September 30, 2024

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction)

AND

IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF BMO INVESTMENTS INC. (the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting it from the requirement in subsection 3.2.01 of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) to deliver or send the most recently filed fund facts document (Fund Facts) before the Filer accepts an instruction from a purchaser (the Fund Facts Delivery Requirement) to purchase F-Series (as defined below) and A-Series (as defined below) securities of any mutual fund managed by the Filer or an affiliate of the Filer (each, a Fund and collectively, the Funds) subject to the requirements of National Instrument 81-102 Investment Funds (NI 81-102), that are made pursuant to the Fee-Based Program (as defined below) (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for the application, and

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon (the Other Jurisdictions and together with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in NI 81-102, National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

The Filer

1. The Filer is a corporation amalgamated under the laws of Canada with its head office located in Toronto, Ontario.

2. The Filer is registered as a mutual fund dealer in each of the Jurisdictions, and as an investment fund manager in each of Ontario, Québec and Newfoundland and Labrador. The Filer is also a member of the Canadian Investment Regulatory Organization.

3. Securities of the Funds are, or will be, distributed through the Filer.

4. The Filer only offers for sale securities of Funds that are managed by it or by an affiliate. However, the Filer will accept transfers of securities of mutual funds managed by third parties into accounts with the Filer (Filer Accounts).

5. The Filer is not in default of securities legislation in any of the Jurisdictions.

The Funds

6. Each Fund is, or will be, an open-end mutual fund created under the laws of one of the Jurisdictions or the laws of Canada.

7. Each Fund is, or will be, a reporting issuer under the laws of the Jurisdictions and subject to NI 81-102.

8. Securities of the Funds are, or will be, qualified for distribution pursuant to a simplified prospectus and Fund Facts that have been, or will be, prepared and filed in accordance with NI 81-101.

9. The Funds currently offer, or will in the future offer, various classes and series in respect of which a trailing commission (Trailing Commission) is paid by the Fund’s manager to the Filer (A-Series) and various classes and series designed to be held in a fee-based account that do not pay a Trailing Commission to the Filer (F-Series).

Fee-Based Program

10. The Filer proposes to implement a program (the Fee-Based Program) whereby investors holding a minimum threshold value (the Minimum Threshold) of securities in Filer Accounts, either alone or together with other members of their Household (defined below) will pay lower total fund management fees and ongoing dealer compensation costs (collectively, Total Fees) if certain conditions are met, as described below.

11. Investors will have the option to enroll in the Fee-Based Program (Participants), individually or as part of a group with certain family members and corporations for which they have signing authority (a Household), if the value of the combined total assets held in all Filer Accounts belonging to the investor and, if applicable, other members of the investor’s Household (Combined Assets), meets or exceeds the Minimum Threshold.

12. Shortly following enrollment, the Filer will switch all A-Series securities of the Funds held in Filer Accounts by Participants to the corresponding F-Series securities of the same Fund (Lower Fee Switches).

13. As a result of the Lower Fee Switches, Participants will no longer hold A-Series securities in their Filer Accounts, and the Trailing Commission that would have been paid to the Filer in respect of those A-Series securities will no longer be payable. Instead, each Participant will pay a fee to the Filer (Service Fee) that is lower than the value of the Trailing Commission that would otherwise be payable to the Filer in respect of the A-Series securities of the Funds.

14. Non-mutual fund investments, investments in a series of a Fund other than A-Series, and investments in funds managed by third parties may be held in Filer Accounts, and will be included by the Filer in determining the value of a Participant’s Combined Assets, but are not eligible to be switched to F-Series securities as part of a Lower Fee Switch.

15. As part of the Fee-Based Program, the Filer will establish tiers (Asset Tiers) whereby the size of the Service Fee paid by a Participant will be contingent on the total value of its Combined Assets. Each Asset Tier will consist of a range of values, and each progressively higher Asset Tier above the Minimum Threshold will feature a lower Service Fee.

16. The Asset Tier applicable to a Participant’s Combined Assets and resultant Service Fee paid by the Participant may fluctuate as the value of the Participant’s Combined Assets increases or decreases. Fluctuations may occur because of purchases or redemptions that change the amount of the Combined Assets, or because of changes in the market value of the Funds and other assets held in the Filer Accounts.

17. As long as the value of a Participant’s Combined Assets remains at or above the Minimum Threshold, the Participant will pay a Service Fee that is lower than the value of the Trailing Commission that would otherwise be payable on the A-Series securities of the Participant’s Funds. If the value of the Participant’s Combined Assets is less than the Minimum Threshold, the Service Fee will be equal to 100% of the Trailing Commission that would otherwise be payable on the A-Series securities of the Funds.

18. At the time of enrollment in the Fee-Based Program, each Participant will instruct the Filer to effect a Lower Fee Switch of any A-Series securities that they later come to hold in a Filer Account, including any new Filer Account opened by the Participant while enrolled in the Fee-Based Program, into F-Series securities of the relevant Fund.

19. The Filer will periodically process Service Fee payments for Filer Accounts by redeeming F-Series securities of a Fund held in the applicable account (a Fee Redemption).

20. Other than the Service Fee, Participants will not be subject to any additional fees due to their participation in the Fee-Based Program, but will continue to be subject to the same fees and expenses associated with any fee-based dealer account, such as transfers out and other account-level and miscellaneous fees, which are unrelated to the Fee-Based Program.

Enrollment and Un-Enrollment

21. From time to time, the Filer will identify investors who are eligible for the Fee-Based Program due to the value of the assets in their Filer Accounts, and may notify such investors of the opportunity to enroll in the Fee-Based Program.

22. Prior to enrollment in the Fee-Based Program, each investor must sign an agreement (Enrollment Agreement) acknowledging the terms and conditions applicable to the Fee-Based Program, including the details of the Program Switches (defined below) and the Service Fee. The Enrollment Agreement will further set out the particulars of the Fee-Based Program and explain in plain language how investors may access the lower Total Fees associated with the different Asset Tiers. The Enrollment Agreement will also contain explicit instructions to the Filer to perform the Program Switches.

23. In addition to signing an Enrollment Agreement, all investors that wish to enroll in the Fee-Based Program as part of a Household must consent to joining the Household and having the assets in their Filer Accounts included in the Filer’s calculation of the Household’s Combined Assets.

24. Participation in the Fee-Based Program will continue until a Participant is un-enrolled. Participants may voluntarily un-enroll from the Fee-Based Program at any time. Participants may also be un-enrolled from the Fee-Based Program by the Filer if the value of their Combined Assets drops below the Minimum Threshold, among other reasons.

25. If the value of a Participant’s Combined Assets drops below the Minimum Threshold (other than solely due to a decline in market value or a Fee Redemption), the Participant will receive a notice (the Threshold Notice) informing them that if they are unable to restore the value of their Combined Assets to at least the Minimum Threshold within a given period of time, the Filer may un-enroll them from the Program.

26. Participants will not be un-enrolled from the Fee-Based Program solely due to a decline in the market value of their Combined Assets. However, if the total value of a Participant’s Combined Assets drops below the Minimum Threshold following a redemption or transfer of securities initiated by the Participant, the Participant will no longer be eligible to remain in the Fee-Based Program.

27. To effect the un-enrollment, the Filer will switch all of the Participant’s F-Series securities of the Funds held in Filer Accounts to the corresponding A-Series securities of the same Fund (Higher Fee Switches, and together with Lower Fee Switches, Program Switches).

Program Switches

28. Investors subject to a Program Switch will continue to hold securities of the same Fund following the switch, with the same underlying pool of assets, the same investment objectives and investment strategies and the same valuation procedures and continue to have the same rights as securityholders as they did prior to the Program Switch, except for the Series Differences (as defined below).

29. The only material difference (the Series Difference) between A-Series and F-Series securities of a Fund subject to a Program Switch is that the management fees for F-Series securities are equivalent to or lower than the respective management fees for A-Series securities of the same Fund due at least in part to F-Series securities not paying a Trailing Commission or other embedded compensation.

30. No Funds held in Filer Accounts are subject to deferred sales charges.

31. There are no sales charges, switch fees, short term trading fees or other fees payable by the investor upon a Program Switch.

32. Implementation of the Program Switches will have no adverse tax consequences on investors under current Canadian tax legislation.

Fund Facts Delivery Requirement

33. Each Program Switch will entail either (a) a redemption of A-Series securities immediately followed by a purchase of the corresponding F-Series securities, or (b) a redemption of F-Series securities immediately followed by a purchase of the corresponding A-Series securities; and each Program Switch will be a “distribution” under Canadian securities legislation, which triggers the Fund Facts Delivery Requirement.

34. Pursuant to the Fund Facts Delivery Requirement, a dealer is required to deliver the most recently filed Fund Facts of a series of a mutual fund to an investor before the dealer accepts an instruction from the investor for the purchase of securities of that series of the mutual fund.

35. While the Filer will initiate each trade done as part of a Program Switch, the Filer does not propose to deliver the Fund Facts to investors in connection with the purchase of securities made pursuant to a Program Switch for the following reasons:

    1. The Service Fee charged to a Participant cannot exceed the A-Series Trailing Commission it replaces, meaning that a Program Switch will always result in a Participant paying equivalent or lower Total Fees than the Total Fees associated with owning the A-Series securities for which they initially subscribed;
    2. Program Switches will only involve securities of the same Fund with the same underlying pool of assets, and since those Participants who already held A-Series securities of a Fund at the time they enrolled in the Fee-Based Program would have received the Fund Facts disclosing the higher Total Fees applicable to those A-Series securities, the Participant would derive little benefit from receiving a further Fund Facts for each Program Switch;
    3. since Participants must sign an Enrollment Agreement prior to enrollment in the Fee-Based Program, Participants will be aware of the proposed Program Switches and would derive little benefit from receiving a further Fund Facts for each Program Switch;
    4. before un-enrolling a Participant from the Fee-Based Program and effecting a Higher Fee Switch, the Filer will send a Threshold Notice or other notice which informs the Participant (i) that un-enrollment will result in the investor paying equivalent or higher Total Fees associated with A-Series securities and (ii) how to obtain the most recently filed A-Series Fund Facts at no cost; and
    5. the Program Switch process is administrative in nature, and since many Participants may hold securities of several different Funds in Filer Accounts, which Funds will all be converted at once at the time of enrollment in the Fee-Based Program, the Program Switch process is the only practical way to achieve the required result of switching Participants between A-Series and F-Series of all Funds they hold in Filer Accounts in order to allow them to benefit from lower Total Fees.

36. The Filer will deliver or will arrange for the delivery of trade confirmations to Participants in connection with each trade done further to a Program Switch. Furthermore, details of the changes in series of securities held will be reflected in the account statements sent to Participants for the quarter in which the change occurred.

37. The Filer will provide Fund Facts to Participants for all first purchases of new Funds, regardless of series purchased, at or after the time of enrollment in the Fee-Based Program. The Fund Facts delivery process for first purchases of new Funds will not differ under the Fee-Based Program and will comply with the Fund Facts Delivery Requirement

38. The Filer will discuss the terms and conditions of the Fee-Based Program with each investor prior to enrolling the investor into the Fee-Based Program.

39. Annual statements for Participants will include a statement reminding them that they can request the most recently filed Fund Facts for any series of securities that they currently hold in their Filer Accounts.

40. In the absence of the Exemption Sought, the Filer may not carry out the Program Switches without complying with the Fund Facts Delivery Requirement.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

1. A Lower Fee Switch into F-Series securities of a Fund always results in a Participant paying equivalent or lower Total Fees than the Total Fees associated with owning the corresponding A-Series securities of the Fund;

2. Before an investor becomes a Participant in the Fee-Based Program, the Filer enters into an Enrollment Agreement with the investor which informs the investor of the following:

a. the A-Series securities held in a Participant’s Filer Accounts will be switched to F-Series securities of the same Fund upon enrollment in the Fee-Based Program;

b. any A-Series securities a Participant comes to hold in new or existing Filer Accounts will be switched into F-Series securities of the same Fund for as long as they are enrolled in the Fee-Based Program;

c. other than the Series Difference, there are no other material differences between A-Series and F-Series securities of a Fund subject to a Program Switch;

d. the extent to which the Service Fees that apply at each Asset Tier under the Fee-Based Program are lower than the Trailing Commission payable on the corresponding A-Series securities of the Fund;

e. Participants will not receive Fund Facts when a Program Switch occurs, but:

i. they may request the most recently filed Fund Facts for the series purchased as part of a Program Switch by calling or by sending a request via email to a representative of the Filer;

ii. if requested, the most recently filed Fund Facts will be sent or delivered to them at no cost;

iii. the most recently filed Fund Facts may be found on www.sedarplus.com or the website of the Filer; and

iv. they will not have the right to withdraw from an agreement of purchase and sale in respect of a purchase of A-Series or F-Series securities made pursuant to a Program Switch, but they will have the right of action in the event the simplified prospectus and any Fund Facts or other document incorporated by reference into a simplified prospectus for the relevant series contains a misrepresentation;

f. a Participant’s F-Series securities held in Filer Accounts will be switched to A-Series securities upon un-enrollment from the Fee-Based Program; and

g. a Participant may voluntarily un-enroll from the Fee-Based Program at any time, and may also be un-enrolled by the Filer if the value of the Participant’s Combined Assets drops below the Minimum Threshold (other than solely due to a decline in market value or a Fee Redemption) subject to first receiving the Threshold Notice.

3. Before effecting a Higher Fee Switch and un-enrolling a Participant from the Fee-Based Program where the value of the Participant’s Combined Assets drops below the Minimum Threshold (other than solely due to a decline in market value or a Fee Redemption), the Filer sends the Participant a Threshold Notice which notifies the Participant of the following:

a. that, upon being unenrolled from the Fee-Based Program, their F-Series securities will be switched for A-Series securities of the same Fund, resulting in the investor paying equivalent or higher Total Fees associated with A-Series securities, and

b. they will not receive the Fund Facts when they are switched to the A-Series of a Fund further to un-enrollment from the Fee-Based Program, but:

i. they may request the most recently filed Fund Facts for the A-Series by calling or by sending a request via email to a representative of the Filer;

ii. if requested, the most recently filed A-Series Fund Facts will be sent or delivered to them at no cost;

iii. the most recently filed A-Series Fund Facts may be found on www.sedarplus.com or the website of the Filer.

4. At least annually, the Filer notifies each Participant in writing of how to request the most recently filed Fund Facts for any series of securities of a Fund that they currently hold.

“Darren McKall”

Darren McKall

Manager, Investment Management Division Ontario Securities Commission

Application No. 2023/0056