2015 HighIcome November 12, 2015 Offerig Advisor Series Uits ad Series F Uits of the Fud i each of the provices ad territories of Caada. This Offerig Memoradum costitutes a offerig of the securities described herei oly i those jurisdictios where they may be lawfully offered for sale ad is ot, ad uder o circumstaces is to be costrued as, a prospectus or public offerig of such securities. No securities commissio or similar authority i Caada has i ay way passed upo the merits of the securities offered hereuder or has it reviewed this Offerig Memoradum ad ay represetatio to the cotrary is a offece.
BMO Global Busiesses High Icome Fud HighIcome TABLE OF CONTENTS Glossary of terms... 2 The offerig... 3 Ivestmet objective, strategies ad restrictios... 3 Ivestmet objective... 3 Ivestmet strategies ad restrictios... 3 Ivestmet risks... 5 Geeral risks... 5 Busiess risk... 5 Capital depletio risk... 5 Couterparty ad settlemet risk... 5 Currecy risk... 5 Custody risk ad broker or dealer isolvecy... 6 Derivative risk... 6 Equity risk... 6 Foreig ivestmet risk... 6 Fud of fud risk... 7 Large trasactio risk... 7 Leverage... 7 Net asset value... 7 Prime broker to hold assets... 7 Series risk... 8 Tax treatmet of optios risk... 8 Distributio policy... 8 Maagemet of the Fud... 8 Maager ad trustee... 8 Portfolio Maager... 9 Prime Broker...10 Auditor...10 Valuatio Aget...10 Registrar ad Trasfer Aget...10 Fud goverace...10 Valuatio ad Net Asset Value...11 Purchases ad Redemptios...11 Distributio of Uits...11 Ivestig i Uits...11 Purchases... 12 Redemptios... 12 Fees ad expeses... 13 Maagemet fees... 13 Operatig expeses... 13 Redemptio fees... 13 Short-term redemptio pealty...14 Dealer compesatio...14 Summary of the Declaratio of Trust... 15 Uitholder Meetigs... 15 Uitholder Liability ad Idemificatio... 15 Amedmets... 16 Termiatio of the Fud... 16 Icome tax cosideratios... 16 Taxatio of the Fud... 17 Taxatio of Uitholders... 17 Taxatio of Registered Plas... 18 Exchage of tax iformatio... 18 Reportig to ivestors...18 Ivestors rights of actio for damages or rescissio...18 Rights for ivestors i Otario...19 Rights for ivestors i Alberta...19 Rights for ivestors i British Columbia... 20 Rights for ivestors i Saskatchewa... 21 Rights for ivestors i Maitoba... 23 Rights for ivestors i Québec... 24 Rights for ivestors i New Bruswick... 25 Rights for ivestors i Nova Scotia... 25 Rights for ivestors i Price Edward Islad... 26 Rights for ivestors i Newfoudlad ad Labrador... 28 Rights for ivestors i the Northwest Territories, Nuavut ad the Yuko Territories... 29 1
BMO Global Busiesses High Icome Fud HighIcome Glossary of terms Accredited Ivestor meas a perso who is permitted by Securities Legislatio i the Offerig Jurisdictios to make a ivestmet i the Fud by virtue of beig a accredited ivestor as defied i the Securities Legislatio. Busiess Day meas ay day o which the Toroto Stock Exchage is ope for busiess. CRA meas the Caada Reveue Agecy. Dealers meas dealers who are registered or are exempt from registratio (ad ot otherwise restricted) uder applicable Securities Legislatio to sell Uits ad who are acceptable to the Maager. Declaratio of Trust meas the ameded ad restated master declaratio of trust creatig the Fud, which ackowledges that the Maager is holdig legal title to the property o behalf of the ivestors i the Fud ad provides for the maagemet of the Fud by the Maager. Fud meas BMO Global Busiesses High Icome Fud. Ivestmet Objective meas the ivestmet objective of the Fud as described uder Ivestmet objective. Ivestmet Strategy meas the ivestmet strategy of the Fud to be implemeted by the Maager i respect of the Fud. Log Positio meas owership of a security with the expectatio that its value will appreciate. Maager (or Maager-Trustee) meas BMO Asset Maagemet Ic., i its capacity as maager ad trustee of the Fud, or ay successor appoited as the maager ad trustee of the Fud. Net Asset Value meas the et asset value of the Fud calculated i accordace with the Declaratio of Trust; Series Net Asset Value meas the et asset value of a particular Series of the Fud calculated i accordace with the Declaratio of Trust; Series Net Asset Value per Uit meas the portio of the Series Net Asset Value attributed to each Uit of the particular Series of the Fud. Offerig Jurisdictios meas all the provices ad territories of Caada. Offerig Memoradum meas this offerig memoradum of the Fud as it may be ameded from time to time. Portfolio Maager meas the Maager or such other portfolio maager as may be retaied by the Maager to provide ivestmet advice i respect of the Fud s ivestmet portfolio with the iitial Portfolio Maager beig Guardia Capital LP. Prime Broker meas a broker offerig professioal services for large istitutioal ivestors. The prime broker clears the trades i securities of the Fud, custodies the Fud s securities, provides margi fiacig, leds stock to cover short sales ad provides ecessary reportig to the Maager. RRIF meas a registered retiremet icome fud. RRSP meas a registered retiremet savigs pla. Registered Pla meas a RRSP, RRIF, TFSA, registered educatio savigs plas, registered disability savigs plas ad deferred profit sharig pla. Registrar ad Trasfer Aget meas BMO Asset Maagemet Ic., i its capacity as registrar ad trasfer aget of the Fud. Risk-Adjusted Returs meas a measure of how much a ivestmet retured i relatio to the amout of risk it took o. ROC (Retur of Capital): The Fud ca geerally choose to make a distributio that is a ROC, but will be cosidered to distribute a ROC if it distributes more tha its et icome ad et realized capital gais. A ROC distributio is ot icluded i Uitholder icome, but istead reduces the adjusted cost base ( ACB ) of the Uits o which it was paid. Whe Uits are redeemed, Uitholders may realize a larger capital gai. If the ACB of Uits held is reduced to less tha zero while Uitholders cotiue to hold them, the Uitholder will be deemed to realize a immediate capital gai equal to the egative amout ad the Uitholder s ACB will be icreased to zero. A ROC distributio should ot be cofused with retur o ivestmet or yield. Coclusios about the Fud s ivestmet performace should ot be draw from the amout of ROC it distributes. Securities Legislatio meas the laws ad regulatios i each provice ad territory of Caada that are applicable to the Fud ad the requiremets, rules, policies, istrumets ad decisios of the local securities authorities that are applicable to the Fud. Series meas the Advisor Series Uits ad Series F Uits, as applicable, ad ay additioal series issued by the Fud i the future. TFSA meas a tax-free savigs accout. Tax Act meas the Icome Tax Act (Caada). Uitholder meas a ivestor who holds Uits. Uits mea the uits of each Series of the Fud. 2
BMO Global Busiesses High Icome Fud HighIcome Valuatio Date meas each day that the Toroto Stock Exchage is ope for tradig, the last day i each fiscal year of the Fud ad ay other day as the Maager Trustee may desigate as a Valuatio Date for the Fud. Valuatio Time meas 4:00 p.m. Easter Time o each Valuatio Date or, if the Toroto Stock Exchage closes earlier that day, the the time as of which the market closes, or ay other time as the Maager may from time to time determie. All dollar refereces i this Offerig Memoradum are to Caadia dollars uless otherwise idicated. The offerig BMO Global Busiesses High Icome Fud is a ope eded mutual fud established o November 12, 2015 as a trust uder the laws of the Provice of Otario pursuat to the Declaratio of Trust executed by the Maager, as ameded from time to time. The Maager is the trustee of the Fud. As part of its maagemet of the Fud, the Maager is resposible for providig or arragig for the provisio of portfolio maagemet services for the Fud. The Maager has arraged for the Portfolio Maager to provide portfolio maagemet services to the Fud. The head office address of the Fud ad the Maager is 1 First Caadia Place, 100 Kig St. W., 43 rd Floor, Toroto, Otario M5X 1A1. At preset, the Fud is offerig: Advisor Series Uits through authorized dealers to ivestors who have a available prospectus exemptio; ad Series F Uits through dealers who have etered ito a agreemet with the Maager to ivestors who have a available prospectus exemptio Uits are offered o a cotiuous basis to ivestors residet i each of the provices ad territories of Caada pursuat to the accredited ivestor exemptio from the prospectus requiremet i Securities Legislatio. Natioal Istrumet 45-106 Prospectus Exemptios ( NI 45-106 ) requires that idividuals who ivest o the basis that they are accredited ivestors (other tha certai high-et worth idividuals) must sig a risk ackowledgemet form, which is icluded i the accompayig subscriptio agreemet. Purchasers will be required to make certai represetatios i the Subscriptio Agreemet ad the Maager will rely o such represetatios to establish the availability of the exemptio from the prospectus requiremet described above. No subscriptio will be accepted uless the Maager is satisfied that the subscriptio is i compliace with applicable securities laws. The Fud is ot available for U.S. residets. If a Uitholder is or becomes a U.S. residet, the Maager may, i the Maager s sole discretio, compulsorily redeem such Uitholder s Uits at ay time. How is the Fud differet from retail mutual fuds? A mutual fud is a pool of moey cotributed by ivestors with similar ivestmet objectives that is ivested i a portfolio of securities o their behalf by professioal portfolio maagers. Whe someoe ivests i a mutual fud, they do so by buyig uits of the fud. Uitholders share i a fud s icome, expeses ad the gais ad losses the fud makes o its ivestmets i proportio to the uits they ow. Ulike retail mutual fuds, this Fud is desiged oly for ivestors who have adequate fiacial meas, a loger term view to ivestig, who do ot rely o predictable distributios or withdrawals from the Fud, who are fiacially able to maitai their ivestmets ad who ca tolerate a higher level of risk i order to obtai potetially higher returs. Ivestmet objective, strategies ad restrictios Ivestmet objective The Fud s ivestmet objective is to achieve a high level of total retur, icludig divided icome ad capital gais, by ivestig primarily i divided yieldig commo ad preferred shares of compaies from aroud the world. As part of its ivestmet objective, the Fud ivests primarily i equities of compaies that trade o recogized stock exchages i coutries aroud the world. Ivestmet strategies ad restrictios The Portfolio Maager primarily uses the followig strategies to achieve the Fud s objectives: 3 ivests primarily i divided yieldig commo ad preferred shares seeks log-term returs cosistig of stable divided growth ad steady icome that is based upo a growth, payout ad sustaiability philosophy applies a market-orieted, bottom-up approach to selectig the best compaies withi each sector, regardless of geography will ivest i a miimum of three sectors
protect reduce gai BMO Global Busiesses High Icome Fud HighIcome uses a proprietary, iterally-developed, multifactor process that performs cross-regioal comparisos to detect where positive fudametal chage is occurrig i global markets utilizes a mid ad large capitalizatio bias diversifies the Fud s assets amog regios, coutries ad sectors to help reduce risk may ivest up to 10% of its Net Asset Value at the time of ivestmet i ay idividual stock may ivest up to 30% of its Net Asset Value at the time of ivestmet i securities of exchage-traded fuds ad other mutual fuds, which may iclude fuds that are maaged by the Maager or oe of its affiliates or associates the Fud is authorized to borrow i order to icrease its ivestmet leverage. O average, over time, the Fud expects to utilize leverage, at the time of ivestmet, of 30% of its Net Asset Value, however the Fud may oly utilize leverage of betwee 0% ad 50% of its Net Asset Value, at the time of borrowig the Fud may use derivatives to implemet the ivestmet strategy. Derivatives, such as optios, futures, forward cotracts, swaps ad other derivative istrumets may be used for both hedgig ad o-hedgig purposes, or to, amog other thigs: the Fud agaist potetial losses. For example, the Portfolio Maager may be cocered about the impact that risig iterest rates may have o the Fud. The Portfolio Maager may attempt to reduce the impact of security price fluctuatios by usig iterest rate swaps the impact of volatility o the Fud. For example, the Portfolio Maager may attempt to reduce the impact of ay adverse chages i exchage rates by buyig currecy futures exposure to securities without buyig the securities directly. may write covered call optios o the securities that it ows to ear optio premiums to supplemet the divideds ad distributios geerated by securities held by the Fud ad to lower the overall volatility of returs associated with the securities. Uder such call optios, the Fud will sell to the buyer of the optio i exchage for a premium, either a right to buy the security from the Fud at a stipulated exercise price or, if the optio is cash settled, the right to a paymet from the Fud equal to the differece betwee the value of the security ad the exercise price o settlemet date the amout, if ay, of covered call optios writte by the Fud will vary based o may factors, icludig the prevailig levels of price volatility of the securities owed by the Fud writig covered call optios also partially hedges agaist a declie i the price of the securities o which they are writte to the extet of the premiums received by the Fud at the time the optios are writte by the Fud the call optios writte by the Fud may be either exchage-traded optios or over-the-couter optios The Fud may hold a portio of its assets i cash or short-term istrumets such as moey market securities or i exchage-traded fuds while seekig ivestmet opportuities or for defesive purposes to reflect geeral ecoomic ad/or market coditios. These ivestmet strategies ad restrictios may oly be chaged o at least 60 days prior writte otice to Uitholders. Loa facility The Fud may borrow pursuat to a loa facility (the Loa Facility ) from the Maager (the Leder ). The Loa Facility may be utilized by the Fud to fud redemptios of Uits by Uitholders from time to time ad to fud expeses of the Fud o a temporary basis. The Fud may also eter ito other loa facilities from time to time which may be used to ivest i securities. The Maager expects that the terms, coditios, iterest rates, fees ad expeses of ad uder ay Loa Facility will be typical for loas of this ature. Utilizatio of the Loa Facility will effectively result i leverage i the Fud. The Maager, o behalf of the Fud, may use such leverage, whe market coditios are appropriate, to attempt to icrease the potetial returs of the Fud. The use of leverage to ehace returs of the Fud may result i losses. The Maager aticipates that, with respect to the Loa Facility, the Leder will require the Fud to provide a security iterest i some or all of its assets i favour of the Leder to secure such borrowigs. The Maager will esure that, i the evet of default uder the Loa Facility, the Leder s recourse will be limited to the assets of the Fud. 4
BMO Global Busiesses High Icome Fud HighIcome The aggregate amout of borrowigs by the Fud may ot exceed 50% of the Net Asset Value of the Fud at the time of the borrowig. I the evet that the total amout borrowed by the Fud exceeds the 50% limit as a result of redemptios or other decrease i the umber of Uits of the Fud, the Maager will reduce idebtedess o a orderly basis as soo as practicable so that the amout borrowed does ot exceed such limit. Other tha borrowigs by the Fud uder the Loa Facility ad from the Maager as cotemplated above, the Fud will ot egage i borrowig. Ivestmet risks Before ivestig, prospective ivestors should carefully cosider the followig risks. The followig risk factors do ot purport to be a complete explaatio of all risks ivolved i purchasig Uits. Potetial ivestors should read this etire Offerig Memoradum ad cosult with their legal ad other professioal advisors before determiig to ivest i Uits. Geeral risks Uitholders ivestmets i the Fud are ot guarateed. The Fud ows differet types of ivestmets, the value of which will chage from day to day, reflectig chages i iterest rates, ecoomic coditios, market ad compay ews, ad uforeseeable evets. As a result, the value of the Fud ivestmets may go up ad dow, ad the value of Uitholders ivestmets may be more or less whe they redeem their Uits tha whe they purchased them. The Fud is ot subject to the ormal mutual fud regulatios ad disclosure requiremets for publicly offered mutual fuds which limit such mutual fuds ability to short sell securities, use leverage, cocetrate ivestmets ad use derivatives, but is istead subject to the ivestmet restrictios set out herei. Busiess risk While the Maager believes that the Fud s ivestmet policies will be successful over the log term, there ca be o guaratee agaist losses resultig from a ivestmet i Uits ad there ca be o assurace that the Fud s ivestmet approach will be successful or that its ivestmet objective will be attaied. No assurace ca be give that the Fud s ivestmet portfolio will geerate ay icome or will appreciate i value. The Fud could realize substatial losses, rather tha gais, from some or all of the ivestmets described herei. A trust, such as the Fud, caot flow through losses to ivestors. However, such losses will be reflected i the Net Asset Value per Uit which, if the Uits are redeemed, would give rise to capital losses which may be used by ivestors. Capital depletio risk Advisor Series Uits ad Series F Uits make mothly distributios of a amout comprised, i whole or i part, of ROC. A ROC reduces the amout of a origial ivestmet ad may result i the retur to a Uitholder of the etire amout of such Uitholder s origial ivestmet. ROC that is ot reivested will reduce the Net Asset Value of the Fud, which could reduce the Fud s ability to geerate future icome. Coclusios about the Fud s ivestmet performace should ot be draw from the amout of this distributio. ROC ca oly be made by a Series of the Fud to the extet that there is a positive balace i the capital accout for the relevat Series. To the extet that the balace i the capital accout becomes, or is at risk of becomig, zero, mothly distributios may be reduced or discotiued without prior otice. See Icome tax cosideratios for additioal iformatio about ROC. Couterparty ad settlemet risk Some of the markets i which the Fud will effect its trasactios may be over the couter or iterdealer markets. The participats i such markets are typically ot subject to credit evaluatio ad regulatory oversight as are members of exchage based markets. This exposes the Fud to the risk that a couterparty will ot settle a trasactio i accordace with its terms ad coditios because of a dispute over the terms of the cotract (whether or ot boa fide) or because of a credit or liquidity problem, thus causig the Fud to suffer a loss. I additio, i the case of a default, the Fud could become subject to adverse market movemets while replacemet trasactios are executed. Such couterparty risk is accetuated for cotracts with loger maturities where evets may itervee to prevet settlemet, or where the Fud has cocetrated its trasactios with a sigle or small group of couterparties. The Fud is ot restricted from dealig with ay particular couterparty or from cocetratig ay or all of its trasactios with oe couterparty. Moreover, either the Fud or the Maager has a iteral credit fuctio which evaluates the creditworthiess of its couterparties. The ability of the Fud to trasact busiess with ay oe or umber of couterparties, the lack of ay meaigful ad idepedet evaluatio of such couterparties fiacial capabilities ad the absece of a regulated market to facilitate settlemet may icrease the potetial for losses by the Fud. Currecy risk Whe the Fud ivests i foreig securities, it will buy the securities usig foreig currecy. For example, the Fud will use U.S. dollars to buy U.S. stocks or bods. Because currecies chage i value agaist each other, it s possible that a ufavourable move i the exchage rate may 5
BMO Global Busiesses High Icome Fud HighIcome reduce, or eve elimiate, ay icrease i the value of that ivestmet. The opposite ca also be true the Fud ca beefit from chages i exchage rates. A acceptable couterparty may ot be willig to eter ito cotracts that allow the Fud to lik its performace to the uderlyig security; Custody risk ad broker or dealer isolvecy The Fud does ot cotrol the custodiaship of all of its securities. The Fud s assets will be held i oe or more accouts maitaied for the Fud by its prime broker or at other brokers. Such brokers are subject to various laws ad regulatios i various jurisdictios that are desiged to protect their customers i the evet of their isolvecy. However, the practical effect of these laws ad their applicatio to the Fud s assets are subject to substatial limitatios ad ucertaities. Because of the large umber of etities ad jurisdictios ivolved ad the rage of possible factual scearios ivolvig the isolvecy of the prime broker or ay sub-custodias, agets or affiliates, it is impossible to geeralize about the effect of their isolvecy o the Fud ad its assets. Ivestors should assume that the isolvecy of ay of the prime broker or such other service providers would result i the loss of all or a substatial portio of the Fud s assets held by or through such prime broker ad/or the delay i the paymet of withdrawal proceeds. Derivative risk While derivatives ca be useful for hedgig agaist losses or as a substitute for the uderlyig assets, they ivolve a umber of risks: The hedgig strategy used by the Fud may ot be effective; If the Fud is required to give a security iterest i order to eter ito a derivative, there is a risk that the other party may try to eforce the security iterest agaist the Fud s assets; The cost of the derivative cotracts may icrease. Equity risk Busiesses issue equity securities, such as shares or uits, to help pay for their operatios ad fiace future growth. Whe the Fud buys equities, it becomes part ower of the compay that issued the securities. Chages i the value of the busiesses chage the value of the Fud. The price of a security is iflueced by the outlook for the particular busiess, by the market activity ad by the larger ecoomic picture, both at home ad abroad. Whe the ecoomy is expadig, the outlook for may busiesses may also be good ad the value of their securities may rise. The opposite is also true. If the Fud ivests i limited partership uits or trust uits, such as oil ad gas royalty trusts, real estate ivestmet trusts ad icome trusts, its degrees of risk will deped o the sector ad the uderlyig asset or busiess ad the Fud may therefore be susceptible to risks associated with the idustry i which the uderlyig busiess operates, to chages i busiess cycles, commodity prices, ad to iterest rate fluctuatios ad other ecoomic factors. There s o guaratee that a market will exist whe the Fud wats to meet the terms of the derivative cotract. This could prevet the Fud from makig a profit or limitig its losses; The other party to a derivative cotract may ot be able to meet its obligatios; Stock exchages may set daily tradig limits o futures cotracts. This could prevet the Fud from closig a cotract; The price of stock idex optios may be distorted if tradig i some or all of the stocks that make up the idex is iterrupted. If the Fud could ot close out its positio i these optios because of iterruptios or imposed restrictios, it may experiece losses; The price of a derivative may ot accurately reflect the value of the uderlyig security or idex; Foreig ivestmet risk If the Fud ivests i foreig securities, its value is affected by fiacial markets ad geeral ecoomic treds i the coutries where the securities are issued. While the U.S. market has stadards that are similar to those i Caada, other foreig markets may ot. For example, some foreig markets may ot be as strictly regulated as Caadia ad U.S. markets. Their laws might make it difficult to protect ivestor rights. The political climate might be less stable ad social, religious ad regioal tesios may exist. Busiess disclosure ad accoutig stadards may be less striget tha i Caada ad the U.S., makig it difficult to obtai complete iformatio about a potetial ivestmet. Securities markets may be smaller tha i more developed coutries, makig it more difficult to sell securities i order to take profits or avoid losses. As a result, the value of foreig securities, ad the value of the Fud if it holds foreig securities, may rise or fall more rapidly ad to a greater 6
BMO Global Busiesses High Icome Fud HighIcome degree tha Caadia ad U.S. ivestmets. I geeral, securities issued i more developed markets have lower foreig ivestmet risk. Securities issued i emergig or developig markets have higher foreig ivestmet risk. If the Fud cocetrates its ivestmets i a sigle coutry or regio of the world it will likely be riskier tha fuds with greater geographic diversificatio because prices of securities i the same markets ted to move up ad dow together. Fud of fud risk The Fud may ivest directly i, or obtai exposure to, other ivestmet fuds as part of its ivestmet strategy. Therefore, the Fud will be subject to the risk of the uderlyig fuds. Also, if the Fud ivests i a uderlyig fud ad that uderlyig fud suspeds redemptios, the Fud will be uable to value part of its portfolio ad may be uable to redeem its securities i the uderlyig fud. Large trasactio risk The Fud may have oe or more ivestors (icludig aother ivestmet fud) who hold or acquire a sigificat amout of Uits. If oe or more of these ivestors (icludig these ivestig fuds) decides to redeem its ivestmet i the Fud, the Fud may have to make large sales of securities to meet these requests. The Portfolio Maager may have to chage the compositio of the Fud s portfolio sigificatly or may be forced to sell ivestmets at ufavourable prices, which ca egatively impact the Fud s returs. Coversely, if oe or more of these ivestors decides to icrease its ivestmet i the Fud, the Fud may have to hold a relatively large positio i cash for a period of time while the Portfolio Maager attempts to fid suitable ivestmets. This could egatively impact the Fud s retur. A trust, such as the Fud, is subject to a loss restrictio evet for tax purposes each time a perso or partership becomes a majority-iterest beeficiary of the trust for tax purposes, which geerally occurs whe a beeficiary of the trust ad its affiliates have beeficial iterests i the trust of more tha 50% of the fair market value of the trust. However, o perso, partership or affiliated group should become a majority iterest beeficiary of the Fud as log as the Fud satisfies certai ivestmet diversificatio restrictios. If the Fud experieces a loss restrictio evet, the taxatio year of the Fud will be deemed to ed. The Fud will realize its capital losses ad may elect to realize its capital gais. Uused capital losses will expire ad the ability of the Fud to carry forward o-capital losses will be restricted. Leverage While gais made with borrowed fuds geerally cause the Fud s value to icrease faster tha without the use of borrowed fuds, if the value of securities purchased with borrowed fuds declies, or does ot appreciate sufficietly to cover the costs of borrowig, the Fud s value will decrease faster ad more sigificatly tha without the use of borrowed fuds. Such decrease i the Fud s value could be substatial if the value of the securities purchased with borrowed fuds declies sigificatly. The iterest expese ad bakig fees icurred i respect of the Loa Facility, or expeses ad fees icurred i respect of other forms of leverage, may exceed the icremetal capital gais/ losses ad icome geerated by the icremetal ivestmet of Fud assets. I additio, the Loa Facility may impose additioal restrictios o the Fud ad the Fud may ot be able to reew the Loa Facility or other form of leverage o acceptable terms. Furthermore, the amout of borrowigs that the Fud may have outstadig at ay time could be large i relatio to its capital. Thus, i additio to chages i the value of securities purchased with borrowed fuds, the amout of the Fud s borrowigs ad the iterest rates o those borrowigs, which may fluctuate from time to time, may have a sigificat effect o the Fud s performace. Net asset value The Net Asset Value of the Fud will fluctuate with chages i the market value of the Fud s ivestmets. Such chages i market value may occur as a result of various factors, icludig those factors idetified above with respect to foreig ivestmets ad emergig market securities ad material chages i the itrisic value of a issuer whose securities are held by the Fud. Prime broker to hold assets Some or all of the Fud s assets may be held i oe or more margi accouts due to the fact that the Fud will use leverage. The margi accouts may provide less segregatio of customer assets tha would be the case with a more covetioal custody arragemet. The prime broker may also led, pledge or hypothecate the Fud s assets i such accouts, which may result i a potetial loss of such assets. As a result, the Fud s assets could be froze ad iaccessible for withdrawal or subsequet tradig for a exteded period of time if the prime broker experieces fiacial difficulty. I such case, the Fud may experiece losses due to isufficiet assets at the prime broker to satisfy the claims of its creditors, ad adverse market movemets while its positios caot be traded. 7
BMO Global Busiesses High Icome Fud HighIcome I additio, the prime broker may ot be able to provide leverage to the Fud, which would adversely affect the Fud s returs. Series risk The Fud issues more tha oe Series of securities. Each Series has its ow fees ad expeses, which are tracked separately; however, if a Series ca t meet its fiacial obligatios, the other Series are resposible for makig up the differece. This is because the Fud as a whole is legally resposible for the fiacial obligatios of all of the Series. Tax treatmet of optios risk I determiig its icome for tax purposes, the Fud will treat the optio premiums received from writig covered call optios ad ay gais or losses realized from closig out the optios i accordace with the CRA s published admiistrative practice. The CRA s practice is to ot grat advace icome tax ruligs o the characterizatio of items as capital or icome. No advace icome tax rulig has bee sought or received from the CRA. Accordigly, there is a risk that the CRA may disagree with the tax treatmet adopted by a fud. I such case, the et icome of the fud for tax purposes ad the taxable compoet of distributios to ivestors could subsequetly be determied to be more tha origially reported. Ivestors could be reassessed or the fud could be liable for icome tax. Ay liability imposed o the fud may reduce the value of the fud ad the value of a ivestor s ivestmet i the fud. The foregoig risk factors do ot purport to be a complete explaatio of all risks ivolved i purchasig Uits of the Fud. Potetial ivestors should read this etire Offerig Memoradum ad cosult with their legal ad other professioal advisers before determiig to ivest i Uits. Distributio policy The Fud distributes a fixed amout per Uit per moth. The amout of the mothly distributio may be adjusted without otice throughout the year as market coditios chage. Ay et icome eared by the Fud i excess of the mothly distributio may also be distributed to Uitholders from time to time. Ay et capital gais are distributed i December, however the Fud may distribute at other times as well. For both Advisor Series Uits ad Series F Uits, the Fud distributes mothly ay et icome ad/or ROC. Distributios are automatically reivested i additioal Uits of the applicable Series of the Fud, uless the Maager receives writte otice from a Uitholder of the desire to withdraw from the automatic reivestmet program ad, i such case, the Uitholder will receive cash distributios from the Fud (the Cash Distributio Optio ). The Cash Distributio Optio shall take effect for a particular Uitholder o the ext scheduled distributio date after receipt of such otice, provided that the Maager has received the otice at least 3 Busiess Days prior to the ext scheduled distributio date. If otice is received by the Maager less tha 3 Busiess Days prior to the ext scheduled distributio date, the Cash Distributio Optio shall take effect o the ext distributio date followig the ed of the 3 Busiess Day otice period. If the cash distributios to a Uitholder are greater tha the et icrease i the value of such Uitholder s ivestmets i Advisor Series Uits or Series F Uits, as applicable, these distributios will erode the value of the Uitholder s origial ivestmets. Because mothly distributios may iclude a ROC, distributios do ot ecessarily reflect the Fud s ivestmet performace ad should ot be cofused with yield or icome. Coclusios about the Fud s ivestmet performace should ot be draw from the amout of this distributio. A ROC made to a Uitholder is ot immediately taxable i the Uitholder s hads but will reduce the ACB of the related Uits. See Icome tax cosideratios for more iformatio. Maagemet of the Fud Maager ad trustee BMO Asset Maagemet Ic. has bee appoited as maager ad trustee of the Fud pursuat to the Declaratio of Trust. The Maager is a idirect wholly-owed subsidiary of Bak of Motreal. As maager, the Maager is resposible for the busiess, operatios ad affairs of the Fud, icludig maagig or arragig for the maagemet of the Fud s ivestmet portfolio as well as providig or arragig for the admiistrative services of the Fud such as valuatio services, fud accoutig ad Uitholder records. I this capacity, the Maager will receive the maagemet fees described later i this Offerig Memoradum. As trustee, the Maager has overall authority over the assets ad affairs of the Fud ad has a fiduciary resposibility to act i the best iterest of the Uitholders. The Maager receives compesatio from the Fud for the services it provides to the Fud i its capacity as maager, but does ot curretly receive ay compesatio for actig as trustee. 8
BMO Global Busiesses High Icome Fud HighIcome The Maager may resig as maager ad trustee o 60 days prior writte otice to Uitholders. The Maager ca be reached at 1 First Caadia Place, 100 Kig St. West, 43 rd Floor, Toroto, Otario M5X 1A1, via telephoe at 1-800-361-1392 or via e-mail at alterativeproducts@bmo.com. The Maager s website is www.bmo.com/gam/ca. Portfolio Maager As part of the services it provides to the Fud, the Maager will provide, or cause to be provided, ivestmet aalysis ad recommedatios, make decisios relatig to the ivestmet of the Fud s assets ad supervise the Fud s ivestmet portfolio o a cotiuous basis. The Maager is registered as a adviser i Otario ad i all of the other Caadia provices ad territories. The Maager may appoit aother portfolio maager for the Fud or retai a sub-advisor for the Fud. The Maager has appoited Guardia Capital LP ( Guardia Capital ) to act as the Portfolio Maager to the Fud. The Portfolio Maager is oe of Caada s logest established, idepedet ivestmet cousellig firms. As at Jue 30, 2015, the Portfolio Maager maaged approximately $25 billio (CAD) i assets for retail mutual fuds, segregated ad pooled pesio cliets, ad corporate, edowmet, ad charitable cliets. The Portfolio Maager is wholly-owed by Guardia Capital Group Limited, a public compay, the shares of which are listed for tradig o the Toroto Stock Exchage. The Portfolio Maager is compesated for providig its portfolio maagemet services to the Fud by the Maager. The Portfolio Maager curretly maages the assets of a umber of ivestmet fuds ad other cliets. While all advice ad recommedatios made to the Fud will be cosistet with its obligatio to exercise its powers ad discharge its duties hoestly, i good faith ad i the best iterests of the Fud, the Portfolio Maager will cotiue to provide ivestmet advice to its other cliets, who may have similar ivestmet eeds to those of the Fud. There may, therefore, be potetial coflicts of iterest betwee the Fud ad other portfolios maaged by the Portfolio Maager. All decisios as to the purchase ad sale of portfolio securities ad decisios as to the executio of these portfolio trasactios, icludig the selectio of market, dealer ad the egotiatio, where applicable, of commissios will be made by the Portfolio Maager. The Portfolio Maager will seek to obtai prompt executio of orders o favourable terms. To the extet that the executios ad prices offered by more tha oe dealer are comparable, the Portfolio Maager may choose to effect portfolio trasactios with dealers who provide research, statistical ad other services to the Fud or the Portfolio Maager. Where the Fud ad oe or more other portfolios or cliets of the Portfolio Maager are egaged i the purchase or sale of the same security, the trasactio will be effected o a equitable basis i accordace with the Portfolio Maager s Security Allocatio Policy dealig with trade allocatio. The Portfolio Maager uses a team approach i makig ivestmet decisios. The followig is a descriptio of the lead people: 9 Srikath Iyer, MBA Maagig Director Systematic Strategies Sri joied Guardia Capital i 2001 to help lead the developmet ad implemetatio of its proprietary systematic strategies. Prior to joiig Guardia Capital, Sri was with Global Value Ivestors i Priceto, New Jersey resposible for a variety of portfolio maagemet ad fiacial egieerig roles. Sri graduated with a Bachelor of Commerce from the Uiversity of Bombay i 1989, eared his Chartered Cost ad Works Accoutat (Idia) desigatio i 1990 ad his MBA (Applied Fiace) from Rutgers Graduate School of Maagemet i 1994. Harpreet Sigh, MBA, CFA Director of Research ad Portfolio Maagemet Systematic Strategies Harpreet joied Guardia Capital i 2012 as Director of Research ad Portfolio Maagemet with resposibility for research ad portfolio maagemet i its systematic strategies team. Harpreet is a prove seior ivestmet professioal i portfolio maagemet ad costructio, risk aalysis ad quatitative modelig. Previously, he was the Head of US Equities at Maulife Asset Maagemet i Toroto, where he successfully guided fudametal as well as quatitative aalysts ad portfolio maagers i a disciplied portfolio costructio process established by him. Before that, Harpreet was a Quatitative Associate at Stadish, Ayer & Wood, Ic., a leadig asset maagemet firm i Bosto. Harpreet eared a B. Tech. i Chemical Egieerig from The Idia Istitute of Techology i New Delhi i 1989 ad his MBA i Fiace i 1992 from Betley Graduate School of Busiess i Massachusetts. Harpreet is a CFA Charterholder. Fioa Wilso, MBA, CFA Portfolio Maager Systemic Strategies Fioa joied Guardia Capital i 2011 as a Portfolio Maager i its systematic strategies team. Fioa bega her career as a optios trader at CIBC ad progressed to become Head of Currecy Optios Marketig, South East Asia for Societe Geerale with postigs i Tokyo,
BMO Global Busiesses High Icome Fud HighIcome Sigapore ad Lodo. Her experieces icluded structurig classical ad exotic optio tradig ad hedgig strategies for cetral baks, corporate ad istitutioal cliets throughout Asia. She subsequetly took o the role of Portfolio Maager, Global Derivative Istrumets with Otario Muicipal Employees Retiremet System (OMERS). Fioa graduated with a Bachelor of Arts from the Uiversity of Wester Otario i 1985 ad obtaied her Hoours Bachelor of Commerce ad MBA from the Uiversity of Widsor i 1987 ad 1989, respectively. Fioa is also a CFA Charterholder. Prime Broker The Maager has appoited BMO Capital Markets as the prime broker for the securities of the Fud pursuat to a prime broker agreemet. BMO Capital Markets offers its services through BMO Nesbitt Burs Ic., a idirect wholly-owed subsidiary of Bak of Motreal ad a affiliate of the Maager. The prime broker agreemet may be termiated by the Prime Broker at ay time ad by the Maager upo writte otice to the Prime Broker, however the obligatios of each party accrued as at the time of termiatio shall cotiue i full force ad effect. The services provided by the Prime Broker iclude: clearig; custody; brokerage; margi fiacig; reportig; ad securities ledig. BMO Capital Markets may hold securities o behalf of the Fud at its head office or ay of its braches or ay other locatio where it is customary for BMO Capital Markets to keep securities o behalf of its cliets. Foreig assets may be held by local sub-custodias appoited by BMO Nesbit Burs Ic. or uder their authority i various foreig jurisdictios where a fud may have assets ivested. BMO Nesbitt Burs Ic. or the sub-custodias may use the facilities of ay domestic or foreig depository or clearig agecy authorized to operate a book-based system. The Prime Broker receives compesatio from the Fud for the services it provides to the Fud. Auditor The auditor of the Fud is PricewaterhouseCoopers, LLP, Chartered Professioal Accoutats, Licesed Public Accoutats of Toroto, Otario. Valuatio Aget BMO Asset Maagemet Ic. is the valuatio aget of the Fud ad provides certai fud accoutig ad valuatio services to the Fud icludig, without limitatio: calculatig the Net Asset Value per Uit, et icome ad et realized capital gais of the Fud. Registrar ad Trasfer Aget BMO Asset Maagemet Ic. is the registrar ad trasfer aget of the Fud. As Registrar ad Trasfer Aget, BMO Asset Maagemet Ic. provides certai uitholder record keepig services for the Fud. The registers of the Uits are kept i Toroto, Otario. Fud goverace The Maager is resposible for the day-to-day admiistratio ad operatio of the Fud. To esure these duties are carried out i the best iterests of the Fud ad its Uitholders, the Maager has adopted a Code of Busiess Coduct (the Code ) cosistig of BMO s Code of Coduct ad Iformatio Security Safeguardig Our Customers Trust which requires that the Maager puts the iterests of the Fud ahead of all self-iterests. Amog other subjects, the Code deals with stadards of coduct, cofidetial iformatio, coflicts of iterests ad isider tradig ad other areas, icludig compliace with laws ad regulatios, ad sactios for breach of the Code. The Maager has a Persoal Tradig Policy, which must be followed by directors, officers ad employees of the Maager ad by specific employees of its affiliates, that icludes obtaiig prior approval, as required, before placig ay trades for their persoal accouts. The Code ad Persoal Tradig Policy is admiistered by the compliace departmet of the Maager. The Maager has the exclusive authority over the assets ad affairs of the Fud ad is ultimately resposible for the Fud. The Maager also has a Ivestmet Maagemet Committee that meets mothly to examie ad review ivestmet performace, compliace, idustry treds, ideas, opportuities ad related matters i coectio with the Fud. This committee reports performace ad sigificat issues to the Maager. The Maager has hired the Portfolio Maager to provide ivestmet advice ad portfolio maagemet to the Fud. The Portfolio Maager s activities are carefully ad regularly moitored by the Maager s Ivestmet Maagemet Committee to help esure observace of ivestmet guidelies, coduct ad fiacial performace. The Portfolio Maager may also report to the Maager from time to time. 10
BMO Global Busiesses High Icome Fud HighIcome Valuatio ad Net Asset Value Uits are purchased, distributios reivested (uless otherwise specified by the Uitholder) ad redemptios implemeted for the Fud o the basis of the Series Net Asset Value per Uit applicable to the trasactio, which is reflected i the ext calculatio of the Series Net Asset Value. The Series Net Asset Value per Uit of a Series of the Fud is calculated by dividig the value of the Series Net Assets of the particular Series of the Fud (that is, the value of that Series proportioate share of the assets of the Fud less the value of that Series proportioate share of the liabilities of the Fud) by the total umber of Uits of that Series of the Fud the outstadig. The Series Net Asset Value is calculated by the Valuatio Aget as of the Valuatio Time o each Valuatio Date. The value of the assets of the Fud is determied with referece to the followig valuatio methods, depedig o the type of security beig valued: 1. cash o had, o deposit or o call, prepaid expeses, cash divideds declared ad iterest accrued are valued at their face amout or what is cosidered reasoable value by the Valuatio Aget; 2. securities listed o ay stock exchage or i the over-the-couter market are valued at their closig price (or such other value as the securities regulatory authorities may permit), last reported at the Valuatio Time o the Valuatio Date o the pricipal stock exchage o which such security is traded. If there are o such recet sales price, the Valuatio Aget may determie its best estimate of the fair value of such securities; 3. derivative securities are valued at their curret market value; 4. where a covered clearig corporatio optio is writte, the premium received is cosidered a deferred credit. The value of the optio is equal to the curret market value of a optio that would have the effect of closig the positio; ay differece resultig from revaluatio will be treated as urealized gai or loss. The deferred credit will be deducted to arrive at the et asset value of the Fud; 5. the value of a forward cotract or a futures cotract is the gai or loss that would be realized if, at the Valuatio Date, the positio i such cotract were to be closed out; 6. uits of ay pooled fud, if permitted to be acquired by the Fud, are valued at the et asset value for such uits quoted by the trustee or maager of such fud; 7. the value of ay security or other asset for which a market quotatio is ot readily available is the best estimate of the fair market value as determied by the Valuatio Aget; 8. the value of all assets ad liabilities of a Fud quoted i a currecy other tha Caadia dollars will be traslated ito Caadia dollars at the prevailig rate of exchage o the Valuatio Date as quoted by customary sources selected by the Valuatio Aget; 9. all expeses ad liabilities of the Fud are calculated o a accrual basis; ad 10. the value of all other assets is their fair value as determied by the Valuatio Aget. The value of ay security or property to which, i the opiio of the Valuatio Aget, the above valuatio priciples caot be applied (whether because o price or yield equivalet quotatios are available as above provided, or for ay other reaso) shall be the fair value thereof determied i such maer as the Valuatio Aget from time to time provides. The Valuatio Aget may also fair value securities i the followig circumstaces: whe there is a halt trade o a security which is ormally traded o a exchage; (ii) o securities that trade o markets that have closed prior to the time of calculatio of the Net Asset Value of the Fud ad for which there is sufficiet evidece that the closig price o the market is ot the most appropriate value at the time of valuatio; ad (iii) whe there are ivestmet or currecy restrictios imposed by a coutry that affect the Fud s ability to liquidate the assets held i that market. Purchases ad Redemptios Distributio of Uits Uits are distributed through the Maager ad Dealers i each Offerig Jurisdictio. Ivestig i Uits The Fud may issue a ulimited umber of Uits o a cotiuous basis i oe or more Series. The Fud curretly issues Advisor Series Uits ad Series F Uits. The Fud may issue additioal Series i the future at the discretio of the Maager. Uits may oly be purchased ad redeemed i Caadia dollars. Uits are offered o a cotiuous basis to ivestors residet i each of the provices ad territories of Caada pursuat to the accredited ivestor exemptio from the prospectus requiremet i Securities Legislatio. 11
BMO Global Busiesses High Icome Fud HighIcome NI 45 106 requires that idividual who ivest o the basis that they are accredited ivestors (other tha certai high et worth idividuals) must sig a risk ackowledgemet form, which is icluded i the accompayig subscriptio agreemet. Each Series of Uits is iteded for differet types of ivestors. Advisor Series Uits are available to Accredited Ivestors who meet the miimum purchase amout. Series F Uits are available to Accredited Ivestors who are erolled i dealer-sposored wrap programs or flat fee accouts, who meet the miimum purchase amout ad whose dealer has etered ito a Series F agreemet with the Maager. If the Maager becomes aware that a Uitholder o loger qualifies to ow Series F Uits, the Maager, o 30 days otice to the Uitholder, may switch the Uitholder s Series F Uits ito Advisor Series Uits. Each iitial purchase of Advisor Series Uits ad Series F Uits of the Fud is subject to a miimum of $5,000. Subsequet purchases must be i icremets of ot less tha $100 or such other amout required by applicable securities laws. The Maager may, i its sole discretio, redeem Uits if a ivestmet i the Fud has a value of less tha $1,000 at ay time. Prior to redeemig such ivestmet, the Maager shall provide the Uitholder with 30 days writte otice that such a redemptio will occur i order to provide the Uitholder with the opportuity to ivest a additioal amout i the Fud to meet the miimum threshold to cotiue to hold Uits. Purchases Orders to purchase Advisor Series Uits ad Series F Uits may be made by a ivestor at ay time. If purchasig Advisor Series Uits, the ivestor may choose betwee the sale charge ( Sales Charge ) optio, the stadard deferred charge ( Stadard Deferred Charge ) optio, or the low load deferred charge ( Low Load Deferred Charge ) optio. I order to receive the Series Net Asset Value per Uit of the applicable Series of the Fud determied o the Valuatio Date upo which the purchaser iteds the Uits to be purchased, a purchase order must be received by the Maager before 4:00 p.m. (Easter Time) o that Valuatio Date. If a purchase order is received after this time, the purchase order will be processed at the Series Net Asset Value per Uit of the applicable Series calculated o the ext Valuatio Date. The Maager is etitled i its discretio to reject subscriptios for purchases of Uits i whole or i part. Ay decisio to reject a subscriptio for purchases of Uits i whole or i part will be made by the Maager promptly, ad i ay evet, withi 3 Busiess Days of the relevat Valuatio Date. If a subscriptio is rejected, the Maager will refud the subscriptio amout without iterest. Settlemet of purchases will geerally be made withi the timelies that are stadard i the idustry but the Maager reserves the right to settle purchases up to 3 Busiess Days followig the Valuatio Date. If the subscriptio proceeds ad, o a iitial purchase, the documets the Maager requires have ot bee received by the Maager withi 3 Busiess Days of processig a purchase order for ay Uits, the Maager will redeem Uits o the ext Busiess Day. If the proceeds from the redemptio are greater tha the paymet owed, the Fud keeps the differece. If the proceeds are less tha the paymet owed, the Maager will pay the differece to the Fud o the Uitholder s behalf, ad collect this amout together with additioal costs from the Uitholder s Dealer who may collect these amouts from the Uitholder. Redemptios Redemptios may be made at the Series Net Asset Value per Uit of the applicable Series of the Fud determied o the relevat Valuatio Date. I order to receive the Series Net Asset Value per Uit of the applicable Series of the Fud determied o a Valuatio Date, a order for redemptio of Uits must be received before 4:00 p.m. (Easter Time) o that Valuatio Date. Ay redemptio order ot received i time to be processed will be processed o the ext Valuatio Date. Subject to the short-term redemptio pealty described below, there are o additioal redemptio charges payable by the Uitholder as a result of a redemptio of Series F Uits. Advisor Series Uits are subject to the redemptio charges set out below as well as the shortterm redemptio pealty. Redemptio paymets will be made i Caadia dollars. Settlemet of redemptios will geerally be made withi the timelies that are stadard withi the idustry but the Maager reserves the right to settle redemptios up to 3 Busiess Days followig the applicable Valuatio Date. The Maager shall susped the calculatio of the Series Net Asset Value per Uit ad the right to request a redemptio for each Series of Uits for ay period whe required to do so uder Securities Legislatio ad may do so whe it believes such a course of actio is i the best iterests of the Fud ad it is permitted to do so uder Securities Legislatio. 12