the date on which a shareholder must officially own shares to earn a distribution.
In addition, the Fund distributes its net capital gains, if
any, at least annually. If capital gains or losses were realized by the Fund, it could result in an increase or decrease in the Fund’s distributions. Your distributions of net investment income and net capital gains will be automatically
reinvested in additional shares of the same class of the same Fund without a sales charge, unless you elect cash payments. If you elect cash payments and the payment is returned as undeliverable, your cash payment will be reinvested in shares of the
Fund and your distribution option will convert to automatic reinvestment. If any distribution check remains uncashed for six months, the check amount will be reinvested in shares and you will not accrue any interest or distributions on this amount
prior to the reinvestment. You will be taxed in the same manner whether you receive your distributions in cash or additional Fund shares.
If you purchase shares just before the Fund declares a
distribution of net investment income or net capital gain, you will pay the full price for the shares and then receive a portion of the price back in the form of the distribution. The distribution will generally be taxable to you for federal income
tax purposes, unless you are investing through a tax deferred arrangement such as an IRA or a 401(k) plan.
| 20 | Account and Share Information |
Account and Share Information (cont.)
Shares may be redeemed or exchanged based on either a dollar amount or number
of shares. If you are redeeming or exchanging based upon a number of Fund shares, you must redeem or exchange enough shares to meet the minimum dollar amounts described above, but not so much as to exceed the maximum dollar amounts.
Accounts with Low Balances.
Due to the high cost of maintaining accounts with low balances, the Fund may redeem your Class A shares and pay you the proceeds if your account balance falls below the required minimum value of
$1,000. Similarly, your Class I shares may be converted to Class A shares if your account balance falls below the required minimum of $1,000,000. Before shares are redeemed to close an account or converted from Class I shares to Class A shares, you
will be notified in writing and allowed 30 days to purchase additional shares to meet the minimum account balance requirement. A redemption by the Fund may result in a taxable gain or loss.
Multiple
Classes.
The BMO Funds have adopted a plan that permits each Fund to offer more than one class of shares. All shares of the Funds or class have equal voting rights and will generally be
entitled to vote in the aggregate and not by Fund or class. There may be circumstances, however, when only shareholders of a particular Fund or class are entitled to vote on matters affecting that Fund or class. Share classes may have different
sales charges and other expenses, which may affect their performance.
Tax Information
Federal Income Tax.
The Fund intends to qualify and elect to be treated as a Regulated Investment Company (RIC) under Subchapter M of the Code, provided that it complies with all applicable requirements regarding
the source of its income, diversification of its assets, and the timing and amount of its distributions. No assurance exists that the Fund will satisfy all requirements to be taxed as a RIC.
The Fund will send you an annual statement of your account
activity to assist you in completing your federal, state, and local tax returns. You will be taxed in the same manner regardless of whether you elect to receive distributions of investment company taxable income, tax-exempt income, or net capital
gains in cash or in additional Fund shares. Distributions from the Fund’s investment company taxable income (which includes but is not limited to dividends, interest, net short-term capital gains, and net gains from foreign currency
transactions), if any, generally are taxable to you as ordinary income. For non-corporate shareholders, to the extent that distributions of investment company taxable income are attributable to and reported as “qualified dividend
income,” such distributions may be eligible for the reduced federal income tax rates applicable
to long-term capital gains, provided certain holding periods and other
requirements are satisfied by the shareholder. To the extent that the Fund’s distributions of investment company taxable income are attributable to net short-term capital gain, such distributions will be treated as ordinary income and cannot
be used to offset a shareholder’s losses from other investments. Distributions of the Fund’s net capital gains (the excess of net long-term capital gains over net short-term capital losses), if any, are generally taxable as long term
capital gains regardless of how long such shareholder has held shares of the Fund. Distributions from the Fund are expected to consist of net capital gains.
Certain individuals, trusts, and estates may be subject to a
Medicare tax of 3.8% (in addition to regular income tax). The Medicare tax is imposed on the lesser of (i) a taxpayer’s investment income, net of deductions properly allocable to such income or (ii) the amount by which the taxpayer’s
modified adjusted gross income exceeds certain thresholds ($250,000 for married individuals filing jointly, $200,000 for unmarried individuals, and $125,000 for married individuals filing separately). The Fund’s distributions are includable in
a shareholder’s investment income for purposes of this Medicare tax. In addition, any capital gain realized on the sale, redemption, or exchange of Fund shares is includable in a shareholder’s investment income for purposes of this
Medicare tax.
Distributions generally are taxed when
received. However, distributions declared by the Fund during October, November or December to shareholders of record during such month and paid by January 31 of the following year are treated for federal income tax purposes as if received by
shareholders on December 31 of the year in which the distribution was declared.
If more than 50% of the value of the Fund’s total assets
at the close of its taxable year consists of stock or securities of foreign corporations, the Fund may be eligible to elect to “pass through” to you foreign taxes that it pays. If the Fund is eligible for and makes this election, you
will be required to include your share of those taxes in gross income as a distribution from the Fund. You will then be allowed to claim a credit (or a deduction, if you itemize deductions) for such amounts on your federal income tax return, subject
to certain limitations. Tax-exempt holders of Fund shares, such as qualified retirement plans, will not generally benefit from such deduction or credit.
Your sale, redemption, or exchange of Fund shares may result
in a taxable capital gain or loss to you for federal income tax purposes, depending on whether the redemption proceeds (including in-kind proceeds) are more or less than your basis in the sold, redeemed or exchanged shares. The gain or loss
will
| Account and Share Information | 21 |
Account and Share Information (cont.)
generally be treated as long-term capital gain or loss if the shares were
held for more than one year, and if held for one year or less, as short-term capital gain or loss. Any loss arising from the sale, redemption, or exchange of Fund shares held for six months or less, however, is treated as a long-term capital loss to
the extent of any distributions of net capital gains received or deemed to be received with respect to such shares. In determining the holding period of such shares for this purpose, any period during which your risk of loss is offset by means of
options, short sales, or similar transactions is not counted. If you purchase Fund shares (through reinvestment of distributions or otherwise) within thirty days before or after selling, redeeming, or exchanging other shares of the same Fund at a
loss, all or part of your loss will not be deductible and will instead increase the basis of the new shares to preserve the loss until a future sale, redemption, or exchange.
If you do not furnish the Fund with your correct social
security number or taxpayer identification number, if you fail to make certain required certifications, and/or if the Fund receives notification from the IRS requiring backup withholding, the Fund is required by federal law to withhold federal
income tax from your distributions (including distributions of tax-exempt interest) and redemption proceeds, at the rate set forth in the Code. Backup withholding is not an additional tax. Any amounts withheld may be credited against your federal
income tax liability, provided the appropriate information is furnished to the IRS.
This section is not intended to be a full discussion of the
federal income tax laws and the effect of such laws on you. On December 20, 2017, Congress passed new tax legislation that
may have wide ranging consequences, the effects of which are not entirely
known as of the date hereof. Changes in income tax laws, potentially with retroactive effect, could impact the Fund’s investments or the tax consequences to you of investing in the Fund. Some of these changes could affect the timing, amount,
and tax treatment of Fund distributions made to shareholders. There may be other federal, state, foreign, or local tax considerations applicable to a particular investor. Please consult your own tax advisor regarding federal, state, foreign, and
local tax considerations.
Cost Basis Reporting
The Fund is required to report to certain shareholders and the
IRS the cost basis of any Fund shares acquired on or after January 1, 2012 when such shareholders subsequently sell, redeem, or exchange those Fund shares. The Fund will determine cost basis using the average cost method unless you elect in writing
(and not over the telephone) any alternate IRS-approved cost basis method. Please see the SAI for more information regarding cost basis reporting.
Portfolio Holdings
A description of the Fund’s policies and procedures with
respect to the disclosure of the Fund’s portfolio securities is available in the Fund’s Statement of Additional Information (SAI). The Fund’s monthly portfolio holdings are disclosed at
www.bmo.com/gam/funds/g/us/home/prospectus-and-fund-docs approximately thirty days after the end of each month.
| 22 | Account and Share Information |
BMO Funds Information
Management of the BMO
Funds.
The Board governs the Fund. The Board oversees the Adviser. The Adviser manages the Fund’s assets, including buying and selling the portfolio securities for the Fund. The
Adviser’s address is 115 S. LaSalle Street, Chicago, Illinois 60603.
Adviser’s Background.
The Adviser is a registered investment adviser and a wholly-owned subsidiary of BMO Financial Corp., a financial services company headquartered in Chicago, Illinois, and an indirect wholly-owned
subsidiary of the Bank of Montreal (BMO), a publicly-held Canadian diversified financial services company. As of August 31, 2017, the Adviser had approximately $36.1 billion in assets under management, of which approximately $12.2 billion was in the
BMO Funds’ assets.
The Adviser, including
its predecessor entities, has managed investments for individuals and institutions since 1973. The Adviser has managed the BMO Funds since 1992.
Manager-of-Managers Exemptive Order.
BMO Funds, Inc. and the Adviser received an exemptive order from the SEC on June 10, 2015 that permits the Adviser, subject to certain conditions, to terminate an existing sub-adviser or hire a
new, wholly-owned or non-affiliated sub-adviser for the Fund, to materially amend the terms of particular agreements with a sub-adviser, or to continue the employment of an existing sub-adviser after events that would otherwise cause an automatic
termination of a sub-advisory agreement. This arrangement, which is commonly referred to as a “manager-of-managers” investment strategy, has been approved by the Board of Directors and the sole initial shareholder of the Fund.
Consequently, under the exemptive order, the Adviser has the right to hire, terminate, and replace sub-advisers when the Board of Directors and the Adviser determine that a change would benefit the Fund. The Fund does not currently utilize the
manager-of-managers investment strategy.
Pursuant
to the conditions imposed by the exemptive order, if a new sub-adviser is retained, shareholders of the Fund will receive notification of the change within 90 days, and the Corporation will make available and maintain the notification on its website
for 90 days thereafter. The exemptive order also exempts the Fund from certain requirements to disclose the compensation paid by the Adviser to the sub-adviser. The manager-of-managers structure enables the Fund to operate with greater efficiency
and without incurring the expense and delays associated with obtaining shareholder approval of sub-advisory agreements. The structure does not permit advisory fees paid by the Fund to be increased or change the Adviser’s obligations under the
investment advisory agreement, including the Adviser’s responsibility to monitor and oversee sub-advisory services furnished to the Fund, without shareholder approval.
Portfolio
Managers.
Jay Kaufman, Ernesto Ramos, Ph.D., and David Rosenblatt co-manage the Fund. All members of the team share investment decision making responsibilities with respect to the Fund. Mr.
Kaufman has co-managed the Fund since December 2013. He joined the Adviser in 2010 where he currently serves as a Director and Portfolio Manager. Dr. Ramos has co-managed the Fund since its inception in 2013. He joined the Adviser in 2005 where he
currently serves as Head of Quantitative Equity Strategy and a Managing Director. Mr. Rosenblatt has co-managed Fund since December 2016. He joined the Adviser in 2012 and currently serves as a Director and Portfolio Manager, after pursuing and
completing his Master of Business Administration degree from 2010 to 2012.
The Fund’s SAI provides additional information about the
portfolio managers, including other accounts they manage, their ownership of Fund shares, and their compensation.
Advisory
Fees.
The Adviser is entitled to receive from the Fund an investment advisory fee equal to a percentage of the Fund’s average daily net assets (ADNA) at the rates, and subject to
reduction at breakpoints for the Fund as shown in the following table.
|
Advisory
Fee
(as % of the Fund’s ADNA) |
|||
| Fund |
on
the
first $1 billion |
on
the
next $1 billion |
in
excess
of $2 billion |
| Global Long/Short Equity | 1.00 | 0.975 | 0.95 |
The following table reflects the
investment advisory fee paid by the Fund as a percentage of the Fund’s ADNA in accordance with the fee schedule in effect during the fiscal year ended August 31, 2017, after taking into effect breakpoints and/or waivers by the Adviser during
the period. The negative advisory fee represents the full waiver of the advisory fee plus additional reimbursement of fund expenses by the Adviser.
| Fund |
Advisory
Fee
Received in Fiscal 2017 |
| Global Long/Short Equity | (1.64) |
The Adviser has contractually
agreed to waive or reduce its investment advisory fee and reimburse expenses to the extent necessary to prevent class total annual operating expenses (excluding acquired fund fees and expenses, interest, taxes, brokerage commissions, other
investment-related costs, any dividend and interest expense, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding the percentage of the average daily net
assets of each class, as set forth in the “Fees and Expenses of the Fund” section of this Prospectus. This agreement may not be terminated prior to
| BMO Funds Information | 23 |
BMO Funds Information (cont.)
December 31, 2019 without the consent of the Fund’s Board of Directors,
unless terminated due to the termination of the investment advisory agreement. Additionally, the agreement does not provide for recoupment by the Adviser of waived fees or reimbursed expenses.
In addition, the Adviser has the discretion to waive its fee
for the Fund. Any such waivers by the Adviser are voluntary and may be terminated at any time in the Adviser’s sole discretion.
The Fund’s August 31, 2017 Annual Report contains a
discussion regarding the Board’s basis for approving the investment advisory contract on behalf of the Fund.
Distributor.
BMO
Investment Distributors, LLC (BID), a registered broker- dealer and member of the Financial Industry Regulatory Authority, Inc., acts as principal distributor of the Fund’s shares. All fees of the Distributor are paid by the Adviser. BID is
an affiliate of the Adviser and BMO Harris Bank.
Affiliate Services and Fees.
The Adviser serves as the Fund’s shareholder servicing agent, recordkeeper, and administrator directly and through its division, BMO Funds U.S. Services. The Adviser, as administrator, is
entitled to receive a fee from the Fund’s Class A shares of 0.15% of the ADNA.
State Street Bank & Trust. (State Street) serves as the
sub-administrator to the Fund. All fees of the sub-administrator are paid by the Adviser.
The Fund pays fees to the Distributor for the sale and
distribution of Class A shares, pursuant to the Rule 12b-1 Plan. The Distributor generally uses the fees to compensate broker/dealers and may retain the fees in certain circumstances.
Payments to Financial Intermediaries.
From time to time, the Adviser, BMO Harris Bank, BMO Harris Financial Advisors (member FINRA/SIPC), the Distributor or their affiliates may enter into arrangements with each other or with
brokers or other financial intermediaries pursuant to which such parties agree to perform administrative or other services on behalf of their clients who are Fund shareholders. Pursuant to these arrangements, the Adviser, BMO Harris Bank, BMO Harris
Financial Advisors, the Distributor or their affiliates may make payments to each other or to brokers or other financial intermediaries from their own resources (including shareholder services fees paid by the Fund to the Adviser and Rule 12b-1 fees
paid by the Fund to the Distributor) for services provided to clients who hold Fund shares. In addition, the Adviser or an affiliate may make payments to a financial intermediary, including affiliates such as BMO Harris Financial Advisors. In
exchange for such payments, the Adviser, BMO Harris Bank, BMO Harris Financial Advisors, the Distributor or their affiliates generally expect to receive the opportunity for the Fund to be sold through the financial intermediaries’ sales forces
or to have
access to third-party platforms or other marketing programs, including but
not limited to mutual fund “supermarket” platforms or other sales programs. These payments may vary in amount and generally range from 0.05% to 0.40%. Additionally, flat fees on a one-time or irregular basis may be made for the initial
set-up of the Fund on a financial intermediary’s systems, participation or attendance at a financial intermediary’s meetings, or for other reasons. The receipt of (or prospect of receiving) such payments or compensation may provide the
affiliate or intermediary and its salespersons with an incentive to favor sales of Fund shares, or certain classes of those shares, over other investment alternatives. You may wish to consider whether such arrangements exist when evaluating
recommendations from the affiliate or intermediary.
| 24 | BMO Funds Information |
Financial Highlights
—
Advisor Class (Class A) of Shares (For a share outstanding throughout each period)
The Financial Highlights will help you understand the
financial performance of the shares of the Fund for the last five fiscal years or since inception. Some of the information is presented on a per share basis. Total returns represent the rate an investor would have earned (or lost) on an investment
in the Fund, assuming reinvestment of any dividends and capital gains distributions.
The information for the fiscal years ended August 31, 2016
and 2017 was derived from financial statements audited by KPMG LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements and notes thereto, is included in the Fund's Annual Report dated
August 31, 2017, which is available free of charge from the Fund.
| (1) | Based on net asset value as of end of period date. |
| (2) | The contractual and voluntary expense waivers pursuant to Note 6 of the financial statements are reflected in both the net expense and net investment income (loss) ratios. |
| (3) | Redemption fees consisted of per share amounts less than $0.01. |
| (4) | Not annualized for periods less than one year. |
| (5) | Annualized for periods less than one year. |
| (6) | Reflects operations for the period from September 17, 2015 (inception date) to August 31, 2016. |
| (7) | Percentages shown include interest expense and dividends on securities sold short. Gross and net expense ratios, respectively, excluding interest expense and dividends on securities sold short are as follows: |
Financial Highlights
—
Institutional Class (Class I) of Shares (For a share outstanding throughout each period)
| (1) | Based on net asset value as of end of period date. |
| (2) | The contractual and voluntary expense waivers pursuant to Note 6 of the financial statements are reflected in both the net expense and net investment income (loss) ratios. |
| (3) | Redemption fees consisted of per share amounts less than $0.01. |
| (4) | Not annualized for periods less than one year. |
| (5) | Annualized for periods less than one year. |
| (6) | Reflects operations for the period from September 17, 2015 (inception date) to August 31, 2016. |
| (7) | Percentages shown include interest expense and dividends on securities sold short. Gross and net expense ratios, respectively, excluding interest expense and dividends on securities sold short are as follows: |
PRSRT STD
U.S. POSTAGE
PAID
LANCASTER, PA
PERMIT NO. 1793
|
BMO Funds U.S. Services
P.O. Box 55931 Boston, MA 02205-5931 |
|
Contact
us
1-800-236-FUND (3863) 414-287-8555 |
|
Learn
more
bmofundsus.com |
The SAI is incorporated by reference into this Prospectus.
Additional information about the Fund’s investments is contained in the SAI and the Annual and Semi-Annual Reports of the Fund as they become available. The Annual Report’s investment commentaries discuss market conditions and investment
strategies that significantly affected the performance of the Fund during its last fiscal year.
To obtain the SAI, Annual Report, Semi-Annual Report, and other
information, free of charge, and to make inquiries, write to or call BMO Funds U.S. Services at 1-800-236-FUND (3863). You also may obtain these materials free of charge on the BMO Funds’ website at www.bmofundsus.com.
You may write to the SEC Public Reference Room at the regular
mailing address or the e-mail address below and ask them to mail you information about the Fund, including the SAI.
They will charge you a fee for this duplicating service. You
can also visit the SEC Public Reference Room and review and copy documents while you are there. For more information about the operation of the Public Reference Room, call the SEC at the telephone number below.
Public Reference Section: Securities and Exchange Commission
Washington, D.C. 20549-1520 | publicinfo@sec.gov | 1-202-551-8090
Reports and other information about the Fund are also available
on the EDGAR database on the SEC’s Internet site at http://www.sec.gov.
BMO Global Asset Management is the brand name for various
affiliated entities of BMO Financial Group that provide investment management and trust and custody services. Certain of the products and services offered under the brand name BMO Global Asset Management are designed specifically for various
categories of investors in a number of different countries and regions and may not be available to all investors. Products and services are only offered to such investors in those countries and regions in accordance with applicable laws and
regulations. BMO Financial Group is a service mark of Bank of Montreal.
BMO Investment Distributors, LLC Distributor
Investment products are:
NOT
FDIC INSURED
—
NO BANK GUARANTEE
—
MAY LOSE VALUE.
| © 2018 BMO Financial Corp. (10/18) | Investment Company Act File No. 811-58433 |
BMO Funds, Inc.
Statement of Additional Information
December October 23, 2018
December October 23, 2018
|
Investor
Class (Class Y) |
Institutional
Class (Class I) |
Advisor
Class (Class A) |
Retirement
Class (Class R3) |
Retirement
Class (Class R6) |
Class F3 |
Premier
Class |
|
| Equity Funds | |||||||
| BMO Low Volatility Equity Fund | — | MLVEX | BLVAX | — | — | — | — |
| BMO Dividend Income Fund | — | MDIVX | BADIX | — | — | — | — |
| BMO Large-Cap Value Fund | — | MLVIX | BALVX | — | BLCRX | — | — |
| BMO Large-Cap Growth Fund | MASTX | MLCIX | BALGX | — | BLGRX | — | — |
| BMO Mid-Cap Value Fund | — | MRVIX | BAMCX | — | BMVGX | — | — |
| BMO Mid-Cap Growth Fund | — | MRMIX | BGMAX | — | BMGGX | — | — |
| BMO Small-Cap Value Fund | — | MRSNX | BACVX | — | BSVGX | — | — |
| BMO Small-Cap Core Fund | — | BSCNX | BCCAX | — | — | — | — |
| BMO Small-Cap Growth Fund | — | MSGIX | BSLAX | — | — | — | — |
| International and Global Funds | |||||||
| BMO Global Low Volatility Equity Fund | — | BGLBX | BAEGX | — | — | — | — |
| BMO Disciplined International Equity Fund | — | BDIQX | BDAQX | — | BDRQX (1) | — | — |
| BMO Pyrford International Stock Fund | — | MISNX | BPIAX | — | BISGX | BISBX | — |
| BMO LGM Emerging Markets Equity Fund | — | MIEMX | BAEMX | — | — | — | — |
| Alternative Funds | |||||||
| BMO Alternative Strategies Fund | — | BMASX | BMATX | — | — | — | — |
| BMO Global Long/Short Equity Fund | — | BGIQX | BGAQX | — | ticker (1) | — | — |
| Fixed Income Funds | |||||||
| BMO Ultra Short Tax-Free Fund | — | MUISX | BAUSX | — | — | — | — |
| BMO Short Tax-Free Fund | — | MTFIX | BASFX | — | — | — | — |
| BMO Short-Term Income Fund | — | MSIFX | BTMAX | — | — | — | — |
| BMO Intermediate Tax-Free Fund | MITFX | MIITX | BITAX | — | — | — | — |
| BMO Strategic Income Fund | MRGIX | MGIIX | BMTAX | — | — | — | — |
| BMO TCH Corporate Income Fund | MCIYX | MCIIX | BATIX | — | — | — | — |
| BMO TCH Core Plus Bond Fund | MCYBX | MCBIX | BATCX | — | — | — | — |
| BMO High Yield Bond Fund | — | MHBNX | BMHAX | — | — | — | — |
| Money Market Funds | |||||||
| BMO Government Money Market Fund | MGYXX | — | — | — | — | — | MGNXX |
| BMO Tax-Free Money Market Fund | MTFXX | — | — | — | — | — | MFIXX |
| BMO Prime Money Market Fund | MARXX | — | — | — | — | — | MAIXX |
| BMO Institutional Prime Money Market Fund | BYFXX | — | — | — | — | — | BPFXX |
|
Investor
Class (Class Y) |
Institutional
Class (Class I) |
Advisor
Class (Class A) |
Retirement
Class (Class R3) |
Retirement
Class (Class R6) |
Class F3 |
Premier
Class |
|
| Asset Allocation – Target Date Funds | |||||||
| BMO In-Retirement Fund | BTRYX | — | — | BTRRX | BTRTX | — | — |
| BMO Target Retirement 2015 Fund | BRTAX | — | — | BRTCX | BRTDX | — | — |
| BMO Target Retirement 2020 Fund | BTRDX | — | — | BTRFX | BTRGX | — | — |
| BMO Target Retirement 2025 Fund | BRTEX | — | — | BRTGX | BRTHX | — | — |
| BMO Target Retirement 2030 Fund | BTRHX | — | — | BTRKX | BTRLX | — | — |
| BMO Target Retirement 2035 Fund | BRTIX | — | — | BRTKX | BRTLX | — | — |
| BMO Target Retirement 2040 Fund | BTRMX | — | — | BTRPX | BTRQX | — | — |
| BMO Target Retirement 2045 Fund | BRTMX | — | — | BRTPX | BRTQX | — | — |
| BMO Target Retirement 2050 Fund | BTRUX | — | — | BTRWX | BTRZX | — | — |
| BMO Target Retirement 2055 Fund | BRTRX | — | — | BRTTX | BRTUX | — | — |
| Asset Allocation – Target Risk Funds | |||||||
| BMO Conservative Allocation Fund | BDVYX | BDVIX | — | BDVRX | BDVSX | — | — |
| BMO Moderate Allocation Fund | BMBYX | BMBHX | — | BMBQX | BMBTX | — | — |
| BMO Balanced Allocation Fund | BGRYX | BGRHX | — | BGRRX | BGRQX | — | — |
| BMO Growth Allocation Fund | BABYX | BABHX | — | BABRX | BABQX | — | — |
| BMO Aggressive Allocation Fund | BDSYX | BDSHX | — | BDSRX | BDSQX | — | — |
| (1) | Not yet offered for sale. |
This Statement of Additional Information
(SAI) is not a Prospectus and should be read in conjunction with the Prospectuses for the BMO Funds listed above (each, a Fund and collectively, the Funds) each dated December 29, 2017, as supplemented, and dated October 23, 2018 with respect to the
Global Long/Short Equity Fund, as may be supplemented. This SAI incorporates by reference the financial statements for the year ended August 31, 2017 from the Funds’ August 31, 2017 Annual Reports. You may obtain the Prospectuses and the
Annual Reports without charge by calling BMO Funds U.S. Services at 1-800-236-FUND (3863), or you can visit the BMO Funds’ website at http://www.bmofundsus.com.
115 South LaSalle Street, Chicago, Illinois 60603
BMO INVESTMENT DISTRIBUTORS, LLC
Distributor
Distributor
Table of contents
ii
How Are the Funds Organized?
BMO Funds, Inc. (the Corporation) is an
open-end, management investment company that was established as Marshall Funds, Inc., a Wisconsin corporation, on July 31, 1992. On July 5, 2011, the Bank of Montreal, a publicly-traded Canadian banking institution (BMO), acquired Marshall &
Ilsley Corporation, and as a result of the transaction, Marshall Funds, Inc. began doing business as BMO Funds. On May 17, 2013, the Corporation changed its corporate name to BMO Funds, Inc.
The Funds are diversified portfolios of the
Corporation with a fiscal year end of August 31. The Corporation may offer separate series of shares representing interests in separate portfolios of securities, and the shares in any one portfolio may be offered in separate classes. Currently, the
Corporation offers 42 separate series and the following share classes: Investor Class (Class Y), Institutional Class (Class I), Advisor Class (Class A), Retirement Class R3, Retirement Class R6, Class F3, and Premier Class.
BMO Asset Management Corp. (Adviser), the
Funds’ investment adviser, has retained the following sub-advisers (each, a Sub-Adviser and collectively, the Sub-Advisers) for certain Funds:
| Fund Name | Sub-Adviser | |
| Pyrford International Stock | Pyrford International, Ltd. (Pyrford) | |
| LGM Emerging Markets Equity | LGM Investments Limited (LGM Investments) | |
| Alternative Strategies | CTC myCFO, LLC (CTC) | |
| Cramer Rosenthal McGlynn, LLC (Cramer Rosenthal) | ||
| F&C Management Limited (doing business as BMO GAM EMEA) | ||
| Graham Capital Management, L.P. (Graham) | ||
| TCH Corporate Income | Taplin, Canida & Habacht, LLC (TCH) | |
| TCH Core Plus Bond | Taplin, Canida & Habacht, LLC (TCH) |
This SAI contains additional information
about the Corporation and the Funds. This SAI uses the same terms as defined in the Funds’ Prospectuses.
The definitions of the terms
“series” and “class” in the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes (WBCL), differ from the meanings assigned to those terms in the Prospectuses and this SAI. The Corporation’s Articles
of Incorporation, as amended, reconcile this inconsistency in terminology and provide that the Prospectuses and SAI may use the meanings assigned the terms in such documents.
Securities, Transactions, Investment Techniques and
Risks
The following information
supplements the discussion of each Fund’s securities, investment techniques, and risks that are described in the Prospectus. While all of the Funds may invest in the securities discussed below (unless otherwise indicated), the Funds most
likely to invest in a given security are noted in the discussion.
For each of the
Target Date
and the
Target Risk Funds
, the following combined summary discloses the investment strategies of the underlying funds in which the
Target Date
and
Target Risk Funds
invest. Certain investments, techniques, and risks will only apply to your
Target Date
or
Target Risk Fund
to the extent it is invested in an underlying fund that invests in or engages in those investments, techniques, or strategies or directly invests in or engages in such investments, techniques, or
strategies. With respect to the disclosure in this section of the SAI, the term “Fund” includes underlying funds in which the
Target Date
and
Target Risk Funds
invest. Unless otherwise prohibited by the description in the relevant Fund’s prospectus or this SAI, each
Target Date
or
Target Risk Fund
may invest directly or
indirectly in underlying funds that engage in the investments and strategies described below.
As used in this section, the term Adviser
means Adviser or Sub-Adviser, as applicable.
Aggressive Investment Techniques and
Strategies
. Certain Funds, in particular, the
Alternative Strategies Fund
, may invest in and use
investment techniques, strategies, and financial instruments that may be considered aggressive. These techniques may expose the Fund to economic leverage or potentially dramatic changes (losses) in the value of its portfolio holdings.
Asset-Backed/Privately-Issued
Mortgage-Backed Securities
. The
Alternative Strategies, Short-Term Income, Strategic Income, TCH Corporate Income, TCH Core Plus Bond, Prime Money
Market
, and
Institutional Prime Money Market Funds
may invest in
asset-backed/privately-issued mortgage-backed securities, which are issued by non-governmental entities and carry
B-1
no direct or indirect government guarantee. The value and liquidity of
asset-backed and mortgage-backed securities in which a Fund invests may be adversely affected by downturns in the sub-prime mortgage lending market. Concerns about defaults on sub-prime loans, which are made to borrowers with low credit ratings and
other factors that increase the risk of default, have created and may continue to create heightened volatility and turmoil in the credit markets. Asset-backed and mortgage-backed securities may be supported by credit enhancements. However, there can
be no assurance that private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. Asset-backed securities represent an interest in a pool of assets such as car loans and credit card receivables.
Almost any type of fixed income assets (including other fixed income securities) may be used to create an asset-backed security. However, most asset-backed securities involve consumer or commercial debts with maturities of less than ten years.
Asset-backed securities may take the form of commercial paper or notes, in addition to pass-through certificates or asset-backed bonds. Asset-backed securities also may resemble some types of collateralized mortgage obligations (CMOs).
Payments on asset-backed securities depend
upon assets held by the issuer and collections of the underlying loans. The value of these securities depends on many factors, including changing interest rates, the availability of information about the pool and its structure, the credit quality of
the underlying assets, the market’s perception of the servicer of the pool, and any credit enhancement provided. Also, these securities may be subject to prepayment risk.
Mortgage-backed securities represent
interests in pools of mortgages. The underlying mortgages normally have similar interest rates, maturities, and other terms. Mortgages may have fixed or adjustable interest rates. Adjustable rate mortgages are known as ARMs. Mortgage-backed
securities come in a variety of forms. Many have extremely complicated terms. The simplest form of mortgage-backed securities is a “pass-through certificate.” Holders of pass-through certificates receive a pro rata share of the payments
from the underlying mortgages. Holders also receive a pro rata share of any prepayments, so they assume all the prepayment risk of the underlying mortgages.
CMOs are complicated instruments that
allocate payments and prepayments from an underlying pass-through certificate among holders of different classes of mortgage-backed securities. This creates different prepayment and market risks for each CMO class. In addition, CMOs may allocate
interest payments to one class (Interest Only or IOs) and principal payments to another class (Principal Only or POs). POs increase in value when prepayment rates increase. In contrast, IOs decrease in value when prepayments increase, because the
underlying mortgages generate fewer interest payments. However, IOs’ prices tend to increase when interest rates rise (and prepayments fall), making IOs a useful hedge against market risk.
Generally, homeowners have the option to
prepay their mortgages at any time without penalty. Homeowners frequently refinance high rate mortgages when mortgage rates fall. This results in the prepayment of the mortgages underlying mortgage-backed securities, which deprives holders of the
securities of the higher yields. Conversely, when mortgage rates increase, prepayments due to refinancings decline. This extends the life of mortgage-backed securities with lower yields. As a result, increases in prepayments of premium
mortgage-backed securities, or decreases in prepayments of discount mortgage-backed securities, may reduce their yield and price. This relationship between interest rates and mortgage prepayments makes the price of mortgage-backed securities more
volatile than most other types of fixed income securities with comparable credit risks. Mortgage-backed securities tend to pay higher yields to compensate for this volatility.
CMOs may include planned amortization
classes (PACs) and targeted amortization classes (TACs). PACs and TACs are issued with companion classes. PACs and TACs receive principal payments and prepayments at a specified rate. The companion classes receive principal payments and any
prepayments in excess of this rate. In addition, PACs will receive the companion classes’ share of principal payments if necessary to cover a shortfall in the prepayment rate. This structure helps PACs and TACs to control prepayment risk by
increasing the risk to their companion classes.
Another variant allocates interest payments
between two classes of CMOs. One class (Floaters) receives a share of interest payments based upon a market index such as London Interbank Offered Rates (LIBOR). The other class (Inverse Floaters) receives any remaining interest payments from the
underlying mortgages. Floater classes receive more interest (and Inverse Floater classes receive correspondingly less interest) as interest rates rise. This shifts prepayment and market risks from the Floater to the Inverse Floater class, reducing
the price volatility of the Floater class and increasing the price volatility of the Inverse Floater class.
CMOs must allocate all payments received
from the underlying mortgages to some class. To capture any unallocated payments, CMOs generally have an accrual (Z) class. Z classes do not receive any payments from the underlying mortgages until all other CMO classes have been paid off. Once this
happens, holders of Z class CMOs receive all payments and prepayments. Similarly, real estate mortgage investment conduits (REMICs) (offerings of multiple class mortgage-backed securities that qualify and elect treatment as
B-2
such under provisions of the Internal Revenue Code of 1986, as amended
(Code)) have residual interests that receive any mortgage payments not allocated to another REMIC class.
The degree of increased or decreased
prepayment risk depends upon the structure of the CMOs. Z classes, IOs, POs, and Inverse Floaters are among the most volatile investment grade fixed income securities currently traded in the United States. However, the actual returns on any type of
mortgage-backed security depend upon the performance of the underlying pool of mortgages, which no one can predict and will vary among pools.
Unlike traditional fixed income securities,
which pay a fixed rate of interest until maturity (when the entire principal amount is due), payments on mortgage-backed securities include both interest and a partial payment of principal. Partial payments of principal may be comprised of scheduled
principal payments as well as unscheduled payments from the voluntary prepayment, refinancing, or foreclosure of the underlying loans. These unscheduled prepayments of principal create risks that can adversely affect a Fund if it is holding
mortgage-backed securities. For example, when interest rates decline, the values of mortgage-backed securities generally rise. However, when interest rates decline, unscheduled prepayments can be expected to accelerate and a Fund would be required
to reinvest the proceeds of the prepayments at the lower interest rates then available. Unscheduled prepayments would also limit the potential for capital appreciation on mortgage-backed securities. Conversely, when interest rates rise, the values
of mortgage-backed securities generally fall. Since rising interest rates typically result in decreased prepayments, this could lengthen the average lives of mortgage-backed securities and cause their value to decline more than traditional fixed
income securities.
Bank Instruments
.
The
Alternative Strategies, Short-Term Income, High Yield Bond, Prime Money Market,
and
Institutional Prime Money Market Funds
may invest in bank instruments, which are unsecured
interest-bearing deposits with banks. Bank instruments include bank accounts, time deposits, certificates of deposit, and banker’s acceptances. Instruments denominated in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks
are commonly referred to as Eurodollar instruments. Instruments denominated in U.S. dollars and issued by U.S. branches of foreign banks are referred to as Yankee dollar instruments. The Funds may invest in bank instruments that have been issued by
banks and savings and loans that have capital, surplus, and undivided profits of over $100 million or whose principal amount is insured by the Bank Insurance Fund or the Savings Association Insurance Fund, which are administered by the Federal
Deposit Insurance Corporation. Securities that are credit-enhanced with a bank’s irrevocable letter of credit or unconditional guaranty also will be treated as bank instruments.
Foreign Bank and Money Market Instruments.
Certain of the Funds that may invest in bank instruments may invest in foreign bank and money market instruments. Eurodollar Certificates of Deposit (ECDs), Yankee dollar Certificates of Deposit
(YCDs), and Eurodollar Time Deposits (ETDs) are all U.S. dollar denominated certificates of deposit. ECDs are issued by, and ETDs are deposits of, foreign banks or foreign branches of U.S. banks. YCDs are issued in the U.S. by branches and agencies
of foreign banks. Europaper is dollar-denominated commercial paper and other short-term notes issued in the U.S. by foreign issuers.
ECDs, ETDs, YCDs, and Europaper have many
of the same risks as other foreign securities. Examples of these risks include economic and political developments that may adversely affect the payment of principal or interest, foreign withholding or other taxes, difficulties in obtaining or
enforcing a judgment against the issuing bank, and possible interruptions in the flow of international currency transactions. Also, the issuing banks or their branches are not necessarily subject to the same regulatory requirements that apply to
domestic banks, such as reserve requirements, loan limitations, examinations, accounting, auditing, recordkeeping, and the public availability of information. These factors will be carefully considered by the Adviser in selecting these
investments.
Bank Loans.
The
Alternative Strategies Fund
may acquire interests in bank loans. A Fund may be unable to sell its
loan interests at a time when it may otherwise be desirable to do so or may be able to sell them only at prices that are less than what a Fund regards as their fair market value. Accordingly, loan interests may at times be illiquid. Loan interests
may be difficult to value and may have extended settlement periods (i.e., more than seven days after the sale), which expose a Fund to the risk that the receipt of principal and interest payments may be delayed until the loan interest settles.
Interests in loans made to finance highly leveraged companies or transactions, such as corporate acquisitions, may be especially vulnerable to adverse changes in economic or market conditions. In addition, loans are not registered under the federal
securities laws like stocks and bonds, so investors in loans have less protection against improper practices than investors in registered securities.
Interests in secured loans have the benefit
of collateral and, typically, of restrictive covenants limiting the ability of the borrower to further encumber its assets. A risk exists that the value of any collateral securing a loan in which a Fund has an interest may decline and that the
collateral may not be sufficient to cover the amount owed on the loan. Most loan agreements do not include a formal requirement to pledge additional collateral. In the event the borrower defaults, a Fund’s access to the collateral may be
limited or delayed by bankruptcy or other insolvency laws. Further, in the event of a default, second lien secured loans will generally be paid only if the value of the collateral exceeds the amount of the borrower’s obligations to the first
lien secured lenders and the remaining
B-3
collateral may not be sufficient to cover the full amount owed on the loan in
which a Fund has an interest. In addition, if a secured loan is foreclosed, a Fund would likely bear the costs and liabilities associated with owning and disposing of the collateral. The collateral may be difficult to sell and a Fund would bear the
risk that the collateral may decline in value while the Fund is holding it.
A Fund may acquire a loan interest by
obtaining an assignment of all or a portion of the interests in a particular loan that are held by an original lender or a prior assignee. As an assignee, a Fund normally will succeed to all rights and obligations of its assignor with respect to the
portion of the loan that is being assigned. However, the rights and obligations acquired by the purchaser of a loan assignment may differ from, and be more limited than, those held by the original lenders or the assignor. Alternatively, a Fund may
acquire a participation interest in a loan that is held by another party. When a Fund’s loan interest is a participation interest, the Fund may have less control over the exercise of remedies than the party selling the participation interest
and it normally would not have any direct rights against the borrower. As a participant, a Fund also would be subject to the risk that the party selling the participation interest would not remit the Fund’s pro rata share of loan payments to
the Fund. It may be difficult for a Fund to obtain an accurate picture of a lending bank’s financial condition. Loan interests may not be considered “securities,” and purchasers, such as a Fund, therefore may not be entitled to
rely on the anti-fraud protections of the federal securities laws.
A Fund also may be in possession of
material non-public information about a borrower as a result of its ownership of a loan instrument of such borrower. Because of prohibitions on trading in securities of issuers while in possession of such information, a Fund might be unable to enter
into a transaction in a security of that borrower when it would otherwise be advantageous to do so. Any steps taken to ensure that a Fund does not receive material non-public information about a security may have the effect of causing the Fund to
have less information than other investors about certain interests in which it seeks to invest.
Borrowing
.
The Funds may borrow money directly or, in some cases, through reverse repurchase agreements and pledge some assets as collateral. If a Fund borrows, it will pay interest on borrowed money and may
incur other transaction costs. These expenses could exceed the income received or capital appreciation realized by a Fund from any securities purchased with borrowed money. With respect to borrowings, a Fund is required to maintain continuous asset
coverage within the limits of the Investment Company Act of 1940, as amended (1940 Act), and as interpreted or modified by regulatory authority having jurisdiction, from time to time. Borrowing by a Fund will involve special risk considerations,
including that a Fund may have to sell portfolio securities to reduce its borrowings and restore the appropriate asset coverage even if it must sell the securities at a loss.
The Corporation has established a line of
credit with a bank by which the Funds may borrow money for temporary or emergency purposes.
In addition, the Corporation received an
exemptive order from the Securities and Exchange Commission (SEC) on July 30, 2014 permitting the Funds to participate in an interfund lending program, subject to their investment policies and limitations. This program allows a Fund to lend cash to
and borrow cash from other BMO Funds for temporary purposes, although the
Money Market Funds
will not participate as borrowers. The program is subject to a number of conditions, including the requirement that
the interfund loan rate to be charged to the Fund under the program is (i) more favorable to the lending Fund than the rate it could otherwise obtain from investing cash in repurchase agreements or purchasing shares of a money market fund and (ii)
more favorable to the borrowing Fund than the lowest interest rate at which bank short-term loans would be available to the Fund. A Fund will participate in the program only to the extent that its participation is consistent with the Fund’s
investment policies and limitations. The Board is responsible for overseeing and periodically reviewing the interfund lending program.
Collateralized Debt Obligations.
The
Disciplined International Equity Fund
and the
Alternative
Funds
may invest in collateralized debt obligations (CDOs). CDOs and similarly structured securities are interests in a trust or other special purpose entity (SPE) and are typically backed
by a pool of bonds, loans, or other debt obligations. CDOs are not limited to investments in one type of debt and, accordingly, a CDO may be collateralized by corporate bonds, commercial loans, asset-backed securities, residential mortgage-backed
securities, real estate investment trusts (REITs), commercial mortgage-backed securities, emerging market debt, and municipal bonds. CDOs may use derivatives contracts to create “synthetic” exposure to assets rather than holding such
assets directly. There are various types of CDOs, which include collateralized loan obligations and collateralized bond obligations, among others.
CDOs are split into two or more tranches
that vary in risk and yield. The equity tranche is the riskiest and the first to suffer a loss from defaults. Senior tranches are less risky and generally have higher ratings and lower yields than the underlying collateral securities held by the
trust. All tranches of CDOs, including senior tranches with high credit ratings have experienced substantial losses due to actual defaults, increased sensitivity to future defaults due to the disappearance of protecting tranches, market anticipation
of defaults, and market aversion to CDO securities as a class. There can be no assurance that additional losses of equal or greater magnitude will not occur in the future.
B-4
CDOs carry risks including, but not limited
to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or quality or go into default or be downgraded; (iii) a Fund may
invest in tranches of a CDO that are subordinate to other classes; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer, difficulty in valuing the security or
unexpected investment results. CDOs also may charge management fees and administrative expenses that the shareholders of a Fund would pay indirectly.
Commercial Paper.
The
Fixed Income, Money Market,
and
Alternative Strategies
Funds
may invest in commercial paper and restricted and illiquid securities. Commercial paper represents an issuer’s draft or note with a maturity of less than nine months. Companies
typically issue commercial paper to fund current expenditures. Most issuers constantly reissue their commercial paper and use the proceeds (or bank loans) to repay maturing paper. Commercial paper may default if the issuer cannot continue to obtain
financing in this fashion. The short maturity of commercial paper reduces both the interest rate and credit risk as compared to other debt securities of the same issuer.
The Funds may invest in commercial paper
issued under Section 4(a)(2) of the Securities Act of 1933, as amended (1933 Act). By law, the sale of Section 4(a)(2) commercial paper is restricted and is generally sold only to institutional investors, such as the Funds. A Fund purchasing Section
4(a)(2) commercial paper must agree to purchase the paper for investment purposes only and not with a view to public distribution. Section 4(a)(2) commercial paper is normally resold to other institutional investors through investment dealers who
make a market in Section 4(a)(2) commercial paper and, thus, provide liquidity.
The Adviser determines whether Section
4(a)(2) commercial paper and certain other restricted securities are liquid in accordance with the Funds’ procedures. Section 4(a)(2) commercial paper and other restricted securities that the Adviser has determined to be liquid are not subject
to a Fund’s investment limitation applicable to illiquid securities.
Concentration
.
All of the Funds have adopted a fundamental investment policy that prohibits a Fund from investing 25% or more of its assets in the securities of companies in
any one industry (except as described under “Investment Policies and Limitations
—
Fundamental Limitations
—
Concentration of Investments”). This policy does not apply to securities in which a Fund may invest that are issued by the U.S. government. For purposes of this policy, the Adviser determines
industry classifications in accordance with the Global Industry Classification Standards, an industry classification system developed by Standard & Poor’s Corporation in collaboration with MSCI, or other sources. In the absence of such
classification, or if the Adviser determines in good faith based on its own information that the economic characteristics affecting a particular issuer make it more appropriate to be considered engaged in a different industry, the Adviser may
classify an issuer accordingly. As a result, the composition of an industry or group of industries may change from time to time. For purposes of the fundamental investment policy regarding industry concentration, “group of industries”
means a group of related industries, as determined in good faith by the Adviser, based on published classifications or other sources.
Convertible Securities.
All of the Funds
(other than the
Money Market Funds
) may invest in convertible securities, which are fixed income securities that give the holder the option to exchange for equity securities at a specified conversion price within a specified time. The
option allows the holder to realize additional returns if the market price of the equity securities exceeds the conversion price. For example, if the holder owns fixed income securities convertible into shares of common stock at a conversion price
of $10 per share and the shares have a market value of $12, the holder could realize an additional $2 per share by converting the fixed income securities.
To compensate for the value of the
conversion option, convertible securities have lower yields than comparable fixed income securities. In addition, the conversion price exceeds the market value of the underlying equity securities at the time a convertible security is issued. Thus,
convertible securities may provide lower returns than non-convertible fixed income securities or equity securities depending upon changes in the price of the underlying equity securities. However, convertible securities permit the holder to realize
some of the potential appreciation of the underlying equity securities with less risk of losing its initial investment.
The Funds treat convertible securities as
both fixed income and equity securities for purposes of their investment policies and limitations because of their unique characteristics.
Core Style Investing
.
The
Small-Cap Core Fund
engages in core style investing. The
returns on “core” securities may or may not move in tandem with the returns on other styles of investing or the overall stock market. Thus, the value of the Fund’s investments will vary and at times may be lower or higher than that
of other types of investments.
B-5
Corporate Debt Securities.
The
Fixed Income, Alternative Strategies, Prime Money Market
, and
Institutional Prime Money Market Funds
may invest in corporate debt securities, which are fixed income securities issued by businesses. Notes, bonds, debentures,
and commercial paper are the most common types of corporate debt securities. The credit risks of corporate debt securities vary widely among issuers.
Corporate Restructuring
.
The
Mid-Cap Value, Mid-Cap Growth, Small-Cap Value, Small-Cap Growth,
and
Alternative Strategies Funds
may invest in securities of companies that are involved in company
turnarounds or corporate restructurings. Investment in these securities may present special risk because of the high degree of uncertainty that can be associated with such events. It is possible that the market price of securities of companies
involved in company turnarounds or corporate restructurings may be subject to significant and unpredictable fluctuations.
Credit Enhancement.
Some of the Funds may invest in credit-enhanced securities. Certain acceptable investments may be credit-enhanced by a guaranty, letter of credit, or insurance. The Adviser may evaluate a security
based, in whole or in part, upon the financial condition of the party providing the credit enhancement (the credit enhancer). The bankruptcy, receivership, or default of the credit enhancer will adversely affect the quality and marketability of the
underlying security. In certain cases, credit-enhanced securities may be treated as having been issued both by the issuer and the credit enhancer.
Credit Risks.
Credit risk is the possibility that an issuer will default on a security by failing to pay interest or principal when due. If an issuer defaults, a Fund may lose money. Many fixed income securities
receive credit ratings from services such as Standard & Poor’s and Moody’s Investors Service. These services assign ratings to securities by assessing the likelihood of issuer default. Lower credit ratings correspond to higher credit
risk. If a security has not received a rating, a Fund must rely entirely upon the Adviser’s credit assessment.
When a Fund invests in investment grade
bonds or other debt securities or convertible securities, some may be rated in the lowest investment grade category (i.e., BBB or Baa). Bonds rated lower than BBB by Standard & Poor’s or Baa by Moody’s Investors Service have
speculative characteristics. The Adviser or Sub-Adviser, as applicable, will determine the credit quality of unrated bonds, which may have greater risk (but a potentially higher yield) than comparably rated bonds. If a bond is downgraded, the
Adviser or Sub-Adviser, as applicable, will re-evaluate the bond and determine whether the bond should be retained or sold. The Money Market Funds may invest only in securities which have been determined by the Board to present minimal credit risks
to the Funds, based on the Board’s consideration of a number of factors including, but not limited to, financial condition, sources of liquidity, ability to react to market-wide and issuer- or guarantor-specific events, and positions within
the industry and industry strength.
Fixed income securities generally
compensate for greater credit risk by paying interest at a higher rate. The difference between the yield of a security and the yield of a U.S. Treasury security with a comparable maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market conditions. A security’s spread also may increase if the security’s rating is lowered, or the security is perceived to have an increased credit risk. An increase in
the spread will cause the price of the security to decline.
Demand Features.
The
Alternative Strategies, Ultra-Short Tax-Free, Short Tax-Free, Intermediate Tax-Free,
and
Money Market Funds
may purchase securities subject to a demand feature, which may take the form of a put or standby commitment. Demand features permit the holder
to demand payment of the value of the security (plus any accrued interest) from either the issuer of the security or a third-party. Demand features help make a security more liquid, although an adverse change in the financial health of the provider
of a demand feature (such as bankruptcy) will negatively affect the liquidity of the security. Other events also may terminate a demand feature which also causes liquidity to be affected.
Demand Master Notes.
All of the Funds (other than the
Low Volatility Equity, Dividend Income, Large-Cap Value, Large-Cap Growth, Mid-Cap Value, Mid-Cap Growth, Small-Cap Value,
Small-Cap Growth, Pyrford International Stock, LGM Emerging Markets Equity,
and
Intermediate Tax-Free Funds
) may invest in demand master notes, which are short-term borrowing arrangements between a corporation or government agency and an institutional lender (such as a Fund) payable upon demand by either
party. A party may demand full or partial payment, and the notice period for demand typically ranges from one to seven days. Many master notes give the holder the option of increasing or decreasing the principal amount of the master note on a daily
or weekly basis within certain limits. Demand master notes usually provide for floating or variable rates of interest.
Depositary Receipts.
All of the Funds (other than the
Intermediate Tax-Free
and
Money Market Funds
) may purchase depositary receipts, which are securities representing common stock in non-U.S. issuers. American Depositary Receipts
(ADRs) are receipts issued by a U.S. bank that represent an interest in shares of a foreign-based corporation. ADRs provide a way to buy shares of foreign-based companies in the U.S. rather than in overseas markets. European Depositary Receipts
(EDRs) and Global Depositary
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Receipts (GDRs) are receipts issued by foreign banks or trust companies or
foreign branches of U.S. banks that represent an interest in shares of either a foreign or U.S. corporation. Only the
International and Global
and
Alternative Funds
may
purchase EDRs and GDRs. Depositary receipts may not be denominated in the same currency as the underlying securities into which they may be converted and are subject to currency risks. Depositary receipts involve many of the same risks of investing
directly in foreign securities.
Derivative Instruments.
Derivative instruments are financial instruments that require payments based upon changes in the values of designated (or underlying) securities, currencies, commodities, interest rates, credit
ratings, or other market factors (reference instruments). Some derivative instruments (such as futures, forwards, and options) require payments relating to a future trade involving the underlying asset. Other derivative instruments (such as swaps)
require payments relating to the income or returns from the underlying asset. The other party to a derivative instrument is referred to as a counterparty.
In General.
The
Money Market Funds
may not purchase or sell derivative instruments. The other Funds, in
pursuing their individual objectives and to the extent specified herein or in the Prospectuses, may (i) purchase and sell (write) both put options and call options on securities, swap agreements, securities indexes, and foreign currencies, (ii)
enter into futures contracts based on securities, interest rates, indices, currencies, and/or U.S. government bonds, and (iii) purchase and sell options on such futures contracts for hedging purposes to seek to replicate the composition and
performance of a particular index or as part of their overall investment strategies. The Funds may purchase and sell foreign currency options for purposes of increasing exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one country to another, except that those Funds that may not invest in foreign currency-denominated securities may not enter into transactions involving currency futures or options. The Funds may enter into swap agreements with
respect to interest rates, credit events, single currency securities, and indices of securities, and to the extent a Fund may invest in foreign currency-denominated securities, may enter into swap agreements with respect to foreign currencies. The
Funds also may invest in structured notes. If other types of financial instruments, including other types of options, futures contracts or futures options, are traded in the future, the Board may authorize their use.
Derivatives may be more volatile than
investments directly in the underlying reference instrument. Derivatives may create economic leverage and can result in losses to the Funds that exceed the original amount invested. The value of some derivative instruments in which a Fund invests
may be particularly sensitive to changes in prevailing interest rates and, like the other investments of the Fund, the ability of the Fund to successfully utilize these instruments may depend in part upon the ability of the Adviser to forecast
interest rates and other economic factors correctly. If a Fund’s Adviser incorrectly forecasts such factors and has taken positions in derivative instruments contrary to prevailing market trends, a Fund could be exposed to a risk of
loss.
The Funds might not employ any
of the derivatives strategies described herein and no assurance can be given that any strategy used will succeed. If the Adviser incorrectly forecasts securities prices, interest rates, credit events, market values, or other economic factors in
utilizing a derivatives strategy for a Fund, the Fund might be in a worse position than if it had not entered into the transaction at all. Also, suitable derivative transactions may not be available in all circumstances. The use of these strategies
involves additional costs as well as certain special risks, including a possible imperfect correlation, or even no correlation, between price movements of derivative instruments and price movements of related investments. Although some strategies
involving derivative instruments can reduce the risk of loss for a Fund, they also can reduce the opportunity for gain, or even result in losses, by offsetting favorable price movements in related investments or otherwise due to (i) the possible
inability of the Fund to purchase or sell a portfolio security at a time that otherwise would be favorable, (ii) the possible need to sell a portfolio security at a disadvantageous time because the Fund is required to maintain asset coverage or
offsetting positions in connection with transactions in derivative instruments, and (iii) the possible inability of the Fund to close out or to liquidate its derivatives positions. Valuation of derivatives may be more difficult, and liquidity may be
reduced, in times of market turmoil since many investors and market makers may be reluctant to purchase complex instruments or quote prices for them. In addition, a Fund’s use of such instruments may cause the Fund to realize higher amounts of
short-term capital gains (generally taxable to shareholders at ordinary income tax rates for federal income tax purposes) than if it had not used such instruments. If a Fund gains exposure to an asset class using derivative instruments backed by a
collateral portfolio of fixed income instruments, changes in the value of the fixed income instruments may result in greater or lesser exposure to that asset class than would have resulted from a direct investment in securities comprising that asset
class. Additionally, a loss may be sustained by a Fund as a result of the failure of a counterparty to a derivative contract to make required payments or otherwise fulfill its obligations under the derivative contract’s terms.
Each Fund (except the
Alternative Strategies Fund
and
Global Long/Short Equity Fund
) is operated by a person that has claimed an exclusion from the registration as a “commodity pool
operator” (CPO) in accordance with Rule 4.5 under the Commodity Exchange Act (the CEA), and, therefore, such person is not subject to registration or regulation as a CPO with respect to the Funds under the CEA. As a result, each Fund must
comply with one of the exclusions set forth in Rule 4.5, which limits a Fund’s investment in commodity futures, options on commodity futures, or certain swaps (used for purposes other than
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“bona fide hedging,” as such term is defined
in the rules of the Commodities Futures Trading Commission (CFTC)). If a Fund is no longer operated in compliance with the exclusion, the Adviser and any Sub-Adviser would be subject to regulation under the CEA. The CFTC has neither reviewed nor
approved reliance on these exclusions, or the Funds, their investment strategies, their prospectus, or this statement of additional information.
With respect to the
Alternative Strategies Fund
and
Global Long/Short Equity Fund
, the Adviser is registered as a “commodity pool operator” (CPO) under the Commodity Exchange Act (CEA)
and the rules of the Commodity Futures Trading Commission (CFTC) and is subject to CFTC regulation with respect to the Fund. The CFTC has adopted rules regarding the disclosure, reporting and recordkeeping requirements that will apply with respect
to the Fund as a result of the Adviser’s registration as a CPO. Generally, these rules allow for substituted compliance with CFTC disclosure and shareholder reporting requirements, based on the Adviser’s compliance with comparable SEC
requirements. This means that for most of the CFTC’s disclosure and shareholder reporting applicable to the Adviser as the Fund’s CPO, the Adviser’s compliance with SEC disclosure and shareholder reporting will be deemed to fulfill
the Adviser’s CFTC compliance obligations. However, as a result of CFTC regulation with respect to the Fund, the Fund may incur additional compliance and other expenses. The Adviser is also registered as a “commodity trading
advisor” (CTA), but relies on an exemption from CTA regulation available for a CTA that also serves as the Fund’s CPO. The CFTC has neither reviewed nor approved the Fund, its investment strategies, its prospectus or this SAI.
The regulation of derivatives is a rapidly
changing area of law and is subject to modification by government and judicial action. It is not possible to predict fully the effects of current or future regulation. New requirements, even if not directly applicable to the Funds, may increase the
cost of a Fund’s investments and cost of doing business, which could adversely affect investors.
Futures Contracts and Options on Futures
Contracts.
A futures contract is an agreement between two parties to buy or sell a specific amount of an underlying reference instrument (such as a security or commodity) for a specified price on a
specified future date. These contracts are traded on exchanges so that, in most cases, either party can close out its position on the exchange for cash without delivering the security or commodity, or other underlying reference instrument. An option
on a futures contract (futures option) gives the holder of the option the right to buy or sell a position in a futures contract to the writer of the option at a specified price and on or before a specified expiration date.
The
Fixed
Income, Alternative, Target Risk
and
Disciplined International Equity Funds
may use financial futures contracts and options for various purposes including for managing duration, which measures a fixed
income security’s average life and reflects the present value of the security’s cash flow. Selling futures contracts or purchasing put options can accomplish the shortening of a portfolio’s duration in anticipation of higher
interest rates. Conversely, purchasing futures contracts or call options can accomplish the lengthening of portfolio duration in anticipation of lower interest rates. The use of these instruments in this manner is preferred to either liquidating or
purchasing securities held by the Funds to achieve the portfolio’s duration targets because it reduces transaction costs to the Funds. In addition, the use of financial futures contracts and related options permits the Funds’ portfolio
managers to react in a more timely manner to changes in interest rates.
A Fund may invest in financial futures
contracts and options thereon with respect to, but not limited to, interest rates and security indexes. To the extent that a Fund may invest in foreign currency-denominated securities, it also may invest in foreign currency futures contracts and
options thereon.
An interest rate,
commodity, foreign currency, or index futures contract provides for the future sale by one party and purchase by another party of a specified quantity of a financial instrument, commodity, foreign currency, or the cash value of an index at a
specified price and time. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of
the contract and the price at which the index contract was originally written. Although the value of an index might be a function of the value of certain specified securities, no physical delivery of those securities is made. A public market exists
in futures contracts covering a number of indexes as well as financial instruments and foreign currencies, including the S&P 500, the S&P Midcap 400, the Nikkei 225, the NYSE composite, U.S. Treasury bonds, U.S. Treasury notes, the
Government National Mortgage Association (GNMA) Certificates, three-month U.S. Treasury bills, 90-day commercial paper, bank certificates of deposit, Eurodollar certificates of deposit, the Australian dollar, the Canadian dollar, the British pound,
the Japanese yen, the Swiss franc, the Mexican peso, and certain multinational currencies, such as the euro. It is expected that other futures contracts will be developed and traded in the future.
A Fund may purchase or write call futures
options and put futures options, to the extent specified herein or in the Prospectus. Futures options possess many of the same characteristics as options on securities and indexes (discussed above). A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at any time during the period of the option. In return for the premium paid by the buyer, the seller assumes
the risk of taking a possibly adverse futures position. Upon exercise of a call option, the holder acquires
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a long position in the futures contract and the writer is
assigned the opposite short position. In the case of a put option, the opposite is true. A call option is “in the money” if the value of the futures contract that is the subject of the option exceeds the exercise price. A put option is
“in the money” if the exercise price exceeds the value of the futures contract that is the subject of the option.
Limitations on Use of Futures Contracts and
Futures Options.
A Fund will only enter into futures contracts and futures options that are standardized and traded on a U.S. or foreign exchange, board of trade, or similar entity, or quoted on an
automated quotation system.
When a purchase or sale of a futures
contract is made by a Fund, the Fund is required to deposit with its custodian (or broker, if legally permitted) a specified amount of assets (initial margin) determined to be liquid by the Adviser. The margin required for a futures contract is set
by the exchange on which the contract is traded and may be modified during the term of the contract. Margin requirements on foreign exchanges may be different than U.S. exchanges. The initial margin is in the nature of a performance bond or good
faith deposit on the futures contract that is returned to the Fund upon termination of the contract, assuming all contractual obligations have been satisfied. Each Fund expects to earn interest income on its initial margin deposits. A futures
contract held by a Fund is valued daily at the official settlement price of the exchange on which it is traded. Each day the Fund pays or receives cash, called “variation margin,” equal to the daily change in value of the futures
contract. This process is known as “marking to market.” Variation margin does not represent a borrowing or loan by the Fund, but is instead a settlement between the Fund and the broker of the amount one would owe the other if the futures
contract expired on that date. In computing daily net asset value, the Fund will mark to market its open futures positions.
A Fund also is required to deposit and
maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market
value of the option, and other futures positions held by the Fund.
Although some futures contracts call for
making or taking delivery of the underlying securities or commodities, generally those obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (same exchange, underlying security or index, and
delivery month). Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity with the same delivery date. If an offsetting purchase price is
less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the Fund realizes a capital gain, or if it is
less, the Fund realizes a capital loss. The transaction costs also must be included in these calculations.
A Fund may write a covered straddle
consisting of a call and a put written on the same underlying futures contract. A straddle will be covered when sufficient assets are deposited to meet the Fund’s immediate obligations. The Fund may use the same liquid assets to cover both the
call and put options where the exercise price of the call and put are the same, or the exercise price of the call is higher than that of the put. In such a case, the Fund also will segregate or earmark liquid assets equivalent to the amount, if any,
by which the put is “in the money.”
When purchasing a futures contract, a Fund
will maintain assets determined to be liquid by the Adviser with its custodian in an amount that, when added to the amounts deposited with a futures commission merchant (FCM) as margin are equal to the market value of the instruments underlying the
futures contract; provided that for cash settled futures, a Fund may segregate or earmark only the net amount due on the contract on a mark-to-market basis. These amounts will be marked to market on a daily basis, resulting in adjustments to the
amounts maintained with the custodian. Alternatively, the Fund may cover its position by purchasing a put option on the same futures contract with a strike price not lower than the price of the contract held by the Fund.
When selling a futures contract, a Fund
will maintain assets determined to be liquid by the Adviser with its custodian in an amount that is equal to the market value of the instruments underlying the contract; provided that for cash-settled futures, a Fund may segregate or earmark only
the net amount due on the contract on a mark-to-market basis. These amounts will be marked to market on a daily basis, resulting in adjustments to the amounts maintained with the custodian. Alternatively, the Fund may cover its position by owning
the instruments underlying the contract (or, in the case of an index futures contract, a portfolio with a volatility substantially similar to that of the index on which the futures contract is based), or by holding a call option permitting the Fund
to purchase the same futures contract at a price no higher than the price of the contract written by the Fund (or at a higher price if the difference is maintained in liquid assets with a Fund’s custodian).
When selling a call option on a futures
contract, a Fund will maintain assets determined to be liquid by the Adviser with its custodian in an amount that, when added to the amounts deposited with an FCM as margin, is equal to the market value of the futures contract underlying the call
option. These amounts will be marked to market on a daily basis, resulting in adjustments to the amounts maintained with the custodian. Alternatively, the Fund may cover its position by entering into a long position in the same futures contract at a
price no higher than the strike price of the call option, by owning the instruments underlying the
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futures contract, or by holding a separate call option
permitting the Fund to purchase the same futures contract at a price not higher than the strike price of the call option sold by the Fund.
When selling a put option on a futures
contract, a Fund will maintain assets determined to be liquid by the Adviser with its custodian in an amount that is equal to the purchase price of the futures contract, less any margin on deposit. These amounts will be marked to market on a daily
basis, resulting in adjustments to the amounts maintained with the custodian. Alternatively, the Fund may cover the position either by entering into a short position in the same futures contract, or by owning a separate put option permitting it to
sell the same futures contract, so long as the strike price of the purchased put option is not lower than the strike price of the put option sold by the Fund.
The requirements for qualification as a
regulated investment company (RIC) under the Code also may limit the extent to which a Fund may enter into futures, futures options, or forward contracts.
Risks Associated with Futures Contracts and
Futures Options Generally.
The following describes the general risks of investing in futures contracts and futures options:
| • | Asset Segregation Risk. Because a Fund typically must segregate or earmark liquid assets to cover open positions with respect to derivatives, the Fund may incur a loss if it needs to sell a futures contract or futures option at a disadvantageous time to maintain that asset coverage. |
| • | Management Risk . Financial futures contracts and related options are highly specialized instruments that require investment techniques and risk analyses different from those associated with stocks and bonds. A Fund’s use of financial futures and options may not always be a successful strategy and using them could lower a Fund’s return. Further, if the Adviser incorrectly forecasts interest rates or other economic factors and has taken positions in financial futures contracts or options contrary to prevailing market trends, a Fund could be exposed to a risk of loss. |
| • | Correlation Risk . Imperfect correlation between the change in market values of the securities held by a Fund and the prices of related futures contracts and options on futures purchased or sold by a Fund may result in losses in excess of the amount invested in these instruments. |
| • | Market Risk. Financial futures contracts and related options, like most other investments, are subject to the risk that the market value of the investment will decline. Adverse movements in the value of the underlying assets can expose the Funds to losses. |
| • | Exchange Limit Risk . Futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of the current trading session. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may work to prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses. |
| • | Liquidity Risk. No assurance can be made that a liquid market will exist at a time when a Fund seeks to close out a futures contract or a futures option position, in which case the Fund would remain obligated to meet margin requirements until the position is closed. In addition, many of the contracts discussed herein are relatively new instruments without a significant trading history. As a result, no assurance can be made that an active secondary market will develop or continue to exist. |
| • | Counterparty and FCM Risk. A loss may be sustained as a result of the failure of another party to the contract to make required payments or otherwise fulfill its obligations under the contract’s terms. A risk exists that a Fund may lose the initial and variation margin deposits in the event of bankruptcy of an FCM with which the Fund has an open position in a futures contract. The assets of a Fund may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Fund might be limited to covering only a pro rata share of all available funds and margin segregated on behalf of an FCM’s customers. If the FCM does not provide accurate reporting, a Fund also is subject to the risk that the FCM could use the Fund’s assets, which are held in an omnibus account with assets belonging to the FCM’s other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty. |
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| • | Volatility Risk. Futures contracts and related options may be more volatile than investments directly in the underlying reference instrument and may be more sensitive to interest rate changes and market price fluctuations than securities or other types of investments. |
| • | Leverage Risk. Futures contracts and related options may create economic leverage and can result in losses to a Fund that exceed the original amount invested. |
| • | Hedging Transactions Risk. Several risks are associated with the use of futures contracts and futures options as hedging techniques. A purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract. No guarantee exists of a correlation between price movements in the hedging vehicle and in the Fund securities being hedged. In addition, significant differences may exist between the securities and futures markets that could result in an imperfect correlation between the markets, causing a given hedge not to achieve its objectives. The degree of imperfection of correlation depends on circumstances such as variations in speculative market demand for futures and futures options on securities, including technical influences in futures trading and futures options and differences between the financial instruments being hedged and the instruments underlying the standard contracts available for trading in such respects as interest rate levels, maturities, and creditworthiness of issuers. A decision as to whether, when, and how to hedge involves the exercise of skill and judgment. Even a well-conceived hedge may be unsuccessful to some degree because of market behavior or unexpected interest rate trends. |
Hybrid Instruments.
A hybrid instrument is a type of potentially high-risk derivative that combines a traditional stock, bond, or commodity with an option or forward contract. Generally, the principal amount, amount
payable upon maturity or redemption, or interest rate of a hybrid is tied (positively or negatively) to the price of some commodity, currency or securities index, or another interest rate, or some other economic factor (each a benchmark). The
interest rate or (unlike most fixed income securities) the principal amount payable at maturity of a hybrid security may be increased or decreased, depending on changes in the value of the benchmark. An example of a hybrid could be a bond issued by
an oil company that pays a small base level of interest with additional interest that accrues in correlation to the extent to which oil prices exceed a certain predetermined level. Such a hybrid instrument would be a combination of a bond and a call
option on oil.
Hybrids can be
used as an efficient means of pursuing a variety of investment objectives, including currency hedging, duration management, and increased total return. Hybrids may not bear interest or pay dividends. The value of a hybrid or its interest rate may be
a multiple of a benchmark and, as a result, may be leveraged and move (up or down) more steeply and rapidly than the benchmark. These benchmarks may be sensitive to economic and political events, such as commodity shortages and currency
devaluations, that cannot be readily foreseen by the purchaser of a hybrid. Under certain conditions, the redemption value of a hybrid could be zero. Thus, an investment in a hybrid may entail significant market risks that are not associated with a
similar investment in a traditional, U.S. dollar-denominated bond that has a fixed principal amount and pays a fixed rate or floating rate of interest. A Fund’s purchase of a hybrid also exposes the Fund to the credit risk of the issuer of the
hybrid. Those risks may cause significant fluctuations in the net asset value of the Fund. Each Fund will not invest more than 5% of its total assets at the time of investment in hybrid instruments.
Certain issuers of structured products such
as hybrid instruments may be deemed to be investment companies as defined in the 1940 Act. As a result, a Fund’s investments in those products may be subject to limits applicable to investments in investment companies and may be subject to
restrictions contained in the 1940 Act.
Options on Securities and Indexes.
A Fund may, to the extent specified herein or in the Prospectus, purchase and sell both put and call options on fixed income or other securities or indexes in standardized contracts traded on foreign
or domestic securities exchanges, boards of trade or similar entities, or quoted on NASDAQ or on an over-the-counter market, and agreements, sometimes called cash puts, which may accompany the purchase of a new issue of bonds from a
dealer.
An option on a
security (or index) is a contract that gives the holder of the option, in return for a premium, the right to buy from (in the case of a call) or sell to (in the case of a put) the writer of the option the security underlying the option (or the cash
value of the index) at a specified exercise price at any time during the term of the option. The writer of an option on a security has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price
or to pay the exercise price upon delivery of the underlying security. Upon exercise, the writer of an option on an index is obligated to pay the difference between the cash value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect features of a particular financial or securities market, a specific group of financial instruments or securities, or certain economic indicators.)
A Fund will not write a call option or put
option unless the option is “covered.” In the case of a call option on a security, the option is “covered” if the Fund owns the security underlying the call or has an absolute and immediate right to acquire that security
without additional cash consideration upon conversion or exchange of other securities held by the Fund (or, if additional cash consideration is required, cash or other assets determined to be liquid in such amount are segregated or
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earmarked). For a call option on an index, the option is
covered if the Fund maintains with its custodian assets determined to be liquid by the Adviser in an amount equal to the contract value of the index. A call option also is covered if the Fund holds a call on the same security or index as the call
written where the exercise price of the call held is (i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written, provided the difference is maintained by the Fund in segregated or
earmarked assets determined to be liquid by the Adviser. A put option on a security or an index is “covered” if the Fund segregates or earmarks assets determined to be liquid by the Adviser equal to the exercise price. A put option is
also covered if the Fund holds a put on the same security or index as the put written where the exercise price of the put held is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put
written, provided the difference is maintained by the Fund in segregated or earmarked assets determined to be liquid by the Adviser.
If an option written by a Fund expires
unexercised, the Fund realizes a short-term capital gain equal to the premium received at the time the option was written. If an option purchased by a Fund expires unexercised, the Fund realizes a capital loss equal to the premium paid. Prior to the
earlier of exercise or expiration, an exchange traded option may be closed out by an offsetting purchase or sale of an option of the same series (type, exchange, underlying security or index, exercise price, and expiration). No assurance exists,
however, that a closing purchase or sale transaction can be effected when the Fund desires.
A Fund may sell a put or call option it has
previously purchased, which could result in a net gain or loss depending on whether the amount realized on the sale is more or less than the premium and other transaction costs paid on the put or call option being sold. Prior to exercise or
expiration, an option may be closed out by an offsetting purchase or sale of an option of the same series. A Fund will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received
from writing the option or, if it is more, the Fund will realize a capital loss. If the premium received from a closing sale transaction is more than the premium paid to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security or index in relation to the exercise
price of the option, the volatility of the underlying security or index, and the time remaining until the expiration date.
The premium paid for a put or call option
purchased by a Fund is an asset of the Fund. The premium received for an option written by a Fund is recorded as a deferred credit. The value of an option purchased or written is marked to market daily and is valued at the closing price on the
exchange on which it is traded or, if not traded on an exchange or no closing price is available, at the mean between the last bid and asked prices.
A Fund may write a covered straddle
consisting of a combination of a call and a put written on the same underlying security. A straddle will be covered when sufficient assets are designated for such purpose on a Fund’s books to meet the Fund’s immediate obligation. The
Fund may use the same liquid assets to cover both the call and put options where the exercise price of the call and put are the same, or the exercise price of the call is higher than that of the put. In such a case, the Fund also will segregate or
earmark liquid assets equivalent to the amount, if any, by which the put is “in the money.”
Several risks are associated with
transactions in options on securities and on indexes. For example, significant differences exist between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to
achieve its objective. A decision as to whether, when, and how to use options involves the exercise of skill and judgment. Even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events.
During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity to profit from a price increase in the underlying security above the exercise price, but, as long as its obligation as a writer continues, has retained the risk of loss
should the price of the underlying security decline.
The writer of an option has no control over
the time when it may be required to fulfill its obligation as a writer of the option. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction to terminate its obligation under the option and must
deliver the underlying security at the exercise price. If a put or call option purchased by the Fund is not sold when it has remaining value and if the market price of the underlying security remains equal to or greater than the exercise price (in
the case of a put) or remains less than or equal to the exercise price (in the case of a call), the Fund will lose its entire investment in the option. Also, where a put or call option on a particular security is purchased to hedge against price
movements in a related security, the price of the put or call option may move more or less than the price of the related security.
No assurance exists of a liquid market when
a Fund seeks to close out an option position. If a Fund were unable to close out an option that it had purchased on a security, it would have to exercise the option to realize any profit or the option may expire worthless. If a Fund were unable to
close out a covered call option that it had written on a security, it would not be able to sell the underlying security unless the option expired without exercise. As the writer of a covered call option, a Fund forgoes, during the option’s
life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the exercise price of the call.
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If trading were suspended in an option
purchased by a Fund, the Fund would not be able to close out the option. If restrictions on exercise were imposed, the Fund might be unable to exercise an option it had purchased. Except to the extent that a call option on an index written by the
Fund is covered by an option on the same index purchased by the Fund, movements in the index may result in a loss to the Fund; however, such losses may be mitigated by changes in the value of the Fund’s securities during the period the option
was outstanding.
Foreign Currency
Transactions.
Foreign currency transactions generally are used by the
Small-Cap Core, TCH Core Plus Bond, International and Global, Target Risk
and
Alternative Funds
to obtain foreign currencies to settle securities transactions. They also can be
used as a hedge to protect assets against adverse changes in foreign currency exchange rates or regulations. When a Fund uses foreign currency exchanges as a hedge, it also may limit potential gain that could result from an increase in the value of
such currencies. A Fund may be affected either favorably or unfavorably by fluctuations in the relative rates of exchange between the currencies of different nations. To the extent that a Fund invests directly in foreign currencies or in securities
denominated in or that trade in foreign currencies, the Fund is subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to
the currency being hedged. Foreign currency hedging transactions include forward foreign currency exchange contracts, foreign currency futures contracts, and purchasing put or call options on foreign currencies.
Exchange-Traded Futures Contracts.
Exchange-traded futures contracts for the purchase or sale of foreign currencies (Foreign Currency Futures) are used to hedge against anticipated changes in exchange rates that might adversely affect
the value of a Fund’s portfolio securities or the prices of securities that a Fund intends to purchase in the future. The successful use of Foreign Currency Futures depends on the ability to forecast currency exchange rate movements correctly.
Should exchange rates move in an unexpected manner, a Fund may not achieve the anticipated benefits of Foreign Currency Futures or may realize losses. For more information about futures contracts generally, see “Futures Contracts and Options
on Futures Contracts,” “Limitations on Use of Futures Contracts and Futures Options,” “Risks Associated with Futures Contracts and Futures Options Generally,” and “Hedging Transactions Risk”
above.
Forward Foreign Currency
Exchange Contracts.
Forward foreign currency exchange contracts (Forward Contracts) are used to minimize the risks associated with changes in the relationship between the U.S. dollar and foreign
currencies. They are used to lock in the U.S. dollar price of a foreign security. A Forward Contract is a commitment to purchase or sell a specific currency for an agreed price at a future date.
If the Adviser believes a foreign currency
will decline against the U.S. dollar, a Forward Contract may be used to sell an amount of the foreign currency approximating the value of a Fund’s security that is denominated in the foreign currency. The success of this hedging strategy is
highly uncertain due to the difficulties of predicting the values of foreign currencies, the challenges of precisely matching Forward Contract amounts, and because of the constantly changing value of the securities involved. A Fund will not enter
into Forward Contracts for hedging purposes in a particular currency in an amount in excess of a Fund’s assets denominated in that currency. Conversely, if the Adviser believes that the U.S. dollar will decline against a foreign currency, a
Forward Contract may be used to buy that foreign currency for a fixed dollar amount, which is known as cross-hedging.
In these transactions, a Fund will
segregate or earmark assets with a market value equal to the amount of the foreign currency purchased. Therefore, the Fund will always have cash, cash equivalents, or high quality debt securities available to cover Forward Contracts or to limit any
potential risk. The segregated or earmarked assets will be priced daily.
Forward Contracts may limit potential gain
from a positive change in the relationship between the U.S. dollar and foreign currencies. Unanticipated changes in currency prices may result in poorer overall performance for a Fund than if it had not engaged in such contracts.
At the maturity of a currency or cross
currency forward, a Fund may either exchange the currencies specified at the maturity of a forward contract or, prior to maturity, the Fund may enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing
transactions with respect to forward contracts are usually effected with the counterparty to the original forward contract. Some Forward Contracts do not provide for physical settlement of two currencies. Instead, these contracts are settled by a
single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (a non-deliverable forward). Under definitions adopted by the CFTC and the Securities
and Exchange Commission, non-deliverable forwards are considered swaps. Although non-deliverable forwards have historically been traded in the over-the-counter (OTC) market, as swaps, they may in the future be required to be centrally cleared and
traded on public facilities. For more information on central clearing and trading of cleared swaps, see the later discussion of “Swap Agreements and Options on Swap Agreements.”
Foreign Currency Options.
A Fund that invests in foreign currency-denominated securities may buy or sell put and call options on foreign currencies, either on U.S. or foreign exchanges or in the over-the-counter market. A put
option on a foreign currency gives the purchaser of the option the right to sell a foreign currency at the exercise price until the option expires. A call option
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on a foreign currency gives the purchaser of the option
the right to purchase the currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be subject to position limits that may limit the ability of a Fund to reduce foreign currency risk using such
options. Over-the-counter options differ from traded options in that they are two-party contracts with price and other terms negotiated between buyer and seller and generally do not have as much market liquidity as exchange-traded options.
Purchasing and writing put and call options
on foreign currencies are used to protect a Fund’s portfolio against declines in the U.S. dollar value of foreign portfolio securities and against increases in the dollar cost of foreign securities to be acquired. Writing an option on foreign
currency constitutes only a partial hedge, up to the amount of the premium received. A Fund could lose money if it is required to purchase or sell foreign currencies at disadvantageous exchange rates. If exchange rate movements are adverse to a
Fund’s position, the Fund may forfeit the entire amount of the premium as well as incur related transaction costs.
Additional Risks of Derivatives Traded on
Foreign Exchanges
.
Options on securities, futures contracts, and foreign currencies may be traded on foreign exchanges. Such transactions may not be
regulated as effectively as similar transactions in the United States, may not involve a clearing mechanism and related guarantees, and are subject to the risk of governmental actions affecting trading in, or the prices of, foreign securities. The
value of such positions also could be adversely affected by (i) other complex foreign political, legal, and economic factors; (ii) lesser availability than in the United States of data on which to make trading decisions; (iii) delays in a
Fund’s ability to act upon economic events occurring in foreign markets during non-business hours in the United States; (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United
States; and (v) lesser trading volume.
Structured Notes and Indexed Securities.
Structured notes are derivative debt securities, the interest rate or principal of which is determined by an unrelated indicator. Indexed securities include structured notes as well as securities other
than debt securities, the interest rate or principal of which is determined by an unrelated indicator. Indexed securities may include a multiplier that multiplies the indexed element by a specified factor and, therefore, the value of such securities
may be very volatile. To the extent a Fund (except Small-Cap Core and Global Low Volatility Equity) invests in these securities, however, the Adviser analyzes these securities in its overall assessment of the effective duration of the Fund’s
portfolio in an effort to monitor the Fund’s interest rate risk.
Swap Agreements and Options on Swap
Agreements.
A Fund may engage in swap transactions, including, but not limited to, swap agreements on interest rates, security indexes, specific securities, and credit and event-linked swaps. To
the extent a Fund may invest in foreign currency-denominated securities, it also may invest in currency exchange rate swap agreements. A Fund also may enter into options on swap agreements (swap options).
A Fund may enter into swap transactions for
any legal purpose consistent with its investment objective and policies, such as for the purpose of attempting to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of
instruments in other markets, to protect against currency fluctuations, as a duration management technique, to protect against any increase in the price of securities a Fund anticipates purchasing at a later date, or to gain exposure to certain
markets in the most economical way possible.
Swap agreements are contracts between a
Fund and another party (the swap counterparty) involving the exchange of payments on specified terms over periods ranging from a few weeks to more than one year. A swap agreement may be negotiated bilaterally and traded over-the-counter between two
parties (for an uncleared swap) or, in some instances, must be transacted through an FCM and cleared through a clearing-house that serves as a central counterparty (for a cleared swap). As a result of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 and related regulatory developments, which have imposed comprehensive new regulatory requirements on swaps and swap market participants, certain categories of swaps, such as most types of standardized interest rate and credit
default swap agreements, are now subject to mandatory central clearing and some of these cleared swaps must be traded on an exchange or swap execution facility. It is expected that additional categories of swaps will in the future be designated as
subject to mandatory clearing and exchange trading. Mandatory clearing and exchange-trading of additional swaps will occur on a phased-in basis based on the type of market participant, CFTC approval of contracts for central clearing and public
trading facilities making such cleared swaps available to trade. Some categories of swaps also may be cleared and traded on exchanges on a voluntary basis. While the intent of these regulatory reforms requiring clearing and exchange trading for
swaps is to mitigate counterparty risk and increase liquidity and transparency in the swaps markets, mandatory clearing and exchange trading may increase trading costs and impose other risks.
In a standard swap transaction, two parties
agree to exchange the returns (or differentials in rates of return) and/or cash flows earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or
swapped between the parties are generally calculated with respect to a “notional amount,” i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign
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currency, or in a basket of securities representing a
particular index. A “quanto” or “differential” swap combines both an interest rate and a currency transaction. Other forms of swap agreements include (i) interest rate caps, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates exceed a specified rate, or “cap;” (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified rate, or “floor;” and (iii) interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given
minimum or maximum levels. With a floating rate, the fee may be pegged to a base rate, such as the LIBOR and is adjusted each period. Therefore, if interest rates increase over the term of the swap contract, the Fund may be required to pay a higher
fee at each swap reset date.
A Fund
may enter into credit default swap agreements. The buyer in a credit default contract is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation
has occurred. If an event of default occurs, the seller must pay the buyer the full notional value, or “par value,” of the reference obligation in exchange for the reference obligation. A Fund may be either the buyer or seller in a
credit default swap transaction. If the Fund is a buyer and no event of default occurs, the Fund will lose its investment and recover nothing. However, if an event of default occurs, the Fund (as the buyer) will receive the full notional value of a
reference obligation that may have little or no value. As a seller, the Fund receives a fixed rate of income throughout the term of the contract, which typically is between six months and three years, provided that there is no default event. If an
event of default occurs, the seller must pay the buyer the full notional value of the reference obligation. Credit default swap transactions involve greater risks than if a Fund had invested in the reference obligation directly.
A swap option is a contract that gives a
counterparty the right (but not the obligation) in return for payment of a premium, to enter into a new swap agreement or to shorten, extend, cancel, or otherwise modify an existing swap agreement at some designated future time on specified terms. A
Fund may write (sell) and purchase put and call swap options.
Most swap agreements entered into by the
Funds would calculate the obligations of the parties to the agreement on a net basis. Consequently, a Fund’s current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to the agreement (the net amount). A Fund’s current obligations under a swap agreement will be accrued daily (offset against any amounts owed to the Fund) and any
accrued but unpaid net amounts owed to a swap counterparty will be covered by segregating or earmarking assets determined to be liquid by the Adviser, to avoid any potential leveraging of the Fund’s portfolio. Obligations under swap agreements
so covered will not be construed to be senior securities for purposes of the Fund’s investment restriction concerning senior securities. A Fund will not enter into an over-the-counter swap agreement with any single party if the net amount owed
or to be received under existing contracts with that party would exceed 5% of the Fund’s total assets.
Whether a Fund’s use of swap
agreements or swap options will be successful in furthering its investment objective will depend on the ability of the Adviser to predict correctly whether certain types of investments are likely to produce greater returns than other investments.
Certain restrictions imposed on the Funds by the Code for qualification as a RIC may limit each Fund’s ability to use swap agreements.
Certain swaps may not be able to be
disposed of in the ordinary course of business within seven days at approximately the value at which the Fund has valued them and, therefore, they may be considered to be illiquid. If a swap transaction is particularly large or if the relevant
market is illiquid, a Fund may not be able to establish or liquidate a position at an advantageous time or price, which may result in significant losses. Moreover, in an uncleared swap the Fund bears the risk of loss of the amount expected to be
received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. In such an event, a Fund will have contractual remedies pursuant to the swap agreements, but bankruptcy and insolvency laws could affect the
Fund’s rights as a creditor. The Funds will enter into uncleared swaps only with counterparties that meet certain standards of creditworthiness (generally, such counterparties would have to be eligible counterparties under the terms of a
Fund’s repurchase agreement guidelines). However, in unusual or extreme market conditions, a counterparty’s creditworthiness and ability to perform may deteriorate rapidly and the availability of suitable replacement counterparties may
become limited.
As noted above,
certain types of swaps currently are, and more in the future will be, centrally cleared. Central clearing is designed to reduce counterparty credit risk and increase liquidity compared to uncleared swaps, but it does not eliminate those risks
completely. Swaps that are centrally cleared are subject to the creditworthiness of the clearing organization involved in the transaction. For example, a Fund could lose margin payments it has deposited with its FCM as well as the net amount of
gains not yet paid by the clearing organization if the FCM or clearing organization becomes insolvent or goes into bankruptcy. Credit risk of cleared swap participants is concentrated in a few clearing-houses and the consequences of insolvency of a
clearing-house are not clear. In the event of bankruptcy of the clearing organization, a Fund may be entitled to the net amount of gains the Fund is entitled to receive plus the return of margin owed to it only in proportion to the amount received
by the clearing
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organization’s other customers, potentially
resulting in losses to the Fund. Finally, the Funds are subject to the risk that, after entering into a cleared swap with an executing broker, no FCM or central counterparty is willing or able to clear the transaction. In such an event, a Fund may
be required to break the trade and make an early termination payment to the executing broker.
Swaps that are subject to mandatory
clearing are also required to be traded on swap execution facilities (SEFs), if any SEF makes the swap available to trade. An SEF is a trading platform where multiple market participants can execute swap transactions by accepting bids and offers
made by multiple other participants on the platform. Transactions executed on an SEF may increase market transparency and liquidity, but may require a Fund to incur increased expenses to access the same types of swaps that it has used in the
past.
Distressed Securities.
The
High Yield
and
Alternative Strategies Funds
may invest in distressed securities, which involve loans, loan participations, bonds, notes, non-performing and sub-performing mortgage loans that typically are unrated, lower-rated, in default, or
close to default. Many of these instruments are not publicly traded and may become illiquid. The prices of such instruments may be extremely volatile. Securities of distressed companies are generally more likely to become worthless than the
securities of more financially stable companies. Valuing such instruments may be difficult and a Fund may lose all of its investment, or it may be required to accept cash or securities with a value less than the Fund’s original investment.
Issuers of distressed securities are typically in a weak financial condition and may default, in which case a Fund may lose its entire investment.
Dollar Rolls.
The Funds may invest in dollar rolls, which are transactions whereby a Fund sells mortgage-backed securities with a commitment to buy similar, but not identical, mortgage-backed securities on a future
date at a lower price. Normally, one or both securities involved are “to be announced” mortgage-backed securities. Dollar rolls are subject to interest rate risks and credit risks. These transactions may create leverage risks. Dollar
roll transactions will cause a Fund to have an increased portfolio turnover rate.
Duration.
The
Fixed Income Funds
utilize various investment tools to manage a portfolio’s duration.
Duration is a measure of volatility in the price of a bond prior to maturity. Volatility is the magnitude of the change in the price of a bond relative to a change in the market interest rate. Volatility is based upon a bond’s coupon rate,
maturity date, and the level of market yields of similar bonds. Generally, bonds with lower coupons or longer maturities will be more volatile than bonds with higher coupons or shorter maturities. Duration combines these variables into a single
measure of price sensitivity to interest rate changes. For example, if interest rates decline by 1%, the market value of a portfolio with a duration of five years would rise by approximately 5%. Conversely, if interest rates increase by 1%, the
market value of the portfolio would decline by approximately 5%.
Equity Securities
The
Equity, International and Global,
and
Alternative
Funds
invest in equity securities, which are fundamental units of ownership in a company. The following describes the types of equity securities in which the Funds may invest:
Common Stocks.
Common stocks are the most prevalent type of equity security. Common stockholders are entitled to the net value of the issuer’s earnings and assets after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer’s earnings directly influence the value of its common stock.
Common Stocks of Foreign Companies.
Common stocks of foreign companies are equity securities issued by a corporation domiciled outside of the United States that trade on a domestic securities exchange.
Master Limited Partnerships (MLPs) and Other
Publicly Traded Partnerships
.
MLPs and other publicly traded partnerships are limited partnerships (or limited liability companies), the units of which are
listed and traded on a securities exchange. The Funds may invest in publicly traded partnerships that are expected to be treated as “qualified publicly traded partnerships” for federal income tax purposes. These include MLPs and other
entities qualifying under limited exceptions in the Code. Many MLPs derive income and capital gains from the exploration, development, mining or production, processing, refining, transportation or marketing of any mineral or natural resource, or
from real property. The value of MLP units fluctuates predominantly based on prevailing market conditions and the success of the MLP. The Funds may purchase common units of an MLP on an exchange as well as directly from the MLP or other parties in
private placements. Unlike owners of common stock of a corporation, owners of common units have limited voting rights and have no ability to annually elect directors.
MLPs generally distribute all available
cash flow (cash flow from operations less maintenance capital expenditures) in the form of quarterly distributions, but a Fund will be required for federal income tax purposes to include in its taxable income its allocable share of the MLP’s
income regardless of whether any distributions are made by the MLP. Thus, if the distributions received by a Fund from an MLP are less than that Fund’s allocable share of the MLP’s income, the Fund may be required to sell other
securities or utilize leverage so that it may satisfy the requirements to qualify as a RIC and avoid imposition of federal income and excise taxes at the Fund level. Common units typically have priority as to minimum quarterly distributions. In the
event of liquidation, common units have preference over subordinated units, but not debt or preferred units, to the remaining assets of the MLP.
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Holders of MLP units of a particular MLP
also are exposed to a remote possibility of liability for the obligations of that MLP under limited circumstances not expected to be applicable to the Funds. In addition, the value of a Fund’s investment in MLPs depends largely on the MLPs
being treated as “qualified publicly traded partnerships” for federal income tax purposes. If an MLP does not meet current federal income tax requirements to maintain partnership status, or if it is unable to do so because of federal
income tax law changes, it could be taxed as a corporation. In that case, the MLP would be obligated to pay federal income tax at the entity level and distributions received by a Fund generally would be taxed as dividend income for federal income
tax purposes. As a result, a reduction in a Fund’s cash flow could occur along with a material decrease in the value of the Fund’s shares. In addition, if an MLP in which a Fund invests does not qualify as a “qualified publicly
traded partnership” (and is otherwise not taxed as a corporation), income derived by the Fund will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership that would be qualifying
income if realized by the Fund. The receipt of non-qualifying income from such investments could jeopardize the Fund’s status as a RIC.
Preferred Stocks
.
Preferred stocks have the right to receive specified dividends or distributions before the payment of dividends or distributions on common stock. Some preferred
stocks also participate in dividends and distributions paid on common stock. Preferred stocks may provide for the issuer to redeem the stock on a specified date. A Fund may treat redeemable preferred stock as a fixed income security.
Warrants.
Warrants provide an option to buy the issuer’s stock or other equity securities at a specified price. When holding a warrant, a Fund may buy the designated shares by paying the exercise price
before the warrant expires. Warrants may become worthless if the price of the stock does not rise above the exercise price by the stated expiration date. Rights are the same as warrants, except they are typically issued to existing
stockholders.
Exchange-Traded
Funds (ETFs).
The Funds may invest in ETFs. Each share of an ETF represents an undivided ownership interest in the portfolio of stocks held by an ETF. ETFs are investment companies that are bought
and sold on a securities exchange. Passively managed ETFs acquire and hold either (i) shares of all of the companies that are represented by a particular index in the same proportion that is represented in the index itself; or (ii) shares of a
sampling of the companies that are represented by a particular index in a proportion meant to track the performance of the entire index. Actively managed ETFs typically do not seek to replicate the performance of a particular index. Instead, they
may be designed to track a popular investment manager’s picks or pursue a specific investment strategy.
Passively managed ETFs are intended to
provide investment results that, before expenses, generally correspond to the price and yield performance of the corresponding market index and the value of their shares should, under normal circumstances, closely track the value of the
index’s underlying component stocks. Unlike actively managed ETFs, passively managed ETFs generally do not buy or sell securities, except to the extent necessary to conform their portfolios to the corresponding index. Because an ETF has
operating expenses and transaction costs, while a market index does not, ETFs that track particular indices typically will be unable to match the performance of the index exactly.
ETFs generally do not sell or redeem their
shares for cash and most investors do not purchase or redeem shares directly from an ETF at all. Instead, the ETF issues and redeems its shares in large blocks (typically 50,000 of its shares) called “creation units.” Creation units are
issued to anyone who deposits a specified portfolio of the ETF’s underlying securities, as well as a cash payment generally equal to accumulated dividends on the securities (net of expenses) up to the time of deposit. Creation units are
redeemed in kind for a portfolio of the underlying securities (based on the ETF’s net asset value) together with a cash payment generally equal to accumulated dividends as of the date of redemption. Most ETF investors, however, purchase and
sell ETF shares in the secondary trading market on a securities exchange, in lots of any size, at any time during the trading day. ETF investors generally must pay a brokerage fee for each purchase or sale of ETF shares, including purchases made to
reinvest dividends.
Because ETF
shares are created from the stocks of an underlying portfolio and can be redeemed into the stocks of an underlying portfolio on any day, arbitrage traders may move to profit from any price discrepancies between the shares and the ETF’s
portfolio, which in turn helps to close the price gap between the two. Of course, because of the forces of supply and demand and other market factors, an ETF share may trade at a premium or discount to its net asset value.
In connection with its investment in ETF
shares, a Fund will incur various costs. A Fund also may realize capital gains or losses when ETF shares are sold and the purchase and sale of the ETF shares may include a brokerage commission that may result in costs. In addition, a Fund is subject
to other fees as an investor in ETFs. Generally, those fees include, but are not limited to, Trustees fees, operating expenses, licensing fees, registration fees, and marketing expenses, each of which will be reflected in the net asset value of ETFs
and, therefore, the shares representing a beneficial interest therein.
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The underlying ETFs in which the Funds
invest may terminate due to extraordinary events that may cause any of the service providers to the ETFs, such as the trustee or sponsor, to close or otherwise fail to perform their obligations to the ETF. Also, because many of the ETFs in which the
Funds intend to invest are granted licenses by agreement to use the indices as a basis for determining their compositions and/or otherwise to use certain trade names, the ETFs may terminate if such license agreements are terminated. In addition, an
ETF may terminate if its entire net asset value falls below a certain amount. Although the Adviser believes that, in the event of the termination of an underlying ETF, it will be able to invest instead in shares of an alternate ETF tracking the same
market index or another market index with the same general market, no guarantee exists that shares of an alternate ETF would be available for investment at that time.
Fixed Income Securities.
Unless specifically prohibited, the Funds may invest in fixed income securities, which generally pay interest at either a fixed or floating rate and provide more regular income than equity securities.
However, the returns on fixed income securities are limited and normally do not increase with the issuer’s earnings. This limits the potential appreciation of fixed income securities as compared to equity securities. Fixed-rate securities and
floating rate securities react differently as prevailing interest rates change.
Callable Securities.
Certain fixed income securities in which the Funds invest are callable at the option of the issuer. Callable securities are subject to call risks. Call risks include the risk that the securities in
which the Funds invest may be redeemed by the issuer before maturity. If this occurs, a Fund may have to reinvest the proceeds in securities that pay a lower interest rate, which may decrease the Fund’s yield. Call risks increase when interest
rates are declining.
Fixed Rate
Debt Securities.
Debt securities that pay a fixed interest rate over the life of the security and have a long-term maturity may have many characteristics of short-term debt. For example, the market
may treat fixed-rate/long-term securities as short-term debt when a security’s market price is close to the call or redemption price, or if the security is approaching its maturity date when the issuer is more likely to call or redeem the
debt.
As interest rates
change, the market prices of fixed-rate debt securities are generally more volatile than the prices of floating rate debt securities. As interest rates rise, the prices of fixed-rate debt securities fall, and as interest rates fall, the prices of
fixed-rate debt securities rise. For example, a bond that pays a fixed interest rate of 10% is more valuable to investors when prevailing interest rates are lower; this value is reflected in a higher price, or premium. Conversely, if interest rates
are over 10%, the bond is less attractive to investors, and sells at a lower price, or discount.
Floating Rate Debt Securities
.
The interest rate paid on floating rate debt securities is reset periodically (e.g., every 90 days) to a predetermined index rate. Commonly used indices include
90-day or 180-day Treasury bill rates, one month or three month LIBOR, commercial paper rates, or the prime rate of interest of a bank. The prices of floating rate debt securities are not as sensitive to changes in interest rates as fixed rate debt
securities because they behave like shorter-term securities and their interest rate is reset periodically.
High Yield Securities (Junk Bonds).
High-yield securities are securities rated below investment grade. A Fund may hold high yield securities if securities it holds are not rated, rated below investment grade, or are downgraded below
investment grade. While generally offering higher yields than investment grade securities with similar maturities, non-investment grade debt securities involve greater risks, including the possibility of default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. Refer to Appendix A of this SAI for a
discussion of securities ratings. The
Money Market Funds
may not purchase high yield securities.
| • | Effect of Interest Rates and Economic Changes . All interest-bearing securities with fixed rates typically experience price appreciation when interest rates decline and price declines when interest rates rise. The market values of high yield securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. High yield securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of high yield securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuers of high yield securities are typically more leveraged, and the risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a high yield security defaulted, a Fund might incur additional expenses to seek recovery. Periods of economic uncertainty and changes would also generally result in increased volatility in the market prices of these securities and thus in the Fund’s net asset value. |
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| • | Payment Expectations . High yield securities typically contain redemption, call, or prepayment provisions that permit the issuer of such securities containing such provisions to redeem the securities at its discretion. During periods of falling interest rates, issuers of these securities are likely to redeem or prepay the securities and refinance them with debt securities with a lower interest rate. To the extent an issuer is able to refinance the securities, or otherwise redeem them, a Fund may have to replace the securities with a lower yielding security, which could result in a lower yield and return for the Fund. |
| • | Credit Ratings. Credit ratings issued by credit-rating agencies evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of high yield securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality. Investments in high yield securities will be more dependent on the Adviser’s credit analysis than would be the case with investments in investment-grade debt securities. The Adviser employs its own credit research and analysis, which includes a study of existing debt, capital structure, ability to service debt and to pay dividends, the issuer’s sensitivity to economic conditions, its operating history, and the current trend of earnings. The Adviser continually monitors the investments of the Funds that it advises and carefully evaluates whether to dispose of or to retain high yield securities whose credit ratings or credit quality may have changed. |
| • | Liquidity and Valuation. A Fund may have difficulty disposing of certain high yield securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all high yield securities, no established retail secondary market exists for many of these securities. Such securities are sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for a Fund to obtain accurate market quotations for purposes of valuing the Fund. Market quotations are generally available on many high yield issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. During periods of thin trading, the spread between bid and asked prices is likely to increase significantly. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of high yield securities, especially in a thinly traded market. |
Treasury Inflation-Protected Securities
(TIPS).
Obligations of the U.S. Treasury, commonly known as TIPS, (and comparable securities issued by governments of other countries) are inflation-protected obligations designed to provide
inflation protection to investors. TIPS are income-generating instruments whose interest and principal payments are adjusted for inflation. The inflation adjustment is tied to the consumer price index (CPI), and TIPS’ principal payments are
adjusted according to changes in the CPI. As inflation rises, both the principal value and the interest payments increase, which can provide investors with a hedge against inflation, as it helps preserve the purchasing power of an investment.
Because of this inflation adjustment feature, inflation-protected bonds typically have lower yields than conventional fixed-rate bonds.
Foreign Securities.
The Funds (other than the
Ultra Short Tax-Free, Short Tax-Free, Intermediate Tax-Free, Government Money Market
, and
Tax-Free Money Market Funds
) may invest in foreign securities, which include securities (i) of
issuers domiciled outside of the United States, including securities issued by foreign governments, (ii) that primarily trade on a foreign securities exchange or in a foreign market, or (iii) that are subject to substantial foreign risk based on
factors such as whether a majority of an issuer’s revenue is earned outside of the United States and whether an issuer’s principal business operations are located outside of the United States.
In General.
Investing in foreign securities, including foreign corporate debt securities and foreign equity securities, involves certain risks not ordinarily associated with investments in securities of domestic
issuers. Foreign securities markets have, for the most part, substantially less volume than the U.S. markets and securities of many foreign companies are generally less liquid and their prices more volatile than securities of U.S. companies. Less
government supervision and regulation exist of foreign exchanges, brokers, and issuers than in the U.S. The rights of investors in certain foreign countries may be more limited than those of shareholders of U.S. issuers and investors may have
greater difficulty taking appropriate legal action to enforce their rights in a foreign court than in a U.S. court. Investing in foreign securities also involves risks associated with government, economic, monetary, and fiscal policies (such as the
adoption of protectionist trade measures), possible foreign withholding taxes on dividends and interest, possible taxes on trading profits, inflation, and interest rates, economic expansion or contraction, and global or regional political, economic,
or banking crises. Furthermore, the risk exists of possible seizure, nationalization, or expropriation of the foreign issuer or foreign deposits, and the possible adoption of foreign government restrictions such as exchange controls. Also, foreign
issuers are not necessarily subject to uniform accounting, auditing, and financial reporting standards, practices, and requirements comparable to those applicable to domestic issuers and, as a result, less publicly available
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information on such foreign issuers may be available than
a domestic issuer. For more information regarding the risks related to foreign currency transactions, see “Derivative Instruments
–
Foreign Currency
Transactions,” above.
Emerging
Markets Securities.
Emerging markets securities are fixed income and equity securities of foreign companies domiciled, headquartered, or whose primary business activities or principal trading
markets are located in emerging and less developed markets (emerging markets). Investments in emerging markets securities involve special risks in addition to those generally associated with foreign investing. Many investments in emerging markets
can be considered speculative and the value of those investments can be more volatile than investments in more developed foreign markets. This difference reflects the greater uncertainties of investing in less established markets and economies.
Costs associated with transactions in emerging markets securities typically are higher than costs associated with transactions in U.S. securities. Such transactions also may involve additional costs for the purchase or sale of foreign
currency.
Certain foreign
markets (including emerging markets) may require governmental approval for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. A Fund could be adversely affected by delays in, or a refusal to
grant, required governmental approval for repatriation of capital, as well as by the application to the Fund of any restrictions on investments.
Many emerging markets have experienced
substantial rates of inflation for extended periods. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the economies and securities markets of certain emerging market countries.
Governments of many emerging market
countries have exercised and continue to exercise substantial influence over many aspects of the private sector through ownership or control of many companies. The future actions of those governments could have a significant effect on economic
conditions in emerging markets, which, in turn, may adversely affect companies in the private sector, general market conditions and prices and yields of certain of the securities in a Fund’s portfolio. Expropriation, confiscatory taxation,
nationalization and political, economic, and social instability have occurred throughout the history of certain emerging market countries and could adversely affect Fund assets should any of those conditions recur. In addition, the securities laws
of emerging market countries may be less developed than those to which U.S. issuers are subject.
Funding Agreements.
The Funds may purchase Funding Agreements (Agreements), which are investment instruments issued by U.S. insurance companies. Pursuant to such Agreements, a Fund may make cash contributions to a deposit
fund of the insurance company’s general or separate accounts. The insurance company then credits guaranteed interest to the Fund. The insurance company may assess periodic charges against an Agreement for expense and service costs allocable to
it and the charges will be deducted from the value of the deposit fund. The purchase price paid for an Agreement becomes part of the general assets of the issuer and the Agreement is paid from the general assets of the issuer. The
Money Market Funds
will only purchase Agreements from issuers that meet quality and credit standards established by the Adviser. Generally, Agreements are not
assignable or transferable without the permission of the issuing insurance companies and an active secondary market in Agreements does not currently exist. Also, the
Money Market Funds
may not have the right to receive the principal amount of an Agreement from the insurance company on seven days’ notice or less. Therefore, Agreements are typically considered to be illiquid
investments.
General Tax Risks.
Each Fund’s investments and investment strategies may be subject to special and complex federal income tax provisions that may, among other things: (i) disallow, suspend, or otherwise limit the
allowance of certain losses or deductions; (ii) accelerate income to the Fund; (iii) convert long-term capital gain taxable at lower rates into short-term capital gain or ordinary income taxable at higher rates; (iv) convert an ordinary loss or a
deduction into a capital loss (the deductibility of which is more limited); (v) treat dividends that would otherwise constitute qualified dividend income as non-qualified dividend income; or (vii) create a risk that the Fund will fail the
diversification and source of income requirements under Subchapter M of the Code, which could cause the Fund to fail to qualify for the tax treatment applicable to a regulated investment company (RIC).
Initial Public Offerings.
The
Equity
and
Alternative Funds
may invest in securities of companies in initial public offerings (IPOs). IPOs of securities issued by unseasoned companies with little or no operating history are risky and their prices are highly
volatile, but they can result in very large gains in their initial trading. Attractive IPOs are often oversubscribed and may not be available to a Fund, or only in very limited quantities. Thus, when a Fund’s size is smaller, any gains from
IPOs will have an exaggerated impact on the Fund’s reported performance than when the Fund is larger. A Fund may engage in short-term trading in connection with its IPO investments, which could produce higher trading costs and adverse tax
consequences. No assurance can be made that a Fund will have favorable IPO investment opportunities.
Lending of Portfolio Securities.
In order to generate additional income, the Funds (other than the
Money Market Funds
) may lend
portfolio securities, although it is not a principal investment strategy for any Fund. When a Fund lends portfolio securities, it will receive either cash or securities issued or guaranteed by the U.S. government or its agencies or instrumentalities
as collateral from
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the borrower. A Fund will reinvest cash collateral in short-term liquid
securities that qualify as an otherwise acceptable investment for the Fund. If the market value of the loaned securities increases, the borrower must furnish additional collateral to a Fund. During the time portfolio securities are on loan, the
borrower pays the Fund any dividends or interest paid on such securities. Loans are subject to termination at the option of the Fund or the borrower. The lending Fund may pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or equivalent collateral to a securities lending agent or broker. Certain of the Funds currently lend their portfolio securities through BMO Harris Bank N.A. (BMO Harris Bank), as
agent. Certain other Funds lend their portfolio securities through State Street Bank & Trust Company as agent.
When a Fund lends its portfolio securities,
it may not be able to get them back from the borrower on a timely basis, in which case the Fund may lose certain investment opportunities, as well as the opportunity to vote the securities. A Fund also is subject to the risks associated with the
investments of cash collateral, usually fixed income securities risk. If a Fund receives a payment from a borrower in lieu of the dividends on the loaned securities, such payment will generally be taxed as ordinary income for federal income tax
purposes and will not be treated as “qualified dividend income.”
Leverage Risks.
Leverage includes the practice of borrowing money to purchase securities or borrowing securities to sell them short. Investments in derivatives also involve the use of leverage because the amount of
exposure to the underlying asset is often greater than the amount of capital required to purchase the derivatives. Leverage can increase the investment returns of a Fund. However, if an asset decreases in value, the Fund will suffer a greater loss
than it would have without the use of leverage. If a Fund employs leverage, the Fund will maintain long positions in assets available for collateral, consisting of cash, cash equivalents, and other liquid assets, to comply with applicable legal
requirements. However, if the value of such collateral declines, margin calls by lending brokers could result in the liquidation of collateral assets at disadvantageous prices.
Liquidity Risk
. Trading opportunities are more limited for fixed income securities that have not received any credit ratings, have received ratings below investment grade, or are not widely held. These features may
make it more difficult to sell or buy a security at a favorable price or time. Consequently, a Fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could
have a negative effect on the Fund’s performance. Infrequent trading of securities also may lead to an increase in their price volatility.
Liquidity risk also refers to the
possibility that a Fund may not be able to sell a security or close out an investment contract when it wants to. If this happens, the Fund will be required to continue to hold the security or keep the position open and the Fund could incur losses.
Recent market events have caused the markets for some of the securities in which the Funds invest to experience reduced liquidity.
For the
Money Market Funds
, significant redemptions by large investors in a Fund could have a material adverse effect on a Fund’s other shareholders and the net asset value could be affected by forced selling
during periods of high redemption pressures and/or illiquid markets. To address this risk and in conjunction with changes to the money market fund rules which went into effect on October 14, 2016, the
Money Market
Funds
adopted policies and procedures for the imposition by certain Funds of liquidity fees on redemptions or temporarily suspending redemptions (“gating”) if a Fund’s weekly liquid assets fall below a certain threshold and
the Board determines such actions to be in the best interest of the Fund. Among other requirements, if a Fund’s weekly liquid assets fall below 10% of its total assets at the end of any business day, the Fund must impose a 1% liquidity fee on
shareholder redemptions unless the Board determines that not doing so is in the best interests of the Fund. If the Fund’s weekly liquid assets fall below 30% of its total assets, the Board, in its discretion, may impose liquidity fees of up to
2% of the value of the shares redeemed or gate redemptions for a period of not more than 10 business days in any 90 day period. The Board has chosen not to subject the
Government Money Market Fund
to a
liquidity fee or redemption gate, and may do so in the future only with advance notice to shareholders.
Multi-Style Management Risks
.
Because portions of the
Alternative Strategies Fund’s
assets are managed by different Sub-Advisers using different styles, the Fund could experience overlapping security transactions or take opposite positions in the same securities. Certain Sub-Advisers may be purchasing securities at the same time
that others may be selling those same securities, which may lead to higher transaction expenses compared to the Fund using a single investment management style. To a significant extent, the Fund’s performance will depend on the success of the
Adviser in allocating the Fund’s assets among the various investment strategies and Sub-Advisers. Further, in the event that there is a proxy vote related to a security in which the Adviser and Sub-Advisers have taken opposite positions,
proxies may be voted in a conflicting manner.
Municipal Securities.
The Funds may invest in municipal securities, which are fixed income securities issued by states, counties, cities, and other political subdivisions and authorities. Although the income paid by most
municipal securities is exempt from regular federal income tax, municipalities also may issue securities that pay income that is subject to the regular federal income tax and
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federal alternative minimum tax (AMT). Tax-exempt securities are generally
classified by their source of payment. The ability of a governmental issuer to make payments on its municipal obligations can be adversely affected by factors such as budget shortfalls, weak economic conditions, and reduced levels of aid to
governments. Other uncertainties applicable to municipal securities may include legislation or litigation that changes the taxation of municipal securities or the rights of municipal security holders in the event of bankruptcy. Certain provisions of
the U.S. Bankruptcy Code governing such bankruptcies are unclear and the application of state law to municipal security issuers could provide varying results among the states or among the municipal security issuers within a state. These
uncertainties could have a significant impact on the prices of the municipal securities in which a Fund invests.
General Obligation Bonds.
General obligation bonds are supported by the issuer’s full faith and credit. The issuer must levy and collect taxes sufficient to pay principal and interest on the bonds. However, the
issuer’s authority to levy additional taxes may be limited by its charter or state law.
Special Revenue Bonds.
Special revenue bonds are payable solely from specific revenues received by the issuer. The revenues may consist of specific taxes, assessments, tolls, fees, or other types of municipal revenues. For
example, a municipality may issue bonds to build a toll road and pledge the tolls to repay the bonds. Bondholders could not collect from the municipality’s general taxes or revenues. Therefore, any shortfall in the tolls normally would result
in a default on the bonds.
Private Activity Bonds.
Private activity bonds are special revenue bonds used to finance private entities. For example, a municipality may issue bonds to finance a new factory to improve its local economy. The municipality
would lend the proceeds to the company using the factory and the company would agree to make loan payments sufficient to repay the bonds. The bonds would be payable solely from the company’s loan payments and not from any other revenues of the
municipality. Therefore, any default on the loan normally would result in a default on the bonds.
The interest on many types of private
activity bonds is subject to the federal AMT. The Funds may invest in bonds subject to the federal AMT. Each of
Ultra Short Tax-Free, Short Tax-Free, Intermediate Tax-Free
, and
Intermediate Tax-Free Money Market Funds
is limited by its fundamental investment limitation in the amount it can invest in securities that may be subject to federal AMT (see “Fundamental Limitations
—
Tax Exempt Obligations”).
Anticipation Notes.
Anticipation notes are securities issued in anticipation of the receipt of taxes, grants, bond proceeds, or other municipal revenues. For example, many municipalities collect property taxes once a year.
Such municipalities may issue tax anticipation notes to fund their operations prior to collecting these taxes. The issuers then repay the tax anticipation notes at the end of their fiscal year, either with collected taxes or proceeds from newly
issued notes or bonds.
Tax
Increment Financing Bonds.
Tax increment financing bonds are payable from increases in taxes or other revenues attributable to projects financed by the bonds. For example, a municipality may issue
these bonds to redevelop a commercial area. The tax increment financing bonds would be payable solely from any increase in sales taxes collected from merchants in the area. The bonds could default if merchants’ sales, and related tax
collections, failed to increase as anticipated.
Municipal Securities include:
| • | TRANs: tax and revenue anticipation notes issued to finance working capital needs in anticipation of receiving taxes or other revenues; |
| • | TANS: tax anticipation notes issued to finance working capital needs in anticipation of receiving taxes; |
| • | RANs: revenue anticipation notes issued to finance working capital needs in anticipation of receiving revenues; |
| • | BANS: bond anticipation notes that are intended to be refinanced through a later issuance of longer term bonds; |
| • | municipal commercial paper and other short-term notes; |
| • | variable rate demand notes; |
| • | industrial development bonds; |
| • | municipal bonds (including bonds having serial maturities and pre-refunded bonds) and leases; |
| • | construction loan notes insured by the Federal Housing Administration and financed by Fannie Mae or GNMA; and |
| • | participation, trust, and partnership interests in any of the foregoing obligations. |
Municipal Leases.
A Fund may purchase participation interests that represent an undivided proportional interest in lease payments by a governmental or nonprofit entity. Lease obligations may be limited by a municipal
charter or by the inclusion in leases or contracts of “non-appropriation” clauses that relieve governmental issuers of any obligation to make future payments under the lease or contract unless money is appropriated for such purpose by
the appropriate legislative body. If the entity does not appropriate funds for future lease or contract payments, the entity cannot be compelled to make such payments.
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Furthermore, a lease may provide that the participants
cannot accelerate lease obligations upon default. The participants would only be able to enforce lease payments as they became due. In the event of a default or failure of appropriation, it is unlikely that the participants would be able to obtain
an acceptable substitute source of payment unless the participation interests are credit enhanced.
The Adviser must consider the following
factors in determining the liquidity of municipal lease securities: (1) the frequency of trades and quotes for the security; (2) the volatility of quotations and trade prices for the security; (3) the number of dealers willing to purchase or sell
the security and the number of potential purchasers; (4) dealer undertakings to make a market in the security; (5) the nature of the security and the nature of the marketplace trades; (6) the rating of the security and the financial condition and
prospects of the issuer of the security; (7) such other factors as may be relevant to a Fund’s ability to dispose of the security; (8) whether the lease can be terminated by the lessee; (9) the potential recovery, if any, from a sale of the
leased property upon termination of the lease; (10) the lessee’s general credit strength; (11) the likelihood that the lessee will discontinue appropriating funding for the leased property because the property is no longer deemed essential to
its operations; and (12) any credit enhancement or legal recourse provided upon an event of non-appropriation or other termination of the lease.
Variable Rate Municipal Securities.
Variable interest rates generally reduce changes in the market value of municipal securities from their original purchase prices. Accordingly, as interest rates decrease or increase, the potential for
capital appreciation or depreciation is less for variable rate municipal securities than for fixed rate obligations. Many municipal securities with variable interest rates purchased by a Fund are subject to repayment of principal (usually within
seven days) on the Fund’s demand. For purposes of determining a Fund’s average maturity, the maturities of these variable rate demand municipal securities (including participation interests) are the longer of the periods remaining until
the next readjustment of their interest rates or the periods remaining until their principal amounts can be recovered by exercising the right to demand payment. The terms of these variable rate demand instruments require payment of principal and
accrued interest from the issuer of the municipal obligations, the issuer of the participation interests or a guarantor of either issuer.
Geographic Diversification
. Geographic diversification of the investments of the
Tax-Free Money Market, Ultra Short Tax-Free, Short-Tax Free
, and
Intermediate Tax-Free Funds
is achieved by purchasing issues of municipal securities
representative of various areas of the U.S. and general obligations of states, cities, and school districts as well as some revenue issues that meet that Fund’s acceptable quality criteria.
Participatory Notes
.
Participatory notes are a type of equity access product, are structured as unsecured and unsubordinated debt securities designed to replicate exposure to the
underlying referenced equity investment, and are sold by a bank or a broker-dealer in markets where the Funds are restricted from directly purchasing equity securities. The Funds may tender a participatory note for cash payment in an amount that
reflects the current market value of the referenced underlying equity investments, reduced by program fees. Participatory notes involve risks that are in addition to the risks normally associated with a direct investment in the underlying equity
securities. The issuer of a participatory note may be unable or may refuse to perform under the terms of the participatory note. While the holder of a participatory note is entitled to receive from the issuing bank or broker-dealer any dividends or
other distributions paid on the underlying securities, the holder is not entitled to the same rights as an owner of the underlying securities, such as voting rights. Participatory notes also are not traded on exchanges, are privately issued, and may
be illiquid. To the extent a participatory note is determined to be illiquid, it would be subject to the Funds’ limitations on investments in illiquid securities. No assurance can be made that the trading price or value of participatory notes
will equal the value of the underlying equity securities they seek to replicate.
Portfolio Turnover.
A Fund’s portfolio investments may be sold for a variety of reasons, such as a more favorable investment opportunity, market conditions, or other factors. A high rate of portfolio turnover (over
100%) may involve correspondingly greater transaction costs to a Fund and its shareholders. High portfolio turnover may result in the realization of substantial capital gains, including short-term capital gains taxable to shareholders at ordinary
income rates for federal income tax purposes.
During the fiscal year ended August 31,
2017, the
Mid-Cap Value
,
Mid-Cap Growth
,
Small-Cap Value
and
Small-Cap Growth Funds
experienced increased portfolio turnover rates in connection with the alignment of the Funds’ strategies by new portfolio managers on a going-forward basis. Also during the fiscal year ended August 31, 2017, the
Ultra Short Tax-Free
and
Short Tax-Free Funds
experienced increased portfolio turnover rates due to increased investment in floating rate notes, which generally have
shorter terms.
Quantitative Model and
Information Risks
.
Certain Sub-Advisers of the
Alternative Strategies Fund
may use quantitative models (Models) and information and data (Data). If such Models and/or Data prove to be incorrect or incomplete, any investment decisions made in reliance on the Models and Data may
not produce the desired results and the Fund may realize losses. The success
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of the Models depends on the accuracy and completeness of the analyses and
assessments that were used in developing such Models. The success of Models that are predictive in nature is dependent largely upon the accuracy and reliability of the supplied historical data. Certain low probability events or factors that are
assigned little weight may occur or prove to be more likely or more relevant than expected, for short or extended periods of time. All Models are susceptible to input errors that may cause the resulting information to be incorrect.
Repurchase Agreements and Reverse Repurchase
Agreements.
All of the Funds may enter into a repurchase agreement or a reverse repurchase agreement. A repurchase agreement is a transaction in which a Fund buys a security from a dealer or bank
and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price exceeds the sale price, reflecting an agreed upon interest rate effective for the period the buyer owns the security subject to repurchase. The
agreed upon interest rate is unrelated to the interest rate on that security. The Adviser will continually monitor the value of the underlying security to ensure that the value of the security always equals or exceeds the repurchase price. A
Fund’s custodian is required to take possession of the securities subject to repurchase agreements. These securities are marked to market daily. To the extent that the original seller defaults and does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price for such securities. In the event that such a defaulting seller files for bankruptcy or becomes insolvent, disposition of such securities by the Fund might be delayed pending court action.
The Funds believe that, under the procedures normally in effect for custody of the portfolio securities subject to repurchase agreements, a court of competent jurisdiction would rule in favor of the Funds and allow retention or disposition of such
securities. The Funds will enter into repurchase agreements only with banks and other recognized financial institutions, such as broker/dealers, that the Adviser has determined to be creditworthy.
Reverse repurchase agreement transactions
are similar to borrowing cash. In a reverse repurchase agreement, a Fund sells a portfolio security to another person, such as a financial institution, broker or dealer, in return for a percentage of the instrument’s market value in cash, and
agrees that on a stipulated date in the future the Fund will repurchase the portfolio security at a price equal to the original sale price plus interest. A Fund may use reverse repurchase agreements for liquidity and for avoiding a sale of portfolio
instruments at a time when the sale may be deemed disadvantageous. However, entering into reverse repurchase agreements may expose a Fund to leverage risks (see “Leverage Risks”).
When effecting reverse repurchase
agreements, liquid assets of a Fund, in a dollar amount sufficient to make payment for the obligations to be purchased, are segregated on the trade date. These securities are marked to market daily and maintained until the transaction is
settled.
During the period any
reverse repurchase agreements are outstanding, but only to the extent necessary to assure completion of the reverse repurchase agreements, the
Money Market Funds
will restrict the purchase of portfolio
instruments to money market instruments maturing on or before the expiration date of the reverse repurchase agreement.
Securities of Other Investment Companies.
All of the Funds may invest in the securities of other investment companies, including affiliated BMO Funds and exchange-traded funds, within the limits prescribed by the 1940 Act and the rules
promulgated thereunder. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment
company. As a result, Fund shareholders indirectly will bear the Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in
connection with the Fund’s own operations. The Funds also may invest in investment companies that are not organized under the laws of the United States (Offshore Funds). In addition to the risks of investing in securities of other investment
companies, Offshore Funds also are subject to the risks described under “Foreign Securities,” above.
The Funds are parties to a fund-of-funds
exemptive order received from the SEC on June 25, 2014 that permits a Fund that relies on the order to invest in securities issued by other investment companies in amounts exceeding the statutory limits set forth in the 1940 Act that would otherwise
be applicable. The exemptive order requires the Board, before approving any advisory contract, to make a determination that the fees charged under such advisory contract are based on services provided that are in addition to, rather than duplicative
of, services provided under the advisory contract(s) of any underlying fund in which a Fund invests pursuant to the order.
Short Sales.
The Funds (other than the
Money Market Funds
), including any underlying funds in which the Funds may
invest, may sell securities, including shares of exchange-traded funds, short in anticipation of a decline in the market value of the securities. When a Fund sells a security short, the Fund does not own the security and must borrow the security to
make delivery to the buyer. The Fund must then replace the borrowed security by purchasing it at the market price at the time of replacement, which may be more or less than the price at which the Fund sold the security. Any potential gain is limited
to the price at which the Fund sold the
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security short and any potential loss is unlimited in size. Until the Fund
closes its short position or replaces the borrowed security, the Fund will designate liquid assets it owns (other than the short sale proceeds) as segregated assets in an amount equal to its obligation to purchase the securities sold short, as
required by the 1940 Act. Depending on arrangements made with the broker or custodian, the Fund may not receive any payments (including interest) on collateral deposited with the broker or custodian. Because the Funds’ portfolio managers may
interpret the market differently, it is possible that one Fund may be short a security at the same time that another Fund is long the same security.
Small and Mid-Cap Stocks
.
The
Mid-Cap Value, Mid-Cap Growth, Pyrford International Stock, Small-Cap Value, Small-Cap Core,
and
Small-Cap Growth Funds
may invest in small and mid-cap stocks. Generally, the smaller the market
capitalization of a company, the fewer the number of shares traded daily, the less liquid its stock, and the more volatile its price. Market capitalization is determined by multiplying the number of a company’s outstanding shares by the
current market price per share. Companies with smaller market capitalizations also tend to have unproven track records, a limited product or service base, and limited access to capital. These factors also increase risks and make these companies more
likely to fail than companies with larger market capitalizations.
Sovereign Debt.
The Funds may purchase sovereign debt. Sovereign debt differs from debt obligations issued by private entities in that, generally, remedies for defaults must be pursued in the courts of the defaulting
party. Legal recourse is therefore limited. Political conditions, especially a sovereign entity’s willingness to meet the terms of its debt obligations, are of considerable significance. Also, no assurance can be made that the holders of
commercial bank loans to the same sovereign entity may not contest payments to the holders of sovereign debt in the event of default under commercial bank loan agreements. Financial markets have recently experienced increased volatility due to the
uncertainty surrounding the sovereign debt of certain European countries, which may have significant adverse effects on the economies of these countries and increase the risks of investing in sovereign debt.
A sovereign debtor’s willingness or
ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including among others, its cash flow situation, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date
a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward principal international lenders, and the political constraints to which a sovereign debtor may be subject. A country
whose exports are concentrated in a few commodities could be vulnerable to a decline in the international price of such commodities. Increased protectionism on the part of a country’s trading partners, or political changes in those countries,
also could adversely affect its exports. Such events could diminish a country’s trade account surplus, if any, or the credit standing of a particular local government or agency. Another factor bearing on the ability of a country to repay
sovereign debt is the level of the country’s international reserves. Fluctuations in the level of these reserves can affect the amount of foreign exchange readily available for external debt payments and, thus, could have a bearing on the
capacity of the country to make payments on its sovereign debt.
To the extent that a country has a current
account deficit (generally when its exports of merchandise and services are less than its country’s imports of merchandise and services plus net transfers (e.g., gifts of currency and goods) to foreigners), it may need to depend on loans from
foreign governments, multilateral organizations, or private commercial banks; aid payments from foreign governments; and inflows of foreign investment. The access of a country to these forms of external funding may not be certain and a withdrawal of
external funding could adversely affect the capacity of a government to make payments on its obligations. In addition, the cost of servicing debt obligations can be adversely affected by a change in international interest rates, since the majority
of these obligations carry interest rates that are adjusted periodically based upon international rates.
With respect to sovereign debt of emerging
market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of
principal and interest on external debt.
Certain emerging market countries have
experienced difficulty in servicing their sovereign debt on a timely basis, which led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds (discussed below), and obtaining new credit to finance interest payments. Holders of
sovereign debt, including a Fund, may be requested to participate in the rescheduling of such debt and to extend further loans to sovereign debtors. The interests of holders of sovereign debt could be adversely affected in the course of
restructuring arrangements or by certain other factors referred to below. Furthermore, some of the participants in the secondary market for sovereign debt also may be involved directly in negotiating the terms of these arrangements and may therefore
have access to information not available to other market participants, such as the Fund. Obligations arising from past restructuring
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agreements may affect the economic performance and political and social
stability of certain issuers of sovereign debt. No bankruptcy proceeding may exist by which sovereign debt on which a sovereign has defaulted may be collected in whole or in part.
Foreign investment in certain sovereign
debt is restricted or controlled to varying degrees. These restrictions or controls may at times limit or preclude foreign investment in such sovereign debt and increase the costs and expenses of a Fund. Certain countries in which the Fund may
invest require governmental approval prior to investments by foreign persons, limit the amount of investment by foreign persons in a particular issuer, limit the investment by foreign persons only to a specific class of securities of an issuer that
may have less advantageous rights than the classes available for purchase by domiciliaries of the countries or impose additional taxes on foreign investors. Certain issuers may require governmental approval for the repatriation of investment income,
capital, or the proceeds of sales of securities by foreign investors. In addition, if a deterioration occurs in a country’s balance of payments, the country could impose temporary restrictions on foreign capital remittances. The Fund could be
adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application to the Fund of any restrictions on investments. Investing in local markets may require the Fund to
adopt special procedures, seek local government approvals, or take other actions, each of which may involve additional costs to the Fund.
The sovereign debt in which a Fund may
invest includes Brady Bonds, which are securities created through the exchange of existing commercial bank loans to public and private entities in certain emerging markets for new bonds in connection with debt restructurings under a debt
restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady. Brady Bonds may be collateralized or uncollateralized and are issued in various currencies (but primarily the dollar). Dollar-denominated, collateralized
Brady Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally collateralized in full as to principal by U.S. Treasury zero coupon bonds having the same maturity as the Brady Bonds. Interest payments on these Brady Bonds generally
are collateralized by cash or securities in an amount that, in the case of fixed rate bonds, is equal to at least one year of rolling interest payments or, in the case of floating rate bonds, initially is equal to at least one year’s rolling
interest payments based on the applicable interest rate at that time and is adjusted at regular intervals thereafter. Brady Bonds are often viewed as having several valuation components: (1) the collateralized repayment of principal, if any, at
final maturity, (2) the collateralized interest payments, if any, (3) the uncollateralized interest payments, and (4) any uncollateralized repayment of principal at maturity (these uncollateralized amounts constitute the “residual
risk”). In light of the residual risk of Brady Bonds and, among other factors, the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, investments in Brady Bonds have
speculative characteristics. A Fund may purchase Brady Bonds with no or limited collateralization and will be relying for payment of interest and (except in the case of principal collateralized Brady Bonds) principal primarily on the willingness and
ability of the foreign government to make payment in accordance with the terms of the Brady Bonds.
Temporary Investments.
Each Fund (other than the
Money Market Funds
) may temporarily invest without limit in short-term debt
obligations (money market instruments) during times when market conditions warrant a defensive position. These investments may include commercial paper, bank instruments, U.S. government obligations, repurchase agreements, securities of other
investment companies investing in short-term debt securities, and foreign short-term debt securities. Each
Money Market Fund
may, from time to time,
take temporary defensive positions by holding cash, shortening the Fund’s dollar weighted average maturity, or investing in other securities that are eligible securities for purchase by money market funds as described in the “Fund
Summary” section of the Prospectus and in accordance with federal laws concerning money market funds, in anticipation of, or in response to, adverse market economic, political, other conditions. The Funds’ temporary investments must be
of comparable quality to their primary investments.
U.S. Government Securities.
U.S. government securities include direct obligations of the U.S. government, including U.S. Treasury bills, notes, and bonds of varying maturities, and those issued or guaranteed by various U.S.
government agencies and instrumentalities. Treasury securities are direct obligations of the federal government of the United States. Agency securities are issued or guaranteed by a federal agency or other government sponsored entity acting under
federal authority. Some government entities are supported by the full faith and credit of the United States. Other government entities receive support through federal subsidies, loans, or other benefits. A few government entities have no explicit
financial support, but are regarded as having implied support because the federal government sponsors their activities.
A Fund treats mortgage-backed securities
guaranteed by a government sponsored entity as if issued or guaranteed by a federal agency. Although such a guarantee protects against credit risks, it does not reduce the market and prepayment risks.
Federal National Mortgage Association (Fannie
Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac)
.
Fannie Mae and Freddie Mac were placed into conservatorship by the Federal Housing Finance
Agency (FHFA), an independent regulator, in 2008, and FHFA succeeded to all of their rights, titles, powers, and privileges. At the time Fannie Mae and Freddie Mac were placed in conservatorship, the U.S. Treasury established preferred stock
purchase agreements pursuant to which the
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U.S. Treasury will contribute cash capital to maintain a
positive net worth in each enterprise. These agreements were amended in December 2009 to permit the U.S. Treasury’s funding commitment to increase as necessary to accommodate any cumulative reduction in net worth of the enterprises for a
three-year period. FHFA has the right to transfer or sell any asset or liability of Fannie Mae or Freddie Mac without any approval, assignment or consent, although FHFA has stated that it has no present intention to do so. In addition, holders of
mortgage-backed securities issued by Fannie Mae or Freddie Mac may not enforce certain rights related to such securities against FHFA, or the enforcement of such rights may be delayed, during the conservatorship.
When-Issued and Delayed Delivery
Transactions.
The
Fixed Income Funds
may engage in when-issued and delayed delivery transactions.
These transactions are made to secure what is considered to be an advantageous price or yield. Settlement dates may be a month or more after entering into these transactions and the market values of the securities purchased may vary from the
purchase prices. Other than normal transaction costs, no fees or expenses are incurred. However, liquid assets of a Fund are segregated on the Fund’s records on the trade date in an amount sufficient to make payment for the securities to be
purchased. These assets are marked to market daily and are maintained until the transaction has been settled.
Zero Coupon Securities.
The Funds (other than the
Global Low Volatility Equity, Pyrford International Stock, LGM Emerging Markets Equity,
and
Equity Funds
) may invest in zero coupon securities. Zero coupon securities do not pay interest or
principal until final maturity, unlike debt securities that provide periodic payments of interest (referred to as a “coupon payment”). Investors buy zero coupon securities at a price below the amount payable at maturity. The difference
between the purchase price and the amount paid at maturity represents interest on the zero coupon security. Investors must wait until maturity to receive interest and principal, which increases the interest rate and credit risks of a zero coupon
security. An investment in zero coupon securities may cause a Fund to recognize income and make required distributions to shareholders before it receives any cash payments on its investment. A Fund may have to dispose of its portfolio investments
under disadvantageous circumstances or utilize leverage to generate sufficient cash to satisfy the distribution requirements for maintaining the Fund’s status as an RIC.
NON-FUNDAMENTAL INVESTMENT OBJECTIVES
The investment objective of each Fund
shown below may be changed by the Board without shareholder approval.
| • | BMO Low Volatility Equity Fund: to provide capital appreciation. |
| • | BMO Dividend Income Fund: to provide capital appreciation and current income. |
| • | BMO Large-Cap Value Fund: to provide capital appreciation. |
| • | BMO Large-Cap Growth Fund: to provide capital appreciation. |
| • | BMO Mid-Cap Value Fund: to provide capital appreciation. |
| • | BMO Mid-Cap Growth Fund: to provide capital appreciation. |
| • | BMO Small-Cap Value Fund: to provide capital appreciation. |
| • | BMO Small-Cap Core Fund: to provide capital appreciation. |
| • | BMO Small-Cap Growth Fund: to provide capital appreciation. |
| • | BMO Global Low Volatility Equity Fund: to provide capital appreciation. |
| • | BMO Disciplined International Equity Fund: to provide capital appreciation. |
| • | BMO Pyrford International Stock Fund: to provide capital appreciation. |
| • | BMO LGM Emerging Markets Equity Fund: to provide capital appreciation. |
| • | BMO Global Long/Short Equity Fund: to provide capital appreciation. |
| • | BMO Alternative Strategies Fund: to seek capital appreciation with an emphasis on absolute returns. |
| • | BMO Ultra Short Tax-Free Fund: to provide current income exempt from federal income tax consistent with preservation of capital. |
| • | BMO Short Tax-Free Fund: to provide current income exempt from federal income tax consistent with preservation of capital. |
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| • | BMO Short-Term Income Fund: to maximize total return consistent with current income. |
| • | BMO Intermediate Tax-Free Fund: to provide a high level of current income exempt from federal income tax consistent with preservation of capital. |
| • | BMO Strategic Income Fund: to maximize total return consistent with current income. |
| • | BMO TCH Corporate Income Fund: to maximize total return consistent with current income. |
| • | BMO TCH Core Plus Bond Fund: to maximize total return consistent with current income. |
| • | BMO High Yield Bond Fund: to maximize total return consistent with current income. |
| • | BMO Government Money Market Fund: to provide current income consistent with stability of principal. |
| • | BMO Tax-Free Money Market Fund: to provide current income exempt from federal income tax consistent with stability of principal. |
| • | BMO Prime Money Market Fund: to provide current income consistent with stability of principal. |
| • | BMO Institutional Prime Money Market Fund: to provide current income consistent with preservation of capital. |
| • | BMO In-Retirement Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund has passed its target date of 2010, the Fund has reduced its emphasis on growth and increased its emphasis on income and preservation of capital. |
| • | BMO Target Retirement 2015 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund has passed its target date, the Fund will reduce its emphasis on growth and increase its emphasis on income and preservation of capital. |
| • | BMO Target Retirement 2020 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increase its emphasis on income and preservation of capital. |
| • | BMO Target Retirement 2025 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increase its emphasis on income and preservation of capital. |
| • | BMO Target Retirement 2030 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increase its emphasis on income and preservation of capital. |
| • | BMO Target Retirement 2035 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increase its emphasis on income and preservation of capital. |
| • | BMO Target Retirement 2040 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increase its emphasis on income and preservation of capital. |
| • | BMO Target Retirement 2045 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increase its emphasis on income and preservation of capital. |
| • | BMO Target Retirement 2050 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increase its emphasis on income and preservation of capital. |
| • | BMO Target Retirement 2055 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increase its emphasis on income and preservation of capital. |
| • | BMO Conservative Allocation Fund: to provide total return primarily from income, secondarily from appreciation. |
| • | BMO Moderate Allocation Fund: to provide total investment return from income and appreciation. |
| • | BMO Balanced Allocation Fund: to provide total investment return from income and appreciation. |
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| • | BMO Growth Allocation Fund: to provide total investment return from income and appreciation. |
| • | BMO Aggressive Allocation Fund: to provide total investment return primarily from appreciation, secondarily from income. |
Investment Policies and Limitations
With respect to each Fund’s
investment policies and limitations, if a percentage limitation is adhered to at the time of investment, a later increase or decrease in percentage resulting from any change in value or net assets will not result in a violation of such limitation,
except in the case of borrowing money. For purposes of such policies and limitations, each Fund considers instruments (such as certificates of deposit and demand and time deposits) issued by a U.S. branch of a domestic bank or savings and loan
having capital, surplus, and undivided profits in excess of $100,000,000 at the time of investment to be cash items. Under the 1940 Act, the authorization of a “majority of the outstanding voting securities” means the affirmative vote of
the holders of the lesser of (i) 67% of the shares of a Fund represented at a meeting at which the holders of more than 50% of the Fund’s outstanding shares are represented or (ii) more than 50% of the outstanding shares of the Fund.
Fundamental Limitations
The following investment limitations are
fundamental and cannot be changed for a Fund unless authorized by the “majority of the outstanding voting securities” of that Fund, as defined by the 1940 Act:
Issuing Senior Securities and Borrowing
Money.
A Fund will not issue senior securities or borrow money, except as the 1940 Act, any rule, regulation or exemptive order thereunder, or any SEC staff interpretation thereof, may
permit.
The 1940 Act permits
the Funds to enter into options, futures contracts, forward contracts, repurchase agreements, and reverse repurchase agreements provided that these types of transactions are covered in accordance with SEC positions. Under SEC staff interpretations
of the 1940 Act, such derivative transactions will not be deemed “senior securities” if a Fund segregates assets or otherwise covers its obligation to limit the Fund’s risk of loss, such as through offsetting positions.
Under the 1940 Act, in addition to
borrowing from banks, a Fund may borrow from other persons an additional amount not exceeding 5% of its total assets for temporary purposes.
Lending Cash or Securities.
A Fund will not lend any of its securities, or make any other loan, in excess of one-third of the value of the Fund’s total assets. This restriction shall not prevent a Fund from purchasing or
holding U.S. government obligations, money market instruments, variable rate demand notes, bonds, debentures, notes, certificates of indebtedness, or other debt securities, entering into repurchase agreements, or engaging in other transactions where
permitted by the Fund’s investment goal, policies, and limitations.
Investing in Commodities.
A Fund (except for the
Disciplined International Equity
and
Alternative Funds
) will not purchase or sell commodities unless acquired as a result of ownership of securities or other instruments and provided that
this restriction shall not prevent the Fund (other than a
Money Market Fund
) from (i) purchasing or selling futures contracts, options, and other
derivative instruments or (ii) investing in securities or other instruments backed by physical commodities.
With respect to
Disciplined International Equity
and
Alternative Funds
, a Fund will not purchase or sell physical commodities, unless acquired as a result of ownership of securities or other
instruments, and provided that this restriction does not prevent the Fund from (i) purchasing or selling securities or instruments of companies that purchase or sell commodities or that invest in commodities; (ii) engaging in any transaction
involving currencies, options, forwards, futures contracts, options on futures contracts, swaps, hybrid instruments or other derivatives; or (iii) investing in securities, or transacting in other instruments, that are linked to or secured by
physical or other commodities.
Investing in Real Estate.
A Fund will not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments and provided that this restriction shall not prevent the Fund from investing in
(i) securities of issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein or (ii) securities or other instruments backed by real estate or interests therein.
Diversification of Investments.
With respect to securities comprising 75% of the value of its total assets, a Fund will not purchase securities issued by any one issuer (other than cash, cash items, or securities issued or guaranteed
by the government of the United States or its agencies or instrumentalities, repurchase agreements collateralized by such securities, and securities of other investment companies) if, as a result, more than 5% of the value of its total assets would
be invested in the securities of that issuer or if it would own more than 10% of the outstanding voting securities of such issuer.
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Under this limitation, each of
Small-Cap Core, Pyrford International Stock, Ultra Short Tax-Free, Short Tax-Free, Intermediate Tax-Free
, and
High Yield Bond Funds
will consider each governmental subdivision,
including states and the District of Columbia, territories, possessions of the United States or their political subdivisions, agencies, authorities, instrumentalities, or similar entities, a separate issuer if its assets and revenues are separate
from those of the governmental body creating it and the security is backed only by its own assets and revenues. Industrial developments bonds backed only by the assets and revenues of a non-governmental user are considered to be issued solely by
that user. If, in the case of an industrial development bond or government-issued security, a governmental or some other entity (such as a bank that issues a letter of credit) guarantees the security, such guarantee or letter of credit would be
considered a separate security issued by the guarantor or other entity, subject to a limit on investments in the guarantor of 10% of total assets. Where a security is insured by bond insurance, the security shall not be considered a security issued
or guaranteed by the insurer. Instead, the issuer of such security will be determined in accordance with the first and second sentences of this paragraph. The foregoing 10% restriction does not limit the percentage of the
Ultra Short Tax-Free, Short Tax-Free,
and
Intermediate Tax-Free Funds
’ assets that may be invested in securities insured by any single insurer.
Concentration of Investments.
| • | Ultra Short Tax-Free, Short Tax-Free, and Intermediate Tax-Free Funds : For these Funds, a Fund will not invest 25% or more of the value of its total assets in any one industry, except that the Fund may invest 25% or more of the value of its total assets in cash or cash items, securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities, and repurchase agreements collateralized by such securities for temporary defensive purposes. In addition, a Fund may invest more than 25% of the value of its total assets in obligations issued by any state, territory, or possession of the United States; the District of Columbia; or any of their authorities, agencies, instrumentalities, or political subdivisions, including tax-exempt project notes guaranteed by the U.S. government, regardless of the location of the issuing municipality. This policy applies to securities that are related in such a way that an economic, business, or political development affecting one security would also affect the other securities (such as securities paid from revenues from selected projects in transportation, public works, education, or housing). |
| • | Target Date and Target Risk Funds : For these Funds, a Fund will not invest 25% or more of the value of its total assets in any one industry, except that the Fund may invest 25% or more of the value of its total assets in any one affiliated underlying fund, cash or cash items, securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities, and repurchase agreements collateralized by such securities for temporary defensive purposes. |
| • | All Other Funds : For these Funds, a Fund will not invest 25% or more of its total assets in any one industry or industries, except as permitted by the SEC. However, investing in U.S. government securities (and domestic bank instruments for the Money Market Funds ) shall not be considered investments in any one industry. |
Underwriting.
A Fund will not underwrite securities of other issuers, except to the extent it may be deemed to be an underwriter within the meaning of the 1933 Act in connection with the purchase and sale of
portfolio securities.
Tax Exempt
Obligations.
The
Tax-Free Money Market Fund
invests,
under normal circumstances, its assets so that at least 80% of the annual interest income that the Fund distributes will be exempt from federal income tax, including the federal AMT.
Each of the
Ultra Short Tax-Free, Short Tax-Free,
and
Intermediate Tax-Free Funds
invests, under normal circumstances, at least 80% of the value of its net assets, plus the amount of
any borrowings for investment purposes, in securities the income from which is exempt from federal income tax, including the federal AMT.
Non-Fundamental Limitations
The following investment limitations are
non-fundamental and, therefore, may be changed by the Board without shareholder approval. Shareholders will be notified before any material change in these limitations becomes effective:
Selling Short and Buying on Margin.
A Fund will not sell any securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, or unless it covers such short sale as
required by the current rules and positions of the SEC or its staff, and provided that transactions in futures contracts or other derivatives are not deemed to constitute selling securities short.
A Fund will not purchase any securities on
margin, except that it may obtain such short-term credits as may be necessary for clearance of transactions, and provided that margin deposits in connection with futures contracts or other derivatives shall not constitute purchasing securities on
margin.
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Pledging Assets.
A Fund will not mortgage, pledge, or hypothecate any assets owned by the Fund, except as may be necessary in connection with permissible borrowings or investments and then such mortgaging, pledging, or
hypothecating may not exceed 33 1/3% of the Fund’s total assets at the time of the borrowing or investment.
Investing in Illiquid and Restricted
Securities.
A Fund will not invest more than 15% (5% for a
Money Market Fund
) of the value of its net assets in illiquid securities.
Purchasing Securities to Exercise Control.
The Funds will not purchase securities of a company for the purpose of exercising control or management.
Investing in Securities of Other Investment
Companies.
Each Fund will limit its investment in other investment companies, including investment companies that may be affiliated with the Adviser, to no
more than 3% of the total outstanding voting stock of any investment company, will invest no more than 5% of total assets in any one investment company, and will invest no more than 10% of its total assets in investment companies in general, unless
permitted to exceed these limits by an exemptive order or rule of the SEC. The Funds will purchase securities of closed-end investment companies only in open market transactions involving only customary broker’s commissions. However, these
limitations are not applicable if the securities are acquired in a merger, consolidation, reorganization or acquisition of assets. The
Money Market Funds
will limit their investments in other investment companies to those of money market funds having investment objectives and policies similar to their own.
Each Fund (excluding the
Target Date Funds
and
Target Risk Funds
) may invest in shares of other investment companies to the extent permitted under the 1940 Act, including the rules and regulations and
any exemptive orders obtained thereunder, provided however, that no Fund that has knowledge that its shares are purchased by another investment company relying on Section 12(d)(1)(G) of the 1940 Act will acquire any securities of registered open-end
management investment companies or registered unit investment trusts in reliance on Section 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
The Funds are parties to a fund-of-funds
exemptive order received from the SEC on June 25, 2014 that permits a Fund that relies on the order to invest in securities issued by other investment companies in amounts exceeding the statutory limits set forth in the 1940 Act that would otherwise
be applicable. The exemptive order requires the Board, before approving any advisory contract, to make a determination that the fees charged under such advisory contract are based on services provided that are in addition to, rather than duplicative
of, services provided under the advisory contract(s) of any underlying fund in which a Fund invests pursuant to the order.
Investing in Options.
Each Fund (excluding the
Alternative Strategies Fund
and
Global
Long/Short Fund
) may not, except for bona fide hedging purposes, invest more than 5% of the value of its net assets in the sum of (a) premiums on open option positions on futures contracts,
plus (b) initial margin deposits on financial futures contracts. A Fund will not purchase put options or write call options on securities unless the securities are held in the Fund’s portfolio or unless the Fund is entitled to them in
deliverable form without further payment or has segregated liquid assets in the amount of any further payment. A Fund will not write call options in excess of 25% of the value of its total assets.
For purposes of the investment limitation
regarding investment in illiquid and restricted securities, an “illiquid” security is a security that the Funds reasonably expect cannot be sold in current market conditions in seven calendar days without significantly changing the
market value of the security.
Money Market Fund
Regulatory Compliance
The
Money Market Funds
are managed to comply with the various requirements of Rule 2a-7 under the 1940 Act, which regulates money market mutual funds. The Board has adopted procedures in accordance with Rule 2a-7, which
govern the quality, maturity, diversity and liquidity of the
Money Market Funds’
investments. Pursuant to Rule 2a-7, the
Money Market Funds
may invest only in
securities which have been determined by the Board to present minimal credit risks to the Fund, based on the Board’s consideration of a number of factors including, but not limited to, financial condition, sources of liquidity, ability to
react to market-wide and issuer- or guarantor-specific events, and positions within the industry and industry strength.
Other Investment Policies
Pursuant to Rule 35d-1 under the 1940 Act,
each Fund (except the
Alternative Strategies, Ultra Short Tax-Free, Short Tax-Free, Intermediate Tax-Free, Strategic Income, TCH Corporate Income, Tax-Free Money Market, Prime Money Market, Institutional Prime Money
Market, Target Date,
and
Target Risk Funds
) has adopted a non-fundamental investment policy to invest at least 80% of its assets (defined as net assets plus any borrowings for investment purposes) in the
types of securities and investments suggested by its name. Each such Fund will provide its shareholders with at least 60 days’ prior written notice of any
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changes to such policy as required by Rule 35d-1. The
Ultra-Short Tax-Free, Short Tax-Free, Intermediate Tax-Free,
and
Tax-Free Money Market Funds,
which have each adopted a fundamental policy to invest at least 80% of its net
assets, plus the amount of any borrowings for investment purposes, in the types of securities suggested by its name, may only change this policy with shareholder approval.
Pursuant to Rule 35d-1 under the 1940 Act
the
Government Money Market Fund
has adopted a non-fundamental investment policy to invest at least 80% of its total assets in obligations issued and/or guaranteed by the U.S. government or by its agencies or
instrumentalities and in repurchase agreements secured by such obligations. In addition, as a result of recent amendments to Rule 2a-7 under the 1940 Act, the
Government Money Market Fund
has adopted a
non-fundamental investment policy to invest at least 99.5% of its total assets in obligations issued and/or guaranteed by the U.S. government or by its agencies or instrumentalities and in repurchase agreements secured by such obligations. The
Government Money Market Fund
will provide its shareholders with at least 60 days’ prior written notice of any changes to such policy.
Valuation of Securities
Money Market Funds
The Board has approved the use of amortized
cost for purposes of valuing portfolio instruments held by the
Money Market Funds
other than the
Institutional Prime Money Market Fund
. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of premium or accumulation of discount rather than at current market value.
The procedures adopted by the Board for the
Money Market Funds
, other than the
Institutional Prime Money Market Fund
, in accordance with Rule 2a-7, are reasonably designed to stabilize the net asset value (NAV) per
share, as computed for purposes of distribution and redemption, at $1.00 per share, taking into account current market conditions and the Funds’ investment goals. The Funds’ procedures include monitoring the relationship between the
amortized cost value per share and the NAV per share based upon available indications of market value. The Board will take any steps it considers appropriate if there is a difference of more than 0.5 of 1% between the two values (such as redemption
in kind or shortening the average portfolio maturity) to minimize any material dilution or other unfair results arising from differences between the two methods of determining NAV.
The
Institutional Prime Money Market Fund
, unlike the other
Money Market Funds
, does not seek to maintain a stable share price. Instead, its share price, which is its NAV per
share, “floats” to reflect changes in the market values of its portfolio holdings.
The
Money
Market Funds
are permitted to purchase instruments that are subject to demand features or standby commitments. As defined by the Rule, a demand feature entitles a Fund to receive the principal amount of the instrument from the issuer or a
third party (1) on no more than 30 calendar days’ notice or (2) at specified intervals not exceeding 397 calendar days on no more than 30 calendar days’ notice. A standby commitment entitles a Fund to achieve same-day settlement and to
receive an exercise price equal to the amortized cost of the underlying instrument plus accrued interest at the time of exercise.
The
Money
Market Funds
acquire instruments subject to demand features and standby commitments to enhance the instruments’ liquidity. The Funds treat demand features and standby commitments as part of the underlying instruments, because the Funds
do not acquire them for speculative purposes and cannot transfer them separately from the underlying instruments. Therefore, although the Funds define demand features and standby commitments as puts, the Funds do not consider them to be corporate
investments for purposes of their investment policies.
Under the amortized cost method of
valuation utilized by the
Money Market Funds
other than the
Institutional Prime Money Market Fund
, neither the amount of daily income nor the NAV is affected by any
unrealized appreciation or depreciation of the portfolio. In periods of declining interest rates, the indicated daily yield on shares of the
Money Market Funds
, computed based upon amortized cost valuation, may
tend to be higher than a similar computation made by using a method of valuation based upon market prices and estimates. In periods of rising interest rates, the indicated daily yield on shares of the Funds computed the same way may tend to be lower
than a similar computation made by using a method of calculation based upon market prices and estimates.
Target Date and Target Risk Funds
Because the assets of the
Target Date
and
Target Risk Funds
consist primarily of shares of underlying funds, the NAV is determined based on the NAV of the underlying funds. It is not anticipated that
the Pricing Committee of the Board will need to fair
B-32
value any of the investments of the Funds. However, an underlying fund may
need to fair value one of its investments, which may require the
Target Date
and
Target Risk Funds
to do the same because of delays in obtaining the underlying
funds’ NAV.
All Other Funds
Portfolio securities of the other Funds are
valued as follows:
| • | for equity securities traded on a securities exchange, including NASDAQ, at the last sale price or official closing price reported on the exchange on which the security is principally traded; |
| • | securities listed on a foreign exchange are valued each trading day at the last closing price on the principal exchange on which they are traded immediately prior to the time for determination of NAV or at fair value; |
| • | in the absence of recorded sales for equity securities, at the mean of the last bid and asked prices as furnished by an independent pricing service; |
| • | for U.S. government securities, listed corporate bonds, private placement securities, other fixed income and asset-backed securities, and unlisted securities, at the mean of the last bid and asked prices as furnished by an independent pricing service, except that fixed income securities with remaining maturities of 60 days or less at the time of purchase generally are valued at amortized cost, which approximates fair value; |
| • | fixed income securities that are not exchange traded are valued by an independent pricing service; |
| • | in the absence of a market quote for asset and mortgage-backed securities for which final paydowns have been processed, par value will be used to price the security until the final payment is received and the final paydown has been removed from the fund accounting records; |
| • | for securities of other open-end registered investment companies, at net asset value; and |
| • | for all other securities, at fair value as determined in good faith by the Board. |
Prices provided by independent pricing
services may be determined without relying exclusively on quoted prices and may consider institutional trading in similar groups of securities, yield, quality, stability, risk, coupon rate, maturity, type of issue, trading characteristics, and other
market data or factors.
A Fund values
futures contracts and options at their market values established by the exchanges on which they are traded at the close of trading on such exchanges. Options traded in the OTC market are valued according to the mean between the last bid and the last
asked price for the option as provided by an investment dealer or other financial institution that deals in the option. The Board may determine in good faith that another method of valuing such investments is necessary to appraise their fair market
value.
Any securities or other assets
for which market valuations are not readily available or are deemed to be inaccurate are valued at fair value as determined in good faith and in accordance with procedures approved by the Board. The Board has established and appointed a Pricing
Committee, which is responsible for determinations of fair value. See “Directors and Officers
–
Board of Directors.” In determining fair value, the Pricing
Committee takes into account all information available and any factors it deems appropriate. Consequently, the price of securities used by a Fund to calculate its NAV may differ from quoted or published prices for the same securities. Fair value
pricing involves subjective judgments and it is possible that the fair value determined for a security is materially different than the value that would be realized upon the sale of that security and the differences may be material to the NAV of the
respective Fund or the financial statements presented.
Certain securities held by the Funds may be
listed on foreign exchanges that trade on days when a Fund does not calculate its NAV. As a result, the market value of the Fund’s investments may change on days when you cannot purchase or sell Fund shares. In addition, a foreign exchange may
not value its listed securities at the same times that the Fund calculates its NAV, giving rise to the possibility that significant events, including broad market moves, may occur in the interim, which may affect a security’s value.
The Pricing Committee may determine that a
security needs to be fair valued if, among other things, it believes the value of the security might have been materially affected by events occurring after the close of the market in which the security was principally traded, but before the time
for determination of the NAV (a subsequent event). A subsequent event might include a company-specific development (for example, announcement of a merger that is made after the close of the foreign market), a development that might affect an entire
market or region (for example, weather related events) or a potentially global development (such as a terrorist attack that may be expected to have an effect on investor expectations worldwide). The Fund has retained an independent
B-33
fair value pricing service to assist in fair valuing foreign securities. The
service utilizes statistical data based on historical performance of securities, markets, and other data in developing factors used to estimate a fair value.
Trading in Foreign Securities
Trading in foreign securities may be
completed at times that vary from the closing of the New York Stock Exchange (NYSE). In computing its NAV, the Funds value foreign securities at the latest closing price on the principal exchange on which they are traded immediately prior to the
closing of the NYSE. Certain foreign currency exchange rates also may be determined at the latest rate prior to the closing of the NYSE. Foreign securities quoted in foreign currencies are translated into U.S. dollars at current rates. The passage
of time between when the foreign exchanges or markets close and when the Funds compute their net asset values could cause the value of foreign securities to no longer be representative or accurate, and as a result, may necessitate that such
securities be fair valued. Accordingly, for foreign securities, the Funds may use an independent pricing service to fair value price the security as of the close of regular trading on the NYSE. As a result, a Fund’s value for a security may be
different from the last sale price (or the latest bid price).
What do Shares Cost?
Except under certain circumstances
described in the Prospectus, shares of each class of each Fund (except the
Money Market Funds
) are sold at their NAVs (plus any applicable sales charge) on days the NYSE is open for business. Shares of each
class of the
Money Market Funds
are sold at their NAVs on any day the Federal Reserve Bank of New York is open for business and, alternatively, on any day the U.S. government securities markets are open and the
Money Market Funds
’ portfolio managers determine sufficient liquidity exists in those markets.
The procedure for purchasing shares is
explained in the Prospectus under “How to Buy Shares.”
How are Fund Shares Sold?
BMO Investment Distributors, LLC (BID),
located at 115 South LaSalle Street, Chicago, Illinois 60603, serves as the principal distributor of the Funds’ shares (the Distributor). Under a Distribution Agreement with the Funds, BID offers the Funds’ shares on a continuous,
best-efforts basis. BID is an affiliate of the Adviser and BMO Harris Bank.
Sales Charge Reallowance (Class A Only)
Sales of Class A shares are subject to a
front-end sales charge, which may be reallowed, as a sales commission, to broker/dealers, investment professionals, or financial institutions (Authorized Dealers) of record as a percentage of the purchase price. Typically, the Authorized Dealers of
record will receive the following amount from the sales charge on such sales:
B-34
Some or all of
the sales charges may be paid as concessions to Authorized Dealers, as that term is defined under “How to Buy Shares - How Do I Purchase Shares?” in the Funds’ Prospectus. BID may retain a portion of the sales charge for sales and
support services. BID and Authorized Dealers may choose to waive sales charges. BID receives a fee for paying agent services from the Adviser.
For the fiscal years ended August 31, 2015,
August 31, 2016, and August 31, 2017, BID did not receive any commissions from the Funds.
12b-1 Plan (Class A and Class R3 Shares Only)
The Corporation has adopted two
compensation-type distribution plans (one plan for the
Target Date
and
Target Risk Funds
and one plan for all other Funds) pursuant to Rule 12b-1 under the 1940 Act (each
a Plan and together the Plans) for the Class A and Class R3 Shares only. The Plans allow the Funds to pay a maximum of 0.25% of the Class A and 0.50% of the Class R3 assets to the distributor for the sale and distribution of each Fund’s Class
A and Class R3 shares and for services provided to shareholders of that class.
The fees paid pursuant to the Plans are
used to finance activities of the Distributor principally intended to result in the sale of shares including: (1) providing incentive to broker/dealers to sell shares and to provide administrative support services to the Funds and their
shareholders; (2) compensating other participating financial institutions and other financial intermediaries for providing administrative and other support services to the Funds and their shareholders; (3) paying for the costs incurred in
conjunction with advertising and marketing of shares to include expenses of preparing, printing and distributing prospectuses and sales literature to prospective shareholders, brokers, dealers, financial institutions or financial intermediaries; and
(4) other costs incurred in the implementation and operation of the Plans.
B-35
The Plans provide that (i) the Distributor
has the right to select, in its sole discretion, brokers (including BMO Harris Financial Advisors (member FINRA/SIPC), an affiliate of the Adviser), dealers, participating financial institutions (including BMO Harris Bank, an affiliate of the
Adviser) and other persons to participate in the Plans, and (ii) payments to the Distributor under the Plans will be made pursuant to the Distribution Agreement entered into by and between the Corporation and the Distributor and that payments made
by the Distributor to brokers, dealers, participating financial institutions, and other persons with funds received as compensation under the Plans will be made pursuant to a Sales and Services Agreement entered into by and between the Distributor
and such entity. The Plans also provide that the Distributor may terminate without cause and in its sole discretion any Sales and Services Agreement.
Other benefits of the Plans include, but
are not limited to, the following: (1) an efficient and effective administrative system; (2) a more efficient use of assets of holders of Class A and Class R3 shares by having them rapidly invested in the applicable Fund with a minimum of delay and
administrative detail; and (3) an efficient and reliable records system for holders of Class A and Class R3 shares and prompt responses to shareholder requests and inquiries concerning their accounts.
BID may voluntarily waive fees it receives
for its distribution (12b-1) services under the Plans. BID may terminate such voluntary waivers at any time.
For the fiscal year ended August 31, 2017,
the Class A and Class R3 shares of the Funds paid the following distribution (12b-1) fees under the Plans, and BID waived the following amounts.
|
Distribution
(12b-1) Fees
Paid/Distribution (12b-1) Fees Waived |
Distribution
(12b-1) Fees
Paid/Distribution (12b-1) Fees Waived |
|||
| Fund | Class A | Class R3 | ||
|
Low Volatility
Equity
|
$ 67,829/$0 | N/A | ||
|
Dividend
Income
|
$ 164,465/$0 | N/A | ||
|
Large-Cap
Value
|
$ 40,851/$0 | N/A | ||
|
Large-Cap
Growth
|
$ 1,349/$0 | N/A | ||
|
Mid-Cap
Value
(1)
|
$ 50,699/$0 | $ 116/$0 | ||
|
Mid-Cap
Growth
|
$ 29,588/$0 | N/A | ||
|
Small-Cap
Value
(1)
|
$ 95,691/$0 | $ 519/$0 | ||
|
Small-Cap
Core
|
$ 3,434/$0 | N/A | ||
|
Small-Cap
Growth
(2)
|
$ 46,513/$0 | N/A | ||
|
Global Low Volatility
Equity
|
$ 1,419/$0 | N/A | ||
|
Disciplined International
Equity
|
$ 334/$0 | N/A | ||
|
Pyrford International
Stock
|
$ 694/$0 | N/A | ||
|
LGM Emerging Markets
Equity
|
$ 110,747/$0 | N/A | ||
|
Alternative
Strategies
|
$ 573/$0 | N/A | ||
|
Global Long/Short
Equity
|
$ 1,459/$0 | N/A | ||
|
Ultra Short
Tax-Free
|
$ 23,562/$0 | N/A | ||
|
Short
Tax-Free
|
$10,444/$4,141 | N/A | ||
|
Short-Term
Income
|
$ 23,865/$0 | N/A | ||
|
Intermediate
Tax-Free
|
$ 8,137/$577 | N/A | ||
|
Strategic
Income
|
$ 8,112/$0 | N/A | ||
|
TCH Corporate
Income
|
$ 1,388/$683 | N/A | ||
|
TCH Core Plus
Bond
|
$ 5,387/$0 | N/A | ||
|
High Yield
Bond
|
$ 56,080/$0 | N/A | ||
|
In-Retirement
|
N/A | $ 5,438/$0 | ||
|
Target Retirement
2015
|
N/A | $ 629/$0 | ||
|
Target Retirement
2020
|
N/A | $ 46,072/$0 | ||
|
Target Retirement
2025
|
N/A | $ 3,929/$0 | ||
|
Target Retirement
2030
|
N/A | $ 40,110/$0 | ||
|
Target Retirement
2035
|
N/A | $ 1,913/$0 | ||
|
Target Retirement
2040
|
N/A | $ 18,757/$0 | ||
|
Target Retirement
2045
|
N/A | $ 1,580/$0 |
B-36
|
Distribution
(12b-1) Fees
Paid/Distribution (12b-1) Fees Waived |
Distribution
(12b-1) Fees
Paid/Distribution (12b-1) Fees Waived |
|||
| Fund | Class A | Class R3 | ||
|
Target Retirement
2050
|
N/A | $ 18,063/$0 | ||
|
Target Retirement
2055
|
N/A | $ 1,924/$0 | ||
|
Conservative
Allocation
|
N/A | $ 25,179/$0 | ||
|
Moderate
Allocation
|
N/A | $ 65,696/$0 | ||
|
Balanced
Allocation
|
N/A | $131,432/$0 | ||
|
Growth
Allocation
|
N/A | $ 98,822/$0 | ||
|
Aggressive
Allocation
|
N/A | $ 93,520/$0 |
| (1) | On May 11, 2018, the Mid-Cap Value Fund and Small-Cap Value Fund liquidated their Class R3 shares. The Funds no longer offer Class R3 shares. |
| (2) | The amount listed for the Small-Cap Growth Fund is for the period from May 31, 2017, the Fund's Class A inception date, to August 31, 2017, the end of the Fund's fiscal year. |
Shareholder Services (Class Y Shares Only)
The Adviser is the shareholder servicing
agent for the Funds. As such, it provides shareholder services to the Funds that include, but are not limited to, distributing the Prospectuses and other information, providing shareholder assistance, and communicating or facilitating purchases and
redemption of shares.
The Class Y
shares may pay the Adviser a shareholder servicing fee equal to 0.25% of the assets of the Class Y shares for providing shareholder services and maintaining shareholder accounts. The Adviser may select others to perform these services for their
customers and may pay them fees. The Adviser may voluntarily waive fees it receives for providing shareholder services and maintaining shareholder accounts. The Adviser may terminate such voluntary waivers at any time.
For the fiscal year ended August 31, 2017,
the Class Y shares of the Funds paid the following shareholder servicing fees to the Adviser, which, unless otherwise indicated, contractually waived the following amounts.
|
Shareholder
Services Fees
Paid |
Shareholder
Services
Fees Waived |
|||
| Fund | Class Y | Class Y | ||
|
Large-Cap
Value
(1)
|
$ 337,030 | $ 0 | ||
|
Large-Cap
Growth
|
$ 403,832 | $ 0 | ||
|
Mid-Cap
Value
(1)
|
$ 271,592 | $ 0 | ||
|
Mid-Cap
Growth
(1)
|
$ 163,287 | $ 0 | ||
|
Small-Cap
Growth
(1)
|
$ 214,723 | $ 0 | ||
|
Pyrford International
Stock
(2)
|
$ 215,123 | $ 0 | ||
|
Ultra Short
Tax-Free
(1)
|
$ 89,795 | $ 0 | ||
|
Short
Tax-Free
(1)
|
$ 33,777 | $ 13,511 | ||
|
Short-Term
Income
(1)
|
$ 103,883 | $ 0 | ||
|
Intermediate
Tax-Free
|
$2,719,878 | $ 181,794 | ||
|
Strategic
Income
|
$ 193,934 | $ 0 | ||
|
TCH Corporate
Income
|
$ 257,330 | $ 130,145 | ||
|
TCH Core Plus
Bond
|
$1,131,214 | $ 0 | ||
|
Government Money
Market
|
$2,179,124 | $ 264,781 (3) | ||
|
Tax-Free Money
Market
|
$ 202,042 | $ 0 | ||
|
Prime Money
Market
|
$ 640,252 | $ 5,970 (3) | ||
|
Institutional
Prime Money
Market
|
$ 3,417 | $ 0 | ||
|
In-Retirement
|
$ 8,171 | $ 0 | ||
|
Target Retirement
2015
|
$ 1,874 | $ 0 | ||
|
Target Retirement
2020
|
$ 44,290 | $ 0 | ||
|
Target Retirement
2025
|
$ 2,097 | $ 0 | ||
|
Target Retirement
2030
|
$ 46,864 | $ 0 | ||
|
Target Retirement
2035
|
$ 1,982 | $ 0 |
B-37
|
Shareholder
Services Fees
Paid |
Shareholder
Services
Fees Waived |
|||
| Fund | Class Y | Class Y | ||
|
Target Retirement
2040
|
$ 28,973 | $ 0 | ||
|
Target Retirement
2045
|
$ 2,267 | $ 0 | ||
|
Target Retirement
2050
|
$ 21,008 | $ 0 | ||
|
Target Retirement
2055
|
$ 1,386 | $ 0 | ||
|
Conservative
Allocation
|
$ 44,416 | $ 0 | ||
|
Moderate
Allocation
|
$ 27,281 | $ 0 | ||
|
Balanced
Allocation
|
$ 256,776 | $ 0 | ||
|
Growth
Allocation
|
$ 52,504 | $ 0 | ||
|
Aggressive
Allocation
|
$ 106,229 | $ 0 |
| (1) | Reflects activity for the period September 1, 2016 to June 1, 2017. On June 2, 2017, Class Y shares of the Fund converted to Class A shares. The Fund no longer offers Class Y shares. |
| (2) | On April 27, 2018, Class Y shares of the Fund converted to Class A shares. The Fund no longer offers Class Y shares. |
| (3) | The Adviser voluntarily waived these amounts for the fiscal year ended August 31, 2017. The Adviser, as shareholder servicing agent, may terminate such voluntary waivers at any time. |
How to Buy Shares
Rights of Accumulation (Class A Shares Only)
As described in the Prospectus, larger
purchases of Class A shares reduce or eliminate the sales charge paid. For example, the Funds will combine all Class A share purchases made on the same day by the investor, the investor’s spouse, and the investor’s children under age 21
when they calculate the sales charge. In addition, the sales charge, if applicable, is reduced for purchases made at one time by a trustee or fiduciary for a single trust estate or single fiduciary account.
If additional Class A shares are purchased,
the Funds will consider the previous purchase still invested in the Funds. For example, if a shareholder already owns the Class A shares of an Equity Fund having a current value of $40,000 and he or she purchases $10,000 of additional shares, the
sales charge on the additional purchases according to the schedule now in effect would be 4.00%, not 5.00% (see “How to Buy Shares
—
Class A Shares - Sales Charge
—
Equity Funds, Global and International Funds, and Alternative Funds” in the Prospectus).
The Funds also will consider purchases of
shares of certain other mutual funds held at BMO Harris Financial Advisors. For example, if a shareholder purchases shares of a certain mutual fund having a current value of $40,000 and then purchases the Class A shares of a Fund having a current
value of $10,000, the shareholder would receive a reduced sales charge on the $10,000 Class A shares purchase based on the other mutual fund’s reduced sales charge schedule applicable to a $50,000 investment in such fund’s shares.
To receive the sales charge reduction, BMO
Harris Financial Advisors must be notified by the shareholder in writing or by his or her investment professional or financial institution at the time the purchase is made that the Class A shares are already owned or that purchases are being
combined. The Funds will reduce or eliminate the sales charge after they confirm the purchases.
Concurrent Purchases (Class A Shares Only)
Shareholders have the privilege of combining
concurrent purchases of the Class A shares of two or more BMO Funds in calculating the applicable sales charge.
To receive a sales charge reduction or
elimination, BID must be notified by the shareholder in writing or by his or her investment professional or financial institution at the time the concurrent purchases are made. The Funds will reduce or eliminate the sales charge after they confirm
the purchases. Shareholders should retain records of their purchases for this purpose and may be required to provide supporting documentation to BID.
B-38
Letter of Intent (Class A Shares Only)
A shareholder may sign a letter of intent
committing to purchase a certain amount of a Fund’s Class A shares within a 13-month period in order to combine such purchases in calculating the applicable sales charge. The Funds’ custodian will hold shares in escrow equal to the
maximum applicable sales charge. If the shareholder completes the commitment, the escrowed shares will be released to his or her account. If the commitment is not completed within 13 months, the custodian will redeem an appropriate number of
escrowed shares to pay for the applicable sales charge.
While this letter of intent will not
obligate the shareholder to purchase Class A shares, each purchase during the period will be at the sales charge applicable to the total amount intended to be purchased. At the time a letter of intent is established, current balances in accounts in
any Class A shares of any Fund will be aggregated to provide a purchase credit towards fulfillment of the letter of intent. The letter may be dated as of a prior date to include any purchase may within the past 90 days. Prior trade prices will not
be adjusted.
Reinvestment Privilege
The reinvestment privilege is available for
all shares of the Funds within the same share class. The Class A shareholders who redeem from a Fund may reinvest the redemption proceeds back into the Fund’s Class A shares at the next determined NAV without any sales charge. The original
shares must have been subject to a sales charge and the reinvestment must be within 90 days.
In addition, if shares were reinvested
through an investment professional or financial institution, the investment professional or financial institution would not be entitled to an advanced payment from BMO Harris Financial Advisors on the reinvested shares, if otherwise applicable. BMO
Harris Financial Advisors must be notified by the shareholder in writing or by his/her investment professional or financial institution of the reinvestment in order to eliminate a sales charge. If a shareholder redeems shares in a Fund, there may be
federal income tax consequences.
Exchanging Securities
for Shares
A shareholder may contact
the Funds to request a purchase of shares in an exchange for securities owned by the shareholder. The Funds reserve the right to determine whether to accept the securities and the minimum market value to accept. The Funds will value the securities
in the same manner as it values its assets. This exchange is treated as a taxable sale of a shareholder’s securities for federal income tax purposes.
Conversion Privilege
Shareholders of a Fund may elect on a
voluntary basis to convert their shares in one class of a Fund into shares of a different class of the same Fund, subject to satisfying the eligibility requirements for investment in the new share class. You may be required to provide sufficient
information to establish eligibility to convert to the new share class. A share conversion within the same Fund should not result in a capital gain or loss for federal income tax purposes. Please consult your own tax advisor regarding federal,
state, foreign, and local tax considerations. The Fund may change, suspend, or terminate this conversion feature at any time.
Redemption In Kind
Although the Funds intend to pay share
redemptions in cash, the Funds reserve the right, as described below, to pay the redemption price in whole or in part by a distribution of a Fund’s portfolio securities.
Because the Corporation has elected to be
governed by Rule 18f-1 under the 1940 Act, each Fund is obligated to pay share redemptions to any one shareholder in cash only up to the lesser of $250,000 or 1% of the Fund’s net assets represented by such share class during any 90-day
period. Any share redemption payment greater than this amount will be in cash unless the Adviser determines that payment should be in kind. In such a case, a Fund will pay all or a portion of the remainder of the redemption in portfolio securities,
valued in the same way as the Fund determines its NAV. The portfolio securities will be selected in a manner that the Adviser deems fair and equitable and, to the extent available, such securities will be readily marketable.
A redemption in kind is not as liquid as a
cash redemption. If a redemption is made in kind, the redeeming shareholder would incur transaction costs in selling the portfolio securities received, and the proceeds of such sales, when made, may be more or less than the value on the redemption
date. Redemptions in kind are taxable for federal income tax purposes in the same manner as
B-39
redemptions for cash. The subsequent sale of securities received in kind may
result in taxable capital gains or realized losses for federal income tax purposes.
In addition, the Funds have adopted
procedures, consistent with SEC guidelines, to permit a redemption in kind to an affiliate.
Purchases and Redemptions Through Authorized Dealers
You may purchase or redeem shares of the
Funds through Authorized Dealers. Certain of these Authorized Dealers are authorized to designate other intermediaries to receive purchase and redemption orders on the Funds’ behalf. The Funds will be deemed to have received a purchase or
redemption order for Fund shares when such Authorized Dealer or, if applicable, such Authorized Dealer’s authorized designee, receives the order.
Money Market Fund Redemptions
In connection with changes to Rule 2a-7 that
went into effect on October 14, 2016, the
Money Market Funds
have adopted, policies and procedures permitting the Board to impose a liquidity fee on redemptions from certain Funds (up to 2%) or temporarily
restrict redemptions from certain Funds up to 10 business days during a 90 day period (a redemption gate), in the event that the Fund’s weekly liquid assets fall below the following thresholds:
| • | 30% weekly liquid assets – If the Fund’s weekly liquid assets fall below 30% of the Fund’s total assets, and the Board determines it is in the best interests of the Fund, the Board may impose a liquidity fee of no more than 2% of the amount redeemed and/or a redemption gate that temporarily suspends the right of redemption. |
| • | 10% weekly liquid assets – If the Fund’s weekly liquid assets fall below 10% of the Fund’s total assets, the Fund will impose, at the beginning of the next business day, a liquidity fee of 1% of the amount redeemed, unless the Board determines that imposing such a fee would not be in the best interests of the Fund or determines that a lower or higher fee (not to exceed 2%) would be in the best interests of the Fund. |
If the Fund imposes a redemption gate, the
Fund will not accept redemption or exchange orders until the Fund has notified shareholders that the redemption gate has been lifted. Any redemption or exchange orders submitted while a redemption gate is in effect will be cancelled without further
notice. If you still wish to redeem or exchange shares once the redemption gate has been lifted, you will need to submit a new redemption or exchange request to the Fund.
The Board generally expects that a
liquidity fee or redemption gate would be imposed, if at all, during periods of extraordinary market stress. Moreover, the Board generally expects that a liquidity fee or redemption gate would be imposed, if at all, after the Fund has notified
shareholders that a liquidity fee or redemption gate will be imposed (generally, as of the beginning of the next business day following the announcement that the Fund has imposed the liquidity fee or redemption gate). Announcements regarding the
imposition of a liquidity fee or redemption gate, or the termination of a liquidity fee or redemption gate, will be filed with the SEC on Form N-CR and will be available on the Fund’s website (http://www.bmofundsus.com). In addition, the Fund
will make such announcements through a supplement to the Funds’ Prospectus and may make such announcements through a press release or by other means.
Liquidity fees and redemption gates will
terminate at the beginning of the next business day once the Fund has invested 30% or more of its total assets in weekly liquid assets. The Fund may only suspend redemptions for up to 10 business days in any 90-day period.
A liquidity fee imposed by a Fund will
reduce the amount you will receive upon the redemption of your shares, and will generally decrease the amount of any capital gain or increase the amount of any capital loss you will recognize with respect to such redemption. Some degree of
uncertainty exists with respect to the tax treatment of liquidity fees received by money market funds and such tax treatment may be the subject of future guidance issued by the Internal Revenue Service (IRS). If a Fund receives liquidity fees, it
will consider the appropriate tax treatment of such fees at such time.
The Board has chosen not to subject the
Government Money Market Fund
to a liquidity fee or redemption gate, and may do so in the future only with advance notice to shareholders.
B-40
Account and Share Information
Voting and Distribution Rights
Shareholders of each Fund are entitled: (i)
to one vote per full share of common stock; (ii) to distributions declared by the Board; and (iii) upon liquidation of a Fund, to participate ratably in the assets of the Fund available for distribution. Each share of a Fund gives the shareholder
one vote in the election of directors and other matters submitted to shareholders for vote and is entitled to participate equally in net income and capital gains distributions by the Fund. All shares of each Fund or class in the Corporation have
equal voting rights, except that only shares of a particular Fund or class are entitled to vote on matters affecting that Fund or class. Consequently, the holders of more than 50% of the Corporation’s shares of common stock voting for the
election of directors can elect the entire Board, and, in such event, the holders of the Corporation’s remaining shares voting for the election of directors will not be able to elect any person or persons to the Board.
The WBCL permits registered investment
companies, such as the Corporation, to operate without an annual meeting of shareholders under specified circumstances if an annual meeting is not required by the 1940 Act. The Corporation holds meetings of shareholders as required by the 1940 Act,
the Corporation’s Articles of Incorporation or By-laws. Directors may be removed by the shareholders at a special meeting. A special meeting of the shareholders may be called by the Board upon written request of shareholders owning at least
10% of the Corporation’s outstanding voting shares.
The shares are redeemable and
transferable. All shares issued and sold by the Corporation will be fully paid and nonassessable.
Control Persons and Principal Shareholders
Any person who beneficially owns more than
25% of the outstanding shares of a Fund or a class may be considered a “controlling person” of such Fund or class. Shareholders with a controlling interest could affect the outcome of proxy voting or the direction of management of a
Fund. Any person who beneficially owns more than 5% of the outstanding shares of a Fund or a class may be considered a “principal shareholder” of such Fund or class. As of November 30, 2017, the following shareholders owned of record or
are known by the Corporation to own beneficially more than 5% of a Fund’s outstanding shares:
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Low Volatility Equity | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
5,487,829.95 | 63.91% | ||||
| Low Volatility Equity | I |
Wells
Fargo Clearing Services
A/C 5851-0146 2801 Market St. Saint Louis, MO 63103-2523 |
811,300.38 | 9.45% | ||||
| Low Volatility Equity | I |
Strafe
Co
FBO Next Egg Investments (NFCT), LP PO Box 6924 Newark DE 19714-6924 |
776,458.19 | 9.04% | ||||
| Low Volatility Equity | A |
Charles
Schwab & Co. Inc.
Reinvest Account Attn: Mutual Fund Dept. 211 Main St. San Francisco, CA 94105-1905 |
1,510,670.88 | 75.06% | ||||
| Low Volatility Equity | A |
Pershing
LLC
1 Pershing Plz Jersey City, NJ 07399-0002 |
246,298.35 | 17.53% | ||||
| Dividend Income | I |
Pershing
LLC
PO Box 2052 Jersey City NJ 07399-0002 |
5,571,171.19 | 72.37% |
B-41
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Dividend Income | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
1,788,861.93 | 23.24% | ||||
| Dividend Income | A |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
79,395.02 | 42.12% | ||||
| Large-Cap Value | I |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
10,196,962.19 | 53.82% | ||||
| Large-Cap Value | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
5,330,888.71 | 28.14% | ||||
| Large-Cap Value | I |
TD
Ameritrade Inc. for the
Exclusive Benefit of our Clients PO Box 2226 Omaha NE 68103-2226 |
2,390,889.13 | 12.62% | ||||
| Large-Cap Value | A |
Mitra
& Co FBO 98
c/o M&I Trust Co Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
293,771.24 | 19.18% | ||||
| Large-Cap Value | A |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
144,326.01 | 9.42% | ||||
| Large-Cap Value | A |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
130,688.37 | 8.53% | ||||
| Large-Cap Value | R6 |
Mitra
& Co FBO 98
c/o M&I Trust Co Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
90,099.51 | 96.11% | ||||
| Large-Cap Growth | Y |
National
Financial Services LLC
Attn: Mutual Funds Dept 400 Washington Blvd Jersey City, NJ 07310-1995 |
947,833.48 | 22.86% | ||||
| Large-Cap Growth | Y |
Charles
Schwab & Co. Inc.
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco, CA 94105-1905 |
538,212.99 | 12.98% | ||||
| Large-Cap Growth | Y |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
212,511.52 | 5.13% |
B-42
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Large-Cap Growth | I |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
7,767,414.69 | 49.92% | ||||
| Large-Cap Growth | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
3,861,511.67 | 24.82% | ||||
| Large-Cap Growth | I |
SEI
Private Trust Co
c/o Washington Trust 1 Freedom Valley Dr Oaks PA 19456-9989 |
1,181,857.72 | 7.59% | ||||
| Large-Cap Growth | A |
TD
Ameritrade Inc. for the
Exclusive Benefit of our Clients PO Box 2226 Omaha NE 68103-2226 |
14,663.06 | 46.18% | ||||
| Large-Cap Growth | A |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
10,675.30 | 33.62% | ||||
| Large-Cap Growth | A |
Robert
W. Baird & Co. Inc.
777 E. Wisconsin Ave. Fl. 29 Milwaukee, WI 53202-5391 |
2,973.98 | 9.73% | ||||
| Large-Cap Growth | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
119,252.74 | 65.76% | ||||
| Large-Cap Growth | R6 |
Lincoln
Retirement Services Company
FBO Public Radio Intl Inc 403B PO Box 7876 Fort Wayne IN 46801-7876 |
21,878.77 | 12.07% | ||||
| Large-Cap Growth | R6 |
Great-West
Trust Co LLC
Ttee F Employee Benefits Clients 401K Greenwood Vlg CO 80111-5002 |
21,216.58 | 11.70% | ||||
| Large-Cap Growth | R6 |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
15,598.82 | 8.60% | ||||
| Mid-Cap Value | I |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
5,892,390.35 | 55.35% | ||||
| Mid-Cap Value | I |
Mitra
& Co FBO 98 Daily Plans
Marshall & Isley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
2,179,887.33 | 20.48% | ||||
| Mid-Cap Value | I |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,252,938.89 | 11.77% |
B-43
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Mid-Cap Value | I |
National
Financial Services LLC
FBO Exclusive Bene of our Customers Attn: Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City NJ 07310-2010 |
551,298.50 | 5.18% | ||||
| Mid-Cap Value | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
2,915,853.16 | 47.66% | ||||
| Mid-Cap Value | I |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,492,307.14 | 24.39% | ||||
| Mid-Cap Value | I |
National
Financial Services LLC
FBO Exclusive Bene of our Customers Attn: Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City NJ 07310-2010 |
471,866.76 | 7.71% | ||||
| Mid-Cap Value | A |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco, CA 94105-1905 |
769,044.98 | 15.23% | ||||
| Mid-Cap Value | A |
Maril
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee, WI 53224-3638 |
734,466.98 | 14.54% | ||||
| Mid-Cap Value | A |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
447,151.45 | 8.85% | ||||
| Mid-Cap Value | A |
Hartford
Life Insurance Co
Attn: UIT Operations PO Box 2999 Hartford CT 06104-2999 |
355,412.56 | 7.04% | ||||
| Mid-Cap Value | A |
TD
Ameritrade Inc For The Exclusive
Benefit Of Our Clients PO Box 2226 Omaha, NE 68103-2226 |
339,103.21 | 6.71% | ||||
| Mid-Cap Value | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,261,016.37 | 96.89% | ||||
| Mid-Cap Growth | I |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
4,543,242.15 | 75.60% |
B-44
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Mid-Cap Growth | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
1,346,230.00 | 22.40% | ||||
| Mid-Cap Growth | A |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
147,760.14 | 13.13% | ||||
| Mid-Cap Growth | A |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
113,023.24 | 10.04% | ||||
| Mid-Cap Growth | A |
AUL
American Group
Retirement Annuity One American Square PO Box 368 Indianapolis, IN 46206-0368 |
100,162.96 | 8.90% | ||||
| Mid-Cap Growth | A |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco, CA 94105-1905 |
61,786.32 | 5.49% | ||||
| Mid-Cap Growth | R6 |
Maril
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 112 W Park Place Suite 400 Milwaukee, WI 53224-3638 |
36,811.67 | 96.19% | ||||
| Small-Cap Value | I |
Pershing
LLC
PO Box 2052 Jersey City, NJ 07303-2052 |
2,721,209.75 | 65.96% | ||||
| Small-Cap Value | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
727,419.23 | 17.63% | ||||
| Small-Cap Value | I |
National
Financial Services LLC
FBO Exclusive Bene of our Customers Attn: Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City NJ 07310-2010 |
386,575.37 | 9.37% | ||||
| Small-Cap Value | A |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
152,187.47 | 44.69% | ||||
| Small-Cap Value | A |
Mitra
& Co FBO 98
Marshall & Isley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Place Suite 400 Milwaukee, WI 53224-3638 |
33,263.60 | 9.77% |
B-45
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Small-Cap Value | A |
Pershing
LLC
1 Pershing Plaza Jersey City, NJ 07399-0002 |
31,692.47 | 9.31% | ||||
| Small-Cap Value | R6 |
Voya
Retirement Insurance and Annuity Company
1 Orange Way Windsor CT 06095-4773 |
91,491.39 | 47.71% | ||||
| Small-Cap Value | R6 |
State
Street Bank & Trust Co As Cust
For MML FBO Its Clients 1200 Crown Colony Dr #10313 Quincy, MA 02169-0938 |
86,089.53 | 44.89% | ||||
| Small-Cap Value | R6 |
Great-West
Trust Co LLC
TTEE F Employee Benefits Clients 401K Greenwood Vlg Co 80111-5002 |
12,010.17 | 6.26% | ||||
| Small-Cap Core | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
933,277.21 | 70.36% | ||||
| Small-Cap Core | I |
National
Financial Services LLC
FBO Exclusive Bene Of Our Customers Attn: Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City, NJ 07310-1995 |
140,619.68 | 10.60% | ||||
| Small-Cap Core | I |
Vallee
& Co FBO 98
c/o BMO Harris Bank N.A. Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay WI 54304-5280 |
138,196.67 | 10.42% | ||||
| Small-Cap Core | A |
Pershing
LLC
1 Pershing Plaza Jersey City, NJ 07399-0002 |
106,454.68 | 51.54% | ||||
| Small-Cap Core | A |
Maril
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
52,868.85 | 25.60% | ||||
| Small-Cap Growth | I |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
2,024,140.00 | 49.15% | ||||
| Small-Cap Growth | I |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,115,293.52 | 27.08% | ||||
| Small-Cap Growth | I |
Capinco
c/o US Bank NA 1555 N Rivercenter Dr Suite 302 Milwaukee, WI 53212-3958 |
244,994.73 | 5.95% | ||||
| Small-Cap Growth | I |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
213,521.37 | 5.18% |
B-46
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Small-Cap Growth | A |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee, WI 53224-3638 |
554,891.02 | 18.17% | ||||
| Small-Cap Growth | A |
AUL
American Group
Retirement Annuity One American Square PO Box 368 Indianapolis, IN 46206-0368 |
372,852.23 | 12.21% | ||||
| Small-Cap Growth | A |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco, CA 94105-1905 |
314,253.92 | 10.29% | ||||
|
Global
Low Volatility
Equity |
I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
1,714,706.72 | 46.88% | ||||
|
Global
Low Volatility
Equity |
I |
Jewish
Communal Fund
575 Madison Ave, Ste 730 New York, NY 10022-8591 |
848,379.35 | 23.19% | ||||
|
Global
Low Volatility
Equity |
I |
Strafe
Co.
FBO Neubauer Foundation P.O. Box 6924 Newark, DE 19714-6924 |
640,000.00 | 17.50% | ||||
|
Global
Low Volatility
Equity |
A |
Pershing
LLC
1 Pershing Plaza Jersey City, NJ 07399-0002 |
46,571.04 | 53.64% | ||||
|
Global
Low Volatility
Equity |
A |
Maril
& Co. FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
8,997.14 | 10.36% | ||||
|
Disciplined
International Equity |
I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
4,413,746.77 | 68.48% | ||||
| Disciplined International Equity | I |
MSSB
FBO Essentia Health
c/o Customer 502 E 2nd St Duluth, MN 55805-1913 |
1,506,091.28 | 23.37% | ||||
| Disciplined International Equity | I |
Wells
Fargo Bank NA
FBO CSV Ret Plan Mutual Fund Acct PO Box 1533 Minneapolis, MN 55480-1533 |
435,897.44 | 6.76% |
B-47
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
|
Disciplined
International Equity |
A |
Maril
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
10,000.00 | 62.30% | ||||
|
Disciplined
International Equity |
A |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
3,411.84 | 21.26% | ||||
| Disciplined International Equity | A |
Pershing
LLC
1 Pershing Plaza Jersey City, NJ 07399-0002 |
2,636.20 | 16.42% | ||||
| Pyrford International Stock | I |
Pershing
LLC
PO Box 2052 Jersey City, NJ 07303-2052 |
7,757,686.25 | 17.36% | ||||
| Pyrford International Stock | I |
Mitra
& Co FBO 98
Marshall & Ilsey Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee, WI 53224-3638 |
6,544,191.84 | 14.65% | ||||
| Pyrford International Stock | I |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco, CA 94105-1905 |
6,073,652.13 | 13.59% | ||||
| Pyrford International Stock | I |
SEI
Private Trust Co
c/o Harris Bank/M&I Attn: Mutual Fund Administrator 1 Freedom Valley Dr Oaks, PA 19456-9989 |
5,758,618.99 | 12.89% | ||||
| Pyrford International Stock | I |
Grange
Mutual Casualty Company
c/o Chris Montgomery 671 S High St Columbus, OH 43206-1049 |
4,437,639.13 | 9.93% | ||||
| Pyrford International Stock | I |
Capinco
c/o US Bank NA 1555 N Rivercenter Dr Ste 302 Milwaukee, WI 53212-3958 |
3,480,697.32 | 7.79% | ||||
| Pyrford International Stock | I |
National
Financial Services LLC
FBO Exclusive Bene Of Our Customers Attn: Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City, NJ 07310-1995 |
3,428,841.58 | 7.67% | ||||
| Pyrford International Stock | A |
TD
Ameritrade Inc For The Exclusive
Benefit Of Our Clients PO Box 2226 Omaha, NE 68103-2226 |
24,952.77 | 37.05% | ||||
| Pyrford International Stock | A |
NFS
LLC FEBO
Our Customer Pittsburgh, PA 15236-1823 |
16,356.88 | 24.29% |
B-48
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
|
Pyrford
International
Stock |
A |
NFS
LLC FEBO
NFS/FMTC Rollover IRA FBO Our Customer Los Angeles, CA 90049-4587 |
9,391.95 | 13.95% | ||||
|
Pyrford
International
Stock |
A |
Raymond
James & Assoc Inc
FBO Our Customer New York, NY 10019-0077 |
7,451.57 | 11.07% | ||||
|
Pyrford
International
Stock |
A |
NFS
LLC FEBO
FBO Our Customer Los Angeles, CA 90049-4587 |
4,552.69 | 6.76% | ||||
|
Pyrford
International
Stock |
R6 |
Wells
Fargo Bank FBO
Various Retirement Plans 1525 West WT Harris Blvd. Charlotte, NC 28288-1076 |
982,221.00 | 25.87% | ||||
| Pyrford International Stock | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee, WI 53224-3638 |
455,589.78 | 12.00% | ||||
|
Pyrford
International
Stock |
R6 |
Flexpath
IndexPlus Moderate 2035
Fund I Series 1100 North Market Street 9th Floor Attn: Dara Alderton Wilmington DE 19890-1100 |
417,513.75 | 11.00% | ||||
| Pyrford International Stock | R6 |
Flexpath
Plus CITS
1100 North Market Street 9th Floor Attn: Dara Alderton Wilmington DE 19890-1100 |
408,332.41 | 10.75% | ||||
| Pyrford International Stock | R6 |
Flexpath
IndexPlus Moderate 2045
Fund I Series 1100 North Market Street 9th Floor Attn: Dara Alderton Wilmington DE 19890-1100 |
329,438.70 | 8.68% | ||||
|
Pyrford
International
Stock |
R6 |
Flexpath
IndexPlus Moderate 2025
Fund I Series 1100 North Market Street 9th Floor Attn: Dara Alderton Wilmington DE 19890-1100 |
329,370.93 | 8.67% | ||||
|
Pyrford
International
Stock |
R6 |
Comerica
Bank
FBO Reading FMMutua P.O. Box 75000 MSC 3446 Detroit MI 48275-0001 |
281,285.15 | 7.41% | ||||
| LGM Emerging Markets Equity | I |
Pershing
LLC
PO Box 2052 Jersey City, NJ 07303-2052 |
3,410,160.37 | 34.84% | ||||
|
LGM
Emerging Markets
Equity |
I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
2,881,754.45 | 29.44% |
B-49
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
|
LGM
Emerging Markets
Equity |
I |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
1,136,731.92 | 11.61% | ||||
|
LGM
Emerging Markets
Equity |
I |
Capinco
c/o U.S. Bank NA
1555 N. Rivercenter Dr., Ste. 302 Milwaukee, WI 53212-3958 |
580,879.51 | 5.93% | ||||
|
LGM
Emerging Markets
Equity |
A |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
111,460.59 | 32.03% | ||||
|
LGM
Emerging Markets
Equity |
A |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco, CA 94105-1905 |
41,767.52 | 12.00% | ||||
|
LGM
Emerging Markets
Equity |
A |
TD
Ameritrade Inc For The Exclusive
Benefit Of Our Clients PO Box 2226 Omaha, NE 68104-2226 |
33,850.91 | 9.73% | ||||
|
LGM
Emerging Markets
Equity |
A |
Vallee
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
32,611.31 | 9.37% | ||||
|
LGM
Emerging Markets
Equity |
A |
Mitra
& Co FBO 98Marshall & Ilsley Trust Oper
c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee, WI 53224-3638 |
18,256.95 | 5.25% | ||||
| Alternative Strategies | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
6,315,326.78 | 81.18% | ||||
| Alternative Strategies | I |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
1,114,385.38 | 14.32% | ||||
| Alternative Strategies | A |
NFS
LLC FEBO
Our Customer Las Vegas, NV 89103-8209 |
3,621.07 | 31.71% | ||||
| Alternative Strategies | A |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
2,856.83 | 25.02% | ||||
| Alternative Strategies | A |
Maril
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
1,211.40 | 10.61% |
B-50
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Alternative Strategies | A |
NFS
LLC FEBO
FBO Our Customer N Stonington, CT 06359-1340 |
954.20 | 8.36% | ||||
| Alternative Strategies | A |
NFS
LLC FEBO
NFS/FMTC SEP IRA FBO Our Customer Grandview, MO 64030-4525 |
788.07 | 6.90% | ||||
| Alternative Strategies | A |
NFS
LLC FEBO
Our Customer Shawnee, KS 66226-3612 |
672.35 | 5.89% | ||||
| Global Long/Short Equity | I |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee, WI 53224-3638 |
362,744.78 | 42.94% | ||||
| Global Long/Short Equity | I |
Maril
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
190,000.00 | 22.49% | ||||
| Global Long/Short Equity | I |
Northern
Trust Company
FBO Fortress Alternative Asset PO Box 92956 Chicago, IL 60675-2956 |
134,266.65 | 15.89% | ||||
| Global Long/Short Equity | I |
LPL
Financial
Omnibus Customer account Attn: Mutual Fund Trading 4707 Executive Drive San Diego, CA 92121-3091 |
112,584.09 | 13.33% | ||||
| Global Long/Short Equity | A |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco, CA 94105-1905 |
39,468.65 | 63.52% | ||||
| Global Long/Short Equity | A |
Vanguard
Brokerage Services
PO Box 1170 Valley Forge, PA 19482-1170 |
11,958.27 | 19.25% | ||||
| Global Long/Short Equity | A |
Maril
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
10,000.00 | 16.09% | ||||
| Ultra Short Tax-Free | I |
SEI
Private Trust Co
c/o ID940 Attn: Mutual Funds Admin 1 Freedom Valley Dr Oaks, PA 19456-9989 |
14,383,507.47 | 25.30% | ||||
| Ultra Short Tax-Free | I |
Newly
Weds Foods Inc.
4140 W. Fullerton Ave. Chicago, IL 60639-2198 |
10,433,428.22 | 18.35% |
B-51
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Ultra Short Tax-Free | I |
SEI
Private Trust Co
c/o Harris Bank/M&I Attn: Mutual Fund Administrator 1 Freedom Valley Dr Oaks, PA 19456-9989 |
5,956,529.23 | 10.48% | ||||
| Ultra Short Tax-Free | I |
Charles
Schwab & Co. Inc.
Reinvest Account Attn: Mutual Fund Dept. 211 Main St. San Francisco, CA 94105-1905 |
4,740,231.48 | 8.34% | ||||
| Ultra Short Tax-Free | I |
National
Financial Services LLC
FBO Exclusive Bene of Our Customers Attn: Mutual Funds Dept. 4th Fl 499 Washington Blvd Jersey City, NJ 07310-1995 |
3,100,694.83 | 5.45% | ||||
| Ultra Short Tax-Free | A |
Pershing
LLC
1 Pershing Plz Jersey City, NJ 07399-0002 |
993,381.14 | 29.15% | ||||
| Ultra Short Tax-Free | A |
Charles
Schwab & Co. Inc.
Reinvest Account Attn: Mutual Fund Dept. 211 Main St. San Francisco, CA 94105-1905 |
426,555.60 | 12.52% | ||||
| Ultra Short Tax-Free | A |
Mitra
& Co. FBO 62
480 Pilgrim Way Ste 1000 Green Bay, WI 54304-5280 |
357,835.57 | 10.50% | ||||
| Ultra Short Tax-Free | A |
Soil
& Engineering Services Inc.
1102 Stewart St. Madison, WI 53713-4648 |
302,554.60 | 8.88% | ||||
| Short Tax-Free | I |
SEI
Private Trust Co
c/o BMO Harris Bank ID940 Attn: Mutual Funds Administrator 1 Freedom Valley Dr Oaks PA 19456-9989 |
10,760,068.32 | 58.99% | ||||
| Short Tax-Free | I |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
1,925,568.23 | 10.56% | ||||
| Short Tax-Free | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
1,235,677.23 | 6.77% | ||||
| Short Tax-Free | I |
Vallee
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
1,055,267.94 | 5.79% | ||||
| Short Tax-Free | I |
Pershing
LLC
1 Pershing Plz Jersey City, NJ 07399-0002 |
960,413.47 | 5.27% |
B-52
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Short Tax-Free | A |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
167,017.46 | 23.96% | ||||
| Short Tax-Free | A |
Pershing
LLC
1 Pershing Plz Jersey City, NJ 07399-0002 |
103,013.00 | 14.78% | ||||
| Short-Term Income | I |
SEI
Private Trust Co
c/o ID 940 Attn: Mutual Fund Administrator 1 Freedom Valley Dr Oaks PA 19456-9989 |
5,767,235.21 | 23.41% | ||||
| Short-Term Income | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
4,035,905.21 | 16.39% | ||||
| Short-Term Income | I |
Vallee
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay WI 54304-5280 |
2,831,752.52 | 11.50% | ||||
| Short-Term Income | I |
Chicago
Professional Sports LP
1901 W Madison St Chicago IL 60612-2459 |
2,277,173.61 | 9.25% | ||||
| Short-Term Income | I |
Data
Recognition Corporation
13490 Bass Lake Rd Maple Grove, MN 55311-3634 |
1,864,186.04 | 7.57% | ||||
| Short-Term Income | I |
Amsted
Industries Incorporated
180 N. Stetson Ave. Ste 1800 Chicago, IL 60601-6808 |
1,600,853.79 | 6.50% | ||||
| Short-Term Income | I |
MAC
& Co
Attn: Mutual Fund Operations 500 Grant Street Room 151-1010 Pittsburgh PA 15219-2502 |
1,529,422.88 | 6.21% | ||||
| Short-Term Income | I |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
1,358,540.08 | 5.52% | ||||
| Short-Term Income | A |
TD
Ameritrade Inc. for the
Exclusive Benefit of our Clients PO Box 2226 Omaha NE 68103-2226 |
407,000.91 | 11.57% | ||||
| Short-Term Income | A |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
403,802.03 | 11.48% | ||||
| Short-Term Income | A |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W. Park Pl Ste 400 Milwaukee, WI 53224-3638 |
359,472.28 | 10.22% |
B-53
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Short-Term Income | A |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco, CA 94105-1905 |
199,202.47 | 5.66% | ||||
| Intermediate Tax-Free | Y |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
55,934,789.65 | 66.75% | ||||
| Intermediate Tax-Free | Y |
National
Financial Services LLC
Attn: Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City NJ 07310-2010 |
17,613,473.83 | 21.02% | ||||
| Intermediate Tax-Free | Y |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
5,110,765.54 | 6.10% | ||||
| Intermediate Tax-Free | I |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco, CA 94105-1905 |
13,342,423.56 | 22.94% | ||||
| Intermediate Tax-Free | I |
SEI
Private Trust Co
c/o ID940 Attn: Mutual Funds Admin 1 Freedom Valley Dr Oaks PA 19456-9989 |
11,868,904.61 | 20.41% | ||||
| Intermediate Tax-Free | I |
National
Financial Services LLC
FBO Exclusive Bene of our Customers Attn: Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City NJ 07310-2010 |
9,690,204.46 | 16.66% | ||||
| Intermediate Tax-Free | I |
SEI
Private Trust Co
c/o Harris Bank/M&I ID 940 Attn: Mutual Fund Administrator 1 Freedom Valley Dr Oaks PA 19456-9989 |
9,214,349.87 | 15.84% | ||||
| Intermediate Tax-Free | I |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
6,841,036.78 | 11.76% | ||||
| Intermediate Tax-Free | A |
TD
Ameritrade Inc. for the
Exclusive Benefit of our Clients PO Box 2226 Omaha NE 68103-2226 |
934,917.43 | 85.96% | ||||
| Intermediate Tax-Free | A |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
129,969.33 | 11.95% | ||||
| Strategic Income | Y |
National
Financial Services LLC
FBO Exclusive Bene of our Customers Attn: Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City NJ 07310-2010 |
5,661,722.02 | 74.46% |
B-54
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Strategic Income | I |
Mitra
& Co FBO 62
480 Pilgrim Way Ste 1000 Green Bay, WI 54304-5280 |
460,934.94 | 21.67% | ||||
| Strategic Income | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W. Park Pl Ste 400 Milwaukee, WI 53224-3638 |
402,102.33 | 18.91% | ||||
| Strategic Income | I |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W. Park Pl Ste 400 Milwaukee, WI 53224-3638 |
346,977.90 | 16.32% | ||||
| Strategic Income | I |
SEI
Private Trust Co
c/o Harris Bank/M&I ID 940 Attn: Mutual Fund Administrator 1 Freedom Valley Dr Oaks, PA 19456-9989 |
301,093.34 | 14.16% | ||||
| Strategic Income | A |
Maril
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee, WI 53224-3638 |
197,993.31 | 10.31% | ||||
| Strategic Income | A |
Pershing
LLC
1 Pershing Plz Jersey City, NJ 07399-0002 |
192,885.72 | 10.04% | ||||
| TCH Corporate Income | Y |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco CA 94105-1905 |
6,753,253.36 | 73.45% | ||||
| TCH Corporate Income | Y |
National
Financial Services LLC
FBO Exclusive Bene of our Customers ATTN Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City NJ 07310-1995 |
1,970,105.41 | 21.43% | ||||
| TCH Corporate Income | I |
SEI
Private Trust Co
c/o Harris Bank/M&I ID 940 Attn: Mutual Fund Administrator 1 Freedom Valley Dr Oaks PA 19456-9989 |
4,672,586.59 | 44.68% | ||||
| TCH Corporate Income | I |
SEI
Private Trust Co
c/o Harris Bank/M&I ID 940 Attn: Mutual Fund Administrator 1 Freedom Valley Dr Oaks PA 19456-9989 |
2,501,729.53 | 23.92% | ||||
| TCH Corporate Income | I |
MAC
& Co
Attn: Mutual Fund Ops 500 Grant St. Pittsburgh PA 15219-2502 |
1,688,049.29 | 16.14% |
B-55
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| TCH Corporate Income | I |
SEI
Private Trust Co
c/o Harris Bank 1 Freedom Valley Dr Oaks PA 19456-9989 |
629,758.32 | 6.02% | ||||
| TCH Corporate Income | A |
Pershing
LLC
1 Pershing Plz Jersey City, NJ 07399-0002 |
60,672.07 | 85.61% | ||||
| TCH Corporate Income | A |
TD
Ameritrade Inc
FBO Our Customers PO Box 2226 Omaha, NE 68103-2226 |
5,955.05 | 8.40% | ||||
| TCH Core Plus Bond | Y |
Charles
Schwab & Co Inc
Reinvest Account Attn: Mutual Fund Dept 211 Main St San Francisco, CA 94105-1905 |
1,691,653.06 | 29.48% | ||||
| TCH Core Plus Bond | Y |
National
Financial Services LLC
FBO Exclusive Bene of Our Customers Attn: Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City, NJ 07310-1995 |
1,422,829.44 | 24.79% | ||||
| TCH Core Plus Bond | Y |
LPL
Financial
Omnibus Customer Account Attn: Mutual Fund Trading 4707 Executive Dr San Diego, CA 92121-3091 |
1,050,264.29 | 18.30% | ||||
| TCH Core Plus Bond | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
699,188.05 | 12.18% | ||||
| TCH Core Plus Bond | Y |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
292,977.44 | 5.11% | ||||
| TCH Core Plus Bond | I |
Pershing
LLC
PO Box 2052 Jersey City NJ 07303-2052 |
40,580,311.40 | 48.12% | ||||
| TCH Core Plus Bond | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
20,647,496.49 | 24.48% | ||||
| TCH Core Plus Bond | I |
National
Financial Services LLC
FBO Exclusive Bene of our Customers Attn: Mutual Funds Dept 4th Fl 499 Washington Blvd Jersey City NJ 07310-1995 |
4,947,791.26 | 5.87% | ||||
| TCH Core Plus Bond | A |
TD
Ameritrade Inc. for the
Exclusive Benefit of our Clients PO Box 2226 Omaha NE 68103-2226 |
232,762.87 | 76.71% |
B-56
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| TCH Core Plus Bond | A |
Pershing
LLC
1 Pershing Plz Jersey City, NJ 07399-0002 |
34,334.28 | 11.32% | ||||
| TCH Core Plus Bond | A |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
25,823.55 | 8.51% | ||||
| High Yield Bond | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
1,031,518.51 | 79.15% | ||||
| High Yield Bond | A |
Pershing
LLC
1 Pershing Plz Jersey City NJ 07399-0002 |
45,358.48 | 45.55% | ||||
| High Yield Bond | A |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
27,420.14 | 27.53% | ||||
|
Government
Money
Market |
Y |
Maril
& Co
M&I Trust Company, NA 11270 West Park Place Suite 400- PPW-08-WM Attn: ACM Milwaukee WI 53224-3638 |
631,603,431.46 | 80.36% | ||||
|
Government
Money
Market |
Y |
San
Pasqual Fiduciary Trust Company
550 S Hope St Ste 550 Los Angeles, CA 90071-2612 |
72,755,117.36 | 9.26% | ||||
|
Government
Money
Market |
Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee, WI 53224-3638 |
42,738,670.94 | 5.44% | ||||
|
Government
Money
Market |
Premier |
Maril
& Co
M&I Trust Company, NA 11270 West Park Place Suite 400- PPW-08-WM Attn: ACM Milwaukee WI 53224-3638 |
1,833,779,454.49 | 72.12% | ||||
|
Government
Money
Market |
Premier |
SEI
Private Trust Company
c/o Harris Bank ID 940 Attn: Mutual Fund Admin 1 Freedom Trail Oaks PA 19456 |
320,949,135.89 | 12.62% | ||||
|
Government
Money
Market |
Premier |
GS
Global Cash Services
Omnibus Account FBO Goldman Sachs & Co LLC Customers 71 S Wacker Dr Ste 500 Chicago, IL 60606-4673 |
148,619,517.41 | 5.85% |
B-57
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Tax-Free Money Market | Y |
Pershing
LLC
As Agent for its Brokerage Customer Attn: Cash Management Services 1 Pershing Plz Jersey City NJ 07399-0002 |
34,402,649.28 | 32.62% | ||||
| Tax-Free Money Market | Y |
Maril
& Co
FBO TMI Trust Company 11270 W Park Pl Milwaukee, WI 53224-3623 |
30,427,009.27 | 28.85% | ||||
| Tax-Free Money Market | Y |
Gretchen
Heller TTEE
J Andrew Heller TTEE Gretchen Heller 1977 Trust U/A dtd 7/18/77 PO Box 240181 Milwaukee WI 53224-9009 |
18,895,838.75 | 17.92% | ||||
| Tax-Free Money Market | Y |
BMO
Harris Bank N A
111 W Monroe 9 E Chicago IL 60603-4014 |
7,662,900.00 | 7.27% | ||||
| Tax-Free Money Market | Y |
Mary
Ellen Heller TTEE
J Andrew Heller TTEE Mary Ellen Heller Marital Trust II U/A dtd 04/05/1995 PO Box 240181 Milwaukee WI 53224-9009 |
6,247,475.00 | 5.92% | ||||
| Tax-Free Money Market | Premier |
SEI
Private Trust Company
c/o Harris Bank ID 940 Attn: Mutual Fund Admin 1 Freedom Trail Oaks PA 19456 |
181,825,926.93 | 77.21% | ||||
| Tax-Free Money Market | Premier |
Maril
and Co
FBO TMI Trust Company 11270 W Park Pl Milwaukee WI 53224-3623 |
43,585,729.46 | 18.51% | ||||
| Prime Money Market | Y |
Pershing
1 Pershing Plz Jersey City NJ 07399-0002 |
126,367,793.61 | 62.12% | ||||
| Prime Money Market | Y |
Maril
and Co
FBO TMI Trust Company 11270 W Park Place Milwaukee WI 53224-3623 |
29,444,915.88 | 14.47% | ||||
| Prime Money Market | Y |
Maril
and Co
11270 W Park Place Suite 400 Attn: ACM Milwaukee, WI 53224-3638 |
24,850,824.41 | 12.22% | ||||
| Prime Money Market | Premier |
SEI
Private Trust Company
c/o Harris Bank ID 940 Attn: Mutual Fund Admin 1 Freedom Valley Dr Oaks PA 19456-9989 |
179,293,815.74 | 88.66% | ||||
| Prime Money Market | Premier |
BMO
Customer
Bayside, WI 53217-1958 |
16,628,518.98 | 8.22% |
B-58
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
|
Institutional
Prime
Money Market |
Y |
Maple
Valley Mutual
Insurance Company P.O. Box 59 Lena, WI 54139-0059 |
948,262.29 | 66.63% | ||||
|
Institutional
Prime
Money Market |
Y |
St.
Sebastian Congregation
Milwaukee, WI 53208-1698 |
220,608.43 | 15.50% | ||||
|
Institutional
Prime
Money Market |
Y |
Stockbridge-Munsee
Community
Waste Water Reserve Account N8618 Oak St. Bowler, WI 54416-9480 |
146,045.57 | 10.26% | ||||
|
Institutional
Prime
Money Market |
Premier |
Maril
& Co FBO 98
BMO Global Asset Management Mutual Funds Dept 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
386,639,705.12 | 99.84% | ||||
| In-Retirement | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
354,022.97 | 97.43% | ||||
| In-Retirement | R3 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
70,451.56 | 100% | ||||
| In-Retirement | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,148,992.42 | 100% | ||||
| Target Retirement 2015 | Y |
Maril
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
10,149.95 | 37.26% | ||||
| Target Retirement 2015 | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
8,329.80 | 30.58% | ||||
| Target Retirement 2015 | Y |
UMB
Bank NA
Cust IRA Buhl, MN 55713-0011 |
3,045.36 | 11.18% | ||||
| Target Retirement 2015 | Y |
UMB
Bank NA
Cust IRA Newcastle, CA 95658-9739 |
2,566.85 | 9.42% | ||||
| Target Retirement 2015 | Y |
UMB
Bank NA
Cust IRA Green Bay, WI 54313-9367 |
1,501.26 | 5.51% | ||||
| Target Retirement 2015 | R3 |
Maril
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
10,107.28 | 100% |
B-59
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Target Retirement 2015 | R6 |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
291,612.28 | 100% | ||||
| Target Retirement 2020 | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,619,693.89 | 96.63% | ||||
| Target Retirement 2020 | R3 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
626,150.32 | 100% | ||||
| Target Retirement 2020 | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
5,250,946.62 | 99.98% | ||||
| Target Retirement 2025 | Y |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
44,843.90 | 61.86% | ||||
| Target Retirement 2025 | Y |
BMO
Customer
Hartford, WI 53027-9221 |
4,448.96 | 6.14% | ||||
| Target Retirement 2025 | Y |
UMB
Bank NA
Cust. IRA FBO Our Customer Fond Du Lac, WI 54935 |
4,059.87 | 5.60% | ||||
| Target Retirement 2025 | R3 |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
13,158.74 | 100% | ||||
| Target Retirement 2025 | R6 |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
1,738,036.32 | 100% | ||||
| Target Retirement 2030 | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,589,581.76 | 97.63% | ||||
| Target Retirement 2030 | R3 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
518,370.45 | 100% |
B-60
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Target Retirement 2030 | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
5,825,511.95 | 100% | ||||
| Target Retirement 2035 | Y |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
43,463.76 | 74.87% | ||||
| Target Retirement 2035 | Y |
UMB
Bank NA
Cust. IRA FBO Our Customer Dresden, OH 43821-9742 |
8,655.99 | 14.91% | ||||
| Target Retirement 2035 | R3 |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
7,381.77 | 100% | ||||
| Target Retirement 2035 | R6 |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
994,789.66 | 100% | ||||
| Target Retirement 2040 | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
927,974.71 | 98.33% | ||||
| Target Retirement 2040 | R3 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
202,254.91 | 100% | ||||
| Target Retirement 2040 | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
3,342,187.04 | 100% | ||||
| Target Retirement 2045 | Y |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
44,011.67 | 63.04% | ||||
| Target Retirement 2045 | Y |
UMB
Bank NA
Cust. IRA FBO Our Customer Antioch, IL 60002-7238 |
15,071.69 | 21.59% | ||||
| Target Retirement 2045 | R3 |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
4,669.08 | 100% |
B-61
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Target Retirement 2045 | R6 |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
540,510.42 | 100% | ||||
| Target Retirement 2050 | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
691,931.24 | 98.89% | ||||
| Target Retirement 2050 | R3 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
226,275.55 | 100% | ||||
| Target Retirement 2050 | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
2,275,402.41 | 100% | ||||
| Target Retirement 2055 | Y |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
38,814.01 | 94.42% | ||||
| Target Retirement 2055 | R3 |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
19,903.55 | 79.55% | ||||
| Target Retirement 2055 | R3 |
Maril
& Co FBO 98
c/o BMO Harris Bank NA Attn: MF 480 Pilgrim Way, Suite 1000 Green Bay, WI 54304-5280 |
5,116.13 | 20.45% | ||||
| Target Retirement 2055 | R6 |
Mitra
Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
574,749.80 | 100% | ||||
| Conservative Allocation | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,480,082.67 | 97.61% | ||||
| Conservative Allocation | I |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
2,608,974.61 | 99.64% |
B-62
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Conservative Allocation | R3 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
134,001.58 | 100% | ||||
| Conservative Allocation | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,889,920.24 | 65.70% | ||||
| Conservative Allocation | R6 |
MAC
& Co
Attn: Mutual Fund Ops 500 Grant St. Pittsburgh PA 15219-2502 |
953,786.81 | 33.16% | ||||
| Moderate Allocation | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
771,297.19 | 97.81% | ||||
| Moderate Allocation | I |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
898,433.93 | 99.84% | ||||
| Moderate Allocation | R3 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
779,500.62 | 59.86% | ||||
| Moderate Allocation | R3 |
Associated
Trust Co. FBO
Our Customer P.O. Box 22037 Green Bay, WI 54305-2037 |
522,706.17 | 40.14% | ||||
| Moderate Allocation | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
6,142,743.20 | 77.37% | ||||
| Moderate Allocation | R6 |
MAC
& Co
Attn: Mutual Fund Ops 500 Grant St. Pittsburgh PA 15219-2502 |
1,527,062.69 | 19.23% | ||||
| Balanced Allocation | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
9,246,946.36 | 88.52% | ||||
| Balanced Allocation | Y |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
1,031,298.52 | 9.87% |
B-63
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Balanced Allocation | I |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
3,999,648.60 | 77.25% | ||||
| Balanced Allocation | I |
Saxon
& Co
FBO Customer PO Box 7780-1888 Philadelphia, PA 19182-0001 |
484,873.22 | 9.37% | ||||
| Balanced Allocation | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
467,038.59 | 9.02% | ||||
| Balanced Allocation | R3 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,454,646.03 | 66.06% | ||||
| Balanced Allocation | R3 |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
747,392.97 | 33.94% | ||||
| Balanced Allocation | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
14,661,195.70 | 72.77% | ||||
| Balanced Allocation | R6 |
MAC
& Co
Attn: Mutual Fund Ops 500 Grant St. Pittsburgh PA 15219-2502 |
3,694,436.19 | 18.34% | ||||
| Balanced Allocation | R6 |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee, WI 53224-3638 |
1,241,849.53 | 6.16% | ||||
| Growth Allocation | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,555,370.36 | 98.46% | ||||
| Growth Allocation | I |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
485,111.58 | 58.91% |
B-64
| Fund Name | Class | Name and Address | Number of Shares | Percent of Class | ||||
| Growth Allocation | I |
Mitra
& Co FBO 98
Marshall & Ilsley Trust Oper c/o BMO Harris Bank NA Attn: MF 11270 W Park Pl Ste 400 Milwaukee WI 53224-3638 |
301,186.29 | 36.57% | ||||
| Growth Allocation | R3 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,711,230.13 | 100% | ||||
| Growth Allocation | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
4,511,926.78 | 53.51% | ||||
| Growth Allocation | R6 |
MAC
& Co
Attn: Mutual Fund Ops 500 Grant St. Pittsburgh PA 15219-2502 |
3,606,237.54 | 42.77% | ||||
| Aggressive Allocation | Y |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
3,621,281.31 | 98.43% | ||||
| Aggressive Allocation | I |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,369,842.03 | 93.77% | ||||
| Aggressive Allocation | R3 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
1,558,845.09 | 96.35% | ||||
| Aggressive Allocation | R6 |
Mitra
& Co FBO 98 Daily Plans
c/o M&I Trust Co NA Attn: MF 11270 W Park Place Suite 400 Milwaukee WI 53224-3638 |
6,854,176.90 | 64.73% | ||||
| Aggressive Allocation | R6 |
MAC
& Co
Attn: Mutual Fund Ops 500 Grant St. Pittsburgh PA 15219-2502 |
3,520,389.61 | 33.24% |
The Corporation
believes that the entities in the above chart, the holders of record of these shares, are not the beneficial owners of such shares.
As of November 30, 2017, the current
officers and directors of the Corporation, as a group, owned less than 1% of any class of each Fund’s outstanding shares.
B-65
What are the Federal Income Tax Consequences?
This section is not intended to be a full
discussion of federal income tax laws and does not discuss state, local, or foreign tax laws. On December 20, 2017, Congress passed new tax legislation that may have wide ranging consequences, the effects of which are not entirely known as of the
date hereof. Changes in income tax laws, potentially with retroactive effect, could impact a Fund’s investments or the tax consequences to you of investing in a Fund. Some of these changes could affect the timing, amount, and tax treatment of
Fund distributions made to shareholders. Please consult your own tax adviser regarding federal, state, local, or foreign tax considerations.
Fund Taxation
Each Fund has qualified and intends to elect
to be treated and qualify each year as a RIC under Subchapter M of the Code. In order to so qualify, each Fund must, among other things, (i) derive at least 90% of its gross income from qualifying income, which includes dividends, interest, payments
with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities, or currencies, and net income derived from interests in qualified publicly traded partnerships, (ii) distribute at least 90% of its investment company taxable income each year and 90% of its net
tax-exempt income, and (iii) at the end of each fiscal quarter (a) maintain at least 50% of the value of its total assets in cash and cash items, U.S. government securities, securities of other regulated investment companies, and other securities of
issuers that represent, with respect to each issuer, no more than 5% of the value of the Fund’s total assets and 10% of the outstanding voting securities of such issuer, and (b) have no more than 25% of the value of its total assets invested
in the securities (other than those of the U.S. government or other RICs) of any one issuer or of two or more issuers that the Fund controls and that are engaged in the same, similar, or related trades and businesses, or the securities of one or
more qualified publicly traded partnerships.
Some Fund investments may produce income
that will not constitute qualifying income for the purposes of this annual gross income requirement. Although foreign currency gains currently constitute qualifying income, the U.S. Treasury Department has the authority to issue regulations
excluding from the definition of qualifying income a RIC’s foreign currency gains not “directly related” to its “principal business” of investing in stock or securities (or options and futures with respect thereto). On
September 28, 2016, the U.S. Treasury Department proposed regulations that, if adopted, would treat “[g]ains from the sale or other disposition of foreign currencies” as qualifying income. These proposed regulations could be changed
before being finalized or withdrawn. No assurance can be made that any Fund will satisfy all requirements to be taxed as a RIC.
To the extent that a Fund qualifies for
treatment as a RIC, it will not be subject to federal income tax on income distributed, or deemed distributed, to shareholders. In the event a Fund fails to qualify as a RIC and does not obtain relief from such failure, it will be treated as a
regular corporation for federal income tax purposes. Accordingly, the Fund would be subject to federal income taxes on its taxable net income and gains and any distributions that the Fund makes would not qualify for any dividends paid deduction.
This would increase the cost of investing in the Fund for shareholders and would make it more economical for shareholders to invest directly in securities held by the Fund instead of investing indirectly in such securities through the Fund.
Each Fund will be treated as a separate
entity for federal income tax purposes, so that income earned and capital gains and losses realized by the other Funds will be separate from those realized by each Fund.
Each Fund generally will be subject to a 4%
nondeductible federal excise tax to the extent the Fund does not meet certain minimum distribution requirements by the end of the calendar year. To avoid the imposition of the 4% excise tax, a Fund must distribute at least 98% of its taxable
ordinary income for the calendar year and at least 98.2% of the excess of its capital gains over capital losses realized during the one-year period ending October 31 (in most cases) of such year as well as amounts that were neither distributed nor
taxed to the Fund during the prior calendar year. Each Fund intends to make distributions during the calendar year in an amount sufficient to prevent imposition of this 4% excise tax.
If a Fund invests in certain pay-in-kind
securities, zero coupon securities, deferred interest securities, or any other securities with original issue discount (or with market discount if the Fund elects to include market discount in income currently), the Fund must accrue income on such
investments for each taxable year, which generally will be prior to the receipt of the corresponding cash payments. However, a Fund must distribute to shareholders, at least annually, all or substantially all of its investment company taxable
income, including such accrued income, to avoid federal income and excise taxes. Therefore, a Fund may have to dispose of its portfolio securities under disadvantageous circumstances to generate cash, or may have to leverage itself by borrowing the
cash, to satisfy these distribution requirements.
B-66
A Fund may acquire market discount bonds. A
market discount bond is a security acquired in the secondary market at a price below its redemption value (or its adjusted issue price if it is also an original issue discount bond). If a Fund invests in a market discount bond, it will be required
to treat any gain recognized on the disposition of such market discount bond as ordinary income (instead of capital gain) to the extent of the accrued market discount, unless the Fund elects to include the market discount in income as it
accrues.
The federal income tax
consequences to a Fund that holds debt securities on which the issuer defaults is not certain in all cases.
A Fund’s transactions, if any, in
forward contracts, options, futures contracts, and hedged investments may be subject to special provisions of the Code that, among other things, may affect the character of gain and loss realized by a Fund (i.e., may affect whether gain or loss is
treated as ordinary or capital), accelerate recognition of income to a Fund, defer a Fund’s losses, and affect whether capital gain and loss is characterized as long-term or short-term. These rules could therefore affect the character, amount,
and timing of distributions to shareholders. These provisions also may require a Fund to mark-to-market certain types of positions (i.e., treat them as if they were closed out), which may cause a Fund to recognize income without receiving cash with
which to make distributions in amounts necessary to satisfy the distribution requirements for maintaining the Fund’s status as a RIC and avoiding federal income and excise taxes. The Funds will monitor their transactions, make the appropriate
tax elections, and make the appropriate entries in their books and records when they acquire any option, futures contract, forward contract, or hedged investment to mitigate the effect of these rules, prevent disqualification of a Fund as a RIC, and
minimize the imposition of federal income and excise taxes.
Options held by a Fund at the end of each
fiscal year on a broad-based stock index are treated under the Code as “Section 1256 contracts” and will be required to be marked-to-market for federal income tax purposes. Sixty percent of any net gain or loss recognized on such deemed
sales or on any actual sales will be treated as long-term capital gain or loss and the remainder will be treated as short-term capital gain or loss (60/40 gain or loss). Certain other options, futures contracts, and options on futures contracts
utilized by the Funds are also Section 1256 contracts. Any Section 1256 contracts held by the Funds at the end of each taxable year (and generally on October 31 of each year for purposes of the 4% excise tax) are also marked-to-market with the
result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as a 60/40 gain or loss.
A Fund’s entry into a short sale
transaction, an option, or certain other contracts could be treated as the constructive sale of an appreciated financial position, causing the Fund to realize gain, but not loss, on the position.
The application of certain requirements for
qualification as a RIC and the application of certain other federal income tax rules may be unclear in some respects in connection with investments in certain derivatives and other investments. As a result, a Fund may be required to limit the extent
to which it invests in such investments and it is also possible that the IRS may not agree with a Fund’s treatment of such investments. In addition, the tax treatment of derivatives and certain other investments may be affected by future
legislation, Treasury Regulations, and guidance issued by the IRS (which could apply retroactively). These authorities could (i) affect the timing, character, and amount of a Fund’s income and gains and distributions to shareholders, (ii)
affect whether a Fund has made sufficient distributions and otherwise satisfied the requirements to maintain its qualification as a RIC and avoid imposition of federal income and excise taxes at the Fund level, and/or (iii) limit the extent to which
a Fund may invest in certain derivatives and other investments in the future.
The
In-Retirement Fund, Target Retirement 2020 Fund, Target Retirement 2030 Fund, Target Retirement 2040 Fund, Target Retirement 2050 Fund,
and
Target Risk Funds
are each a
successor to the portfolio of a collective trust fund managed by the Adviser with objectives, policies, and restrictions that were, in all material respects, equivalent to those of the succeeding fund. Each such Fund has taken the position that it
has succeeded to the tax basis of the assets of its predecessor collective trust fund. Shareholders should be aware that as a Fund sells portfolio securities that were acquired from a predecessor collective trust fund, any gain inherent in such
securities at the time the Fund acquired such securities, along with any appreciation that occurred while the Fund held such securities, may be recognized by the Fund and any such recognized gain will be distributed to Fund shareholders and will be
taxable to them for federal income tax purposes. Accordingly, a shareholder of a Fund may be taxed on appreciation that occurred before the shareholder purchased Fund shares, including appreciation that occurred prior to the Fund’s acquisition
of portfolio securities from a predecessor collective trust fund.
Generally, the character of the income or
capital gains that a Fund receives from another RIC will pass through to such Fund’s shareholders as long as the Fund and the other RIC each qualify as a RIC. However, to the extent that another RIC realizes net losses on its investments for a
given taxable year, a Fund investing in such RIC will not be able to recognize its share of those losses until it disposes of shares of such RIC. Moreover, even when a Fund does make such a disposition, a portion of its loss may be recognized as a
long-term capital loss, which will not be treated as favorably for federal income tax purposes as a short-term capital loss or ordinary deduction. In particular, a Fund will not be able to offset any capital losses from its dispositions of shares of
other RICs against its
B-67
ordinary income. As a result of the foregoing rules, and certain other
special rules, it is possible that the amounts of investment company taxable income and net capital gain that a Fund will be required to distribute to shareholders will be greater than such amounts would have been had the Fund invested directly in
the securities held by the RICs in which it invests, rather than investing in shares of the RICs. For similar reasons, the character of distributions from a Fund (e.g., long-term capital gain, qualified dividend income, etc.) will not necessarily be
the same as it would have been had the Fund invested directly in the securities held by the RICs in which it invests.
Certain Funds may invest to a limited
degree in MLPs that are treated as qualified publicly traded partnerships for federal income tax purposes. Net income derived from an interest in a qualified publicly traded partnership is treated as qualifying income for purposes of satisfying the
source of income requirements to be treated as a RIC. However, no more than 25% of the value of a RIC’s total assets at the end of each fiscal quarter may be invested in securities of qualified publicly traded partnerships. If an MLP in which
a Fund invests is taxed as a partnership for federal income tax purposes, the Fund will include in its taxable income its allocable share of the MLP’s income regardless of whether the Fund receives any distribution from the MLP. Thus, the Fund
may be required to sell other securities or may have to use leverage to satisfy the distribution requirements to qualify as a RIC and to avoid federal income and excise taxes. In addition, if an MLP in which a Fund invests does not qualify as a
qualified publicly traded partnership (and is otherwise not taxed as a corporation), income derived by the Fund will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership that would be
qualifying income if realized by the Fund. The receipt of non-qualifying income from such investments could jeopardize a Fund’s status as a RIC. Distributions to a Fund from an MLP that is taxed as a partnership for federal income tax purposes
will constitute a return of capital to the extent of the Fund’s basis in its interest in the MLP. If a Fund’s basis is reduced to zero, distributions in excess of basis will generally constitute capital gain for federal income tax
purposes.
Gains or losses
attributable to fluctuations in exchange rates that occur between the time a Fund accrues income or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivable
or pays such liabilities generally are treated as ordinary income or loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of certain other instruments, gains or losses attributable to fluctuations
in the value of the foreign currency between the date of acquisition of the security or contract and the date of disposition also may be treated as ordinary gain or loss. These gains and losses may increase or decrease the amount of a Fund’s
investment company taxable income to be distributed to its shareholders.
Distributions from a Fund may be based on
estimates of book income for the year. Book income generally consists solely of the income generated by the securities in the portfolio, whereas tax basis income includes, in addition to book income, gains or losses attributable to currency
fluctuation. Due to differences in the book and tax treatment of fixed income securities denominated in foreign currencies, it is difficult to project currency effects on an interim basis. Therefore, to the extent that currency fluctuations cannot
be anticipated, a portion of distributions to shareholders could later be designated as a return of capital, rather than income, for federal income tax purposes, which may be of particular concern to simple trusts.
If a Fund receives an “excess
distribution” with respect to the stock of a passive foreign investment company (PFIC), the Fund itself may be subject to federal income tax on a portion of the excess distribution, whether or not the corresponding income is distributed by the
Fund to shareholders. In general, a foreign corporation is classified as a PFIC for a taxable year if at least 50% of its assets produce or are held to produce passive income or 75% or more of its gross income is passive income.
Under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during which the Fund held the PFIC stock. A Fund itself will be subject to U.S. federal income tax (including interest) on the portion, if any, of an excess distribution that
is so allocated to prior taxable years. Certain distributions from a PFIC as well as gain from the sale of PFIC stock are treated as excess distributions. Excess distributions are characterized as ordinary income even though, absent application of
the PFIC rules, certain excess distributions might have been classified as capital gain.
Rather than being taxed on the PFIC income
as discussed above, a Fund may be eligible to elect alternative tax treatment. Under an election that is currently available in certain circumstances, a Fund generally would be required to include in its gross income its share of the PFIC’s
income and net capital gain annually, regardless of whether distributions are received from the PFIC in a given year. In addition, another election may be available that would involve marking to market a Fund’s PFIC shares at the end of each
taxable year (and on certain other dates prescribed in the Code), with the result that unrealized gains are treated as though they were realized and treated as ordinary income or loss (subject to certain limitations). If this election were made,
federal income tax at the Fund level under the PFIC rules would generally be eliminated, but the Fund could, in limited circumstances, incur nondeductible interest charges. A Fund’s intention to qualify annually as a RIC may limit its options
with respect to PFIC shares.
B-68
Because the application of the PFIC rules
may affect, among other things, the character of gains and the amount of gain or loss and the timing of the recognition of income with respect to PFIC shares, and may subject a Fund itself to tax on certain income from PFIC shares, the amount that
must be distributed to shareholders and that will be taxed to shareholders as ordinary income or long-term capital gain may be increased or decreased as compared to a fund that did not invest in PFIC shares.
Taxation of U.S. Shareholders
With respect to Funds other than the
Tax-Exempt Funds (see discussion below), shareholders will be subject to federal income tax on distributions made by the Funds whether received in cash or additional shares of the Funds, unless the shareholder is investing through a tax-deferred
arrangement such as an IRA or a 401(k) plan (a shareholder may be taxed later upon withdrawal of monies from such tax-deferred arrangements). Distributions of investment company taxable income (which includes any net short-term capital gain in
excess of any net long-term capital loss) generally will be taxable to shareholders as ordinary income. However, for non-corporate shareholders, the portion of investment company taxable income that a Fund reports as attributable to “qualified
dividend” income (generally dividends received from U.S. domestic corporations and qualified foreign corporations) generally will be taxed at the lower federal income tax rates applicable to net long-term capital gain, provided certain holding
period and other requirements described below are satisfied. To the extent that distributions of investment company taxable income consist of net short-term capital gain, such gain will be taxable as ordinary income and cannot be used to offset a
shareholder’s losses from other investments. Distributions of net capital gain (the excess of net long-term capital gains over net short-term capital losses), if any, will be taxable at long-term capital gain rates (for non-corporate
shareholders, currently taxed at a maximum federal income tax rate of 20%), without regard to how long a shareholder has held shares of a Fund. A portion of a Fund’s distributions of investment company taxable income may qualify in part for
the 70% dividends received deduction available to corporate shareholders to the extent that the Fund receives dividend income directly or indirectly from U.S. corporations and reports the amount distributed as eligible for the deduction, provided
that certain holding period and other requirements under the Code are satisfied. Generally, however, dividends received on stocks of foreign issuers that are held by a Fund are not eligible for the dividends received deduction when distributed to a
Fund’s shareholders. Because no portion of the income of any Fund, other than the
Global Low Volatility Equity, Pyrford International Stock, LGM Emerging Markets Equity,
and
Equity Funds
, is expected to consist of dividends from domestic corporations or qualified foreign corporations, distributions paid by the Funds, other than the
Global Low Volatility
Equity, Pyrford International Stock, LGM Emerging Markets Equity,
and
Equity Funds
, are not expected to be eligible for “qualified dividend” treatment when paid to non-corporate shareholders
or qualify for the dividends received deduction available to corporate shareholders.
Dividend income received by a Fund and
distributed to a Fund shareholder may not be treated as “qualified dividend” income by the shareholder unless the Fund satisfies certain holding period and other requirements with respect to the stock in its portfolio generating such
dividend income and the shareholder meets certain holding period and other requirements with respect to the Fund’s shares. A dividend will not be treated as qualified dividend income (at either the Fund or shareholder level) (1) if the
dividend is received with respect to any share of stock held for fewer than 61 days during the 121-day period beginning on the date that is 60 days before the date on which such share becomes ex-dividend with respect to such dividend (or, in the
case of certain preferred stock, fewer than 91 days during the 181-day period beginning 90 days before such date), (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments
with respect to positions in substantially similar or related property, or (3) if the recipient elects to have the dividend income treated as investment income for purposes of the limitation on deductibility of investment interest. For purposes of
determining the holding period for stock on which a dividend is received, such holding period is reduced for any period the recipient has an option to sell, is under a contractual obligation to sell, or has made (and not closed) a short sale of
substantially identical stock or securities and in certain other circumstances. In order for a dividend paid by a foreign corporation to constitute qualified dividend income, the foreign corporation must (1) be eligible for the benefits of a
comprehensive income tax treaty with the United States (or the stock on which the dividend is paid must be readily tradable on an established securities market in the United States) and (2) not be treated as a PFIC.
In addition to the regular federal income
tax, certain individuals, trusts, and estates may be subject to a Medicare tax of 3.8%. The Medicare tax is imposed on the lesser of (i) a taxpayer’s investment income (which excludes tax-exempt interest distributions), net of deductions
properly allocable to such income, or (ii) the amount by which the taxpayer’s modified adjusted gross income exceeds certain thresholds ($250,000 for married individuals filing jointly, $200,000 for unmarried individuals, and $125,000 for
married individuals filing separately). The Funds’ distributions (other than tax-exempt interest distributions paid by the
Ultra Short Tax-Free, Short Tax-Free, Intermediate Tax-Free,
and
Tax-Free Money Market Funds
) are includable in a shareholder’s investment income for purposes of this Medicare tax. In addition, any capital gain realized on the sale, redemption, or exchange of a
Fund’s shares is includable in a shareholder’s investment income for purposes of this Medicare tax.
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To the extent a Fund is unable to use its
capital losses in a given taxable year, it may be entitled to carry forward the capital loss, which may reduce the taxable capital gain that the Fund would realize and on which the shareholder would be subject to federal income tax in the future.
Any capital loss carried forward by a Fund will generally retain its character as short-term or long-term and may be carried forward indefinitely.
Distributions are generally taxable when
received. However, distributions declared by a Fund during October, November, or December to shareholders of record and paid by January 31 of the following year will be taxable in the year they are declared, rather than the year in which they are
received. Each Fund will notify its shareholders each year of the amount and type of distributions paid.
Gain or loss realized upon a sale,
redemption, or other disposition (such as an exchange) of shares of a Fund by a shareholder will generally be treated as long-term capital gain or loss if the shares have been held for more than one year and, if held for one year or less, as
short-term capital gain or loss. Any loss on the sale, redemption, or exchange of shares held for six months or less will be treated as a long-term capital loss to the extent of any net capital gain distributions paid or deemed to be paid to the
shareholder with respect to such shares. Any loss realized upon a sale, exchange, or redemption of shares of the
Ultra Short Tax-Free, Short Tax-Free, Intermediate Tax-Free,
or
Tax-Free Money Market Funds
that were held for six months or less will be disallowed to the extent of any tax-exempt interest distributions received with respect to such shares. Any loss a shareholder realizes on a sale, redemption, or
exchange of shares will be disallowed if the shareholder acquires other shares of the same Fund (whether through the automatic reinvestment of distributions or otherwise) within 30 days before or after the sale, redemption, or exchange of the
shares. In such case, the shareholder’s tax basis in the shares acquired will be adjusted to reflect the disallowed loss. Capital losses may be subject to limitations on their use by a shareholder.
With respect to the
Institutional Prime Money Market Fund
, because the Fund does not maintain a stable share price, tax consequences to you may occur if you dispose of your shares in the Fund, for example, through redemption,
exchange, or sale. Unless you choose to adopt a simplified “NAV method” of accounting (described below), the amount of any gain or loss and the rate of tax will be determined under the rules described in the preceding paragraph. However,
if you elect to adopt the simplified NAV method of accounting available under proposed regulations, rather than compute gain or loss on every taxable sale, redemption, or other disposition of Fund shares, you would generally determine your gain or
loss based on the change in the aggregate value of your Fund shares during a computation period (such as your taxable year), reduced by your net investment (i.e., purchases minus sales) in those Fund shares during the computation period. Under the
simplified NAV method, any resulting capital gain or loss would be reportable on a net basis and treated as a short-term capital gain or loss, provided that you hold the shares as a capital asset. The IRS also has issued guidance indicating that the
wash sale rules described above will not apply to taxpayers who use the simplified NAV method of accounting with respect to shares redeemed from a floating NAV money market fund.
If shares that were purchased subject to a
sales charge are exchanged for shares of a different Fund before the 91st day after the date on which such shares were acquired, the lesser of (i) the sales charge incurred on the exchanged shares or (ii) the sales charge waived on the reinvested
shares is added to the basis of the reinvested shares and is not included in the basis of the exchanged shares.
Purchasing shares shortly before a
distribution may not be advantageous. If the distribution is taxable, it will essentially result in a taxable return of a portion of the purchase price.
Tax-Exempt Funds
The
Ultra
Short Tax-Free, Short Tax-Free, Intermediate Tax-Free,
and
Tax-Free Money Market Funds
(the Tax-Exempt Funds) intend to qualify to pay tax-exempt interest distributions by satisfying the Code’s
requirement that at the close of each quarter of its taxable year at least 50 percent of the value of its total assets consists of other RICs or obligations of a state or political subdivision thereof on which the interest is exempt from federal
income tax under Section 103(a) of the Code. So long as this and certain other requirements are met, distributions consisting of each such Fund’s net tax-exempt interest income will be tax-exempt interest distributions, which are exempt from
regular federal income tax in the hands of the shareholders of the Fund. As discussed below, certain tax-exempt interest distributions may be subject to federal AMT. Distributions of investment company taxable income made by these Funds consisting
of income from taxable securities or net short-term capital gains, if any, realized by the Funds will be taxable to shareholders as ordinary income whether received in cash or additional shares of the Funds. Distributions of net capital gain made by
the Funds, if any, will be taxable to shareholders as long-term capital gain. Gains of the Tax-Exempt Funds that are attributable to market discount on certain municipal obligations are treated as ordinary income to the extent of the accrued market
discount on those bonds.
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Interest on indebtedness incurred by a
shareholder to purchase or carry shares in the Tax-Exempt Funds is generally not deductible for federal income tax purposes to the extent that the Fund makes tax-exempt interest distributions during the taxable year. If a shareholder receives
tax-exempt interest distributions with respect to any share of these Funds and if such share is held by the shareholder for six months or less, then any loss on the sale or exchange of such share will be disallowed to the extent of the amount of
tax-exempt interest distributions, provided, this rule does not apply to a Fund if it declares tax-exempt interest distributions daily in an amount equal to at least 90% of its net tax-exempt interest and distributes these amounts at least monthly.
In addition, shareholders will have to include any tax-exempt interest distributions in determining the taxable portion of their social security and railroad retirement benefit payments. Furthermore, entities or persons who are “substantial
users” (or persons related to “substantial users”) of facilities financed by “private activity bonds” or certain industrial development bonds should consult their tax advisers before purchasing shares in the Tax-Exempt
Funds. For these purposes, the term “substantial user” is defined generally to include a “non-exempt person” who regularly uses in a trade or business a part of a facility financed from the proceeds of such bonds. Moreover,
some or all of the tax-exempt interest distributions received from the Tax-Exempt Funds may be a specific preference item, or a component of an adjustment item, for purposes of the federal individual and corporate AMT. The receipt of these exempt
interest dividends also may affect a foreign corporate shareholder’s federal “branch profits” tax liability and an S corporation shareholder’s federal tax on “passive investment income.”
Distributions may be subject to state and
local taxation despite their status as tax-exempt interest distributions for federal income tax purposes. As a result, shareholders of a Tax-Exempt Fund should consult their tax advisers to determine whether any portion of the distributions received
from the Fund is considered tax-exempt in their particular states.
Issuers of securities purchased by the
Tax-Exempt Funds (or the beneficiary of such bonds) may have made certain representations or covenants in connection with the issuance of such securities to satisfy certain requirements of the Code that must be satisfied subsequent to the issuance
of such bonds. Shareholders should be aware that tax-exempt interest distributions may become subject to federal income taxation retroactively to the date of issuance of the bonds to which such distributions are attributable if such representations
are determined to have been inaccurate or if the issuers (or the beneficiary) of the bonds fail to comply with certain covenants made at that time.
Tax legislation may, from time to time,
include provisions that may affect the supply of, and demand for, tax-exempt securities, as well as the tax-exempt nature of interest paid thereon. It is not possible to predict with certainty the effect of tax law changes upon the tax-exempt
market, including the availability of obligations appropriate for investment, nor is it possible to predict any additional restrictions.
Foreign Taxation
Income received by a Fund from sources
within foreign countries may be subject to withholding and other taxes imposed by such countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. Also, many foreign countries do not impose taxes on capital
gains in respect of investments by foreign investors. The effective rate of foreign tax cannot be predicted since the amount of each Fund’s assets to be invested within various countries is uncertain.
If more than 50% of the value of a
Fund’s total assets at the close of its taxable year consists of RICs or stock or securities of foreign corporations, such Fund will be eligible to elect to “pass through” to the Fund’s shareholders the amount of eligible
foreign income and similar taxes paid by the Fund. If this election is made, a shareholder generally subject to federal income tax will be required to include in gross income (in addition to taxable distributions actually received) his or her pro
rata share of foreign taxes paid by the Fund in computing his or her taxable income and to use such amount as a foreign tax credit against his or her U.S. federal income tax liability or deduct such amount in lieu of claiming a credit, subject to
certain limitations. No deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions. If a Fund is eligible to make this election, each shareholder will be notified after the close of the Fund’s taxable year
whether the foreign taxes paid by the Fund will “pass through” for that year. The Corporation expects that only the
Alternative
and
International and Global
Funds
will qualify to pass through to Fund shareholders foreign taxes paid by the Fund.
If a Fund does not satisfy the requirements
for passing through to its shareholders their proportionate shares of any foreign taxes paid by the Fund, shareholders will not be required to include such taxes in their gross income and will not be entitled to a tax deduction or credit for such
taxes on their own federal income tax returns.
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State and Local Taxes
Shareholders may be subject to state and
local taxes on distributions received from a Fund (including tax-exempt interest distributions) and on sales, exchanges, or redemptions of Fund shares. Rules of state and local taxation of distributions from RICs often differ from rules for federal
income taxation described above. You are urged to consult your tax adviser as to the consequences of these and other state and local tax rules affecting an investment in a Fund.
Backup Withholding and Other Considerations
If a shareholder does not furnish a Fund
with a correct social security number or taxpayer identification number, certify that it is correct, and certify that he, she, or it is not subject to backup withholding and/or the Fund receives notification from the IRS requiring backup
withholding, the Fund is required by federal law to withhold federal income tax from all distributions (including tax-exempt interest distributions) and redemption proceeds paid to the shareholder at the rate set forth in the Code. Amounts withheld
may be applied to the shareholder’s federal income tax liability and the shareholder may obtain a refund from the IRS if withholding results in an overpayment of federal income tax for such year.
Taxation of Non-U.S. Shareholders
The foregoing discussion relates solely to
U.S. federal income tax law as applied to U.S. investors. Non-U.S. investors should consult their tax advisers concerning the tax consequences of ownership of shares of the Funds, including the possibility that distributions may be subject to a 30%
U.S. withholding tax (or a reduced rate of withholding provided by an applicable tax treaty).
Under the Foreign Account Tax Compliance
Act (FATCA), a Fund may be required to withhold a generally non-refundable 30% tax on distributions of investment company taxable income and distributions of net capital gain and the gross proceeds of a sale, redemption, or exchange of Fund shares
paid after December 31, 2018 to certain “foreign financial institutions” unless (i) such foreign financial institution agrees to verify, monitor, and report to the IRS the identity of certain of its accountholders, among other things (or
unless such entity is otherwise deemed compliant pursuant to the terms of an intergovernmental agreement between the U.S. and the entity’s country of residence), and (ii) certain “non-financial foreign entities” unless such entity
certifies to the Fund that it does not have any substantial U.S. owners or provides the name, address, and taxpayer identification number of each substantial U.S. owner, among other things. This FATCA withholding tax also could affect a Fund’s
return on its investments in foreign stocks or securities or affect a shareholder’s return if the shareholder holds its Fund shares through a foreign intermediary. You are urged to consult your tax adviser regarding the application of this
FATCA withholding tax to your investment in a Fund and the potential certification, compliance, due diligence, reporting, and withholding obligations to which you may become subject in order to avoid this withholding tax.
This section is not intended to be a full
discussion of federal income tax laws and the effect of such laws on an investor. Other federal, state, local, or foreign tax considerations applicable to a particular investor may exist. Investors are urged to consult their own tax advisers.
Cost Basis Reporting
Each Fund is required to report to certain
shareholders and the IRS the cost basis of shares acquired on or after January 1, 2012 (covered shares) when such shareholders sell, redeem, or exchange such shares. These requirements do not apply to shares held through a tax-deferred arrangement,
such as a 401(k) plan or an IRA, or to shares held by tax-exempt organizations, financial institutions, corporations (other than S corporations), banks, credit unions, and certain other entities and governmental bodies. Shares acquired before
January 1, 2012 (non-covered shares) are treated as if held in a separate account from covered shares. The Funds are not required to determine or report your cost basis in non-covered shares and are not responsible for the accuracy or reliability of
any information provided for non-covered shares.
The cost basis of a share is generally its
purchase price adjusted for distributions, returns of capital, and other corporate actions. Cost basis is used to determine whether the sale, redemption, or exchange of a share results in a capital gain or loss. If you sell, redeem, or exchange
covered shares during any year, the Fund will report the gain or loss, cost basis, and holding period of such covered shares to you and the IRS on an applicable Form 1099.
A cost basis method is the method by which
a Fund determines which specific covered shares are deemed to be sold, redeemed, or exchanged when you sell, redeem, or exchange less than your entire position in the Fund and have made multiple purchases of Fund shares on different dates at
differing net asset values. If you do not affirmatively elect a cost basis method, each
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Fund will use the average cost method, which averages the basis of all Fund
shares in your account regardless of holding period, and covered shares sold, exchanged, or redeemed are deemed to be those with the longest holding period first. You may elect in writing (and not over the telephone) any alternate IRS-approved cost
basis method to calculate the cost basis in your covered shares. The default cost basis method applied by a Fund or the alternate method elected by you may not be changed after the settlement date of a sale of Fund shares.
If you hold Fund shares through a broker or
another nominee, please contact that broker or nominee with respect to the reporting of cost basis and available elections for your account.
You are encouraged to consult with your tax
adviser regarding the application of these cost basis reporting rules and, in particular, which cost basis calculation method you should elect.
Directors and Officers
Directors
The Board of Directors is responsible for
overseeing the business and affairs of the Corporation. Information regarding the directors of the Corporation, and their age and business experience during the past five years, are shown in the following table. The address of each director is 111
East Kilbourn Avenue, Suite 200, Milwaukee, Wisconsin 53202. Current directors who are not considered to be “interested persons” of the Corporation are referred to in this SAI as “independent directors.” The Corporation
currently offers 42 separate portfolios or funds. The number of portfolios in the Fund Complex overseen by a Director set forth below includes the BMO LGM Frontier Markets Equity Fund, a closed-end management investment company. The information in
the following table is as of September 1, 2017, unless otherwise indicated.
Interested Directors
| Name and Age |
Position(s)
Held
with the Corporation |
Term
of Office
and Length of Time Served (1) |
Principal
Occupation(s)
During Past 5 Years |
Number
of
Portfolios in Fund Complex Overseen by Director (2) |
Other
Directorships Held by Director |
|||||
|
John
M. Blaser
(3)
Age: 60 |
Director
and President |
Since
May 1999 |
Managing Director of the Adviser, since June 2012. | 43 | None | |||||
|
Daniela
O’Leary-Gill
(4)
Age: 63 |
Director |
Since
August 2018 |
Chief Operating Officer of BMO Financial Group, since February 1, 2018; Director of the Adviser since June 1, 2018; Head, Communications, Government & Investor Relations 2016-2018; Head, AML Program Oversight 2014-2016; SVP, Personal Banking & Chief CRA Officer 2011-2014. | 43 | None |
| (1) | Each director serves an indefinite term until he or she retires or otherwise resigns, is removed, dies, or until his or her successor is duly elected. Retirement for a director occurs no later than August 31 following his or her 75th birthday. |
| (2) | The information in this column is as of the date of this SAI. |
| (3) | Mr. Blaser is an “interested person” of the Corporation (as defined in the 1940 Act) due to the positions that he holds with the Corporation and the Adviser. Mr. Begy is an “interested person” of the Corporation due to the positions that he holds with the Adviser and BMO. |
| (4) | Ms. O’Leary-Gill joined the Board on August 1, 2018. She is an “interested person” of the Fund due to the positions that she holds with the Adviser and BMO. The information provided for Ms. O’Leary-Gill is as of the date of this SAI. |
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Independent Directors
| Name and Age |
Position(s)
Held
with the Corporation |
Term
of Office
and Length of Time Served (1) |
Principal
Occupation(s)
During Past 5 Years |
Number
of
Portfolios in Fund Complex Overseen by Director (2) |
Other
Directorships Held by Director |
|||||
|
Ridge
A. Braunschweig
Age: 64 |
Independent
Director |
Since October 2009 | President and Chief Executive Officer, CPL Industries, Inc. (a manufacturing holding company prior to May 2009 and a family office since May 2009), since January 2012; Executive Vice President and Chief Financial Officer, CPL Industries, Inc., from 2000 to 2012. | 43 | None | |||||
|
Benjamin
M. Cutler
Age: 72 |
Independent
Director |
Since July 2004 | Chairman, USHEALTH Group, Inc. (a health insurance company), since 2004; CEO and President, USHEALTH Group, Inc., from 2004 to 2016; Director, Freedom from Hunger (a non-profit organization), since 2016. | 43 | None | |||||
|
John
A. Lubs
Age: 69 |
Independent
Director |
Since July 2004 | Retired; formerly, Vice Chairman, Mason Companies, Inc. (a footwear distributor), from 2004 to 2010 and Chief Operating Officer, from 2003 to 2010. | 43 | None | |||||
|
Vincent
P. Lyles
Age: 56 |
Independent
Director |
Since September 2017 | President and Chief Executive Officer, Boys & Girls Club of Greater Milwaukee, since 2012 | 43 | None | |||||
|
James
Mitchell
Age: 70 |
Independent
Director |
Since March 1999 | Chairman, Ayrshire Precision Engineering (a precision machining company), since 1992; Chief Executive Officer, NOG, Inc. (a metal processing and consulting company), from 1999 to 2015. | 43 | None | |||||
|
Barbara
J. Pope
Age: 69 |
Independent
Director |
Since March 1999 | Retired; formerly, President of Barbara J. Pope, P.C. (a financial consulting firm), 1992 to 2015; President of Sedgwick Street Fund LLC (a private investment partnership), 1996 to 2015; Tax Partner, Price Waterhouse. | 43 | None |
| (1) | Each director serves an indefinite term until he or she retires or otherwise resigns, is removed, dies, or until his or her successor is duly elected. Retirement for a director occurs no later than August 31 following his or her 75th birthday. |
| (2) | The information in this column is as of the date of this SAI. |
Some of the independent directors,
personally or through business relationships, have banking, investment management, custodial, or borrowing relationships with BMO Harris Bank and other affiliates of the Adviser. Mr. Lyles currently serves as the President and Chief Executive
Officer of the Boys & Girls Club of Great Milwaukee, as noted above, and Mr. Judson Snyder, President
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of BMO Harris Equipment Finance, an affiliate of the Adviser, has served on
the Board of Trustees of the Boys & Girls Club of Greater Milwaukee since 2015.
Officers
The officers of the Corporation are elected
annually by the Board and hold the same position with all of the Funds of the Corporation. Each officer holds office for one year and until the election and qualification of his or her successor. The address of each officer is 111 East Kilbourn
Avenue, Suite 200, Milwaukee, Wisconsin 53202. Officers of the Corporation, together with information as to their principal business occupation during the past five years and certain other information, are shown in the following table as of August
31, 2017 unless otherwise indicated.
Principal
Officers
| Name and Age |
Position(s)
Held with the Corporation |
Term
of Office and
Length of Time Served |
Principal
Occupation(s) During Past 5 Years |
|||
|
Brett
Black
(1)
Age: 45 |
Chief Compliance Officer and Anti-Money Laundering Compliance Officer | Elected by the Board annually; since November 2017 | Vice President and Chief Compliance Officer of BMO Harris Bank, since 2017; Assistant Vice President, Deputy Chief Compliance Officer, since 2014; Senior Compliance Officer of BMO Harris Bank, since 2012. | |||
|
Timothy
M. Bonin
Age: 44 |
Vice President, Chief Financial Officer and Treasurer | Elected by the Board annually; since February 2006 | Vice President of the Adviser, since February 2006. | |||
|
Michael
J. Murphy
Age: 38 |
Secretary | Elected by the Board annually; since May 2016 | Senior Counsel and Vice President of BMO Harris Bank N.A., since 2014; Associate, Vedder Price P.C., 2010 to 2014. |
| (1) | Stephen R. Oliver, who previously served as Chief Compliance Officer and Anti-Money Laundering Compliance Officer for the Corporation, retired from the Corporation effective October 31, 2017. |
Board of Directors
The primary responsibility of the Board is
to provide oversight of the management of the Funds. The Board is responsible for managing the Funds’ business affairs. During the fiscal year ended August 31, 2017, the Board held six meetings. The Board has established two standing
committees, the Audit Committee and the Nominating and Governance Committee, to which it has delegated certain responsibilities. These Committees are comprised solely of independent directors.
The day-to-day operations of the Funds are
managed by the Adviser with assistance from other service providers approved by the Board. The Board, directly and through its Committees, oversees the services provided by the Adviser and other Fund service providers. The Board does not have a
chairperson or an independent lead director. The President of the Corporation, or such other person designated by the Board, serves as the chair of the Board meetings. Counsel to the Funds and independent directors attends all Board meetings. The
Board is structured to encourage equal participation by all members and to provide for and to promote open and candid communication between the Board and Adviser and the other service providers to assist the Board in fulfilling its oversight
responsibilities. The Board believes that this structure is appropriate in recognition of the historical relationship between the Funds and the Adviser and its affiliates, the assets and number of the BMO Funds overseen by the Board, and the nature
of the BMO Funds’ investments.
As part of its general oversight
responsibilities, the Board, directly and through its Committees, is involved in the risk oversight of the Funds. The Funds, the Adviser, and other Fund service providers have adopted policies, procedures and controls to address the Funds’
operational, investment, and compliance risks. The Board and its Committees meet regularly during the year to review, among
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other information related to the Funds’ operations, the contractual
arrangements with the Adviser and other service providers for the Funds, the Funds’ performance, investment strategies, and limitations, and compliance and regulatory matters. The Board, directly and through its Committees, reviews information
from the Adviser, other Fund service providers, the Funds’ independent registered public accounting firm, and counsel to the Funds and independent directors to assist it in its oversight responsibilities. The Board reviews the Funds’
performance and meets with the Adviser and Sub-Advisers, as applicable, and the Funds’ portfolio managers. As part of its compliance oversight, the Board receives and reviews the annual report prepared by the Chief Compliance Officer (CCO) as
required by Rule 38a-1 under the 1940 Act and quarterly reports regarding the operation of the compliance policies and procedures, including any material compliance issues that arose during the quarter for the Funds. The independent directors also
meet quarterly with the CCO in executive session. In addition, any material changes to a Fund’s investment objective, strategies, and restrictions must be approved by the Board.
The Audit Committee serves to provide an
open avenue of communication among the Board, the Funds’ independent registered public accounting firm, and the internal accounting staff serving the Funds. The Board has adopted a written charter of the Audit Committee pursuant to which the
Audit Committee evaluates the independence of, and approves the retention of, the independent registered public accounting firm to audit the financial statements of the Funds, reviews the results of Fund audits, and preapproves, or establishes
preapproval policies and procedures concerning, all audit and non-audit services provided to the Funds. The Audit Committee monitors the accounting policies of the Funds, as well as the work of the independent registered public accounting firm.
Messrs. Braunschweig (Chair), Cutler, Lubs, Lyles, and Mitchell and Ms. Pope currently serve as members of the Audit Committee. During the fiscal year ended August 31, 2017, the Audit Committee held two meetings.
The Nominating and Governance Committee
oversees the administration of the Corporation’s Governance Guidelines and Procedures. In addition, the Board has adopted a written charter of the Nominating and Governance Committee, pursuant to which the Nominating and Governance Committee
evaluates and nominates, or recommends for nomination, candidates for the Board. The Nominating and Governance Committee may consider candidates for the Board submitted by shareholders if a vacancy were to exist. Shareholders who wish to recommend a
nominee may do so by submitting the appropriate information about the candidate to the Corporation’s Secretary. Messrs. Braunschweig, Cutler, Lubs (Vice Chair), Lyles, and Mitchell and Ms. Pope (Chair) currently serve as members of the
Nominating and Governance Committee. During the fiscal year ended August 31, 2017, the Nominating and Governance Committee held three meetings.
The Board also oversees a Pricing
Committee. The Pricing Committee meets as necessary and is comprised of members of the Adviser. The Pricing Committee is responsible for monitoring the valuation of Fund securities and other investments as well as determining the fair value of
securities for which market quotations are not readily available, after consideration of all relevant factors, in accordance with the pricing procedures adopted by the Board. Any determinations by the Pricing Committee are subsequently reported to
and reviewed by the full Board.
Director Experience and
Qualifications
Following is a brief
discussion of the experiences and qualifications that led to the conclusion that, as of the date of this SAI, each current Board member should serve as a director of the Corporation. Generally, each director’s professional, business, and
educational background, judgment, ability to work effectively with the other directors and commitment to act in the best interests of the Funds were considered in determining his or her qualifications to serve on the Board. With respect to each
director, the Board considered, among other factors, the following experiences and qualifications:
The Board considered that Mr. Blaser has
served as a director and President of the Corporation since 1999 and Managing Director of the Adviser since June 2012. He also served as Vice President of the Adviser from 1998 to 2012. The Board also considered his professional and financial
industry experience serving as chief financial officer for various fund complexes. The Board considered the audit, executive, financial, investment, and operations experience that Mr. Blaser gained over the course of his career and through his
financial industry experience. The Board also considered that because of Mr. Blaser’s position with the Adviser, he is involved in the day-to-day management of the Adviser and the Corporation.
The Board considered that
Ms. O’Leary-Gill has served as Chief Operating Officer of BMO Financial Group since February 1, 2018. She also served as an executive officer of the bank since 2001. The Board also considered that Ms. O’Leary-Gill held various executive
positions within BMO including Head of Small Business, Senior Vice President, and Chief Auditor at BMO Harris Bank N.A. Ms. O’Leary-Gill joined Harris Bank’s Corporate Audit department in 1996 from the Office of the Comptroller of the
Currency (OCC). At the OCC, Ms. O’Leary-Gill was a commissioned National Bank Examiner supervising safety and soundness examinations of nationally chartered banks in the Chicago region beginning in 1992. Prior to joining the OCC, she was a
Commercial Banker at American National Bank
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and Retail Banker at Merchants National Bank. The Board also considered the
executive, financial, and operations experience that Ms. O’Leary-Gill gained over the course of her career.
The Board considered that Mr. Braunschweig
has served as a director of the Corporation since 2009, and that he serves as Chair of the Audit Committee. The Board considered his professional experience serving in various executive positions with CPL Industries, Inc. and his auditing
experience. The Board also considered Mr. Braunschweig’s experience serving as an executive and director of a private charitable foundation. The Board considered the audit, executive, financial, and operations experience that Mr. Braunschweig
gained over the course of his career.
The Board considered that Mr. Cutler has
served as a director of the Corporation since 2004. The Board considered his professional experience serving in various executive positions with large health insurance companies, including most recently as Chairman of USHEALTH Group, Inc. as well as
serving as a director of Freedom from Hunger, a non-profit organization. The Board also considered the executive, financial, and operations experience that Mr. Cutler gained over the course of his career.
The Board considered that Mr. Lubs has
served as a director of the Corporation since 2004, and that he serves as Vice Chair of the Nominating and Governance Committee. The Board considered his professional experience serving in various executive positions with Mason Companies, Inc. Mr.
Lubs also serves as a trustee of North Bay Trading Co. The Board also considered the executive, financial, and operations experience that Mr. Lubs gained over the course of his career.
The Board considered Mr. Lyles’s
professional experience, including currently serving as President and CEO of the Boys and Girls Club of Greater Milwaukee. Mr. Lyles previously served as President of M&I Community Development Corporation and a Director of Robert W. Baird &
Co. The Board also considered the executive, financial, legal, and operations experience that Mr. Lyles gained over the course of his career.
The Board considered that Mr. Mitchell has
served as a director of the Corporation since 1999. The Board considered his professional experience serving in various executive positions, including most recently as Chairman of Ayrshire Precision Engineering. The Board also considered the
executive, financial, and operations experience that Mr. Mitchell gained over the course of his career.
The Board considered that Ms. Pope has
served as a director of the Corporation since 1999, and that she serves as Chair of the Nominating and Governance Committee. The Board considered her professional experience serving as President of Barbara J. Pope, P.C. and President of Sedgwick
Street Fund LLC, as well as her experience as a tax partner at an accounting firm. The Board also considered the executive, financial, and investment experience that Ms. Pope gained over the course of her career.
References to the experience and
qualifications of the directors of the Corporation are pursuant to requirements of the SEC, do not constitute holding out the Board or any director as having any special expertise and shall not impose any greater responsibility or liability on any
such person or on the Board by reason thereof.
Compensation of Directors
With respect to the fiscal year ended August
31, 2017, each independent director was paid an aggregate retainer of $100,000. The Corporation does not pay any fees to its interested directors or officers. Neither the Corporation nor the Funds maintain any deferred compensation, pension or
retirement plans, and no pension or retirement benefits are accrued as Corporation or Fund expenses. The following table shows the fees paid to the directors by the Corporation for the fiscal year ended August 31, 2017.
| Name |
Aggregate
Compensation from the Corporation (1) |
Total
Compensation
from the Corporation and Fund Complex Paid to Directors (1) |
||
|
Larry D.
Armel
(2)
|
$97,778 | $100,000 | ||
|
Ridge A.
Braunschweig
|
$97,778 | $100,000 | ||
|
Benjamin M.
Cutler
|
$97,778 | $100,000 | ||
|
John A.
Lubs
|
$97,778 | $100,000 | ||
|
James
Mitchell
|
$97,778 | $100,000 | ||
|
Barbara J.
Pope
|
$97,778 | $100,000 |
| (1) | The BMO Funds Complex currently offers 43 Funds, including the BMO LGM Frontier Markets Equity Fund. Each series of the Corporation pays an equal portion of the total compensation received by each independent director, adjusted based on each Fund’s inception date, if shorter than one fiscal year. |
| (2) | Mr. Armel retired from the Board effective August 31, 2017. |
B-77
Board Ownership of Shares in the Funds and in the BMO Funds
Family as of December 31, 2016.
| Name of Director (1) | Fund Name |
Dollar
Range of
Shares Owned in Fund |
Aggregate
Dollar
Range of Shares Owned in BMO Funds |
|||||||
|
Larry
D. Armel
(2)
|
Large-Cap Value | Over $100,000 | Over $100,000 | |||||||
| Independent Director | Mid-Cap Value | Over $100,000 | ||||||||
|
Christopher
Begy
(3)
|
Low Volatility | $10,001 | – | $50,000 | $50,001 | – | $100,000 | |||
| Interested Director | Large-Cap Value | $10,001 | – | $50,000 | ||||||
| Large-Cap Growth | $10,001 | – | $50,000 | |||||||
|
John
M. Blaser
|
Alternative Strategies | $50,001 | – | $100,000 | Over $100,000 | |||||
| Interested Director | Ultra Short-Tax Free | $10,001 | – | $50,000 | ||||||
| Short Tax-Free | Over $100,000 | |||||||||
| Balanced Allocation | Over $100,000 | |||||||||
|
Ridge
A. Braunschweig
|
Ultra Short Tax-Free | Over $100,000 | Over $100,000 | |||||||
| Independent Director | Intermediate Tax-Free | $50,001 | – | $100,000 | ||||||
| Tax-Free Money Market | $50,001 | – | $100,000 | |||||||
| Prime Money Market | $10,001 | – | $50,000 | |||||||
|
Benjamin
M. Cutler
|
Large-Cap Value | $1 | – | $10,000 | Over $100,000 | |||||
| Independent Director | Small-Cap Growth | $10,001 | – | $50,000 | ||||||
| LGM Emerging Markets Equity | $1 | – | $10,000 | |||||||
| Alternative Strategies | $50,001 | – | $100,000 | |||||||
| Ultra Short Tax-Free | Over $100,000 | |||||||||
| Short-Term Income | Over $100,000 | |||||||||
| Intermediate Tax-Free | Over $100,000 | |||||||||
| TCH Corporate Income | $10,001 | – | $50,000 | |||||||
| TCH Core Plus Bond | Over $100,000 | |||||||||
| Prime Money Market | $10,001 | – | $50,000 | |||||||
|
John
A. Lubs
|
Large-Cap Growth | $50,001 | – | $100,000 | Over $100,000 | |||||
| Independent Director | Large-Cap Value | $50,001 | – | $100,000 | ||||||
| Dividend Income | $10,001 | – | $50,000 | |||||||
| Mid-Cap Growth | $10,001 | – | $50,000 | |||||||
| Mid-Cap Value | $10,001 | – | $50,000 | |||||||
| Small-Cap Growth | $10,001 | – | $50,000 | |||||||
| Alternative Strategies | $10,001 | – | $50,000 | |||||||
| TCH Corporate Income | $10,001 | – | $50,000 | |||||||
|
James
Mitchell
|
Pyrford International Stock | $50,001 | – | $100,000 |
Over
$100,000
|
|||||
| Independent Director | Tax-Free Money Market | Over $100,000 | ||||||||
| Prime Money Market | $50,001 | – | $100,000 | |||||||
|
Barbara
J. Pope
|
Large-Cap Growth | Over $100,000 | Over $100,000 | |||||||
| Independent Director | Large-Cap Value | Over $100,000 | ||||||||
| Mid-Cap Growth | Over $100,000 | |||||||||
| Mid-Cap Value | $50,001 | – | $100,000 | |||||||
| Small-Cap Growth | $50,001 | – | $100,000 | |||||||
| Alternative Strategies | $10,001 | – | $50,000 | |||||||
| TCH Core Plus Bond | $10,001 | – | $50,000 | |||||||
| High Yield Bond | $50,001 | – | $100,000 | |||||||
| Tax-Free Money Market | $50,001 | – | $100,000 | |||||||
| Prime Money Market | $10,001 | – | $50,000 | |||||||
| (1) | Dollar range of shares owned in any Fund that is not identified in this table is “None.” |
| (2) | Mr. Armel retired from the Board effective August 31, 2017. |
| (3) |
Mr. Begy retired from the
Board effective July 31, 2018.
|
B-78
Information About the Adviser and Sub-Advisers
Adviser to the Funds
The Funds’ investment adviser is BMO
Asset Management Corp., a Delaware corporation headquartered in Chicago, Illinois.
The Adviser conducts investment research
and makes investment decisions for the Funds, except for the
Pyrford International Stock, LGM Emerging Markets Equity, TCH Corporate Income, TCH Core Plus Bond,
and
Alternative
Strategies Funds
, for which the Adviser performs oversight of the Funds’ Sub-Advisers as described below. The Adviser provides investment management services for investment companies, financial institutions, individuals, corporations,
and not-for-profit organizations and is registered as an investment adviser with the SEC. The Adviser shall not be liable to the Corporation, the Funds, or any shareholder of a Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or omissions involving willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties imposed upon it by its contract with the Corporation. Because of the
internal controls maintained by the Adviser’s affiliates to restrict the flow of non-public information, Fund investments are typically made without any knowledge of the lending relationships that affiliates of the Adviser may have. The
control persons of the Adviser are described in the Adviser’s Uniform Application for Investment Adviser Registration (Form ADV) as filed with the SEC.
As compensation for the Adviser’s
investment advisory services under the investment advisory agreement with the Corporation, each Fund (excluding the
Target Date
and
Target Risk Funds
, as discussed below)
pays the Adviser, on a monthly basis, an annual investment advisory fee based on the percentage of the average daily net assets of the Fund (ADNA) and subject to certain breakpoints as listed in the following tables:
| Advisory Fee (as % of each Fund’s ADNA) | ||||||||
| Fund |
on
the first
$500 million |
on
the next
$200 million |
on
the next
$100 million |
in
excess of
$800 million |
||||
|
Low Volatility
Equity
|
0.500% | 0.49% | 0.45% | 0.40% | ||||
|
Dividend
Income
|
0.500% | 0.49% | 0.45% | 0.40% | ||||
|
Mid-Cap
Value
|
0.685% | 0.67% | 0.57% | 0.51% | ||||
|
Mid-Cap
Growth
|
0.685% | 0.67% | 0.57% | 0.51% | ||||
|
Small-Cap
Value
|
0.685% | 0.68% | 0.62% | 0.61% | ||||
|
Small-Cap
Growth
|
0.685% | 0.68% | 0.62% | 0.61% | ||||
|
Global Low Volatility
Equity
|
0.650% | 0.64% | 0.60% | 0.55% | ||||
|
Pyrford International
Stock
|
0.735% | 0.72% | 0.62% | 0.56% | ||||
|
LGM Emerging Markets
Equity
|
0.900% | 0.89% | 0.85% | 0.80% | ||||
| Advisory Fee (as % of each Fund’s ADNA) | ||||||||
| Fund |
on
the first
$100 million |
on
the next
$150 million |
on
the next
$250 million |
in
excess of
$500 million |
||||
|
Ultra Short Tax-Free
|
0.20% | 0.19% | 0.17% | 0.10% | ||||
|
Short Tax-Free
|
0.20% | 0.19% | 0.17% | 0.15% | ||||
|
Short-Term Income
|
0.20% | 0.19% | 0.17% | 0.10% | ||||
|
Intermediate Tax-Free
|
0.25% | 0.16% | 0.12% | 0.10% | ||||
|
Strategic Income
|
0.25% | 0.20% | 0.20% | 0.20% | ||||
|
TCH Corporate Income
|
0.20% | 0.19% | 0.15% | 0.10% | ||||
|
TCH Core Plus Bond
|
0.25% | 0.16% | 0.12% | 0.10% | ||||
|
High Yield Bond
|
0.50% | 0.50% | 0.50% | 0.50% | ||||
| Advisory Fee (as % of each Fund’s ADNA) | ||||||
| Fund |
on
the first
$1 billion |
on
the next
$1 billion |
in
excess of
$2 billion |
|||
|
Large-Cap
Value
|
0.35% | 0.325% | 0.30% | |||
|
Large-Cap
Growth
|
0.35% | 0.325% | 0.30% | |||
|
Small-Cap
Core
|
0.65% | 0.625% | 0.60% | |||
|
Disciplined International
Equity
|
0.60% | 0.575% | 0.55% | |||
|
Alternative
Strategies
|
1.00% | 0.975% | 0.95% | |||
B-79
| Advisory Fee (as % of each Fund’s ADNA) | ||||||
| Fund |
on
the first
$1 billion |
on
the next
$1 billion |
in
excess of
$2 billion |
|||
|
Global Long/Short
Equity
|
1.00% | 0.975% | 0.95% | |||
| Advisory Fee (as % of each Fund’s ADNA) | ||||||||||
| Fund |
on
the first
$2 billion |
on
the next
$2 billion |
on
the next
$2 billion |
on
the next
$2 billion |
in
excess of
$8 billion |
|||||
|
Government Money
Market
|
0.20% | 0.185% | 0.17% | 0.155% | 0.14% | |||||
|
Tax-Free Money
Market
|
0.20% | 0.185% | 0.17% | 0.155% | 0.14% | |||||
|
Prime Money
Market
|
0.15% | 0.135% | 0.12% | 0.105% | 0.09% | |||||
|
Institutional
Prime Money
Market
|
0.15% | 0.135% | 0.12% | 0.105% | 0.09% | |||||
The Adviser does
not receive an investment advisory fee for the services that it performs for the
Target Date
and
Target Risk Funds
. However, the Adviser is entitled to receive an
investment advisory fee from each of the affiliated BMO Funds that serve as underlying funds in which the
Target Date
and
Target Risk Funds
invest. In addition, since each
Target Date
and
Target Risk Fund
pursues its investment objective by primarily investing in other mutual funds, you will bear the proportionate share of a Fund’s
operating expenses and also indirectly, the operating expenses of the underlying funds in which it invests.
The Adviser has agreed to
waive or reduce its investment advisory fee or reimburse expenses to the extent necessary to prevent class total annual operating expenses (excluding acquired fund fees and expenses, interest, taxes, brokerage commissions, other investment-related
costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of a Fund’s business for all Funds and with respect to the
Alternative Funds
, also excluding
dividend and interest expenses), from exceeding the percentage of the average daily net assets of each class of the following Funds (the Expense Limit), as set forth below. The Adviser may not terminate this arrangement prior to December 31, 2018
(December 31, 2019 with respect to the
Large-Cap Value
,
Large-Cap Growth
,
and
Alternative Strategies
Funds
) without the consent of the Funds’ Board of Directors unless terminated due to the termination of the investment advisory agreement.
| Fund |
Expense
Limit
(as a % of each Fund’s ADNA) |
|
|
Low
Volatility Equity
|
||
|
Class
I
|
0.65% | |
|
Class
A
|
0.90% | |
|
Dividend
Income
|
||
|
Class
I
|
0.65% | |
|
Class
A
|
0.90% | |
|
Large-Cap
Value
|
||
|
Class
I
|
0.54% | |
|
Class
A
|
0.79% | |
|
Class
R6
|
0.39% | |
|
Large-Cap
Growth
|
||
|
Class
Y
|
0.79% | |
|
Class
I
|
0.54% | |
|
Class
A
|
0.79% | |
|
Class
R6
|
0.39% | |
|
Mid-Cap
Value
|
||
|
Class
I
|
0.99% | |
|
Class
A
|
1.24% | |
|
Class
R6
|
0.84% | |
|
Mid-Cap
Growth
|
||
|
Class
I
|
0.99% | |
|
Class
A
|
1.24% | |
|
Class
R6
|
0.84% |
| Fund |
Expense
Limit
(as a % of each Fund’s ADNA) |
|
|
Small-Cap
Value Fund
|
||
|
Class
I
|
0.99% | |
|
Class
A
|
1.24% | |
|
Class
R6
|
0.84% | |
|
Small-Cap
Core
|
||
|
Class
I
|
0.90% | |
|
Class
A
|
1.15% | |
|
Small-Cap
Growth
|
||
|
Class
I
|
0.99% | |
|
Class
A
|
1.24% | |
|
Global
Low Volatility Equity
|
||
|
Class
I
|
0.85% | |
|
Class
A
|
1.10% | |
|
Disciplined
International Equity
|
||
|
Class
I
|
0.90% | |
|
Class
A
|
1.15% | |
|
Class
R6
|
0.75% | |
|
Pyrford
International Stock
|
||
|
Class
I
|
0.94% | |
|
Class
A
|
1.19% | |
|
Class
R6
|
0.79% | |
|
Class
F3
|
0.79% |
B-80
| Fund |
Expense
Limit
(as a % of each Fund’s ADNA) |
|
|
LGM
Emerging Markets Equity
|
||
|
Class
I
|
1.15% | |
|
Class
A
|
1.40% | |
|
Alternative
Strategies
|
||
|
Class
I
|
1.45% | |
|
Class
A
|
1.70% | |
|
Global
Long/Short Equity
|
||
|
Class
I
|
1.35% | |
|
Class
A
|
1.60% | |
|
Class
R6
|
1.20% | |
|
Ultra
Short Tax-Free
|
||
|
Class
I
|
0.30% | |
|
Class
A
|
0.55% | |
|
Short
Tax-Free
|
||
|
Class
I
|
0.40% | |
|
Class
A
|
0.55% | |
|
Short-Term
Income
|
||
|
Class
I
|
0.35% | |
|
Class
A
|
0.60% | |
|
Intermediate
Tax-Free
|
||
|
Class
Y
|
0.55% | |
|
Class
I
|
0.50% | |
|
Class
A
|
0.55% | |
|
Strategic
Income
|
||
|
Class
Y
|
0.80% | |
|
Class
I
|
0.55% | |
|
Class
A
|
0.80% | |
|
TCH
Corporate Income
|
||
|
Class
Y
|
0.59% | |
|
Class
I
|
0.55% | |
|
Class
A
|
0.59% | |
|
TCH
Core Plus Bond
|
||
|
Class
Y
|
0.59% | |
|
Class
I
|
0.55% | |
|
Class
A
|
0.59% | |
|
High
Yield Bond
|
||
|
Class
I
|
0.65% | |
|
Class
A
|
0.90% | |
|
Government
Money Market
|
||
|
Class
Y
|
0.45% | |
|
Premier
Class
|
0.20% | |
|
Tax-Free
Money Market
|
||
|
Class
Y
|
0.45% | |
|
Premier
Class
|
0.20% | |
|
Prime
Money Market
|
||
|
Class
Y
|
0.45% | |
|
Premier
Class
|
0.20% | |
|
Institutional
Prime Money Market
|
||
|
Class
Y
|
0.45% | |
|
Premier
Class
|
0.20% |
| Fund |
Expense
Limit
(as a % of each Fund’s ADNA) |
|
|
In-Retirement
|
||
|
Class
Y
|
0.33% | |
|
Class
R3
|
0.58% | |
|
Class
R6
|
-0.07% | |
|
Target
Retirement 2015
|
||
|
Class
Y
|
0.33% | |
|
Class
R3
|
0.58% | |
|
Class
R6
|
-0.07% | |
|
Target
Retirement 2020
|
||
|
Class
Y
|
0.33% | |
|
Class
R3
|
0.58% | |
|
Class
R6
|
-0.07% | |
|
Target
Retirement 2025
|
||
|
Class
Y
|
0.33% | |
|
Class
R3
|
0.58% | |
|
Class
R6
|
-0.07% | |
|
Target
Retirement 2030
|
||
|
Class
Y
|
0.37% | |
|
Class
R3
|
0.62% | |
|
Class
R6
|
-0.03% | |
|
Target
Retirement 2035
|
||
|
Class
Y
|
0.37% | |
|
Class
R3
|
0.62% | |
|
Class
R6
|
-0.03% | |
|
Target
Retirement 2040
|
||
|
Class
Y
|
0.36% | |
|
Class
R3
|
0.61% | |
|
Class
R6
|
-0.04% | |
|
Target
Retirement 2045
|
||
|
Class
Y
|
0.36% | |
|
Class
R3
|
0.61% | |
|
Class
R6
|
-0.04% | |
|
Target
Retirement 2050
|
||
|
Class
Y
|
0.36% | |
|
Class
R3
|
0.61% | |
|
Class
R6
|
-0.04% | |
|
Target
Retirement 2055
|
||
|
Class
Y
|
0.36% | |
|
Class
R3
|
0.61% | |
|
Class
R6
|
-0.04% | |
|
Conservative
Allocation
|
||
|
Class
Y
|
0.33% | |
|
Class
I
|
0.08% | |
|
Class
R3
|
0.58% | |
|
Class
R6
|
-0.07% | |
|
Moderate
Allocation
|
||
|
Class
Y
|
0.30% | |
|
Class
I
|
0.05% | |
|
Class
R3
|
0.55% | |
|
Class
R6
|
-0.10% |
B-81
| Fund |
Expense
Limit
(as a % of each Fund’s ADNA) |
|
|
Balanced
Allocation
|
||
|
Class
Y
|
0.33% | |
|
Class
I
|
0.08% | |
|
Class
R3
|
0.58% | |
|
Class
R6
|
-0.07% | |
|
Growth
Allocation
|
||
|
Class
Y
|
0.30% | |
|
Class
I
|
0.05% | |
|
Class
R3
|
0.55% | |
|
Class
R6
|
-0.10% |
| Fund |
Expense
Limit
(as a % of each Fund’s ADNA) |
|
|
Aggressive
Allocation
|
||
|
Class
Y
|
0.33% | |
|
Class
I
|
0.08% | |
|
Class
R3
|
0.58% | |
|
Class
R6
|
-0.07% |
In addition, the Adviser may
voluntarily waive any portion of its management fee for a Fund. Any such voluntary waivers by the Adviser may be terminated at any time in the Adviser’s sole discretion.
For the fiscal periods ended
August 31, 2017, 2016, and 2015, the Adviser was entitled to receive the management fees shown below. During those same periods, the Adviser and/or its affiliates waived or reimbursed the amounts shown below.
| Fund |
2017
Fees
Paid |
2017
Fees
Waived or Reimbursed |
2016
Fees
Paid |
2016
Fees
Waived or Reimbursed |
2015
Fees
Paid |
2015
Fees
Waived or Reimbursed |
||||||
|
Low Volatility
Equity
|
$ 798,321 | $ 214,704 | $ 533,558 | $ 162,611 | $ 338,858 (1) | $ 147,875 | ||||||
|
Dividend
Income
|
$ 584,597 | $ 207,995 | $ 575,937 | $ 203,238 | $ 627,129 (1) | $ 194,222 | ||||||
|
Large-Cap
Value
|
$ 1,630,918 | $ 67,008 | $ 1,554,841 (2) | $ 82,362 | $ 2,000,429 (1) | $ 27,286 | ||||||
|
Large-Cap
Growth
|
$ 1,518,543 | $ 94,996 | $ 1,268,164 (2) | $ 134,976 | $ 1,997,963 (1) | $ 35,679 | ||||||
|
Mid-Cap
Value
|
$ 1,511,577 | $ 43,876 | $ 1,785,837 | $ 0 | $ 2,236,738 | $ 0 | ||||||
|
Mid-Cap
Growth
|
$ 804,195 | $ 148,063 | $ 1,174,437 | $ 84,773 | $ 1,733,262 | $ 27,233 | ||||||
|
Small-Cap
Value
|
$ 462,184 | $ 166,953 | $ 602,291 | $ 127,704 | $ 584,191 | $ 186,820 | ||||||
|
Small-Cap
Core
|
$ 111,610 | $ 117,281 | $ 54,208 | $ 115,581 | $ 25,853 | $ 154,174 | ||||||
|
Small-Cap
Growth
|
$ 1,471,741 (6) | $ 5,110 | $ 4,614,856 | $ 0 | $ 7,264,222 (1) | $ 0 | ||||||
|
Global Low Volatility
Equity
|
$ 326,874 | $ 211,613 | $ 221,108 | $ 180,459 | $ 28,063 (1) | $ 201,142 | ||||||
|
Disciplined International
Equity
|
$ 388,006 | $ 157,950 | $ 383,094 (3) | $ 189,296 (3) | N/A | N/A | ||||||
|
Pyrford International
Stock
|
$ 4,616,251 | $ 560,420 | $ 4,872,466 | $ 462,539 | $ 3,585,498 | $ 196,754 | ||||||
|
LGM Emerging Markets
Equity
|
$ 1,304,225 | $ 339,413 | $ 1,304,224 | $ 339,607 | $ 1,537,858 (1) | $ 328,973 | ||||||
|
Alternative
Strategies
|
$ 1,734,588 (7) | $ 730,384 | $ 1,563,744 | $ 745,373 | $ 421,348 (4) | $ 551,511 (4) | ||||||
|
Global Long/Short
Equity
|
$ 72,295 | $ 190,751 | $ 32,084 (3) | $ 227,739 (3) | N/A | N/A | ||||||
|
Ultra Short
Tax-Free
|
$ 1,019,790 | $ 552,571 | $ 1,058,810 | $ 557,607 | $ 1,382,777 (1) | $ 347,613 | ||||||
|
Short
Tax-Free
|
$ 358,602 | $ 205,719 | $ 331,490 | $ 210,983 | $ 303,849 (1) | $ 230,788 | ||||||
|
Short-Term
Income
|
$ 490,064 | $ 295,091 | $ 615,799 | $ 312,797 | $ 487,539 (1) | $ 220,052 | ||||||
|
Intermediate
Tax-Free
|
$ 1,954,524 | $ 0 | $ 2,082,926 | $ 0 | $ 3,129,717 (1) | $ 0 | ||||||
|
Strategic
Income
|
$ 242,483 | $ 97,679 | $ 277,134 | $ 66,254 | $ 450,276 (1) | $ 161,223 | ||||||
|
TCH Corporate
Income
|
$ 444,534 | $ 0 | $ 439,639 | $ 0 | $ 645,453 (1) | $ 0 | ||||||
|
TCH Core Plus
Bond
|
$ 1,272,636 | $ 0 | $ 1,288,117 | $ 0 | $ 1,914,460 (1) | $ 0 | ||||||
|
High Yield
Bond
|
$ 208,206 | $ 215,614 | $ 370,755 | $ 229,957 | $ 372,900 (1) | $ 232,758 | ||||||
|
Government Money
Market
|
$ 6,422,550 | $1,662,643 | $ 1,484,739 | $ 713,711 | $ 1,245,872 | $1,250,142 | ||||||
|
Tax-Free Money
Market
|
$ 733,467 | $ 427,816 | $ 1,322,771 | $ 814,673 | $ 1,286,559 | $ 785,449 | ||||||
|
Prime Money
Market
|
$ 763,460 | $ 382,608 | $ 4,943,748 | $ 124,193 | $ 5,123,339 | $ 620,101 | ||||||
|
Institutional
Prime Money
Market
|
$ 624,829 | $ 433,421 | $ 157,038 (5) | $ 92,063 (5) | N/A | N/A | ||||||
|
In-Retirement
|
$ 0 | $ 187,982 | $ 0 | $ 185,945 | $ 0 | $ 183,862 | ||||||
|
Target Retirement
2015
|
$ 0 | $ 167,393 | $ 0 | $ 171,459 | $ 0 | $ 176,177 | ||||||
|
Target Retirement
2020
|
$ 0 | $ 261,398 | $ 0 | $ 231,374 | $ 0 | $ 251,881 | ||||||
|
Target Retirement
2025
|
$ 0 | $ 193,804 | $ 0 | $ 184,632 | $ 0 | $ 182,666 |
B-82
| Fund |
2017
Fees
Paid |
2017
Fees
Waived or Reimbursed |
2016
Fees
Paid |
2016
Fees
Waived or Reimbursed |
2015
Fees
Paid |
2015
Fees
Waived or Reimbursed |
||||||
|
Target Retirement
2030
|
$ 0 | $ 237,007 | $ 0 | $ 219,529 | $ 0 | $ 229,580 | ||||||
|
Target Retirement
2035
|
$ 0 | $ 180,068 | $ 0 | $ 182,986 | $ 0 | $ 182,370 | ||||||
|
Target Retirement
2040
|
$ 0 | $ 217,867 | $ 0 | $ 206,660 | $ 0 | $ 209,558 | ||||||
|
Target Retirement
2045
|
$ 0 | $ 173,042 | $ 0 | $ 176,975 | $ 0 | $ 178,206 | ||||||
|
Target Retirement
2050
|
$ 0 | $ 203,682 | $ 0 | $ 196,503 | $ 0 | $ 194,751 | ||||||
|
Target Retirement
2055
|
$ 0 | $ 168,512 | $ 0 | $ 171,684 | $ 0 | $ 174,859 | ||||||
|
Conservative
Allocation
|
$ 0 | $ 322,197 | $ 0 | $ 268,583 | $ 0 | $ 304,219 | ||||||
|
Moderate
Allocation
|
$ 0 | $ 358,924 | $ 0 | $ 287,791 | $ 0 | $ 322,855 | ||||||
|
Balanced
Allocation
|
$ 0 | $ 639,816 | $ 0 | $ 523,352 | $ 0 | $ 628,948 | ||||||
|
Growth
Allocation
|
$ 0 | $ 369,976 | $ 0 | $ 306,710 | $ 0 | $ 350,826 | ||||||
|
Aggressive
Allocation
|
$ 0 | $ 405,076 | $ 0 | $ 353,191 | $ 0 | $ 390,099 |
| (1) | Amounts in 2015 include fees based on the prior advisory fee rate which was changed for certain Funds effective June 1, 2015. |
| (2) | Amounts in 2016 for Large-Cap Value and Large-Cap Growth include fees based on the prior advisory fee rate which was changed effective December 29, 2015. |
| (3) | Amounts in 2016 for the Disciplined International Equity and Global Long/Short Equity are for the period from September 17, 2015, each Fund’s inception date, to August 31, 2016, the end of each Fund’s fiscal year. |
| (4) | Amounts in 2015 for Alternative Strategies are for the period from December 16, 2014, the Fund’s inception date, to August 31, 2015, the end of the Fund’s fiscal year. |
| (5) | Amounts in 2016 for Institutional Prime Money Market are for the period from June 3, 2016, the Fund’s inception date, to August 31, 2016, the end of the Fund’s fiscal year. |
| (6) | Amounts in 2017 for Small-Cap Growth include fees based on the prior advisory fee rate which was changed effective October 5, 2016. |
| (7) | Amounts in 2017 for Alternative Strategies include fees based on the prior advisory fee rate which was changed effective June 1, 2017. |
Sub-Advisers to Pyrford International Stock,
LGM Emerging Markets Equity, TCH Corporate Income, TCH Core Plus Bond, and Alternative Strategies
It is the Adviser’s
responsibility to select sub-advisers for
Pyrford International Stock, LGM Emerging Markets Equity, TCH Corporate Income, TCH Core Plus Bond,
and
Alternative Strategies
and to review each Sub-Adviser’s performance. Pyrford is the sub-adviser to
Pyrford International Stock
. LGM Investments is the sub-adviser to
LGM Emerging Markets
Equity
. TCH is the sub-adviser to
TCH Corporate Income
and
TCH Core Plus Bond
. CTC, Cramer Rosenthal, Graham, and BMO GAM EMEA are the sub-advisers to
Alternative Strategies
. The Adviser provides investment management evaluation services by performing initial due diligence on each Sub-Adviser and, thereafter, by monitoring the Sub-Advisers’ performance
through quantitative and qualitative analysis, as well as periodic in-person, telephonic, and written consultations. In evaluating the Sub-Advisers, the Adviser considers, among other factors, their level of expertise; relative performance and
consistency of performance over a minimum period of time; level of adherence to investment discipline or philosophy; personnel, facilities, and financial strength; and quality of service and client communications. The Adviser has the responsibility
for communicating performance expectations and evaluations to the Sub-Advisers and ultimately recommending to the Corporation’s Board whether their sub-advisory agreements should be renewed, modified, or terminated.
BMO Funds, Inc. and the Adviser have
received an order from the SEC that permits the Adviser, subject to certain conditions, but without shareholder approval, to terminate an existing sub-adviser or hire a new, wholly-owned or non-affiliated sub-adviser for a Fund, to materially amend
the terms of particular agreements with a sub-adviser, or to continue the employment of an existing sub-adviser after events that would otherwise cause an automatic termination of a sub-advisory agreement. This arrangement, which is commonly
referred to as a “manager-of-managers” investment strategy, has been approved by the Board of Directors and is currently utilized by the
Alternative Strategies Fund
. Additionally, any other Fund may
rely on the exemptive order, subject to shareholder approval and so long as it (i) is advised by the Adviser; (ii) uses the manager-of managers structure that is described in the exemptive application; and (iii) complies with the terms and
conditions of the exemptive application. The sole initial shareholder of each of the
Disciplined International Equity
and
Global Long/Short Equity Funds
has previously
approved this arrangement if the Board of Directors and the Adviser choose to use it. Consequently, under the exemptive order, the Adviser has the right to hire, terminate, and replace sub-advisers when the Board of Directors and the Adviser
determine that a change would benefit a Fund.
Pursuant to the conditions imposed by the
exemptive order, if a new sub-adviser is retained, shareholders of the affected Fund will receive notification of the change within 90 days, and the Corporation will make available and maintain the notification on its website for 90 days thereafter.
The exemptive order also exempts a Fund from certain requirements to disclose the compensation paid by the Adviser to the sub-adviser. The manager-of-managers structure enables each Fund to operate with greater efficiency and without incurring the
expense and delays associated with obtaining shareholder approval of sub-advisory agreements. The structure
B-83
does not permit advisory fees paid by a Fund to be increased or change the
Adviser’s obligations under the investment advisory agreement, including the Adviser’s responsibility to monitor and oversee sub-advisory services furnished to the Fund, without shareholder approval.
The Adviser provides written reports to the
Board regarding the results of its evaluation and monitoring functions. The Adviser also is responsible for conducting all operations of the Funds, except those operations contracted to the Sub-Advisers, the custodian, the transfer agent, and the
administrator. Although the Sub-Advisers’ activities are subject to oversight by the Board and officers of the Corporation, neither the Board, the officers, nor the Adviser evaluates the investment merits of the Sub-Advisers’ individual
security selections. The Sub-Advisers have complete discretion to purchase, manage, and sell portfolio securities for their respective Funds, subject to the Fund’s investment objective, policies, and limitations. The control persons of each
Sub-Adviser are described in each Sub-Adviser’s Form ADV as filed with the SEC.
Pyrford.
Pyrford is a registered investment adviser that is a wholly-owned subsidiary of the Bank of Montreal Capital Markets (Holdings) Ltd, a BMO Financial Group company. As part of BMO’s private client
group, Pyrford provides wealth management services to clients in North America, the Middle East, UK, and Europe. Pyrford’s address is 79 Grosvenor Street, London, U.K. For its services to
Pyrford
International Stock
, the Adviser pays Pyrford a fee at the rate of forty percent (40%) of the gross advisory fee received by the Adviser.
LGM Investments.
LGM Investments is an investment advisory firm founded in 1995 that specializes in Asia Pacific, global emerging market, and frontier market entities and provides investment management services to
pension funds, foundations, government organizations, high net worth individuals, hedge funds, and other funds sponsored by its parent LGM (Bermuda) Limited (LGM). LGM Investments is a wholly-owned subsidiary of LGM and an indirect wholly-owned
subsidiary of BMO. LGM Investments’ address is 95 Wigmore Street, London, United Kingdom. For its services to
LGM Emerging Markets Equity
, LGM
Investments, a registered investment adviser, receives a fee at the annual rate of forty percent (40%) of the gross advisory fee received by the Adviser. From December 29, 2011 to December 28, 2012, Lloyd George Management (Hong Kong) Limited,
another subsidiary of LGM, served as the subadviser to
LGM Emerging Markets Equity
. The subadvisory agreement was transferred to LGM Investments
effective December 28, 2012.
TCH.
TCH is a Delaware limited liability company and an investment adviser registered with the SEC. TCH provides investment management services to investment companies, pension, and profit sharing plans,
state or municipal government entities, corporations, charitable organizations, and individuals. TCH is a wholly-owned subsidiary of the Adviser. For its services to
TCH Corporate Income
and
TCH Core Plus Bond
, the Adviser pays TCH a fee at the rate of forty percent (40%) of the gross
advisory fee received by the Adviser.
BMO GAM EMEA.
BMO GAM EMEA is a registered investment adviser that provides investment management services to various types of clients. BMO GAM EMEA is an affiliate of the Adviser. BMO GAM EMEA’s registered
office address is Exchange House, Primrose Street, London, United Kingdom EC2A 2NY.
CTC.
CTC is a registered investment adviser that is a wholly-owned subsidiary of BMO Financial Corp., which is a wholly-owned subsidiary of BMO. CTC is a registered investment adviser that provides
investment management services to investment companies, pension and profit sharing plans, state or municipal government entities, corporations, charitable organizations, and individuals. CTC’s address is 2200 Geng Road, Suite 100, Palo Alto,
California 94303.
Cramer Rosenthal.
Cramer Rosenthal is a registered investment adviser that provides investment management services to various types of clients, including individuals, pooled investment vehicles, other corporations and
trusts. Cramer Rosenthal’s address is 520 Madison Avenue, 20th Floor, New York, New York 10022.
Graham.
Graham is a registered investment adviser that provides investment management services to various types of clients, including pooled investment vehicles. Graham’s address is 40 Highland Avenue,
Rowayton, Connecticut 06853.
All fees of the Sub-Advisers are paid by
the Adviser. BMO is the ultimate parent company of the Adviser, Pyrford, LGM Investments, TCH, BMO GAM EMEA, and CTC. Accordingly, the Adviser, Pyrford, LGM Investments, TCH, BMO GAM EMEA, and CTC are affiliates.
B-84
Portfolio Managers
Other Accounts Managed by Portfolio Managers of the Funds
As described in the Funds’ Prospectus,
the portfolio managers listed below are responsible for the day-to-day management of the Funds. With respect to the Funds for which one portfolio manager is listed in the following table, such portfolio manager is solely responsible for the
day-to-day management of the Fund and is primarily responsible for the day-to-day management of the other accounts set forth in the table. In the case of the Funds for which more than one portfolio manager is listed in the following table, such
portfolio managers are jointly responsible for the day-to-day management of the applicable Fund and the other accounts are generally managed jointly with the other portfolio manager(s). Unless noted otherwise, none of the mutual fund clients listed
in the table pays a performance-based fee to the Adviser or Sub-Advisers.
B-85
Other Accounts Managed by the Portfolio Managers
of the Funds as of August 31, 2017
of the Funds as of August 31, 2017
|
Other
Registered
Investment Companies Managed by Portfolio Manager |
Other
Pooled
Investment Vehicle Managed by Portfolio Manager |
Other
Accounts
Managed by Portfolio Manager |
||||||||||||||||||
|
Fund/Portfolio
Manager/Firms |
Number |
Total
Assets ($) |
Number |
Total
Assets ($) |
Number
with
Performance- Based Fees |
Total
Assets
of Pooled Investment Vehicles with Performance- Based Fees ($) |
Number |
Total
Assets ($) |
Number
with Performance- Based Fees |
Total
Assets of Accounts with Performance- Based Fees ($) |
||||||||||
| Low Volatility Equity | ||||||||||||||||||||
|
David A.
Corris
|
2 | 379.1 million | 4 | 4.168 billion | — | — | 141 | 5.765 billion | — | — | ||||||||||
|
Jason C.
Hans
|
— | — | 4 | 4.168 billion | — | — | 111 | 5.463 billion | — | — | ||||||||||
|
Jay
Kaufman
|
— | — | 2 | 585.6 million | — | — | 23 | 433.0 million | — | — | ||||||||||
|
Ernesto
Ramos
|
— | — | 9 | 5.168 billion | — | — | 160 | 5.717 billion | — | — | ||||||||||
| Dividend Income | ||||||||||||||||||||
|
Kenneth
Conrad
|
— | — | 3 | 413.7 million | — | — | 41 | 85.2 million | — | — | ||||||||||
|
Casey J.
Sambs
|
— | — | 3 | 413.7 million | — | — | 122 | 576.1 million | — | — | ||||||||||
| Large-Cap Value | ||||||||||||||||||||
|
David A.
Corris
|
2 | 379.1 million | 4 | 4.168 billion | — | — | 141 | 5.765 billion | — | — | ||||||||||
|
Jason C.
Hans
|
— | — | 4 | 4.168 billion | — | — | 111 | 5.463 billion | — | — | ||||||||||
|
Ernesto
Ramos
|
— | — | 9 | 5.168 billion | — | — | 160 | 5.717 billion | — | — | ||||||||||
| Large-Cap Growth | ||||||||||||||||||||
|
David A.
Corris
|
2 | 379.1 million | 4 | 4.168 billion | — | — | 141 | 5.765 billion | — | — | ||||||||||
|
Jason C.
Hans
|
— | — | 4 | 4.168 billion | — | — | 111 | 5.463 billion | — | — | ||||||||||
|
Ernesto
Ramos
|
— | — | 9 | 5.168 billion | — | — | 160 | 5.717 billion | — | — | ||||||||||
| Mid-Cap Value | ||||||||||||||||||||
|
David A.
Corris
|
2 | 379.1 million | 4 | 4.168 billion | — | — | 141 | 5.765 billion | — | — | ||||||||||
|
Thomas
Lettenberger
|
2 | 379.1 million | — | — | — | — | 28 | 284.8 million | — | — | ||||||||||
| Mid-Cap Growth | ||||||||||||||||||||
|
David A.
Corris
|
2 | 379.1 million | 4 | 4.168 billion | — | — | 141 | 5.765 billion | — | — | ||||||||||
|
Thomas
Lettenberger
|
2 | 379.1 million | — | — | — | — | 28 | 284.8 million | — | — | ||||||||||
| Small-Cap Value | ||||||||||||||||||||
|
David A.
Corris
|
2 | 379.1 million | 4 | 4.168 billion | — | — | 141 | 5.765 billion | — | — | ||||||||||
|
Thomas
Lettenberger
|
2 | 379.1 million | — | — | — | — | 28 | 284.8 million | — | — | ||||||||||
| Small-Cap Core | ||||||||||||||||||||
|
David A.
Corris
|
2 | 379.1 million | 4 | 4.168 billion | — | — | 141 | 5.765 billion | — | — | ||||||||||
|
Thomas
Lettenberger
|
2 | 379.1 million | — | — | — | — | 28 | 284.8 million | — | — | ||||||||||
B-86
|
Other
Registered
Investment Companies Managed by Portfolio Manager |
Other
Pooled
Investment Vehicle Managed by Portfolio Manager |
Other
Accounts
Managed by Portfolio Manager |
||||||||||||||||||
|
Fund/Portfolio
Manager/Firms |
Number |
Total
Assets ($) |
Number |
Total
Assets ($) |
Number
with
Performance- Based Fees |
Total
Assets
of Pooled Investment Vehicles with Performance- Based Fees ($) |
Number |
Total
Assets ($) |
Number
with Performance- Based Fees |
Total
Assets of Accounts with Performance- Based Fees ($) |
||||||||||
| Small-Cap Growth | ||||||||||||||||||||
|
David A.
Corris
|
2 | 379.1 million | 4 | 4.168 billion | — | — | 141 | 5.765 billion | — | — | ||||||||||
|
Thomas
Lettenberger
|
2 | 379.1 million | — | — | — | — | 28 | 284.8 million | — | — | ||||||||||
| Global Low Volatility Equity | ||||||||||||||||||||
|
Jay
Kaufman
|
— | — | 2 | 585.6 million | — | — | 23 | 433.0 million | — | — | ||||||||||
|
Ernesto
Ramos
|
— | — | 9 | 5.168 billion | — | — | 160 | 5.717 billion | — | — | ||||||||||
|
David
Rosenblatt
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Disciplined International Equity | ||||||||||||||||||||
|
Jay
Kaufman
|
— | — | 2 | 585.6 million | — | — | 23 | 433.0 million | — | — | ||||||||||
|
Ernesto
Ramos
|
— | — | 9 | 5.168 billion | — | — | 160 | 5.717 billion | — | — | ||||||||||
|
David
Rosenblatt
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Pyrford International Stock | ||||||||||||||||||||
|
Tony Cousins
(Pyrford)
|
4 | 1.042 billion | 6 | 5.256 billion | — | — | 30 | 3.529 billion | 2 | 449.9 million | ||||||||||
|
Daniel McDonagh
(Pyrford)
|
4 | 1.042 billion | 6 | 5.256 billion | — | — | 30 | 3.529 billion | 2 | 449.9 million | ||||||||||
|
Paul Simons
(Pyrford)
|
4 | 1.042 billion | 6 | 5.256 billion | — | — | 30 | 3.529 billion | 2 | 449.9 million | ||||||||||
| LGM Emerging Markets Equity | ||||||||||||||||||||
|
Irina Hunter (LGM
Investments)
|
— | — | 9 | 1.745 billion | — | — | — | — | — | — | ||||||||||
|
Rishikesh Patel (LGM
Investments)
|
— | — | 10 | 1.752 billion | — | — | 2 | 51.0 million | 1 | 23.2 million | ||||||||||
|
Damian Bird (LGM
Investments)
|
— | — | 11 | 1.890 billion | — | — | 2 | 51.0 million | 1 | 23.2 million | ||||||||||
| Alternative Strategies | ||||||||||||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Global Long/Short Equity | ||||||||||||||||||||
|
Jay
Kaufman
|
— | — | 2 | 585.6 million | — | — | 23 | 433.0 million | — | — | ||||||||||
|
Ernesto
Ramos
|
— | — | 9 | 5.168 billion | — | — | 160 | 5.717 billion | — | — | ||||||||||
|
David
Rosenblatt
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Ultra Short Tax-Free | ||||||||||||||||||||
|
Robert
Wimmel
|
— | — | — | — | — | — | 120 | 1.107 billion | — | — | ||||||||||
|
Thomas
Byron
|
— | — | — | — | — | — | 120 | 1.107 billion | — | — | ||||||||||
|
Brian
Sipich
|
— | — | — | — | — | — | 120 | 1.107 billion | — | — | ||||||||||
B-87
|
Other
Registered
Investment Companies Managed by Portfolio Manager |
Other
Pooled
Investment Vehicle Managed by Portfolio Manager |
Other
Accounts
Managed by Portfolio Manager |
||||||||||||||||||
|
Fund/Portfolio
Manager/Firms |
Number |
Total
Assets ($) |
Number |
Total
Assets ($) |
Number
with
Performance- Based Fees |
Total
Assets
of Pooled Investment Vehicles with Performance- Based Fees ($) |
Number |
Total
Assets ($) |
Number
with Performance- Based Fees |
Total
Assets of Accounts with Performance- Based Fees ($) |
||||||||||
| Short Tax-Free | ||||||||||||||||||||
|
Robert
Wimmel
|
— | — | — | — | — | — | 120 | 1.107 billion | — | — | ||||||||||
|
Thomas
Byron
|
— | — | — | — | — | — | 120 | 1.107 billion | — | — | ||||||||||
|
Brian
Sipich
|
— | — | — | — | — | — | 120 | 1.107 billion | — | — | ||||||||||
| Short-Term Income | ||||||||||||||||||||
|
Peter J.
Arts
|
— | — | 5 | 1.370 billion | — | — | 154 | 8.473 billion | — | — | ||||||||||
|
Boyd R.
Eager
|
— | — | 1 | 38.6 million | — | — | 151 | 7.608 billion | — | — | ||||||||||
| Intermediate Tax-Free | ||||||||||||||||||||
|
Robert
Wimmel
|
— | — | — | — | — | — | 120 | 1.107 billion | — | — | ||||||||||
|
Thomas
Byron
|
— | — | — | — | — | — | 120 | 1.107 billion | — | — | ||||||||||
|
Brian
Sipich
|
— | — | — | — | — | — | 120 | 1.107 billion | — | — | ||||||||||
| Strategic Income | ||||||||||||||||||||
|
Scott M.
Kimball
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Daniela
Mardarovici
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Frank Reda
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Janelle Woodward
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
| TCH Corporate Income | ||||||||||||||||||||
|
Scott M. Kimball
(TCH)
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Daniela Mardarovici
(TCH)
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Frank Reda
(TCH)
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Janelle Woodward
(TCH)
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
| TCH Core Plus Bond | ||||||||||||||||||||
|
Scott M. Kimball
(TCH)
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Daniela Mardarovici
(TCH)
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Frank Reda
(TCH)
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Janelle Woodward
(TCH)
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
| High Yield Bond | ||||||||||||||||||||
|
Ronald
Salinas
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Eduardo
Simpson
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
|
Janelle Woodward
|
— | — | — | — | — | — | 90 | 9.437 billion | 1 (1) | 111.9 million (1) | ||||||||||
B-88
|
Other
Registered
Investment Companies Managed by Portfolio Manager |
Other
Pooled
Investment Vehicle Managed by Portfolio Manager |
Other
Accounts
Managed by Portfolio Manager |
||||||||||||||||||
|
Fund/Portfolio
Manager/Firms |
Number |
Total
Assets ($) |
Number |
Total
Assets ($) |
Number
with
Performance- Based Fees |
Total
Assets
of Pooled Investment Vehicles with Performance- Based Fees ($) |
Number |
Total
Assets ($) |
Number
with Performance- Based Fees |
Total
Assets of Accounts with Performance- Based Fees ($) |
||||||||||
| In-Retirement | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Irina
Pacheco
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Target Retirement 2015 | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Irina
Pacheco
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Target Retirement 2020 | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Irina
Pacheco
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Target Retirement 2025 | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Irina
Pacheco
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Target Retirement 2030 | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Irina
Pacheco
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Target Retirement 2035 | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Irina
Pacheco
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Target Retirement 2040 | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Irina
Pacheco
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
B-89
|
Other
Registered
Investment Companies Managed by Portfolio Manager |
Other
Pooled
Investment Vehicle Managed by Portfolio Manager |
Other
Accounts
Managed by Portfolio Manager |
||||||||||||||||||
|
Fund/Portfolio
Manager/Firms |
Number |
Total
Assets ($) |
Number |
Total
Assets ($) |
Number
with
Performance- Based Fees |
Total
Assets
of Pooled Investment Vehicles with Performance- Based Fees ($) |
Number |
Total
Assets ($) |
Number
with Performance- Based Fees |
Total
Assets of Accounts with Performance- Based Fees ($) |
||||||||||
| Target Retirement 2045 | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Irina
Pacheco
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Target Retirement 2050 | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Irina
Pacheco
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Target Retirement 2055 | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Irina
Pacheco
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Conservative Allocation | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Moderate Allocation | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Balanced Allocation | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Growth Allocation | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| Aggressive Allocation | ||||||||||||||||||||
|
Jon
Adams
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
|
Michael
Dowdall
|
— | — | — | — | — | — | — | — | — | — | ||||||||||
| (1) | As of September 13, 2017. |
B-90
Conflicts of Interest
A conflict of interest may arise as a result
of a portfolio manager being responsible for multiple accounts, including the Funds, which may have different investment guidelines and objectives. In addition to the Funds, these accounts may include other mutual funds managed on an advisory or
subadvisory basis, separate accounts, and collective trust accounts. An investment opportunity may be suitable for a Fund as well as for any of the other managed accounts. However, the investment may not be available in sufficient quantity for all
of the accounts to participate fully. In addition, a limited opportunity may exist to sell an investment held by a Fund and the other accounts. The other accounts may have similar investment objectives or strategies as the Funds, they may track the
same benchmarks or indexes as the Funds track, and they may sell securities that are eligible to be held, sold or purchased by the Funds. A portfolio manager may be responsible for accounts that have different advisory fee schedules, which may
create the incentive for the portfolio manager to favor one account over another in terms of access to investment opportunities. A portfolio manager also may manage accounts whose investment objectives and policies differ from those of the Funds,
which may cause the portfolio manager to effect trading in one account that may have an adverse effect on the value of the holdings within another account, including a Fund.
To address and manage
these potential conflicts of interest, each of the Adviser, Pyrford, LGM Investments, BMO GAM EMEA, and TCH has adopted compliance policies and procedures to allocate investment opportunities and to ensure that each of their clients is treated on a
fair and equitable basis. Such policies and procedures include, but are not limited to, trade allocation and trade aggregation policies, cross trading policies, portfolio manager assignment practices, and oversight by investment management, and/or
compliance departments.
All
of the portfolio managers for the Funds must make investment decisions without taking into consideration or being in possession of material, non-public information about the securities and other instruments in which they invest. The Adviser and each
Sub-adviser have established procedures to prevent portfolio managers from trading on material, non-public information. For the portfolio managers of the
Target Date
and
Target
Risk Funds
, this prohibition applies to material, non-public information about the underlying funds. In the event that a portfolio manager of a
Target Date
or
Target Risk
Fund
comes into possession of material, non-public information about an underlying affiliated fund the portfolio managers’ ability to initiate transactions in the underlying affiliated fund could potentially be restricted as a result of
the portfolio manager’s possession of such information. The trading restriction could have an adverse effect on the ability of a fund managed by such portfolio managers to participate in any potential gains or avoid any potential losses in the
restricted underlying affiliated fund. In some instances, these trading restrictions could continue in effect for a substantial period of time.
Compensation of Portfolio Managers
Compensation for the
portfolio managers of the Adviser and each affiliated Sub-Adviser (LGM Investments, Pyrford, BMO GAM EMEA, and TCH) consists of base salary, discretionary performance bonuses, and other benefits. Base salaries are reviewed on an annual basis to
ensure alignment with the external market. Discretionary performance bonuses vary according to business and individual performance and are provided in a combination of cash and deferred equity-based awards for employees at higher levels of
compensation. Portfolio managers also may have a long-term incentive program consisting of restricted share units or other units linked to the performance of BMO.
BMO ensures that its compensation programs
provide for clear alignment between pay and sustained business, client and individual performance as well as recognize behaviors which align to core values and contribute to the success of BMO and BMO clients. The compensation programs are designed
to support and promote effective risk management, aligned to clients’ risk objectives and BMO’s corporate risk appetite and reflect local regulatory and legal requirements. The approach to compensation does not encourage excessive
risk-taking that exceeds tolerated levels of risk.
With respect to any perceived conflicts of
interest relating to the payment model, the risk management focus of the investment process drives all key decision making. Likewise, individual compensation is weighted more toward long term profit from fee-based client relationships than it is on
short term performance, which further motivates the team to achieve stable long-term fee-based relationships through consistent benchmark outperformance and capital preservation. Finally, the deferred equity-linked component of the incentive
compensation plan promotes a long-term interest in firm value.
As of the date of this SAI, the structures
and methods described above are used to determine each portfolio manager’s compensation.
B-91
Ownership of Fund Shares by Portfolio Managers
As of August 31, 2017, the portfolio
managers beneficially owned shares of the Funds they manage having a value within the range shown below.
| Fund/Portfolio Manager | Dollar Range of Shares Owned | ||||
|
Low
Volatility Equity
|
|||||
|
David A.
Corris
|
$50,001 | – | $100,000 | ||
|
Jason C.
Hans
|
$10,001 | – | $50,000 | ||
|
Jay
Kaufman
|
$10,001 | – | $50,000 | ||
|
Ernesto
Ramos
|
None | ||||
|
Dividend
Income
|
|||||
|
Kenneth
Conrad
|
$10,001 | – | $50,000 | ||
|
Casey J.
Sambs
|
$10,001 | – | $50,000 | ||
|
Large-Cap
Value
|
|||||
|
David A.
Corris
|
$1 | – | $10,000 | ||
|
Jason
Hans
|
$10,001 | – | $50,000 | ||
|
Ernesto
Ramos
|
None | ||||
|
Large-Cap
Growth
|
|||||
|
David A.
Corris
|
$10,001 | – | $50,000 | ||
|
Jason C.
Hans
|
$10,001 | – | $50,000 | ||
|
Ernesto
Ramos
|
None | ||||
|
Mid-Cap
Value
|
|||||
|
David
Corris
|
$1 | – | $10,000 | ||
|
Thomas
Lettenberger
|
$10,001 | – | $50,000 | ||
|
Mid-Cap
Growth
|
|||||
|
David
Corris
|
None | ||||
|
Thomas
Lettenberger
|
$10,001 | – | $50,000 | ||
|
Small-Cap
Value
|
|||||
|
David
Corris
|
$10,001 | – | $50,000 | ||
|
Thomas
Lettenberger
|
$50,001 | – | $100,000 | ||
|
Small-Cap
Core
|
|||||
|
David
Corris
|
$50,001 | – | $100,000 | ||
|
Thomas
Lettenberger
|
$50,001 | – | $100,000 | ||
|
Small-Cap
Growth
|
|||||
|
David
Corris
|
$10,001 | – | $50,000 | ||
|
Thomas
Lettenberger
|
$50,001 | – | $100,000 | ||
|
Global
Low Volatility Equity
|
|||||
|
Jay
Kaufman
|
$10,001 | – | $50,000 | ||
|
Ernesto
Ramos
|
Over $1,000,000 | ||||
|
David
Rosenblatt
|
None | ||||
|
Disciplined
International Equity
|
|||||
|
Jay
Kaufman
|
$10,001 | – | $50,000 | ||
|
Ernesto
Ramos
|
None | ||||
|
David
Rosenblatt
|
None | ||||
|
Pyrford
International Stock
|
|||||
|
Tony Cousins
(Pyrford)
(1)
|
None (1) | ||||
|
Daniel McDonagh
(Pyrford)
(1)
|
None (1) | ||||
|
Paul Simons
(Pyrford)
(1)
|
None (1) | ||||
|
LGM
Emerging Markets Equity
|
|||||
|
Irina Hunter (LGM
Investments)
(1)
|
None (1) | ||||
|
Rishikesh Patel (LGM
Investments)
(1)
|
None (1) | ||||
|
Damian Bird (LGM
Investments)
(1)
|
None (1) | ||||
B-92
| Fund/Portfolio Manager | Dollar Range of Shares Owned | ||||
|
Alternative
Strategies
|
|||||
|
Michael
Dowdall
|
None | ||||
|
Global
Long/Short Equity
|
|||||
|
Jay
Kaufman
|
$10,001 | – | $50,000 | ||
|
Ernesto
Ramos
|
None | ||||
|
David
Rosenblatt
|
$100,001 | – | $500,000 | ||
|
Ultra
Short Tax-Free
|
|||||
|
Robert
Wimmel
|
None | ||||
|
Thomas
Byron
|
None | ||||
|
Brian
Sipich
|
None | ||||
|
Short
Tax-Free
|
|||||
|
Robert
Wimmel
|
None | ||||
|
Thomas
Byron
|
None | ||||
|
Brian
Sipich
|
None | ||||
|
Short-Term
Income
|
|||||
|
Peter J.
Arts
|
None | ||||
|
Boyd R.
Eager
|
None | ||||
|
Intermediate
Tax-Free
|
|||||
|
Robert
Wimmel
|
None | ||||
|
Thomas
Byron
|
$1 | – | $10,000 | ||
|
Brian
Sipich
|
None | ||||
|
Strategic
Income
|
|||||
|
Scott M.
Kimball
|
None | ||||
|
Daniela
Mardarovici
|
None | ||||
|
Frank Reda
|
None | ||||
|
Janelle Woodward
|
None | ||||
|
TCH
Corporate Income
|
|||||
|
Scott M. Kimball
(TCH)
|
$10,001 | – | $50,000 | ||
|
Daniela Mardarovici
(TCH)
|
None | ||||
|
Frank Reda
(TCH)
|
$1 | – | $10,000 | ||
|
Janelle Woodward
(TCH)
|
$1 | – | $10,000 | ||
|
TCH
Core Plus Bond
|
|||||
|
Scott M. Kimball
(TCH)
|
$10,001 | – | $50,000 | ||
|
Daniela Mardarovici
(TCH)
|
$1 | – | $10,000 | ||
|
Frank Reda
(TCH)
|
None | ||||
|
Janelle Woodward
(TCH)
|
$1 | – | $10,000 | ||
|
High
Yield Bond
|
|||||
|
Ronald
Salinas
|
None | ||||
|
Eduardo
Simpson
|
None | ||||
|
Janelle
Woodward
|
None | ||||
|
In-Retirement
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Irina
Pacheco
|
None | ||||
|
Target
Retirement 2015
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Irina
Pacheco
|
None | ||||
|
Target
Retirement 2020
|
|||||
|
Jon
Adams
|
None | ||||
B-93
| Fund/Portfolio Manager | Dollar Range of Shares Owned | ||||
|
Michael
Dowdall
|
None | ||||
|
Irina
Pacheco
|
None | ||||
|
Target
Retirement 2025
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Irina
Pacheco
|
None | ||||
|
Target
Retirement 2030
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Irina
Pacheco
|
None | ||||
|
Target
Retirement 2035
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Irina
Pacheco
|
None | ||||
|
Target
Retirement 2040
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Irina
Pacheco
|
None | ||||
|
Target
Retirement 2045
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Irina
Pacheco
|
None | ||||
|
Target
Retirement 2050
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Irina
Pacheco
|
None | ||||
|
Target
Retirement 2055
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Irina
Pacheco
|
None | ||||
|
Conservative
Allocation
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Moderate
Allocation
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Balanced
Allocation
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Growth
Allocation
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
None | ||||
|
Aggressive
Allocation
|
|||||
|
Jon
Adams
|
None | ||||
|
Michael
Dowdall
|
$10,001 | – | $50,000 | ||
| (1) | Non-U.S. citizens are not eligible to purchase shares of BMO Funds. |
As of August 31, 2017, the portfolio
managers listed below beneficially owned shares of the Fund family having a value within the range shown below.
B-94
| Portfolio Manager | Dollar Range of Shares Owned in Fund Family | |||
|
Thomas
Byron
|
$1 | – | $10,000 | |
|
Kenneth
Conrad
|
$10,001 | – | $50,000 | |
|
David A.
Corris
|
$100,001 | – | $500,000 | |
|
Michael
Dowdall
|
$10,001 | – | $50,000 | |
|
Jason C.
Hans
|
$50,001 | – | $100,000 | |
|
Jay
Kaufman
|
$50,001 | – | $100,000 | |
|
Scott
Kimball
|
$10,001 | – | $50,000 | |
|
Thomas
Lettenberger
|
$500,001 | – | $1,000,000 | |
|
Daniela
Mardarovici
|
$1 | – | $10,000 | |
|
Ernesto
Ramos
|
Over $1,000,000 | |||
|
Frank
Reda
|
$1 | – | $10,000 | |
|
David
Rosenblatt
|
$100,001 | – | $500,000 | |
|
Ronald
Salinas
|
$1 | – | $10,000 | |
|
Casey J.
Sambs
|
$100,001 | – | $500,000 | |
|
Janelle
Woodward
|
$1 | – | $10,000 | |
Voting Proxies on Fund
Portfolio Securities
The Board has
delegated the authority to vote proxies relating to the securities held in the Funds’ portfolios to the Adviser and, in the case of
Pyrford International Stock, LGM Emerging Markets Equity,
and
Alternative Strategies
, has authorized the Adviser to delegate its authority to vote proxies to the respective Sub-Adviser on behalf of the Fund. Due to the Funds’ proposed investments in fixed income
securities, the Adviser does not anticipate voting proxies on behalf of the
Money Market
or
Fixed Income Funds
.
Proxy Voting Policy and Guidelines
The Board of
Directors has delegated proxy voting authority to the Adviser, subject to the Board’s oversight. The Adviser has agreed to vote the Funds’ proxies according to the Adviser’s proxy voting policies and procedures. The Adviser’s
proxy voting policies and procedures are reasonably designed to ensure that proxies are voted in the best interest of clients. The policies and procedures were developed by BMO’s Responsible Investment Committee established by the Adviser and
affiliates of BMO Financial Corp., and BMO’s Governance & Sustainable Investment team administers the proxy voting framework. The Board reviews and approves all changes to the proxy policies and procedures. The proxy policies and
procedures seek to ensure, as applicable, that shareholder return and the value of Fund investments are maximized and that sound corporate governance is promoted.
The proxy voting policies, procedures, and
guidelines generally follow BMO’s Corporate Governance Guidelines which set out what BMO expects of companies in terms of good governance. Although the Adviser generally adheres to the guidelines and relies on an independent proxy voting
advisory service to execute votes, any proxy issues that differ from our Corporate Governance Guidelines are considered by taking into account the particular circumstances involved. This provides needed flexibility in making prudent judgments in the
proxy voting process.
In
situations where a conflict of interest exists, the Adviser will obtain a proxy voting recommendation from an independent proxy voting advisory service and will ultimately vote proxies in the best economic interests of clients without consideration
of any benefit to the Adviser or its affiliates.
With respect to the
assets of
Alternative Strategies
managed by unaffiliated Sub-Advisers, the Adviser has delegated responsibility for voting those proxies to the applicable unaffiliated Sub-Adviser. Each
Alternative Strategies
Sub-Adviser’s Proxy Voting Policies (other than CTC’s and BMO GAM EMEA’s) are set forth in
Appendix C
.
If an underlying affiliated fund in which
the
Target Date
and
Target Risk Funds
invest has a shareholder meeting, a Fund will vote its shares in the underlying affiliated fund in the same proportion as the votes
of the other shareholders of the underlying fund.
B-95
Proxy Voting Record
Each Fund is required to disclose annually
its proxy voting record for the most recent 12-month period ended June 30 and files it with the SEC by August 31. Each Fund’s proxy voting record will be available at that time without charge, either upon request, by calling toll free,
1-800-236-FUND (3863), or by accessing the SEC’s website at http://www.sec.gov.
Portfolio Holdings Disclosure Policy
The Funds do not provide or permit others
to provide information about the Funds’ portfolio holdings to any third party, except as permitted by the Corporation’s policy regarding disclosure of portfolio holdings (Disclosure Policy). This Disclosure Policy also applies to the
Adviser, Sub-Advisers, and BMO Harris Bank. Pursuant to the Disclosure Policy, information about the Funds’ portfolio holdings may be disclosed as required by SEC regulations and in the following circumstances:
| • | As required by SEC regulations, a Fund’s portfolio holdings are disclosed in publicly available filings with the SEC including Form N-CSR, Form N-Q, and Form N-MFP; |
| • | Fund portfolio holdings may be disclosed from time to time, to the Funds’ service providers, including the Sub-Advisers, administrator, sub-administrator, custodians, fund accountant, transfer agent, independent accountant, legal counsel, third-party research providers, and financial printer, in connection with the fulfillment of their duties to the Funds and the Corporation; |
| • | Each Fund (other than the Target Date, Target Risk, and Money Market Funds ) makes a complete list of its portfolio holdings publicly available on the Funds’ website, http://www.bmofundsus.com, approximately thirty days after the end of each month; |
| • | The Funds’ portfolio holdings as of each month end are disclosed to certain approved institutional databases and rating agencies including Lipper Inc., Morningstar, Inc., Standard & Poor’s Financial Services, LLC, Bloomberg L.P., Thompson Reuters Corporation, Vickers Stock Research Corporation, and Capital Bridge, Inc.; |
| • | Each Target Date and Target Risk Fund’s portfolio holdings are posted on the Fund’s website approximately five days after the end of each month; and |
| • | Each Money Market Fund’s portfolio holdings as of the last business day of the preceding month is posted on the Funds’ website no later than five business days after the end of the month and remains posted on the website for a minimum of six months thereafter. |
The Corporation is prohibited from entering
into any other arrangements to disclose information regarding the Funds’ portfolio securities prior to public availability without prior approval of the Board. Third parties who receive portfolio holdings information are subject to
restrictions by contract or by law that prohibit the disclosure or misuse of the holdings information to ensure that the information remains confidential. No compensation or other consideration may be received by the Funds, the Adviser,
Sub-Advisers, or BMO Harris Bank in connection with the disclosure of portfolio holdings in accordance with this policy. The Funds’ Chief Compliance Officer monitors compliance with the Disclosure Policy and reports any violations to the
Board.
The Board will review any
disclosures of Fund portfolio holdings outside of the permitted disclosures described above on a quarterly basis to ensure that disclosure of information about portfolio holdings is in the best interest of Fund shareholders and to address any
conflicts between the interests of Fund shareholders and those of the Adviser or any other Fund affiliate.
Brokerage Transactions
As used in this section, the term Adviser
means Adviser or Sub-Adviser, as applicable.
The Adviser is responsible for decisions to
buy and sell securities for the Funds and for the placement of the Funds’ securities business, the negotiation of the charges to be paid on such transactions, and the allocation of portfolio brokerage and principal business. Trades may be done
with brokers, dealers and, on occasion, issuers. Remuneration for trades may include commissions, commission-equivalent charges, dealer spreads, mark-ups, and mark-downs.
In executing transactions on behalf of the
Funds, the Adviser has no obligation to deal with any particular broker or dealer. Rather, the Adviser seeks to obtain the best qualitative execution. The best net price is an important factor, but the Adviser also considers the full range and
quality of a broker’s services, as described below. Recognizing the value of the range of services, the Funds may not pay the lowest commission or spread available on any particular transaction.
B-96
Section 28(e) of the Securities Exchange
Act of 1934, as amended, permits an investment adviser, under certain circumstances, to cause an account to pay a broker who supplies brokerage and research services a commission or commission-equivalent charge for effecting a transaction in excess
of the amount of commission another broker would have charged for effecting the transaction. Brokerage and research services include:
| • | furnishing advice as to the value of securities, the advisability of investing, purchasing, or selling securities, and the availability of securities or purchasers or sellers of securities; |
| • | furnishing analyses and reports concerning issuers, industries, sectors, securities, economic factors and trends, portfolio strategy, and the performance of accounts; and |
| • | effecting securities transactions and performing functions incidental thereto (such as clearance, settlement, and custody). |
In selecting brokers, the Adviser considers
quality of investment research and brokerage services; communication of such information; trade execution pricing, capability, and efficiency; and the appropriateness of the commission rate. Investment research services utilized by the Adviser
include economic forecasts, industry analysis, individual company or issuer analysis and opinion, and investment strategy. In ensuring that the commission to be paid is fair compensation for the nature of the trade and the quality of the execution
provided by the broker/dealer, the Adviser considers the commission rates paid by investment institutions of similar size. While the Adviser negotiates similar commission rates with all brokers and dealers, if the Adviser believes favorable prices
and efficient execution is available from more than one broker or dealer, the Adviser may give consideration to placing trades with those brokers or dealers who furnish investment research and other brokerage services.
The Adviser places portfolio transactions
for other advisory accounts in addition to the Funds. Research services furnished by firms through which the Funds effect their securities transactions may be used by the Adviser in servicing all of their accounts; that is, not all of such services
may be used by the Adviser in connection with the Funds. The Adviser believes it is not possible to measure separately the benefits from research services received by each of the accounts (including the Funds) managed by them. Because the volume and
nature of the trading activities of the accounts are not uniform, the amount of commissions in excess of those charged by another broker (if any) paid by each account for brokerage and research services will vary. The Adviser believes any such costs
to the Funds, however, will not be disproportionate to the benefits received by the Funds on a continuing basis and, to the extent that receipt of these services may supplant services for which the Adviser might otherwise have paid, it would tend to
reduce their expenses.
The following
table shows aggregate total commissions paid by each Fund to brokers that provide brokerage and research services to the Adviser and/or Sub-Advisers and the aggregate principal value of the transactions for the fiscal year ended August 31,
2017.
| Fund |
Brokerage
Commissions
Paid to Brokers Who Provided Brokerage and Research Services |
Principal
Value
of Transactions |
||
|
Low Volatility
Equity
|
$ 33,215 | $ 76,355,670 | ||
|
Dividend
Income
|
$ 28,859 | $ 56,502,456 | ||
|
Large-Cap
Value
|
$121,612 | $213,739,214 | ||
|
Large-Cap
Growth
|
$ 80,162 | $249,549,879 | ||
|
Mid-Cap
Value
|
$154,148 | $507,154,556 | ||
|
Mid-Cap
Growth
|
$ 71,448 | $307,199,329 | ||
|
Small-Cap
Value
|
$ 88,808 | $157,452,898 | ||
|
Small-Cap
Core
|
$ 14,772 | $ 16,875,055 | ||
|
Small-Cap
Growth
|
$339,357 | $777,059,261 | ||
|
Global Low Volatility
Equity
|
$ 54,479 | $ 80,092,034 | ||
|
Disciplined International
Equity
|
$ 53,898 | $ 89,522,514 | ||
|
Pyrford International
Stock
|
$339,051 | $426,248,358 | ||
|
LGM Emerging Markets
Equity
|
$122,408 | $123,822,162 | ||
|
Alternative
Strategies
|
$ 86,212 | $131,075,148 | ||
|
Global Long/Short
Equity
|
$ 660 | $ 942,069 | ||
|
Ultra Short
Tax-Free
|
N/A | N/A | ||
|
Short
Tax-Free
|
N/A | N/A | ||
|
Short-Term
Income
|
N/A | N/A |
B-97
| Fund |
Brokerage
Commissions
Paid to Brokers Who Provided Brokerage and Research Services |
Principal
Value
of Transactions |
||
|
Intermediate
Tax-Free
|
$ 612 | $ 3,396,111 | ||
|
Strategic
Income
|
N/A | N/A | ||
|
TCH Corporate
Income
|
N/A | N/A | ||
|
TCH Core Plus
Bond
|
N/A | N/A | ||
|
High Yield
Bond
|
N/A | N/A | ||
|
Government Money
Market
|
N/A | N/A | ||
|
Tax-Free Money
Market
|
N/A | N/A | ||
|
Prime Money
Market
|
N/A | N/A | ||
|
Institutional Prime Money
Market
|
N/A | N/A | ||
|
In-Retirement
|
N/A | N/A | ||
|
Target Retirement
2015
|
N/A | N/A | ||
|
Target Retirement
2020
|
N/A | N/A | ||
|
Target Retirement
2025
|
N/A | N/A | ||
|
Target Retirement
2030
|
N/A | N/A | ||
|
Target Retirement
2035
|
N/A | N/A | ||
|
Target Retirement
2040
|
N/A | N/A | ||
|
Target Retirement
2045
|
N/A | N/A | ||
|
Target Retirement
2050
|
N/A | N/A | ||
|
Target Retirement
2055
|
N/A | N/A | ||
|
Conservative
Allocation
|
N/A | N/A | ||
|
Moderate
Allocation
|
N/A | N/A | ||
|
Balanced
Allocation
|
N/A | N/A | ||
|
Growth
Allocation
|
N/A | N/A | ||
|
Aggressive
Allocation
|
N/A | N/A |
The
Target Date
and
Target Risk Funds
will not incur any brokerage commissions for purchasing shares of underlying funds. However, a Fund may incur brokerage commissions and/or
investment dealer concessions when purchasing short-term and other securities for the Fund. Each underlying fund in which the
Target Date
and
Target Risk Funds
invest has
policies with respect to the execution of the underlying fund’s portfolio transactions, which are described in the applicable statement of additional information.
The Adviser generally seeks to allocate
portfolio transactions equitably whenever concurrent decisions are made to purchase or sell securities by the Funds and other advisory accounts. No assurance can be made that a particular purchase or sale opportunity will be allocated to a Fund. In
making allocations between the Funds, and between a Fund and other advisory accounts, certain factors considered by the Adviser are the respective investment objectives, the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, and the size of investment commitments generally held.
For the periods noted below, the Funds
paid the following brokerage commissions.
| For the fiscal year ended August 31 | ||||||
| Fund | 2017 | 2016 | 2015 | |||
|
Low Volatility
Equity
|
$ 65,831 | $ 62,570 | $ 33,395 | |||
|
Dividend
Income
|
$ 48,014 | $ 60,929 | $ 71,474 | |||
|
Large-Cap
Value
|
$189,158 | $ 225,885 | $ 174,744 | |||
|
Large-Cap
Growth
|
$153,795 | $ 118,436 | $ 228,010 | |||
|
Mid-Cap
Value
|
$242,728 | $ 107,595 | $ 164,528 | |||
|
Mid-Cap
Growth
|
$ 99,242 | $ 148,332 | $ 278,715 | |||
|
Small-Cap
Value
|
$124,725 | $ 87,229 | $ 120,685 | |||
|
Small-Cap
Core
|
$ 28,435 | $ 17,934 | $ 8,080 | |||
|
Small-Cap
Growth
|
$525,605 | $1,046,519 | $1,502,752 | |||
|
Global Low Volatility
Equity
|
$ 54,479 | $ 35,023 | $ 1,975 | |||
B-98
| For the fiscal year ended August 31 | ||||||
| Fund | 2017 | 2016 | 2015 | |||
|
Disciplined International
Equity
|
$ 57,393 | $ 94,206 (1) | N/A | |||
|
Pyrford International
Stock
|
$339,051 | $ 326,180 | $ 558,862 | |||
|
LGM Emerging Markets
Equity
|
$122,408 | $ 161,743 | $ 180,588 | |||
|
Alternative
Strategies
|
$119,580 | $ 151,709 | $ 30,016 (2) | |||
|
Global Long/Short
Equity
|
$ 6,097 | $ 4,378 (1) | N/A | |||
|
Ultra Short
Tax-Free
|
— | — | — | |||
|
Short
Tax-Free
|
— | — | $ 170 | |||
|
Short-Term
Income
|
— | — | — | |||
|
Intermediate
Tax-Free
|
$ 1,191 | — | $ 12,898 | |||
|
Strategic
Income
|
— | — | — | |||
|
TCH Corporate
Income
|
— | — | — | |||
|
TCH Core Plus
Bond
|
— | — | — | |||
|
High Yield
Bond
|
— | — | — | |||
|
Government Money
Market
|
— | — | — | |||
|
Tax-Free Money
Market
|
— | — | — | |||
|
Prime Money
Market
|
— | — | — | |||
|
Institutional Prime Money
Market
|
— | — (3) | N/A | |||
|
In-Retirement
|
— | — | — | |||
|
Target Retirement
2015
|
— | — | $ 172 | |||
|
Target Retirement
2020
|
— | — | — | |||
|
Target Retirement
2025
|
— | — | $ 1,324 | |||
|
Target Retirement
2030
|
— | — | — | |||
|
Target Retirement
2035
|
— | — | $ 2,748 | |||
|
Target Retirement
2040
|
— | — | — | |||
|
Target Retirement
2045
|
— | — | $ 1,412 | |||
|
Target Retirement
2050
|
— | — | — | |||
|
Target Retirement
2055
|
— | — | $ 156 | |||
|
Conservative
Allocation
|
— | — | — | |||
|
Moderate
Allocation
|
— | — | — | |||
|
Balanced
Allocation
|
— | — | — | |||
|
Growth
Allocation
|
— | — | — | |||
|
Aggressive
Allocation
|
— | — | — | |||
| (1) | The fees paid in 2016 by Disciplined International Equity and Global Long/Short Equity are for the period from September 17, 2015, each Fund’s inception date, to August 31, 2016, the end of each Fund’s fiscal year. |
| (2) | The fees paid in 2015 by Alternative Strategies are for the period from December 16, 2014, the Fund’s inception date, to August 31, 2015, the end of the Fund’s fiscal year. |
| (3) | The fees paid in 2016 by Institutional Prime Money Market are for the period from June 3, 2016, the Fund’s inception date, to August 31, 2016, the end of the Fund’s fiscal year. |
For each Fund that acquired securities of
its regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) during the fiscal year, the following sets forth the dollar amount held as of August 31, 2017.
| Fund |
Regular
Broker or Dealer
(or Parent) Issuer |
Value
of Securities
Owned (as of 8/31/17) |
||
| LGM Emerging Markets Equity | Citigroup | $ 4.2 million | ||
| Strategic Income | Goldman Sachs | $ 1.5 million | ||
| Morgan Stanley | $ 1.5 million | |||
| HSBC | $ 1.1 million | |||
| Leucadia National Corp. | $ 0.5 million | |||
| TCH Corporate Income | Bank of America Corp. | $ 2.0 million | ||
| Citigroup, Inc. | $ 2.0 million | |||
| Goldman Sachs | $ 2.0 million | |||
| JP Morgan Chase & Co. | $ 2.0 million |
B-99
| Fund |
Regular
Broker or Dealer
(or Parent) Issuer |
Value
of Securities
Owned (as of 8/31/17) |
||
| HSBC | $ 1.6 million | |||
| Morgan Stanley | $ 1.5 million | |||
| Wells Fargo | $ 1.0 million | |||
| Jefferies Goup, Inc. | $ 0.6 million | |||
| Leucadia National Corp. | $ 0.5 million | |||
| TCH Core Plus Bond | Goldman Sachs | $18.2 million | ||
| JP Morgan Chase & Co. | $12.7 million | |||
| Citigroup, Inc. | $10.9 million | |||
| HSBC | $ 5.2 million | |||
| Morgan Stanley | $ 3.0 million | |||
| Wells Fargo | $ 3.0 million | |||
| Jefferies Goup, Inc. | $ 1.1 million | |||
| Leucadia National Corp. | $ 0.5 million | |||
| Short-Term Income | Goldman Sachs | $ 4.2 million | ||
| Bank of America Corp. | $ 5.0 million | |||
| CIBC | $ 3.9 million | |||
| Sumitomo Mitsui Bank Corp | $ 3.3 million | |||
| Morgan Stanley | $ 2.5 million | |||
| PNC Bank | $ 2.4 million | |||
| Royal Bank of Canada | $ 2.4 million | |||
| Citigroup, Inc. | $ 2.0 million | |||
| Wells Fargo | $ 0.7 million | |||
| Toronto Dominion | $ 0.5 million | |||
| Prime Money Market | Wells Fargo | $12.4 million | ||
| Toronto Dominion | $12.1 million | |||
| Mitsubishi Trust and Bank Corp | $ 6.7 million | |||
| HSBC | $ 5.0 million | |||
| Mizuho Bank | $ 4.5 million | |||
| Sumitomo Mitsui Bank Corp | $ 2.5 million | |||
| Bank of Nova Scotia | $ 2.0 million | |||
| Institutional NAV Prime Money Market | Wells Fargo | $11.9 million | ||
| Toronto Dominion | $11.3 million | |||
| HSBC | $ 8.3 million | |||
| JP Morgan Chase & Co | $ 8.0 million | |||
| Mitsubishi Trust and Bank Corp | $ 6.7 million | |||
| Mizuho Bank | $ 4.5 million | |||
| Sumitomo Mitsui Bank Corp | $ 2.5 million | |||
| Bank of Nova Scotia | $ 2.0 million |
Information About the Funds’ Service
Providers
Code of Ethics Restrictions on Personal
Trading
As required by SEC rules, the
Funds, the Adviser, each Sub-Adviser and the Distributor have adopted codes of ethics. These codes govern securities trading activities of investment personnel, Fund directors, and certain other employees (Access Persons). Although the codes permit
Access Persons to trade in securities, including those that the Funds could buy, they also contain significant safeguards designed to protect the Funds and their shareholders from abuses in this area, such as requirements to obtain prior approval
for, and to report, particular transactions.
B-100
Administrator and Shareholder Servicing Agent
The Adviser serves as the administrator to
the Funds. As administrator, the Adviser is entitled to receive fees from each of the
Equity, International and Global, Alternative, Fixed Income, Target Date,
and
Target Risk
Funds
at an annual rate of 0.15% of the ADNA of each of Class Y, Class I, Class A, and Class R3 shares.
The Adviser, as administrator, is entitled
to receive fees from the
Money Market Funds
at the following annual rates based on the aggregate ADNA of the
Money Market Funds
combined:
| Fee | Fund’s ADNA | |
|
0.040%
|
on the first $2 billion | |
|
0.030%
|
on the next $2 billion | |
|
0.025%
|
on the next $2 billion | |
|
0.020%
|
on the next $2 billion | |
|
0.010%
|
on ADNA in excess of $8 billion |
The aggregate fees paid by the
Money Market Funds
are allocated to each Fund based on its assets.
For the fiscal periods noted below, the
Adviser was paid (net of waivers) the following fees for services as administrator.
| For the fiscal year ended August 31 | ||||||
| Fund | 2017 | 2016 | 2015 | |||
|
Low Volatility
Equity
|
$ 239,496 | $ 160,067 | $ 73,127 (1) | |||
|
Dividend
Income
|
$ 175,379 | $ 172,781 | $ 134,414 (1) | |||
|
Large-Cap
Value
|
$ 487,801 | $ 411,851 | $ 288,680 (1) | |||
|
Large-Cap
Growth
|
$ 454,021 | $ 334,758 | $ 286,167 (1) | |||
|
Mid-Cap
Value
|
$ 311,151 | $ 375,901 | $ 480,105 | |||
|
Mid-Cap
Growth
|
$ 175,873 | $ 257,141 | $ 379,506 | |||
|
Small-Cap
Value
|
$ 98,504 | $ 130,957 | $ 127,861 | |||
|
Small-Cap
Core
|
$ 25,756 | $ 12,452 | $ 5,966 | |||
|
Small-Cap
Growth
|
$ 306,628 | $ 731,255 | $ 736,086 (1) | |||
|
Global Low Volatility
Equity
|
$ 75,432 | $ 51,025 | $ 4,643 (1) | |||
|
Disciplined International
Equity
|
$ 97,001 | $ 95,774 (2) | N/A | |||
|
Pyrford International
Stock
|
$ 893,292 | $ 981,827 | $ 731,792 | |||
|
LGM Emerging Markets
Equity
|
$ 217,371 | $ 217,371 | $ 181,977 (1) | |||
|
Alternative
Strategies
|
$ 157,472 | $ 137,705 | $ 37,178 (3) | |||
|
Global Long/Short
Equity
|
$ 10,844 | $ 4,812 (2) | N/A | |||
|
Ultra Short
Tax-Free
|
$ 914,685 | $ 973,215 | $ 770,197 (1) | |||
|
Short
Tax-Free
|
$ 275,212 | $ 253,808 | $ 137,979 (1) | |||
|
Short-Term
Income
|
$ 380,459 | $ 490,411 | $ 274,144 (1) | |||
|
Intermediate
Tax-Free
|
$2,496,786 | $2,689,389 | $ 1,227,913 (1) | |||
|
Strategic
Income
|
$ 146,559 | $ 170,351 | $ 132,179 (1) | |||
|
TCH Corporate
Income
|
$ 343,184 | $ 342,471 | $ 301,322 (1) | |||
|
TCH Core Plus
Bond
|
$1,473,953 | $1,497,174 | $ 924,674 (1) | |||
|
High Yield
Bond
|
$ 62,462 | $ 111,227 | $ 79,883 (1) | |||
|
Government Money
Market
|
$1,115,080 | $ 245,987 | $ 207,138 | |||
|
Tax-Free Money
Market
|
$ 123,526 | $ 218,781 | $ 214,148 | |||
|
Prime Money
Market
|
$ 171,450 | $1,137,666 | $ 1,188,579 | |||
|
Institutional
Prime Money
Market
|
$ 140,384 | $ 34,726 (4) | N/A | |||
|
In-Retirement
|
$ 6,534 | $ 8,764 | $ 15,183 | |||
|
Target Retirement
2015
|
$ 1,313 | $ 1,261 | $ 1,026 | |||
|
Target Retirement
2020
|
$ 40,396 | $ 53,853 | $ 83,216 | |||
|
Target Retirement
2025
|
$ 2,437 | $ 4,175 | $ 2,656 | |||
|
Target Retirement
2030
|
$ 40,151 | $ 51,240 | $ 81,292 | |||
B-101
| For the fiscal year ended August 31 | ||||||
| Fund | 2017 | 2016 | 2015 | |||
|
Target Retirement
2035
|
$ 1,764 | $ 2,141 | $ 1,675 | |||
|
Target Retirement
2040
|
$ 23,011 | $ 31,407 | $ 48,511 | |||
|
Target Retirement
2045
|
$ 1,834 | $ 2,507 | $ 1,677 | |||
|
Target Retirement
2050
|
$ 18,024 | $ 24,777 | $ 32,363 | |||
|
Target Retirement
2055
|
$ 1,409 | $ 2,070 | $ 1,387 | |||
|
Conservative
Allocation
|
$ 76,019 | $ 85,191 | $ 97,249 | |||
|
Moderate
Allocation
|
$ 52,449 | $ 74,076 | $ 91,867 | |||
|
Balanced
Allocation
|
$ 293,147 | $ 375,450 | $ 447,192 | |||
|
Growth
Allocation
|
$ 76,102 | $ 113,166 | $ 137,991 | |||
|
Aggressive
Allocation
|
$ 124,322 | $ 175,165 | $ 206,966 | |||
| (1) | The fees paid in 2015 include fees based on the prior administrative fee rate which was changed effective June 1, 2015. |
| (2) | The fees paid in 2016 by Disciplined International Equity and Global Long/Short Equity are for the period from September 17, 2015, each Fund’s inception date, to August 31, 2016, the end of each Fund’s fiscal year. |
| (3) | The fees paid in 2015 by Alternative Strategies are for the period from December 16, 2014, the Fund’s inception date, to August 31, 2015, the end of the Fund’s fiscal year. |
| (4) | The fees paid in 2016 by Institutional Prime Money Market are for the period from June 3, 2016, the Fund’s inception date, to August 31, 2016, the end of the Fund’s fiscal year. |
The administrator may choose voluntarily
to reimburse a portion of its fee at any time.
The functions performed by the
administrator include, but are not limited, to the following:
| • | preparation, filing, and maintenance of the Corporation’s governing documents, minutes of Board meetings, and shareholder meetings; |
| • | preparation and filing with the SEC and state regulatory authorities, the Corporation’s registration statement and all amendments, and any other documents required for the Funds to make a continuous offering of their shares; |
| • | preparation, negotiation, and administration of contracts on behalf of a Fund; |
| • | supervision of the preparation of financial reports; |
| • | preparation and filing of federal and state tax returns; |
| • | assistance with the design, development, and operation of a Fund; and |
| • | provision of advice to the Funds and the Board. |
The Adviser also serves as the shareholder
servicing agent to the Funds. The services provided by the Adviser and the fees received for these services are described under “How are Fund Shares
Sold?
—
Shareholder Services (Class Y Shares Only).”
Sub-Administrator
State Street Bank & Trust Company (State
Street) is the Funds’ sub-administrator pursuant to the Sub-Administration Agreement with the administrator. Under the Sub-Administration Agreement, the functions performed by State Street include and relate to, but are not limited to, the
following:
| • | facilitating Fund expense invoice allocation and payments; |
| • | drafting and reviewing of the Funds’ annual and semi-annual reports and certain other regulatory filings; |
| • | various services relating to Fund compliance including monitoring investment restrictions and diversification requirements; |
| • | obtaining CUSIPs, NASDAQ symbols, and IRS tax identification numbers; |
| • | coordination and facilitation of external audits by the Corporation’s independent auditors and regulatory examinations of the Corporation; |
| • | assistance with reporting of performance for the Funds; and |
| • | preparation of the Corporation’s tax returns. |
B-102
For its services, State Street is entitled
to receive from the administrator a fee equal to 0.02% of each Fund’s net asset value, plus certain additional per-use fees.
Prior to April 2, 2018, UMB Fund Services,
Inc. (UMBFS) served as the Funds’ sub-administrator. For the fiscal years ended August 31, 2017, 2016, and 2015, BMO Asset Management Corp. as administrator paid UMBFS $1,324,958, $1,374,952, and $1,375,435, respectively, under the
Sub-Administration Agreement.
Securities Lending
Certain of the Funds participate in a
securities lending program, providing for the lending of equity securities to qualified brokers, in exchange for the opportunity to earn additional income for participation. The Funds pay a portion of the net revenue earned on securities lending
activities to a securities lending agent. The Funds compensate BMO Harris Bank, an affiliate of the Adviser, for acting as securities lending agent at a rate generally equal to BHB’s cost of providing such services plus a reasonable profit
margin. The Funds compensate State Street at a contractually negotiated rate.
Under the securities lending program of
each of BMO Harris Bank and State Street, the Funds receive collateral in return for the securities and record a corresponding payable for collateral due to the respective broker. Collateral received consists of cash under the State Street program,
and it consists of either cash or securities issued or guaranteed by the U.S. government or its agencies or instrumentalities under the BMO Harris Bank program. The amount of collateral received is maintained at a minimum level of 100% of the prior
day’s market value of the securities loaned, plus any accrued interest. Cash collateral is generally reinvested in a money market fund.
The following Funds paid the amounts listed
to BMO Harris Bank for its services as securities lending agent for the fiscal year ended August 31, 2017.
| Fund |
Gross
Revenue
(including collateral reinvestment) |
Revenue
Split |
Cash
collateral
management services fees |
Administrative
and Indemnification fees |
Rebates
to borrowers |
Other fees |
Aggregate
Fees |
Net
income
from securities lending activities |
||||||||
|
Low Volatility
Equity
|
$ 691,549 | – | $ 36,124 | – | $ 549,525 | – | $ 585,649 | $105,900 | ||||||||
|
Dividend
Income
|
$ 497,962 | – | $ 27,923 | – | $ 386,182 | – | $ 414,105 | $ 83,857 | ||||||||
|
Large-Cap
Value
|
$1,373,421 | – | $ 72,303 | – | $1,083,796 | – | $1,156,099 | $217,322 | ||||||||
|
Large-Cap
Growth
|
$1,281,866 | – | $ 84,623 | – | $ 968,169 | – | $1,052,792 | $229,074 | ||||||||
|
Mid-Cap
Value
|
$ 956,901 | – | $ 49,788 | – | $ 760,487 | – | $ 810,275 | $146,626 | ||||||||
|
Mid-Cap
Growth
|
$ 502,295 | – | $ 28,555 | – | $ 387,499 | – | $ 416,054 | $ 86,241 | ||||||||
|
Small-Cap
Value
|
$ 264,609 | – | $ 19,349 | – | $ 190,047 | – | $ 209,396 | $ 55,213 | ||||||||
|
Small-Cap
Core
|
$ 73,547 | – | $ 5,213 | – | $ 52,822 | – | $ 58,035 | $ 15,512 | ||||||||
|
Small-Cap
Growth
|
$ 834,329 | – | $130,092 | – | $ 247,064 | – | $ 377,156 | $457,173 | ||||||||
|
Short-Term
Income
|
$ 437,406 | – | $ 31,541 | – | $ 313,141 | – | $ 344,682 | $ 92,724 | ||||||||
|
Strategic
Income
|
$ 43,436 | – | $ 6,932 | – | $ 26,242 | – | $ 33,174 | $ 10,262 | ||||||||
|
TCH Corporate
Income
|
$ 366,014 | – | $ 25,492 | – | $ 270,344 | – | $ 295,836 | $ 70,178 | ||||||||
|
TCH Core Plus
Bond
|
$1,983,581 | – | $127,382 | – | $1,512,053 | – | $1,639,435 | $344,146 |
The following
Funds paid the amounts listed to State Street for its services as securities lending agent for the fiscal year ended August 31, 2017.
| Fund |
Gross
Revenue
(including collateral reinvestment) |
Revenue
Split |
Cash
collateral
management services fees |
Administrative
and Indemnification fees |
Rebates
to borrowers |
Other fees |
Aggregate
Fees |
Net
income
from securities lending activities |
||||||||
|
Global Long/Short
Equity
|
$ 3,397 | $ 348 | – | – | $ 1,519 | – | $ 1,867 | $ 1,530 | ||||||||
|
Global Low
Volatility
|
$ 18,031 | $ 1,708 | – | – | $ 9,518 | – | $ 11,226 | $ 6,805 | ||||||||
|
Disciplined International
Equity
|
$ 59,466 | $ 9,204 | – | – | $13,687 | – | $ 22,891 | $ 36,575 | ||||||||
|
Pyrford International
Stock
|
$433,615 | $68,547 | – | – | $91,676 | – | $160,223 | $273,392 | ||||||||
|
LGM Emerging Markets
Equity
|
$ 16,073 | $ 1,109 | – | – | $10,574 | – | $ 11,683 | $ 4,390 |
B-103
Payments to Financial Intermediaries
The Adviser, BMO Harris Bank, BMO Harris
Financial Advisors, Inc., BID, and/or their affiliates may make additional payments (which are often referred to as “revenue sharing” payments), out of their own assets and not as an additional charge to each Fund, to financial
intermediaries, including their affiliates, from their past profits and other available sources, including profits from their relationships with the Funds. Revenue sharing payments are a form of compensation paid to a financial intermediary in
addition to the sales charges paid by fund shareholders or Rule 12b-1 Plan fees paid by the Funds.
These payments are intended, among other
things, to foster the sale of Fund shares and/or to compensate financial services firms for assisting in marketing or promotional activities in connection with the sale of Fund shares. Such payments may be for services provided to clients who hold
Fund shares, for introducing new shareholders to the Funds, or for other services. In exchange for revenue sharing payments, the Adviser, BMO Harris Bank, BMO Harris Financial Advisors, Inc., BID, and/or their affiliates generally expect to receive
the opportunity for the Funds to be sold through the financial intermediaries’ sales forces or to have access to third-party platforms or other marketing programs, including but not limited to mutual fund “supermarket” platforms or
other sales programs. To the extent that financial intermediaries receiving revenue sharing payments sell more shares of the Funds, the Adviser, BMO Harris Bank, BMO Harris Financial Advisors, Inc., BID, and/or their affiliates benefit from the
increase in Fund assets as a result of the fees they receive from the Funds.
The structure of these compensation
arrangements, as well as the amounts paid under such arrangements, varies and may change from time to time. Payments generally range from 0.05% to 0.40%, however, the Adviser, BMO Harris Bank, BMO Harris Financial Advisors, Inc., BID, and/or their
affiliates may pay flat fees on a one-time or irregular basis for the initial set-up of a Fund or Funds on a financial intermediary’s systems, participation or attendance at a financial intermediary’s meetings, or for other reasons. In
addition, new compensation arrangements may be negotiated at any time. The compensation arrangements described in this section are not mutually exclusive, and a single financial intermediary may receive multiple types of compensation.
The Adviser, BMO Harris Bank, BMO Harris
Financial Advisors, Inc., BID, and/or their affiliates currently anticipate that such payments may be made to the following financial intermediaries.
Financial
Intermediaries
| American Northcoast Securities, Inc. |
| American Portfolios Financial Services, Inc. |
| American United Life Insurance Co |
| Apex Clearing Corporation |
| Ascensus |
| Ascensus Financial Services, LLC |
| Ascensus Trust Company |
| Ausdal Financial Partners, Inc. |
| B. C. Ziegler And Company |
| Bancwest Investment Services, Inc. |
| BB&T Investment Services, Inc. |
| BB&T Securities, LLC |
| BBVA Compass Investment Solutions, a Division of BBVA Securities Inc. |
| Bel Air Securities LLC |
| Benefit Trust Company |
| Benjamin F. Edwards & Company, Inc. |
| Bernard Herold & Co Inc |
| BMO Harris Bank N.A. |
| BMO Harris Financial Advisors, Inc. |
| Cadaret Grant & Co. Inc. |
| Cambridge Investment Research, Inc. |
| Capital Investment Brokerage, Inc. |
| Capital Investment Group, Inc. |
| Capital One Investing, LLC |
| Capital One Investment Services LLC |
| CAPTRUST Financial Advisors, LLC |
| Cetera Advisor Networks, LLC |
| Cetera Advisors LLC |
| Cetera Financial Specialists LLC |
| Cetera Investment Services LLC |
| Charles Schwab & Co Inc. |
| Chase Investment Services Corp. |
| Citigroup Global Markets Inc. |
| Comerica Bank |
| Community Bank c/o Hand Benefits & Trust Co. |
| Concorde Investment Services LLC |
| COR Clearing LLC |
| Credit-Suisse Securities USA LLC |
| CRI Securities, LLC |
| Cuso Financial Services Lp |
| D.A. Davidson & Co. |
| DST Asset Manager Solutions, Inc. |
| Duncan-Williams, Inc. |
| E*Trade Clearing LLC |
| Edward D. Jones & Co. LP |
| Fiduciary Trust International |
| First Allied Securities Inc |
| First National Bank & Trust - Ardmore |
| First National Bank of Omaha |
| First Republic Securities Co LLC |
| First Southwest Company |
| Foothill Securities, Inc. |
| Girard Securities Inc |
| GWFS Equities Inc |
B-104
Transfer Agent and Dividend Disbursing Agent
DST Asset Manager Solutions, Inc.
(formerly, Boston Financial Data Services, Inc.), 2000 Crown Colony Drive, Quincy, Massachusetts, maintains all necessary shareholder records. For its services, the transfer agent receives a fee based on the size, type, and number of accounts and
transactions made by shareholders. The fee is based on the level of the Funds’ average net assets for the period plus out-of-pocket expenses.
B-105
Each Fund may pay amounts to third parties,
such as banks, broker-dealers, or affiliated entities, including BMO Harris Bank, that provide recordkeeping services, shareholder servicing, and/or other administrative services to the Funds.
Fund Accountants
State Street, 1 Iron Street, Boston,
Massachusetts, provides fund accounting services to Funds. For its services, State Street receives a fee based on the net asset value of the Funds.
Custodians
State Street, 1 Iron Street, Boston,
Massachusetts, is a custodian for the securities and cash of the Funds (except the
Target Date
and
Target Risk Funds
). State Street also maintains certain books and
records of the
Alternative Strategies Fund
that are required by applicable federal regulations.
BMO Harris Bank, 111 East Kilbourn Avenue,
Suite 200, Milwaukee, Wisconsin, an indirect wholly-owned subsidiary of BMO Corp., is a custodian for the securities and cash of the
Target Date
and
Target Risk Funds
. For
its services as custodian, BMO Harris Bank receives an annual fee, payable monthly, based on a percentage of a Fund’s average aggregate daily net assets.
Independent Registered Public Accounting Firm
The independent registered public accounting
firm for the Funds, KPMG LLP, 833 East Michigan Street, Milwaukee, WI 53202, conducts its audits in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require it to plan and perform its audits to
provide reasonable assurance about whether the Funds’ financial statements and financial highlights are free of material misstatements.
Please refer to
Appendix B
for a consolidated list of mailing addresses for the Funds and their service providers.
Performance
From time to time, when available, the
yield and total return of the Class Y, Class I, Class A, Class R3, Class R6, Class F3, and/or Premier Class shares of a Fund may be quoted in advertisements, shareholder reports or other communications to shareholders. Performance information is
generally available by calling the Funds (toll free) at 1-800-236-FUND (3863).
Financial Statements
The audited financial statements for the
Funds’ fiscal year ended August 31, 2017 are incorporated herein by reference from the Funds’ Annual Report dated August 31, 2017 (File Nos. 33-48907 and 811-58433). A copy of the Annual Report for a Fund may be obtained without charge
by contacting BMO Funds U.S. Services at the address located on the back cover of the SAI or by calling BMO Funds U.S. Services at 1-414-287-8555 or 1-800-236-FUND (3863).
BMO Global Asset Management is the brand
name for various affiliated entities of BMO Financial Group that provide investment management, retirement, and trust and custody services. Certain of the products and services offered under the brand name BMO Global Asset Management are designed
specifically for various categories of investors in a number of different countries and regions and may not be available to all investors. Products and services are only offered to such investors in those countries and regions in accordance with
applicable laws and regulations. BMO Financial Group is a service mark of Bank of Montreal.
B-106
Appendix A
—
Ratings Definitions
S&P Credit Rating Definitions
An S&P Global Ratings issue credit rating is a
forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and
commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion
reflects S&P Global Ratings' view of the obligor's capacity and willingness to meet its financial commitments as they come due, and this opinion may assess terms, such as collateral security and subordination, which could affect ultimate payment
in the event of default.
Issue credit ratings can be
either long-term or short-term. Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features
on long-term obligations. Medium-term notes are assigned long-term ratings.
Short-Term Issue Credit Ratings
A-1
A short-term obligation rated 'A-1' is rated in the highest
category by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitments on these obligations is extremely strong
A-2
A short-term obligation rated 'A-2' is somewhat more
susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitments on the obligation is satisfactory.
A-3
A short-term obligation rated 'A-3' exhibits adequate
protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligor's capacity to meet its financial commitments on the obligation.
B
A short-term obligation rated 'B' is regarded as vulnerable
and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligor's inadequate capacity to meet its financial
commitments.
C
A short-term obligation rated 'C' is currently vulnerable to
nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation.
D
A short-term obligation rated 'D' is in default or in breach
of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within any stated grace
period. However, any stated grace period longer than five business days will be treated as five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an
obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer.
App. A-1
SPUR (S&P Underlying Rating)
A SPUR is an opinion about the stand-alone capacity of an
obligor to pay debt service on a credit-enhanced debt issue, without giving effect to the enhancement that applies to it. These ratings are published only at the request of the debt issuer or obligor with the designation SPUR to distinguish them
from the credit-enhanced rating that applies to the debt issue. S&P Global Ratings maintains surveillance of an issue with a published SPUR.
Dual Ratings
Dual ratings may be assigned to debt issues that have a put
option or demand feature. The first component of the rating addresses the likelihood of repayment of principal and interest as due, and the second component of the rating addresses only the demand feature. The first component of the rating can
relate to either a short-term or long-term transaction and accordingly use either short-term or long-term rating symbols. The second component of the rating relates to the put option and is assigned a short-term rating symbol (for example,
'AAA/A-1+' or 'A-1+/A-1'). With U.S. municipal short-term demand debt, the U.S. municipal short-term note rating symbols are used for the first component of the rating (for example, 'SP-1+/A-1+').
The analyses, including ratings, of S&P Global Ratings
and its affiliates (together, S&P Global Ratings) are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or make any investment decisions. S&P
Global Ratings assumes no obligation to update any information following publication. Users of ratings or other analyses should not rely on them in making any investment decision. S&P Global Ratings' opinions and analyses do not address the
suitability of any security. S&P Global Ratings does not act as a fiduciary or an investment advisor except where registered as such. While S&P Global Ratings has obtained information from sources it believes to be reliable, it does not
perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Ratings and other opinions may be changed, suspended, or withdrawn at any time.
Active Qualifiers
S&P Global Ratings uses the following qualifiers that
limit the scope of a rating. The structure of the transaction can require the use of a qualifier such as a 'p' qualifier, which indicates the rating addresses the principal portion of the obligation only. A qualifier appears as a suffix and is part
of the rating.
1. Federal deposit insurance limit: 'L'
qualifier
Ratings qualified with 'L' apply only to
amounts invested up to federal deposit insurance limits.
2. Principal: 'p' qualifier
This suffix is used for issues in which the credit factors,
the terms, or both that determine the likelihood of receipt of payment of principal are different from the credit factors, terms, or both that determine the likelihood of receipt of interest on the obligation. The 'p' suffix indicates that the
rating addresses the principal portion of the obligation only and that the interest is not rated.
3. Preliminary ratings: 'prelim' qualifier
Preliminary ratings, with the 'prelim' suffix, may be assigned
to obligors or obligations, including financial programs, in the circumstances described below. Assignment of a final rating is conditional on the receipt by S&P Global Ratings of appropriate documentation. S&P Global Ratings reserves the
right not to issue a final rating. Moreover, if a final rating is issued, it may differ from the preliminary rating.
| • | Preliminary ratings may be assigned to obligations, most commonly structured and project finance issues, pending receipt of final documentation and legal opinions. |
| • | Preliminary ratings may be assigned to obligations that will likely be issued upon the obligor's emergence from bankruptcy or similar reorganization, based on late-stage reorganization plans, documentation, and discussions with the obligor. Preliminary ratings may also be assigned to the obligors. These ratings consider the anticipated general credit quality of the reorganized or post-bankruptcy issuer as well as attributes of the anticipated obligation(s). |
| • | Preliminary ratings may be assigned to entities that are being formed or that are in the process of being independently established when, in S&P Global Ratings' opinion, documentation is close to final. Preliminary ratings may also be assigned to the obligations of these entities. |
App. A-2
| • | Preliminary ratings may be assigned when a previously unrated entity is undergoing a well-formulated restructuring, recapitalization, significant financing, or other transformative event, generally at the point that investor or lender commitments are invited. The preliminary rating may be assigned to the entity and to its proposed obligation(s). These preliminary ratings consider the anticipated general credit quality of the obligor, as well as attributes of the anticipated obligation(s), assuming successful completion of the transformative event. Should the transformative event not occur, S&P Global Ratings would likely withdraw these preliminary ratings. |
| • | A preliminary recovery rating may be assigned to an obligation that has a preliminary issue credit rating. |
4. Termination structures: 't' qualifier
This symbol indicates termination structures that are designed
to honor their contracts to full maturity or, should certain events occur, to terminate and cash settle all their contracts before their final maturity date.
5. Counterparty instrument rating: 'cir' qualifier
This symbol indicates a counterparty instrument rating (CIR),
which is a forward-looking opinion about the creditworthiness of an issuer in a securitization structure with respect to a specific financial obligation to a counterparty (including interest rate swaps, currency swaps, and liquidity facilities). The
CIR is determined on an ultimate payment basis; these opinions do not take into account timeliness of payment.
Inactive Qualifiers
Inactive qualifiers are no longer applied or
outstanding.
1. Contingent upon final documentation: '*'
inactive qualifier
This symbol indicated that the rating
was contingent upon S&P Global Ratings' receipt of an executed copy of the escrow agreement or closing documentation confirming investments and cash flows. Discontinued use in August 1998.
2. Termination of obligation to tender: 'c' inactive
qualifier
This qualifier was used to provide additional
information to investors that the bank may terminate its obligation to purchase tendered bonds if the long-term credit rating of the issuer was lowered to below an investment-grade level and/or the issuer's bonds were deemed taxable. Discontinued
use in January 2001.
3. U.S. direct government
securities: 'G' inactive qualifier
The letter 'G'
followed the rating symbol when a fund's portfolio consisted primarily of direct U.S. government securities.
4. Public information ratings: 'pi' qualifier
This qualifier was used to indicate ratings that were based on
an analysis of an issuer's published financial information, as well as additional information in the public domain. Such ratings did not, however, reflect in-depth meetings with an issuer's management and therefore could have been based on less
comprehensive information than ratings without a 'pi' suffix. Discontinued use as of December 2014 and as of August 2015 for Lloyd's Syndicate Assessments.
5. Provisional ratings: 'pr' inactive qualifier
The letters 'pr' indicate that the rating was provisional. A
provisional rating assumed the successful completion of a project financed by the debt being rated and indicates that payment of debt service requirements was largely or entirely dependent upon the successful, timely completion of the project. This
rating, however, while addressing credit quality subsequent to completion of the project, made no comment on the likelihood of or the risk of default upon failure of such completion.
6. Quantitative analysis of public information: 'q' inactive
qualifier
A 'q' subscript indicates that the rating is
based solely on quantitative analysis of publicly available information. Discontinued use in April 2001.
App. A-3
7. Extraordinary risks: 'r' inactive qualifier
The 'r' modifier was assigned to securities containing
extraordinary risks, particularly market risks, that are not covered in the credit rating. The absence of an 'r' modifier should not be taken as an indication that an obligation would not exhibit extraordinary noncredit-related risks. S&P Global
Ratings discontinued the use of the 'r' modifier for most obligations in June 2000 and for the balance of obligations (mainly structured finance transactions) in November 2002.
Active Identifiers
1. Unsolicited: 'unsolicited' and 'u' identifier
The 'u' identifier and 'unsolicited' designation are assigned
to credit ratings initiated by parties other than the issuer or its agents, including those initiated by S&P Global Ratings.
2. Structured finance: 'sf' identifier
The 'sf' identifier shall be assigned to ratings on
"structured finance instruments" when required to comply with applicable law or regulatory requirement or when S&P Global Ratings believes it appropriate. The addition of the 'sf' identifier to a rating does not change that rating's definition
or our opinion about the issue's creditworthiness. For detailed information on the instruments assigned the 'sf' identifier, please see "" in Section VIII, under "Related Research."
Local Currency and Foreign Currency Ratings
S&P Global Ratings' issuer credit ratings make a
distinction between foreign currency ratings and local currency ratings. An issuer's foreign currency rating will differ from its local currency rating when the obligor has a different capacity to meet its obligations denominated in its local
currency, vs. obligations denominated in a foreign currency.
Moody’s Credit Rating Definitions
Purpose
The system of rating securities was originated by John Moody
in 1909. The purpose of Moody's ratings is to provide investors with a simple system of gradation by which future relative creditworthiness of securities may be gauged
.
Rating Symbols
Gradations of creditworthiness are indicated by rating
symbols, with each symbol representing a group in which the credit characteristics are broadly the same. There are nine symbols as shown below, from that used to designate least credit risk to that denoting greatest credit risk:
Aaa Aa A Baa Ba B Caa Ca C
Moody’s appends numerical modifiers 1, 2, and 3 to each
generic rating classification from Aa through Caa.
Absence of a Rating
Where no rating has been assigned or where a rating has been
withdrawn, it may be for reasons unrelated to the creditworthiness of the issue.
Should no rating be assigned, the reason may be one of the
following:
| 1. | An application was not received or accepted. |
| 2. | The issue or issuer belongs to a group of securities or entities that are not rated as a matter of policy. |
| 3. | There is a lack of essential data pertaining to the issue or issuer. |
| 4. | The issue was privately placed, in which case the rating is not published in Moody's publications. |
App. A-4
Withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer available reasonable up-to-date data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons.
Changes in Rating
The credit quality of most issuers and their obligations is
not fixed and steady over a period of time, but tends to undergo change. For this reason changes in ratings occur so as to reflect variations in the intrinsic relative position of issuers and their obligations.
A change in rating may thus occur at any time in the case of
an individual issue. Such rating change should serve notice that Moody's observes some alteration in creditworthiness, or that the previous rating did not fully reflect the quality of the bond as now seen. While because of their very nature, changes
are to be expected more frequently among bonds of lower ratings than among bonds of higher ratings. Nevertheless, the user of bond ratings should keep close and constant check on all ratings
—
both high and low
—
to be able to note promptly any signs of change in status that may occur.
Limitations to Uses of Ratings*
Obligations carrying the same rating are not claimed to be of
absolutely equal credit quality. In a broad sense, they are alike in position, but since there are a limited number of rating classes used in grading thousands of bonds, the symbols cannot reflect the same shadings of risk which actually
exist.
As ratings are designed exclusively for the
purpose of grading obligations according to their credit quality, they should not be used alone as a basis for investment operations. For example, they have no value in forecasting the direction of future trends of market price. Market price
movements in bonds are influenced not only by the credit quality of individual issues but also by changes in money rates and general economic trends, as well as by the length of maturity, etc. During its life even the highest rated bond may have
wide price movements, while its high rating status remains unchanged.
The matter of market price has no bearing whatsoever on the
determination of ratings, which are not to be construed as recommendations with respect to "attractiveness". The attractiveness of a given bond may depend on its yield, its maturity date or other factors for which the investor may search, as well as
on its credit quality, the only characteristic to which the rating refers.
Since ratings involve judgements about the future, on the one
hand, and since they are used by investors as a means of protection, on the other, the effort is made when assigning ratings to look at "worst" possibilities in the "visible" future, rather than solely at the past record and the status of the
present. Therefore, investors using the rating should not expect to find in them a reflection of statistical factors alone, since they are an appraisal of long-term risks, including the recognition of many non-statistical factors.
Though ratings may be used by the banking authorities to
classify bonds in their bank examination procedure, Moody's ratings are not made with these bank regulations in mind. Moody's Investors Service's own judgement as to the desirability or non-desirability of a bond for bank investment purposes is not
indicated by Moody's ratings.
Moody's ratings represent
the opinion of Moody's Investors Service as to the relative creditworthiness of securities. As such, they should be used in conjunction with the descriptions and statistics appearing in Moody's publications. Reference should be made to these
statements for information regarding the issuer. Moody's ratings are not commercial credit ratings. In no case is default or receivership to be imputed unless expressly stated.
| * | As set forth more fully on the copyright, credit ratings are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, selling or holding. |
Short-Term Obligation Ratings
Ratings assigned on Moody’s global long-term and
short-term rating scales are forward-looking opinions of the relative credit risks of financial obligations issues by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector
entities. Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the
event
App. A-5
of default. Short-term ratings are assigned to obligations with an original
maturity of thirteen months or less and reflect the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default.
Moody’s employs the following designations to indicate
the relative repayment ability of rated issuers:
P-1
Issuers (or supporting institutions) rated Prime-1 have a
superior ability to repay short-term debt obligations.
P-2
Issuers (or supporting institutions) rated Prime-2 have a
strong ability to repay short-term debt obligations.
P-3
Issuers (or supporting institutions) rated Prime-3 have an
acceptable ability to repay short-term obligations.
NP
Issuers (or supporting institutions) rated Not Prime do not
fall within any of the Prime rating categories.
The
following table indicates the long-term ratings consistent with different short-term ratings when such long-term ratings exist.
SHORT-TERM VS. LONG-TERM RATINGS
Fitch’s National Credit
Ratings
National scale ratings are an opinion of
creditworthiness relative to the universe of issuers and issues within a single country. They are most commonly used in emerging market countries with sub- or low investment grade sovereign ratings on the international scale.
As creditworthiness can be expressed across the full range of
the scale, a national scale can enable greater rating differentiation within a market than the international scale, particularity in highly speculative grade countries where ratings tend to cluster around the often low sovereign rating due to higher
risks associated with a more volatile operating environment.
A "+" or "-" may be appended to a National Rating to denote
relative status within a major rating category. Such suffixes are not added to the 'AAA(xxx)' National Rating category, to categories below 'CCC(xxx)', or to Short-Term National Ratings other than 'F1(xxx)'.
National scale ratings are assigned on the basis that the
“best credits or issuers” in the country are rated ‘AAA’ on the national scale. National Ratings are then assessed using the full range of the national scale based on a comparative analysis of issuers rated under the same
national scale to establish a relative ranking of credit worthiness.
App. A-6
At any given point in time, there is a certain relationship
between National and International Ratings but there is not a precise translation between the scales. Fitch monitors the ratings relationship of issuers rated on both the international and national scales to ensure the consistency of rating
relativities across scales. In other words, if issuer “X” is rated higher than issuer “Y” on one scale, issuer “X” cannot be rated lower than issuer “Y” on the other scale.
National Ratings for local issuers exclude the effects of
sovereign and transfer risk and exclude the possibility that investors may be unable to repatriate any due interest and principal repayments. Comparisons between different national scales or between an individual national scale and the international
rating scale are therefore inappropriate and potentially misleading.
In certain countries, regulators have established credit
rating scales to be used within their domestic markets using specific nomenclature. In these countries, the agency's National Rating definitions may be substituted by the regulatory scales. For instance Fitch's National Short Term Ratings of
'F1+(xxx)', 'F1(xxx)', 'F2(xxx)' and 'F3(xxx)' may be substituted by the regulatory scales, e.g. 'A1+', 'A1', 'A2' and 'A3'. The below definitions thus serve as a template, but users should consult the individual scales for each country listed on
Fitch's regional websites to determine if any additional or alternative category definitions apply.
Fitch maintains internal mapping tables that document the
current relationship between the National and International Local Currency Ratings in each jurisdiction where we maintain a National Rating scale in order to serve as a tool for analysts. Where our National rating coverage exceeds a minimum
threshold and there is external demand, these mappings will be published on this site. Presently, publicly available mappings can be accessed here. Fitch currently publishes the mapping tables for Brazil, South Africa and Chile.
Limitations of the National Rating Scale
Specific limitations relevant to National Rating scale
include:
| • | National scale ratings are only available in selected countries. |
| • | National scale ratings are only directly comparable with other national ratings in the same country. There is a certain correlation between national and global ratings but there is not a precise translation between the scales. The implied vulnerability to default of a given national scale rating will vary over time. |
| • | The value of default studies for National Ratings is limited. Due to the relative nature of national scales, a given national scale rating is not intended to represent a fixed amount of default risk over time. As a result, a default study using only National Ratings may not give an accurate picture of the historical relationship between ratings and default risk. Users should exercise caution in making inferences relating to the relative vulnerability to default of national scale ratings using the historical default experience with International Ratings and mapping tables to link the National and International ratings. As with ratings on any scale, the future will not necessarily follow the past. |
National Short-Term Credit Ratings
F1(xxx)
Indicates the strongest capacity for timely payment of
financial commitments relative to other issuers or obligations in the same country. Under the agency’s National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country. Where the liquidity
profile is particularly strong, a “+” is added to the assigned rating.
F2(xxx)
Indicates a good capacity for timely payment of financial
commitments relative to other issuers or obligations in the same country. However, the margin of safety is not as great as in the case of the higher ratings.
F3(xxx)
Indicates an adequate capacity for timely payment of financial
commitments relative to other issuers or obligations in the same country. However, such capacity is more susceptible to near-term adverse changes than for financial commitments in higher rated categories.
App. A-7
B(xxx)
Indicates an uncertain capacity for timely payment of
financial commitments relative to other issuers or obligations in the same country. Such capacity is highly susceptible to near-term adverse changes in financial and economic conditions.
C(xxx)
Indicates a highly uncertain capacity for timely payment of
financial commitments relative to other issuers or obligations in the same country. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.
RD(xxx): Restricted default
Indicates an entity that has defaulted on one or more of its
financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only.
D(xxx)
Indicates actual or imminent payment default.
Notes to Long-Term and Short-Term National Ratings:
The ISO international country code is placed in parentheses
immediately following the rating letters to indicate the identity of the National market within which the rating applies. For illustrative purposes, (xxx) has been used.
“+” or “-” may be appended to a
National Rating to denote relative status within a major rating category. Such suffixes are not added to the ‘AAA(xxx)’ Long-Term National Rating category, to categories below ‘CCC(xxx)’, or to Short-Term National Ratings
other than ‘F1(xxx).’
LONG-TERM
RATINGS
S & P Global Ratings Long-Term Issue Credit
Ratings
Issue credit ratings are based, in varying
degrees, on S & P Global Ratings analysis of the following considerations:
| • | Likelihood of payment — capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; |
| • | Nature of and provisions of the obligation and the promise we impute. |
| • | Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors’ rights. |
Issue ratings are an assessment of default risk, but may
incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation
may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
Long-Term Issuer Credit Ratings
AAA
An obligation rated ‘AAA’ has the highest rating
assigned by S & P Global Ratings. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
AA
An obligation rated ‘AA’ differs from the
highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
App. A-8
A
An obligation rated ‘A’ is somewhat more
susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.
BBB
An obligation rated ‘BBB’ exhibits adequate
protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB; B; CCC; CC; and C
Obligations rated ‘BB’, ‘B’,
‘CCC’, ‘CC’, and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely
have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB
An obligation rated ‘BB’ is less vulnerable to
nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment
on the obligation.
B
An obligation rated ‘B’ is more vulnerable to
nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or
willingness to meet its financial commitment on the obligation.
CCC
An obligation rated ‘CCC’ is currently vulnerable
to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not
likely to have the capacity to meet its financial commitment on the obligation.
CC
An obligation rated ‘CC’ is currently highly
vulnerable to nonpayment. The ‘CC’ rating is used when a default has not yet occurred, but S & P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.
R
An obligor rated 'R' is under regulatory supervision owing to
its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others.
SD and D
An obligor rated 'SD' (selective default) or 'D' is in default
on one or more of its financial obligations including rated and unrated obligations but excluding hybrid instruments classified as regulatory capital or in nonpayment according to terms. An obligor is considered in default unless S&P Global
Ratings believes that such payments will be made within five business days of the due date in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. A 'D' rating is assigned when S&P Global
Ratings believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. An 'SD' rating is assigned when S&P Global Ratings believes that the obligor has
selectively defaulted on a specific issue or class of obligations but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. An obligor's rating is lowered to 'D' or 'SD' if it is conducting a
distressed exchange offer.
App. A-9
Plus (+) or minus (-)
The ratings from ‘AA’ to ‘CCC’ may be
modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
See active and inactive qualifiers following S & P Global
Ratings Short-Term Issue Credit Ratings beginning on pages A-2 and A-3.
Moody’s Long-Term Obligation Ratings
Long-Term Obligation Ratings
Ratings assigned on Moody’s global long-term and
short-term rating scales are forward-looking opinions of the relative credit risks of financial obligations issues by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector
entities. Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event
of default. Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of
default.
Moody’s Long-Term Rating
Definitions:
Aaa
Obligations rated Aaa are judged to be of the highest quality,
subject to the lowest level of credit risk.
Aa
Obligations rated Aa are judged to be of high quality and are
subject to very low credit risk.
A
Obligations rated A are considered upper-medium grade and are
subject to low credit risk.
Baa
Obligations rated Baa are judged to be medium-grade and
subject to moderate credit risk and as such may possess certain speculative characteristics.
Ba
Obligations rated Ba are judged to be speculative and are
subject to substantial credit risk.
B
Obligations rated B are considered speculative and are subject
to high credit risk.
Caa
Obligations rated Caa are judged to be speculative of poor
standing and are subject to very high credit risk.
Ca
Obligations rated Ca are highly speculative and are likely in,
or very near, default, with some prospect of recovery of principal and interest.
C
Obligations rated C are the lowest rated and are typically in
default, with little prospect for recovery of principal or interest.
App. A-10
Note:
Moody’s appends
numerical modifiers 1, 2, and 3 to each generic rating classification from Aaa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a “(hyb)” indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities
firms.*
| * | By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security. |
Fitch’s National Long-Term Credit Ratings
AAA(xxx)
‘AAA’ National Ratings denote the highest rating
assigned by the agency in its National Rating scale for that country. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country.
AA(xxx)
‘AA’ National Ratings denote expectations of very
low default risk relative to other issuers or obligations in the same country. The default risk inherent differs only slightly from that of the country’s highest rated issuers or obligations.
A(xxx)
‘A’ National Ratings denote expectations of low
default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions may affect the capacity for timely repayment to a greater degree than is the case for financial commitments denoted
by a higher rated category.
BBB(xxx)
‘BBB’ National Ratings denote a moderate default
risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher
rated category.
BB(xxx)
‘BB’ National Ratings denote an elevated default
risk relative to other issuers or obligations in the same country. Within the context of the country, payment is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.
B(xxx)
‘B’ National Ratings denote a significantly
elevated default risk relative to other issuers or obligations in the same country. Financial commitments are currently being met but a limited margin of safety remains and capacity for continued timely payments is contingent upon a sustained,
favorable business and economic environment.
CCC(xxx)
‘CCC’ National Ratings denote very high default
risk relative to other issuers or obligations in the same country.
CC(xxx)
‘CC' National Ratings denote default risk is among the
highest relative to other issuers or obligations in the same country.
App. A-11
C(xxx)
A default or default-like process has begun, or the issuer is
in standstill, or for a closed funding vehicle, payment capacity is irrevocably impaired. Conditions that are indicative of a 'C' category rating for an issuer include:
| a. | the issuer has entered into a grace or cure period following non-payment of a material financial obligation; |
| b. | the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default on a material financial obligation; |
| c. | the formal announcement by the issuer or their agent of a distressed debt exchange; and |
| d. | a closed financing vehicle where payment capacity is irrevocably impaired such that it is not expected to pay interest and/or principal in full during the life of the transaction, but where no payment default is imminent |
RD(xxx): Restricted default.
“RD” ratings indicated that an issuer that in
Fitch Ratings’ opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up
procedure, and which has not otherwise ceased business. This would include:
| a. | the selective payment default on a specific class or currency of debt; |
| b. | the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a bank loan, capital markets security or other material financial obligation; |
| c. | the extension of multiple waivers or forbearance periods upon a payment default on one or more material financial obligations either in series or in parallel; or |
| d. | execution of a distressed debt exchange on one or more material financial obligations. |
D(xxx)
‘D’ National Ratings denote an issuer or
instrument that is currently in default.
Notes to
Long-Term and Short-Term National Ratings:
The ISO
International country code is placed in parentheses immediately following the rating letters to indicate the identity of the National market within which the rating applies. For illustrative purposes, (xxx) has been used.
“+” or “-” may be appended to a
National Rating to denote relative status within a major rating category. Such suffixes are not added to the ‘AAA(xxx)’ Long-Term National Rating category, to categories below ‘CCC(xxx)’, or to Short-Term National Ratings
other than ‘F1(xxx).’
MUNICIPAL NOTE
RATINGS
S & P Global Ratings Municipal Short-Term
Note Ratings Definitions
An S & P Global Ratings
U.S. municipal note rating reflects S & P Global Ratings' opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of
more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, S & P Global Ratings analysis will review the following considerations:
| • | Amortization schedule — the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and |
| • | Source of payment — the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. |
Note rating symbols are as follows:
App. A-12
SP-1
Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service is given a plus (+) designation.
SP-2
Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the notes.
SP-3
Speculative capacity to pay principal and interest.
D
'D' is assigned upon failure to pay the note when due,
completion of a distressed exchange offer, or the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions.
See active and inactive qualifiers following S & P Global
Ratings Short-Term Issue Credit Ratings beginning on page A-2.
Moody’s US Municipal Short-Term Debt And Demand
Obligation Ratings
Short-Term Obligation Ratings
Short-Term Obligation Ratings
While the global short-term ‘prime’ rating scale
is applied to US municipal tax-exempt commercial paper, these programs are typically backed by external letters of credit or liquidity facilities and their short-term prime ratings usually map to the long-term rating of the enhancing bank or
financial institution and not to the municipality’s rating. Other short-term municipal obligations, which generally have different funding sources for repayment, are rated using two additional short-term rating scales (i.e., the MIG and VMIG
scales discussed below).
The Municipal Investment Grade
(MIG) scale is used to rate US municipal bond anticipation notes of up to three years maturity. Municipal notes rated on the MIG scale may be secured by either pledged revenues or proceeds of a take-out financing received prior to note maturity. MIG
ratings expire at the maturity of the obligation, and the issuer’s long-term rating is only one consideration in assigning the MIG rating. MIG ratings are divided into three levels
—
MIG 1 through MIG 3
—
while speculative grade short-term obligations are designated SG.
MIG 1
This designation denotes superior credit quality. Excellent
protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.
MIG 2
This designation denotes strong credit quality. Margins of
protection are ample, although not as large as in the preceding group.
MIG 3
This designation denotes acceptable credit quality. Liquidity
and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.
SG
This designation denotes speculative-grade credit quality.
Debt instruments in this category may lack sufficient margins of protection.
App. A-13
Demand Obligation Ratings
In the case of variable rate demand obligations (VRDOs), a
two-component rating is assigned: a long or short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation of risk associated with scheduled principal and interest payments. The second element represents
Moody’s evaluation of risk associated with the ability to receive purchase price upon demand (“demand feature”). The second element uses a rating from a variation of the MIG scale called the Variable Municipal Investment Grade
(VMIG) scale. VMIG ratings of demand obligations with unconditional liquidity support are mapped from the short-term debt rating (or counterparty assessment) of the support provider, or the underlying obligor in the absence of third party liquidity
support, with VMIG 1 corresponding to P-1, VMIG 2 to P-2, VMIG 3 to P-3 and SG to not prime. For example, the VMIG rating for an industrial revenue bond with Company XYZ as the underlying obligor would normally have the same numerical modifier as
Company XYZ’s prime rating. Transitions of VMIG ratings of demand obligations with conditional liquidity support, as shown in the diagram below, differ from transitions on the Prime scale to reflect the risk that external liquidity support
will terminate if the issuer’s long-term rating drops below investment grade.
VMIG 1
This designation denotes superior credit quality. Excellent
protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG 2
This designation denotes strong credit quality. Good
protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG 3
This designation denotes acceptable credit quality. Adequate
protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
SG
This designation denotes speculative-grade credit quality.
Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price
upon demand.
US MUNICIPAL SHORT-TERM VS. LONG-TERM
RATINGS
| * | For VRDBs supported with conditional liquidity support, short-term ratings transition down at higher long-term ratings to reflect the risk of termination of liquidity support as a result of a downgrade below investment grade. |
VMIG ratings of VRDBs with unconditional liquidity support
reflect the short-term debt rating (or counterparty assessment) of the liquidity support provider with VMIG 1 corresponding to P-1, VMIG 2 to P-2, VMIG 3 to P-3 and SG to not prime.
App. A-14
Appendix B
—
Addresses
The
Funds:
111 East Kilbourn Avenue,
Suite 200
Milwaukee, Wisconsin 53202
Milwaukee, Wisconsin 53202
Distributor:
BMO Investment Distributors, LLC
115 South LaSalle Street
Chicago, Illinois 60603
115 South LaSalle Street
Chicago, Illinois 60603
Adviser,
Administrator, and Shareholder Servicing Agent:
BMO Asset Management Corp.
115 South LaSalle Street
Chicago, Illinois 60603
115 South LaSalle Street
Chicago, Illinois 60603
Sub-Adviser to
Pyrford International Stock:
Pyrford
International Ltd.
79 Grosvenor Street
London
United Kingdom
79 Grosvenor Street
London
United Kingdom
Sub-Adviser to LGM Emerging Markets Equity:
LGM Investments Limited
95 Wigmore Street
London
United Kingdom
95 Wigmore Street
London
United Kingdom
Sub-Adviser to TCH
Corporate Income and TCH Core Plus Bond:
Taplin, Canida & Habacht, LLC
1001 Brickell Bay Drive, Suite 2100
Miami, Florida 33131
1001 Brickell Bay Drive, Suite 2100
Miami, Florida 33131
Sub-Advisers to Alternative Strategies Fund:
CTC myCFO, LLC
2200 Geng Road, Suite 100
Palo Alto, California 94303
2200 Geng Road, Suite 100
Palo Alto, California 94303
Cramer Rosenthal McGlynn, LLC
520 Madison Avenue, 20th Floor
New York, New York, 10022
520 Madison Avenue, 20th Floor
New York, New York, 10022
F&C Management
Limited (dba BMO GAM EMEA)
Exchange House, Primrose Street
London, United Kingdom, EC2A 2NY
Exchange House, Primrose Street
London, United Kingdom, EC2A 2NY
Graham Capital Management, L.P.
40 Highland Avenue
Rowayton, Connecticut 06853
40 Highland Avenue
Rowayton, Connecticut 06853
App. B-1
Sub-Administrator and Portfolio Accounting Services
Agent:
State Street Bank & Trust
Company
1 Iron Street
Boston, Massachusetts 02116
1 Iron Street
Boston, Massachusetts 02116
Custodian
(for all Funds except Target Date Funds and Target Risk Funds):
(for all Funds except Target Date Funds and Target Risk Funds):
State Street Bank
& Trust Company
1 Iron Street
Boston, Massachusetts 02116
1 Iron Street
Boston, Massachusetts 02116
Custodian
(for Target Date Funds and Target Risk Funds):
(for Target Date Funds and Target Risk Funds):
BMO Harris Bank N.A.
111 East Kilbourn Avenue, Suite 200
Milwaukee, Wisconsin 53202
111 East Kilbourn Avenue, Suite 200
Milwaukee, Wisconsin 53202
Transfer Agent and Dividend Disbursing Agent:
DST Asset Manager Solutions, Inc.
2000 Crown Colony Drive
Quincy, Massachusetts 02171
2000 Crown Colony Drive
Quincy, Massachusetts 02171
Legal
Counsel:
Stradley Ronon Stevens &
Young, LLP
2005 Market Street, Suite 2600
Philadelphia, Pennsylvania 19103
2005 Market Street, Suite 2600
Philadelphia, Pennsylvania 19103
Independent Registered Public Accounting Firm:
KPMG LLP
833 East Michigan Street
Milwaukee, Wisconsin 53202
833 East Michigan Street
Milwaukee, Wisconsin 53202
App. B-2
Appendix C
—
Proxy Voting Procedures
| I. | CRAMER ROSENTHAL MCGLYNN, LLC |
Proxy Voting Policy And
Procedures
In most cases, CRM clients have delegated to
the Firm the authority to vote proxies relating to equity securities on their behalf. In exercising its voting obligations, CRM is guided by general fiduciary principles. It must act prudently, solely in the interest of clients, and for the purpose
of providing benefits to such clients. The CRM Compliance Committee (the “Compliance Committee”) has determined that these Policies and Procedures for Proxy Voting (these “Policies”) are reasonably designed to assure that CRM
votes client proxies in the best interest of clients and to provide clients with information about how their proxies are voted. In addition, these Policies are designed to satisfy CRM’s obligations under Rule 206(4)-7 under the Advisers
Act.
Proxy Voting Process
CRM’s policy seeks to monitor corporate actions, analyze
proxy solicitation materials, and vote client proxies for stocks which are held in client accounts in a timely and appropriate manner. CRM will consider the factors that could affect the value of a Fund’s investment in its determination on a
vote. CRM has identified certain significant contributors to shareholder value with respect to a number of common or routine matters that are often the subject of proxy solicitations for shareholder meetings. CRM’s proxy voting procedures
address these considerations and establish a framework for its consideration of a vote that would be appropriate for a Fund. In particular, the proxy voting procedures outline principles and factors to be considered in the exercise of voting
authority for proposals addressing many common or routine matters.
The Voting Process
Review of Proxy Solicitation Materials/Independent
Recommendations
CRM receives proxy materials through an
independent third party, Institutional Shareholder Services (“ISS”). ISS provides analyses and voting recommendations based on empirical research measuring the impact of proxy issues on shareholder value. ISS’s voting
recommendations cover three categories: (i) voting recommendations for social and environmental shareholder proposals; (ii) voting recommendations for “Taft-Hartley” accounts that are in the best long-term economic interest of plan
participants and beneficiaries conforming to AFL-CIO voting guidelines;
1
and (iii) voting recommendations intended to generally maximize shareholder
value.
In determining how to vote on a proxy issue, CRM
will consider ISS analysis and recommendations, as well as the portfolio manager’s own knowledge of the company (including its management, operations, industry and the particular proxy issue) in rendering a decision, with the exception of
separately-managed Taft-Hartley or accounts where the client specifically directs CRM to vote in a “socially responsible” manner; in these cases CRM would generally follow the particular ISS recommendations for that category.
ISS Standard Proxy Voting Guidelines Summary
The following is a summary of the ISS Standard Proxy Voting
Guidelines (the “Guidelines), which form the substantive basis of CRM’s Policy on Proxy Voting.
2
As described above, CRM may diverge from the
Guidelines and a related ISS recommendation on any particular proxy vote or in connection with any individual investment decision.
Auditors
Vote for proposals to ratify auditors, unless any of the
following apply:
| • | An auditor has a financial interest in or association with the company, and is therefore not independent. |
| • | Fees for non-audit services are excessive, or |
| • | There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company’s financial position. |
App. C-1
Board of Directors
Voting on Director Nominees in Uncontested Elections
Votes on director nominees should be made on a case-by-case
basis, examining: independence of the board and key board committees, attendance at board meetings, corporate governance provisions and takeover activity, long-term company performance, responsiveness to shareholder proposals, any egregious board
actions, and any excessive non-audit fees or other potential auditor conflicts.
| 1 | CRM receives an analysis intended to protect plan assets as required by the U.S. Department of Labor and the Employees Retirement Income Security Act of 1974 (“ERISA”). |
| 2 | The full ISS recommendations are outlined in the ISS Proxy Guidelines, which are available to CRM clients upon request. |
Classification/Declassification of the Board
Vote against proposals to classify the board. Vote for
proposals to repeal classified boards and to elect all directors annually.
Independent Chairman (Separate Chairman/CEO)
Vote on a case-by-case basis shareholder proposals requiring
that the positions of chairman and CEO be held separately. Because some companies have governance structures in place that counterbalance a combined position, certain factors should be considered in determining whether
Updated May 2012 the proposal warrants support. These factors
include the presence of a lead director, board and committee independence, governance guidelines, company performance, and annual review by outside directors of CRO pay.
Majority of Independent Directors/Establishment of
Committees
Vote for shareholder proposals asking that a
majority or more of directors be independent unless the board composition already meets the proposed threshold by ISS’s definition of independence.
Vote for shareholder proposals asking that board audit,
compensation, and/or nominating committees be composed exclusively of independent directors if they currently do not meet that standard.
Shareholder Rights
Shareholder Ability to Act by Written Consent
Vote against proposals to restrict or prohibit shareholder
ability to take action by written consent.
Vote for
proposals to allow or make shareholder action by written consent.
Shareholder Ability to Call Special Meeting
Vote against proposals to restrict or prohibit shareholder
ability to call special meetings.
Vote for proposals
that remove restrictions on the right of shareholder to act independently of management.
Supermajority Vote Requirements
Vote against proposals to require a supermajority shareholder
vote.
Vote for proposals to lower supermajority vote
requirements.
App. C-2
Cumulative Voting
Vote for proposals to eliminate cumulative voting.
Vote against proposals that require cumulative voting.
Confidential Voting
Vote for shareholder proposals requesting that corporations
adopt confidential voting, use independent vote tabulators and use independent inspector of election, as long as the proposal includes a provision for proxy contents as follows: IN the case of a contested election, management should be permitted to
request that the dissident group honor its confidential voting Updated May 2012 policy. If the dissidents agree, the policy remains in place. If the dissidents will not agree, the confidential voting policy is waived.
Vote for management proposals to adopt confidential
voting.
Proxy Contests
Voting for Director Nominees in Contested Elections
Votes in a contested election of directors must be evaluated
on a case-by-case basis, considering the factors that include the long-term financial performance, management’s track record, qualification of director nominees (both slates), and an evaluation of what each side is offering shareholders.
Reimbursing Proxy Solicitation Expenses
Vote case-by-case. Where ISS recommends in favor of the
dissidents, ISS also recommends voting for reimbursing proxy solicitation expenses.
Poison Pills
Vote for shareholder proposals that ask a company to submit
its poison pill for shareholder ratification. Review on a case-by-case basis shareholder proposals to redeem a company’s poison pill and management proposals to ratify a poison pill.
Mergers and Corporate Restructurings
Vote case-by-case on mergers and corporate restructurings
based on such features as the fairness opinion, pricing, strategic rationale, and the negotiating process.
Reincorporation Proposals
Proposals to change a company’s state of incorporation
should be evaluated on a case-by-case basis, giving consideration to both financial and corporate governance concerns, including the reasons for reincorporating, a comparison of the governance provisions, and a comparison of the jurisdictional laws.
Vote for reincorporation when the economic factors outweigh any neutral or negative governance changes.
Capital Structure
Common Stock Authorization
Votes on proposals to increase the number of shares of common
stock authorized for issuance are determined on a case-by-case basis using a model developed by ISS. Vote against proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has
superior voting rights. Vote for proposals to approve increases beyond the Updated May 2012 allowable increase when a company’s shares are in danger of being de-listed or if a company’s ability to continue to operate as a going concern
is uncertain.
App. C-3
Preferred Stock
Vote against proposals authorizing the creation of new classes
of preferred stock with unspecified voting, conversion, dividend distribution and other rights (“blank check” preferred stock). Vote for proposals to create “declawed” blank check preferred stock (stock that cannot be used as
a takeover defense).
Management Compensation
Director
Compensation
Votes on compensation plans for
directors are determined on a case-by-case basis, using a proprietary, quantitative model developed by ISS.
Employee, Stock Purchase Plans
Votes on employee stock purchase plans should be determined
on a case-by-case basis.
Shareholder Proposals regarding Executive and Director Pay
Generally, vote for shareholder proposals seeking additional
disclosure of executive and director pay information, provided the information requested is relevant to shareholders’ needs, and would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to
the company. Vote on a case-by-case basis for all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook.
Advisory Vote on Say on Pay Frequency
Vote FOR annual advisory votes on compensation, which provide
the most consistent and clear communication channel for shareholder concerns about companies’ executive pay programs.
Management Proposals Seeking Approval to Re-price Options
Votes on management proposals seeking to re-price options are
evaluated on a case-by-case basis giving consideration to: historic trading patterns rationale for re-pricing, value-for-value exchange, options vesting, term of the options, exercise price, and participation.
Employee Stock Purchase Plans
Votes on employee stock purchase plans should be determined on
a case-by-case basis.
Shareholder Proposals on
Compensation
Vote on a case-by-case basis for all other
shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long-term corporate outlook.
Social and Environmental Issues
These issues cover a wide range of topics, including consumer
and public safety, environment and energy, general corporate issues, labor standards and human rights, military business and workplace diversity. In general, vote case-by-case. While a wide variety of factors are considered, the primary focus is on
how the proposal will enhance the economic value of the company.
Securities on Loan
Securities over which CRM has voting authority in certain
accounts are subject to being lent to other parties, including securities in private investment partnerships, registered mutual funds and certain other accounts. CRM has no role in the lending process; securities lending decisions are made by the
custodian with the consent of and on behalf of the client. As a general matter, when a security is on “loan” as of the record date, CRM has no authority to vote, and shall not vote, a proxy for the security.
App. C-4
Clients Who Vote Their Own Proxies
CRM clients may retain the authority to vote their own proxies
in their discretion.
Conflicts and Potential Conflicts of
Interest
CRM’s proxy voting procedures establish a
protocol for voting of proxies in cases in which it may have a potential conflict of interest arising from, among other things, a direct business relationship or financial interest in a company soliciting proxies. When a conflict or potential
conflict has been identified, CRM will generally vote the proxy as recommended by ISS, subject to a review by the CRM Compliance Committee indicating the nature of the potential conflict of interest and how the determination of such vote was
achieved.
Disclosure
CRM, in its written brochure required under Rule 204-3 (the
“Form ADV”) shall describe: (i) these Policies; (ii) how a client can obtain information from CRM on how it voted the client’s proxies; and (iii) how a client can obtain a copy of these Policies and/or the ISS Proxy Voting
Guidelines.
Recordkeeping
CRM shall retain the following books and records in, as
appropriate, electronic or hard copy form: (i) a copy of each proxy statement received regarding client securities (which may be kept by relying on obtaining copies through the EDGAR system maintained by the Securities and Exchange Commission), (ii)
a record of each vote cast on behalf of clients, (iii) internal documents created that were material to the decision on how to vote any proxies or that memorialize the basis for such a decision, including any documentation relating to decisions to
vote proxies other than in accordance with ISS recommendations, (iv) copies of written client requests for proxy voting records and of the Firm’s written responses to either a written or oral request for information on how the Firm voted
proxies on behalf of the requesting client, and (v) with respect to votes cast for securities held in any registered investment company, records of CUSIP numbers.
Records for the CRM Mutual Fund Trust shall be recorded and
maintained by the Trust.
The above records shall be
retained in an easily accessible place for a period of at least five (5) years from the end for the fiscal year during which the last entry was made on such record, the first two years in an appropriate office of CRM
| II. | GRAHAM CAPITAL MANAGEMENT, L.P. |
Proxy Voting Policy and
Procedures
Graham has selected and retained ISS
Governance Services to assist in the proxy voting process. The CCO manages Graham’s relationship with ISS. The CCO ensures that ISS votes all proxies according to Graham’s general guidance, and retains all required documentation
associated with proxy voting.
Graham has approved a
list of proxy voting guidelines that ISS generally follows when recommending how to vote on particular proxies. The following guidelines reflect ISS’ general approach on certain key proxy proposals; however, these guidelines represent only a
small number of proposals and the guidelines are much broader in scope and more detailed.
| • | Auditor Ratification . ISS generally recommends to vote FOR proposals to ratify auditors except where (i) the auditor has a financial interest or association with the company, (ii) there is reason to believe the auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position, (iii) poor accounting practices have been identified that rise to a serious level of concern or (iv) fees for non-audit services are excessive; |
| • | Board of Directors . ISS generally recommends to vote FOR director nominees except where (i) the board lacks accountability coupled with sustained poor performance relative to peers, (ii) the board demonstrates a lack of responsiveness (e.g., in responding to shareholder proposals, takeover offers, issues that resulted in one or more directors receiving more than 50% withhold/against votes, etc.), (iii) there are defects in the composition of the board (e.g., unacceptable attendance at board and committee meetings, directors serve on excessive number of boards of other companies, etc.), and (iv) the board lacks sufficient controls or features to ensure its independence; |
App. C-5
| • | Capital Structure Changes . ISS generally recommends to vote (i) FOR proposals to increase the number of shares where the primary purpose is to issue shares in connection with a transaction on the same ballot, (ii) AGAINST proposals to increase the number of shares of a class with superior voting rights, (iii) AGAINST proposals to increase the number of shares if a vote for a reverse stock split is on the same ballot, and (iv) AGAINST proposals to create a new class of common stock, except under certain conditions; |
| • | Executive Compensation . ISS Generally recommends to vote (i) AGAINST advisory votes on executive compensation if there is a significant misalignment between CEO pay and company performance, the company maintains problematic pay practices or the board exhibits a significant level of poor communications and responsiveness to shareholders, (ii) AGAINST/WITHHOLD from the members of the compensation committee or full board as applicable where there is no management-say-on pay item on the ballot, and in other instances, and (iii) AGAINST an equity plan if there is a performance misalignment and the CEO’s pay is skewed towards non-performance based equity awards. |
Portfolio Managers
that wish to deviate from ISS’s proxy recommendations must provide the CCO with a written explanation of the reason for the deviation, as well as a representation that the employee and Graham are not conflicted in making the chosen voting
decision.
Because Graham generally will vote proxies
based upon the recommendations of ISS, there is little to no risk of a conflict of interest arising. However, in instances that might involve a conflict of interest between Graham and its Clients, such as where a portfolio manager wishes to deviate
from ISS’s recommendation or such other instances as Graham may determine, the CCO, in conjunction with the compliance committee as appropriate, will review the relevant facts and determine whether or not a material conflict of interest may
arise due to business, personal or family relationships of Graham, its owners, its employees or its affiliates, with persons having an interest in the outcome of the vote. If a material conflict exists, Graham will take steps to ensure that its
voting decision is based on the best interests of the Client and is not a product of the conflict. Graham shall keep appropriate records demonstrating how such conflicts were resolved.
ISS will retain, on Graham’s behalf, the following
information in connection with each proxy vote:
| • | The Issuer’s name; |
| • | The security ticker symbol or CUSIP, as applicable; |
| • | The shareholder meeting date; |
| • | The number of shares that Graham voted; |
| • | A brief identification of the matter voted on; |
| • | Whether the matter was proposed by the Issuer or a security holder; |
| • | Whether Graham cast a vote; |
| • | How Graham cast its vote (for the proposal, against the proposal, or abstain); and |
| • | Whether Graham cast its vote with or against management. |
With respect to each registered investment company for which
Graham provides discretionary subadvisory services, Graham will provide each fund with a copy of Graham’s proxy voting policy. In addition, when requested, Graham will provide such funds with information concerning Graham’s proxy voting
policy and voting results as required to enable such funds to file periodic proxy voting reports.
App. C-6
BMO FUNDS, INC.
PART C
OTHER INFORMATION
Item 28. Exhibits.
| (a)(1) | Articles of Incorporation dated July 30, 1992 4 | |
| (a)(2) | Amendment No. 1 to Articles of Incorporation dated August 11, 1992 4 | |
| (a)(3) | Amendment No. 2 to Articles of Incorporation dated September 14, 1992 4 | |
| (a)(4) | Amendment No. 3 to Articles of Incorporation dated April 23, 1993 4 | |
| (a)(5) | Amendment No. 4 to Articles of Incorporation dated November 1, 1993 2 | |
| (a)(6) | Amendment No. 5 to Articles of Incorporation dated July 25, 1994 4 | |
| (a)(7) | Amendment No. 6 to Articles of Incorporation dated October 24, 1994 6 | |
| (a)(8) | Amendment No. 7 to Articles of Incorporation dated July 22, 1996 7 | |
| (a)(9) | Amendment No. 8 to Articles of Incorporation dated April 28, 1997 8 | |
| (a)(10) | Amendment No. 9 to Articles of Incorporation dated October 26, 1998 9 | |
| (a)(11) | Amendment No. 10 to Articles of Incorporation dated June 7, 1999 10 | |
| (a)(12) | Amendment No. 11 to Articles of Incorporation dated January 31, 2000 11 | |
| (a)(13) | Amendment No. 12 to Articles of Incorporation dated July 10, 2000 12 | |
| (a)(14) | Amendment No. 13 to Articles of Incorporation dated February 26, 2004 15 | |
| (a)(15) | Amendment No. 14 to Articles of Incorporation dated July 30, 2004 15 | |
| (a)(16) | Amendment No. 15 to Articles of Incorporation dated June 21, 2005 17 | |
| (a)(17) | Amendment No. 16 to Articles of Incorporation dated October 26, 2005 17 | |
| (a)(18) | Amendment No. 17 to Articles of Incorporation dated May 7, 2007 19 | |
| (a)(19) | Amendment No. 18 to Articles of Incorporation dated January 29, 2008 21 | |
| (a)(20) | Amendment No. 19 to Articles of Incorporation dated December 11, 2008 23 | |
| (a)(21) | Amendment No. 20 to Articles of Incorporation dated July 15, 2009 24 | |
| (a)(22) | Amendment No. 21 to Articles of Incorporation dated May 11, 2010 26 | |
| (a)(23) | Amendment No. 22 to Articles of Incorporation dated November 30, 2010 27 | |
| (a)(24) | Amendment No. 23 to Articles of Incorporation dated February 3, 2011 28 | |
| (a)(25) | Amendment No. 24 to Articles of Incorporation dated December 12, 2011 32 | |
| (a)(26) | Amendment No. 25 to Articles of Incorporation dated December 28, 2011 33 | |
| (a)(27) | Amendment No. 26 to Articles of Incorporation dated September 7, 2012 34 | |
| (a)(28) | Amendment No. 27 to Articles of Incorporation dated September 25, 2012 34 | |
| (a)(29) | Amendment No. 28 to Articles of Incorporation dated May 13, 2013 36 | |
| (a)(30) | Amendment No. 29 to Articles of Incorporation dated June 28, 2013 36 | |
| (a)(31) | Amendment No. 30 to Articles of Incorporation dated August 16, 2013 37 | |
| (a)(32) | Amendment No. 31 to Articles of Incorporation dated August 27, 2013 38 | |
| (a)(33) | Amendment No. 32 to Articles of Incorporation dated December 23, 2013 39 | |
| (a)(34) | Amendment No. 33 to Articles of Incorporation dated February 27, 2014 41 | |
| (a)(35) | Amendment No. 34 to Articles of Incorporation dated March 27, 2014 41 | |
| (a)(36) | Amendment No. 35 to Articles of Incorporation dated May 23, 2014 41 | |
| (a)(37) | Amendment No. 36 to Articles of Incorporation dated July 25, 2014 42 | |
| (a)(38) | Amendment No. 37 to Articles of Incorporation dated November 24, 2014 43 | |
| (a)(39) | Amendment No. 38 to Articles of Incorporation dated December 19, 2014 44 | |
| (a)(40) | Amendment No. 39 to Articles of Incorporation dated December 23, 2014 44 | |
| (a)(41) | Amendment No. 40 to Articles of Incorporation dated March 30, 2015 45 | |
| (a)(42) | Amendment No. 41 to Articles of Incorporation dated April 21, 2015 45 | |
| (a)(43) | Amendment No. 42 to Articles of Incorporation dated May 18, 2015 46 | |
| (a)(44) | Amendment No. 43 to Articles of Incorporation dated August 14, 2015 46 | |
| (a)(45) | Amendment No. 44 to Articles of Incorporation dated December 15, 2015 47 | |
| (a)(46) | Amendment No. 45 to Articles of Incorporation dated December 23, 2015 47 | |
| (a)(47) | Amendment No. 46 to Articles of Incorporation dated May 25, 2016 49 | |
| (a)(48) | Amendment No. 47 to Articles of Incorporation dated August 11, 2016 51 | |
| (a)(49) | Amendment No. 48 to Articles of Incorporation dated March 1, 2017 51 | |
| (a)(50) | Amendment No. 49 to Articles of Incorporation dated March 7, 2017 52 | |
| (a)(51) | Amendment No. 50 to Articles of Incorporation dated May 8, 2017 52 | |
| (a)(52) | Amendment No. 51 to Articles of Incorporation dated June 2, 2017 54 | |
| (a)(53) | Amendment No. 52 to Articles of Incorporation dated June 29, 2017 54 | |
| (a)(54) | Amendment No. 53 to Articles of Incorporation dated February 26, 2018 # | |
| (a)(55) | Amendment No. 54 to Articles of Incorporation dated April 27, 2018 # | |
| (a)(56) | Amendment No. 55 to Articles of Incorporation dated May 11, 2018 # | |
| (b) | By-Laws As Amended and Restated through February 8, 2017 51 | |
| (c) | Instruments Defining Rights of Security Holders — Incorporated by reference to the Articles of Incorporation and By-Laws | |
| (d)(1) | Form of Investment Advisory Contract with BMO Asset Management Corp. (f/k/a M&I Investment Management Corp.) 29 | |
| (d)(2) | Amended and Restated Schedules A and B to Investment Advisory Contract # | |
| (d)(3) | Form of Sub-Advisory Agreement with Pyrford International Ltd. 33 | |
| (d)(4) | Form of Amended and Restated Exhibit A to Sub-Advisory Agreement with Pyrford International Ltd. for Pyrford International Stock Fund 47 | |
| (d)(5) | Form of Sub-Advisory Agreement with Lloyd George Management (Hong Kong) Ltd. for LGM Emerging Markets Equity Fund 33 | |
| (d)(6) | Form of Amended and Restated Sub-Advisory Agreement with Taplin, Canida & Habacht, LLC for TCH Emerging Markets Bond Fund, TCH Corporate Income Fund, and TCH Core Plus Bond Fund 40 | |
| (d)(7) | Form of Sub-Advisory Agreement (CTC myCFO, LLC) for Alternative Strategies Fund 43 | |
| (d)(8) | Form of Sub-Advisory Agreement with subadvisers registered as a commodity trading adviser for Alternative Strategies Fund 43 | |
| (d)(9) | Form of Sub-Advisory Agreement with subadvisers not registered as a commodity trading adviser for Alternative Strategies Fund 43 | |
| (e)(1) | Distribution Agreement with BMO Investment Distributors, LLC (formerly, M&I Distributors, LLC) dated July 5, 2011 31 | |
| (e)(2) | Amended and Restated Schedule A to Distribution Agreement # | |
| (f) | Bonus or Profit Sharing Contracts—None | |
| (g)(1) | Custodian Contract with Marshall & Ilsley Trust Company (now, BMO Harris Bank, N.A.) dated April 26, 1993 3 | |
| (g)(2) | Amendment to Custodian Contract dated November 1, 1995 17 | |
| (g)(3) | Amendment to Custodian Contract dated November 1, 2000 17 | |
| (g)(4) | Amendment to Custodian Contract dated June 22, 2001 13 | |
| (g)(5) | Custodian Agreement with State Street Bank and Trust Company (formerly, Investors Bank & Trust Company) dated September 1, 2004 15 | |
| (g)(6) | Amendment to Custodian Agreement with State Street Bank and Trust Company dated March 27, 2018 # | |
| (h)(1) | Administrative Services Agreement with M&I Trust Company dated January 1, 2000 and Amendment No. 1 to Administrative Services Agreement dated September 15, 2000 14 | |
| (h)(2) | Amendment to Administrative Services Agreement dated June 22, 2001 13 | |
| (h)(3) | Amendment to Administrative Services Agreement dated November 1, 2007 20 | |
| (h)(4) | Amendment to Administrative Services Agreement dated July 1, 2008 22 | |
| (h)(5) | Form of Fifth Amendment to Administrative Services Agreement 33 | |
| (h)(6) | Form of Sixth Amendment to Administrative Services Agreement 41 | |
| (h)(7) | Form of Seventh Amendment to Administrative Services Agreement 43 | |
| (h)(8) | Form of Eighth Amendment to Administrative Services Agreement 44 | |
| (h)(9) | Form of Ninth Amendment to Administrative Services Agreement 46 | |
| (h)(10) | Shareholder Services Agreement dated July 5, 2011 31 | |
| (h)(11) | Form of Amended and Restated Exhibit 1 of Shareholder Services Agreement 53 | |
| (h)(12) | Transfer Agency and Service Agreement with DST Asset Manager Solutions, Inc. (formerly, Boston Financial Data Services, Inc.) dated June 30, 2011 33 | |
| (h)(13) | Amendment to Transfer Agency Agreement dated December 21, 2012 35 | |
| (h)(14) | Form of Amended and Restated Schedule A to Transfer Agency and Service Agreement 53 | |
| (h)(15) | Fund Accounting Agreement with State Street Bank and Trust Company (formerly Investors Bank & Trust Company) dated September 1, 2004 15 | |
| (h)(16) | Amendment to Fund Accounting Agreement with State Street Bank & Trust Company dated March 27, 2018 # | |
| (h)(17) | Form of Amended and Restated Expense Limitation Agreement 38 | |
| (h)(18) | Amended and Restated Schedule A to Amended and Restated Expense Limitation Agreement # | |
| (h)(19) | Power of Attorney 55 | |
| (i)(1) | Opinion and Consent 1 | |
| (i)(2) | Opinion and Consent of Godfrey & Kahn, S.C. dated May 31, 2007 19 | |
| (i)(3) | Opinion and Consent of Godfrey & Kahn, S.C. dated January 29, 2008 21 | |
| (i)(4) | Opinion and Consent of Godfrey & Kahn, S.C. dated December 15, 2008 23 | |
| (i)(5) | Opinion and Consent of Godfrey & Kahn, S.C. dated September 29, 2009 25 | |
| (i)(6) | Opinion and Consent of Godfrey & Kahn, S.C. dated August 30, 2010 26 | |
| (i)(7) | Opinion and Consent of Godfrey & Kahn, S.C. dated February 28, 2011 28 | |
| (i)(8) | Opinion and Consent of Godfrey & Kahn, S.C. dated December 29, 2011 33 | |
| (i)(9) | Opinion and Consent of Godfrey & Kahn, S.C. dated September 27, 2012 34 | |
| (i)(10) | Opinion and Consent of Godfrey & Kahn, S.C. dated June 28, 2013 36 | |
| (i)(11) | Opinion and Consent of Godfrey & Kahn, S.C. dated September 27, 2013 38 | |
| (i)(12) | Opinion and Consent of Godfrey & Kahn, S.C. dated December 27, 2013 39 | |
| (i)(13) | Opinion and Consent of Godfrey & Kahn, S.C. dated May 27, 2014 41 | |
| (i)(14) | Opinion and Consent of Godfrey & Kahn, S.C. dated December 15, 2014 43 | |
| (i)(15) | Opinion and Consent of Godfrey & Kahn, S.C. dated August 26, 2015 46 | |
| (i)(16) | Opinion and Consent of Godfrey & Kahn, S.C. dated June 1, 2016 49 | |
| (i)(17) | Opinion and Consent of Godfrey & Kahn, S.C. dated March 1, 2017 51 | |
| (i)(18) | Opinion and Consent of Godfrey & Kahn, S.C. dated May 8, 2017 52 | |
| (j) | Consent of Independent Registered Public Accounting Firm—None | |
| (k) | Omitted Financial Statements—None | |
| (l) | Initial Capital Understanding 5 | |
| (m)(1) | Amended and Restated Rule 12b-1 Plan # | |
| (m)(2) | Amended and Restated Rule 12b-1 Plan—Target Date and Target Risk Funds 47 | |
| (m)(3) | Form of Sales and Services Agreement, As Amended # | |
| (n)(1) | Amended and Restated Multiple Class Plan # | |
| (n)(2) | Amended and Restated Multiple Class Plan—Target Date and Target Risk Funds 54 | |
| (o) | Reserved | |
| (p)(1) | Code of Ethics for BMO Asset Management Corp., BMO Investment Distributors, LLC, Taplin, Canida & Habacht, LLC, BMO Funds, Inc. and certain affiliated entities dated March 2018 # | |
| (p)(2) | Pyrford International Ltd. Code of Ethics 35 | |
| (p)(3) | LGM Investments Limited (formerly, Lloyd George Management (Europe) Limited) Code of Ethics 39 | |
| (p)(4) | CTC myCFO, LLC Code of Ethics 43 | |
| (p)(5) | Graham Capital Management, L.P. Code of Ethics 43 | |
| (p)(6) | Cramer Rosenthal McGlynn LLC Code of Ethics 43 | |
| # | Filed herewith. | |
| 1 | Exhibit to PEA No. 5 filed April 23, 1993.* | |
| 2 | Exhibit to PEA No. 8 filed December 28, 1993.* | |
| 3 | Exhibit to PEA No. 10 filed July 1, 1994.* | |
| 4 | Exhibit to PEA No. 11 filed October 21, 1994.* | |
| 5 | Exhibit to PEA No. 14 filed December 26, 1995.* | |
| 6 | Exhibit to PEA No. 15 filed June 17, 1996.* | |
| 7 | Exhibit to PEA No. 17 filed August 30, 1996.* | |
| 8 | Exhibit to PEA No. 22 filed October 21, 1998.* | |
| 9 | Exhibit to PEA No. 27 filed August 27, 1999.* | |
| 10 | Exhibit to PEA No. 29 filed October 29, 1999.* | |
| 11 | Exhibit to PEA No. 31 filed March 1, 2000.* | |
| 12 | Exhibit to PEA No. 33 filed October 30, 2000.* | |
| 13 | Exhibit to PEA No. 34 filed October 29, 2001.* | |
| 14 | Exhibit to PEA No. 37 filed October 30, 2003.* | |
| 15 | Exhibit to PEA No. 42 filed December 30, 2004.* | |
| 16 | Appendix to Definitive Proxy Statement filed July 13, 2005. | |
| 17 | Exhibit to PEA No. 46 filed October 31, 2005.* | |
| 18 | Exhibit to PEA No. 47 filed October 31, 2006.* | |
| 19 | Exhibit to PEA No. 49 filed June 1, 2007.* | |
| 20 | Exhibit to PEA No. 51 filed November 30, 2007.* | |
| 21 | Exhibit to PEA No. 52 filed January 29, 2008.* | |
| 22 | Exhibit to PEA No. 53 filed September 16, 2008.* | |
| 23 | Exhibit to PEA No. 55 filed December 15, 2008.* | |
| 24 | Exhibit to PEA No. 56 filed July 16, 2009.* | |
| 25 | Exhibit to PEA No. 58 filed September 30, 2009.* | |
| 26 | Exhibit to PEA No. 64 filed August 30, 2010.* | |
| 27 | Exhibit to PEA No. 66 filed December 15, 2010.* | |
| 28 | Exhibit to PEA No. 70 filed February 28, 2011.* | |
| 29 | Appendix B to Definitive Proxy Statement on Schedule 14A filed August 24, 2011.* | |
| 30 | Appendix C to Definitive Proxy Statement on Schedule 14A filed August 24, 2011.* | |
| 31 | Exhibit to PEA No. 72 filed October 14, 2011.* | |
| 32 | Exhibit to PEA No. 75 filed December 23, 2011.* | |
| 33 | Exhibit to PEA No. 76 filed December 29, 2011.* | |
| 34 | Exhibit to PEA No. 79 filed September 27, 2012.* | |
| 35 | Exhibit to PEA No. 81 filed December 27, 2012.* | |
| 36 | Exhibit to PEA No. 84 filed June 28, 2013.* | |
| 37 | Exhibit to PEA No. 87 filed August 29, 2013.* | |
| 38 | Exhibit to PEA No. 89 filed September 27, 2013.* | |
| 39 | Exhibit to PEA No. 92 filed December 27, 2013.* | |
| 40 | Annex A to Definitive Proxy Statement on Schedule 14A filed March 10, 2014. * | |
| 41 | Exhibit to PEA No. 95 filed May 27, 2014.* | |
| 42 | Exhibit to Proxy Statement/Prospectus on Form N-14 filed November 5, 2014.* | |
| 43 | Exhibit to PEA No. 102 filed December 15, 2014.* | |
| 44 | Exhibit to PEA No. 103 filed December 29, 2014.* | |
| 45 | Exhibit to PEA No. 107 filed April 28, 2015.* | |
| 46 | Exhibit to PEA No. 110 filed August 26, 2015.* | |
| 47 | Exhibit to PEA No. 112 filed December 29, 2015 * |
| 48 | Exhibit to PEA No. 114 filed January 14, 2016 * | |
| 49 | Exhibit to PEA No. 116 filed June 1, 2016 * | |
| 50 | Exhibit to PEA No. 118 filed December 22, 2016 * | |
| 51 | Exhibit to PEA No. 120 filed March 1, 2017* | |
| 52 | Exhibit to PEA No. 124 filed May 8, 2017* | |
| 53 | Exhibit to PEA No. 125 filed May 8, 2017* | |
| 54 | Exhibit to PEA No. 128 filed December 21, 2017* | |
| 55 | Exhibit to PEA No. 130 filed August 24, 2018* | |
| * | Incorporated by reference. | |
Item 29. Persons Controlled by or Under Common Control with Registrant.
The information in the Statement of Additional Information captions “Account and Share Information – Control Persons and Principal Shareholders” and “Directors and Officers – Adviser to the Fund” is incorporated by reference.
Item 30. Indemnification.
Reference is made to Article IX of the Registrant’s By-Laws and Section 4 of the Distribution Agreement between the Registrant and BMO Investment Distributors, LLC.
The Registrant’s By-Laws provide for indemnification of its officers and directors to the fullest extent permitted by Wisconsin Business Corporation Law and applicable federal and state securities laws. Notwithstanding the foregoing, the By-Laws state that this indemnification will not protect any officer or director against liability to the Registrant or any shareholder by reason of his/her willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such officer’s or director’s office.
The Distribution Agreement between the Registrant and the Distributor provides that the Registrant will indemnify the Distributor and any of its officers, directors, employees and control persons against certain losses incurred under the securities laws or otherwise, arising out of or based upon any alleged untrue statement or omission of a material fact contained in the Registrant’s SEC filings or other documents and in certain other circumstances.
In addition, the Wisconsin Business Corporation Law requires the Registrant to indemnify each of its officers and directors against liability incurred by the officer or director in any proceeding to which the officer or director was a party because he or she is an officer or director, unless liability was incurred because the officer or director breached or failed to perform a duty owed to the Registrant and the breach or failure to perform constitutes (i) a willful failure to deal fairly with the Registrant or its shareholders in connection with a matter in which the officer or director has a material conflict of interest; (ii) a violation of criminal law, unless the officer or director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe it was unlawful; (iii) a transaction from which the officer or director derived an improper personal profit; or (iv) willful misconduct.
The Registrant’s directors and officers are insured under a policy of insurance maintained by the Registrant against certain liabilities that might be imposed as a result of actions, suit or proceedings to which they are parties by reason of being or having been such directors or officers.
In addition, each of the directors who is not an “interested person” (as defined under the Investment Company Act of 1940) of Registrant (a “Non-interested Director”) has entered into an indemnification agreement with Registrant, which agreement provides that the Registrant shall indemnify the Non-interested Director against certain liabilities which such Director may incur while acting in the capacity as a director, officer or employee of the Registrant to the fullest extent permitted by law, now or in the future, and requires indemnification and advancement of expenses unless prohibited by law. The
indemnification agreement cannot be altered without the consent of the Non-interested Director and is not affected by amendment of the Articles of Incorporation. In addition, the indemnification agreement adopts certain presumptions and procedures which may make the process of indemnification and advancement of expenses more timely, efficient and certain. In accordance with Section 17(h) of the Investment Company Act of 1940, the indemnification agreement does not protect a Non-interested Director against any liability to the Registrant or its shareholders to which such Non-interested Director would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office.
Item 31. Business and Other Connections of the Investment Adviser.
BMO Asset Management Corp. (the “Adviser”) serves as the investment adviser for the Registrant. The Adviser’s principal business address is 115 South LaSalle Street, 11th Floor, Chicago, Illinois 60603. The Adviser is a registered investment adviser and wholly-owned subsidiary of BMO Financial Corp., a financial services company headquartered in Chicago, Illinois, and an indirect wholly-owned subsidiary of the Bank of Montreal (“BMO”), a Canadian bank holding company. The business and other connections of the Adviser, as well as the names and titles of the executive officers and directors of the Adviser, are further described in the Adviser’s Uniform Application for Investment Adviser Registration (“Form ADV”) as filed with the SEC.
Pyrford International Ltd. (“Pyrford”) serves as the sub-adviser with respect to the Registrant’s Pyrford International Stock Fund. Pyrford’s principal business address is 95 Wigmore Street, London, United Kingdom. Pyrford is a registered investment adviser. The business and other connections of Pyrford, as well as the names and titles of the executive officers and directors of Pyrford, are further described in Pyrford’s Form ADV as filed with the SEC.
LGM Investments Limited (formerly, Lloyd George Management (Europe) Limited) (“LGM Investments”) serves as a sub-adviser with respect to the Registrant’s LGM Emerging Markets Equity Fund. LGM Investments is a registered investment adviser. LGM Investments’ principal business address is 95 Wigmore Street, London, United Kingdom. The business and other connections of LGM Investments, as well as the names and titles of the executive officers and directors of LGM Investments, are further described in LGM Investments’ Form ADV as filed with the SEC.
Taplin, Canida & Habacht, LLC (“TCH”) serves as the sub-adviser with respect to the Registrant’s TCH Corporate Income Fund, TCH Core Plus Bond Fund, and TCH Emerging Markets Bond Fund. TCH’s principal business address is 1001 Brickell Bay Drive, Suite 2100, Miami, Florida 33131. TCH is a registered investment adviser. The business and other connections of TCH, as well as the names and titles of the executive officers and directors of TCH, are further described in TCH’s Form ADV as filed with the SEC.
F&C Management Limited (doing business as “BMO GAM EMEA”) serves as the sub-adviser with respect to the Registrant’s Alternative Strategies Fund. BMO GAM EMEA’s principal business address is Exchange House, Primrose Street, London, United Kingdom EC2A 2NY. BMO GAM EMEA is a registered investment adviser. The business and other connections of BMO GAM EMEA, as well as the names and titles of the executive officers and directors of BMO GAM EMEA, are further described in BMO GAM EMEA’s Form ADV as filed with the SEC.
CTC myCFO, LLC (“CTC”) serves as the sub-adviser with respect to the Registrant’s Alternative Strategies Fund. CTC’s principal business address is 2200 Geng Road, Suite 100, Palo Alto, California 94303. CTC is a registered investment adviser. The business and other connection of CTC, as well as the names and title of the executive officers and directors of CTC, are further described in CTC’s Form ADV as filed with the SEC.
Graham Capital Management, L.P. (“Graham”) serves as the sub-adviser with respect to the Registrant’s Alternative Strategies Fund. Graham’s principal business address is 40 Highland Avenue, Rowayton, Connecticut 06853. Graham is a registered investment adviser. The business and other connection of Graham, as well as the names and title of the executive officers and directors of Graham, are further described in Graham’s Form ADV as filed with the SEC.
Cramer Rosenthal McGlynn LLC (“Cramer Rosenthal McGlynn”) serves as the sub-adviser with respect to the Registrant’s Alternative Strategies Fund. Cramer Rosenthal McGlynn’s principal business address is 520 Madison Avenue, 20th Floor, New York, New York, 10022. Cramer Rosenthal McGlynn is a registered investment adviser. The business and other connection of Cramer Rosenthal McGlynn, as well as the names and title of the executive officers and directors of Cramer Rosenthal McGlynn, are further described in Cramer Rosenthal McGlynn’s Form ADV as filed with the SEC.
BMO is the ultimate parent company of the Adviser, Pyrford, LGM Investments, TCH, BMO GAM EMEA, and CTC. Accordingly, the Adviser, Pyrford, LGM Investments, TCH, BMO GAM EMEA, and CTC are affiliates. To the best of Registrant’s knowledge, none of the Adviser’s directors or executive officers is or has been engaged in any other business, profession, vocation, or employment of a substantial nature for the past two fiscal years, except as noted in the “Directors and Officers” section of the Registrant’s Statement of Additional Information, which is incorporated herein by reference.
Item 32. Principal Underwriters.
|
(a) BMO LGM Frontier Markets Equity Fund. |
|
(b) To the best of Registrant’s knowledge, the directors and executive officers of BMO Investment Distributors, LLC are as follows: |
|
Name and Principal Business Address* |
Positions and Offices with BMO Investment Distributors, LLC |
Positions and Offices
with Registrant |
||
| Phillip E. Enochs | Chairman | None | ||
| Steven J. Arquilla | Director | None | ||
| Stephanie Lake | Chief Financial Officer | None | ||
| Nayra Calderon Najera | Chief Compliance Officer | None | ||
| Ben Jones | President, Chief Operating Officer, Director | None | ||
| Susan G. Oleari | Director | None | ||
| Pete Papageorgakis | Director | None | ||
| Matthew Raynier | AML Officer | None | ||
* The address of each of the foregoing is 111 East Kilbourn Avenue, Suite 200, Milwaukee, Wisconsin 53202.
|
(c) Not applicable. |
Item 33. Location of Accounts and Records.
The books and records required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules under that section are maintained in the following locations:
| Records Relating to: | Are located at: | |
| Registrant’s Transfer Agent and Dividend Disbursing Agent |
DST Asset Manager Solutions, Inc. 2000 Crown Colony Drive Quincy, MA 02171 |
|
| Registrant’s Sub-Administrator and Portfolio Accounting Services Agent |
State Street Bank & Trust Company 1 Iron Street Boston, Massachusetts 02116 |
|
| Registrant’s Investment Adviser, Administrator, and Shareholder Servicing Agent |
BMO Asset Management Corp. 111 East Kilbourn Avenue, Suite 200 Milwaukee, Wisconsin 53202 |
|
| Registrant’s Sub-Adviser to Pyrford International Stock Fund |
Pyrford International Ltd. 95 Wigmore Street London United Kingdom |
|
| Registrant’s Sub-Adviser to LGM Emerging Markets Equity Fund |
LGM Investments Limited 95 Wigmore Street London United Kingdom |
|
| Registrant’s Sub-Adviser to TCH Corporate Income Fund, TCH Core Plus Bond Fund, and TCH Emerging Markets Bond Fund |
Taplin, Canida & Habacht, LLC 1001 Brickell Bay Drive, Suite 2100 Miami, Florida 33131 |
|
| Registrant’s Sub-Adviser to Alternative Strategies Fund |
F&C Management Limited (dba BMO GAM EMEA) Exchange House, Primrose Street London, United Kingdom, EC2A 2NY |
|
| Registrant’s Sub-Adviser to Alternative Strategies Fund |
CTC myCFO LLC 2200 Geng Road, Suite 100 Palo Alto, California 94303 |
|
| Registrant’s Sub-Adviser to Alternative Strategies Fund |
Graham Capital Management, L.P. 40 Highland Avenue Rowayton, Connecticut 06853 |
|
| Records Relating to: | Are located at: | |
| Registrant’s Sub-Adviser to Alternative Strategies Fund |
Cramer Rosenthal McGlynn LLC 520 Madison Avenue, 20th Floor New York, New York 10022 |
|
| Registrant’s Custodian (Target Retirement and Target Risk Funds) |
BMO Harris Bank N.A. 111 East Kilbourn Avenue, Suite 200 Milwaukee, Wisconsin 53202 |
|
| Registrant’s Custodian and Portfolio Accounting Services Agent (except Target Retirement and Target Risk Funds) |
State Street Bank & Trust Company 1 Iron Street Boston, Massachusetts 02116 |
|
| Registrant’s Distributor |
BMO Investment Distributors, LLC 111 East Kilbourn Avenue, Suite 200 Milwaukee, Wisconsin 53202 |
|
Item 34. Management Services.
None.
Item 35. Undertakings.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant confirms that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 131 to the Registration Statement on Form N-1A to be signed on its behalf by the undersigned, duly authorized, in the City of Milwaukee and the State of Wisconsin on the 23rd day of October, 2018.
| BMO FUNDS, INC. | ||
| (Registrant) | ||
| By: |
/s/ John M. Blaser |
|
| John M. Blaser | ||
| President | ||
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on October 23, 2018 by the following persons in the capacities indicated.
| Signature | Title | |||
|
/s/ John M. Blaser |
President (principal executive officer) and Director | |||
| John M. Blaser | ||||
|
/s/ Timothy M. Bonin |
Chief Financial Officer and Treasurer | |||
| Timothy M. Bonin | (principal financial and accounting officer) | |||
|
* |
Director | |||
| Ridge A. Braunschweig | ||||
|
* |
Director | |||
| Benjamin M. Cutler | ||||
|
* |
Director | |||
| John A. Lubs | ||||
|
* |
Director | |||
| Vincent P. Lyles | ||||
|
* |
Director | |||
| James Mitchell | ||||
|
* |
Director | |||
| Daniela O’Leary-Gill | ||||
|
* |
Director | |||
| Barbara J. Pope | ||||
| *By: | /s/ John M. Blaser | |
| John M. Blaser |
Attorney in fact pursuant to Power of Attorney filed with Post-Effective Amendment No. 130 to the Registration Statement on Form N-1A
EXHIBIT INDEX
| Exhibit No. | Exhibit Name | |
| (a)(54) | Amendment No. 53 to Articles of Incorporation dated February 26, 2018 | |
| (a)(55) | Amendment No. 54 to Articles of Incorporation dated April 27, 2018 | |
| (a)(56) | Amendment No. 55 to Articles of Incorporation dated May 11, 2018 | |
| (d)(2) | Amended and Restated Schedules A and B to Investment Advisory Contract | |
| (e)(2) | Amended and Restated Schedule A to Distribution Agreement | |
| (g)(6) | Amendment to Custodian Agreement with State Street Bank and Trust Company dated March 27, 2018 | |
| (h)(16) | Amendment to Fund Accounting Agreement with State Street Bank & Trust Company dated March 27, 2018 | |
| (h)(18) | Amended and Restated Schedule A to Amended and Restated Expense Limitation Agreement | |
| (m)(1) | Amended and Restated Rule 12b-1 Plan | |
| (m)(3) | Form of Sales and Services Agreement, As Amended | |
| (n)(1) | Amended and Restated Multiple Class Plan | |
| (p)(1) | Code of Ethics for BMO Asset Management Corp., BMO Investment Distributors, LLC, Taplin, Canida & Habacht, LLC, BMO Funds, Inc. and certain affiliated entities dated March 2018 | |