Bank of Montreal PARTNRS (Principal At Risk Notes)™ GGOF

Transcription

This pricing supplement together with the short form base shelf prospectus dated April 13, 2007, as amended or supplemented (the “Prospectus”), to
which it relates, and each document incorporated by reference into the Prospectus, constitutes a public offering of securities only in those jurisdictions
where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. No securities commission or similar regulatory
authority has in any way passed upon the merits of the securities offered hereunder or has in any way expressed an opinion about these securities and it is
an offence to claim otherwise.
The Notes to be offered hereunder have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S.
Securities Act”) and, except as stated under “Plan of Distribution”, may not be offered, sold or delivered, directly or indirectly, in the United States of
America, its territories, its possessions and other areas subject to its jurisdiction or to, or for the account or benefit of, a U.S. person (as defined in
Regulation S under the U.S. Securities Act).
Information has been incorporated by reference in this pricing supplement from documents filed with the securities commission or similar regulatory
authorities in Canada (the permanent information record in Québec). Copies of the documents incorporated herein by reference may be obtained on
request without charge from the Secretary, Bank of Montreal, 1 First Canadian Place, Toronto, Ontario, M5X 1A1, telephone: (416) 867-6783. For the
purpose of the Province of Québec, this pricing supplement contains information to be completed by consulting the permanent information record. A copy
of the permanent information record may be obtained from the Secretary, Bank of Montreal at the above-mentioned address and telephone number.
Pricing Supplement No. 6 dated October 12, 2007
(to short form base shelf prospectus dated April 13, 2007)
Bank of Montreal PARTNRS (Principal At Risk Notes)™
GGOF Dividend Growth Fund Total Return Class, Series 1, Due December 19, 2017
(Unsecured)
Maximum $100,000,000
Bank of Montreal PARTNRS (Principal At Risk Notes), GGOF Dividend Growth Fund Total Return Class, Series 1 (the
“Notes”) are issued by Bank of Montreal (the “Bank”) and will mature on December 19, 2017 (“Maturity” or “Maturity
Date”). A holder of Notes (each a “Holder”) will receive a return at Maturity based on the performance of a notional
portfolio (the “Portfolio”) providing 150% exposure to the total return of the Mutual Fund Units (the “Units”) of the
GGOF Dividend Growth Fund (the “Fund”), a Canadian mutual fund managed by Guardian Group of Funds Ltd. (the
“Investment Manager”). The objectives of the Notes are to provide Holders with an enhanced return based on the longterm capital appreciation of the Portfolio.
The Fund seeks to generate a relatively high return that includes dividend income and some capital gains from any increase
in the value of the securities held by the Fund. The Fund will invest primarily in dividend-yielding common and preferred
shares of established Canadian companies and may also invest in fixed income securities. Jones Heward Investment
Counsel Inc. (the “Investment Advisor”), an indirect wholly-owned subsidiary of the Bank, has been retained by the
Investment Manager to provide investment advice for the Fund. Both the Investment Manager and the Investment Advisor
are affiliates of the Bank.
Amounts, if any, paid to Holders at Maturity will depend on the performance of the Portfolio. Bank of Montreal
does not guarantee that Holders will receive an amount equal to the amount invested in the Notes and does not
guarantee that any return will be paid on the Notes, other than a minimum principal repayment of $1.00 per Note
at Maturity. Since the principal amount of the Notes will not be guaranteed and will be at risk, Holders may not
receive any amount at Maturity (other than a minimum principal repayment of $1.00 per Note at Maturity) and
Holders could lose substantially all of their investment in the Notes. Prospective investors in the Notes should
consider the suitability of their investment in light of their particular circumstances. See “Certain Risk Factors”
and “Suitability for Investment”.
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On or about the Closing Date, a notional investment of $142.50 will be made in the Units of the Fund for each $100.00
principal amount of Notes (such amount being notionally comprised of net proceeds of the Offering of $95.00 per Note,
together with a loan amount of $47.50 per Note). The amount of leverage may vary from time to time based on the value of
the Portfolio Units but will be rebalanced monthly, such that the amount of leverage will be maintained at 50% of the Net
Value of the Portfolio, in order to provide 150% exposure to the Fund throughout the term of the Notes, subject to the
occurrence of an Extraordinary Event.
All distributions notionally paid on the Units will be reinvested in additional Units for the Portfolio. No interest or other
amount will be paid during the term of the Notes. See “Description of Notes and Note Program”.
At Maturity, each Holder will receive an amount for each Note equal to the greater of $1.00 (the “Minimum Payment”),
and (ii) the NAV per Note (as herein defined) at maturity (the “Maturity Value”). The NAV per Note, and as a result the
Maturity Value, will vary with the Net Value of the Portfolio and the fees and expenses of the Note Program and may be
affected by a number of other factors beyond the control of the Investment Manager or the Bank. See “Certain Risk
Factors”. If the Value of the Portfolio (as herein defined) decreases or does not increase sufficiently, Holders will
receive less than the amount they invested in the Notes and could lose substantially all of their investment in the
Notes.
Holders of Notes will not have an ownership interest in the Portfolio or the Portfolio Units as a result of their
investment in the Notes and will not have the rights of a direct holder of interests in the Fund. See “The Portfolio”.
BMO Nesbitt Burns Inc. (“BMO Capital Markets”) will provide a secondary market for the sale of Notes by Holders
through the clearing and settlement service operated by FundSERV Inc. (“FundSERV”) but reserves the right not to do so
in the future, in its sole discretion, without prior notice to investors. Except in certain unusual circumstances described
herein, a Note may be sold to BMO Capital Markets through FundSERV on a daily basis at a price equal to the NAV per
Note on the Sale Date (as herein defined) minus any applicable early trading charge. A Holder will not be able to sell a
Note prior to Maturity other than through any secondary market provided by BMO Capital Markets. See “Secondary
Market”.
_________________________________
Price:
$100 Per Note
Minimum Subscription: $2,000 (20 Notes)
_________________________________
Per Note ....................................................................................................
Total assuming maximum Offering size ..................................................
Price to the Public
$100.00
$100,000,000
Agents’ Fee
$5.00
$5,000,000
Proceeds to the Bank
$95.00
$95,000,000
BMO Capital Markets and HSBC Securities (Canada) Inc., as agents, (collectively, the “Agents”) are conditionally offering
the Notes subject to prior sale on a best efforts basis, if, as and when issued by the Bank and accepted by the Agents in
accordance with the conditions contained in the Dealer Agreement among the Bank and the Agents and subject to the
approval of certain legal matters by Torys LLP, as counsel to the Bank, and Stikeman Elliott LLP, as counsel to the Agents.
BMO Capital Markets, one of the Agents, is a wholly-owned subsidiary of BMO Nesbitt Burns Corporation Limited which
is, in turn, an indirect majority-owned subsidiary of the Bank. As a result, the Bank is a related issuer of BMO Capital
Markets under applicable securities legislation. See “Plan of Distribution”.
The closing of this offering (the “Offering”) is scheduled to occur on or about December 19, 2007 or on such other date as
the Bank and the Agents may agree. Subscriptions for the Notes will be received subject to rejection or allotment in whole
or in part and the right is reserved to close the subscription books at any time without notice. Subscription for Notes will be
made through the mutual fund order entry system FundSERV under the mutual fund order code “JHN820”, which will
result in funds being accumulated in a non-interest bearing account of BMO Capital Markets pending execution of all
documents required for this transaction and satisfaction of closing conditions if any. Upon acceptance of a subscription at
closing, a confirmation of acceptance will be sent out by prepaid mail or other means of delivery to the subscriber. If for
any reason the closing of this Offering does not occur, all subscription funds will be returned to subscribers without interest
or deduction.
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The Notes will constitute direct, unconditional obligations of the Bank to the extent the Bank is obligated to make
payments to Holders under the Notes. The Notes will be issued on an unsubordinated basis and will rank pari passu, as
among themselves, and with all other outstanding direct, unsecured and unsubordinated, present and future obligations
(except as otherwise prescribed by law) of the Bank, and will be payable rateably without any preference or priority. The
Notes will not be deposits under the Bank Act or insured under the Canada Deposit Insurance Corporation Act or any
other deposit insurance regime designed to ensure the payment of all or a portion of a deposit upon the insolvency of
the deposit taking financial institution. See “Description of the Notes and Note Program — Rank; No Deposit
Insurance”.
“GGOF” and the Guardian Group of Funds logo are registered trademarks of Guardian Group of Funds Ltd. and have been
licensed for use by BMO Capital Markets Corporation Limited and its affiliates. “BMO (M-bar rounded symbol)” is a
registered trademark of the Bank used under license. “Nesbitt Burns” is a registered trademark and “PARTNRS” and
“PARTNRS (Principal At Risk Notes)” are trademarks of BMO Capital Markets Corporation Limited used under license.
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TABLE OF CONTENTS
Page
FORWARD-LOOKING STATEMENTS............................................................................................................................... 6
DOCUMENTS INCORPORATED BY REFERENCE .......................................................................................................... 6
INFORMATION RELATING TO THE INVESTMENT MANAGER AND THE FUND.................................................... 7
SUITABILITY FOR INVESTMENT..................................................................................................................................... 7
ELIGIBILITY FOR INVESTMENT ...................................................................................................................................... 7
SUMMARY OF THE OFFERING ......................................................................................................................................... 8
GLOSSARY OF TERMS ..................................................................................................................................................... 16
DESCRIPTION OF THE NOTES AND NOTE PROGRAM............................................................................................... 19
Offering................................................................................................................................................................... 19
No Return Until Maturity........................................................................................................................................ 19
Payments at Maturity .............................................................................................................................................. 19
No Redemption Prior to Maturity ........................................................................................................................... 22
Rank; No Deposit Insurance ................................................................................................................................... 23
Credit Rating........................................................................................................................................................... 23
Continuous Disclosure ............................................................................................................................................ 23
NAV PER NOTE .................................................................................................................................................................. 23
Determination of the NAV per Note ....................................................................................................................... 23
Net Value of the Portfolio....................................................................................................................................... 23
Unamortized Offering Expenses ............................................................................................................................. 24
NAV of the Units .................................................................................................................................................... 24
Temporary Suspension of Calculation of the NAV per Note.................................................................................. 24
Consequences of Suspension of Calculation of the NAV per Note ........................................................................ 24
THE PORTFOLIO ................................................................................................................................................................ 24
Objectives of the Notes ........................................................................................................................................... 24
Loan ........................................................................................................................................................................ 25
GGOF DIVIDEND GROWTH FUND ................................................................................................................................. 25
Investment Objectives............................................................................................................................................. 25
Investment Strategies .............................................................................................................................................. 25
Fund Performance ................................................................................................................................................... 27
MANAGEMENT OF THE FUND ....................................................................................................................................... 28
The Investment Manager ........................................................................................................................................ 28
The Investment Advisor.......................................................................................................................................... 28
The Investment Manager and Fund Governance .................................................................................................... 28
SPECIAL CIRCUMSTANCES ............................................................................................................................................ 30
Substitution Event ................................................................................................................................................... 30
Extraordinary Event ................................................................................................................................................ 32
Market Disruption Event......................................................................................................................................... 33
SECONDARY MARKET..................................................................................................................................................... 33
Sale Prior to Maturity.............................................................................................................................................. 33
Early Trading Charge.............................................................................................................................................. 34
ADDITIONAL DETAILS OF THE OFFERING ................................................................................................................. 34
FundSERV .............................................................................................................................................................. 34
Global Deposit Note................................................................................................................................................ 35
Purchase Through FundSERV ................................................................................................................................ 35
Sale Through FundSERV........................................................................................................................................ 35
Settlement of Payments........................................................................................................................................... 36
Deferred Payment ................................................................................................................................................... 36
Book-Entry Only System ........................................................................................................................................ 36
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Global Note............................................................................................................................................................. 37
Definitive Notes ...................................................................................................................................................... 37
Notices to Holders................................................................................................................................................... 37
Amendments to the Notes ....................................................................................................................................... 37
EARNINGS COVERAGE RATIOS..................................................................................................................................... 37
PLAN OF DISTRIBUTION ................................................................................................................................................. 38
USE OF PROCEEDS............................................................................................................................................................ 39
THE NOTE PROGRAM MANAGER.................................................................................................................................. 39
THE CALCULATION AGENT ........................................................................................................................................... 40
CONFLICTS OF INTEREST ............................................................................................................................................... 40
INDEPENDENT REVIEW COMMITTEE FOR THE NOTE PROGRAM......................................................................... 40
FEES AND EXPENSES OF THE NOTE PROGRAM ........................................................................................................ 40
Initial Fees and Expenses........................................................................................................................................ 40
Note Program Fee ................................................................................................................................................... 41
Loan Expense.......................................................................................................................................................... 41
General.................................................................................................................................................................... 41
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS ....................................................................... 41
Payment at Maturity or Early Redemption ............................................................................................................. 42
Disposition of Notes Prior to Maturity.................................................................................................................... 42
CERTAIN RISK FACTORS................................................................................................................................................. 42
Risks Relating to the Offering................................................................................................................................. 42
Risks Relating to the Fund ...................................................................................................................................... 47
LEGAL MATTERS .............................................................................................................................................................. 48
APPENDIX “A” AUDITORS’ CONSENT ............................................................................................................................ 1
CERTIFICATE OF THE AGENTS........................................................................................................................................ 1
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FORWARD-LOOKING STATEMENTS
Certain statements included in this pricing supplement constitute forward-looking statements, including those
identified by the expressions “anticipate”, “believe”, “plan”, “estimate”, “expect”, “intend” and similar expressions to the
extent they relate to the Bank, the Investment Manager or the Portfolio. The forward-looking statements are not historical
facts but reflect the Bank’s current expectations regarding future results or events and are based on information currently
available to management. Reference is also made to the disclosure relating to forward-looking statements on page 28 of the
Bank’s 2006 Annual Report, which disclosure is incorporated herein by reference. These forward-looking statements are
subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current
expectations or a forecast, projection or conclusion in such forward-looking statements, including the matters discussed
under “Certain Risk Factors” and in other sections of this pricing supplement.
DOCUMENTS INCORPORATED BY REFERENCE
This pricing supplement is deemed to be incorporated by reference into the short form base shelf prospectus of the
Bank dated April 13, 2007 (the “Prospectus”), solely for the purpose of offering the Notes.
The following documents, filed by the Bank with the Superintendent of Financial Institutions (the
“Superintendent”) and the various securities commissions or similar authorities in Canada, are specifically incorporated
by reference into and form an integral part of this pricing supplement:
(a)
Annual Information Form dated December 18, 2006;
(b)
audited consolidated financial statements as at and for the year ended October 31, 2006 with comparative
consolidated financial statements as at and for the year ended October 31, 2005, together with the
auditors’ report thereon and the auditors’ report on internal control over financial reporting under
Standards of the Public Company Accounting Oversight Board (United States) and Management’s
Discussion and Analysis as contained in pages 22 to 133 of the Bank’s Annual Report for the year ended
October 31, 2006;
(c)
material change report dated December 5, 2006 with respect to the retirement of Tony Comper from the
position of President and Chief Executive Officer of BMO Financial Group and the appointment of Bill
Downe to such position effective March 1, 2007;
(d)
the Bank’s Management Proxy Circular dated January 11, 2007 in connection with the annual meeting of
shareholders of the Bank held on March 1, 2007 (excluding those portions which, pursuant to National
Instrument 44-101, are not required to be incorporated by reference);
(e)
unaudited consolidated interim financial statements as at and for the three-month and nine-month periods
ended July 31, 2007 and July 31, 2006 and Management’s Discussion and Analysis, contained in pages 5
to 37 of the Bank’s Third Quarter 2007 Report to Shareholders for the three-month and nine-month
periods ended July 31, 2007;
(f)
amended and restated material change report dated April 27, 2007 with respect to mark-to-market
commodity trading losses to be recorded in the second quarter of the 2007 fiscal year; and
(g)
material change report dated May 17, 2007 with respect to an update of the mark-to-market commodity
trading losses to be recorded by the Bank in the first and second quarters of its 2007 fiscal year.
Any statement contained in the Prospectus, this pricing supplement or a document incorporated or deemed to be
incorporated by reference herein or in the Prospectus for the purposes of the Offering shall be deemed to be modified or
superseded for purposes of this pricing supplement to the extent that a statement contained herein, in the Prospectus or in
any other subsequently filed document which also is or is deemed to be incorporated by reference herein or in the
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Prospectus modifies or supersedes such statement. The modifying or superseding statement need not state that it has
modified or superseded a prior statement nor include any other information set forth in the document that it modifies or
supersedes. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to
constitute a part of this pricing supplement. The making of a modifying or superseding statement is not to be deemed an
admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an
untrue statement of a material fact or an omission to state a material fact that was required to be stated or that was necessary
to make a statement not misleading in light of the circumstances in which it was made.
INFORMATION RELATING TO THE INVESTMENT MANAGER AND THE FUND
This pricing supplement has been prepared for the sole purpose of assisting prospective investors in making an
investment decision with respect to the Notes. The Bank has taken reasonable care to ensure that the facts stated in this
pricing supplement with respect to the Notes are true and accurate in all material respects. All information in this pricing
supplement relating to the Investment Manager and the Fund has been provided by the Investment Manager or is taken
from publicly available documents, including the simplified prospectus of the Fund dated July 5, 2007 (the “Fund’s
Prospectus”) and the annual information form of the Fund dated July 5, 2007 (the “Fund’s AIF”) available on SEDAR
(www.SEDAR.com) (see “Guardian Group of Funds No. 3”) and/or the Investment Manager’s website (www.ggof.com),
and is subject to any modifications made to such information, whether through periodic renewal of the Fund’s Prospectus
and the Fund’s AIF or through other documents filed pursuant to other continuous disclosure filing requirements to which
the Fund is subject under applicable law. The Bank makes no assurances, representations or warranties with respect to the
accuracy, reliability or the completeness of information obtained from third parties, including information provided by the
Investment Manager and the Fund. Furthermore, the Bank makes no recommendation concerning the Investment Manager,
the Fund, investment funds as an asset class, or the suitability of investing in securities generally.
SUITABILITY FOR INVESTMENT
An investment in the Notes is suitable only for investors prepared to assume risks with respect to a return tied to the
performance of the Portfolio. The return on the Notes, if any, is uncertain and an investor may not be repaid his or her
original investment, other than the Minimum Payment, at Maturity. A person should only reach a decision to invest in the
Notes after carefully considering, with his or her advisors, the suitability of this investment in light of his or her investment
objectives and the information set out in this pricing supplement. The Notes are not conventional indebtedness in that they
do not provide a return or income stream prior to Maturity and the return at Maturity is not calculated by reference to a
fixed or floating rate of interest that is determined prior to Maturity. It is possible that the Portfolio will not appreciate
in value at Maturity and, therefore, the Notes could produce no return at Maturity, other than the Minimum
Payment. Investors could lose substantially all of their investment in the Notes. Accordingly, the Notes are not
suitable investments for a Holder if the Holder needs or expects to receive any payments during the term of the Notes, any
return or a specific return on investment or to have the principal repaid at Maturity or otherwise. The Notes are generally
designed for investors with a long-term investment horizon who are prepared to assume risk with respect to a return tied to
the performance of the Portfolio and risk with respect to a loss of principal. The Notes are not a suitable investment for a
prospective purchaser who does not understand their terms or the risks involved in holding the Notes. There is no
assurance that the Portfolio will be able to meet the investment objectives of the Notes or avoid losses. Prospective
purchasers should take into account certain additional risk factors associated with this Offering. See “Certain Risk
Factors”.
ELIGIBILITY FOR INVESTMENT
In the opinion of Torys LLP, counsel to the Bank, the Notes offered hereby will, at the date of issue, be qualified
investments for trusts governed by registered retirement savings plans, registered retirement income funds, registered
education savings plans or deferred profit sharing plans (other than a trust governed by a deferred profit sharing plan to
which contributions are made by the Bank or by an employer with which the Bank does not deal at arm’s length within the
meaning of the Income Tax Act (Canada) (the “Tax Act”)) and pursuant to proposed amendments to the Tax Act regarding
registered disability savings plans.
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SUMMARY OF THE OFFERING
This is a summary of the Offering under this pricing supplement. Because this is a summary, it does not contain all of the information that may be
important to investors, and investors should read the more detailed information appearing elsewhere in this pricing supplement. In this summary, “$”
refers to Canadian dollars, unless otherwise specified, the “Bank” refers to Bank of Montreal and “BMO Capital Markets” refers to a company owned by
the Bank called BMO Nesbitt Burns Inc. and any of its affiliates. Capitalized terms that are used but not defined in this summary are defined in “Glossary
of Terms” and elsewhere in this pricing supplement.
Issue:
Bank of Montreal PARTNRS (Principal At Risk Notes) GGOF Dividend Growth Fund Total Return
Class, Series 1, Due December 19, 2017.
Issuer:
Bank of Montreal.
Subscription
Price:
$100 per Note.
Minimum
Subscription:
A Holder must invest a minimum of $2,000 (20 Notes).
Issue Size:
The Bank will issue a maximum of $100,000,000 of Notes.
Closing Date:
The Notes will be issued on or about December 19, 2007.
Maturity Date:
The Notes will mature on or about December 19, 2017 (“Maturity”). The term to Maturity is
approximately 10 years. The Notes are not redeemable at the option of the Bank, subject to the
occurrence of an Extraordinary Event, or the Holder.
Investment
Objectives:
The Notes will provide Holders with 150% exposure to the total return of the Mutual Fund Units
(the “Units”) of the GGOF Dividend Growth Fund (the “Fund”). The Portfolio has been designed
with the objective of providing Holders with an enhanced return based on the long-term capital
appreciation of the Portfolio.
Loan:
The Notes offer leveraged exposure to the Fund targeted at 50% of the Net Value of the Portfolio
throughout the term of the Notes. The Portfolio will notionally borrow funds from the Bank at an
annual rate equal to the Bankers’ Acceptance Rate plus one-quarter of one percent, accrued daily
and paid monthly (a “Loan”) to purchase additional Units for the Portfolio. The aggregate amount
of the Loan will initially equal 50% of the Net Value of the Portfolio. The Loan, together with other
forms of leverage, may vary from time to time based on the value of the Units in the Portfolio but
will be rebalanced monthly, such that the amount of leverage will be maintained at 50% of the Net
Value of the Portfolio, in order to provide 150% exposure to the Fund throughout the term of the
Notes. See “The Portfolio — Loan”.
No Return Until
Maturity:
All distributions notionally paid on the Units will be reinvested in additional Units for the Portfolio.
No interest or other amount will be paid during the term of the Notes.
Payments at
Maturity:
The Notes will mature on or about December 19, 2017. At Maturity, each Holder will receive an
amount for each Note equal to the greater of $1 and the NAV per Note on the Maturity Date (the
“Maturity Value”). See “NAV per Note — Determination of the NAV per Note”. The NAV per
Note will vary throughout the term with the Net Value of the Portfolio and the fees and expenses of
the Note Program and may be affected by a number of other factors beyond the control of the
Investment Manager or the Bank. As a result, the Maturity Value will not be determinable before
the Valuation Date. See “Certain Risk Factors”. The Net Value of the Portfolio will be $95.00 per
Note on the Closing Date. If the Value of the Portfolio decreases or does not increase sufficiently,
Holders will receive less than the amount they invested in the Notes. The Notes do not guarantee
any return of principal at or prior to Maturity, other than the Minimum Payment, and as
such, Holders could lose substantially all of their investment in the Notes. In addition, because
the ongoing fees and expenses of the Note Program reduce the amount of return, the Value of the
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Portfolio must increase sufficiently in order for Holders to receive at or prior to Maturity at least the
amount they invested in the Notes.
NAV Per Note:
The NAV per Note on any Business Day will be the Net Value of the Portfolio plus Unamortized
Offering Expenses divided by the number of Notes outstanding on such Business Day, as calculated
by the Note Program Manager as at the close of business and published on FundSERV. The NAV
per Note will also be published daily at www.globefund.com, at www.bmosp.com and in the
national edition of a major Canadian newspaper.
The net value of the Portfolio (the “Net Value of the Portfolio”) will be calculated by the
Calculation Agent and will be the Value of the Portfolio less Note Liabilities. The value of the
Portfolio (the “Value of the Portfolio”) will be calculated by the Calculation Agent and will be the
product of the Unit Price and the Number of Portfolio Units. The Net Value of the Portfolio upon
issuance will be $95.00 per Note. On any Business Day, the “Note Liabilities” shall be all
liabilities of the Note Program and Portfolio, which are any notionally borrowed funds, accrued and
unpaid interest charges and Note Program Fees.
The “Unamortized Offering Expenses” are for a Business Day (i) within one year of the Closing
Date, 5.00% of the Issue Amount, (ii) during the second year from the Closing Date, 3.25% of the
Issue Amount, (iii) during the third year from the Closing Date, 1.50% of the Issue Amount, and (iv)
three years after the Closing Date, nil. (See “NAV Per Note”.)
The Portfolio:
The Portfolio is a notional portfolio of Units of the GGOF Dividend Growth Fund, a Canadian
equity mutual fund managed by the Investment Manager. The concept of a “notional portfolio”
means that the portfolio is a fictional portfolio, with no actual investment in the Units, used solely as
a reference to calculate the amount payable on the Notes at Maturity. All actions (e.g., purchases,
sales, liquidations, loan drawdowns and repayments, etc.) taken in connection with the Portfolio are
notional actions only.
Although the Portfolio will be comprised of Units, the unit price used to calculate the Value of the
Portfolio will be the net asset value of the Units, adjusted to remove the management fees and
operating expenses otherwise charged by the Fund on such Units. As a result, the Portfolio will be
comprised of mutual fund units with no management fees or operating expenses (the “Portfolio
Units”). All distributions notionally paid on the Portfolio Units will be reinvested in additional
Units for the Portfolio.
In certain special circumstances, the Bank has the ability to substitute the Fund with another
Canadian mutual fund managed by the Investment Manager having similar investment objectives.
See “Special Circumstances — Substitution Event”
GGOF Dividend
Growth Fund:
Investment Objective & Strategies
The Fund’s objective is to generate a relatively high return that includes dividend income and some
capital gains, from any increase in the value of the securities held by the Fund by investing primarily
in dividend-yielding common and preferred shares of established Canadian companies. It may also
invest in fixed income securities.
The Investment Advisor uses a bottom-up selection process which emphasizes growth in earnings
and dividend payouts, while also taking into account the valuation of the companies so chosen. The
Fund may hold foreign investments.
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Top 10 Holdings
(as at September 30, 2007)
% of
Net Assets
Investment
The Toronto-Dominion Bank
7.09
Manulife Financial Corporation
6.27
Royal Bank of Canada
6.11
Canadian Imperial Bank of Commerce
5.44
Bank of Nova Scotia
5.28
Sun Life Financial Inc.
4.88
Power Financial Corporation
4.48
Alcan Inc.
3.24
Imperial Oil Limited
3.19
Husky Energy Inc.
3.06
Aggregate % of Top 10 Holdings =
49.04% of Fund’s Net Assets
Country
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Sector Allocations
Consumer Staples
3.28%
Utilities
1.55%
Cash & Equivalents
5.40%
Industrial
4.69%
Materials
5.79%
Financials
48.00%
Telecommunication
Services
7.09%
Consumer
Discretionary
8.03%
Energy
15.18%
See “GGOF Dividend Growth Fund” for more details on the investment strategies and holdings of
the Fund and the historical performance of the Units.
Investment
Manager:
Guardian Group of Funds Ltd., an indirect, wholly-owned subsidiary of the Bank, is the manager of
the Fund. The Investment Manager is responsible for the day-to-day administration and operation of
the Fund. For further information, see “Management of the Fund - The Investment Manager”.
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Investment
Advisor:
Jones Heward Investment Counsel Inc., an indirect wholly-owned subsidiary of the Bank, is the
investment advisor to the Fund. Jones Heward has managed money for Canadians since 1925 and,
as of September 30, 2007, had over $34 billion in assets under management. The Jones Heward
investment management team employs a bottom-up investment process using fundamental analysis
to identify attractively priced equity securities.
The individual who is primarily responsible for managing the Fund is Mr. Michael Stanley. Mr.
Stanley is the Chief Executive Officer, President and Chief Investment Officer at Jones Heward and
has over 27 years of experience in the investment industry.
See “Management of the Portfolio” and “Certain Risk Factors — Risks Relating to the Offering —
Conflicts of Interest”.
Calculation Agent:
BMO Capital Markets. BMO Capital Markets has delegated the calculation of NAV per Note to
Jones Heward Investment Counsel Inc., an indirect wholly-owned subsidiary of the Bank.
Secondary
Market:
BMO Capital Markets will arrange for a secondary market for the sale of Notes by Holders through
FundSERV but reserves the right to elect not to do so in the future in its sole discretion and is under
no obligation to provide prior notice to investors of any such election. The Notes may be sold to
BMO Capital Markets through FundSERV on a daily basis. A Holder who sells a Note to BMO
Capital Markets prior to Maturity will receive proceeds equal to the NAV per Note, minus any
applicable Early Trading Charge (see below).
If a Note is sold within the first three years, the proceeds from the sale of the Note will be reduced
by an early trading charge (“Early Trading Charge”) equal to a percentage of the Subscription
Price determined as follows:
If Sold During
First year after Closing Date
Second year after Closing Date
Third year after Closing Date
Thereafter
Early Trading Charge
(% of Subscription Price)
5.00%
3.25%
1.50%
Nil
A Holder will not be able to sell a Note prior to Maturity other than through any secondary market
provided by BMO Capital Markets. The secondary market may be temporarily suspended if, for any
reason, the value of the Units is not available. See “NAV per Note — Temporary Suspension”.
A Holder should consult his or her investment advisor as to whether it would be more favourable in
the circumstances at any time to sell the Notes (assuming the availability of a secondary market) or
hold the Notes until the Maturity Date (as defined herein). A Holder should also consult his or her
tax advisor as to the tax consequences arising from a sale of a Note prior to the Maturity Date as
compared to holding the Note until the Maturity Date. See “Certain Canadian Federal Income Tax
Considerations”.
BMO Capital Markets or the Bank, or any of their respective affiliates, may at any time purchase
Notes at any price in the open market or by private agreement, subject to applicable laws. See
“Secondary Market”.
Special
Circumstances:
If, as a consequence of a Market Disruption Event, it is not possible to determine the Maturity Value
for the Notes on the Valuation Date, the calculation and payment of the Maturity Value may be
postponed. Upon the occurrence of a Substitution Event, the Bank may replace a Fund with another
mutual fund managed or sponsored by the Investment Manager having similar investment objectives
to the Fund. If a replacement fund is not available or some other Extraordinary Event has occurred,
the Bank may choose to make an accelerated payment to Holders prior to Maturity. In such
circumstances, the Bank will seek market quotations confirming the value of any such Early
Redemption of Notes. See “Special Circumstances”.
S-11
Use of Proceeds:
The Bank will use the net proceeds of the Offering for general banking purposes. The Bank and/or
its affiliates may use all or any portion of the proceeds in transactions intended to hedge the Bank’s
obligations under the Notes, including forward and option contracts. The Bank may benefit from
any difference between the amount it is obligated to pay under the Notes, net of related expenses,
and the returns it may generate in hedging such obligation.
Rank:
The Notes will constitute direct, unconditional obligations of the Bank to the extent the Bank is
obligated to make payments to Holders under the Notes. The Notes will be issued on an
unsubordinated basis and will rank pari passu, as among themselves, and with all other outstanding
direct, unsecured and unsubordinated, present and future obligations (except as otherwise prescribed
by law) of the Bank, and will be payable ratably without any preference or priority. The Notes will
not be deposits under the Bank Act or insured under the Canada Deposit Insurance
Corporation Act or any other deposit insurance regime designed to ensure the payment of all
or a portion of a deposit upon the insolvency of the deposit taking financial institution. See
“Description of the Notes and Note Program ─ Rank; No Deposit Insurance”.
Credit Rating:
As at the date of this pricing supplement, the deposit liabilities of the Bank with a term to maturity
of more than one year were rated AA by DBRS, A+ by S&P and Aa1 by Moody’s. The Notes have
not been rated. There can be no assurance that, if the Notes were specifically rated by these rating
agencies, they would have the same rating as the other unsubordinated indebtedness of the Bank. A
rating is not a recommendation to buy, sell or hold investments, and may be subject to revision
or withdrawal at any time by the relevant rating agency. See “Description of the Notes and
Note Program ─ Credit Rating”.
Conflicts of
Interest:
The Bank is the issuer of the Notes. BMO Capital Markets, a wholly-owned subsidiary of BMO
Nesbitt Burns Corporation Limited which is, in turn, an indirect majority-owned subsidiary of the
Bank, is the Agent and the Calculation Agent for the Notes. Guardian Group of Funds Ltd., an
indirect wholly-owned subsidiary of the Bank, is the Investment Manager and Jones Heward
Investment Counsel Inc, an indirect wholly-owned subsidiary of the Bank, is the Investment
Advisor. The Notes will be sold by dealers and other firms, which will include the Bank’s related
entities such as BMO Nesbitt Burns. All of the parties referred to above will receive fees in
connection with their roles in the distribution of the Notes, payable from the Agents’ fees, or in case
of the management of the Fund, payable from the Note Program Fee.
Independent
Review
Committee:
The Bank will establish an independent review committee for the Note Program to review and make
recommendations on conflict of interest matters that could arise under the Note Program between
Holders of Notes and the Bank, the Investment Manager and entities related to either of them. The
standard of care of the committee members will be to act honestly and in good faith, with a view to
the best interest of the Holders, having regard to the structure and the terms of the Notes, and the
legitimate interest of the Bank in hedging its obligations under the Notes. The committee will
prepare an annual report which will be posted at www.bmosp.com. See “Independent Review
Committee”.
Book-Entry Only
System:
A global note for the full amount of this Offering will be issued in registered form to CDS and will
be deposited with a depository or nominee as the owner of the Notes, initially to be CDS, on the
Closing Date. Only in limited circumstances will certificates evidencing the Notes be available to
Holders and registration of interests in the Notes will be made through CDS’s book-entry only
system. See “Additional Details of the Offering ─ Book-Entry Only System” and “Additional
Details of the Offering - Global Note”.
FundSERV:
Notes may be purchased through the order entry system of FundSERV. The FundSERV entry code
for the Notes is JHN820. No interest will be paid on account of funds deposited through FundSERV
pending closing of the offering or the return of such funds if subscriptions are rejected or not fully
allotted. See “FundSERV” for a description of the mechanics and restrictions involved in the use of
FundSERV for the purchase and sale of the Notes.
S-12
Eligibility:
In the opinion of Torys LLP, counsel to the Bank, the Notes offered hereby will, at the date of issue,
be qualified investments for trusts governed by registered retirement savings plans, registered
retirement income funds, registered education savings plans or deferred profit sharing plans (other
than a trust governed by a deferred profit sharing plan to which contributions are made by the Bank
or by an employer with which the Bank does not deal at arm’s length within the meaning of the Tax
Act) and pursuant to proposed amendments to the Tax Act regarding registered disability savings
plans.
Certain Canadian
Federal Income
Tax
Considerations
This income tax summary applies to an Initial Holder who is resident in Canada and is subject to the
limitations and qualifications set out under the heading “Certain Canadian Federal Income Tax
Considerations” in the body of this pricing supplement.
In the opinion of Torys LLP, counsel to the Bank, an Initial Holder who holds a Note at the Maturity
Date or Early Redemption Date will be required to include in his or her income for the taxation year
which includes the Maturity Date or Early Redemption Date, the amount, if any, by which the
Maturity Value or Redemption Value exceeds the Subscription Price. At Maturity or Early
Redemption an Initial Holder will be considered to have disposed of the Note and therefore may
realize a capital loss.
While the matter is not free from doubt, a disposition or deemed disposition of a Note prior to the
Valuation Date by an Initial Holder should give rise to a capital gain (or capital loss) to the extent
that the proceeds of disposition exceed (or are less than) the aggregate of the Initial Holder’s
adjusted cost base of the Note and any reasonable costs of disposition. An Initial Holder who
disposes of a Note prior to Maturity should consult his or her tax advisor with respect to his or her
particular circumstances. See “Certain Canadian Federal Income Tax Considerations”.
Certain Risk
Factors:
The Notes are not conventional notes or debt securities in that they do not provide Holders with a
return or income stream prior to Maturity calculated by reference to a fixed or floating rate of
interest that is determinable prior to Maturity nor do they provide Holders with any assurance that
the principal amount of the Notes will be paid at or prior to Maturity, other than the Minimum
Payment. The Notes, unlike traditional debt obligations of Canadian chartered banks, are
speculative or uncertain in that they could produce no return on the Holder’s original investment and
may not repay any principal amount at or prior to Maturity, other than the Minimum Payment.
Prospective investors should carefully consider all of the information set forth in this Pricing
Supplement and the Prospectus and, in particular, should evaluate the specific risk factors set forth
under “Certain Risk Factors”.
Risk factors relating to the Notes include but are not limited to the following:
•
•
•
•
•
•
•
•
•
The Notes are not suitable for all investors
The return on the Notes will be uncertain until Maturity and investors could lose their
original investment in the Notes
Past performance of the Fund will not be indicative of future returns of the Fund or the
Notes
Holders have no ownership interest in the Fund referenced in the Portfolio
The payment of the Maturity Value will be dependent upon the creditworthiness of the
Bank
The Notes will not be insured by the Canada Deposit Insurance Corporation or any other
entity
There is no assurance of a secondary market and any such secondary market may be
illiquid or offer prices that may not reflect appreciation in the value of the Portfolio
Conflicts of interest may affect the Calculation Agent
The Calculation Agent may postpone the determination of the Maturity Value or the
Maturity Date if a Market Disruption Event occurs on the Valuation Date
S-13
Risk factors relating to the Fund include but are not limited to the following:
•
•
•
•
•
•
•
•
Class risk
Foreign market risk
Repurchase/reverse repurchase risk
Substantial unitholder risk
Currency risk
Market risk
Securities lending risk
Volatility risk
The foregoing is not a comprehensive list of risk factors and prospective purchasers should take into
account additional risk factors associated with this offering. See “Certain Risk Factors”.
Continuous
Disclosure:
The Bank will make certain information regarding the Notes and the Portfolio available at
www.bmosp.com, including the daily NAV per Note and a description of the Portfolio on a
quarterly basis.
S-14
SUMMARY OF FEES AND EXPENSES OF THE NOTE PROGRAM
The following table contains a summary of the fees and expenses in respect of the Note Program. For further particulars,
see “Fees and Expenses” of the Note Program.
Fees payable to the Agents for
selling the Notes:
$5.00 per Note (5.00% of the Subscription Price) will be paid out of the
proceeds of the Offering on or about the Closing Date.
Note Program Fee:
As compensation for management of the Note Program, the Note Program
Manager is entitled to receive an annual fee of 2.00% of the Net Value of
the Portfolio (the “Note Program Fee”). The Note Program Fee will be
calculated daily and payable monthly in arrears to the Note Program
Manager.
From the Note Program Fee, the Note Program Manager will be responsible
for paying (i) certain management fees to the Investment Manager for the
management services provided by it in respect of the Units notionally held
in the Portfolio (the “Investment Management Fee”), and (ii) 0.50% per
annum of the Net Value of the Portfolio per Note for the first 9 years from
the Closing Date to sales representatives of qualified selling members in
respect of Notes held by their clients (the “Service Fee”).
Loan Expense:
In order to provide increased exposure to the Fund, the Portfolio will
notionally borrow funds through the Loan with the Bank at an annual rate
equal to the Bankers’ Acceptance Rate plus one-quarter of one percent,
accrued daily and paid monthly. Any interest expense that accrues on the
Loan will be paid by notionally selling Portfolio Units.
The Note Program Fee and Loan Expense will be paid by reducing the Number of Portfolio Units, therefore ultimately
reducing the Value of the Portfolio. The Bank will not charge any other fee or seek reimbursement of any other expense
under the Note Program. For certainty, all other expenses of the Offering (other than the fees payable to the Agents
described above) will be borne by the Bank.
Holders wishing to sell their Notes within the first three years of their issuance will be subject to an early trading charge of
up to 5.00% of the Subscription Price per Note. See “Secondary Market — Sale Prior to Maturity” for a description of the
early trading charge. The NAV per Note quoted in the secondary market will be before the deduction of any applicable
Early Trading Charge.
In order for the payment at Maturity to exceed the principal amount of the Notes, the return generated by the Portfolio from
the Closing Date to the Valuation Date will have to exceed the ongoing fees and expenses of the Note Program.
S-15
GLOSSARY OF TERMS
In addition to the terms defined in the Prospectus and elsewhere in this pricing supplement, unless the context
otherwise requires terms not otherwise defined in this pricing supplement will have the meaning ascribed thereto hereunder:
“Actualized NAV” has the meaning ascribed thereto under “Special Circumstances — Extraordinary Event”.
“Agents” means BMO Capital Markets and HSBC Securities (Canada) Inc.
“Bankers’ Acceptance Rate” means an annual rate of interest equal to the prevailing market one-month bankers’
acceptance rate as determined by the Calculation Agent.
“BMO Capital Markets” means BMO Nesbitt Burns Inc.
“Book-Entry Only System” means the record entry securities transfer and pledge system established and governed by one
or more agreements between CDS and CDS Participants pursuant to which the operating rules and procedures for such
system are established and administered by CDS, including in relation to CDS.
“Business Day” means a day (other than a Saturday, a Sunday or a statutory holiday) on which commercial banks are open
for business in Toronto, Ontario.
“Calculation Agent” means BMO Capital Markets or a person appointed by BMO Capital Markets to act as calculation
agent for the Note Program. BMO Capital Markets has delegated the calculation of NAV per Note to Jones Heward
Investment Counsel Inc.
“CDS” means CDS Clearing and Depository Services Inc. or its nominee.
“CDS Participant” means a broker, dealer, bank or other financial institution or other person for whom CDS effects bookentry transfers and pledges of Notes under the Book-Entry Only System.
“Closing Date” means a Business Day on or about December 19, 2007 or such other date as the Bank and the Agents may
agree.
“CRA” means Canada Revenue Agency.
“DBRS” means Dominion Bond Rating Service Limited.
“Dealer Agreement” means the dealer agreement dated October 12, 2007 among BMO Capital Markets, HSBC Securities
(Canada) Inc., the Investment Manager and the Bank.
“Early Redemption” has the meaning ascribed thereto under “Special Circumstances — Extraordinary Event”.
“Early Redemption Date” has the meaning ascribed thereto under “Special Circumstances — Extraordinary Event”.
“Extraordinary Event” has the meaning ascribed thereto under “Special Circumstances — Extraordinary Event”.
“Fund” means GGOF Dividend Growth Fund.
“Fund’s AIF” means the annual information form of the Fund dated July 5, 2007.
“Fund’s Prospectus” means the simplified prospectus of the Fund dated July 5, 2007.
“FundSERV” means the mutual fund order entry system operated by FundSERV Inc.
“FundSERV Notes” means Notes purchased through FundSERV.
S-16
“Fund Substitution” has the meaning ascribed thereto under “Special Circumstances — Substitution Event”.
“Global Note” means the global note representing the aggregate principal amount of the Notes issued on the closing of this
Offering.
“Holder” means holders of Notes from time to time.
“Initial Holder” means a Holder who purchases Notes at the time of their issuance.
“Investment Advisor” means Jones Heward Investment Counsel Inc., an indirect wholly-owned subsidiary of the Bank
and the portfolio advisor to the Fund.
“Investment Manager” means Guardian Group of Funds Ltd., an indirect wholly-owned subsidiary of the Bank and
manager of the Fund.
“Issue Amount” means the number of Notes outstanding multiplied by the Subscription Price.
“Loan” has the meaning ascribed thereto under “The Portfolio — Loan”.
“Loan Amount” has the meaning ascribed thereto under “The Portfolio — Loan”.
“Market Disruption Event” has the meaning ascribed thereto under “Special Circumstances — Market Disruption Event”.
“Maturity” or “Maturity Date” means on or about December 19, 2017.
“Maturity Value” means the amount per Note each Holder will receive at Maturity that is equal to the greater of the
Minimum Payment and the NAV per Note on the Maturity Date.
“Minimum Payment” means a principal repayment of $1.00 per Note at Maturity.
“Moody’s” means Moody’s Investors Service Inc.
“NAV” means net asset value.
“NAV per Note” means, for a Business Day, the Net Value of the Portfolio plus the Unamortized Offering Expenses
divided by the number of Notes outstanding on such Business Day, as calculated by the Note Program Manager.
“Net Value of the Portfolio” means the Value of the Portfolio less the Note Liabilities.
“Note Liabilities” means, on any Business Day, the liabilities of the Note Program and Portfolio, which are any notionally
borrowed funds and all accrued and unpaid interest charges and Note Program Fees.
“Note Program” means the Bank of Montreal Note Program administered by the Note Program Manager.
“Note Program Fee” is an annual fee of 2.00% of the Net Value of the Portfolio.
“Note Program Manager” means BMO Capital Markets or other person appointed by the Bank in its sole discretion.
“Number of Portfolio Units” has the meaning ascribed thereto under “NAV Per Note — Value of the Portfolio”.
“Offering” means the offering of these Notes to prospective investors under this pricing supplement.
“Offering Expenses” means $5.00 per Note (or 5.00% of the principal amount of the Notes).
“Portfolio” means a notional portfolio comprised of Portfolio Units.
S-17
“Portfolio Units” means the notional Units of the Fund comprising the Portfolio.
“Redemption Value” means the amount per Note that each Holder will receive on the Early Redemption Date that is equal
to the greater of the Minimum Payment and the Actualized NAV per Note as more particularly described under “Special
Circumstances — Extraordinary Event”.
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies (Canada) Corporation.
“Sale Date” means the date established by FundSERV as the date on which a request to sell a Note is sent and received in
FundSERV.
“Subscription Price” means $100 per Note.
“Substitution Event” has the meaning ascribed thereto under “Special Circumstances — Substitution Event”.
“Tax Act” means the Income Tax Act (Canada) and the regulations thereunder, as amended from time to time.
“Unamortized Offering Expenses” means, for a Business Day (i) within one year of the Closing Date, 5.00% of the Issue
Amount, (ii) during the second year from the Closing Date, 3.25% of the Issue Amount, (iii) during the third year from the
Closing Date, 1.50% of the Issue Amount, and (iv) three years after the Closing Date, nil.
“Unit Price” means the price for a Unit, adjusted to remove the management fees and operating expenses otherwise
charged by the Fund on such Units.
“Units” means the Mutual Fund Units of the Fund, being a separate class of units of the Fund sold generally to retail
investors.
“Valuation Date” means the third Business Day immediately preceding the Maturity Date, subject to the occurrence of a
Market Disruption Event.
“Value of the Portfolio” means, on any day, a number (rounded to three decimal places) equal to the product of (i) the
Number of Portfolio Units and (ii) the Unit Price on that day.
“$” means Canadian dollars, unless otherwise specified.
S-18
DESCRIPTION OF THE NOTES AND NOTE PROGRAM
The following is a summary of the material attributes and characteristics relating to the Notes offered hereby and
how purchases thereof may be effected. Reference is made to the certificate representing the Global Note referred to below
which contains the full text of such attributes and characteristics.
Offering
The Notes are being issued by the Bank with a subscription price of $100 per Note (the “Subscription Price”) and
a minimum subscription of $2,000 (20 Notes). The Notes are denominated in Canadian dollars. The Bank will pay all
amounts on the Notes in Canadian dollars. The maximum issue size will be an aggregate amount of $100,000,000 for the
Offering.
The Bank is offering the Notes through the mutual fund order entry system FundSERV. Subscriptions for Notes
will be made through FundSERV under the mutual fund order code “JHN820”, which will result in funds being
accumulated in a non-interest bearing account of BMO Capital Markets pending execution of all documents required for
this transaction and satisfaction of closing conditions, if any. Funds in respect of all subscriptions shall be payable at the
time of subscription.
Orders for purchases of Notes may be accepted in whole or in part, and the Bank reserves the right to allot Notes
to investors in an amount less than that subscribed for by the investor. The Bank reserves the right to discontinue accepting
subscriptions at any time without notice. The Bank may at any time prior to the Closing Date, in its discretion, elect
whether or not to proceed in whole or in part with the issue of the Notes.
The Bank may from time to time issue any additional series of Notes or any other Notes or other debt instruments
(which may or may not resemble the Notes) which may be offered by the Bank concurrently with the Offering.
Amounts, if any, paid to Holders of the Notes will depend on the performance of the Portfolio. The Bank
does not guarantee that Holders will receive an amount equal to the amount invested in the Notes and does not
guarantee that any return will be paid on the Notes. Since the principal amount of the Notes will not be guaranteed
and will be at risk, Holders may not receive any amount at or prior to Maturity, other than the Minimum Payment,
and may lose substantially all of their investment in the Notes. See “Certain Risk Factors”.
No Return Until Maturity
All distributions notionally paid on the Units will be reinvested in additional Units for the Portfolio. No interest or
any other payment will be paid during the term of the Notes.
Payments at Maturity
The Notes will mature on or about December 19, 2017. At Maturity, each Holder will receive an amount for each
Note equal to the Maturity Value, which is the greater of the Minimum Payment and the NAV per Note on the Maturity
Date as described below. See also “NAV per Note — Determination of the NAV per Note”. The NAV per Note will vary
through the term with the Net Value of the Portfolio and the fees and expenses of the Note Program and may be affected by
a number of other factors beyond the control of the Investment Manager or the Bank. As a result, the Maturity Value will
not be determinable before the Valuation Date. See “Certain Risk Factors”. The Net Value of the Portfolio will be $95.00
per Note on the Closing Date. If the Value of the Portfolio decreases or does not increase sufficiently, Holders will receive
less than the amount they invested in the Notes. The Notes do not guarantee any return of principal at or prior to Maturity
other than the Minimum Payment, and as such, Holders could lose substantially all of their investment in the Notes. In
addition, because the ongoing fees and expenses of the Note Program reduce the amount of return, the Value of the
Portfolio must increase sufficiently in order for Holders to receive at or prior to Maturity at least the amount they invested
in the Notes.
The NAV per Note at Maturity will be the Net Value of the Portfolio on the Valuation Date divided by the number
of Notes outstanding at that time. The Net Value of the Portfolio at Maturity will be calculated by the Calculation Agent on
S-19
the Valuation Date and will be the Value of the Portfolio less Note Liabilities on the Valuation Date. The “Value of the
Portfolio” will be calculated by the Calculation Agent and will be the Unit Price for the Portfolio Units on the Valuation
Date multiplied by the Number of Portfolio Units on the Valuation Date. “Note Liabilities” will be the total of any
notionally borrowed funds plus all accrued and unpaid interest charges and Note Program Fees on the Valuation Date.
Illustrative Examples of Calculation of Net Value of the Portfolio per Note
Example 1: Positive Performance
The following hypothetical example illustrates the calculation of the Net Value of the Portfolio per Note and
subsequent rebalancing of the Loan Amount following positive performance of the Portfolio over a 30-day period. This
example assumes the following: (i) there are 100 Notes outstanding at the beginning and ending of the 30-day period;
(ii) the starting exposure to the Fund is $142.50 per Note (including a Loan Amount of $47.50 per Note); (iii) the Loan
Amount remains constant at $47.50 throughout the 30-day period; (iv) a constant borrowing cost of 5.13% (a 1-month
Bankers’ Acceptance Rate of 4.88%, plus 0.25% basis points); and (v) the Value of the Portfolio increases by 12.0% over
the 30-day period.
Day 1
Day 30
Monthly Rebalance
Value of the Portfolio
Loan Amount
Accrued Fees (2.00%)
Accrued Interest (5.13%)
Total Liabilities
$142.50
$47.50
$47.50
$159.60
$47.50
$0.16
$0.20
$47.86
$167.61
$55.87
$55.87
Net Value per Note
$95.00
$111.74
$111.74
Calculation of Net Value of the Portfolio (100 Notes):
Day 1: Start of 30-day Period
The value of a Note at the beginning of the 30-day period in this hypothetical example is $142.50 (with a Loan Amount of
$47.50). There will be no fees or expenses that will have accrued in the Portfolio at this time as fees and expenses are paid
on a monthly basis by reducing the notional Units held in the Portfolio.
Æ
Less: Note Liabilities
Æ
Net Value of the Portfolio
Æ
$9,500
Net Value of the Portfolio per Note
Æ
$9,500 ÷ 100 = $95.00
$142.50 × 100 = $14,250
–
$47.50 × 100 = $4,750
Day 30: End of 30-day Period
During the 30-day period in this example, the Loan Amount will have remained fixed at $47.50 and the Value of the
Portfolio hypothetically grew in value by 12.00%. Similarly, the Net Value of the Portfolio will have increased to $111.74
per Note at the end of the thirty days.
S-20
Æ
Æ
Æ
$11,174
Æ
$11,174 ÷ 100 = $111.74
$159.60 × 100 = $15,960
–
$47.86 × 100 = $4,786
Day 30: Loan Rebalancing After 30-day Period
At the end of the thirty days, the fees and expenses that have accrued in the Portfolio will be paid by reducing the number
of Units held in the Portfolio. The Loan Amount will also be rebalanced to maintain 150% exposure to the Fund. In this
hypothetical example, the Loan Amount would be adjusted to $55.87 for the subsequent 30-day period.
Æ
Æ
Æ
$11,174
Æ
$11,174 ÷ 100 = $111.74
$167.61 × 100 = $16,761
–
$55.87 × 100 = $5,587
Example 2: Negative Performance
The following hypothetical example illustrates the calculation of the Net Value of the Portfolio per Note and
subsequent rebalancing of the Loan Amount following negative performance of the Portfolio over a 30-day period. This
example assumes the following: (i) there are 100 Notes outstanding at the beginning and ending of the 30-day period;
(ii) the starting exposure to the Fund is $142.50 per Note (including a Loan Amount of $47.50 per Note); (iii) the Loan
Amount remains constant at $47.50 throughout the 30-day period; (iv) a constant borrowing cost of 5.13% (a 1-month
Bankers’ Acceptance Rate of 4.88%, plus 0.25% basis points); and (v) the Value of the Portfolio decreases by 13.00% over
the 30-day period.
Day 1
Day 30
Monthly Rebalance
Fund Portfolio
Loan Amount
Accrued Fees (2.00%)
Accrued Interest (5.13%)
Total Liabilities
$142.50
$47.50
$47.50
$123.98
$47.50
$0.16
$0.20
$47.86
$114.17
$38.06
$38.06
Net Value per Note
$95.00
$76.11
$76.11
S-21
Calculation of Net Value of the Portfolio (100 Notes):
Day 1: Start of 30-day Period
The value of a Note at the beginning of the 30-day period in this hypothetical example is $142.50 (with a Loan Amount of
$47.50). There will be no fees or expenses that will have accrued in the Portfolio at this time as fees and expenses are paid
on a monthly basis by reducing the notional Units held in the Portfolio.
Æ
Æ
Æ
$9,500
Æ
$9,500 ÷ 100 = $95.00
$142.50 × 100 = $14,250
–
$47.50 × 100 = $4,750
Day 30: End of 30-day Period
During the 30-day period, the Loan Amount will have remained fixed at $47.50 and the Value of the Portfolio
hypothetically decreased in value by 13.00%. Similarly, the Net Value of the Portfolio will have decreased to $76.11 per
Note at the end of the thirty days.
Æ
Æ
Æ
$7,611
Æ
$7,611 ÷ 100 = $76.11
$123.98 × 100 = $12,398
–
$47.86 × 100 = $4,786
Day 30: Loan Rebalancing After 30-day Period
At the end of the thirty days, any fees and expenses that have accrued in the Portfolio will be paid by reducing the number
of Units held in the Portfolio. The Loan Amount will also be rebalanced to maintain 150% exposure to the Fund. In this
hypothetical example, the Loan Amount would be adjusted to $38.06 for the subsequent 30-day period.
Æ
Æ
Æ
$7,611
Æ
$7,611 ÷ 100 = $76.11
$114.17 × 100 = $11,417
–
$38.06 × 100 = $3,806
The preceding examples are for illustration purposes only and are not intended to be a prediction or indication of
the performance of the Notes. See “NAV per Note”.
No Redemption Prior to Maturity
The Notes are not redeemable at the option of the Holder. The Notes are not redeemable at the option of the Bank,
subject to the occurrence of an Extraordinary Event. See “Special Circumstances - Extraordinary Event”.
S-22
Rank; No Deposit Insurance
The Notes will rank equally with all of the Bank’s deposit liabilities and constitute direct unconditional obligations
of the Bank to the extent the Bank is obligated to make payments to Holders under the Notes. The Notes will be issued on
an unsubordinated basis and will rank pari passu, as among themselves, and with all other outstanding direct, unsecured
and unsubordinated, present and future obligations (except as otherwise prescribed by law) of the Bank, and will be payable
ratably without any preference or priority. The Notes will not be deposits insured under the Bank Act, the Canada
Deposit Insurance Corporation Act or any other deposit insurance regime designed to ensure the payment of all or a
portion of a deposit upon the insolvency of the deposit taking financial institution.
Credit Rating
As at the date of this pricing supplement, the deposit liabilities of the Bank with a term to maturity of more than
one year were rated AA by DBRS, A+ by S&P and Aa1 by Moody’s. The Notes have not been rated. There can be no
assurance that, if the Notes were specifically rated by these rating agencies, they would have the same rating as the other
unsubordinated indebtedness of the Bank. A rating is not a recommendation to buy, sell or hold investments, and may be
subject to revision or withdrawal at any time by the relevant rating agency.
Continuous Disclosure
The Bank will make certain information regarding the Notes and the Portfolio available at www.bmosp.com,
including the daily NAV per Note and a description of the Portfolio on a quarterly basis.
NAV PER NOTE
Determination of the NAV per Note
The NAV per Note on any Business Day will be the Net Value of the Portfolio plus Unamortized Offering
Expenses divided by the number of Notes outstanding on such Business Day, as calculated by the Note Program Manager
as at the close of business and published on FundSERV. The NAV per Note will also be published daily at
www.globefund.com, at www.bmosp.com and in the national edition of a major Canadian newspaper. The Calculation
Agent has appointed Jones Heward Investment Counsel Inc., an indirect wholly-owned subsidiary of the Bank, to calculate
the daily NAV per Note. Such calculations will be based on information provided by the Investment Manager and other
publicly available information. Jones Heward Investment Counsel Inc. will have no discretion in determining the various
inputs or applying the formula used to calculate the NAV per Note. The Bank has established certain control objectives and
control procedures for the calculation of NAV per Note. These procedures will be audited annually by an independent
national accounting firm to assess their effectiveness.
The Net Value of the Portfolio will be calculated by the Calculation Agent and will be the Value of the Portfolio
less Note Liabilities. The Net Value of the Portfolio upon issuance will be $95.00 per Note.
The Value of the Portfolio will be calculated by the Calculation Agent and will be the Unit Price multiplied by the
Number of Portfolio Units.
The “Number of Portfolio Units” shall be equal to the number of Units notionally held in the Portfolio at the
relevant time. The Number of Portfolio Units will be adjusted to reflect the re-investment of any distributions paid on the
Units. The re-investment of any distributions paid on the Units will be made as of the applicable distribution date and will
increase the number of Portfolio Units by adjusting the number of Portfolio Units proportionally to the amount of such
distribution relative to the post-distribution closing price on the dividend or distribution date. On each monthly rebalancing
date, the Number of Portfolio Units will be adjusted as appropriate to rebalance the loan amount to 50% of the Net Value of
S-23
the Portfolio on such date. The payment of any accrued and unpaid interest expenses and Note Program Fees from the
previous month will be reflected in the adjusted Number of Portfolio Units held in the Portfolio.
Note Liabilities
On any Business Day, the “Note Liabilities” shall be all liabilities of the Note Program and Portfolio, which are
any notionally borrowed funds and all accrued and unpaid interest charges and Note Program Fees.
Unamortized Offering Expenses
The “Unamortized Offering Expenses” are for a Business Day (i) within one year of the Closing Date, 5.00% of
the Issue Amount, (ii) during the second year from the Closing Date, 3.25% of the Issue Amount, (iii) during the third year
from the Closing Date, 1.50% of the Issue Amount, and (iv) three years after the Closing Date, nil.
NAV of the Units
The NAV per Unit will be determined and published by the Fund as described in the Fund’s Prospectus.
Temporary Suspension of Calculation of the NAV per Note
The Note Program Manager may suspend the determination of the NAV per Note during the existence of any state
of affairs that makes the determination of the NAV per Note impossible, impractical or prejudicial to Holders, including,
without limitation, the interruption, breakdown or suspension of the calculation of the Value of the Portfolio as a result of
the Investment Manager being unable to provide the required information (including the Unit Price) to the Calculation
Agent.
Consequences of Suspension of Calculation of the NAV per Note
If the Note Program Manager suspends the calculation of the NAV per Note, BMO Capital Markets will not be
able to fairly and accurately determine the price for Notes in order to facilitate a secondary market. BMO Capital Markets
may suspend the secondary market (assuming the availability of a secondary market) for the Notes if the Note Program
Manager suspends the calculation of the NAV per Note. See “Secondary Market”.
If the Fund suspends the right of unitholders to redeem the Units, BMO Capital Markets will suspend the
secondary market (assuming the availability of a secondary market) for the Notes. Securities regulations allow the Fund to
temporarily suspend the right to redeem units and postpone payment of redemption proceeds:
•
during any period when normal trading is suspended on any exchange on which securities or derivatives that
make up more than 50% of the Fund’s value or its underlying market exposure are traded, provided those
securities or derivatives are not traded on any other exchange that is a reasonable alternative for the Fund, or
•
with the approval of securities regulators.
THE PORTFOLIO
Objectives of the Notes
The Notes will provide Holders with 150% exposure to the total returns of the Units. The Portfolio has been
designed with the objectives of providing Holders with an enhanced return based on the long-term capital appreciation of
the Portfolio.
The Portfolio is a notional portfolio of Units. The concept of a “notional portfolio” means that the portfolio is a
fictional portfolio, with no actual investment in the Units, used solely as a reference to calculate the amount payable on the
Notes at Maturity. All actions (e.g., purchases, sales, liquidations, loan drawdowns and repayments, etc.) taken in
connection with the Portfolio are notional actions only.
S-24
Holders of Notes will not have an ownership interest in the Portfolio or the Portfolio Units as a result of
their investment in the Notes and will not have the rights of a direct holder of interests in the Fund. See “The
Portfolio”.
Although the Portfolio will be comprised of Units, the unit price used to calculate the Value of the Portfolio will
be the NAV of the Units, adjusted to remove the management fees and operating expenses otherwise charged by the Fund
on such Units. As a result, the Portfolio will be comprised of Units with no management fees or operating expenses. All
distributions notionally paid on the Portfolio Units will be reinvested in additional Units for the Portfolio.
In certain special circumstances, the Bank has the ability to substitute the Fund with another Canadian mutual fund
managed by the Investment Manager having similar investment objectives. See “Special Circumstances — Substitution
Event”.
Loan
In order to provide increased exposure to the Fund, the Portfolio will notionally borrow funds through the Loan
with the Bank at an annual rate equal to the Bankers’ Acceptance Rate plus one-quarter of one percent, accrued daily and
paid monthly.
The aggregate amount of the Loan (the “Loan Amount”) and other forms of leverage will equal 50% of the Net
Value of the Portfolio on each rebalancing date. While the amount of leverage may vary from time to time based on the
Unit Price of the Portfolio Units, the Loan Amount will be rebalanced on a monthly basis, such that the amount of leverage
will be maintained at 50% of the Net Value of the Portfolio, in order to provide 150% exposure to the Fund throughout the
term of the Notes. Any interest expense that accrues on the Loan will be paid by notionally selling Portfolio Units.
The Portfolio will not engage in any borrowing, other than as described above.
GGOF DIVIDEND GROWTH FUND
All information in this pricing supplement relating to the Investment Manager, the Investment Advisor and
the Fund has been provided by the Investment Manager or is taken from publicly available documents, and is
subject to any modifications made to such information. The Bank makes no assurances, representations or
warranties with respect to the accuracy, reliability or the completeness of information obtained from third parties,
including information provided by the Investment Manager, the Investment Advisor and the Fund.
The Fund is a mutual fund trust created by a declaration of trust under the laws of Ontario.
Investment Objectives
The Fund’s objective is to generate a relatively high return that includes dividend income and some capital gains
from any increase in the value of the securities held by the Fund, by investing primarily in dividend-yielding common and
preferred shares of established Canadian companies. It may also invest in fixed income securities.
Investment Strategies
The Investment Advisor uses a bottom-up selection process which emphasizes growth in earnings and dividend
payouts, while also taking into account the valuation of the companies so chosen. The Fund may hold foreign investments.
The Fund has received from the Canadian securities regulators an exemption allowing it to engage in certain
transactions in debt securities in which, without the exemption, it would be prohibited from engaging. Pursuant to such
exemption the Fund may, in accordance with certain conditions imposed by the regulators:
•
invest in non-government debt securities when a related underwriter acts as an underwriter of such
securities; and
S-25
•
purchase from, or sell to, related dealers that are principal dealers in the Canadian debt securities market,
non-government debt securities or government debt securities in a secondary market.
The relief granted under the exemption is scheduled to expire on November 1, 2007. However, the Fund has
applied to the Canadian securities regulators to extended the relief beyond this date.
The Fund may engage in securities lending and repurchase/reverse repurchase transactions as permitted by the
securities regulators. For a description and the strategies used by the Fund to minimize the risks associated with these
transactions, see “Certain Risk Factors”. These types of transactions are used by the Fund to increase income.
Cash or short-term notes may be held temporarily for defensive purposes.
Top 10 Holdings
% of
Net Assets
Investment
The Toronto-Dominion Bank
7.09
Manulife Financial Corporation
6.27
Royal Bank of Canada
6.11
Canadian Imperial Bank of Commerce
5.44
Bank of Nova Scotia
5.28
Sun Life Financial Inc.
4.88
Power Financial Corporation
4.48
Alcan Inc.
3.24
Imperial Oil Limited
3.19
Husky Energy Inc.
3.06
Aggregate % of Top 10 Holdings =
49.04% of Fund’s Net Assets
Country
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Sector Allocations
Consumer Staples
3.28%
Utilities
1.55%
Cash & Equivalents
5.40%
Industrial
4.69%
Materials
5.79%
Financials
48.00%
Telecommunication
Services
7.09%
Consumer
Discretionary
8.03%
Energy
15.18%
S-26
Fund Performance
The information under this heading contains historical returns as of September 30, 2007 and calendar year
performance for the Units and is not intended to be, nor should it be construed to be, an indication as to the future returns or
volatility of the Units or the potential return, if any, on the Notes. The following performance figures assume that all
distributions on Units were reinvested in additional Units and does not include any applicable sales, redemption,
distribution or optional charges or taxes, which would have reduced returns. Similarly, the Notes provide for reinvestment
of all distributions of Units. The returns are also shown after the payment of expenses and fees charged by the Fund in
respect of the Units. The performance figures below reflect the payment of the management expense ratio of the Units for
the indicated periods. In contrast, the Notes will be subject to a Note Program Fee which may be higher than the
management expense ratio of the Units. As a result of the potential for differing fees, the performance of the Notes could
have been lower than the past performance figures reflected below. See “Fees and Expenses of the Note Program”.
The Fund had assets of approximately $757.8. million as at September 30, 2007. The following table sets out the
returns of the Units over the time periods indicated:
Returns as at September 30, 2007(1)
Performance (%)
3 mos
6 mos
YTD
1 yr
3 yr
5 yr
10 yr
Since
Inception
Units
0.49%
2.69%
4.04%
12.78%
15.12%
15.61%
-
12.92%(2)
________________________________
(1)
(2)
Simple returns for periods less than one year; compound annual returns otherwise.
The Fund was created on November 9, 2001.
Calendar Year Performance
Performance (%)
Units
2000
2001
2002
2003
2004
2005
2006
-
-
-0.10%
22.30%
15.60%
20.10%
13.60%
For purposes of illustration only, the following chart shows that an initial investment of $10,000 in Units made on
November 9, 2001 (the creation date of the Fund) would have grown in value to $20,468 on September 30, 2007.
GGOF Dividend Growth Fund
$25,000
Sept. 30, 2007
$20,468
$20,000
$15,000
$10,000
$5,000
No
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S-27
Further information in respect of the Fund can be found at www.SEDAR.com and on the Investment Manager’s
public website at www.ggof.com.
MANAGEMENT OF THE FUND
The Investment Manager
Guardian Group of Funds Ltd., an indirect, wholly-owned subsidiary of the Bank, is the manager of the Fund. The
Investment Manager is responsible for the day-to-day administration and operation of the Fund. The Investment Manager
was founded in 1962 and currently offers a family of 35 mutual funds that cover a full array of domestic and foreign
investment options, including money market, fixed income, balanced and equity funds.
The Investment Advisor
Jones Heward Investment Counsel Inc., an indirect wholly-owned subsidiary of the Bank, has been retained by the
Investment Manager to provide investment advice for the Fund. The Investment Advisor has managed money for
Canadians since 1925 and, as of September 30, 2007, had over $34 billion in assets under management. The head office of
the Investment Advisor is 77 King Street West, Suite 4200, Toronto, Ontario, M5K 1J5.
The individual who will be primarily responsible for managing the Fund is Mr. Michael Stanley. Mr. Stanley is
the Chief Executive Officer, President and Chief Investment Officer at Jones Heward and has over 27 years of experience
in the investment industry.
The Investment Manager and Fund Governance
The following information is taken from the disclosure contained in the Fund’s AIF (see “Fund Governance” in
the AIF).
General Oversight
In order to ensure that the Investment Manager carries out its duties in the best interests of the Fund and its
unitholders, the Investment Manager has adopted a Code of Business Conduct (the “Code”). Among other subjects, the
Code deals with conduct in the following areas:
• corporate, including standards of conduct, confidential information, conflicts of interests and
insider trading;
• investments, including personal trading by employees, and annual confirmation from each of the
Investment Manager’s portfolio advisers, including the Investment Advisor, as to their standards of
conduct and compliance with all securities laws in their home jurisdictions; and
• other areas, including compliance with laws and regulations, and sanctions for breach of the Code.
The Code is administered by the Compliance Department of the Investment Manager. The Investment Manager
also has a written policy statement dealing with permitted sales practices.
The portion of the Code dealing with ethics for personal investing is designed to prevent potential, perceived or
actual conflicts between the interests of the Investment Manager and its employees with the interests of clients and the
Fund. Certain senior employees of the Investment Manager identified as access persons are required to pre-clear certain
personal securities transactions in order to ensure that those trades do not conflict with the best interests of the Fund and
have not been offered to the person because of the position they hold at the Investment Manager.
S-28
The Investment Manager, in conjunction with the Investment Advisor, has adopted a Statement of Investment
Policies and Goals (the “Policy Statement”) for the Fund. The Policy Statement stipulates the risk management rules which
are applied to the investment of the Fund’s portfolio, including: geographical and currency diversification; maximum
holdings by issuer, by percentage of the Fund and by industry; and rules regarding the use of derivatives in the Fund. The
Policy Statement also sets out specific procedures for the authorization, documentation, reporting, monitoring and review of
derivative strategies and positions. The Investment Advisor is required to provide investment advice in accordance with the
Policy Statement, and to report any instances of failure to comply.
The Compliance and Investment Departments of the Investment Manager and the Compliance Department of the
Investment Advisor oversee compliance with the Policy Statement by the Investment Advisor. A formal
Investment/Compliance reporting meeting takes place with representatives of the Investment Advisor on a quarterly basis.
As part of its reporting obligations to the Investment Manager, the Investment Advisor reports, among other things, on its
use of derivatives. Such derivative use is overseen by the Investment Department of the Investment Manager and by the
Compliance Department of the Investment Advisor. The Investment Department of the Investment Manager reviews the
Policy Statements, including the use of derivatives, on a regular basis with a minimum annual review, and considers any
recommendations for changes from the Investment Advisor. The Investment Department also considers the use of
derivatives in conjunction with the rules contained in National Instrument 81-102 - Mutual Funds, and is responsible for
applying trading limits or other controls, when necessary. On an annual basis, the Investment Department will report to the
Board of Directors of the Investment Manger on the use of derivatives by the Fund. Amendments to the Policy Statements
must be approved by both the Investment Manager and the Investment Advisor. Risk measurement procedures or
simulations to test the Fund’s portfolio under stress are not used.
Independent Review Committee
The Investment Manager has established an independent review committee (the “IRC”) comprised of six
individuals, in accordance with the requirements of National Instrument 81-107 - Independent Review Committee for
Investment Funds. The IRC became operational on September 12, 2007. Each of the members of the IRC is independent
of the Investment Manager and other companies associated with BMO Financial Group.
The mandate of the IRC as required under National Instrument 81-107 - Independent Review Committee for
Investment Funds is to:
(a)
review a conflict of interest matter, including any related policies and procedures, referred to it by the
Investment Manager and make recommendations to the Investment Manager regarding whether the
proposed action of the Investment Manager in respect of the conflict of interest matter achieves a fair and
reasonable result for the applicable funds;
(b)
consider and approve, if deemed appropriate, the Investment Manager’s proposed action on a conflict of
interest matter that the Investment Manager refers to the IRC for approval; and
(c)
perform such other duties, recommendations and approvals as may be permitted of the IRC under
applicable securities laws.
Proxy Voting Policies and Procedures
The Investment Manager has delegated the voting of proxies of the Fund’s portfolio securities to the Fund’s
Investment Advisor as part of the management of the Fund’s portfolio, subject to the Investment Manager’s continuing
oversight. As part of its continuing oversight, the Investment Manager has established policies and procedures to be
followed by the Fund’s Investment Advisor, in conjunction with the Investment Advisor’s own policies and procedures, in
determining how to vote on any matter for which the Fund receives proxy materials for a meeting of securityholders of an
issuer. The Investment Advisor voting proxies on behalf of the Fund must do so in a manner consistent with the best
interests of the Fund and its securityholders.
A conflict of interest may exist if the Investment Advisor, its personnel or another related entity has a business
relationship with (or is actively soliciting business from) either the company soliciting the proxy or a third party that has a
S-29
material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote.
Conflicts of interest also may arise if an individual employed by the portfolio adviser that is involved in the proxy vote
decision, has a direct or indirect personal relationship or other interest in either the company soliciting the proxy or in a
third party that has a material interest in the outcome of a proxy vote or that is lobbying for a particular outcome of a proxy
vote.
The Investment Advisor has procedures in place to identify potential conflicts of interest. When the Investment
Advisor becomes aware of any vote that presents a conflict, the Investment Advisor must vote such proxy question in a
manner consistent with, and uninfluenced by considerations other than, the best interest of the Fund and its securityholders.
Securities Lending, Repurchase and Reverse Repurchase Transactions
The Fund, may engage in securities lending and/or repurchase/reverse repurchase transactions (the “transactions”)
as permitted under National Instrument 81-102 - Mutual Funds. The Investment Manager and the custodian have entered
into a written securities lending and repurchase/reverse repurchase agreement (the “Securities Lending Agreement”). The
custodian acts as agent for the Fund in administering the transactions, including negotiating agreements, assessing the credit
worthiness of the other parties and collecting the fees earned by the Fund.
The Investment Manager manages the risks associated with securities lending, repurchase and reverse repurchase
transactions (which are described in the Fund’s Prospectus) by requiring the custodian to:
• enter into securities lending, repurchase or reverse repurchase transactions with reputable and well-established
Canadian and foreign brokers, dealers and institutions (“counterparties”);
• maintain internal controls, procedures and records including a list of approved counterparties based on generally
accepted creditworthiness standards, transaction and credit limits for each counterparty and collateral
diversification standards;
• establish daily the market value of both the securities loaned by the Fund under a securities lending transaction or
sold by the Fund under a repurchase transaction and the cash or collateral held by the Fund. If on any day the
market value of the cash or collateral is less than 102% of the market value of the borrowed or sold securities, the
custodian will request that the counterparty provide additional cash or collateral to the Fund to make up the
shortfall; and
• ensure that the collateral to be delivered to the Fund is one or more of cash, qualified securities or securities
immediately convertible into, or exchangeable for, securities of the same issuer, class or type, and same term, if
applicable, as the securities being loaned by the Fund.
The Investment Manager will review these policies and procedures at least annually to ensure that the risks
associated with securities lending, repurchase and reverse repurchase transactions are being properly managed.
SPECIAL CIRCUMSTANCES
Substitution Event
Following the occurrence of a Substitution Event, the Bank may substitute another mutual fund for the Fund as
provided below. To do this, the Bank will notionally redeem the Portfolio Units and reallocate the notional proceeds to
notional units or shares of one or more Canadian mutual funds (other than the Fund) managed by the Investment Manager
having similar investment objectives and strategies to the Fund (a “Fund Substitution”). If the Bank determines, in its
discretion, that there is no suitable replacement fund managed or sponsored by the Investment Manager, the Bank may then
(i) substitute a Canadian mutual fund managed by another fund manager or (ii) declare an Extraordinary Event and proceed
to make an accelerated payment to Holders of the Notes in accordance with the provisions under this “Special
Circumstances” section.
As determined by the Bank, the occurrence of any of the following events will be a “Substitution Event”:
S-30
(i)
the winding-up, dissolution or liquidation of the Fund or other cessation of trading of any Units of the
Fund;
(ii)
the Investment Manager or any affiliate of the Investment Manager ceases to act as the manager of the
Fund;
(iii)
the investment objectives, investment restrictions or investment policies of the Fund are modified (except
where such modification is of a formal, minor or technical nature);
(iv)
a material modification (other than any modifications referred to in (iii) above of the terms and conditions
relating to any Units of the Fund (including but not limited to a material modification of the constating
documents of the Fund) or the occurrence of any event or change having a material adverse effect on any
Units of the Fund (including, but not limited to, the interruption, breakdown or suspension for a
significant period of time of the calculation or publication of the NAV per Unit);
(v)
the non-execution or partial-execution by the Fund of a subscription or redemption order given by an
investor in any Units of the Fund or a refusal to transfer any Units of the Fund to an eligible transferee
except where such non-execution, partial execution or refusal is the result of circumstances beyond the
control of the Fund;
(vi)
any mandatory redemption or other reduction (actual or potential as determined by the Calculation Agent
in its sole discretion) in the number of Units of the Fund held by any holder of such Units for any reason
beyond the control of such holder;
(vii)
any failure by the Investment Manager to calculate or publish the daily official NAV per Unit of the Fund
within three Business Days after the relevant valuation date except as provided in the case of a suspension
of determination of the NAV per Unit in accordance with the provisions set out in the constating
documents of the Fund;
(viii)
the Fund imposes in whole or in part any restriction, charge or fee in respect of a redemption or
subscription of any Units of the Fund by any holder thereof (other than any fee applicable to a holder of
Units of the Fund as at the Closing Date);
(ix)
any relevant activities of or in relation to the Fund or the Investment Manager are or become unlawful,
illegal or otherwise prohibited in whole or in part as a result of compliance with any present or future law,
regulation, judgment, order or directive of any governmental, administrative, legislative or judicial
authority or power, or in the interpretation thereof;
(x)
a relevant authorization or license is revoked or is under review by a competent authority in respect of the
Fund or the Investment Manager;
(xi)
any change in or in the official interpretation or administration of any laws or regulation relating to
taxation that has or is likely to have a material adverse effect on any unitholder of the Fund or in respect
of any hedge established in connection with the Offering;
(xii)
the Bank is unable to effectively acquire, establish, re-establish, substitute, maintain or unwind any hedge
transaction in connection with the Offering or to realize, recover or remit the proceeds of any such
hedging transaction;
(xiii)
an increase in the cost of acquiring, establishing, re-establishing, substituting, maintaining, unwinding or
disposing of any hedging transaction respecting the Units of the Fund or in the cost of realizing,
recovering or remitting the proceeds of any such hedging transaction; or
(xiv)
as a result of any adoption of, or any change in, any law, order, regulation, decree or notice, howsoever
described, or issuance of any directive or promulgation of, or any change in the interpretation, whether
S-31
formal or informal, by any court, tribunal, regulatory authority or similar administrative or judicial body
of any law, order, regulation, decree or notice, howsoever described, after such date or as a result of any
other event, (1) it would become unlawful for any unitholder of the Fund to hold, purchase or sell any
Units of the Fund, (2) the cost of investing in any Units of the Fund would materially increase, other than
ordinary course increases in the market value of Units of the Fund, or (3) a unitholder of the Fund would
be subject to a material loss as a result of holding any Units of the Fund.
The Bank will provide to Holders notice of any Substitution Event and will also publicize the details of any such
Fund Substitution on its web site at www.bmosp.com.
Extraordinary Event
If an Extraordinary Event has occurred in the opinion of the Bank, all of the outstanding Notes may be redeemed,
at the option of the Bank (an “Early Redemption”), upon 30 Business Days’ prior notice furnished in writing by the Bank
in the manner set forth under “Additional Details of the Offering ― Notice to Holders” in this Pricing Supplement.
An “Extraordinary Event” means any one or more of the following events:
(i)
a Substitution Event occurs and the Bank determines there to be no suitable replacement fund for the
Fund;
(ii)
the Bank is unable to effectively acquire, establish, re-establish, substitute, maintain, unwind or dispose
of any hedge transaction in connection with the Offering or to realize, recover, or remit the proceeds of
any such hedging transaction;
(iii)
an increase in the cost of acquiring, establishing, re-establishing, substituting, maintaining, unwinding or
disposing of any hedging transaction in connection with the Offering or in the cost of realizing,
recovering or remitting the proceeds of any such hedging transaction;
(iv)
an amendment or change is made to a taxation act or regulation, taxation practices, policies or
administration, or to the interpretation of a taxation act or regulation or taxation practice, policy or
administration that has or is likely to have a material adverse effect on any hedging transaction
established in connection with the Offering; or
(v)
an event occurs, now or in the future, caused by circumstances beyond the control of the Bank making it
illegal or disadvantageous, from a legislative or regulatory point-of-view, or disadvantageous, from a
financial point-of-view, for the Bank to allow the Notes to remain outstanding.
Upon the occurrence of an Extraordinary Event where the Bank has opted to make an Early Redemption whereby
an accelerated payment will be made to Holders prior to the Maturity Date, the Bank, acting in good faith, will set a date for
the early redemption of the Notes (the “Early Redemption Date”) and the Maturity Date will be accelerated to the Early
Redemption Date. In such event, the Bank will seek market quotations for the value of the Notes to be redeemed from
three external financial institutions and will use the average of those quotations; provided that if such quotations are
deemed not to be reasonable by the Bank, acting in good faith, or if the Bank is unable to obtain such quotations, the Bank
will establish a value for the Notes, acting in good faith in accordance with industry-accepted methods based on a number
of interrelated factors, such as the appreciation and the volatility of the Value of the Portfolio, interest rates, dividends and
distributions paid on the Fund and the time remaining to the Maturity Date (the “Actualized NAV”). Holders of record on
the Early Redemption Date will be entitled to receive the greater of the Minimum Payment and the Actualized NAV of
their Notes. The Bank will make available to Holders, no later than 10:00 a.m. (Toronto time) on the fifth Business Day
following the determination of the Actualized NAV, the amount payable pursuant to such redemption, through CDS or its
nominee.
S-32
Market Disruption Event
If the Calculation Agent determines that a Market Disruption Event exists on the Valuation Date, then the
Valuation Date will be postponed to the next Business Day on which there is no Market Disruption Event. However, if on
the eighth Business Day following the date originally scheduled as the Valuation Date, the Valuation Date has not occurred,
then despite the continuance of such Market Disruption Event on or after such Business Day: (a) such Business Day shall
be the Valuation Date in respect of the Portfolio; and (b) the NAV per Note used for determining the Maturity Value will be
the NAV per Note as determined by the Calculation Agent as at such Valuation Date, taking into account all relevant
market circumstances.
A Market Disruption Event may delay the determination of the Value of the Portfolio and consequently the
calculation of the Maturity Value that may be payable on the Notes. In circumstances where a Market Disruption Event has
occurred, payment of the Maturity Value will be made on the third Business Day after the valuation of the Portfolio.
“Market Disruption Event” means any bona fide event, circumstance or cause (whether or not reasonably
foreseeable) beyond the reasonable control of the Calculation Agent or any person that does not deal at arm’s length with
the Calculation Agent which has or will have a material adverse effect on the ability of the Bank and/or its affiliates
generally to place, maintain or modify hedge positions in respect of the Portfolio or the Notes. A Market Disruption Event
may include, without limitation, any of the following events:
•
a suspension, absence or material limitation of subscription and redemption of Units of the Fund, as
determined by the Calculation Agent in its sole discretion;
•
a suspension, absence or material limitation of trading in a material number of securities in which the
Fund invests in assets or in option or futures contracts relating to the Fund or a material number of
securities in which the Fund invests in assets in the primary market for those contracts for more than two
hours of trading or during the one-half hour before the close of trading in that market, as determined by
the Calculation Agent in its sole discretion; or
•
in any other event, if the Calculation Agent determines in its sole discretion that the event materially
affects the ability of the Bank and/or its affiliates to hedge or unwind all or a material portion of a hedge
with respect to the Notes.
For the purposes of determining whether a Market Disruption Event has occurred: (1) a limitation on the hours or
number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the
regular business hours of an exchange or related market, and (2) a “suspension, absence or material limitation of trading”
on any exchange or related market will not include any time when such exchange or related market itself is closed for
trading under ordinary circumstances.
SECONDARY MARKET
Sale Prior to Maturity
BMO Capital Markets will arrange for a secondary market for the sale of Notes by Holders through FundSERV
but reserves the right to elect not to do so in the future, in its sole discretion, without prior notice to investors. Other than
on the occurrence of a Market Disruption Event, Notes may be sold to BMO Capital Markets in the secondary market
(assuming the availability of a secondary market) through FundSERV on a daily basis. In order to sell a Note, a Holder
must arrange through his or her investment broker to give notice to BMO Capital Markets either in writing or electronically
through the FundSERV system. The Notes will not be listed on any stock exchange. The sale of a Note to BMO Capital
Markets will be effected at a price equal to (i) the NAV per Note on the Sale Date, minus (ii) any applicable Early Trading
Charge (as defined below).
A sale of the Notes may occur at a price that is less than the Subscription Price. The NAV per Note at any time
will be determined by the Note Program Manager and will vary with the Value of the Portfolio and the ongoing fees and
expenses of the Note Program and may be affected by a number of other factors beyond the control of the Investment
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Manager or the Bank. As a result, the Maturity Value will not be determinable before the Valuation Date (see “Certain Risk
Factors”).
A Holder should consult his or her investment advisor on whether it would be more favourable in the
circumstances at any time to sell the Notes (assuming the availability of a secondary market) or hold the Notes until the
Maturity Date and in order to understand the timing and other procedural requirements and limitations of selling. A Holder
should also consult his or her tax advisor as to the tax consequences arising from a sale of a Note prior to the Maturity Date
as compared to holding the Note until the Maturity Date. See “Certain Canadian Federal Income Tax Considerations”.
BMO Capital Markets or the Bank, or any of their respective affiliates, may at any time, subject to applicable laws,
purchase Notes at any price in the open market or by private agreement.
A Holder will not be able to sell a Note prior to Maturity other than through the secondary market
provided by BMO Capital Markets.
A sale of a Note to BMO Capital Markets prior to Maturity may be subject to an Early Trading Charge. If a
Holder sells a Note within the first three (3) years from the Closing Date, the price of the Note will be reduced by an Early
Trading Charge equal to a percentage of the Subscription Price, determined as follows:
If Sold During
First year after Closing Date
5.00%
Second year after Closing Date
3.25%
Third year after Closing Date
1.50%
Thereafter
Nil
Illustrative Proceeds on Disposition Prior to Maturity ($)
Year
1
2
3
4
Quoted NAV per Note1
103.00
106.00
109.00
108.00
5.00
3.25
1.50
Nil
Net Proceeds From
98.00
102.75
107.50
108.00
Disposition
Note:
(1) Price at which purchase by BMO Capital Markets will occur, subject to any applicable
Early Trading Charge, is posted daily by BMO Capital Markets. NAV per Notes cannot be
forecast or guaranteed — for illustrative purposes only (see “Certain Risk Factors”).
A Holder should be aware that any valuation price for the Notes appearing in his or her periodic investment account
statements within the first 3 years of the Closing Date is not what a Holder would receive on disposition. Any price quoted
to the Holder to sell his or her Notes within the first 3 years of the Closing Date will be before the application of any
applicable Early Trading Charge. A Holder wishing to sell a Note prior to Maturity should consult his or her investment
advisor as to whether a sale of the Note will be subject to an Early Trading Charge and, if so, the amount of the Early
Trading Charge.
ADDITIONAL DETAILS OF THE OFFERING
FundSERV
Purchases of Notes will be effected through dealers and other firms that facilitate purchase and related settlement
through a clearing and settlement service operated by FundSERV Inc. (“FundSERV”). The following information about
FundSERV is pertinent to Holders.
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FundSERV is owned and operated by both fund sponsors and distributors and provides distributors of funds and
certain other financial products with online order access for such financial products. FundSERV was originally designed
and is operated as a mutual fund communications network facilitating members in electronically placing, clearing and
settling mutual fund orders. In addition, FundSERV is currently used in respect of other financial products that may be sold
by financial advisors, such as the Notes. FundSERV enables its participants to clear certain financial product transactions
between themselves. Holders should consult with their financial advisors as to whether their Notes have been purchased
through FundSERV and to obtain further information on FundSERV procedures applicable to those Holders.
Where a Holder’s purchase order for Notes is effected by a dealer or other firm through FundSERV, such dealer or
other firm may not be able to accommodate a purchase of Notes through certain registered plans for purposes of the Tax
Act. Holders should consult their financial advisors as to whether their orders for Notes will be made through FundSERV
and any limitation on their ability to purchase Notes through registered plans.
Global Deposit Note
All Notes will initially be issued in the form of a fully registered global note (“Global Note”) and will be
deposited with CDS. Notes purchased through FundSERV (“FundSERV Notes”) will also be evidenced by the Global
Note. Holders holding FundSERV Notes will have a beneficial interest in the Global Note held by CDS. The Notes will be
recorded by CDS as being held by BMO Capital Markets, as a direct participant in CDS on behalf of the Holders. BMO
Capital Markets will in turn record or cause to be recorded the respective interests in the FundSERV Notes which
recordings will be made as instructed by FundSERV.
Purchase Through FundSERV
In order to purchase FundSERV Notes, the full aggregate Subscription Price therefor must be delivered to BMO
Capital Markets, as Agent, in immediately available funds prior to the Closing Date. Despite delivery of such funds, BMO
Capital Markets, reserves the right not to accept any offer to purchase FundSERV Notes. If the FundSERV Notes are not
issued to the subscriber for any reason, such funds will be returned forthwith to the subscriber. In any case, whether or not
the FundSERV Notes are issued, no interest or other compensation will be paid to the subscriber on such funds.
Sale Through FundSERV
A Holder wishing to sell FundSERV Notes prior to Maturity is subject to certain procedures and limitations. Any
Holder wishing to sell a FundSERV Note should consult with his or her financial advisor in advance in order to understand
the timing and other procedural requirements and limitations of selling. A Holder must sell FundSERV Notes by using the
sale procedures of FundSERV; any other sale is not possible. Accordingly, a Holder will not be able to negotiate a sale
price for FundSERV Notes. Instead, the financial advisor for the Holder will need to initiate an irrevocable request to sell
the FundSERV Note in accordance with the then established procedures of FundSERV. Generally, this will mean the
financial advisor will need to initiate the sale request by 1:00 p.m. (Toronto time, or such other time as may hereafter be
established by FundSERV) on a Business Day. Any request received after such time will be deemed to be a request sent
and received in respect of the next following Business Day. Sale of a FundSERV Note will be effected at a sale price equal
to the NAV per Note on the Sale Date minus any applicable Early Trading Charge. The Holder should be aware of the
limitations and restrictions surrounding the secondary market. See “Secondary Market”.
The Holder should also be aware that, although the “redemption” procedures of FundSERV would be utilized, the
FundSERV Notes of the Holder will actually be sold in the secondary market (assuming the availability of a secondary
market) to BMO Capital Markets. In turn, BMO Capital Markets will be able to deal with such FundSERV Notes in its
discretion, including, without limitation, to sell those FundSERV Notes to other parties, hold them in its inventory or have
them cancelled upon receipt from the assets of the Portfolio of an amount equal to the NAV per Note minus any applicable
Holders should also be aware that from time to time such sale mechanism to sell FundSERV Notes may be
suspended for any reason without notice, thus effectively preventing Holders from selling their FundSERV Notes.
Potential Holders requiring liquidity should carefully consider this possibility before purchasing FundSERV Notes.
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The Note Program Manager is required to post (or arrange to be posted) the NAV per Note on each Business Day,
subject to a suspension of the calculation of the NAV per Note described under “NAV per Note — Temporary Suspension
of Calculation of the NAV per Note”. The posted NAV per Note may also be used for valuation purposes in any statement
sent to Holders.
In certain circumstances FundSERV Notes may not be transferable to another dealer, if the Holder were to decide
to move his or her investment accounts to such other dealer. In that event, the Holder would have to sell the FundSERV
Notes pursuant to the procedures outlined above.
Settlement of Payments
The Bank will be required to make available to CDS, no later than 10:00 a.m. (Toronto time) on the third Business
Day following the Valuation Date, funds in an amount sufficient to pay the amounts due under the Notes at Maturity.
All amounts payable in respect of the Notes will be made available by the Bank through CDS or its nominee.
CDS or its nominee will, upon receipt of any such amount, facilitate payment to the applicable CDS Participants or credit
the account of such CDS Participants, in amounts proportionate to their respective interests as shown on the records of
CDS. BMO Capital Markets will facilitate payment by FundSERV to non-CDS Participants or credit the account of such
non-CDS Participants, in amounts proportionate to their respective interests.
The Bank expects that payments by CDS Participants and non-CDS Participants to Holders will be governed by
standing instructions and customary practices, as is the case with securities or instruments held for the accounts of
customers in bearer form or registered in street name, and will be the responsibility of such CDS Participants or non-CDS
Participants. The responsibility and liability of the Bank in respect of Notes represented by a Global Note is limited to
making payment of the amounts due in respect of the Global Note to CDS or its nominee. Neither the Bank nor the Note
Program Manager will have any responsibility or liability for any aspect of the records relating to or payments made on
account of ownership of the Notes represented by the Global Note or for maintaining, supervising or reviewing records
relating to any such ownership.
The Bank retains the right, as a condition to payment of amounts at Maturity to require the surrender for
cancellation of any certificate evidencing the Notes.
Neither the Bank nor CDS will be bound to see the execution of any trust affecting the ownership of any Note or
be affected by notice of any equity that may be subsisting with respect to any Note.
Deferred Payment
Federal laws of Canada preclude the charging of interest or other amounts for the advancing of credit at effective
rates in excess of 60% per annum. Therefore, when any payment is to be made by the Bank to a Holder at Maturity,
payment of a portion of such payment constituting a variable return on the Notes that would exceed 60% may be deferred to
ensure compliance with such laws. The Bank will pay the portion so deferred to the Holder together with interest at the
Bank’s equivalent term deposit rate as soon as Canadian law permits. In addition, the Bank may withhold a portion of any
payment to a Holder that the Bank is legally able or required to withhold. The Bank will pay the portion so deferred to the
Holder together with interest at the Bank’s equivalent term deposit rate as soon as Canadian law permits.
Book-Entry Only System
All of the Notes will be represented by a Global Note. The Bank will issue Notes evidenced by certificates in
definitive form to a particular Holder only in limited circumstances. A Global Note will name a depository or its nominee
as the owner of the Notes, initially to be CDS. (All references to the Notes and a Note contained in this pricing supplement
will include the Global Note unless the context otherwise requires.) For further information about Notes held through a
depository, see “Description of the Notes — Form of Notes and Transfer” in the Prospectus.
S-36
Global Note
The Bank will issue registered Notes in the form of a fully registered Global Note that will be deposited on the
Closing Date with a depository (initially being CDS) and registered in the name of such depository or its nominee in
denominations equal to the aggregate principal amount of the Notes. Unless and until it is exchanged in whole for Notes in
definitive registered form, the registered Global Note may not be transferred except as a whole by and among the
depository, its nominee or any successors of such depository or nominee. Each person owning a beneficial interest in a
registered Global Note must rely on the procedures of the depository for that registered Global Note and if that person is
not a participant, on the procedures of the participant through which the person owns its interest, to exercise any rights of a
Holder.
Definitive Notes
If the depository for any of the Notes represented by a registered Global Note is at any time unwilling or unable to
continue to properly discharge its responsibilities as depository, and a successor depository is not appointed by the Bank
within 90 days, the Bank will issue Notes in definitive form in exchange for the registered Global Note that had been held
by the depository.
In addition, the Bank may at any time and in its sole discretion decide not to have any of the Notes represented by
one or more registered Global Notes. If the Bank makes that decision, the Bank will issue Notes in definitive form in
exchange for all of the registered Global Notes representing the Notes.
Except in the circumstances described above and in the Prospectus, beneficial owners of the Notes will not be
entitled to have any portions of such Notes registered in their name, will not receive or be entitled to receive physical
delivery of the Notes in certificated, definitive form and will not be considered the owners or holders of a Global Note.
Notices to Holders
All notices to the Holders regarding the Notes will be validly given if (a) published once in a French language
Canadian newspaper and in the national edition of an English language Canadian newspaper or (b) given through CDS to
CDS’s participants. The Investment Manager will give notice as aforesaid to the Holders of any material change or
material fact relating to the Notes.
Amendments to the Notes
The Global Note may be amended without the consent of the Holders by agreement between the Bank and the
Note Program Manager if, in the reasonable opinion of the Bank and the Note Program Manager, the amendment would not
materially and adversely affect the interests of the Holders. In all other cases, the Global Note may be amended if the
amendment is approved by a resolution passed by the favourable votes of Holders representing not less than 66 2/3% of the
outstanding aggregate Notes represented for the purpose of considering the resolution. Each Holder is entitled to one vote
per Note held for the purpose of voting at meetings convened to consider a resolution. The Notes do not carry the right to
vote in any other circumstances.
EARNINGS COVERAGE RATIOS
The following consolidated financial ratios for the Bank, which are calculated for the 12 months ended October 31, 2006
and the 12 months ended July 31, 2007, reflect the repayment at maturity of U.S.$300 million 7.80% Notes on April 1,
2007, the issuance of the $1,200 million Series D Medium-Term notes, Second Tranche on June 21, 2007, the redemption
of $150 million 7.92% Debentures, Series 22 on July 31, 2007, the redemption of $200 million Non-Cumulative Class B
Preferred Shares, Series 4 on August 27, 2007, and the issuance of $800 million of 5.75% Trust Subordinated Notes due
2022 by the non-consolidated BMO Subordinated Notes Trust on September 26, 2007:
October 31, 2006(1)
S-37
July 31, 2007(1)
Interest coverage on subordinated indebtedness, Preferred Share
Liabilities and Capital Trust Securities..........................................
11.08 times
9.01 times
Note:
(1) As at October 31, 2006 and July 31, 2007, there were no Class A Preferred Shares outstanding.
The financial ratios in the table above are calculated by dividing the Bank’s earnings before interest and income
tax by the interest requirements on the Bank’s issued and outstanding subordinated indebtedness, Preferred Share Liabilities
and Capital Trust Securities determined in accordance with Canadian generally accepted accounting principles, for the
periods indicated, after giving effect to the above-noted repayment, issuance and redemption of notes and preferred shares
of the Bank. The issuance of the Notes will have no effect on the foregoing financial ratios.
The Bank’s interest requirements for its long-term debt amounted to $329.349 million for the 12 months ended
October 31, 2006 and $336.203 million for the 12 months ended July 31, 2007. The Bank’s earnings before interest and
income tax was $3,648.663 million for the 12 months ended October 31, 2006, which is 11.08 times the Bank’s interest
requirements for this period. The Bank’s earnings before interest and income tax was $3,029.573 million for the 12 months
ended July 31, 2007, which is 9.01 times the Bank’s interest requirements for this period.
In calculating the interest coverages, foreign currency amounts have been converted to Canadian dollars using
rates of exchange as at the end of each month. For the 12 month period ended October 31, 2006, the average exchange rate
was Cdn.$1.1322 per U.S.$1.00, and for the 12 month period ended July 31, 2007, the average exchange rate was
Cdn.$1.1223 per U.S.$1.00.
PLAN OF DISTRIBUTION
Pursuant to a dealer agreement (the “Dealer Agreement”) dated October 12, 2007 among BMO Capital Markets,
HSBC Securities (Canada) Inc., and the Bank, the Agents have agreed to offer the Notes for sale as agent of the Bank, on a
best efforts basis, if, as and when issued by the Bank, in accordance with the terms and conditions of the Dealer Agreement.
The Notes will be offered at a price of $100 per Note. The Agents will be entitled to a fee equal to $5.00 (5%) per Note
sold. While the Agents have agreed to use their best efforts to sell the Notes offered hereby, they will not be obligated to
purchase the Notes which are not sold.
The Notes are being offered through the mutual fund order entry system FundSERV. Subscriptions for Notes will
be made through FundSERV under the mutual fund order code “JHN820”, which will result in funds being accumulated in
a non-interest bearing account of BMO Capital Markets pending execution of all documents required for this transaction
and satisfaction of closing conditions if any. Holders should recognize that, unless they have purchased the Notes directly
through a representative of BMO Capital Markets, they do not have an account with BMO Nesbitt Burns Inc. Funds in
respect of all subscriptions shall be payable at the time of subscription. The Bank will have the sole right to accept offers to
purchase Notes and may reject any proposed purchase of Notes in whole or in part, and the right is reserved to close the
subscription book at any time.
BMO Capital Markets is a wholly-owned subsidiary of BMO Nesbitt Burns Corporation Limited which is, in turn,
an indirect majority-owned subsidiary of the Bank. As a result, the Bank is a related issuer of the BMO Capital Markets
under applicable securities legislation. The decision to offer the Notes and the determination of the terms of the Notes was
based on the direction and advice of officers of BMO Capital Markets. The terms of the Notes were based on negotiations
between BMO Capital Markets, as agent of the Bank, and the Agents. The Bank or BMO Capital Markets, as agent on
behalf of the Bank, may enter into arrangements to hedge the Bank’s risks associated with the Notes. The Bank has agreed
that BMO Capital Markets may retain a portion of any profits, and may be required to compensate the Bank for a portion of
any losses, resulting from such hedging arrangements. In addition, BMO Capital Markets will serve as Calculation Agent
and facilitate payment of amounts payable, if any, in respect of the Notes. BMO Capital Markets will also arrange for a
secondary market for the sale of Notes, as described herein, but reserves the right to elect not to do so in the future, in its
sole discretion, without prior notice to investors, and may earn a profit in connection with the acquisition or subsequent
S-38
disposition of Notes acting as principal. BMO Capital Markets will receive its share of the Agents’ fee and an amount
equal to the Note Program Manager Fee as described under “Fees and Expenses of the Note Program.”
The Bank reserves the right to purchase for cancellation at its discretion any amount of Notes in the
secondary market, without notice to Holders.
If for any reason the closing of the Offering does not occur, all subscription funds will be returned to
subscribers without interest or deduction. It is expected that the closing of the Offering will take place on December
19, 2007 or on such other date as the Bank and the Agents may agree and that the Notes will be available for
delivery in book-entry form only through the facilities of CDS on or about closing. Subscribers for the Notes will
not have the right to receive physical certificates evidencing their ownership of the Notes.
In connection with the issue and sale of the Notes by the Bank, no person is authorized to give any
information or to make any representation not expressly contained in this pricing supplement or the Global Note
and the Bank does not accept responsibility for any information not contained herein. This pricing supplement does
not constitute, and may not be used for the purposes of, an offer or solicitation by anyone in any jurisdiction in
which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or
solicitation and no action is being taken to permit an offering of the Notes in any jurisdiction outside Canada where
any action is required.
The Notes to be issued hereunder have not been, and will not be, registered under the U.S. Securities Act and may
not be offered, sold or delivered, directly or indirectly, in the United States of America, its territories, its possessions and
other areas subject to its jurisdiction or to, or for the account or benefit of, a U.S. person (as defined in Regulation S under
the U.S. Securities Act) except in certain transactions exempt from the requirements of the U.S. Securities Act.
USE OF PROCEEDS
The Bank will use the net proceeds of the Offering for general banking purposes. The Bank and/or its affiliates
may use all or any portion of the proceeds in transactions intended to hedge the Bank’s obligations under the Notes,
including forward and option contracts. The Bank may benefit from any difference between the amount it is obligated to
pay under the Notes, net of related fees and expenses, and the returns it may generate in hedging such obligation.
THE NOTE PROGRAM MANAGER
BMO Capital Markets or a person appointed by BMO Capital Markets in its sole discretion will act as the Note
Program Manager. The Note Program Manager is responsible for managing and administering the Note Program. In that
capacity, the Note Program Manager will be responsible for:
•
publishing NAV per Note,
•
determining the circumstances under which to suspend the determination of the NAV per Note,
•
determining when a Substitution Event has occurred allowing the Bank to substitute a new mutual fund for an
existing fund in the Portfolio,
•
determining whether an Extraordinary Event has occurred permitting the Bank to redeem Notes prior to their
Maturity Date, and
•
determining whether a Market Disruption Event exists permitting the temporary postponement of the
Portfolio’s Valuation Date.
As compensation for its management of the Note Program, the Note Program Manager is entitled to receive an
annual fee of 2.00% of the Net Value of the Portfolio. From this fee, the Note Program Manager will also be responsible
for: (1) paying any management fees to the Investment Manager for management services provided to the Note Program;
(2) paying any services fees to sales representatives of qualified selling members in respect of Notes held by their clients.
S-39
Conflicts that may arise as a result of BMO Capital Markets or an affiliate of the Bank acting as the Note Program Manager
are disclosed in “Certain Risk Factors — Risks Relating to the Offering — Conflicts of Interest”.
THE CALCULATION AGENT
BMO Capital Markets or a person appointed by BMO Capital Markets will act as Calculation Agent for the Note
Program. The Calculation Agent will be solely responsible for the determination and calculation of the Bankers’
Acceptance Rate, the Value of the Portfolio, the Net Value of the Portfolio, NAV per Note and any other determinations
and calculations with respect to any payment in connection with the Notes, as well as for determining whether a Market
Disruption Event has occurred and for making certain other determinations with regard to the Notes and the Portfolio. The
Calculation Agent has appointed Jones Heward Investment Counsel Inc. to calculate the NAV per Note. Such calculations
will be based on information provided by the Investment Manager and other publicly available information. Except in the
circumstances of an Early Redemption following an Extraordinary Event, all determinations and calculations made by the
Calculation Agent will be at the sole discretion of the Calculation Agent and will, in the absence of manifest error, be
conclusive for all purposes and binding upon the Holders. The Calculation Agent receives no fees for acting in such
capacity. Where the Bank or one of its affiliates is the Calculation Agent, it will discharge its duties in such capacity
honestly and in good faith. Conflicts that may arise as a result of BMO Capital Markets or an affiliate of the Bank acting as
the Calculation Agent are described in “Certain Risk Factors — Risks Relating to the Offering — Conflicts of Interest”.
CONFLICTS OF INTEREST
The Bank is the issuer of the Notes. BMO Capital Markets, a wholly-owned subsidiary of BMO Nesbitt Burns
Corporation Limited which is, in turn, an indirect majority-owned subsidiary of the Bank, is the Agent and the Calculation
Agent for the Notes. Guardian Group of Funds Ltd., an indirect wholly-owned subsidiary of the Bank, is the Investment
Manager and Jones Heward Investment Counsel Inc, an indirect wholly-owned subsidiary of the Bank, is the Investment
Advisor. The Notes will be sold by dealers and other firms, which will include the Bank’s related entities such as BMO
Nesbitt Burns. All of the parties referred to above will receive fees in connection with their roles in the distribution of the
Notes, payable from the Agents’ fees, or in case of the management of the Fund, payable from the Note Program Fee.
INDEPENDENT REVIEW COMMITTEE FOR THE NOTE PROGRAM
The Bank will establish an independent review committee for the Note Program composed of three members who
are independent of the Bank, the Investment Manager and entities related to either of them. The independent review
committee will review and make recommendations on conflict of interest matters that could arise under the Note Program
between Holders of Notes and the Bank, the Investment Manager and entities related to either of them. The committee will
be asked to determine that, in its opinion, the proposed action is taken by the Bank acting in good faith (i.e., not with the
intent of adversely affecting the Holders). The committee may provide standing instructions permitting on a continuous
basis a particular action by the Bank. The standard of care of the committee members will be to act honestly and in good
faith, with a view to the best interest of the Holders, having regard to the structure and the terms of the Notes and the
legitimate interest of the Bank in hedging its obligations under the Notes. The committee will have no binding authority,
but if any of its recommendations is not followed by the Bank, it will be reported in the committee’s annual report. The
committee may hire outside advisors if deemed necessary or useful to make their determinations at the expense of the Bank.
The committee will prepare an annual report which will be posted at www.bmosp.com. The report will contain a
description of the composition of the committee and a description of any known instance when the Bank proceeded with a
matter referred to the committee for which no recommendation was given by the committee or where the Bank did not
follow a recommendation of the Committee.
FEES AND EXPENSES OF THE NOTE PROGRAM
Initial Fees and Expenses
Expenses of the Offering of $5.00 per Note (5% of the Subscription Price) will be paid out of the proceeds of the
Offering on or about the Closing Date to the Agents.
S-40
Note Program Fee
As compensation for management of the Note Program, the Note Program Manager is entitled to receive an annual
fee of 2.00% of the Net Value of the Portfolio (the “Note Program Fee”). The Note Program Fee will be calculated daily
and payable monthly in arrears to the Note Program Manager.
From the Note Program Fee, the Note Program Manager will be responsible for paying (i) certain management
fees to the Investment Manager for the management services provided by it in respect of the Units notionally held in the
Portfolio (the “Investment Management Fee”), and (ii) 0.50% per annum of the Net Value of the Portfolio per Note for
the first 9 years from the Closing Date to sales representatives of qualified selling members in respect of Notes held by their
clients (the “Service Fee”).
Loan Expense
In order to provide increased exposure to the Fund, the Portfolio will notionally borrow funds through the Loan
with the Bank at an annual rate equal to the Bankers’ Acceptance Rate plus one-quarter of one percent, accrued daily and
paid monthly. Any interest expense that accrues on the Loan will be paid by notionally selling Portfolio Units.
General
The Note Program Fee and Loan Expense will be charged by reducing the Number of Portfolio Units, therefore
ultimately reducing the Value of the Portfolio. The Bank will not charge any other fee or seek reimbursement of any other
expense under the Note Program. For certainty, all other expenses of the Offering (other than the selling commission
described above) will be borne by the Bank.
Holders wishing to sell their Notes within the first three years of their issuance will be subject to an early trading
charge of up to 5% of the Subscription Price per Note. See “Secondary Market — Sale Prior to Maturity” for a description
of the early trading charge. The NAV per Note quoted in the secondary market will be before deduction of any applicable
In order for the payment at Maturity to exceed the principal amount of the Notes, the return generated by the
Portfolio from the Closing Date to the Valuation Date will have to exceed the ongoing fees and expenses of the Note
Program.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Torys LLP, counsel to the Bank, the following is, as of the date hereof, a summary of the
principal Canadian federal income tax considerations generally applicable to the acquisition, holding and disposition of the
Notes by an Initial Holder. This summary is applicable only to an Initial Holder who is an individual (other than a trust)
and, for the purposes of the Tax Act, is a resident of Canada, deals at arm’s length with and is not affiliated with the Bank
and holds Notes as capital property. The Notes will generally be considered to be capital property to an Initial Holder
unless: (i) the Initial Holder holds the Notes in the course of carrying on or otherwise as part of a business of trading or
dealing in or buying and selling securities; or (ii) the Initial Holder acquired the Notes as an adventure in the nature of
trade. Certain Initial Holders whose Notes might not otherwise be considered to be capital property or who desire certainty
with respect to the treatment of the Notes as capital property may be entitled to make an irrevocable election to have the
Notes and all of the Initial Holder’s other “Canadian securities” deemed to be capital property pursuant to subsection 39(4)
of the Tax Act.
This summary is based on the current provisions of the Tax Act as in force on the date hereof, counsel’s
understanding of the current administrative and assessing practices of the CRA and all specific proposals to amend
the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof. This
summary does not otherwise take into account or anticipate any changes in law or in the CRA’s administrative or
assessing practices, whether by legislative, governmental or judicial action. This summary is not exhaustive of all
possible Canadian federal income tax considerations applicable to an investment in Notes and does not take into
account provincial, territorial or foreign income tax legislation or considerations.
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This summary is of a general nature only and is not intended to be legal or tax advice to any particular
Holder. Holders should consult their tax advisors for advice with respect to the income tax consequences of an
investment in Notes, based on their particular circumstances.
Payment at Maturity or Early Redemption
A Note is a “prescribed debt obligation” within the meaning of the Tax Act. The rules in the Tax Act applicable to
a prescribed debt obligation generally require a taxpayer to accrue the amount of any interest, bonus or premium receivable
in respect of the obligation over the term of the obligation, based on the maximum amount of interest, bonus or premium
receivable on the obligation. Based in part on counsel’s understanding of the CRA’s administrative practice with regard to
prescribed debt obligations, there should be no deemed accrual of any amount in respect of the Notes under these
provisions prior to the Valuation Date. As a result, an Initial Holder who holds a Note at the Maturity Date or Early
Redemption Date will be required to include in his or her income for the taxation year which includes the Maturity Date or
Early Redemption Date, the amount, if any, by which the Maturity Value or Redemption Value exceeds the Subscription
Price. The Bank will file an information return with the CRA in respect of any such amount to be included in an Initial
Holder’s income and will provide the Initial Holder with a copy of such return. Generally, at Maturity or Early Redemption
an Initial Holder will also be considered to have disposed of the Note and may realize a capital loss to the extent that the
Maturity Value or Redemption Value is less than the Initial Holder’s adjusted cost base of the Note.
Disposition of Notes Prior to Maturity
In certain circumstances, where an investor assigns or otherwise transfers a debt obligation prior to its maturity,
the amount of interest accrued on the debt obligation to that time, but unpaid, will be excluded from the proceeds of
disposition of the obligation and will be required to be included as interest in computing the investor’s income for the
taxation year in which the transfer occurs. There should be no amount that will be treated as accrued interest on an
assignment or transfer of a Note prior to the Valuation Date. While the matter is not free from doubt, a disposition or
deemed disposition of a Note prior to the Valuation Date by an Initial Holder should give rise to a capital gain (or capital
loss) to the extent that the proceeds of disposition exceed (or are less than) the aggregate of the Initial Holder’s adjusted
cost base of the Note and any reasonable costs of disposition. An Initial Holder who disposes of a Note prior to Maturity
should consult his or her tax advisor with respect to his or her particular circumstances.
One-half of a capital gain (a “taxable capital gain”) realized by an Initial Holder must be included in the income
of the Initial Holder. One-half of a capital loss (an “allowable capital loss”) realized by an Initial Holder is deductible
against taxable capital gains realized in the taxation year. Allowable capital losses in excess of taxable capital gains may be
carried back and deducted against net taxable capital gains realized in the three preceding taxation years or carried forward
and deducted against net realized taxable capital gains in subsequent taxation years, subject to the rules in the Tax Act.
Capital gains realized by an individual may give rise to a liability for alternative minimum tax.
CERTAIN RISK FACTORS
An investment in the Notes is subject to certain risk factors that prospective investors should carefully consider
before acquiring the Notes, including but not limited to the risks described below. In addition to the risks described herein
and in the Prospectus, reference is made to the disclosure relating to risk factors on pages 28, 29, and 66 to 73 of the Bank’s
Annual Report for the year ended October 31, 2006, which disclosure is incorporated herein by reference.
Risks Relating to the Offering
Suitability of Notes for Investment
An investor should decide to invest in the Notes only after carefully considering with his or her advisor, whether
the Notes are a suitable investment in light of the information set out in this pricing supplement.
Investments in the Notes are highly speculative and uncertain in nature in that they could produce no return on the
Holder’s original investment, other than the Minimum Payment, and Holders could lose substantially all of their investment
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in the Notes. Therefore, an investment in the Notes is only suitable for investors prepared to assume risks with an
investment whose return is tied to the performance of the Portfolio. The Notes are not conventional notes or debt securities
in that they do not provide Holders with a return or income stream prior to Maturity and the return at Maturity is not
calculated by reference to a fixed or floating rate of interest that is determinable prior to Maturity nor do they provide
Holders with any assurance that the principal amount of the Notes will be paid at or prior to Maturity, other than the
Minimum Payment. The Notes, unlike many traditional debt obligations of Canadian chartered banks, are speculative or
uncertain in that they could produce no return on the Holder’s original investment and not repay their principal amount at or
prior to Maturity, other than the Minimum Payment. There is no assurance the Portfolio will be able to notionally generate
positive returns. Therefore, there is no assurance that a Holder will receive any return at Maturity, other than the Minimum
Payment, and Holders could lose substantially all of their investment in the Notes. Accordingly, the Notes are not suitable
investments for a Holder if the Holder needs or expects to receive any payments during the term of the Notes, any return or
a specific return on investment or to have the principal repaid at Maturity or otherwise. The Notes are designed for
investors with a long-term investment horizon who are prepared to hold the Notes to Maturity and are prepared to assume
risk with respect to a return tied to the performance of the Portfolio and risk with respect to a loss of principal. The Notes
are not a suitable investment for a prospective purchaser who does not understand their terms or the risks involved in
holding the Notes. There is no assurance that the Portfolio will be able to meet the investment objectives of the Notes or
avoid losses.
Risk of Loss of Original Investment
The Notes and the Bank do not guarantee any return of principal at Maturity, other than the Minimum Payment.
At Maturity, each Holder will receive an amount for each Note equal to the Maturity Value. The NAV per Note, and as a
result the Maturity Value, will vary with, among other things, the Value of the Portfolio and the ongoing fees and expenses
of the Note Program and may be affected by a number of other factors beyond the control of the Investment Manager or the
Bank. As a result, the Maturity Value will not be determinable before the Valuation Date. In addition, because the ongoing
fees and expenses of the Note Program reduce the amount of return, the Value of the Portfolio must increase sufficiently in
order for Holders to receive at Maturity at least the amount they invested in the Notes. If the Value of the Portfolio
decreases or does not increase sufficiently, Holders will receive less than the principal amount they invested and could lose
substantially all of their investment in the Notes.
Uncertain Return Until Maturity
The Notes are not conventional indebtedness in that they do not provide a return or income stream prior to
Maturity and the return at Maturity is not calculated by reference to a fixed or floating rate of interest that is determined
prior to Maturity. It is possible that the Portfolio will not appreciate in value at Maturity and, therefore, the Notes could
produce no return or principal repayment at Maturity, other than the Minimum Payment.
The return, if any, on the Notes will be uncertain until Maturity. Whether there is a return on the Notes will
depend in part on the performance of the Portfolio, as measured by the change, if any, in the Value of the Portfolio. There
can be no assurance that the Portfolio will generate positive returns or that the objectives of the Notes will be achieved.
Depending on the performance of the Portfolio, Holders may not have been repaid the amount they invested in the Notes
(other than the Minimum Payment). Holders may receive no return on the Notes and may lose substantially all of the
amount they invested in the Notes.
Investors should understand that the risk involved in this type of investment is greater than that normally
associated with other types of investments. The investments in which the Investment Manager proposes to invest (and
hence those to which the Portfolio is exposed) can be subject to sudden, unexpected and substantial price movements and
various other risks. Consequently, the trading of investments can lead to substantial losses as well as gains in the value of
the Portfolio within a short period of time.
Reliance on Investment Manager and Investment Advisor
The Investment Manager is responsible for the management of the Fund and together with the Investment Advisor
has exclusive and absolute discretion and authority over the management and control of the investments of the Fund. The
decisions of the Investment Manager and Investment Advisor will influence the overall performance of the Fund and, as a
result, the Notes. Accordingly, the performance of the Notes depends on the skill and acumen of the management and
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portfolio management teams of the Investment Manager and the Investment Advisor. These individuals will not devote all
of their time to the business of the Fund. If these individuals should cease to participate in the Fund’s business, the Fund’s
ability to select attractive investments and manage its portfolio could be severely impaired. There can be no assurance
that: (a) the Fund’s investment objectives will be realized; (b) the Fund’s investment strategies will prove successful; (c)
the Fund’s distribution policy can be maintained; or (d) the Fund can avoid losses and generate a positive return. Past
performance of the Investment Manager and the Investment Advisor is not indicative of future returns.
Public Disclosure by Investment Manager
Although the Investment Manager is an indirect wholly-owned subsidiary of the Bank, neither the Bank nor its
affiliates have ability to control or predict the actions of the Investment Manager or its affiliates with respect to methods or
policies relating to the calculation of the NAV of Units, and consequently, are not responsible for any errors in, or the
discontinuation of, disclosure regarding the methods or policies of the Investment Manager relating to the calculation of the
NAV of Units.
Future Results
The past investment performance of the Investment Advisor and Fund may not be relied on as an indication of the
future results of the Portfolio. There can be no assurance that the Investment Advisor’s assessment of the short-term or
long-term prospects of investments will prove accurate.
Secondary Trading of Notes
There is currently no market through which Notes may be sold. The Bank does not intend to apply to have the
Notes listed on any securities exchange.
BMO Capital Markets will arrange for a secondary market for the purchase and sale of the Notes other than on the
occurrence of a Market Disruption Event. BMO Capital Markets reserves the right to elect not to arrange for such a
secondary market in the future, in its sole discretion, without prior notice to investors.
A Holder who sells Notes in the secondary market (assuming the availability of a secondary market) may receive a
price less than the Subscription Price.
The NAV per Note at any time will be determined by the Note Program Manager and will vary with the Value of
the Portfolio and the ongoing fees and expenses of the Note Program and may be affected by a number of other factors
beyond the control of the Investment Manager or the Bank. As a result, the Maturity Value will not be determinable before
the Valuation Date.
Holders may wish to consult their respective investment advisors on whether it would be more appropriate in the
circumstances at any time to sell or to hold their Notes until Maturity.
A Holder will not be able to sell Notes prior to Maturity other than through the secondary market.
Market Disruption Event
The determination of the Maturity Value may be postponed if the Calculation Agent determines that a Market
Disruption Event has occurred or is continuing on the Valuation Date. If such a postponement occurs, the Calculation
Agent will calculate the Maturity Value on the first Business Day immediately after that day on which no Market
Disruption Event occurs or is continuing. In no event, however, will the Valuation Date be postponed by more than eight
Business days. If the Valuation Date is postponed to the last possible day, but a Market Disruption Event occurs or is
continuing on that day, that day will nevertheless be the Valuation Date. In such an event, the Calculation Agent will make
a good faith estimate in its sole discretion of the Maturity Value that would have prevailed in the absence of the Market
Disruption Event.
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Loan
The use of the Loan creates an opportunity for increased exposure to the Fund and the potential of an increased
return. At the same time, however, the use of the Loan creates special risks. The Loan will create notional interest expense
for the Note Program. The interest expense may exceed the return made from the borrowed funds. To the extent that the
notional return on the additional Units purchased for the Portfolio with borrowed funds is greater than the notional interest
expense incurred by the Note Program on the borrowed money, then the return on the Note Program assets will be greater
than the return if no funds were borrowed. Conversely, if the notional return from the additional Units notionally
purchased for the Portfolio with borrowed funds is not sufficient to cover the notional interest expense on the borrowed
money, then the return on the Note Program assets will be less than if no money was notionally borrowed.
Conflicts of Interest
The Investment Manager or any of its affiliates may conduct any other business. This other business may include
activities in securities and such business may be in competition with the Portfolio or the Notes. For example, the
Investment Manager or any of its affiliates may act as a general partner, managing member, investment advisor or
investment manager for others (including the issuers of securities owned by the Portfolio). The Investment Manager or any
of its affiliates may also manage funds or capital for others, may have, make and maintain investments in its own name or
through other entities, may serve as a consultant, managing member, partner or shareholder of one or more investment
advisors, partnerships, securities firms or advisory firms, and may act as a director, officer or employee of any corporation,
a trustee of any trust, an executor or manager of any estate, or an administrative official of any other business entity. The
investment objectives and policies relating to these other entities and activities may not be consistent with the investment
objectives and strategies in respect of the Portfolio. As a result, the investments taken, held or liquidated in respect of the
Portfolio may vary in kind, terms or price from those taken, held or liquidated by or on behalf of these other entities or in
connection with these other activities. The Investment Manager also may be subject to certain limitations, bylaws or
policies under its own internal code of ethics or other policies that may prevent the Investment Manager from taking certain
actions or making certain investments for the Fund. In addition, the Investment Manager and/or its respective affiliates, in
connection with its other business activities, may acquire material non-public confidential information that may restrict it
from purchasing assets or selling assets for itself or its clients (including the Portfolio) or otherwise using such information
for the benefit of its clients or itself. As a result of the foregoing, the Investment Manager and its affiliates may have
conflicts of interest in allocating their time and activity between the Portfolio and other entities and activities, and in
allocating investments among the Portfolio and in respect of other clients, including those in which the Investment Manager
and its affiliates may have a greater financial interest.
The Investment Manager and the Investment Advisor are indirect wholly-owned subsidiaries of the Bank. In
addition to the Bank’s ownership interest in the Investment Manager and the Investment Advisor, each of the Bank and
BMO Capital Markets, whether in its capacity as Agent, Calculation Agent or Note Program Manager or otherwise, and
any of their respective affiliates, may from time to time, in the course of its normal business operations, hold interests
linked to the Portfolio or hold securities of, extend credit to or enter into other business dealings with the Investment
Manager, the Investment Advisor, the Portfolio or one or more of the entities whose securities constitute investments of the
Portfolio, including under hedging arrangements relating to the Notes. Conflicts may also arise because the Bank and/or its
affiliates expect to engage in trading activities related to the Fund and the securities in which the Fund invests that are not
for the account of Holders or on their behalf. These trading activities may present a conflict between the Holders’ interest
in the Notes and the interests of the Bank and/or its affiliates in their proprietary accounts in facilitating transactions,
including block trades and options and other derivatives transactions, for their customers and in accounts under their
management. These trading activities, if they influence the level of the Portfolio, could be adverse to the interests of the
Holders. Moreover, subsidiaries of the Bank, including BMO Capital Markets, have published, and in the future expect to
publish, research reports with respect to some or all of the issuers of the securities in which the Fund invests. This research
is modified from time to time without notice and may express opinions or provide recommendations that are inconsistent
with purchasing or holding the Notes. Each has agreed that all such actions taken by it shall be taken based on normal
commercial criteria in the particular circumstances, which may include payment of trailer fees. Such actions may not take
into account the effect, if any, of such actions on the amount payable at Maturity of the Notes.
BMO Capital Markets, an indirect subsidiary of the Bank, is the Calculation Agent and Note Program Manager
responsible for, among other things, calculating the NAV per Note and facilitating sales of Notes, as described under
“Secondary Market”, and may enter into derivative transactions or other arrangements with the Bank in respect of the
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Bank’s investment of the net proceeds of the Offering. BMO Capital Markets may have economic interests adverse to
those of Holders, including with respect to certain determinations that the Calculation Agent or Note Program Manager
must make with respect to the Notes.
No Independent Calculation
As part of its responsibilities, the Note Program Manager will be solely responsible for computing the NAV per
Note based on the calculations of the Value of the Portfolio as determined by the Calculation Agent based on information
provided by the Investment Manager. Except in circumstances of an Early Redemption following an Extraordinary Event,
no independent calculation agent will be retained to make or confirm the determinations and calculations made by the
Calculation Agent or the Note Program Manager or the information provided by the Investment Manager.
Credit Rating
The Notes have not been rated. As at the date of this pricing supplement, the deposit liabilities of the Bank with a
term to maturity of more than one year were rated AA by DBRS, A+ by S&P and Aa1 by Moody’s. There can be no
assurance that, if the Notes were specifically rated by these rating agencies, they would have the same rating as the other
unsubordinated indebtedness of the Bank. A rating is not a recommendation to buy, sell or hold investments, and may be
subject to revision or withdrawal at any time by the relevant rating agency.
Credit Risk
Because the obligation to make payments to Holders of Notes is an obligation of the Bank, the likelihood that such
Holders will receive the payments owing to them in connection with the Notes will be dependent upon the financial health
and creditworthiness of the Bank.
No Deposit Insurance
The Notes will not constitute deposits that are insured under the Canada Deposit Insurance Corporation Act
(Canada), the Bank Act or any other deposit insurance regime designed to ensure the payment of all or a portion of a deposit
upon the insolvency of a deposit taking financial institution. Therefore, a Holder will not be entitled to Canada Deposit
Insurance Corporation protection.
Valuation of the Portfolio
The Note Program Manager and the Calculation Agent will be dependent on information reported by the
Investment Manager (including the Unit Price) when determining the Value of the Portfolio, which generally will be
unaudited (except in respect of the Unit Price). The Note Program Manager will not have access to information about the
Fund’s holdings that could be used to verify the information and determinations reported by the Investment Manager.
No Ownership of Portfolio or Portfolio Units
The Notes will not entitle a Holder to any direct or indirect ownership of or entitlement to the Portfolio or the
Portfolio Units. As such, a Holder will not be entitled to the rights and benefits of a unitholder of the Fund, including any
right to receive distributions or dividends or to vote at or attend meetings of unitholders.
Owning Notes is different from owning an interest in the Portfolio or Portfolio Units. The Notes do not represent
an investment in the Portfolio or the Portfolio Units.
The value of the Portfolio Units from time to time, among other things, will determine the notional value of the
Portfolio. Holders should recognize that it is impossible to know whether the value of the Portfolio Units at any time will
rise or fall and whether the investment decisions of the Investment Advisor will prove to be successful. The value of the
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Portfolio Units will be influenced by complex and inter-related political, economic, financial and other factors that can
affect the capital markets generally or the equity trading markets on which the assets of the Fund are trading.
The Notes could be redeemed prior to Maturity
Upon the occurrence of an Extraordinary Event, the Bank may redeem the Notes. Under such circumstances, a
Holder will not be able to participate fully in the appreciation, if any, of the Portfolio that might have occurred up to the
payment date pursuant to an Early Redemption.
Legislative and Regulatory Change
Changes may be made to federal and provincial legislation, regulations or administrative practices, including with
respect to taxation, that could have a material adverse effect on the Note Program and a Holder. In addition, future
regulatory changes in applicable jurisdictions could limit the ability of the Investment Manager to carry out its business and
could have a material adverse effect on the Note Program.
Risks Relating to the Fund
The NAV per Note and the Maturity Value is linked to the performance of the Portfolio. Accordingly, risk factors
applicable to direct investments in the Portfolio Units, as set out below, are also applicable to an investment in Notes.
Class Risk
Notwithstanding that expenses of the Fund attributable to a particular class of units of the Fund will be deducted in
calculating the net asset value of that class, such expenses will continue to be liabilities of the Fund as a whole, and the
assets of the Fund can be called upon to satisfy these liabilities. The expenses of one class of units in the Fund on a record
date for the payment of a distribution may exceed that class’ share of the Fund’s net income. If that occurs, any such excess
will be applied to reduce the amount of the distribution otherwise payable to the other class of units in a reasonable manner,
in order to reduce the income subject to tax in the hands of the unitholders of the Fund as a whole. Therefore, the expenses
of one class may result in the reduction of the income tax payable by the holders of another class.
Foreign Market Risk
Issuers of non-North American securities are generally not subject to the same degree of regulation as are
Canadian or US issuers. The reporting, accounting and auditing standards of foreign countries may differ, in some cases
significantly, from Canadian or US standards.
Repurchase/Reverse Repurchase Risk
The Fund may enter into repurchase agreements and reverse repurchase agreements. In a repurchase agreement,
the Fund sells a security at one price and agrees to buy it back at an agreed price, which is usually lower, on a specified
date. It is a way for the fund to borrow short-term cash and earn fees. In a reverse repurchase agreement, the Fund buys a
security and agrees to sell it back at an agreed price, which is usually higher, on a specified date. It is a way for the Fund to
earn income and for the other party to borrow short-term cash. Though no more than 50% of the Fund’s total assets may be
subject to repurchase agreements, the Fund could experience a loss if the counterparty becomes insolvent and the value of
the securities decreases before the Fund can recover its investment. To minimize risk, the Fund holds collateral equal to at
least 102% of the resale price in the agreement. The collateral held by the Fund to cover its obligations under the
repurchase agreements is adjusted each trading day to ensure that the minimum level is maintained.
Substantial Unitholder Risk
The Fund may have one or more investors who hold or acquire a significant amount of units of the Fund, including
another mutual fund. For example, a financial institution may buy or sell large amounts of the Fund to hedge its obligations
relating to guaranteed investment products whose performance is linked to the performance of the Fund. As well, the
GGOF Solutions invest directly in certain funds managed by the Investment Manager. The redemption of a substantial
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number of units of the Fund by these investors may require the Investment Advisor to sell investments at unfavourable
prices in order to pay the redemption proceeds, which can negatively affect the Fund’s returns. Therefore, the redemption of
securities by a substantial unitholder may adversely affect the performance of the Fund. Conversely, if one or more of these
investors decides to increase its investment in the Fund, the Fund may have to hold a relatively large cash position for a
period of time while the Investment Advisor finds suitable investments. This could negatively impact the Fund’s return.
Currency Risk
A decline in the value of foreign currencies relative to the Canadian dollar will reduce the value of securities
denominated in those currencies.
Market Risk
The value of the equity securities in which the Fund invests is affected (i.e., it may go up or down) by individual
company developments, stock market conditions and general economic conditions.
Securities Lending Risk
The Fund may lend its securities as permitted by securities legislation. The Fund lends securities it holds for a set
period of time in exchange for collateral, which can include cash, qualified securities or securities that can be immediately
converted into the securities that are on loan. To engage in securities lending, the Investment Manager has appointed a
qualified agent under a written agreement between the Investment Manger and the agent, which addresses, among other
requirements, the responsibility for administration and supervision of the securities lending program. There is a risk that
the other party to the transaction may not live up to its obligations under the transaction, leaving the Fund holding collateral
which could be worth less than the loaned securities, if the value of the loaned securities increases relative to the value of
the collateral. To limit this risk: (i) the Fund must hold collateral valued at no less than 102% of the value of the loaned
securities, and the collateral is adjusted each trading day to ensure that this minimum level is maintained; (ii) the collateral
to be held consists of cash, qualified securities or securities that can be immediately converted into the securities that are on
loan; and (iii) the Fund cannot lend more than 50% of the total value of its assets (not including the collateral held by the
Fund).
Volatility Risk
Equity funds generally tend to be more volatile than fixed income funds, and the value of their units may vary
more widely than fixed income funds.
LEGAL MATTERS
Legal matters in connection with the Offering will be passed upon on behalf of the Bank by Torys LLP and on
behalf of the Agents by Stikeman Elliott LLP. As of October 12, 2007, the partners and associates of Torys LLP and
Stikeman Elliott LLP beneficially owned, directly or indirectly, in the aggregate, less than 1% of the outstanding securities
of the Bank and its affiliates and associates.
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APPENDIX “A”
AUDITORS’ CONSENT
We have read pricing supplement No. 6 of Bank of Montreal (the “Bank”) dated October 12, 2007 relating to the issue
of up to $100,000,000 Principal at Risk Notes, Series 1, Due December 19, 2017 to the short form base shelf prospectus of the
Bank dated April 13, 2007 (collectively, the "Prospectus"). We have complied with Canadian generally accepted standards for
an auditor’s involvement with offering documents.
We consent to the incorporation by reference in the above-mentioned Prospectus of (i) our auditors’ report to the
shareholders of the Bank on the consolidated balance sheets of the Bank as at October 31, 2006 and 2005 and the consolidated
statements of income, changes in shareholders’ equity and cash flows for each of the years in the two-year period ended
October 31, 2006 and (ii) our report on management’s assessment of the effectiveness of internal control over financial
reporting and the effectiveness of internal control over financial reporting of the Bank as of October 31, 2006.
Our reports are dated November 28, 2006.
(Signed) KPMG LLP
Chartered Accountants, Licensed Public Accountants
Toronto, Canada
October 12, 2007
A-1
CERTIFICATE OF THE AGENTS
Dated: October 12, 2007
To the best of our knowledge, information and belief, the short form prospectus, together with the documents
incorporated in the prospectus by reference, as supplemented by the foregoing, constitutes full, true and plain disclosure of all
material facts relating to the securities offered by the prospectus and this supplement as required by the securities legislation of
each of the provinces and territories of Canada. For the purpose of the Province of Québec, this simplified prospectus, together
with documents incorporated therein by reference and as supplemented by the foregoing and by the permanent information
record, contains no misrepresentation that is likely to affect the value or the market price of the securities to be distributed.
BMO Nesbitt Burns Inc.
HSBC Securities (Canada) Inc.
By: (Signed) Farooq Moosa
By: (Signed) Catherine Code
C-1
Base Shelf Prospectus
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise.
This short form base shelf prospectus is a base shelf prospectus and has been filed under legislation in each of the provinces and territories of
Canada that permits certain information about these securities to be determined after this prospectus has become final and that permits the
omission from this prospectus of that information. The legislation requires the delivery to purchasers of a prospectus supplement containing the
omitted information within a specified period of time after agreeing to purchase any of these securities.
This short form base shelf prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully
offered for sale and therein only by persons permitted to sell such securities. No securities commission or similar regulatory authority has in any
way passed upon the merits of the securities offered hereunder or has in any way expressed an opinion about these securities and it is an offence
to claim otherwise.
The Notes to be offered hereunder have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the
“U.S. Securities Act”) and, except as stated under “Plan of Distribution”, may not be offered, sold or delivered, directly or indirectly, in the
United States of America, its territories, its possessions and other areas subject to its jurisdiction or to, or for the account or benefit of, a U.S.
person (as defined in Regulation S under the U.S. Securities Act).
Information has been incorporated by reference in this short form base shelf prospectus from documents filed with the securities commission
or similar regulatory authorities in Canada (the permanent information record in Québec). Copies of the documents incorporated herein by
reference may be obtained on request without charge from the Secretary, Bank of Montreal, 1 First Canadian Place, Toronto, Ontario, M5X 1A1,
telephone: (416) 867-6783. For the purpose of the Province of Québec, this simplified prospectus contains information to be completed by
consulting the permanent information record. A copy of the permanent information record may be obtained from the Secretary, Bank of Montreal
at the above-mentioned address and telephone number.
April 13, 2007
SHORT FORM BASE SHELF PROSPECTUS
$1,000,000,000
Medium Term Notes (Principal At Risk Notes)
Bank of Montreal (the “Bank”) may from time to time offer and issue medium term notes (principal at risk notes)
(the “Notes”) in amounts, at prices and on terms to be set forth in an accompanying pricing supplement (a “Pricing
Supplement”). All shelf information omitted from this short form base shelf prospectus (the “Prospectus”) will be
contained in one or more Pricing Supplements that will be delivered to purchasers together with this Prospectus. The
Bank may sell up to $1,000,000,000 in aggregate initial offering price of Notes (or the Canadian dollar equivalent
thereof if any of Notes are denominated in a foreign currency or currency unit) during the 25 month period that this
Prospectus, including any amendments thereto, remains valid. All currency amounts in this Prospectus are stated in
Canadian dollars, unless otherwise indicated.
The specific terms of the Notes in respect of which this Prospectus is being delivered will be set forth in the
applicable Pricing Supplement and may include, where applicable, the specific designation, aggregate principal
amount, the currency or the currency unit for which the Notes may be purchased, maturity, variable return
(including interest) provisions, authorized denominations, offering price, any terms for redemption at the option of
the Bank or the holder, any exchange or conversion terms and any other specific terms. The Bank reserves the right
to set forth in a Pricing Supplement specific variable terms that are not within the options and parameters set forth
herein.
The principal amount of a Note payable at or prior to maturity, if any, or any variable return or other payment will
be determined, in whole or in part, by reference to one or more equity or other securities or financial instruments,
units or other securities of one or more publicly or privately offered investment funds or portfolios, statistical
measures of economic or financial performance, the price or value of any commodity or other asset, or any
combination of the foregoing.
Amounts, if any, paid to holders of the Notes will depend on the performance of the underlying securities.
Unless otherwise specified in the applicable Pricing Supplement, Bank of Montreal does not guarantee any
return of principal and does not guarantee that any return will be paid on the Notes. Accordingly, there is no
assurance that holders will be repaid the principal amount of their investment at or before maturity or will
receive any return on an investment in the Notes and holders could lose substantially all of their investment in
the Notes.
Notes offered under this Prospectus may not be conventional notes or debt securities. Unless otherwise specified in
the applicable Pricing Supplement, there is no assurance that any of the principal amount of the Notes will be paid at
or before maturity. In addition, Notes may not provide holders with a return or income stream prior to maturity
calculated by reference to a fixed or floating rate of interest determinable prior to maturity. The Notes, unlike
traditional debt obligations of Canadian chartered banks, may be speculative or uncertain in that they could produce
no return on a holder’s original investment or not repay any of their principal amount at or prior to maturity or
otherwise. Prospective purchasers are directed to the applicable Pricing Supplement for the specific terms of the
relevant Notes, including the risk factors set out therein. In compliance with applicable securities laws, the Bank will
file with the regulators an undertaking that it will not distribute Notes in Canada that are considered “novel”
specified derivatives within the meaning of the applicable laws without pre-clearing with the regulators the
disclosure contained in the Pricing Supplement pertaining to such securities. The regulators have advised the Bank
that they are currently considering notes linked to investment funds, including hedge funds and certain flow-through
entities, as novel. Unless otherwise specified in the applicable Pricing Supplement, there may be no market through
which the Notes may be sold and purchasers may not be able to resell Notes purchased under the Prospectus. This
may affect the pricing of the Notes in the secondary market, the transparency and availability of trading prices, the
liquidity of the securities, and the extent of issuer regulations. See “Risk Factors”.
Notes may be sold to or through underwriters or dealers purchasing as principal, by the Bank directly through
applicable statutory exemptions, or through agents designated by the Bank from time to time. See “Plan of
Distribution”. The Pricing Supplement will set forth each underwriter, dealer or agent engaged in connection with
the offering and sale of such Notes, and will also set forth the terms of the offering of such Notes including the net
proceeds to the Bank and, to the extent applicable, any fees payable to the underwriters, dealers or agents. The
offerings are subject to approval of certain legal matters on behalf of the Bank by Torys LLP.
BMO Nesbitt Burns Inc. (“BMO Capital Markets”) was involved in the decision to distribute Notes and in
determining the terms of the Notes set forth in this Prospectus and will be involved in the determination of the terms
of each particular offering of Notes, which shall be made based on the direction and advice of one or more officers
of BMO Capital Markets. BMO Capital Markets may receive a commission in connection with it acting as a dealer
for the distribution of Notes and may earn a profit in connection with the acquisition or disposition of Notes acting
as principal. BMO Capital Markets is a wholly-owned subsidiary of BMO Nesbitt Burns Corporation Limited
which is, in turn, an indirect majority-owned subsidiary of the Bank. As a result, the Bank is a related issuer of
BMO Capital Markets under applicable securities legislation. See “Plan of Distribution”.
Notes will be direct, unconditional obligations of the Bank. The Notes will be issued on an unsubordinated basis and
will rank pari passu, as among themselves, and with all other outstanding direct, unsecured and unsubordinated,
present and future obligations (except as otherwise prescribed by law) of the Bank, and will be payable rateably
without any preference or priority. The Notes will not constitute deposits under the Bank Act (unless otherwise
specified in the applicable Pricing Supplement) or that are insured under the Canada Deposit Insurance
Corporation Act or any other deposit insurance regime designed to ensure the payment of all or a portion of a
deposit upon the insolvency of the deposit taking financial institution.
The Bank’s head office is located at 129 Saint-Jacques Street, Montreal, Quebec H2Y 1L6.
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TABLE OF CONTENTS
Documents Incorporated by Reference........................................................................................................................ 3
Bank of Montreal......................................................................................................................................................... 5
Description of the Notes .............................................................................................................................................. 5
Consolidated Capitalization of the Bank ................................................................................................................... 13
Earnings Coverage Ratio ........................................................................................................................................... 14
Plan of Distribution ................................................................................................................................................... 14
Certain Risk Factors .................................................................................................................................................. 15
Use of Proceeds ......................................................................................................................................................... 17
Tax Consequences ..................................................................................................................................................... 17
Purchaser’s Statutory Rights...................................................................................................................................... 17
Appendix “A” Auditors’ Consent................................................................................................................................ 1
Certificate of the Bank................................................................................................................................................. 1
Certificate Of The Dealer ............................................................................................................................................ 2
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, filed by the Bank with the Superintendent of Financial Institutions (the
“Superintendent”) and the various securities commissions or similar authorities in Canada, are specifically
incorporated by reference into and form an integral part of this Prospectus:
(a)
management proxy circular dated January 11, 2007 for the annual meeting held on March 1, 2007;
(b)
Annual Information Form dated December 18, 2006;
(c)
audited consolidated financial statements as at and for the year ended October 31, 2006 with
comparative consolidated financial statements as at and for the year ended October 31, 2005,
together with the auditors’ report thereon and the auditors’ report on internal control over financial
reporting under Standards of the Public Company Accounting Oversight Board (United States)
and Management’s Discussion and Analysis as contained in pages 22 to 133 of the Bank’s Annual
Report for the year ended October 31, 2006;
(d)
the Bank's unaudited consolidated interim financial statements as at and for the three months
ended January 31, 2007 and January 31, 2006 and Management's Discussion and Analysis, each as
contained in the Bank's First Quarter Report to Shareholders for the three months ended January
31, 2007 (the "Bank's First Quarter 2007 Report"); and
(e)
material change report dated December 5, 2006 with respect to the retirement of Tony Comper
from the position of President and Chief Executive Officer of BMO Financial Group as of
March 1, 2007 and the appointment of Bill Downe to such position.
Any documents of the type referred to in the preceding paragraph as well as all Pricing Supplements and
other documents disclosing additional or updated information filed by the Bank with a securities commission or any
similar authority in Canada, after the date of this Prospectus and prior to the termination of the offering under any
Pricing Supplement, shall be deemed to be incorporated by reference herein, as prescribed by applicable securities
laws.
Any statement contained in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified
or superseded a prior statement nor include any other information set forth in the document that it modifies or
supersedes. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. The making of a modifying or superseding statement is not to be deemed an
admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation,
-3-
an untrue statement of a material fact or an omission to state a material fact that was required to be stated or that was
necessary to make a statement not misleading in light of the circumstances in which it was made.
A Pricing Supplement containing the specific terms of an offering of Notes will be delivered to purchasers
of such Notes together with this Prospectus and will be deemed to be incorporated into this Prospectus as of the date
of the Pricing Supplement solely for the purposes of the offering of the Notes covered by that Pricing Supplement
unless otherwise expressly provided therein.
Upon a new Annual Information Form and the related annual consolidated financial statements together
with the auditors’ report thereon and the auditors’ report on internal control over financial reporting under Standards
of the Public Company Accounting Oversight Board (United States) and management’s discussion and analysis
being filed by the Bank with, and where required, accepted by, the applicable securities regulatory authorities during
the currency of this Prospectus, the previous Annual Information Form, the previous annual consolidated financial
statements and management’s discussion and analysis and all interim consolidated financial statements, material
change reports, and information circulars filed prior to the commencement of the Bank’s financial year in which the
new Annual Information Form is filed shall be deemed no longer to be incorporated into this Prospectus for
purposes of future offers and sales of Notes hereunder.
An updated earnings coverage ratio will be filed quarterly with the applicable securities regulatory
authorities, either as a prospectus supplement or as an exhibit to the Bank’s unaudited interim and audited annual
consolidated financial statements, and will be deemed to be incorporated by reference into this Prospectus for the
purposes of future offers and sales of Notes hereunder.
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BANK OF MONTREAL
Bank of Montreal, a chartered bank subject to the provisions of the Bank Act (Canada) (the “Bank Act”),
was founded in 1817 and is Canada’s oldest chartered bank. The head office is at 129 rue Saint-Jacques, Montreal,
Québec, H2Y 1L6, and the executive offices are located at 1 First Canadian Place, Toronto, Ontario, M5X 1A1.
The Bank offers, domestically and internationally, a broad range of credit and non-credit products and
services to individuals, industry, financial institutions and governments directly and through special-purpose
domestic and foreign subsidiaries.
DESCRIPTION OF THE NOTES
The Notes will be issued from time to time during the 25 month period that this Prospectus remains valid in
an aggregate principal amount outstanding on the date of issue not to exceed $1,000,000,000 or the Canadian dollar
equivalent thereof if the Notes are issued in currencies or currency units other than Canadian dollars.
The specific terms of any offering of Notes not described herein, including the initial offering price, any
discount or commission to be paid to any dealers or agents, the aggregate principal amount, currency, issue price and
maturity date of the Notes being offered, applicable fees and the proceeds to the Bank, will be set forth in the Pricing
Supplement that will accompany this Prospectus. The following description of Notes will apply unless otherwise
specified in an applicable Pricing Supplement.
The Notes will be direct, unconditional obligations of the Bank. The Notes will be issued on an
unsubordinated basis and will rank pari passu, as among themselves, and with all other outstanding direct,
unsecured and unsubordinated, present and future obligations (except as otherwise prescribed by law) of the Bank,
and will be payable rateably without any preference or priority.
The Notes may be issued by any branch of the Bank, including a branch located in the United States of
America.
The Notes will not constitute deposits under the Bank Act (unless otherwise specified in the applicable
Pricing Supplement) or that are insured under the Canada Deposit Insurance Corporation Act or any other
deposit insurance regime designed to ensure the payment of all or a portion of a deposit upon the insolvency
of the deposit taking financial institution.
Terms of Notes
The Notes will be offered on a continuing basis and will mature on a day from six months to 30 years from
the date of issue, as specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, the Notes will be issuable in minimum denominations of $100 and integral multiples thereof.
The Notes may provide for a variable return (including fixed or floating rates of interest) by reference to a formula
specified in the applicable Pricing Supplement.
The principal amount of a Note payable at or prior to maturity, if any, or any variable return or other
payment will be determined, in whole or in part, by reference to:
(a)
one or more equity or other securities or financial instruments, including, but not limited to, the
market price or yield of such securities;
(b)
units or other securities of one or more publicly or privately offered investment funds or
portfolios, including, but not limited to, the net asset value, market price or yield of such units or
other securities;
(c)
any statistical measure of economic or financial performance, including, but not limited to, any
exchange rate, interest rate, consumer price or other variable index or reference point;
-5-
(d)
the price or value of any commodity or other asset; or
(e)
any combination of the foregoing;
(collectively, “underlying securities”).
Unless otherwise indicated in a Note and in the applicable Pricing Supplement, Notes will be denominated
in Canadian dollars and the Bank will make payments of principal of, and premium and variable return, if any, on,
Notes in Canadian dollars. Unless otherwise specified in the applicable Note and Pricing Supplement, the Bank will
pay money upon payment of the discharge of Notes when due or upon redemption.
If the date or dates on which any amounts are payable at or prior to maturity or on redemption of a Note or
if any variable return payment date falls on a day that is not a business day, the related payment of principal, if any,
of, and premium or variable return, if any, on, such Note, will be made on the next succeeding business day as if
made on the date the applicable payment was due and no variable return will accrue on the amount payable for the
period from and after the variable return payment date or maturity, as the case may be, unless otherwise indicated in
the applicable Note and in the applicable Pricing Supplement.
Notes may be issued from time to time at such variable return rates and at par, at a premium or at a
discount, the principal amount of which payable at or prior to maturity, if any, may be determined, in whole or in
part, by reference to one or more underlying securities, any amounts of principal and variable return may be payable
in instalments over the term of the Notes, and the Notes may be subject to redemption or repayment prior to
maturity, in each case as specified in the applicable Pricing Supplement.
Issuance of Notes
The Bank may issue Notes upon establishing the principal terms of the particular Notes being issued, which
shall include the following, to the extent applicable:
(a)
the title of such Notes;
(b)
the underlying securities upon which payments of amounts at or prior to maturity or on
redemption or upon which variable return on such Notes are to be determined, the methods or
formulas pursuant to which such payments of amounts at or prior to maturity or on redemption or
pursuant to which variable return will be determined, including how and the extent to which such
determination depends on the performance of such underlying securities, the calculation agent
with respect to such determination, and the relevant considerations, including investment
objectives and risk factors, applicable to an investment in or exposure to the performance of such
underlying securities;
(c)
the date or dates on which amounts payable at or prior to maturity or on redemption, if any, of
such Notes are payable, the basis upon which any such amounts will be determined and the
calculation agent with respect thereto;
(d)
details about any investment manager engaged to provide investment advisory services in respect
of the underlying securities;
(e)
the aggregate principal amount, on the date of issue, of the Notes of such title, including any
maximum or minimum principal amount of Notes to be issued;
(f)
whether, and the extent to which, the Bank covenants to repay at or prior to maturity any part of
the principal amount of such Notes;
(g)
the date(s) on which the Notes will be issued and delivered;
-6-
(h)
the method by which such Notes may be distributed and the basis on which such Notes may be
purchased, including whether such Notes are to be issued or payable on an instalment basis, the
name of any agents, underwriters or dealers engaged to distribute the Notes, any commissions,
fees, selling concessions or other fees or expenses payable by holders of such Notes or to be
deducted from any amount that would otherwise be payable to such holders in respect of such
Notes;
(i)
all commissions, fees or expenses payable to the Bank or any of its affiliates in connection with
the issue, maintenance or administration of, or provision of services in respect of, the Notes;
(j)
whether such Notes are to be issuable in definitive form or as book-entry only securities and, if in
definitive form, whether such Notes are to be issuable initially in global form and, if so, (i)
whether beneficial owners of interests in any such Note in global form may exchange such
interests for Notes of like tenor of any authorized form and denomination and the circumstances
under which any such exchanges may occur, and (ii) the name of the clearing agency through
which any book-entry only Note may be purchased or transferred or a temporary global form of
Note may be deposited;
(k)
the date as of which any book-entry only Note or temporary global Note representing outstanding
Notes will be dated if other than the original issue date of the first such Note to be issued;
(l)
if such Notes are to be issuable in definitive form (whether upon original issue or upon exchange
of a temporary global Note) only upon receipt of certain certificates or other documents or
satisfaction of other conditions, then the form and terms of such certificates, documents or
conditions;
(m)
whether Notes will provide a variable return or whether Notes will be issued at par or at a
premium or a discount, the rate or rates at which, or the formula based on which, such Notes will
provide a variable return, if any, and, if applicable, the interest rate basis (including whether fixed
or floating) and/or any method by which such rate or rates or variable return will be determined,
whether, and the extent to which, the Bank covenants to make minimum payments of interest or
on account of variable return in a specified amount or based on a specified fixed or floating rate,
the date or dates from which such interest will accrue or such variable return will be calculated,
the payment dates on which such interest or variable return will be payable and the regular record
date for the interest or variable return payable on such Notes on any payment date, whether any
interest will be paid on defaulted interest or payments of variable return, and the basis upon which
interest will be calculated or variable return will be determined, as applicable;
(n)
the place or places, if any, where amounts payable at or prior to maturity or on redemption or
where variable return on, or additional amounts, if any, payable in respect of, such Notes will be
payable, where such Notes may be surrendered for registration or transfer, where such Notes may
be surrendered for exchange and where demand to or upon the Bank in respect of such Notes may
be served;
(o)
the period or periods within which, the price or prices at which, the terms and conditions upon
which and the procedure pursuant to which such Notes may be redeemed or purchased, in whole
or in part, at the option of the Bank;
(p)
the right or obligation, if any, of the Bank or any affiliate to redeem, purchase or “make a market”
in such Notes and the period or periods within which, the price or prices at which and the terms
and conditions, including any redemption, purchase or early trading charges upon which such
Notes will be redeemed or purchased, in whole or in part, pursuant to such obligation, and any
provisions for the remarketing of such Notes;
-7-
(q)
the denominations in which such Notes will be issuable if other than denominations of $100 and
any integral multiple thereof;
(r)
if other than the principal amount thereof on the date of issue, the portion of the principal amount
of such Notes or such other amount which will be payable upon declaration, if any, of acceleration
of the maturity thereof;
(s)
if other than Canadian dollars, the currency in which payment of amounts payable at or prior to
maturity or on redemption or in which variable return, if any, on, and additional amounts, if any,
in respect of, such Notes will be payable and the manner in which the amount of such currency
will be determined for purposes of such payments;
(t)
if amounts payable at or prior to maturity or on redemption (and premium or discount, if any) or
variable return, if any, on, and additional amounts, if any, in respect of, such Notes are to be
payable, at the election of the Bank or a holder thereof, in a currency other than the original
currency of such Notes specified in the applicable Pricing Supplement, the period or periods
within which, and the terms and conditions upon which, such election may be made;
(u)
any additional terms and provisions with respect to, and any additional conditions, representations,
covenants and events of default, if any, for such Notes;
(v)
any other provisions, requirements, conditions, indemnities, enhancements or other matters of any
nature or kind whatsoever relating to such Notes, including any terms which may be required by,
or advisable under, any applicable law or any rules, procedures or requirements of any exchange
on which any of the Notes are, or are proposed to be, listed or of any over-the-counter market in
which any of the Notes are, or are proposed to be, traded or which may be advisable in connection
with the marketing of such Notes; and
(w)
any other terms of such Notes.
The Bank may, without the consent of holders of any Notes, issue additional Notes with terms substantially
similar or different from those of Notes previously issued under this Prospectus.
Amounts Payable on Notes
Except as provided in the applicable Pricing Supplement, amounts payable at or prior to maturity or on
redemption of the Notes, variable return rates (including interest rates), variable return formulas and other variable
terms of the Notes are subject to change by the Bank from time to time, but no change will affect any Note already
issued, or as to which the Bank has accepted an offer to purchase, without the holder's consent. Such amounts and
variable returns with respect to Notes offered by the Bank may differ depending upon a number of factors. The Bank
may at any time concurrently offer Notes with similar variable terms but different amounts payable or variable
return rates. The Bank may also concurrently offer Notes having different variable terms to different investors.
Each Note providing for a variable return will calculate such variable return from the date of issue, unless
otherwise specified in the applicable Pricing Supplement, pursuant to the formula or method of determination stated
in the applicable Note and in the applicable Pricing Supplement, until the amount payable at maturity of the Note is
paid or made available for payment. Unless otherwise specified in the applicable Pricing Supplement, payments of
variable returns will be made in arrears on each payment date specified in the applicable Pricing Supplement on
which an instalment of variable return is due and payable and at maturity. Unless otherwise indicated in the
applicable Pricing Supplement, the Bank will be the calculation agent. Where the Bank or one of its affiliates is the
calculation agent, it will discharge its duties in such capacity honestly and in good faith.
-8-
Settlement of Payments
In the case of Notes in book-entry only form, payments of principal, the redemption price, if any, and
variable return, if any, as applicable, on the Notes will be made by the Bank to CDS Clearing and Depository
Services Inc. (“CDS”) or its nominee or any other depository specified in the applicable Pricing Supplement, or, in
either case, its nominee, as the case may be, as the registered holder of the Notes. The Bank’s understanding of
payment procedures applicable to CDS are described below under “Form of Notes and Transfer - Book-Entry Only
Notes”. Payment procedures applicable to a depository other than CDS or its nominee will be described in the
applicable Pricing Supplement.
Payments of amounts payable prior to maturity or variable return, if any, on definitive Notes, if issued, will
be made to registered holders of such Notes and may be made by cheque or by electronic funds transfer on the terms
specified in the applicable Pricing Supplement. The Bank will make payment of amounts payable at maturity or on
the redemption of each Note in immediately available funds upon presentation and surrender of the Note and, in the
case of any repayment on an optional repayment date, in accordance with the provisions described in the applicable
Pricing Supplement, at or from the place or places of payment set forth in the applicable Pricing Supplement.
Payment of variable return due at maturity will be made to the person to whom payment of amounts payable at
maturity of the Note in definitive form will be made. The Bank or an agent on behalf of the Bank reserves the right,
in the case of payment of any principal or variable return on definitive Notes prior to the maturity date thereof, to
mark on the Note that such principal or variable return has been paid in full or in part (as the case may be), or, in the
case of payment in full at any time, to retain the Note and mark it as cancelled.
Redemption at the Option of the Bank
The Bank may redeem Notes at its option prior to their stated maturity only if an initial redemption date is
specified in the applicable Notes and in the applicable Pricing Supplement. If so indicated in the applicable Pricing
Supplement, the Bank may redeem Notes at its option on one or more dates or during any period or periods on and
after the applicable initial redemption date specified in the applicable Pricing Supplement. On and after the initial
redemption date, if any, the Bank may redeem the related Note at any time or times specified in the applicable
Pricing Supplement in whole or from time to time in part at its option at the applicable redemption price or
redemption prices specified in the applicable Pricing Supplement, together with any variable return payable in
respect of the applicable Note payable to the redemption date, on notice given to the holders of such Notes.
Redemption at the Option of the Holder and the Secondary Market
Unless otherwise specified in the applicable Pricing Supplement, the Notes will not be redeemable at the
option of a Holder prior to their stated maturity. However, the applicable Pricing Supplement may provide for the
creation of a secondary market through which Notes may be “redeemed” or sold, together with the procedures and
limitations on redemptions or sales effected through such secondary market and the basis on which prices payable in
such secondary market on such redemption or sale will be determined. If specified in the applicable Pricing
Supplement, the proceeds from the sale of a Note may be reduced by an early trading charge determined with
reference to the length of the period between the issuance of such Notes and the date of their redemption.
Unless otherwise specified in the applicable Pricing Supplement, the Bank is under no obligation to
facilitate or arrange for a secondary market through which Notes may be redeemed or sold, and such secondary
market, when commenced, may be suspended at any time without notice. Therefore, there can be no assurance that a
secondary market will be available or that such market will be liquid or sustainable. If so specified in the
applicable Pricing Supplement, a holder of Notes may not be able to redeem or sell a Note prior to maturity
other than through the secondary market, if any.
Form of Notes and Transfer
The Notes will be issued in fully registered form only and will be either issued as book-entry only Notes
transferable only through CDS or its nominee or any other depository specified in the applicable Pricing Supplement
or in definitive form.
-9-
Book-Entry Only Notes
Unless otherwise specified in the applicable Pricing Supplement, upon issuance, Notes will be issued in
book-entry only form and will be represented by fully registered global notes. Each such global note will be held by
CDS or its nominee or such other entity designated in writing by the Bank to act as depository. Such global notes
will be registered in the name of CDS or its nominee or such other entity designated as depository. The Bank
anticipates that the following provisions will apply to all arrangements in respect of a depository.
Ownership of beneficial interests in a global note will be limited to persons that hold interests directly or
indirectly through persons, called “participants”, that have accounts with the relevant depository or persons that may
hold interests through participants. Upon the issuance of a registered global note, the depository will credit, on its
book-entry registration and transfer system, the participants’ accounts with the respective principal amounts of the
Notes beneficially owned by the participants. Any dealers, underwriters or agents participating in the distribution of
the Notes will designate the accounts to be credited. Ownership of beneficial interests in a registered global note will
be shown on, and the transfer of ownership interests will be effected only through, records maintained by the
depository, with respect to interests of participants, and on the records of participants, with respect to interests of
persons holding through participants.
So long as the depository, or its nominee, is the registered owner of a registered global note, that depository
or its nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by the
registered global note for all purposes. Except as described below, owners of beneficial interests in a registered
global note will not be entitled to have the Notes represented by the registered global note registered in their names,
will not receive or be entitled to receive physical delivery of the Notes in definitive form and will not be considered
the owners or holders of Notes. Accordingly, each person owning a beneficial interest in a registered global note
must rely on the procedures of the depository for that registered global note and, if that person is not a participant,
on the procedures of the participant(s) and any custodian, through which the person owns its interest, to exercise any
rights of a holder. The Bank understands that under existing industry practices, if the Bank requests any action of
holders or if an owner of a beneficial interest in a registered global note desires to give or take any action that a
holder is entitled to give or take in respect of the Notes, the depository for the registered global note would authorize
the participants and any custodian holding the relevant beneficial interests to give or take that action, and the
participants would authorize beneficial owners owning through them to give or take that action or would otherwise
act upon the instructions of beneficial owners holding through them.
Payments on the Notes represented by a registered global note registered in the name of a depository or its
nominee will be made to the depository or its nominee, as the case may be, as the registered owner of the registered
global note. Unless otherwise specified in the applicable Pricing Supplement, neither the Bank (except in any
capacity as custodian) nor any agent thereof will have any responsibility or liability for any aspect of the records
relating to payments made on account of beneficial ownership interests in the registered global note or for
maintaining, supervising or reviewing any records relating to those beneficial ownership interests.
The Bank expects that the depository for any of the Notes represented by a registered global note, upon
receipt of any payment on the Notes, will immediately credit participants’ accounts in amounts proportionate to their
respective beneficial interests in that registered global note as shown on the records of the depository. The Bank also
expects that payments by participants to owners of beneficial interests in a registered global note held through
participants will be governed by standing customer instructions and customary practices, as is now the case with the
securities held for the accounts or customers in bearer form or registered in “street name,” and will be the
responsibility of those participants.
Book-Entry Only Notes Issued to CDS
The following is the Bank’s understanding with respect to Notes issued in book-entry only form to CDS or
its nominee. Procedures applicable to a depository other than CDS or its nominee will be described in the applicable
Pricing Supplement.
- 10 -
Notes issued in book-entry only form must be purchased, transferred or redeemed through participants in
the depository service of CDS or its nominee. Each of the dealers or agents, as the case may be, involved in the
offering and sale of the Notes will be a participant. On the closing of a book-entry only offering, the Bank will cause
a global certificate or certificates representing the aggregate number of Notes subscribed for under such offering to
be delivered to, and registered in the name of, CDS or its nominee. Except as described below and in any Pricing
Supplement, no purchaser of Notes will be entitled to a certificate or other instrument from the Bank or CDS
evidencing that purchaser’s ownership thereof, and no purchaser will be shown on the records maintained by CDS
except through a book-entry account of a participant acting on behalf of such purchaser. Each purchaser of Notes
will receive a customer confirmation of purchase from the registered dealer from which the Notes are purchased in
accordance with the practices and procedures of that registered dealer. The practices of registered dealers may vary,
but generally customer confirmations are issued promptly after execution of a customer order. CDS will be
responsible for establishing and maintaining book-entry accounts for its participants having interests in the Notes.
Reference in this Prospectus to a holder of Notes means, unless the context otherwise requires, the owner of the
beneficial interest in the Notes.
If the Bank determines, or CDS notifies the Bank in writing, that CDS is no longer willing or able to
discharge properly its responsibilities as depository with respect to the Notes and the Bank is unable to locate a
qualified successor, or if the Bank at its option elects, or is required by law, to terminate the book-entry system, then
the Notes will be issued in fully registered form to holders or their nominees.
Transfer, Conversion or Redemption of Notes
Transfer of ownership, conversion or redemptions of Notes are expected to be effected through records
maintained by CDS or its nominee for such Notes with respect to interests of participants, and on the records of
participants with respect to interests of persons other than participants. Holders who desire to purchase, sell or
otherwise transfer ownership of or other interests in the Notes may do so only through participants.
The ability of a holder to pledge a Note or otherwise take action with respect to such holder’s interest in a
Note (other than through a participant) may be limited due to the lack of a physical certificate.
Payments and Notices
Payments of principal or the redemption price, if any, and variable return, if any, on each Note will be
made by the Bank to CDS or its nominee, as the case may be, as the registered holder of the Note and the Bank
understands that such payments will be credited by CDS or its nominee in the appropriate amounts to the relevant
participants. Payments to holders of Notes of amounts so credited will be the responsibility of the participants.
As long as CDS or its nominee is the registered holder of the Notes, CDS or its nominee, as the case may
be, will be considered the sole owner of the Notes for the purposes of receiving notices or payments on the Notes. In
such circumstances, the responsibility and liability of the Bank in respect of notices or payments on the Notes is
limited to giving or making payment of any principal or redemption price, if any, and variable return, if any, due on
the Notes to CDS or its nominee.
Each holder must rely on the procedures of CDS and, if such holder is not a participant, on the procedures
of the participant through which such holder owns its interest, to exercise any rights with respect to the Notes. The
Bank understands that under existing policies of CDS and industry practices, if the Bank requests any action of
holders or if a holder desires to give any notice or take any action which a registered holder is entitled to give or take
with respect to the Notes, CDS would authorize the participant acting on behalf of the holder to give such notice or
to take such action, in accordance with the procedures established by CDS or agreed to from time to time by the
Bank and CDS. Any holder that is not a participant must rely on the contractual arrangement it has directly, or
indirectly through its financial intermediary, with its participant to give such notice or take such action.
- 11 -
The Bank and any dealers or agents involved in the offering and sale of the Notes will not have any liability
or responsibility for (i) records maintained by CDS relating to beneficial ownership interest in the Notes held by
CDS or the book-entry accounts maintained by CDS; (ii) maintaining, supervising or reviewing any records relating
to any such beneficial ownership interest; or (iii) any advice or representation made by or with respect to CDS and
contained herein or in any Pricing Supplement with respect to the rules and regulations of CDS or at the directions
of the participants.
Custodian
If specified in the applicable Pricing Supplement, the Bank or a person appointed by the Bank will act as
custodian to hold the Notes for participants in the relevant depository and persons that do not have accounts with the
relevant depository (including, in certain cases, holders of Notes), referred to herein as non-participants, in
accordance with their respective entitlements as reflected in a register to be maintained by the custodian solely on
the basis of and in reliance upon instructions received from such participants or non-participants, as the case may be.
Upon receiving amounts payable in respect of Notes, the Custodian will arrange for payment to participants and
non-participants (including holders) in amounts proportionate to their respective interests in the Notes recorded in
the register maintained by the custodian.
All records maintained by the custodian shall, absent manifest error, be final for all purposes and binding
on all persons, including the holders. The custodian shall not be responsible for its errors if made in good faith.
Definitive Notes
If specified in the applicable Pricing Supplement, the Bank may issue Notes in definitive form. In addition,
if the Bank determines, in the circumstances described above under “Form of Notes and Transfer - Book-Entry Only
Notes” or “Book-Entry Only Notes Issued to CDS”, to terminate the book-entry system, then the Notes will be
issued in fully registered form to holders or their nominees in exchange for the registered global note that had been
held by the depository. Any Notes issued in definitive form in exchange for a registered global note will be
registered in the name or names that the depository gives to the Bank or its agent, as the case may be. It is expected
that the depository’s instructions will be based upon directions received by the depository from participants with
respect to ownership of beneficial interests in the registered global note that had been held by the depository.
Definitive Notes, if issued, will name holders or their nominees as the owners of the Notes. In addition, the Bank
may at any time and in its sole discretion decide not to have any of the Notes represented by one or more registered
global notes. If the Bank makes that decision, the Bank will issue Notes in definitive form in exchange for all of the
registered global notes representing the Notes.
The text of any Notes issued in definitive form will contain such provisions as the Bank may deem
necessary or advisable. Unless otherwise specified in the applicable Pricing Supplement, the Bank shall keep or
cause to be kept a register in which will be recorded registrations and transfers of Notes in definitive form if issued.
Such register will be kept at the offices of the paying and transfer agent specified in the Pricing Supplement or at
such other offices notified by the Bank to holders of the Notes.
No transfer of a definitive Note will be valid unless made at such offices upon surrender of the certificate in
definitive form for cancellation with a written instrument of transfer in form and as to execution satisfactory to the
Bank or its agent, and upon compliance with such reasonable conditions as may be required by the Bank or its agent
and with any requirement imposed by law and entered on the register.
Unless otherwise specified in the applicable Pricing Supplement, payments on a definitive Note, if issued,
will be made by cheque mailed to the applicable registered holder at the address of the holder appearing in the
aforementioned register in which registrations and transfers of Notes are to be recorded or, if requested in writing by
the holder at least five business days before the date of the payment and agreed to by the Bank, by electronic funds
transfer to a bank account nominated by the holder with a bank in Canada. Payment under any definitive Note is
conditional upon the holder first delivering the Note to the paying and transfer agent who reserves the right on
behalf of the Bank, in the case of payment of the return on the Notes prior to the maturity date, to mark on the Note
that such return has been paid in full or in part (as the case may be), or, in the case of payment in full at any time of
any amount due on the maturity or redemption of any Note, to retain the Note and mark the Note as cancelled.
- 12 -
Notices to Holders
All notices to the holders regarding the Notes will be validly given if (a) published once in a French
language Canadian newspaper and in the national edition of an English language Canadian newspaper or (b) given
through CDS to CDS’s participants. Unless otherwise specified in the applicable Pricing Supplement, the Bank or a
person appointed by the Bank will give notice as aforesaid to the holders of any material change or material fact
relating to the Notes including a complete discontinuance of investing in any underlying securities.
Amendments to the Notes
The following applies unless otherwise specified in the applicable Pricing Supplement. The Notes or any
global note representing Notes may be amended without the consent of the holders by the Bank or a person
appointed by the Bank if, in the reasonable opinion of the Bank or its appointee, the amendment would not
materially and adversely affect the interests of the holders. In all other cases, any particular issue of Notes or any
global notes representing such issue of Notes may be amended if the amendment is approved by a resolution passed
by the favourable votes of holders representing not less than 66 2/3% of the outstanding aggregate principal amount
of such issue of Notes for the purpose of considering the resolution. Each holder is entitled to one vote per Note held
for the purpose of voting at meetings convened to consider a resolution. The Notes do not carry the right to vote in
any other circumstances.
Governing Law
Unless otherwise specified in an applicable Pricing Supplement, the Notes will be governed by and
construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.
CONSOLIDATED CAPITALIZATION OF THE BANK
The following table sets forth the consolidated capitalization of the Bank at January 31, 2007. This table
should be read in conjunction with the Bank's interim consolidated financial statements and the Bank's
Management's Discussion and Analysis as at and for the three months ended January 31, 2007 incorporated by
reference in this Prospectus.
As at
January 31, 2007
(in millions of
Canadian dollars)
Non-Controlling Interest in Subsidiaries(1)
BMO BOaTS — Series D(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . .
BMO BOaTS — Series E(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . .
Non-Controlling Interest in Other Subsidiaries . . . . . . . . . . . . . . .. . . . . . . . . . . . . .
Total Non-Controlling Interest in Subsidiaries. . . . . . . . . . . . . . .. . . . . . . . . . .
$
595
447
331
1,373
Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .
2,745
. . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
450
Preferred Share Liability
(3)
Capital Trust Securities(1)
BMO BOaTS — Series A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . .
BMO BOaTS — Series B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . .
BMO BOaTS — Series C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . .
Total Capital Trust Securities . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .
Shareholders’ Equity
Preferred Shares(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .
Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .
- 13 -
350
400
400
1,150
946
4,279
Contributed Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
Accumulated Other Comprehensive Loss . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . .
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
55
(698)
11,073
Total Shareholders’ Equity . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
15,655
Total Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .
$ 21,373
Notes:
(1) For more information on the classification of Capital Trust Securities, please refer to Note 18 of the audited consolidated financial statements
of the Bank for the year ended October 31, 2006 incorporated by reference in this Prospectus.
(2) Amounts shown for BMO BOaTS — Series D and BMO BOaTS — Series E are net of external issuance costs of $5 million and $3 million,
respectively.
(3) Preferred Share Liability consists of Class B Preferred Shares Series 4 and 6, and Preferred Shares classified under Shareholders’ Equity
consist of Class B Preferred Shares Series 5, 10 and 13. For more information on the classification of Preferred Shares, please refer to Note
20 of the audited consolidated financial statements of the Bank for the year ended October 31, 2006 incorporated by reference in this
Prospectus.
EARNINGS COVERAGE RATIO
The following consolidated financial ratios for the Bank, which are calculated for the 12 months ended
January 31, 2007 and for the twelve months ended October 31, 2006, do not reflect the issue of any Notes under this
Prospectus:
January 31, 2007
Interest coverage on subordinated indebtedness, Preferred Share Liabilities
and Capital Trust Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 13.19 times
October 31, 2006
13.60 times
In calculating the interest coverage, foreign currency amounts have been converted to Canadian dollars
using rates of exchange as at the end of each month. For the 12 month periods ended January 31, 2007 and October
31, 2006, the average exchange rate was Cdn.$1.1336 per U.S.$1.00 and Cdn.$1.1322 per U.S.$1.00, respectively
PLAN OF DISTRIBUTION
The Bank may sell Notes to or through underwriters or dealers purchasing as principal, and also may sell
Notes to one or more purchasers directly through applicable statutory exemptions or through agents designated by
the Bank from time to time, as provided in the applicable Pricing Supplement. Where the applicable Pricing
Supplement so specifies, Notes may be purchased through a clearing and settlement service operated by FundSERV
Inc. or another clearing and settlement service company. The Notes may be sold from time to time in one or more
transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at prices to be negotiated with purchasers.
A Pricing Supplement will set forth the terms of any offering of Notes, including the name or names of any
underwriters, dealers or agents involved in the offering and sale of the Notes, the initial public offering price, the
proceeds to the Bank and any discount or commission to be paid to any underwriters, dealers or agents involved in
the offering and sale of the Notes and any discounts, concessions or commissions allowed or reallowed or paid by
any underwriters, agents or dealers to other dealers. Unless otherwise indicated in the Pricing Supplement, any agent
is acting on a best efforts basis for the period of its appointment.
If underwriters are used in the sale, the Notes will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale, at market prices prevailing at the time of sale or at
prices related to such prevailing market prices. The obligations of the underwriters to purchase such Notes will be
subject to certain conditions precedent, and the underwriters will be obligated to purchase all the Notes offered by
the Pricing Supplement if any of such Notes are purchased. Any public offering price and any discounts or
concessions allowed or re-allowed or paid to dealers may be changed from time to time.
- 14 -
The Notes may also be sold directly by the Bank at such prices and upon such terms as agreed to by the
Bank and the purchaser.
The Bank may agree to pay commissions for various services relating to the issue and sale of any Notes
offered hereby. Dealers and agents who participate in the distribution of the Notes may be entitled under
agreements to be entered into with the Bank to indemnification by the Bank against certain liabilities, including
liabilities under securities legislation, or to contribution with respect to payments which such dealers or agents may
be required to make in respect thereof.
BMO Capital Markets was involved in the decision to distribute Notes and in determining the terms of the
Notes set forth in this Prospectus and will be involved in the determination of the terms of each particular offering of
Notes, which shall be made based on the direction and advice of one or more officers of BMO Capital Markets.
BMO Capital Markets may receive a commission in connection with it acting as a dealer for the distribution of
Notes and may earn a profit in connection with the acquisition or disposition of Notes acting as principal. BMO
Capital Markets is a wholly-owned subsidiary of BMO Nesbitt Burns Corporation Limited which is, in turn, an
indirect majority-owned subsidiary of the Bank. As a result, the Bank is a related issuer of BMO Capital
Markets under applicable securities legislation.
As required under applicable Canadian securities legislation, one or more independent underwriters,
dealers, or agents that is not related or connected to the Bank or BMO Capital Markets will participate with all of the
other underwriters, dealers, or agents in due diligence meetings with the Bank and its representatives in relation to
offerings of Notes pursuant to this Prospectus, and will review the Prospectus and any Pricing Supplement, and will
have the opportunity to propose such changes to this Prospectus considered appropriate, and will participate,
together with the other underwriters, dealers or agents, in establishing the terms of the Notes and the price at which
they will be sold by the Bank from time to time.
In connection with any offering of the Notes (unless otherwise specified in a Pricing Supplement), the
underwriters, dealers or agents may over-allot or effect transactions which stabilize or maintain the market price of
the Notes offered at a higher level than that which might exist in the open market. These transactions may be
commenced, interrupted or discontinued at any time.
The Notes to be issued hereunder have not been, and will not be, registered under the U.S. Securities Act
and may not be offered, sold or delivered, directly or indirectly, in the United States of America, its territories, its
possessions and other areas subject to its jurisdiction or to, or for the account or benefit of, a U.S. person (as defined
in Regulation S under the U.S. Securities Act) except in certain transactions exempt from the requirements of the
U.S. Securities Act.
CERTAIN RISK FACTORS
Before deciding whether to invest in any Notes, investors should consider carefully the risks set out and
incorporated by reference herein, including risk factors set out in any Pricing Supplement relating to a specific
offering of Notes.
Risks Relating to Underlying Securities
The principal amount of a Note payable at or before maturity, if any, and any variable return or other
payment will be determined, in whole or in part, by reference to one or more underlying securities. Accordingly,
certain risk factors applicable to investors who invest directly in the underlying securities are also applicable to an
investment in Notes.
Principal at Risk; Non-Conventional Debt Securities
Notes offered under this Prospectus may not be conventional notes or debt securities. If specified in the
applicable Pricing Supplement, Notes may provide no assurance that any of the principal amount of the Notes will
be paid at or before maturity. In addition, Notes may not provide holders with a return or income stream prior to
- 15 -
maturity calculated by reference to a fixed or floating rate of interest determinable prior to maturity. The Notes,
unlike traditional debt obligations of Canadian chartered banks, may be speculative or uncertain in that they could
produce no return on a holder’s original investment or not repay any principal amount at or before maturity.
Prospective purchasers are directed to the applicable Pricing Supplement for the specific terms of the relevant Notes,
including the risk factors set out therein.
Market for Notes
Unless otherwise specified in the applicable Pricing Supplement, there may be no market through which
the Notes may be sold and holders may not be able to sell Notes. This may affect the pricing of the Notes in the
secondary market, the transparency and availability of trading prices, the liquidity of the securities, and the extent of
issuer regulations.
Fees and Transaction Costs
Expenses and transaction costs may reduce a holder’s return, if any, on the Notes.
Conflicts of Interest
The Bank and its affiliates may, from time to time, in the course of its normal business operations, hold
interests linked to the underlying securities or hold securities of, extend credit to or enter into other business dealings
with issuers thereof or persons affiliated, associated or in a business relationship with such issuers, including under
hedging arrangements relating to the Notes. Each has agreed that all such actions taken by it shall be taken based on
normal commercial criteria in the particular circumstances, which may include payment of trailer fees. Such actions
may not take into account the effect, if any, of such actions on the amount of variable return that may be payable on
the Notes.
The Bank or one of its affiliates, including BMO Capital Markets, may be the calculation agent, and may
have economic interests adverse to those of holders of Notes, including with respect to certain determinations that
the calculation agent must make with respect to the Notes.
Regulatory Change
Future regulatory changes in applicable jurisdictions could have a material adverse effect on the Notes.
No Ownership of Underlying Securities
The Notes will not entitle a holder to any direct or indirect ownership or entitlement to the underlying
securities, except as specified in the applicable Pricing Supplement. A holder will not be entitled to the rights and
benefits of a holder of underlying securities, including any right to receive any distributions or dividends or to vote
at or attend any meetings of holders of underlying securities.
Credit Risk
The obligation to make payments to holders of Notes is an obligation of the Bank. Accordingly, the
likelihood that such holders will receive payments owing to them in connection with the Notes will be dependent
upon the financial health and creditworthiness of the Bank.
No Deposit Insurance
The Notes will not constitute deposits that are insured under the Canada Deposit Insurance Corporation
Act (Canada), the Bank Act or any other deposit insurance regime designed to ensure the payment of all or a portion
of a deposit upon the insolvency of the deposit taking financial institution. Therefore a holder will not be entitled to
Canadian Deposit Insurance Corporation protection.
- 16 -
USE OF PROCEEDS
Unless otherwise specified in a Pricing Supplement, the net proceeds to the Bank from the sale of the Notes
will be added to the general funds of the Bank and utilized for general banking purposes.
TAX CONSEQUENCES
Where appropriate, the applicable Pricing Supplement will describe certain Canadian and United States of
America federal income tax considerations relevant to the Notes being offered.
PURCHASER’S STATUTORY RIGHTS
Securities legislation in certain of the provinces and territories of Canada provides purchasers with the right
to withdraw from an agreement to purchase securities. This right may be exercised within two business days after
receipt or deemed receipt of a prospectus and any amendment. In several of the provinces and territories, the
securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, damages if
the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that
the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the
securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions
of the securities legislation of the purchaser's province or territory for the particulars of these rights or consult with a
legal adviser.
- 17 -
APPENDIX “A”
AUDITORS’ CONSENT
We have read the short form base shelf prospectus of Bank of Montreal (the “Bank”) dated April
13, 2007 relating to the issue of up to $1,000,000,000 of medium term notes (Principal At Risk Notes)
(the “Prospectus”). We have complied with Canadian generally accepted standards for an auditor’s
involvement with offering documents.
We consent to the incorporation by reference in the above-mentioned Prospectus of (i)
our auditors’ report to the shareholders of the Bank on the consolidated balance sheets of the Bank as at
October 31, 2006 and 2005 and the consolidated statements of income, changes in shareholders’ equity
and cash flows for each of the years in the two-year period ended October 31, 2006 and (ii) our report on
management’s assessment of the effectiveness of internal control over financial reporting and the
effectiveness of internal control over financial reporting of the Bank as of October 31, 2006.
Our reports are dated November 28, 2006.
(Signed) KPMG LLP
Chartered Accountants, Licensed Public Accountants
Toronto, Canada
April 13, 2007
A-1
Certificate of the Bank
Dated: April 13, 2007
This short form prospectus, together with the documents incorporated in this prospectus by reference, will,
as of the date of the last supplement to this prospectus relating to the securities offered by this prospectus and the
supplement(s) constitute full, true and plain disclosure of all material facts relating to the securities offered by this
prospectus and the supplement(s) as required by the Bank Act (Canada) and the regulations thereunder and the
securities legislation of all provinces and territories of Canada and, for the purposes of the Province of Québec this
simplified prospectus, together with documents incorporated herein by reference and as supplemented by the
permanent information record, will contain no misrepresentation likely to affect the value or the market price of the
securities to be distributed.
(Signed) WILLIAM A. DOWNE
(Signed) KAREN E. MAIDMENT
President and Chief Executive Officer
Chief Financial and Administrative
Officer
On Behalf of the Board of Directors
(Signed) DAVID A. GALLOWAY
(Signed) BRUCE H. MITCHELL
Director
Director
C-1
Certificate Of The Dealer
Dated: April 13, 2007
To the best of our knowledge, information and belief, this short form prospectus, together with the
documents incorporated in this prospectus by reference, will, as of the date of the last supplement to this prospectus
relating to the securities offered by this prospectus and the supplement(s), constitute full, true and plain disclosure of
all material facts relating to the securities offered by this prospectus and the supplement(s) as required by the
securities legislation of each of the provinces and territories of Canada. For the purpose of the Province of Québec,
this simplified prospectus, together with documents incorporated by reference, and as supplemented by the
permanent information record, will contain no misrepresentation that is likely to affect the value or the market price
of the securities to be distributed.
BMO NESBITT BURNS INC.
Per: (Signed) David Thomas
C-2

Bank of Montreal PARTNRS (Principal At Risk Notes)™ GGOF

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