Marshall Funds Inc d/b/a BMO Funds

485APOS 1 d519768d485apos.htm MARSHALL FUNDS INC D/B/A BMO FUNDS Marshall Funds Inc d/b/a BMO Funds

As filed with the Securities and Exchange Commission on April 16, 2013

Securities Act Registration No. 033-48907

Investment Company Act Registration No. 811-58433

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT

UNDER


		*THE SECURITIES ACT OF 1933*		x
		Pre-Effective Amendment No.		¨
		Post-Effective Amendment No. 83		x

and/or

REGISTRATION STATEMENT

UNDER


		*THE INVESTMENT COMPANY ACT OF 1940*		x
		Amendment No. 83

MARSHALL FUNDS, INC.

(Exact Name of Registrant as Specified in Charter)


111 East Kilbourn Avenue, Suite 200
Milwaukee, Wisconsin		53202
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, including Area Code: (800) 236-3863

John M. Blaser

111 East Kilbourn Avenue, Suite 200

Milwaukee, Wisconsin 53202

(Name and Address of Agent for Service)

Copies to:

Michael P. O’Hare, Esq.

Stradley, Ronon, Stevens & Young, LLP

2005 Market Street, Suite 2600

Philadelphia, PA 19103

It is proposed that this filing will become effective (check appropriate box):

immediately upon filing pursuant to paragraph (b) of Rule 485

On (date) pursuant to paragraph (b) of Rule 485

60 days after filing pursuant to paragraph (a)(1) of Rule 485

on (date) pursuant to paragraph (a)(1) of Rule 485

75 days after filing pursuant to paragraph (a)(2) of Rule 485

on (date) pursuant to paragraph (a)(2) of Rule 485

The information contained in this preliminary prospectus is not complete and may be changed. These securities may not be sold nor may offers to buy be accepted until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy the securities in any jurisdiction where the offer or sale is not permitted.


PRELIMINARY PROSPECTUS		SUBJECT TO COMPLETION APRIL 16, 2013

BMO Funds

Investor
Class

(Class Y)

Institutional
Class

(Class I)

Retirement
Class

(Class R-3)

Retirement
Class

(Class R-6)

BMO Target Date Retirement Funds

BMO Target Retirement 2010 Fund

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BMO Target Retirement 2020 Fund

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BMO Target Retirement 2030 Fund

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BMO Target Retirement 2040 Fund

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BMO Target Retirement 2050 Fund

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Shares of the BMO Funds are not bank deposits or other obligations of, or issued, endorsed or guaranteed by, BMO Harris Bank N.A. or any of its affiliates. Shares of the BMO Funds, like shares of all mutual funds, are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), or any other government agency, and may lose value.

As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

Investor Class

(Class Y)

Institutional Class

(Class I)

Retirement Class

(R-3)

Retirement Class

(R-6)

Table of Contents

Fund Summary


BMO Target Date Retirement Funds
BMO Target Retirement 2010 Fund			2
BMO Target Retirement 2020 Fund			8
BMO Target Retirement 2030 Fund			14
BMO Target Retirement 2040 Fund			20
BMO Target Retirement 2050 Fund			26

Additional Information Regarding Principal Investment Strategies and Risks			32

How to Buy Shares			33

How to Redeem and Exchange Shares			37

Account and Share Information			41

BMO Funds Information			44


Fund Summary		BMO Target Retirement 2010 Fund

Investment Objective: To achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increasingly increase its emphasis on income and conservation of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		0.77	%		0.52	%		0.52	%		0.37	%

Acquired (underlying) fund fees and expenses		0.55	%		0.55	%		0.55	%		0.55	%

Total Annual Fund Operating Expenses		1.32	%		1.07	%		1.57	%		0.92	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.44	%		0.44	%		0.44	%		0.44	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		0.88	%		0.63	%		1.13	%		0.48	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

BMO Asset Management Corp. (Adviser) has agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding 0.88% for Class Y, 0.63% for Class I, 1.13% for Class R-3, and 0.48% for Class R-6 through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.

Example

This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses are as shown in the table and remain the same. The costs in the one-year example and for the first year of the three-year example reflect the Adviser’s agreement to waive fees and reimburse expenses through December 31, 2014. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	90	$	64	$	115	$	49
3 Years	$	375	$	297	$	453	$	249

BMO Target Retirement 2010 Fund (cont.)

Portfolio Turnover

The Fund incurs transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance.

Principal Investment Strategies

The Fund will attempt to achieve its investment objectives by investing in a mix of BMO Funds and unaffiliated funds (the underlying funds) in different combinations and weightings. The Adviser may periodically rebalance or modify the asset mix of the funds and change the underlying funds.

The Fund may invest no more than 60% of its total assets in funds that invest principally in equity securities. The Fund also may invest in underlying funds that invest in fixed income securities, alternative investments, and cash and cash equivalents, including money market funds. The allocation to asset classes and funds is expected to change over time, becoming more conservative as time elapses. This change is referred to as the “glide path” to the retirement date. The decline in the equity allocation is necessary to reduce market risk and portfolio volatility approaching and into retirement. The Fund does not guarantee a level of income during retirement. It is intended to serve as a post-retirement investment portfolio to provide an income stream made up of regular withdrawals throughout retirement, as well as some growth to offset the effects of inflation. The following chart illustrates the Adviser’s approach to making these changes over time.

LOGO

BMO Target Retirement 2010 Fund (cont.)

At the target date, the Fund’s allocation to funds that invest principally in equity securities is anticipated to be approximately 47% of its total assets. The Fund’s exposure to funds that invest principally in equity securities will continue to decline for as long as 10 years after its target date, when its allocation to funds that invest principally in equity securities will remain fixed at approximately 30% of its total assets with the remaining allocation devoted to funds that invest principally in fixed income securities and money market instruments. The allocations shown in the glide path represent target allocations, but they do not reflect any tactical decisions made by the Adviser to overweight or underweight a particular asset class or sector based on its market expectations. The target allocations assigned to the broad asset classes (equities and fixed income) are based upon the current market outlook.

The Adviser will continuously monitor the Fund and may make modifications to either the investment approach or the underlying fund allocations that the Adviser believes could benefit shareholders. Any change to existing target allocations or from tactical adjustments around the target allocations are not expected to vary from the existing target allocations set forth in the glide path by more than plus or minus ten percentage points.

Although the Fund intends to invest primarily in a combination of underlying funds, the Fund may invest directly in equity and fixed income securities and money market securities. For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the Fund may invest up to 100% of its assets directly in cash, money market funds and other money market instruments, repurchase agreements, and other short-term obligations. When the Fund engages in such activities, it may not achieve its investment objective.

Principal Risks

The Fund cannot assure that it will achieve its investment objective. An investment in the Fund is not a deposit of BMO Harris Bank N.A., or any of its affiliates, and is not insured or guaranteed by the FDIC or any other government agency.

This section describes the principal risks associated with the Fund’s principal investment strategies. The net asset value of the Fund will vary, and you could lose money by investing in the Fund. The likelihood of loss may be greater if you invest for a shorter period of time. Investors in the Fund should have a long-term perspective and be able to tolerate potentially sharp declines in value.

Affiliated Fund Risk. The Adviser’s authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds may create a conflict of interest because the Adviser and its affiliated companies typically receive fees from the affiliated funds.

Asset Allocation Risk. Investments in the Fund are subject to risks related to the Adviser’s allocation choices. The selection of the underlying funds and the allocation of the Fund’s assets among the various asset classes and market segments could cause the Fund to lose value or cause the Fund to underperform relevant benchmarks or other funds with similar investment objectives.

Market Risk. Stock and bond markets rise and fall daily. As with any investment whose performance is tied to these markets, the value of your investment in the Fund will fluctuate, which means that you could lose money.

Underlying Fund Investment Risk. The Fund invests in underlying funds and incurs expenses related to the underlying funds. In addition, investors in the Fund will incur fees to pay for certain expenses related to the operations of the Fund. An investor holding the underlying funds directly and in the same proportions as the Fund would incur lower overall expenses, but would not receive the benefit of the portfolio management and other services provided by the Fund. The Fund’s risks are directly related to the risks of the underlying funds. It is important to understand the risks associated with investing in the underlying funds.

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Equity Risk. The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries, or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

BMO Target Retirement 2010 Fund (cont.)

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Large-, Mid-, and Small-Cap Risk. Stocks of different market capitalizations tend to go in and out of favor based on market and economic conditions. Historically, small- and mid-cap stocks tend to be more volatile than large-cap stocks, and small-cap stocks have been riskier than large- and mid-cap stocks. During a period when stocks of a particular market capitalization fall behind other types of investments, an underlying fund’s large-, mid-, or small-cap holdings could reduce performance.

•

Style Risk. Different investment styles, such as growth or equity, tend to shift in and out of favor depending on market and investor sentiment. The Fund may underperform other funds that invest in underlying funds with similar asset classes but employ different investment styles.

•

Foreign Securities Risk. Investing in foreign securities may involve additional risks, including currency-rate fluctuations, political and economic instability, differences in financial reporting standards, less-strict regulation of the securities markets, and possible imposition of foreign withholding taxes. Furthermore, a fund may incur higher costs and expenses when making foreign investments, which will affect the fund’s total return.

•

Emerging Markets Risk. Investments in emerging markets can involve risks in addition to and greater than those generally associated with investing in more developed foreign markets, which may make emerging market securities more volatile and potentially less liquid than securities issued in more developed markets.

•

Liquidity Risk. Liquidity risk refers to the possibility that a fund may not be able to sell or buy a security or close out an investment contract at a favorable price or time. Consequently, an underlying fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on the fund’s performance.

•

Fixed Income Risk. Interest rates rise and fall over time, which will affect an underlying fund’s yield and share price. The credit quality of a portfolio investment could also cause an underlying fund’s share price to fall. An underlying fund could lose money if the issuer or counterparty defaults by failing to pay interest or principal when due. Fixed income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt the fund’s yield or share price.

•

High Yield Securities Risk. High yield securities, also referred to as “junk bonds” or non-investment grade securities, tend to be more sensitive to economic conditions than are higher-rated securities, generally involve more credit risk than securities in the higher-rated categories and are predominantly considered to be speculative. The issuers of high yield securities are typically more leveraged, and the risk of loss due to default by an issuer of high yield securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors.

•

Sector Risks. Companies with similar characteristics, such as those within the same industry, may be grouped together in broad categories called sectors. To the extent an underlying fund invests its assets in a particular sector, the fund’s performance may be more susceptible to any economic, business or other developments that generally affect that sector.

Fund Performance

The Fund is the successor to the portfolio of a collective trust fund (the “Collective Fund”) managed by the Adviser with objectives, policies and restrictions that were, in all material respects, equivalent to those of the Fund. It is anticipated that, at the Fund’s commencement of operations, the assets of the Collective Fund will be transferred to the Fund in exchange for Fund shares. The performance information shown for the Class I shares reflects the performance of the Collective Fund for periods before the Fund’s registration statement became effective, not adjusted to reflect the Class I expenses which differ from the expenses of the Collective Fund. The Collective Fund was not registered under the Investment Company Act of 1940 (“1940 Act”) and was not subject to certain investment restrictions and diversification requirements that are imposed by the 1940 Act and the Internal Revenue Code which, if applicable, might have adversely affected the performance of the Collective Fund.

BMO Target Retirement 2010 Fund (cont.)

The bar chart and table show the historical performance of the Collective Fund and provide some indication of the risks of investing in the Fund. The bar chart shows how the Collective Fund’s total returns before taxes have varied from year to year, while the table compares the Collective Fund’s average annual total returns to the returns of a broad measure of market performance and averages of funds with similar investment objectives. Performance for the Fund’s Class Y, R-3 and R-6 shares will vary from the Class I shares based on the expenses of each class. Please keep in mind that the Collective Fund’s past performance does not represent how the Fund will perform in the future both before and after taxes. Investors may obtain updated performance information for the Fund at www.bmofundsus.com.

Class I—Annual Total Returns (calendar years 2006-2012)

[Insert bar chart]


Return	9.91	%	6.46	%	(24.80	)%	24.06	%	12.16	%	0.50	%	12.71	%
Year	2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		6/30/2009		12.28	%
Worst quarter		12/31/2008		(13.03	)%

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			Since Inception (10/25/05)
Class I
Return Before Taxes		12.71	%		3.46	%		5.03	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		4.68	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.87	%
Morningstar Target Date 2000-2010 Category Average		9.61	%		2.54	%		4.40	%
Lipper Mixed-Asset Target 2010 Funds Average		9.63	%		2.52	%		4.44	%

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity and industry group representation to represent U.S. equity performance.

The Barclays U.S. Aggregate Bond Index (BABI) is an index that covers the U.S. investment-grade fixed-rate bond market, including government and credit securities, agency mortgage pass-through securities, asset-backed securities and commercial mortgage-based securities. To qualify for inclusion, a bond or security must have at least one year to final maturity and be rated Baa3 or better, dollar denominated, non-convertible, fixed-rate and publicly issued.

The Morningstar Category Average represents the average composite performance of all mutual funds listed in the respective category as reported by Morningstar, Inc. The Lipper Funds Average is the average level of performance for all mutual funds listed in the respective category as reported by Lipper, Inc.

BMO Target Retirement 2010 Fund (cont.)

Management of the Fund

Adviser. BMO Asset Management Corp.

Portfolio Managers. John D. Boritzke, Sandy Lincoln, and Alan W. Schwartz co-manage the Fund. Mr. Boritzke, Head of Fixed Income, a Managing Director and a Portfolio Manager of the Adviser, joined the Adviser in 1983 and has co-managed the Fund since its inception in 2013. Mr. Lincoln, Chief Market Strategist and Senior Vice President of the Adviser, joined the Adviser in 2008 and has co-managed the Fund since its inception in 2013. Mr. Schwartz, Director of Asset Allocation Strategies and Senior Vice President of the Adviser, joined the Adviser in 1981 and has co-managed the Fund since its inception in 2013. Mr. Boritzke and Mr. Schwartz have been part of the portfolio management team for the Collective Fund since its inception in 2005.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Eligible retirement plans generally may open an account and purchase Class R-3 and R-6 shares by contacting BMO Funds U.S. Services. Please contact your plan administrator or recordkeeper in order to sell (redeem) shares from your retirement plan.

You may sell (redeem) your shares of the Fund on any day the New York Stock Exchange is open for business using one of the following methods, depending on the elections you made in your account application:

Phone. Call 1-800-236-FUND (3863).

Wire/Electronic Transfer. Upon written request sent to the address below under “Mail,” redemption proceeds can be directly deposited by Electronic Funds Transfer or wired to your previously designated domestic commercial bank.

Mail. Send a written request, indicating your name, the Fund name, your account number, and the number of shares or the dollar amount you want to redeem, to: BMO Funds U.S. Services, P.O. Box 55931, Boston, MA 02205-5931.

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

Payments to Broker-Dealers and Other Financial Intermediaries

If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.


Fund Summary		BMO Target Retirement 2020 Fund

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		0.58	%		0.33	%		0.33	%		0.18	%

Acquired (underlying) fund fees and expenses		0.61	%		0.61	%		0.61	%		0.61	%

Total Annual Fund Operating Expenses		1.19	%		0.94	%		1.44	%		0.79	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.25	%		0.25	%		0.25	%		0.25	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		0.94	%		0.69	%		1.19	%		0.54	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

BMO Asset Management Corp. (Adviser) has agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding 0.94% for Class Y, 0.69% for Class I, 1.19% for Class R-3, and 0.54% for Class R-6 through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.

Example


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	96	$	70	$	121	$	55
3 Years	$	353	$	275	$	431	$	227

BMO Target Retirement 2020 Fund (cont.)

Portfolio Turnover

Principal Investment Strategies

The Fund may invest no more than 80% of its total assets in funds that invest principally in equity securities. The Fund also may invest in underlying funds that invest in fixed income securities, alternative investments, and cash and cash equivalents, including money market funds. The allocation to asset classes and funds is expected to change over time, becoming more conservative as time elapses. This change is referred to as the “glide path” to the retirement date. The decline in the equity allocation is necessary to reduce market risk and portfolio volatility approaching and into retirement. The Fund does not guarantee a level of income during retirement. It is intended to serve as a post-retirement investment portfolio to provide an income stream made up of regular withdrawals throughout retirement, as well as some growth to offset the effects of inflation. The following chart illustrates the Adviser’s approach to making these changes over time.

LOGO

BMO Target Retirement 2020 Fund (cont.)

Principal Risks

•

BMO Target Retirement 2020 Fund (cont.)

•

Foreign Securities Risk. Investing in foreign securities may involve additional risks, including currency-rate fluctuations, political and economic instability, differences in financial reporting standards, less-strict regulation of the securities markets, and possible imposition of foreign withholding taxes. Furthermore, a fund may incur higher costs and expenses when making foreign investments, which will affect the fund’s total return.

•

Emerging Markets Risk. Investments in emerging markets can involve risks in addition to and greater than those generally associated with investing in more developed foreign markets, which may make emerging market securities more volatile and potentially less liquid than securities issued in more developed markets.

•

Fund Performance

BMO Target Retirement 2020 Fund (cont.)

Class I—Annual Total Returns (calendar years 2006-2012)

[Insert bar chart]


Return	11.90	%	6.67	%	(32.22	)%	29.65	%	14.37	%	(1.40	)%	14.52	%
Year	2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		6/30/2009		15.19	%
Worst quarter		12/31/2008		(17.51	)%

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			Since Inception (12/2/05)
Class I
Return Before Taxes		14.52	%		2.56	%		4.35	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		3.90	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.95	%
Morningstar Target Date 2016-2020 Category Average		11.68	%		1.89	%		4.00	%
Lipper Mixed-Asset Target 2020 Funds Average		11.55	%		1.82	%		3.54	%

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity and industry group representation to represent U.S. equity performance.

BMO Target Retirement 2020 Fund (cont.)

Management of the Fund

Adviser. BMO Asset Management Corp.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Phone. Call 1-800-236-FUND (3863).

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

Payments to Broker-Dealers and Other Financial Intermediaries


Fund Summary		BMO Target Retirement 2030 Fund

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		0.64	%		0.39	%		0.39	%		0.24	%

Acquired (underlying) fund fees and expenses		0.64	%		0.64	%		0.64	%		0.64	%

Total Annual Fund Operating Expenses		1.28	%		1.03	%		1.53	%		0.88	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.27	%		0.27	%		0.27	%		0.27	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		1.01	%		0.76	%		1.26	%		0.61	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

BMO Asset Management Corp. (Adviser) has agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding 1.01% for Class Y, 0.76% for Class I, 1.26% for Class R-3, and 0.61% for Class R-6 through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.

Example


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	103	$	78	$	128	$	62
3 Years	$	379	$	301	$	457	$	254

BMO Target Retirement 2030 Fund (cont.)

Portfolio Turnover

Principal Investment Strategies

The Fund may invest no more than 90% of its total assets in funds that invest principally in equity securities. The Fund also may invest in underlying funds that invest in fixed income securities, alternative investments, and cash and cash equivalents, including money market funds. The allocation to asset classes and funds is expected to change over time, becoming more conservative as time elapses. This change is referred to as the “glide path” to the retirement date. The decline in the equity allocation is necessary to reduce market risk and portfolio volatility approaching and into retirement. The Fund does not guarantee a level of income during retirement. It is intended to serve as a post-retirement investment portfolio to provide an income stream made up of regular withdrawals throughout retirement, as well as some growth to offset the effects of inflation. The following chart illustrates the Adviser’s approach to making these changes over time.

LOGO

BMO Target Retirement 2030 Fund (cont.)

Principal Risks

•

BMO Target Retirement 2030 Fund (cont.)

•

Fund Performance

BMO Target Retirement 2030 Fund (cont.)

Class I—Annual Total Returns (calendar years 2006-2012)

[Insert bar chart]


Return	13.16	%	6.56	%	(36.17	)%	31.76	%	15.62	%	(2.95	)%	15.79	%
Year	2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		6/30/2009		16.73	%
Worst quarter		12/31/2008		(20.01	)%

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			Since Inception (12/2/05)
Class I
Return Before Taxes		15.79	%		1.79	%		3.93	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		3.90	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.95	%
Morningstar Target Date 2026-2030 Category Average		13.59	%		1.00	%		3.49	%
Lipper Mixed-Asset Target 2030 Funds Average		13.60	%		0.98	%		3.15	%

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

The Barclays U.S. Aggregate Bond Index (BABI) is an index that covers the U.S. investment-grade fixed-rate bond market, including government and credit securities, agency mortgage pass-through securities, asset-backed securities and commercial mortgage-based securities. To qualify for inclusion, a bond or security must have at least on year to final maturity and be rated Baa3 or better, dollar denominated, non-convertible, fixed-rate, and publicly issued.

BMO Target Retirement 2030 Fund (cont.)

Management of the Fund

Adviser. BMO Asset Management Corp.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Phone. Call 1-800-236-FUND (3863).

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

Payments to Broker-Dealers and Other Financial Intermediaries


Fund Summary		BMO Target Retirement 2040 Fund

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		0.75	%		0.50	%		0.50	%		0.35	%

Acquired (underlying) fund fees and expenses		0.65	%		0.65	%		0.65	%		0.65	%

Total Annual Fund Operating Expenses		1.40	%		1.15	%		1.65	%		1.00	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.39	%		0.39	%		0.39	%		0.39	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		1.01	%		0.76	%		1.26	%		0.61	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

BMO Asset Management Corp. (Adviser) has agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding 1.01% for Class Y, 0.76% for Class I, 1.26% for Class R-3, and 0.61% for Class R-6 through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.

Example


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	103	$	78	$	128	$	62
3 Years	$	405	$	327	$	482	$	280

BMO Target Retirement 2040 Fund (cont.)

Portfolio Turnover

Principal Investment Strategies

The Fund may invest up to 100% of its total assets in funds that invest principally in equity securities. The Fund also may invest in underlying funds that invest in fixed income securities, alternative investments, and cash and cash equivalents, including money market funds. The allocation to asset classes and funds is expected to change over time, becoming more conservative as time elapses. This change is referred to as the “glide path” to the retirement date. The decline in the equity allocation is necessary to reduce market risk and portfolio volatility approaching and into retirement. The Fund does not guarantee a level of income during retirement. It is intended to serve as a post-retirement investment portfolio to provide an income stream made up of regular withdrawals throughout retirement, as well as some growth to offset the effects of inflation. The following chart illustrates the Adviser’s approach to making these changes over time.

LOGO

BMO Target Retirement 2040 Fund (cont.)

Principal Risks

•

BMO Target Retirement 2040 Fund (cont.)

•

Fund Performance

BMO Target Retirement 2040 Fund (cont.)

Class I—Annual Total Returns (calendar years 2006-2012)

[Insert bar chart]


Return	15.92	%	6.68	%	(38.14	)%	32.68	%	16.14	%	(3.60	)%	16.28	%
Year	2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		6/30/2009		17.49	%
Worst quarter		12/31/2008		(21.24	)%

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			Since Inception (12/1/05)
Class I
Return Before Taxes		16.28	%		1.33	%		3.90	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		3.89	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.95	%
Morningstar Target Date 2036-2040 Category Average		14.64	%		0.57	%		3.57	%
Lipper Mixed-Asset Target 2040 Funds Average		14.65	%		0.55	%		3.01	%

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

The Barclays U.S. Aggregate Bond Index (BABI) is an index that covers the U.S. investment-grade fixed-rate bond market, including government and credit securities, agency mortgage pass-through securities, asset-backed securities and commercial mortgage-based securities. To qualify for inclusion, a bond or security must have at least on year to final maturity and be rated Baa3 or better, dollar denominated, non-convertible, fixed-rate, and publicly issued.

BMO Target Retirement 2040 Fund (cont.)

Management of the Fund

Adviser. BMO Asset Management Corp.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Phone. Call 1-800-236-FUND (3863).

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

Payments to Broker-Dealers and Other Financial Intermediaries


Fund Summary		BMO Target Retirement 2050 Fund

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		1.24	%		0.99	%		0.99	%		0.84	%

Acquired (underlying) fund fees and expenses		0.65	%		0.65	%		0.65	%		0.65	%

Total Annual Fund Operating Expenses		1.89	%		1.64	%		2.14	%		1.49	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.88	%		0.88	%		0.88	%		0.88	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		1.01	%		0.76	%		1.26	%		0.61	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

BMO Asset Management Corp. (Adviser) has agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding 1.01% for Class Y, 0.76% for Class I, 1.26% for Class R-3, and 0.61% for Class R-6 through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.

Example


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	103	$	78	$	128	$	62
3 Years	$	508	$	431	$	585	$	384

BMO Target Retirement 2050 Fund (cont.)

Portfolio Turnover

Principal Investment Strategies

LOGO

BMO Target Retirement 2050 Fund (cont.)

Principal Risks

•

BMO Target Retirement 2050 Fund (cont.)

•

Fund Performance

BMO Target Retirement 2050 Fund (cont.)

Class I—Annual Total Returns (calendar years 2006-2012)

[Insert bar chart]


Return	14.91	%	6.64	%	(38.01	)%	32.69	%	16.27	%	(3.60	)%	16.08	%
Year	2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		6/30/2009		17.44	%
Worst quarter		12/31/2009		(21.19	)%

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			Since Inception (12/19/05)
Class I
Return Before Taxes		16.08	%		1.36	%		3.88	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		3.97	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.88	%
Morningstar Target Date 2046-2050 Category Average		15.07	%		0.54	%		3.34	%
Lipper Mixed-Asset Target 2050+ Funds Average		15.21	%		0.37	%		2.70	%

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

The Barclays U.S. Aggregate Bond Index (BABI) is an index that covers the U.S. investment-grade fixed-rate bond market, including government and credit securities, agency mortgage pass-through securities, asset-backed securities and commercial mortgage-based securities. To qualify for inclusion, a bond or security must have at least on year to final maturity and be rated Baa3 or better, dollar denominated, non-convertible, fixed-rate, and publicly issued.

BMO Target Retirement 2050 Fund (cont.)

Management of the Fund

Adviser. BMO Asset Management Corp.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Phone. Call 1-800-236-FUND (3863).

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

Payments to Broker-Dealers and Other Financial Intermediaries

Additional Information Regarding Principal

Investment Strategies and Risks

The BMO Target Retirement 2010 Fund, BMO Target Retirement 2020 Fund, BMO Target Retirement 2030 Fund, BMO Target Retirement 2040 Fund, and BMO Target Retirement 2050 Fund (each, a Target Date Retirement Fund or a Fund) share the same investment approach: each Fund seeks to achieve its investment objectives by investing in a mix of affiliated BMO Funds and unaffiliated mutual funds (the underlying funds). The Funds are designed to provide investors with investment management, asset allocation, and ongoing reallocation over time. Because the Funds invest in other mutual funds, each Fund is considered a “fund of funds.” A fund of funds bears its own direct expenses in addition to bearing a proportionate share of expenses charged to the underlying funds in which it invests.

Each Fund is designed for an investor who anticipates retiring in or within a few years of the specific year (target date) included in its name and plans to withdraw the value of the investor’s account in the Fund gradually after retirement. The Funds gradually decrease their holdings in underlying funds that invest in equity securities and increase their holdings in underlying funds that invest in fixed income securities as the target date approaches and beyond. This change in asset allocation over time is referred to as the glide path to the retirement date. According to its current investment approach, the Adviser will continue to manage each Fund for a period of time after a Fund reaches its target date. After that time, a Fund may be combined with other funds in a single portfolio with an investment allocation that will not evolve beyond that which is in effect at that time.

The Adviser will continuously monitor each Fund and may make modifications to either the investment approach or the underlying fund allocations that the Adviser believes could benefit shareholders. The Adviser may adjust each Fund’s underlying fund allocations within a particular asset class based on the following considerations: market trends, its outlook for a given market capitalization and the underlying funds’ performance in various market conditions. Accordingly, a Fund’s allocation to a particular underlying fund may increase or decrease throughout the year.

The Funds are designed to be an integral part of an investor’s overall retirement investment strategy. However, they are not designed to provide investors with a complete solution to their retirement needs. Investors must consider many factors when choosing an investment strategy for their retirement. For example, factors such as an appropriate retirement date, your expected retirement needs and your sources of income all should be considered when you choose your overall retirement strategy.

How to Buy Shares

Who Can Invest in the BMO Funds? Only adult U.S. citizens/residents or a U.S. entity may invest in the BMO Funds, as long as they have a valid U.S. taxpayer identification (social security or employer identification) number. You may not place transactions in your account for the benefit of any person other than yourself (except for a transfer of shares to another account). If the Funds determine that the registered owner of an account has permitted another person or entity who is not the registered or beneficial owner of the account to hold shares through that account, the Funds may reject future purchases in that account and any related accounts.

Shares of the Funds are qualified for sale only in the U.S. and its territories and possessions. The Funds generally do not sell shares to investors residing outside the U.S., even if they are U.S. citizens or lawful permanent residents, except to investors with U.S. military APO or FPO addresses.

When Can Shares Be Purchased? You can buy the shares of a Fund on any day the New York Stock Exchange (NYSE) is open for regular session trading. The NYSE is closed on most national holidays and Good Friday.

When you deliver your transaction request in proper form and it is accepted by the BMO Funds, or its authorized agent, your transaction is processed at the next determined net asset value (NAV). The NAV is calculated for each of the Funds at the end of regular trading (normally 3:00 p.m. Central Time) each day the NYSE is open. All purchase orders received in proper form and accepted by the time a Fund’s NAV is calculated will receive that day’s NAV, regardless of when the order is processed.

How is NAV Calculated? Each class’s NAV per share is the value of a single share of the class. It is computed for each class of a Fund by totaling the class’s pro rata share of the value of the Fund’s investments, cash, and other assets, subtracting the class’s pro rata share of the value of the Fund’s general liabilities and the liabilities specifically allocated to the class, then dividing the result by the number of shares of that class outstanding. For purposes of calculating the NAV, securities transactions and shareholder transactions are accounted for no later than one business day after the trade date.

In determining the NAV for the Funds, investments in other open-end registered investment companies are valued at net asset value. In valuing other portfolio securities, listed equity securities are valued each trading day at the last sale price or official closing price reported on a national securities exchange, including NASDAQ. Securities listed on a foreign exchange are valued each trading day at the last closing price on the principal

exchange on which they are traded immediately prior to the time for determination of NAV or at fair value as discussed below.

Equity securities without a reported trade, U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities with maturities of 60 days or more, unlisted securities, and private placement securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. Fixed income securities that are not exchange traded are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Fixed income securities with remaining maturities of 60 days or less at the time of purchase are valued at amortized cost, which approximates fair value.

Securities or other assets for which market valuations are not readily available, or are deemed to be inaccurate, are valued at fair value as determined in good faith using methods approved by the Board. The Board oversees a Pricing Committee, which is responsible for determinations of fair value, subject to the supervision of the Board. In determining fair value, the Pricing Committee takes into account all information available and any factors it deems appropriate. Consequently, the price of securities used by a Fund to calculate its NAV may differ from quoted or published prices for the same securities. Fair value pricing involves subjective judgments. It is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security and the difference may be material to the NAV of the respective Fund.

The Pricing Committee may determine that a security needs to be fair valued if, among other things, it believes the value of the security might have been materially affected by events occurring after the close of the market in which the security was principally traded, but before the time for determination of the NAV (“a subsequent event”). A subsequent event might include a company-specific development (for example, announcement of a merger that is made after the close of the foreign market), a development that might affect an entire market or region (for example, weather related events) or a potentially global development (such as a terrorist attack that may be expected to have an effect on investor expectations worldwide). The Board has retained an independent fair value pricing service to assist in valuing foreign securities when a subsequent event has occurred. The service uses statistical data based on historical performance of securities and markets and other data in developing factors used to estimate fair value for that day.

How to Buy Shares (cont.)

In valuing underlying fund investments, the Funds use the NAVs reported by the underlying funds. An underlying fund may need to fair value one or more of its investments, which may, in turn, require a Target Date Retirement Fund to do the same because of delays in obtaining the underlying fund’s NAV.

How Do I Purchase Shares? You may purchase shares through a broker/dealer, investment professional, or financial institution (Authorized Dealers). Some Authorized Dealers may charge a transaction fee for this service. You also may purchase shares directly from the Funds by the methods described below under the “Fund Purchase Easy Reference Table” and sending your payment to the Funds by check or wire. Clients of BMO Harris Bank N.A. may purchase shares by contacting their account officer. In connection with opening an account, you will be requested to provide information that will be used by the Funds to verify your identity, as described in more detail under “Important Information About Procedures for Opening a New Account” below.

The minimum investment for each class of shares is listed in the table below. An account may be opened with a smaller amount as long as the minimum investment is reached within 90 days. In certain circumstances, the minimum investments listed in the table may be waived or lowered at the Funds’ discretion. You may meet the minimum investment amount for Class I shares by aggregating multiple accounts with common ownership or discretionary control within a Fund, including accounts held at Authorized Dealers. If approved in advance by Fund management, clients of a financial adviser or institutional consultant may qualify to purchase Class I shares if the aggregate amount invested by the adviser or consultant in a Fund meets the minimum investment amount. Different minimums may apply to accounts opened through third parties. Call your Authorized Dealer for any additional limitations.

The minimum investment for Class I shares does not apply to current employees of BMO Financial Corp. and its affiliates, or to the directors of the BMO Funds, provided such persons purchase shares directly from the BMO Funds. Persons investing in Class I shares in this manner are not eligible to participate in the Systematic Investment Program or Checkwriting described in the tables below.

If you purchase shares of a Fund through a program of services offered or administered by an Authorized Dealer or other service provider, you should read the program materials, including information relating to fees, in conjunction with the Fund’s Prospectus. Certain features of a Fund may not be available or may be modified in connection with the program of services provided.

Once you have opened an account, you may purchase additional Fund shares by contacting BMO Funds U.S. Services at 1-800-236-FUND (3863) if you have pre-authorized the telephone purchase privilege.

Each Fund reserves the right to reject any purchase request. It is the responsibility of BMO Funds U.S. Services, any Authorized Dealer, or other service provider that has entered into an agreement with a Fund, its distributor, or its administrative or shareholder services agent to promptly submit purchase orders to the Fund.

You are not the owner of Fund shares (and therefore will not receive distributions) until payment for the shares is received in “good funds.” Wires are generally “good funds” on the day received and checks are “good funds” when deposited with the Funds’ custodian, normally the next business day after receipt. Checks sent to the BMO Funds to purchase shares must be made payable to the “BMO Funds.”

Purchase of Class R Shares. Class R shares are generally available only to retirement plans established under Internal Revenue Code sections 401(a) (including 401(k) plans), 403(b) or 457, and to nonqualified deferred compensation plans and certain voluntary employee benefit association and post-retirement benefit plans. Class R shares also are generally available only to retirement plans where plan level or omnibus accounts are held on the books of the Adviser. Class R-3 and R-6 shares are generally available only to fee-based programs or through retirement plan intermediaries. Class R shares generally are not available to retail nonretirement accounts, traditional and Roth individual retirement accounts (IRAs), Coverdell Education Savings Accounts, SEPs, SARSEPs, and SIMPLE IRAs.

Important Information About Procedures for Opening a New Account. The Funds are required to comply with various anti-money laundering laws and regulations. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions, including mutual funds, to obtain, verify, and record information that identifies each person who opens an account. Consequently, when you open an account, the Funds must obtain certain personal information, including your full name, address, date of birth, social security number, and other information that will allow the Funds to identify you. The Funds also may ask for other identifying documents or information.

How to Buy Shares (cont.)

your account within five business days and redeem your shares at the NAV next determined after the account is closed. Any delay in processing your order due to your failure to provide all required information will affect the purchase price you receive for your shares. The Funds are not liable for fluctuations in value experienced as a result of such delays in processing. If at any time the Funds

detect suspicious behavior or if certain account information matches government lists of suspicious persons, the Funds may determine not to open an account, may reject additional purchases, may close an existing account, may file a suspicious activity report, or may take other appropriate action.

Fund Purchase Easy Reference Table

Minimum Investments

Class Y

•

To open an account—$1,000

•

To add to an account (including through a Systematic Investment Program)—$50

Class I

•

To open an account—$2,000,000

Class R-3

•

To open an account—Contact BMO Funds U.S. Services

Class R-6

•

To open an account—Contact BMO Funds U.S. Services

Phone 1-800-236-FUND (3863)

•

Contact BMO Funds U.S. Services.

•

Complete an application for a new account.

•

Once you have opened an account and if you authorized telephone privileges on your account application or by subsequently completing an authorization form, you may purchase additional shares or exchange shares from another BMO Fund having an identical shareholder registration.

Mail

•

To open an account, send your completed account application and check payable to “BMO Funds” to the following address:

BMO Funds U.S. Services

P.O. Box 55931

Boston, MA 02205-5931

•

To add to your existing Fund account, send in your check, payable to “BMO Funds,” to the same address. Indicate your Fund account number on the check.

Wire

•

Notify BMO Funds U.S. Services and request wire instructions at 1-800-236-FUND (3863).

•

Mail a completed account application to the Fund at the address above under “Mail.”

•

Your bank may charge a fee for wiring funds. Wire orders are accepted only on days when the Fund and the Federal Reserve wire system are open for business.

Systematic Investment Program

•

You can have money automatically withdrawn from your checking account ($50 minimum) on predetermined dates and invest it in a Fund at the next Fund share price determined after BMO Funds U.S. Services receives the order.

•

Call BMO Funds U.S. Services at 1-800-236-FUND (3863) to apply for this program.

BMO Funds Website

•

You may purchase Fund shares at www.bmofundsus.com.

How to Buy Shares (cont.)

Additional Information About Checks and Automated Clearing House (ACH) Transactions Used to Purchase Shares

•

If your check or ACH purchase does not clear, your purchase will be canceled and you will be charged a $15 fee and held liable for any losses incurred by the Fund.

•

If you purchase shares by check or ACH, you may not be able to receive proceeds from a redemption for up to seven days.

•

All checks should be made payable to “BMO Funds.”

•

The maximum ACH purchase amount is $100,000.

Employer-Sponsored Retirement Plans

•

Eligible retirement plans may open an account and purchase Class R shares by contacting an Authorized Dealer. Additional shares may be purchased through a plan’s administrator or recordkeeper.

How to Redeem and Exchange Shares

How Do I Redeem Shares? You may redeem your Fund shares by several methods, described below under the “Fund Redemption Easy Reference Table.” You should note that redemptions will be made only on days when a Fund computes its NAV. When your redemption request is received in proper form, it is processed at the next determined NAV.

Clients of BMO Harris Bank should contact their account officer to make redemption requests. Telephone or written requests for redemptions must be received in proper form, as described below, and can be made through BMO Funds U.S. Services or any Authorized Dealer. It is the responsibility of BMO Funds U.S. Services, any Authorized Dealer or other service provider to promptly submit redemption requests to a Fund.

Redemption requests for the Funds must be received in proper form by the close of trading on the NYSE, generally 3:00 p.m. (Central Time), for shares to be

redeemed at that day’s NAV. Different cut-off times for redemption requests through an Authorized Dealer may be imposed. Please contact your Authorized Dealer for more information.

All redemption requests received in proper form by the time a Fund’s NAV is calculated will receive that day’s NAV, regardless of when the request is processed. Redemption proceeds will normally be mailed, or wired if by written request, the following business day, but in no event more than seven days, after the request is made.

Will I Be Charged a Fee for Redemptions? You may be charged a transaction fee if you redeem Fund shares through an Authorized Dealer or service provider (other than BMO Funds U.S. Services or BMO Harris Bank), or if you are redeeming by wire. Consult your Authorized Dealer or service provider for more information, including applicable fees.

Fund Redemption Easy Reference Table

Certain redemption requests may require a signature guarantee. See “Signature Guarantee” below for details.

Phone 1-800-236-FUND (3863)

•

Contact BMO Funds U.S. Services.

•

If you have authorized the telephone redemption privilege in your account application or by a subsequent authorization form, you may redeem shares by telephone. If you are a customer of an Authorized Dealer, you must contact your account representative.

•

Not available to retirement accounts, for which redemptions must be done in writing.

Mail

•

Send in your written request to the following address, indicating your name, the Fund name, your account number and the number of shares or the dollar amount you want to redeem to:

BMO Funds U.S. Services

P.O. Box 55931

Boston, MA 02205-5931

•

For additional assistance, call BMO Funds U.S. Services at 1-800-236-FUND (3863).

Wire/Electronic Transfer

•

Upon written request sent to the address above under “Mail,” redemption proceeds can be directly deposited by Electronic Funds Transfer or wired directly to a domestic commercial bank previously designated by you in your account application or by subsequent form.

•

Wires of redemption proceeds will only be made on days on which the Funds and the Federal Reserve wire system are open for business.

•

Wire-transferred redemptions may be subject to an additional fee imposed by the bank receiving the wire.

How to Redeem and Exchange Shares (cont.)

Systematic Withdrawal Program

•

If you have a Fund account balance of at least $10,000, you can have predetermined amounts of at least $100 automatically redeemed from your Fund account on predetermined dates on a monthly or quarterly basis.

•

Contact BMO Funds U.S. Services to apply for this program.

BMO Funds Website

•

You may redeem Fund shares at www.bmofundsus.com.

Employer-Sponsored Retirement Plans

•

Shares held in eligible retirement plans may be sold through the plan’s administrator or recordkeeper.

Additional Conditions for Redemption

Signature Guarantees. In the following instances, you must have a signature guarantee on written redemption requests:

•

when you want a redemption to be sent to an address other than the one you have on record with a Fund;

•

when you want the redemption payable to someone other than the shareholder of record; or

•

when your redemption is to be sent to an address of record that was changed within the last 30 days.

Your signature can be guaranteed by any federally insured financial institution (such as a bank or credit union) or a broker/dealer that is a domestic stock exchange member, but not by a notary public.

Limitations on Redemption Proceeds. Redemption proceeds normally are wired or mailed within one business day after accepting a request in proper form. However, delivery of payment may be delayed up to seven days:

•

to allow your purchase payment to clear;

•

during periods of market volatility; or

•

when a shareholder’s trade activity or amount adversely impacts a Fund’s ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from a Fund. If those checks are undeliverable and returned to a Fund, the proceeds will be reinvested in shares of the Funds that were redeemed.

Corporate Resolutions. Corporations, trusts, and institutional organizations are required to furnish evidence of the authority of persons designated on the account application to effect transactions on behalf of the organizations.

Redemption in Kind. The Funds have reserved the right to pay the redemption price in whole or in part by a distribution of a Fund’s portfolio securities. This means that the Funds are obligated to pay share redemptions to any one shareholder in cash only up to the lesser of $250,000 or 1.00% of a Fund’s net assets represented by such share class during any 90-day period. Generally, any share redemption payment greater than this amount will be paid in cash unless the Adviser determines that payment should be in kind. Redemptions in kind are taxable for federal income tax purposes in the same manner as redemptions for cash.

Exchange Privilege. You may exchange shares of a Fund for shares of the same class of any of the other BMO Funds free of charge, provided you meet the investment minimum of the Fund and you reside in a jurisdiction where Fund shares may be lawfully offered for sale. An exchange is treated as a redemption and a subsequent purchase and is, therefore, a taxable transaction for federal income tax purposes.

Signatures must be guaranteed if you request an exchange into another Fund with a different shareholder registration. The exchange privilege may be modified or terminated at any time.

Exchanges by Telephone. If you have completed the telephone authorization section on your account application or an authorization form obtained through BMO Funds U.S. Services, you may telephone instructions to BMO Funds U.S. Services to exchange between Fund accounts that have identical shareholder registrations. Customers of broker/dealers, financial institutions, or service providers should contact their account representatives. Telephone exchange instructions must be received by the Funds before the close of trading on the NYSE, generally 3:00 p.m. (Central Time), for shares to be exchanged at the NAV calculated that day and to receive a dividend of the Fund into which you exchange, if applicable.

The Funds will record your telephone instructions. The Funds will not be liable for losses due to unauthorized or fraudulent telephone instructions as long as reasonable security procedures are followed. You will be notified of changes to telephone transaction privileges.

Frequent Traders. The Funds’ management or the Adviser may determine from the amount, frequency, and pattern of exchanges or redemptions that a shareholder is engaged in excessive trading that is detrimental to a Fund or its other shareholders. Such short-term or excessive trading into and out of a Fund may harm all shareholders by disrupting investment strategies, increasing brokerage, administrative and other expenses, decreasing tax efficiency, and diluting the value of shares held by long-term shareholders.

The Board has approved policies that seek to discourage frequent purchases and redemptions and curb the disruptive effects of frequent trading (the Market Timing Policy). Pursuant to the Market Timing Policy, a Fund may decline to accept an application or may reject a purchase request, including an exchange, from an investor who, in the sole judgment of the Adviser, has a pattern of short-term or excessive trading or whose trading has been or may be disruptive to the Fund. The Funds, the Adviser, and affiliates thereof are prohibited from entering into arrangements with any shareholder or other person to permit frequent purchases and redemptions of Fund shares.

Additional Conditions for Redemption (cont.)

Each Fund monitors and enforces the Market Timing Policy through:

•

the termination of a shareholder’s purchase and/or exchange privileges; and

•

selective monitoring of trade activity.

Although the Funds seek to detect and deter market timing activity, their ability to monitor trades that are placed by individual shareholders through omnibus accounts is limited because the Funds may not have direct access to the underlying shareholder account information. Omnibus accounts are accounts maintained by financial intermediaries on behalf of multiple beneficial shareholders. Due to policy, operational or system requirements and limitations, omnibus account holders, including qualified employee benefit plans, may use criteria and methods for tracking, applying, or calculating the redemption fee that may differ from those utilized by the Funds’ transfer agent. In addition, the Funds may rely on a financial intermediary’s market timing policy, even if those policies are different from the Funds’ policy, when the Funds believe that the policy is reasonably designed to prevent excessive trading practices that are detrimental to the Fund. If you purchase Fund shares through a financial intermediary, you should contact your financial intermediary for more information on how the redemption fee is applied to redemptions or exchanges of your shares.

The Funds may request that financial intermediaries furnish the Funds with trading and identifying information relating to beneficial shareholders, such as social security and account numbers, in order to review any unusual patterns of trading activity discovered in the omnibus account. The Funds also may request that the financial intermediaries take action to prevent a particular shareholder from engaging in excessive trading and to enforce the Funds’ or their market timing policies. Legal and technological limitations on the ability of financial intermediaries may exist to restrict the trading practices of their clients and they may impose restrictions or limitations that are different from the Funds’ policies. As a result, the Funds’ ability to monitor and discourage excessive trading practices in omnibus accounts may be limited.

Account and Share Information

Fund Transactions Through BMO Funds Website. If you have previously established an account with a Fund, you may purchase, redeem, or exchange shares through the BMO Funds’ website at www.bmofundsus.com. You also may check your Fund account balance(s) and historical transactions through the website. You cannot, however, establish a new Fund account through the website—you may only establish a new Fund account under the methods described in the “How to Buy Shares” section.

Clients of BMO Harris Bank should contact their account officer for information on the availability of transactions on the website.

Online Conditions. Because of security concerns and costs associated with maintaining the website, purchases, redemptions, and exchanges through the website are subject to the following daily minimum and maximum transaction amounts:


	Minimum		Maximum

Purchases:	$	50	$	100,000
Redemptions:	By ACH: $	50	By ACH: $	50,000
	By wire: $	1,000	By wire: $	50,000
Exchanges:	$	50	$	100,000

Your transactions through the website are effective at the time they are accepted by a Fund and are subject to all of the conditions and procedures described in this Prospectus.

You may not change your address of record, registration, or wiring instructions through the website. The website privilege may be modified at any time, but you will be notified in writing of any termination of the privilege.

Online Risks. If you utilize the website for account histories or transactions, you should be aware that the Internet is an unsecured, unregulated, and unpredictable environment. Your ability to use the website for transactions is dependent upon the Internet and equipment, software, systems, data, and services provided by various vendors and third parties (including telecommunications carriers, equipment manufacturers, firewall providers, and encryption system providers). While the Funds and their service providers have established certain security procedures, the Funds and their transfer agent cannot assure you that inquiries or trading activity will be completely secure. There also may be delays, malfunctions, or other inconveniences generally associated with this medium. There may be times when the website is unavailable for Fund transactions, which may be due to the Internet or the actions or omissions of a third party—should this happen, you should consider purchasing, redeeming, or exchanging shares by another method. The Funds, their transfer agent, and BMO Funds U.S. Services

are not responsible for any such delays or malfunctions and are not responsible for wrongful acts by third parties as long as reasonable security procedures are followed.

Confirmations and Account Statements. You will receive confirmation of purchases, redemption, and exchanges (except for systematic program transactions). In addition, you will receive periodic statements reporting all account activity, including systematic program transactions and distributions of net investment income and capital gains. You may request photocopies of historical confirmations from prior years. The Funds may charge a fee for this service.

Distributions of Net Investment Income and Net Capital Gains. Distributions of net investment income, if any, of each Fund are declared and paid quarterly. Distributions of net investment income are paid to all shareholders invested in the Funds on the record date, which is the date on which a shareholder must officially own shares in order to earn a distribution.

In addition, each Fund distributes its net capital gains, if any, at least annually. If capital gains or losses were realized by a Fund, they could result in an increase or decrease in such Fund’s distributions. Your distributions of net investment income and net capital gains will be automatically reinvested in additional shares of the same class of the same Fund unless you elect cash payments. If you elect cash payments and the payment is returned as undeliverable, your cash payment will be reinvested in shares of the Fund and your distribution option will convert to automatic reinvestment. If any distribution check remains uncashed for six months, the check amount will be reinvested in shares and you will not accrue any interest or distributions on this amount prior to the reinvestment. Distributions of net investment income and net capital gains are treated the same for federal income tax purposes whether received in cash or in additional shares.

What are Distributions of Net Investment Income and Net Capital Gains? A distribution of net investment income is the money paid to shareholders that a mutual fund has earned from the income on its investments after paying any Fund expenses. A net capital gain distribution is the money paid to shareholders from a mutual fund’s net profit realized from the sales of portfolio securities.

If you purchase shares just before a Fund declares a distribution of net investment income or net capital gain, you will pay the full price for the shares and then receive a portion of the price back in the form of the distribution. The distribution will generally be taxable to you for federal income tax purposes, unless you are investing through a tax-deferred arrangement such as an IRA or a 401(k) plan.

Account and Share Information (cont.)

Shares may be redeemed or exchanged based on either a dollar amount or number of shares. If you are redeeming or exchanging based upon a number of Fund shares, you must redeem or exchange enough shares to meet the minimum dollar amounts described above, but not so much as to exceed the maximum dollar amounts.

Accounts with Low Balances. Due to the high cost of maintaining accounts with low balances, a Fund may redeem your Class Y shares and pay you the proceeds if your account balance falls below the required minimum value of $1,000. Similarly, your Class I shares may be converted to Class Y shares if your account balance falls below the required minimum of $2,000,000. Before shares are redeemed to close an account or converted from Class I shares to Class Y shares, you will be notified in writing and allowed 30 days to purchase additional shares to meet the minimum account balance requirement.

Rule 12b-1 Plan. The Funds have adopted a Rule 12b-1 Plan, which allows them to pay an annual fee equal to a maximum of 0.50% of the Class R-3 assets to the distributor and financial intermediaries for the sale and distribution of each Fund’s Class R-3 shares and for services provided to shareholders of that class. Such activities include, but are not necessarily limited to, compensating brokers, dealers, financial intermediaries, and sales personnel for distribution and shareholder services, printing and mailing prospectuses to persons other than current shareholders, printing and mailing sales literature, and advertising. Because Rule 12b-1 fees are ongoing, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.

Multiple Classes. The BMO Funds have adopted a plan that permits each Fund to offer more than one class of shares. The Funds in this prospectus each offer four classes of shares. All shares of each Fund or class have equal voting rights and will generally be entitled to vote in the aggregate and not by Fund or class. There may be circumstances, however, when only shareholders of a particular Fund or class are entitled to vote on matters affecting that Fund or class. Share classes may have different expenses, which may affect their performance.

Tax Information

Federal Income Tax. The Funds will send you an annual statement of your account activity to assist you in completing your federal, state, and local tax returns. Fund distributions of investment company taxable income and net capital gains are treated the same for federal income

tax purposes whether paid in cash or reinvested in the Fund. Distributions from the Funds’ investment company taxable income (which includes but is not limited to dividends, interest, net short-term capital gains, and net gains from foreign currency transactions), if any, generally are taxable to you as ordinary income (for non-corporate shareholders, currently taxed at a maximum rate of 39.6%). For non-corporate shareholders, to the extent that distributions of investment company taxable income are attributable to and reported as “qualified dividend income,” such distribution may be eligible for the reduced federal income tax rates applicable to long-term capital gains, provided certain holding periods and other requirements are satisfied by the shareholder. Distributions of the Funds’ net capital gains (the excess of net long-term capital gains over net short-term capital losses), if any, are generally taxable to non-corporate shareholders as long-term capital gains (currently taxed at a maximum rate of 20%), regardless of how long such shareholder has held shares of the Funds. Fund distributions are expected to consist of both investment company taxable income and net capital gains.

Certain individuals, trusts and estates may be subject to a Medicare tax of 3.8% (in addition to regular income tax). The Medicare tax is imposed on the lesser of (i) the taxpayer’s investment income, net of deductions properly allocable to such income, or (ii) the amount by which the taxpayer’s modified adjusted gross income exceeds certain thresholds ($250,000 for married individuals filing jointly, $200,000 for unmarried individuals and $125,000 for married individuals filing separately). The Funds anticipate that they will distribute income that will be includable in a shareholder’s investment income for purposes of this Medicare tax. In addition, any capital gain realized on the sale, redemption, or exchange of Fund shares is includable in a shareholder’s investment income for purposes of this Medicare tax.

Distributions declared by a Fund during October, November or December to shareholders of record and paid by January 31 of the following year are treated for federal income tax purposes as if received by shareholders on December 31 of the year in which the distribution was declared.

If more than 50% of the value of a Fund’s total assets at the close of its taxable year consists of stock or securities of foreign corporations, the Fund may be eligible to elect to “pass through” to you foreign income taxes that it pays. If a Fund is eligible for and makes this election, you will be required to include your share of those taxes in gross income as a distribution from the Fund. You will then be allowed to claim a credit (or a deduction, if you itemize deductions) for such amounts on your federal income tax return, subject to certain limitations. Tax-exempt holders of Fund shares, such as qualified retirement plans, will not generally benefit from such deduction or credit.

Account and Share Information (cont.)

Your sale, redemption, or exchange of Fund shares may result in a taxable capital gain or loss to you for federal income tax purposes, depending on whether the redemption proceeds (including in-kind proceeds) are more or less than your basis in the sold, redeemed or exchanged shares. The gain or loss will generally be treated as long-term capital gain or loss if the shares were held for more than one year, and if held for one year or less, as short-term capital gain or loss. Any loss arising from the sale, redemption, or exchange of Fund shares held for six months or less, however, is treated as a long-term capital loss to the extent of any distributions of net capital gains received or deemed to be received with respect to such shares. In determining the holding period of such shares for this purpose, any period during which your risk of loss is offset by means of options, short sales, or similar transactions is not counted. If you purchase Fund shares within thirty days before or after selling, redeeming, or exchanging other shares of the same Fund at a loss, all or part of your loss will not be deductible and will instead increase the basis of the new shares to preserve the loss until a future sale, redemption, or exchange.

If you do not furnish a Fund with your correct social security number or taxpayer identification number, if you fail to make certain required certifications, and/or if the Fund receives notification from the Internal Revenue Service (“IRS”) requiring backup withholding, the Fund is required by federal law to withhold federal income tax

from your distributions and redemption proceeds, at the rate set forth in the Internal Revenue Code of 1986, as amended (the “Code”). Backup withholding is not an additional tax. Any amounts withheld may be credited against your federal income tax liability, provided the appropriate information is furnished to the Internal Revenue Service.

This section is not intended to be a full discussion of the federal income tax laws and the effect of such laws on you. There may be other federal, state, foreign, or local tax considerations applicable to a particular investor. Please consult your own tax advisor regarding federal, state, foreign and local tax considerations.

Cost Basis Reporting

The Funds are required to report to you and the IRS the cost basis of any Fund shares acquired after January 1, 2012 when you subsequently sell, redeem, or exchange those Fund shares. Each Fund will determine cost basis using the average cost method unless you elect in writing (and not over the telephone) any alternate IRS-approved cost basis method. Please see the SAI for more information regarding cost basis reporting.

Portfolio Holdings

A description of the Funds’ policies and procedures with respect to the disclosure of the Funds’ portfolio securities is available in the Funds’ Statement of Additional Information (SAI).

BMO Funds Information

Management of the BMO Funds. The Board governs the Funds. The Board oversees the Adviser. The Adviser manages each Fund’s assets, including buying and selling the underlying funds and any portfolio securities for the Funds. The Adviser’s address is 115 S. LaSalle Street, Chicago, Illinois 60603.

Adviser’s Background. The Adviser is a registered investment adviser and a wholly-owned subsidiary of BMO Financial Corp., a financial services company headquartered in Chicago, Illinois, and an indirect wholly-owned subsidiary of the Bank of Montreal (BMO), a Canadian bank holding company. As of June 30, 2013, the Adviser had approximately $[ ] billion in assets under management, of which approximately $[ ] billion was in the BMO Funds’ assets, and has managed investments for individuals and institutions since 1973. The Adviser managed the BMO Funds, previously known as Marshall Funds, since 1992.

Portfolio Managers. John D. Boritzke, Sandy Lincoln, and Alan W. Schwartz co-manage the Funds. All members of the team share investment decision making responsibilities with respect to the Funds. Mr. Boritzke, Head of Fixed Income, a Managing Director and a Portfolio Manager of the Adviser, joined the Adviser in 1983 and has co-managed the Funds since their inception in 2013. He is a CFA Charterholder. Mr. Lincoln, Chief Market Strategist and Senior Vice President of the Adviser, joined the Adviser in 2008 and has co-managed the Funds since their inception in 2013. Mr. Schwartz, Director of Asset Allocation Strategies and Senior Vice President of the Adviser, joined the Adviser in 1981 and has co-managed the Funds since their inception in 2013. Mr. Boritzke and Mr. Schwartz have been part of the portfolio management team for the Collective Funds since their inception in 2005.

The Funds’ SAI provides additional information about the portfolio managers, including other accounts they manage, their ownership of Fund shares and their compensation.

Advisory Fees. The Adviser does not receive an investment advisory fee for the services it performs for the Target Date Retirement Funds. However, the Adviser is entitled to receive an investment advisory fee from each of the affiliated BMO Funds that serve as underlying funds.

The Adviser has contractually agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses but excluding interest, taxes, brokerage commissions, other investment-related costs and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of a

Fund’s business) from exceeding the levels set out in the table below through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 for the Funds unless the investment advisory agreement is terminated.


	Class Y			Class I			Class R-3			Class R-6
BMO Target Retirement 2010 Fund		0.88	%		0.63	%		1.13	%		0.48	%
BMO Target Retirement 2020 Fund		0.94	%		0.69	%		1.19	%		0.54	%
BMO Target Retirement 2030 Fund		1.01	%		0.76	%		1.26	%		0.61	%
BMO Target Retirement 2040 Fund		1.01	%		0.76	%		1.26	%		0.61	%
BMO Target Retirement 2050 Fund		1.01	%		0.76	%		1.26	%		0.61	%

The Board’s basis for approving the investment advisory contract for the Funds will be included in the Funds’ next Annual or Semi-Annual Report.

Affiliate Services and Fees. BMO Harris Bank, an affiliate of the Adviser, provides services to the Funds as custodian of the assets. For each Fund, the custody fees are calculated at the annual rate of 0.02% on the first $250 million of average daily net assets (ADNA) plus 0.01% of assets exceeding $250 million.

The Adviser serves as the Funds’ shareholder servicing agent, recordkeeper, and administrator directly and through its division, BMO Funds U.S. Services. The Adviser is entitled to receive shareholder services fees from Class Y and R-3 shares of each Fund at the annual rate of 0.25% of the Fund’s ADNA. The Adviser has the discretion to waive a portion of its fees. However, any fee waivers are voluntary and may be terminated at any time in its sole discretion.

The Adviser is the administrator of the Funds and UMB Fund Services, Inc. (UMB) is the sub-administrator. The Adviser, as administrator, is entitled to receive fees from Class Y, I, and R-3 shares of each Fund at the annual rate of 0.15% of the Fund’s ADNA. All fees of the sub-administrator are paid by the Adviser.

Payments to Financial Intermediaries. From time to time, the Adviser, BMO Harris Bank, BMO Harris Financial Advisors, the distributor, or their affiliates may enter into arrangements with each other or with brokers or other financial intermediaries pursuant to which such parties agree to perform administrative or other services on behalf of their clients who are Fund shareholders. Pursuant to these arrangements, the Adviser, BMO Harris

BMO Funds Information (cont.)

Bank, BMO Harris Financial Advisors, the distributor, or their affiliates may make payments to each other or to brokers or other financial intermediaries from their own resources (including shareholder services fees paid by the Funds to the Adviser) for services provided to clients who hold Fund shares. In addition, the Adviser or an affiliate may make payments to a financial intermediary, including affiliates such as BMO Harris Financial Advisors, based on the value of Fund shares held through the affiliate or intermediary, to compensate it for introducing new shareholders to the Funds and for other services. These payments may vary in amount and generally range from 0.05% to 0.40%. For its services, BMO Harris Financial Advisors will receive special cash compensation based on the value of Fund shares invested through certain intermediaries for a designated time period. The receipt of (or prospect of receiving) such payments or compensation may provide the affiliate or intermediary and its salespersons with an incentive to favor sales of Fund

shares, or certain classes of those shares, over other investment alternatives. You may wish to consider whether such arrangements exist when evaluating recommendations from the affiliate or intermediary.

Distributor. M&I Distributors, LLC (MID), a registered broker-dealer and member of the Financial Industry Regulatory Authority, Inc., acts as principal distributor of the Funds’ shares. All fees of the distributor are paid by BMO Harris Bank. MID is an affiliate of the Adviser and BMO Harris Bank.

Financial Highlights

Each Fund is new and does not have an operating history. Information, when available, will be included in each Fund’s first financial report.

The SAI is incorporated by reference into this Prospectus. Additional information about the Funds’ investments is contained in the SAI and the Annual and Semi-Annual Reports of the Funds as they become available. The Annual Report’s investment commentaries will discuss market conditions and investment strategies that significantly affected the performance of each Fund during its last fiscal year.

To obtain the SAI, Annual Report, Semi-Annual Report, and other information, free of charge, and to make inquiries, write to or call BMO Funds U.S. Services at 1-414-287-8555 or at 1-800-236-FUND (3863). You also may obtain these materials free of charge on the BMO Funds’ website at www.bmofundsus.com.

You may write to the SEC Public Reference Room at the regular mailing address or the e-mail address below and ask them to mail you information about the Funds, including the SAI.

They will charge you a fee for this duplicating service. You can also visit the SEC Public Reference Room and review and copy documents while you are there. For more information about the operation of the Public Reference Room, call the SEC at the telephone number below.

Public Reference Section

Securities and Exchange Commission

Washington, D.C. 20549-1520

publicinfo@sec.gov

1-202-551-8090

Reports and other information about the Funds are also available on the EDGAR database on the SEC’s Internet site at http://www.sec.gov.

BMO Funds U.S. Services

P.O. Box 55931

Boston, MA 02205-5931

1-414-287-8555

1-800-236-FUND (3863)

www.bmofundsus.com


Not FDIC Insured		No Bank Guarantee		May Lose Value

M&I Distributors, LLC

Distributor

Investment Company Act File No. 811-58433


PRELIMINARY PROSPECTUS		SUBJECT TO COMPLETION APRIL 16, 2013

BMO Funds

Investor
Class(Class Y)

Institutional
Class

(Class I)

Retirement
Class

(Class R-3)

Retirement
Class

(Class R-6)

BMO Target Risk Funds

BMO Diversified Income Fund

[Ticker

]

[Ticker

]

[Ticker

]

[Ticker

]

BMO Moderate Balanced Fund

[Ticker

]

[Ticker

]

[Ticker

]

[Ticker

]

BMO Growth Balanced Fund

[Ticker

]

[Ticker

]

[Ticker

]

[Ticker

]

BMO Aggressive Balanced Fund

[Ticker

]

[Ticker

]

[Ticker

]

[Ticker

]

BMO Diversified Stock Fund

[Ticker

]

[Ticker

]

[Ticker

]

[Ticker

]

BMO Aggressive Stock Fund

[Ticker

]

[Ticker

]

[Ticker

]

[Ticker

]

Investor Class

(Class Y)

Institutional Class

(Class I)

Retirement Class

(R-3)

Retirement Class

(R-6)

Table of Contents


Fund Summary			2

BMO Target Risk Funds
BMO Diversified Income Fund			2
BMO Moderate Balanced Fund			8
BMO Growth Balanced Fund			14
BMO Aggressive Balanced Fund			20
BMO Diversified Stock Fund			26
BMO Aggressive Stock Fund			31

Additional Information Regarding Principal Investment Strategies and Risks			36

How to Buy Shares			37

How to Redeem and Exchange Shares			41

Account and Share Information			45

BMO Funds Information			48


Fund Summary		BMO Diversified Income Fund

Investment Objective: To provide total return primarily from income, secondarily from appreciation.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		0.50	%		0.25	%		0.25	%		0.10	%

Acquired (underlying) fund fees and expenses		0.55	%		0.55	%		0.55	%		0.55	%

Total Annual Fund Operating Expenses		1.05	%		0.80	%		1.30	%		0.65	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.17	%		0.17	%		0.17	%		0.17	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		0.88	%		0.63	%		1.13	%		0.48	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

Example


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	90	$	64	$	115	$	49
3 Years	$	317	$	238	$	395	$	191

BMO Diversified Income Fund (cont.)

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in shares of other mutual funds, including other BMO Funds (the “underlying funds”), according to an asset allocation strategy developed by the Adviser. The Fund normally targets an allocation of approximately 80% of its total assets in funds that invest principally in fixed income securities and 20% of its total assets in funds that invest principally in equity securities. Under normal market conditions, the Fund allocates its assets among the underlying funds based on asset allocation target ranges of 70-90% of its total assets in funds that invest principally in fixed income securities and 10-30% of its total assets in funds that invest principally in equity securities. Equity securities in which the underlying funds may invest include common stock, preferred stock, rights and warrants, and securities convertible into common stock. Fixed income securities in which the underlying funds may invest include corporate bonds and government, mortgage-backed and asset-backed securities. The Fund also may invest in funds with exposure to debt securities that are below investment grade, also known as high yield securities, and in funds that invest in alternative investments, and cash and cash equivalents, including money market funds.

The Fund is one of the BMO Target Risk Funds. The target investment allocation for each of the Target Risk Funds is set forth below.


BMO Fund:	Equity:	Fixed Income:	Money Market Funds:
Diversified Income	10% - 30%	70% - 100%	0% - 10%
Moderate Balanced	30% - 50%	50% - 70%	0% - 10%
Growth Balanced	50% - 70%	30% - 50%	0% - 10%
Aggressive Balanced	70% - 90%	10% - 30%	0% - 10%
Diversified Stock	90% - 100%	0%	0% - 10%
Aggressive Stock	90% - 100%	0%	0% - 10%

The Adviser will continuously monitor the Fund and may make modifications to either the investment approach or the underlying fund allocations that the Adviser believes could benefit shareholders. The Adviser will also monitor the underlying funds on an ongoing basis and may increase or decrease the Fund’s investment in one or several underlying funds. The underlying fund selections are made based on several considerations, including the fund’s investment team expertise, style or asset class exposures, portfolio characteristics, risk profile, and investment process.

The underlying funds invest their assets directly in equity, fixed income, cash, and cash equivalents (including money market funds) in accordance with their own investment objectives and policies.

BMO Diversified Income Fund (cont.)

Principal Risks

•

Liquidity Risk. Liquidity risk refers to the possibility that a fund may not be able to sell or buy a security or close out an investment contract at a favorable price or time. Consequently, an underlying fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on the fund’s performance.

•

BMO Diversified Income Fund (cont.)

Fund Performance

Class I—Annual Total Returns (calendar years 2003-2012)

[Insert bar chart]


Return	8.61	%	5.39	%	3.72	%	6.57	%	6.19	%	(11.45	)%	19.65	%	10.38	%	2.51	%	10.60	%
Year	2003		2004		2005		2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		6/30/2009		9.22	%
Worst quarter		9/30/2008		(5.56	)%

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			10 Year			Since Inception (8/1/94)
Class I
Return Before Taxes		10.60	%		5.80	%		5.94	%		6.24	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		7.10	%		6.24	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.18	%		6.48	%
Morningstar Conservative Allocation Category Average		9.40	%		3.63	%		5.71	%		5.92	%

BMO Diversified Income Fund (cont.)

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

The Morningstar Category Average represents the average composite performance of all mutual funds listed in the respective category as reported by Morningstar, Inc.

Management of the Fund

Adviser. BMO Asset Management Corp.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Phone. Call 1-800-236-FUND (3863).

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

BMO Diversified Income Fund (cont.)

Payments to Broker-Dealers and Other Financial Intermediaries


Fund Summary		BMO Moderate Balanced Fund

Investment Objective: To provide total investment return from income and appreciation.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		0.50	%		0.25	%		0.25	%		0.10	%

Acquired (underlying) fund fees and expenses		0.58	%		0.58	%		0.58	%		0.58	%

Total Annual Fund Operating Expenses		1.08	%		0.83	%		1.33	%		0.68	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.20	%		0.20	%		0.20	%		0.20	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		0.88	%		0.63	%		1.13	%		0.48	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

BMO Asset Management Corp. (Adviser) has agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding 0.88% for Class Y, 0.63% for Class I, 1.13% for Class R-3, and 0.48% for Class R-6. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.

Example


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	90	$	64	$	115	$	49
3 Years	$	324	$	245	$	402	$	197

BMO Moderate Balanced Fund (cont.)

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in shares of other mutual funds, including other BMO Funds (the “underlying funds”), according to an asset allocation strategy developed by the Adviser. The Fund normally targets an allocation of approximately 60% of its total assets in funds that invest principally in fixed income securities and 40% of its total assets in funds that invest principally in equity securities. Under normal market conditions the Fund allocates its assets among the underlying funds based on asset allocation target ranges of 50-70% of its total assets in funds that invest principally in fixed income securities and 30-50% of its total assets in funds that invest principally in equity securities. Equity securities in which the underlying funds may invest include common stock, preferred stock, rights and warrants, and securities convertible into common stock. Fixed income securities in which the underlying funds may invest include corporate bonds and government, mortgage-backed and asset-backed securities. The Fund also may invest in funds with exposure to debt securities that are below investment grade, also known as high yield securities, and in funds that invest in alternative investment strategies as well as cash and cash equivalents, including money market funds.

The Fund is one of the BMO Target Risk Funds. The target investment allocation for each of the Target Risk Funds is set forth below.


BMO Fund:	Equity:	Fixed Income:	Money Market Funds:
Diversified Income	10% - 30%	70% - 100%	0% - 10%
Moderate Balanced	30% - 50%	50% - 70%	0% - 10%
Growth Balanced	50% - 70%	30% - 50%	0% - 10%
Aggressive Balanced	70% - 90%	10% - 30%	0% - 10%
Diversified Stock	90% - 100%	0%	0% - 10%
Aggressive Stock	90% - 100%	0%	0% - 10%

The Adviser will continuously monitor the Fund and may make modifications to either the investment approach or the underlying fund allocations that the Adviser believes could benefit shareholders. The Adviser will also monitor the underlying funds on an ongoing basis and may increase or decrease the Fund’s investment in one or several underlying funds. The underlying fund selections are made based on several considerations, including the fund’s investment team expertise, style or asset class exposures, portfolio characteristics, risk profile, and investment process.

The underlying funds invest their assets directly in equity, fixed income, cash, and cash equivalents (including money market funds) in accordance with their own investment objectives and policies.

BMO Moderate Balanced Fund (cont.)

Principal Risks

•

BMO Moderate Balanced Fund (cont.)

•

Fund Performance

Class I—Annual Total Returns (calendar years 2003-2012)

[Insert bar chart]


Return	15.11	%	7.33	%	4.99	%	8.95	%	6.43	%	(20.15	)%	23.18	%	12.28	%	0.71	%	11.91	%
Year	2003		2004		2005		2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		6/30/2009		11.41	%
Worst quarter		12/31/2008		(9.39	)%

BMO Moderate Balanced Fund (cont.)

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			10 Year			Since Inception (8/1/94)
Class I
Return Before Taxes		11.91	%		4.48	%		6.47	%		6.84	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		7.10	%		6.24	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.18	%		6.48	%
Morningstar Conservative Allocation Category Average		9.40	%		3.63	%		5.71	%		5.92	%

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

The Morningstar Category Average represents the average composite performance of all mutual funds listed in the respective category as reported by Morningstar, Inc.

Management of the Fund

Adviser. BMO Asset Management Corp.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Phone. Call 1-800-236-FUND (3863).

BMO Moderate Balanced Fund (cont.)

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

Payments to Broker-Dealers and Other Financial Intermediaries


Fund Summary		BMO Growth Balanced Fund

Investment Objective: To provide total investment return from income and appreciation.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		0.46	%		0.21	%		0.21	%		0.06	%

Acquired (underlying) fund fees and expenses		0.61	%		0.61	%		0.61	%		0.61	%

Total Annual Fund Operating Expenses		1.07	%		0.82	%		1.32	%		0.67	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.13	%		0.13	%		0.13	%		0.13	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		0.94	%		0.69	%		1.19	%		0.54	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

BMO Asset Management Corp. (Adviser) has agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding 0.94% for Class Y, 0.69% for Class I, 1.19% for Class R-3, and 0.54% for Class R-6 through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.

Example


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	96	$	70	$	121	$	55
3 Years	$	327	$	249	$	406	$	201

BMO Growth Balanced Fund (cont.)

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in shares of other mutual funds, including other BMO Funds (the “underlying funds”), according to an asset allocation strategy developed by the Adviser. The Fund normally targets an allocation of approximately 40% of its total assets in funds that invest principally in fixed income securities and 60% of its total assets in funds that invest principally in equity securities. Under normal market conditions, the Fund allocates its assets among the underlying funds based on asset allocation target ranges of 30-50% of its total assets in funds that invest principally in fixed income securities and 50-70% of its total assets in funds that invest principally in equity securities. Equity securities in which the underlying funds may invest include common stock, preferred stock, rights and warrants, and securities convertible into common stock. Fixed income securities in which the underlying funds may invest include corporate bonds and government, mortgage-backed and asset-backed securities. The Fund also may invest in funds with exposure to debt securities that are below investment grade, also known as high yield securities, and in funds that invest in alternative investments, and cash and cash equivalents, including money market funds.

The Fund is one of the BMO Target Risk Funds. The target investment allocation for each of the Target Risk Funds is set forth below.


BMO Fund:	Equity:	Fixed Income:	Money Market Funds:
Diversified Income	10% - 30%	70% - 100%	0% - 10%
Moderate Balanced	30% - 50%	50% - 70%	0% - 10%
Growth Balanced	50% - 70%	30% - 50%	0% - 10%
Aggressive Balanced	70% - 90%	10% - 30%	0% - 10%
Diversified Stock	90% - 100%	0%	0% - 10%
Aggressive Stock	90% - 100%	0%	0% - 10%

The Adviser will continuously monitor the Fund and may make modifications to either the investment approach or the underlying fund allocations that the Adviser believes could benefit shareholders. The Adviser will also monitor the underlying funds on an ongoing basis and may increase or decrease the Fund’s investment in one or several underlying funds. The underlying fund selections are made based on several considerations, including the fund’s investment team expertise, style or asset class exposures, portfolio characteristics, risk profile, and investment process.

The underlying funds invest their assets directly in equity, fixed income, cash, and cash equivalents (including money market funds) in accordance with their own investment objectives and policies.

BMO Growth Balanced Fund (cont.)

Principal Risks

•

BMO Growth Balanced Fund (cont.)

•

Fund Performance

Class I—Annual Total Returns (calendar years 2003-2012)

[Insert bar chart]


Return	20.33	%	9.08	%	6.26	%	11.38	%	6.65	%	(28.29	)%	26.44	%	13.97	%	(1.31	)%	13.12	%
Year	2003		2004		2005		2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		9/30/2009		13.62	%
Worst quarter		12/31/2008		(14.17	)%

BMO Growth Balanced Fund (cont.)

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			10 Year			Since Inception (8/1/94)
Class I
Return Before Taxes		13.21	%		2.95	%		6.72	%		7.13	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		7.10	%		6.24	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.18	%		6.48	%
Morningstar Moderate Allocation Category Average		11.72	%		2.32	%		6.39	%		6.58	%

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

The Morningstar Category Average represents the average composite performance of all mutual funds listed in the respective category as reported by Morningstar, Inc.

Management of the Fund

Adviser. BMO Asset Management Corp.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Phone. Call 1-800-236-FUND (3863).

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Growth Balanced Fund (cont.)

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

Payments to Broker-Dealers and Other Financial Intermediaries


Fund Summary		BMO Aggressive Balanced Fund

Investment Objective: To provide total investment return from income and appreciation.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		0.52	%		0.27	%		0.27	%		0.12	%

Acquired (underlying) fund fees and expenses		0.64	%		0.64	%		0.64	%		0.64	%

Total Annual Fund Operating Expenses		1.16	%		0.91	%		1.41	%		0.76	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.22	%		0.22	%		0.22	%		0.22	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		0.94	%		0.69	%		1.19	%		0.54	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

BMO Asset Management Corp. (Adviser) has agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding 0.94% for Class Y, 0.69% for Class I, 1.19% for Class R-3, and 0.54% for Class R-6 through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.

Example


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	96	$	70	$	121	$	55
3 Years	$	347	$	268	$	425	$	221

BMO Aggressive Balanced Fund (cont.)

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in shares of other mutual funds, including other BMO Funds (the “underlying funds”), according to an asset allocation strategy developed by the Adviser. The Fund normally targets an allocation of approximately 20% of its total assets in funds that invest principally in fixed income securities and 80% of its total assets in funds that invest principally in equity securities. Under normal market conditions the Fund allocates its assets among the underlying funds based on asset allocation target ranges of 10-30% of its total assets in funds that invest principally in fixed income securities and 70-90% of its total assets in funds that invest principally in equity securities. Equity securities in which the underlying funds may invest include common stock, preferred stock, rights and warrants, and securities convertible into common stock. The underlying funds may also invest in fixed income securities, including corporate bonds and government, mortgage-backed and asset-backed securities. The Fund also may allocate assets to underlying funds that pursue alternative investment strategies as well as cash and cash equivalents, including money market funds.

The Fund is one of the BMO Target Risk Funds. The target investment allocation for each of the Target Risk Funds is set forth below.


BMO Fund:	Equity:	Fixed Income:	Money Market Funds:
Diversified Income	10% - 30%	70% - 100%	0% - 10%
Moderate Balanced	30% - 50%	50% - 70%	0% - 10%
Growth Balanced	50% - 70%	30% - 50%	0% - 10%
Aggressive Balanced	70% - 90%	10% - 30%	0% - 10%
Diversified Stock	90% - 100%	0%	0% - 10%
Aggressive Stock	90% - 100%	0%	0% - 10%

The Adviser will continuously monitor the Fund and may make modifications to either the investment approach or the underlying fund allocations that the Adviser believes could benefit shareholders. The Adviser will also monitor the underlying funds on an ongoing basis and may increase or decrease the Fund’s investment in one or several underlying funds. The underlying fund selections are made based on several considerations, including the fund’s investment team expertise, style or asset class exposures, portfolio characteristics, risk profile, and investment process.

Principal Risks

BMO Aggressive Balanced Fund (cont.)

Affiliated Fund Risk. The Adviser’s authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds may create a conflict of interest because the Adviser and its affiliated companies typically receive fees from the affiliated funds.

Asset Allocation Risk. Investments in the Fund are subject to risks related to the Adviser’s allocation choices. The selection of the underlying funds and the allocation of the Fund’s assets among the various asset classes and market segments could cause the Fund to lose value or cause the Fund to underperform relevant benchmarks or other funds with similar investment objectives.

Market Risk. Stock and bond markets rise and fall daily. As with any investment whose performance is tied to these markets, the value of your investment in the Fund will fluctuate, which means that you could lose money.

Underlying Fund Investment Risk. The Fund invests in underlying funds and incurs expenses related to the underlying funds. In addition, investors in the Fund will incur fees to pay for certain expenses related to the operations of the Fund. An investor holding the underlying funds directly and in the same proportions as the Fund would incur lower overall expenses, but would not receive the benefit of the portfolio management and other services provided by the Fund. The Fund’s risks are directly related to the risks of the underlying funds. It is important to understand the risks associated with investing in the underlying funds.

•

Equity Risk. The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries, or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

•

Large-, Mid-, and Small-Cap Risk. Stocks of different market capitalizations tend to go in and out of favor based on market and economic conditions. Historically, small- and mid-cap stocks tend to be more volatile than large-cap stocks, and small-cap stocks have been riskier than large- and mid-cap stocks. During a period when stocks of a particular market capitalization fall behind other types of investments, an underlying fund’s large-, mid-, or small-cap holdings could reduce performance.

•

Style Risk. Different investment styles, such as growth or equity, tend to shift in and out of favor depending on market and investor sentiment. The Fund may underperform other funds that invest in underlying funds with similar asset classes but employ different investment styles.

•

Fixed Income Risk. Interest rates rise and fall over time, which will affect an underlying fund’s yield and share price. The credit quality of a portfolio investment could also cause an underlying fund’s share price to fall. An underlying fund could lose money if the issuer or counterparty defaults by failing to pay interest or principal when due. Fixed income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt the fund’s yield or share price.

•

Sector Risks. Companies with similar characteristics, such as those within the same industry, may be grouped together in broad categories called sectors. To the extent an underlying fund invests its assets in a particular sector, the fund’s performance may be more susceptible to any economic, business or other developments that generally affect that sector.

BMO Aggressive Balanced Fund (cont.)

Fund Performance

Class I—Annual Total Returns (calendar years 2003-2012)

[Insert bar chart]


Return	25.64	%	10.61	%	7.36	%	13.53	%	6.82	%	(35.79	)%	29.79	%	15.58	%	(2.73	)%	14.39	%
Year	2003		2004		2005		2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		9/30/2009		15.97	%
Worst quarter		12/31/2008		(19.02	)%

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			10 Year			Since Inception (8/1/94)
Class I
Return Before Taxes		11.28	%		4.88	%		8.06	%		7.66	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		7.10	%		6.24	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.18	%		6.48	%
Morningstar Aggressive Allocation Category Average		13.42	%		0.97	%		6.66	%		6.76	%

BMO Aggressive Balanced Fund (cont.)

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

The Morningstar Category Average represents the average composite performance of all mutual funds listed in the respective category as reported by Morningstar, Inc.

Management of the Fund

Adviser. BMO Asset Management Corp.

Portfolio Managers. John D. Boritzke, Sandy Lincoln, and Alan W. Schwartz co-manage the Fund. Mr. Boritzke, Head of Fixed Income, a Managing Director and a Portfolio Manager of the Adviser, joined the Adviser in 1983 and has co-managed the Fund since its inception in 2013. Mr. Lincoln, Chief Market Strategist and Senior Vice President of the Adviser, joined the Adviser in 2008 and has co-managed the Fund since its inception in 2013. Mr. Schwartz, Director of Asset Allocation Strategies and Senior Vice President of the Adviser, joined the Adviser in 1981 and has co-managed the Fund since its inception in 2013. Mr. Boritzke and Mr. Schwartz have been part of the portfolio management team for the Collective Fund since its inception in 1994.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Phone. Call 1-800-236-FUND (3863).

Wire/Electronic Transfer. Upon written request sent to the address below under “Mail,” redemption proceeds can be directly deposited by Electronic Funds Transfer or wired to your previously designated domestic commercial bank.

Mail. Send a written request, indicating your name, the Fund name, your account number, and the number of shares or the dollar amount you want to redeem, to: BMO Funds U.S. Services, P.O. Box 55931, Boston, MA 02205-5931.

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

BMO Aggressive Balanced Fund (cont.)

Payments to Broker-Dealers and Other Financial Intermediaries


Fund Summary		BMO Diversified Stock Fund

Investment Objective: To provide total investment return primarily from appreciation, secondarily from income.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		0.51	%		0.26	%		0.26	%		0.11	%

Acquired (underlying) fund fees and expenses		0.65	%		0.65	%		0.65	%		0.65	%

Total Annual Fund Operating Expenses		1.16	%		0.91	%		1.41	%		0.76	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.15	%		0.15	%		0.15	%		0.15	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		1.01	%		0.76	%		1.26	%		0.61	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

BMO Asset Management Corp. (Adviser) has agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding 1.01% for Class Y, 0.76% for Class I, 1.26% for Class R-3, and 0.61% for Class R-6 through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.

Example


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	103	$	78	$	128	$	62
3 Years	$	354	$	275	$	431	$	228

BMO Diversified Stock Fund (cont.)

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in shares of other mutual funds, including other BMO Funds (the “underlying funds”), according to an asset allocation strategy developed by the Adviser. The Fund normally targets an allocation of approximately 100% of its total assets in funds that invest principally in equity securities. Under normal market conditions the Fund allocates its assets among the underlying funds based on asset allocation target ranges of 0-10% of its total assets in funds that invest principally in money market funds and 90-100% of its total assets in funds that invest principally in equity securities. Equity securities in which the underlying funds may invest include common stock, preferred stock, rights and warrants, and securities convertible into common stock. The Fund also may allocate assets to underlying funds that pursue alternative investment strategies as well as cash and cash equivalents.

The Fund is one of the BMO Target Risk Funds. The target investment allocation for each of the Target Risk Funds is set forth below.


BMO Fund:	Equity:	Fixed Income:	Money Market Funds:
Diversified Income	10% - 30%	70% - 100%	0% - 10%
Moderate Balanced	30% - 50%	50% - 70%	0% - 10%
Growth Balanced	50% - 70%	30% - 50%	0% - 10%
Aggressive Balanced	70% - 90%	10% - 30%	0% - 10%
Diversified Stock	90% - 100%	0%	0% - 10%
Aggressive Stock	90% - 100%	0%	0% - 10%

The Adviser will continuously monitor the Fund and may make modifications to either the investment approach or the underlying fund allocations that the Adviser believes could benefit shareholders. The Adviser will also monitor the underlying funds on an ongoing basis and may increase or decrease the Fund’s investment in one or several underlying funds. The underlying fund selections are made based on several considerations, including the fund’s investment team expertise style or asset class exposures, portfolio characteristics, risk profile, and investment process.

The underlying funds invest their assets directly in equity, fixed income, cash, and cash equivalents (including money market funds) in accordance with their own investment objectives and policies.

Principal Risks

BMO Diversified Stock Fund (cont.)

•

BMO Diversified Stock Fund (cont.)

Fund Performance

Class I—Annual Total Returns (calendar years 2003-2012)

[Insert bar chart]


Return	29.66	%	11.83	%	8.19	%	15.14	%	6.78	%	(40.72	)%	31.96	%	16.68	%	(4.38	)%	15.67	%
Year	2003		2004		2005		2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		9/30/2009		17.74	%
Worst quarter		12/31/2008		(22.56	)%

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			10 Year			Since Inception (8/1/94)
Class I
Return Before Taxes		15.67	%		0.19	%		6.89	%		7.55	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		7.10	%		6.24	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.18	%		6.48	%
Morningstar Large-Cap Blend Category Average		14.96	%		0.68	%		6.62	%		6.97	%

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

BMO Diversified Stock Fund (cont.)

The Morningstar Category Average represents the average composite performance of all mutual funds listed in the respective category as reported by Morningstar, Inc.

Management of the Fund

Adviser. BMO Asset Management Corp.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Phone. Call 1-800-236-FUND (3863).

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

Payments to Broker-Dealers and Other Financial Intermediaries


Fund Summary		BMO Aggressive Stock Fund

Investment Objective: To provide capital appreciation.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.


	Class Y			Class I			Class R-3			Class R-6

Shareholder Fees (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price)		None			None			None			None

Redemption Fee (as a percentage of amount redeemed, for shares held less than 30 days)		None			None			None			None

Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

Management Fees		None			None			None			None

Distribution (12b-1) fees		None			None			0.50	%		None

Other Expenses⁽¹⁾		0.51	%		0.26	%		0.26	%		0.11	%

Acquired (underlying) fund fees and expenses		0.80	%		0.80	%		0.80	%		0.80	%

Total Annual Fund Operating Expenses		1.31	%		1.06	%		1.56	%		0.91	%

Fee Waiver and Expense Reimbursement⁽²⁾		0.30	%		0.30	%		0.30	%		0.30	%

Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement⁽²⁾		1.01	%		0.76	%		1.26	%		0.61	%

(1)	“Other Expenses” are based on estimated amounts for the Fund’s current fiscal year.

(2)

BMO Asset Management Corp. (Adviser) has agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs, and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) from exceeding 1.01% for Class Y, 0.76% for Class I, 1.26% for Class R-3, and 0.61% for Class R-6 through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.

Example


	Class Y		Class I		Class R-3		Class R-6
1 Year	$	103	$	78	$	128	$	62
3 Years	$	386	$	307	$	463	$	260

BMO Aggressive Stock Fund (cont.)

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in shares of other mutual funds, including other BMO Funds (the “underlying funds”), according to an asset allocation strategy developed by the Adviser. The Fund normally targets an allocation of approximately 100% of its total assets in funds that invest principally in equity securities. Under normal market conditions the Fund allocates its assets among the underlying funds based on asset allocation target ranges of 0-10% of its total assets in funds that invest principally in money market funds and 90-100% of its total assets in funds that invest principally in equity securities. Equity securities in which the underlying funds may invest include common stock, preferred stock, rights and warrants, and securities convertible into common stock. The Fund also may allocate assets to underlying funds that pursue alternative investment strategies as well as cash and cash equivalents.

The Fund is one of the BMO Target Risk Funds. The target investment allocation for each of the Target Risk Funds is set forth below.


BMO Fund:	Equity:	Fixed Income:	Money Market Funds:
Diversified Income	10% - 30%	70% - 100%	0% - 10%
Moderate Balanced	30% - 50%	50% - 70%	0% - 10%
Growth Balanced	50% - 70%	30% - 50%	0% - 10%
Aggressive Balanced	70% - 90%	10% - 30%	0% - 10%
Diversified Stock	90% - 100%	0%	0% - 10%
Aggressive Stock	90% - 100%	0%	0% - 10%

The Adviser will continuously monitor the Fund and may make modifications to either the investment approach or the underlying fund allocations that the Adviser believes could benefit shareholders. The Adviser will also monitor the underlying funds on an ongoing basis and may increase or decrease the Fund’s investment in one or several underlying funds. The underlying fund selections are made based on several considerations, including the fund’s investment team expertise, style or asset class exposures, portfolio characteristics, risk profile, and investment process.

The underlying funds invest their assets directly in equity, fixed income, cash, and cash equivalents (including money market funds) in accordance with their own investment objectives and policies.

Principal Risks

BMO Aggressive Stock Fund (cont.)

•

BMO Aggressive Stock Fund (cont.)

Fund Performance

Class I—Annual Total Returns (calendar years 2003-2012)

[Insert bar chart]


Return	32.18	%	12.59	%	8.26	%	14.97	%	8.17	%	(41.57	)%	35.71	%	19.99	%	(6.22	)%	15.85	%
Year	2003		2004		2005		2006		2007		2008		2009		2010		2011		2012

For the period January 1, 2013 through June 30, 2013, the aggregate (non-annualized) total return for the Collective Fund was [ ]%.

During the periods shown in the bar chart for the Fund:


	Quarter Ended		Returns
Best quarter		6/30/2009		18.67	%
Worst quarter		12/31/2008		(22.72	)%

Average Annual Total Returns through 12/31/12


	1 Year			5 Year			10 Year			Since Inception (8/1/94)
Class I
Return Before Taxes		15.85	%		0.67	%		7.55	%		7.98	%
Return After Taxes on Distributions		N.A.			N.A.			N.A.			N.A.
Return After Taxes on Distributions and Sale of Fund Shares		N.A.			N.A.			N.A.			N.A.
S&P 500 Index		16.00	%		1.66	%		7.10	%		6.24	%
Barclays U.S. Aggregate Bond Index		4.22	%		5.95	%		5.18	%		6.48	%
Morningstar Large-Cap Blend Category Average		14.96	%		0.68	%		6.62	%		6.97	%

The S&P 500 Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

BMO Aggressive Stock Fund (cont.)

The Morningstar Category Average represents the average composite performance of all mutual funds listed in the respective category as reported by Morningstar, Inc.

Management of the Fund

Adviser. BMO Asset Management Corp.

Purchase and Sale of Fund Shares

Minimums. To open an account, your first investment must be at least $1,000 for Class Y shares and $2 million for Class I shares. For Class Y, the minimum subsequent purchase amount is $50.

Phone. Call 1-800-236-FUND (3863).

Systematic Withdrawal Program. If your account balance is at least $10,000, you may have predetermined amounts of at least $100 withdrawn from your account on a monthly or quarterly basis.

BMO Funds Website. Go to www.bmofundsus.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains for federal income tax purposes.

Payments to Broker-Dealers and Other Financial Intermediaries

Additional Information Regarding Principal

Investment Strategies and Risks

The BMO Diversified Income Fund, BMO Moderate Balanced Fund, BMO Growth Balanced Fund, BMO Aggressive Balanced Fund, BMO Diversified Stock Fund, and BMO Aggressive Stock Fund (each, a Target Risk Fund or a Fund) share the same investment approach: each Fund seeks to achieve its objective by investing in a diversified mix of affiliated BMO Funds and unaffiliated mutual funds (the underlying funds). The underlying funds will include funds that invest in equity and fixed income investments and will be used by the Funds to meet their target asset allocations and investment styles. The Funds are designed to provide investors with investment management, asset allocation, and ongoing reallocation over time. Because the Funds invest in other mutual funds, each Fund is considered a “fund of funds.” A fund of funds bears its own direct expenses in addition to bearing a proportionate share of expenses charged to the underlying funds in which it invests.

The Funds are designed for investors with varying degrees of risk tolerance. The Funds maintain their equity and fixed income holdings in underlying funds that target varying levels of risk. Market appreciation or depreciation may cause a Fund’s actual asset allocation to vary temporarily from the Fund’s target asset allocation. Based on the target risk, each Fund will have a customized asset allocation best suited for the following types of investors:


Fund Name		Type of Investor
BMO Diversified Income Fund		Investors who are relatively conservative and whose primary goal is receiving investment income while avoiding high levels of volatility
BMO Moderate Balanced Fund		Investors whose primary goal is to receive income but who are willing to accept some additional risk in pursuing appreciation
BMO Growth Balanced Fund		Investors whose preferences for capital appreciation and investment income are about equal
BMO Aggressive Balanced Fund		Investors pursuing investment growth but who would prefer to reduce some of the risks involved with aggressive equity strategies
BMO Diversified Stock Fund		Investors interested in pursuing a high rate of investment growth over the long term and who are comfortable with the risks of stock investing
BMO Aggressive Stock Fund		Investors who pursue higher levels of potential investment growth and are willing to accept a greater degree of volatility

The Funds are intended for investors who are comfortable with varying levels of volatility and who are willing to accept the risks associated with the Funds’ asset allocation strategies. In general, a fund with a higher equity asset allocation is expected to be more volatile than a fund with a higher fixed income asset allocation. For more information on the principal risks of investing in the Funds, please see the Fund Summary sections in this prospectus and the SAI.

The Adviser may adjust each Fund’s underlying fund allocations within a particular asset class based on the following considerations: market trends, its outlook for a given market capitalization and the underlying funds’ performance in various market conditions. Accordingly, a Fund’s allocation to a particular underlying fund may increase or decrease throughout the year. Within the equity asset class, each Fund will have exposure to one or more style classes. The style classes include large-cap, mid-cap, small-cap, and international funds. The Adviser may adjust a Fund’s allocation to a particular style class based on the following considerations: market trends, its outlook for a given style class, and the style classes’ performance in various market conditions. Accordingly, a Fund’s allocation to a particular style class within the equity asset class may increase or decrease throughout the year.

The Funds are designed to be an integral part of an investor’s overall investment strategy. However, they are not designed to provide investors with a complete solution to their investment needs. Investors must consider many factors when choosing an investment strategy. For example, factors such as current income needs and your sources of income all should be considered when you choose your overall investment strategy.

How to Buy Shares

the time for determination of NAV or at fair value as discussed below.

In valuing underlying fund investments, the Funds use the NAVs reported by the underlying funds. An underlying fund may need to fair value one or more of its investments,

How to Buy Shares (cont.)

which may, in turn, require a Target Risk Fund to do the same because of delays in obtaining the underlying fund’s NAV.

Once you have opened an account, you may purchase additional Fund shares by contacting BMO Funds U.S. Services at 1-800-236-FUND (3863) if you have pre-authorized the telephone purchase privilege.

If you do not provide this information, the Funds may be unable to open an account for you and your purchase order will not be in proper form. In the event the Funds are unable to verify your identity from the information provided, the Funds may, without prior notice to you, close your account within five business days and redeem your shares at the NAV next determined after the account is closed. Any delay in processing your order due to your failure to provide all required information will affect the purchase price you receive for your shares. The Funds are not liable for fluctuations in value experienced as a result of such delays in processing. If at any time the Funds

How to Buy Shares (cont.)

account, may file a suspicious activity report, or may take other appropriate action.

Fund Purchase Easy Reference Table

Minimum Investments

Class Y

•

To open an account—$1,000

•

To add to an account (including through a Systematic Investment Program)—$50

Class I

•

To open an account—$2,000,000

Class R-3

•

To open an account—Contact BMO Funds U.S. Services

Class R-6

•

To open an account—Contact BMO Funds U.S. Services

Phone 1-800-236-FUND (3863)

•

Contact BMO Funds U.S. Services.

•

Complete an application for a new account.

•

Mail

•

To open an account, send your completed account application and check payable to “BMO Funds” to the following address:

BMO Funds U.S. Services

P.O. Box 55931

Boston, MA 02205-5931

•

To add to your existing Fund account, send in your check, payable to “BMO Funds,” to the same address. Indicate your Fund account number on the check.

Wire

•

Notify BMO Funds U.S. Services and request wire instructions at 1-800-236-FUND (3863).

•

Mail a completed account application to the Fund at the address above under “Mail.”

•

Your bank may charge a fee for wiring funds. Wire orders are accepted only on days when the Fund and the Federal Reserve wire system are open for business.

Systematic Investment Program

•

Call BMO Funds U.S. Services at 1-800-236-FUND (3863) to apply for this program.

BMO Funds Website

•

You may purchase Fund shares at www.bmofundsus.com.

Additional Information About Checks and Automated Clearing House (ACH) Transactions Used to Purchase Shares

•

If your check or ACH purchase does not clear, your purchase will be canceled and you will be charged a $15 fee and held liable for any losses incurred by the Fund.

How to Buy Shares (cont.)

•

If you purchase shares by check or ACH, you may not be able to receive proceeds from a redemption for up to seven days.

•

All checks should be made payable to “BMO Funds.”

•

The maximum ACH purchase amount is $100,000.

Employer-Sponsored Retirement Plans

•

Eligible retirement plans may open an account and purchase Class R shares by contacting an Authorized Dealer. Additional shares may be purchased through a plan’s administrator or recordkeeper.

How to Redeem and Exchange Shares

Redemption requests for the Funds must be received in proper form by the close of trading on the NYSE, generally 3:00 p.m. (Central Time), for shares to be

redeemed at that day’s NAV. Different cut-off times for redemption requests through an Authorized Dealer may be imposed. Please contact your Authorized Dealer for more information.

Fund Redemption Easy Reference Table

Certain redemption requests may require a signature guarantee. See “Signature Guarantee” below for details.

Phone 1-800-236-FUND (3863)

•

Contact BMO Funds U.S. Services.

•

Not available to retirement accounts, for which redemptions must be done in writing.

Mail

•

Send in your written request to the following address, indicating your name, the Fund name, your account number and the number of shares or the dollar amount you want to redeem to:

BMO Funds U.S. Services

P.O. Box 55931

Boston, MA 02205-5931

•

For additional assistance, call BMO Funds U.S. Services at 1-800-236-FUND (3863).

Wire/Electronic Transfer

•

Wires of redemption proceeds will only be made on days on which the Funds and the Federal Reserve wire system are open for business.

•

Wire-transferred redemptions may be subject to an additional fee imposed by the bank receiving the wire.

Systematic Withdrawal Program

•

Contact BMO Funds U.S. Services to apply for this program.

BMO Funds Website

•

You may redeem Fund shares at www.bmofundsus.com.

How to Redeem and Exchange Shares (cont.)

Employer-Sponsored Retirement Plans

•

Shares held in eligible retirement plans may be sold through the plan’s administrator or recordkeeper.

Additional Conditions for Redemption

Signature Guarantees. In the following instances, you must have a signature guarantee on written redemption requests:

•

when you want a redemption to be sent to an address other than the one you have on record with a Fund;

•

when you want the redemption payable to someone other than the shareholder of record; or

•

when your redemption is to be sent to an address of record that was changed within the last 30 days.

•

to allow your purchase payment to clear;

•

during periods of market volatility; or

•

when a shareholder’s trade activity or amount adversely impacts a Fund’s ability to manage its assets.

Exchange Privilege. You may exchange shares of a Fund for shares of the same class of any of the other BMO

Funds free of charge, provided you meet the investment minimum of the Fund and you reside in a jurisdiction where Fund shares may be lawfully offered for sale. An exchange is treated as a redemption and a subsequent purchase and is, therefore, a taxable transaction for federal income tax purposes.

Signatures must be guaranteed if you request an exchange into another Fund with a different shareholder registration. The exchange privilege may be modified or terminated at any time.

Additional Conditions for Redemption (cont.)

Each Fund monitors and enforces the Market Timing Policy through:

•

the termination of a shareholder’s purchase and/or exchange privileges; and

•

selective monitoring of trade activity.

Account and Share Information

Clients of BMO Harris Bank should contact their account officer for information on the availability of transactions on the website.


	Minimum		Maximum

Purchases:	$	50	$	100,000
Redemptions:	By ACH: $	50	By ACH: $	50,000
	By wire: $	1,000	By wire: $	50,000
Exchanges:	$	50	$	100,000

Your transactions through the website are effective at the time they are accepted by a Fund and are subject to all of the conditions and procedures described in this Prospectus.

are not responsible for any such delays or malfunctions and are not responsible for wrongful acts by third parties as long as reasonable security procedures are followed.

Account and Share Information (cont.)

Tax Information

taxable income (which includes but is not limited to dividends, interest, net short-term capital gains, and net gains from foreign currency transactions), if any, generally are taxable to you as ordinary income (for non-corporate shareholders, currently taxed at a maximum rate of 39.6%). For non-corporate shareholders, to the extent that distributions of investment company taxable income are attributable to and reported as “qualified dividend income,” such distribution may be eligible for the reduced federal income tax rates applicable to long-term capital gains, provided certain holding periods and other requirements are satisfied by the shareholder. Distributions of the Funds’ net capital gains (the excess of net long-term capital gains over net short-term capital losses), if any, are generally taxable to non-corporate shareholders as long-term capital gains (currently taxed at a maximum rate of 20%), regardless of how long such shareholder has held shares of the Funds. Fund distributions are expected to consist of both investment company taxable income and net capital gains.

Account and Share Information (cont.)

amended (the “Code”). Backup withholding is not an additional tax. Any amounts withheld may be credited against your federal income tax liability, provided the appropriate information is furnished to the Internal Revenue Service.

Cost Basis Reporting

Portfolio Holdings

A description of the Funds’ policies and procedures with respect to the disclosure of the Funds’ portfolio securities is available in the Funds’ Statement of Additional Information (SAI).

BMO Funds Information

The Funds’ SAI provides additional information about the portfolio managers, including other accounts they manage, their ownership of Fund shares and their compensation.

Advisory Fees. The Adviser does not receive an investment advisory fee for the services it performs for the Target Risk Funds. However, the Adviser is entitled to receive an investment advisory fee from each of the affiliated BMO Funds that serve as underlying funds.

The Adviser has contractually agreed to waive or reduce fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired fund fees and expenses, but excluding interest, taxes, brokerage commissions, other investment-related costs and extraordinary expenses, such as litigation and

other expenses not incurred in the ordinary course of a Fund’s business) from exceeding the levels set out in the table below through December 31, 2014. The Adviser may not terminate this arrangement prior to December 31, 2014 for the Funds unless the investment advisory agreement is terminated.


	Class Y			Class I			Class R-3			Class R-6
BMO Diversified Income Fund		0.88	%		0.63	%		1.13	%		0.48	%
BMO Moderate Balanced Fund		0.88	%		0.63	%		1.13	%		0.48	%
BMO Growth Balanced Fund		0.94	%		0.69	%		1.19	%		0.54	%
BMO Aggressive Balanced Fund		0.94	%		0.69	%		1.19	%		0.54	%
BMO Diversified Stock Fund		1.01	%		0.76	%		1.26	%		0.61	%
BMO Aggressive Stock Fund		1.01	%		0.76	%		1.26	%		0.61	%

The Board’s basis for approving the investment advisory contract for the Funds will be included in the Funds’ next Annual or Semi-Annual Report.

BMO Funds Information (cont.)

parties agree to perform administrative or other services on behalf of their clients who are Fund shareholders. Pursuant to these arrangements, the Adviser, BMO Harris Bank, BMO Harris Financial Advisors, the distributor, or their affiliates may make payments to each other or to brokers or other financial intermediaries from their own resources (including shareholder services fees paid by the Funds to the Adviser) for services provided to clients who hold Fund shares. In addition, the Adviser or an affiliate may make payments to a financial intermediary, including affiliates such as BMO Harris Financial Advisors, based on the value of Fund shares held through the affiliate or intermediary, to compensate it for introducing new shareholders to the Funds and for other services. These payments may vary in amount and generally range from 0.05% to 0.40%. For its services, BMO Harris Financial Advisors will receive special cash compensation based on the value of Fund shares invested through certain intermediaries for a designated time period. The receipt of (or prospect of receiving) such payments or compensation

may provide the affiliate or intermediary and its salespersons with an incentive to favor sales of Fund shares, or certain classes of those shares, over other investment alternatives. You may wish to consider whether such arrangements exist when evaluating recommendations from the affiliate or intermediary.

Financial Highlights

Each Fund is new and does not have an operating history. Information, when available, will be included in each Fund’s first financial report.

You may write to the SEC Public Reference Room at the regular mailing address or the e-mail address below and ask them to mail you information about the Funds, including the SAI.

Public Reference Section

Securities and Exchange Commission

Washington, D.C. 20549-1520

publicinfo@sec.gov

1-202-551-8090

Reports and other information about the Funds are also available on the EDGAR database on the SEC’s Internet site at http://www.sec.gov.

BMO Funds U.S. Services

P.O. Box 55931

Boston, MA 02205-5931

1-414-287-8555

1-800-236-FUND (3863)

www.bmofundsus.com


Not FDIC Insured		No Bank Guarantee		May Lose Value


M&I Distributors, LLC
Distributor		Investment Company Act File No. 811-58433

The information contained in this preliminary statement of additional information is not complete and may be changed. These securities may not be sold nor may offers to buy be accepted until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary statement of additional information is not an offer to sell nor does it seek an offer to buy the securities in any jurisdiction where the offer or sale is not permitted.

BMO Funds

Preliminary Statement of Additional Information

(Subject to Completion)

April 16, 2013

BMO Target Date Retirement Funds


• BMO Target Retirement 2010 Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

• BMO Target Retirement 2020 Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

• BMO Target Retirement 2030 Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

• BMO Target Retirement 2040 Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

• BMO Target Retirement 2050 Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

BMO Target Risk Funds


• BMO Diversified Income Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

• BMO Moderate Balanced Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

• BMO Growth Balanced Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

• BMO Aggressive Balanced Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

• BMO Diversified Stock Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

• BMO Aggressive Stock Fund
Class Y ( )	Class I ( )	Class R-3 ( )	Class R-6 ( )

This Preliminary Statement of Additional Information (SAI) is not a Prospectus and should be read in conjunction with the Prospectuses for the BMO Funds listed above (the Target Date and Target Risk Funds) dated [ , 2013]. You may obtain the Prospectuses for the Target Date and Target Risk Funds and, when available, the Annual Report without charge by calling BMO Funds U.S. Services at 1-800-236-FUND (3863), or you can visit the BMO Funds’ website at http://www.bmofundsus.com.

P.O. Box 1348, Milwaukee, Wisconsin 53201-1348

M&I DISTRIBUTORS, LLC

Distributor

TABLE OF CONTENTS


HOW ARE THE FUNDS ORGANIZED?			1

SECURITIES, TRANSACTIONS, INVESTMENT TECHNIQUES AND RISKS			2

NON-FUNDAMENTAL INVESTMENT OBJECTIVES			24

INVESTMENT POLICIES AND LIMITATIONS			24

VALUATION OF SECURITIES			27

WHAT DO SHARES COST?			27

HOW ARE FUND SHARES SOLD?			27

HOW TO BUY SHARES			28

ACCOUNT AND SHARE INFORMATION			28

WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES?			29

DIRECTORS AND OFFICERS			34

INFORMATION ABOUT THE ADVISER			40

PORTFOLIO MANAGERS			42

VOTING PROXIES ON FUND PORTFOLIO SECURITIES			45

PORTFOLIO HOLDINGS DISCLOSURE POLICY			45

BROKERAGE TRANSACTIONS			47

INFORMATION ABOUT THE FUNDS’ SERVICE PROVIDERS			47

PERFORMANCE			50

FINANCIAL STATEMENTS			50

APPENDIX A - RATINGS DEFINITIONS			1

APPENDIX B - ADDRESSES			1

HOW ARE THE FUNDS ORGANIZED?

BMO Funds, Inc. (formerly known as the Marshall Funds, Inc.) (the Corporation), is an open-end, management investment company that was established as a Wisconsin corporation on July 31, 1992.

The Target Date and Target Risk Funds are diversified portfolios of the Corporation. The Corporation may offer separate series of shares representing interests in separate portfolios of securities, and the shares in any one portfolio may be offered in separate classes. Currently, the Corporation offers [25] separate series. Currently, each Target Date and Target Risk Fund offers the following classes of shares: Investor Class Shares (Class Y), Institutional Class Shares (Class I), and Retirement Class Shares (Class R-3 and R-6).

B-1

This SAI contains additional information about the Corporation and the Target Date and Target Risk Funds. This SAI uses the same terms as defined in the Target Date and Target Risk Funds’ Prospectuses.

The definitions of the terms “series” and “class” in the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes (WBCL), differ from the meanings assigned to those terms in the Prospectuses and this SAI. The Corporation’s Articles of Incorporation reconcile this inconsistency in terminology and provide that the Prospectuses and SAI may use the meanings assigned the terms in such documents.

SECURITIES, TRANSACTIONS, INVESTMENT TECHNIQUES AND RISKS

The following is a combined summary of investment strategies of all of the underlying funds. Certain investments, techniques and risks will only apply to your Target Date or Target Risk Fund to the extent it is invested in an underlying fund that invests in or engages in those investments, techniques, or strategies or directly invests in or engages in such investments, techniques, or strategies. Unless otherwise prohibited by the description in the relevant Fund’s prospectus or this SAI, each Target Date and Target Risk Fund may invest directly or indirectly in underlying funds that engage in the investments and strategies described below.

Asset-Backed/Privately-Issued Mortgage-Backed Securities are issued by non-governmental entities and carry no direct or indirect government guarantee. The value and liquidity of asset-backed and mortgage-backed securities in which an underlying fund invests may be adversely affected by downturns in the sub-prime mortgage lending market. Concerns about defaults on sub-prime loans, which are made to borrowers with low credit ratings and other factors that increase the risk of default, have and may continue to create heightened volatility and turmoil in the credit markets. Asset-backed and mortgage-backed securities may be supported by credit enhancements. However, there can be no assurance that private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements.

Asset-backed securities represent an interest in a pool of assets such as car loans and credit card receivables. Almost any type of fixed income assets (including other fixed income securities) may be used to create an asset-backed security. However, most asset-backed securities involve consumer or commercial debts with maturities of less than ten years. Asset-backed securities may take the form of commercial paper or notes, in addition to pass-through certificates or asset-backed bonds. Asset-backed securities also may resemble some types of collateralized mortgage obligations (CMOs).

Payments on asset-backed securities depend upon assets held by the issuer and collections of the underlying loans. The value of these securities depends on many factors, including changing interest rates, the availability of information about the pool and its structure, the credit quality of the underlying assets, the market’s perception of the servicer of the pool, and any credit enhancement provided. Also, these securities may be subject to prepayment risk.

Mortgage-backed securities represent interests in pools of mortgages. The underlying mortgages normally have similar interest rates, maturities, and other terms. Mortgages may have fixed or adjustable interest rates. Adjustable rate mortgages are known as ARMs.

Mortgage-backed securities come in a variety of forms. Many have extremely complicated terms. The simplest form of mortgage-backed securities is a “pass-through certificate.” Holders of pass-through certificates receive a pro rata share of the payments from the underlying mortgages. Holders also receive a pro rata share of any prepayments, so they assume all the prepayment risk of the underlying mortgages.

CMOs are complicated instruments that allocate payments and prepayments from an underlying pass-through certificate among holders of different classes of mortgage-backed securities. This creates different prepayment and market risks for each CMO class.

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In addition, CMOs may allocate interest payments to one class (Interest Only or IOs) and principal payments to another class (Principal Only or POs). POs increase in value when prepayment rates increase. In contrast, IOs decrease in value when prepayments increase, because the underlying mortgages generate fewer interest payments. However, IOs’ prices tend to increase when interest rates rise (and prepayments fall), making IOs a useful hedge against market risk.

Generally, homeowners have the option to prepay their mortgages at any time without penalty. Homeowners frequently refinance high rate mortgages when mortgage rates fall. This results in the prepayment of the mortgages underlying mortgage-backed securities, which deprives holders of the securities of the higher yields. Conversely, when mortgage rates increase, prepayments due to refinancings decline. This extends the life of mortgage-backed securities with lower yields. As a result, increases in prepayments of premium mortgage-backed securities, or decreases in prepayments of discount mortgage-backed securities, may reduce their yield and price.

This relationship between interest rates and mortgage prepayments makes the price of mortgage-backed securities more volatile than most other types of fixed income securities with comparable credit risks. Mortgage-backed securities tend to pay higher yields to compensate for this volatility.

CMOs may include planned amortization classes (PACs) and targeted amortization classes (TACs). PACs and TACs are issued with companion classes. PACs and TACs receive principal payments and prepayments at a specified rate. The companion classes receive principal payments and any prepayments in excess of this rate. In addition, PACs will receive the companion classes’ share of principal payments if necessary to cover a shortfall in the prepayment rate. This helps PACs and TACs to control prepayment risk by increasing the risk to their companion classes.

Another variant allocates interest payments between two classes of CMOs. One class (Floaters) receives a share of interest payments based upon a market index such as LIBOR. The other class (Inverse Floaters) receives any remaining interest payments from the underlying mortgages. Floater classes receive more interest (and Inverse Floater classes receive correspondingly less interest) as interest rates rise. This shifts prepayment and market risks from the Floater to the Inverse Floater class, reducing the price volatility of the Floater class and increasing the price volatility of the Inverse Floater class.

CMOs must allocate all payments received from the underlying mortgages to some class. To capture any unallocated payments, CMOs generally have an accrual (Z) class. Z classes do not receive any payments from the underlying mortgages until all other CMO classes have been paid off. Once this happens, holders of Z class CMOs receive all payments and prepayments. Similarly, real estate mortgage investment conduits (REMICs) (offerings of multiple class mortgage-backed securities that qualify and elect treatment as such under provisions of the Internal Revenue Code of 1986, as amended (Code)) have residual interests that receive any mortgage payments not allocated to another REMIC class.

The degree of increased or decreased prepayment risk depends upon the structure of the CMOs. Z classes, IOs, POs, and Inverse Floaters are among the most volatile investment grade fixed income securities currently traded in the United States. However, the actual returns on any type of mortgage-backed security depend upon the performance of the underlying pool of mortgages, which no one can predict and will vary among pools.

Prepayment Risks. Unlike traditional fixed income securities, which pay a fixed rate of interest until maturity (when the entire principal amount is due), payments on mortgage-backed securities include both interest and a partial payment of principal. Partial payments of principal may be comprised of scheduled principal payments as well as unscheduled payments from the voluntary prepayment, refinancing, or foreclosure of the underlying loans. These unscheduled prepayments of principal create risks that can adversely affect an underlying fund holding mortgage-backed securities. For example, when interest rates decline, the values of mortgage-backed securities generally rise. However, when interest rates decline, unscheduled prepayments can be expected to accelerate and an underlying fund would be required to reinvest the proceeds of the prepayments at the lower interest rates then available. Unscheduled prepayments would also limit the potential for capital appreciation on mortgage-backed securities. Conversely, when interest rates rise, the values of mortgage-backed securities generally fall. Since rising interest rates typically result in decreased prepayments, this could lengthen the average lives of mortgage-backed securities and cause their value to decline more than traditional fixed income securities.

B-3

Bank Instruments are unsecured interest-bearing deposits with banks. Bank instruments include bank accounts, time deposits, certificates of deposit, and banker’s acceptances. Instruments denominated in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks are commonly referred to as Eurodollar instruments. Instruments denominated in U.S. dollars and issued by U.S. branches of foreign banks are referred to as Yankee dollar instruments.

The Target Date and Target Risk Funds or an underlying fund will invest in bank instruments that have been issued by banks and savings and loans that have capital, surplus and undivided profits of over $100 million, or whose principal amount is insured by the Bank Insurance Fund or the Savings Association Insurance Fund, which are administered by the Federal Deposit Insurance Corporation. Securities that are credit-enhanced with a bank’s irrevocable letter of credit or unconditional guaranty also will be treated as bank instruments.

Foreign Bank and Money Market Instruments. Eurodollar Certificates of Deposit (ECDs), Yankee dollar Certificates of Deposit (YCDs), and Eurodollar Time Deposits (ETDs) are all U.S. dollar denominated certificates of deposit. ECDs are issued by, and ETDs are deposits of, foreign banks or foreign branches of U.S. banks. YCDs are issued in the U.S. by branches and agencies of foreign banks. Europaper is dollar-denominated commercial paper and other short-term notes issued in the U.S. by foreign issuers.

ECDs, ETDs, YCDs, and Europaper have many of the same risks as other foreign securities. Examples of these risks include economic and political developments that may adversely affect the payment of principal or interest, foreign withholding or other taxes, difficulties in obtaining or enforcing a judgment against the issuing bank, and possible interruptions in the flow of international currency transactions. Also, the issuing banks or their branches are not necessarily subject to the same regulatory requirements that apply to domestic banks, such as reserve requirements, loan limitations, examinations, accounting, auditing, recordkeeping, and the public availability of information. These factors will be carefully considered by the Adviser in selecting these investments.

Borrowing. The Target Date and Target Risk Funds or an underlying fund may borrow money directly or through reverse repurchase agreements and pledge some assets as collateral. If a fund borrows, it will pay interest on borrowed money and may incur other transaction costs. These expenses could exceed the income received or capital appreciation realized by a fund from any securities purchased with borrowed money. With respect to borrowings, a fund is required to maintain continuous asset coverage within the limits of the Investment Company Act of 1940, as amended (1940 Act), and as interpreted or modified by regulatory authority having jurisdiction, from time to time. Borrowing by a fund will involve special risk considerations, including that a fund may have to sell portfolio securities to reduce its borrowings and restore the appropriate asset coverage even if it must sell the securities at a loss.

The Corporation has established a line of credit with a bank by which the Target Date and Target Risk Funds and certain of the underlying funds may borrow money for temporary or emergency purposes.

Commercial Paper and Restricted and Illiquid Securities. Commercial paper represents an issuer’s draft or note with a maturity of less than nine months. Companies typically issue commercial paper to fund current expenditures. Most issuers constantly reissue their commercial paper and use the proceeds (or bank loans) to repay maturing paper. Commercial paper may default if the issuer cannot continue to obtain financing in this fashion. The short maturity of commercial paper reduces both the interest rate and credit risk as compared to other debt securities of the same issuer.

The Target Date and Target Risk Funds or an underlying fund may invest in commercial paper issued under Section 4(2) of the Securities Act of 1933, as amended (1933 Act). By law, the sale of Section 4(2) commercial paper is restricted and is generally sold only to institutional investors, such as the Target Date and Target Risk Funds and the underlying funds. A fund purchasing Section 4(2) commercial paper must agree to purchase the paper for investment purposes only and not with a view to public distribution. Section 4(2) commercial paper is normally resold to other institutional investors through investment dealers who make a market in Section 4(2) commercial paper and, thus, provide liquidity.

B-4

With respect to the Target Date, Target Risk and any underlying affiliated funds, the Adviser determines whether Section 4(2) commercial paper and certain other restricted securities are liquid in accordance with the Funds’ procedures. Section 4(2) commercial paper and other restricted securities that the Adviser has determined to be liquid are not subject to a Fund’s investment limitation applicable to illiquid securities.

Convertible Securities are fixed income securities that give the holder the option to exchange for equity securities at a specified conversion price within a specified time. The option allows the holder to realize additional returns if the market price of the equity securities exceeds the conversion price. For example, if the holder owns fixed income securities convertible into shares of common stock at a conversion price of $10 per share and the shares have a market value of $12, the holder could realize an additional $2 per share by converting the fixed income securities.

To compensate for the value of the conversion option, convertible securities have lower yields than comparable fixed income securities. In addition, the conversion price exceeds the market value of the underlying equity securities at the time a convertible security is issued. Thus, convertible securities may provide lower returns than non-convertible fixed income securities or equity securities depending upon changes in the price of the underlying equity securities. However, convertible securities permit the holder to realize some of the potential appreciation of the underlying equity securities with less risk of losing its initial investment.

Convertible securities are treated as both fixed income and equity securities for purposes of a Fund’s investment policies and limitations, because of their unique characteristics.

Corporate Debt Securities are fixed income securities issued by businesses. Notes, bonds, debentures, and commercial paper are the most common types of corporate debt securities. The credit risks of corporate debt securities vary widely among issuers.

Credit Enhancement. Certain acceptable investments may be credit-enhanced by a guaranty, letter of credit, or insurance. The Adviser may evaluate a security based, in whole or in part, upon the financial condition of the party providing the credit enhancement (the credit enhancer). The bankruptcy, receivership, or default of the credit enhancer will adversely affect the quality and marketability of the underlying security. In certain cases, credit-enhanced securities may be treated as having been issued both by the issuer and the credit enhancer.

Demand Features. Securities subject to a demand feature may take the form of a put or standby commitment. Demand features permit the holder to demand payment of the value of the security (plus any accrued interest) from either the issuer of the security or a third-party. Demand features help make a security more liquid, although an adverse change in the financial health of the provider of a demand feature (such as bankruptcy) will negatively affect the liquidity of the security. Other events also may terminate a demand feature which also causes liquidity to be affected.

Demand Master Notes are short-term borrowing arrangements between a corporation or government agency and an institutional lender (such as a fund) payable upon demand by either party. A party may demand full or partial payment, and the notice period for demand typically ranges from one to seven days. Many master notes give the holder the option of increasing or decreasing the principal amount of the master note on a daily or weekly basis within certain limits. Demand master notes usually provide for floating or variable rates of interest.

Depositary Receipts. Depositary receipts are securities representing common stock in non-U.S. issuers. American Depositary Receipts (ADRs) are receipts issued by a U.S. bank that represent an interest in shares of a foreign-based corporation. ADRs provide a way to buy shares of foreign-based companies in the U.S. rather than in overseas markets. European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts issued by foreign banks or trust companies or foreign branches of U.S. banks that represent an interest in shares of either a foreign or U.S. corporation. Depositary receipts may not be denominated in the same currency as the underlying securities into which they may be converted and are subject to currency risks. Depositary receipts involve many of the same risks of investing directly in foreign securities.

B-5

Derivative Instruments. Derivative instruments are financial instruments that require payments based upon changes in the values of designated (or underlying) securities, currencies, commodities, financial indices, or other assets. Some derivative instruments (such as futures, forwards, and options) require payments relating to a future trade involving the underlying asset. Other derivative instruments (such as swaps) require payments relating to the income or returns from the underlying asset. The other party to a derivative instrument is referred to as a counterparty.

The underlying funds in pursuing their individual objectives, may (i) purchase and sell (write) both put options and call options on securities, swap agreements, securities indexes, and foreign currencies, (ii) enter into interest rate, foreign currency, and index futures contracts, and (iii) purchase and sell options on such futures contracts for hedging purposes to seek to replicate the composition and performance of a particular index or as part of their overall investment strategies. A fund may purchase and sell foreign currency options for purposes of increasing exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. A fund may enter into swap agreements with respect to interest rates and indexes of securities, and to the extent a fund may invest in foreign currency-denominated securities, may enter into swap agreements with respect to foreign currencies. If other types of financial instruments, including other types of options, futures contracts or futures options, are traded in the future, the Board may authorize their use.

An fund may use financial futures contracts and options as tools in managing duration, which measures a fixed income security’s average life and reflects the present value of the security’s cash flow. Selling futures contracts or purchasing put options can accomplish the shortening of a portfolio’s duration in anticipation of higher interest rates. Conversely, purchasing futures contracts or call options can accomplish the lengthening of portfolio duration in anticipation of lower interest rates. The use of these instruments in this manner is preferred to either liquidating or purchasing securities held by a fund to achieve the portfolio’s duration targets because it reduces transaction costs to the fund. In addition, the use of financial futures contracts and related options permits a fund’s portfolio managers to react in a more timely manner to changes in interest rates.

The value of some derivative instruments in which a fund invests may be particularly sensitive to changes in prevailing interest rates and, like the other investments of the fund, the ability of the fund to successfully utilize these instruments may depend in part upon the ability of the respective fund’s investment adviser to forecast interest rates and other economic factors correctly. If an adviser incorrectly forecasts such factors and has taken positions in derivative instruments contrary to prevailing market trends, a fund could be exposed to a risk of loss.

Futures Contracts and Options on Futures Contracts. A futures contract is an agreement between two parties to buy or sell a security or commodity for a set price on a future date. These contracts are traded on exchanges so that, in most cases, either party can close out its position on the exchange for cash without delivering the security or commodity. An option on a futures contract (futures option) gives the holder of the option the right to buy or sell a position in a futures contract to the writer of the option at a specified price and on or before a specified expiration date.

A fund may invest in financial futures contracts and options thereon with respect to, but not limited to, interest rates and security indexes. To the extent that an underlying fund may invest in foreign currency-denominated securities, it also may invest in foreign currency futures contracts and options thereon.

An interest rate, commodity, foreign currency, or index futures contract provides for the future sale by one party and purchase by another party of a specified quantity of a financial instrument, commodity, foreign currency, or the cash value of an index at a specified price and time. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. Although the value of an index might be a function of the value of certain specified securities, no physical delivery of those securities is made. A public market exists in futures contracts covering a number of indexes as well as financial instruments and foreign currencies, including the S&P 500, the S&P Midcap 400, the Nikkei 225, the NYSE composite, U.S. Treasury bonds, U.S. Treasury notes, the Government National Mortgage Association (GNMA) Certificates, three-month U.S. Treasury bills, 90-day commercial paper, bank certificates of deposit, Eurodollar certificates of deposit, the Australian dollar, the Canadian dollar, the British pound, the Japanese yen, the Swiss franc, the Mexican peso, and certain multinational currencies, such as the euro. It is expected that other futures contracts will be developed and traded in the future.

B-6

A fund may purchase or write call futures options and put futures options. Futures options possess many of the same characteristics as options on securities and indexes (discussed above). A futures option gives the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at any time during the period of the option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true. A call option is “in the money” if the value of the futures contract that is the subject of the option exceeds the exercise price. A put option is “in the money” if the exercise price exceeds the value of the futures contract that is the subject of the option.

Each Target Date and Target Risk Fund is operated by a person that has claimed an exclusion from the definition of the term “commodity pool operator” (“CPO”) under the Commodity Exchange Act (“CEA”) and, therefore, such person is not subject to registration or regulation as a commodity pool operator under the CEA. As of January 1, 2013, the terms of the CPO exclusion require each fund, among other things, to limit its investments in futures, commodity options, or swaps (used for purposes other than bona fide hedging). The Target Date and Target Risk Funds are not intended as vehicles for trading in the futures, commodity options, or swaps markets. The CFTC has neither reviewed nor approved reliance on these exclusions, or the Target Date and Target Risk Funds, their investment strategies, or this statement of additional information.

Limitations on Use of Futures and Futures Options. A fund will only enter into futures contracts and futures options that are standardized and traded on a U.S. or foreign exchange, board of trade, or similar entity, or quoted on an automated quotation system.

When a purchase or sale of a futures contract is made by a fund, the fund is required to deposit with its custodian (or broker, if legally permitted) a specified amount of assets (initial margin) determined to be liquid by the Adviser. The margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term of the contract. Margin requirements on foreign exchanges may be different than U.S. exchanges. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract that is returned to the Fund upon termination of the contract, assuming all contractual obligations have been satisfied. A fund expects to earn interest income on its initial margin deposits. A futures contract held by a fund is valued daily at the official settlement price of the exchange on which it is traded. Each day the fund pays or receives cash, called “variation margin,” equal to the daily change in value of the futures contract. This process is known as “marking to market.” Variation margin does not represent a borrowing or loan by the fund, but is instead a settlement between the fund and the broker of the amount one would owe the other if the futures contract expired on that date. In computing daily net asset value, the fund will mark to market its open futures positions.

A fund also is required to deposit and maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market value of the option, and other futures positions held by the fund.

Although some futures contracts call for making or taking delivery of the underlying securities or commodities, generally those obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (same exchange, underlying security or index, and delivery month). Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity with the same delivery date. If an offsetting purchase price is less than the original sale price, the fund realizes a capital gain, or if it is more, the fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the fund realizes a capital gain, or if it is less, the fund realizes a capital loss. The transaction costs also must be included in these calculations.

A fund may write a covered straddle consisting of a call and a put written on the same underlying futures contract. A straddle will be covered when sufficient assets are deposited to meet the fund’s immediate obligations. The fund may

B-7

use the same liquid assets to cover both the call and put options where the exercise price of the call and put are the same, or the exercise price of the call is higher than that of the put. In such a case, the fund also will segregate liquid assets equivalent to the amount, if any, by which the put is “in the money.”

When purchasing a futures contract, a fund will maintain assets determined to be liquid by its adviser with its custodian in an amount that, when added to the amounts deposited with a futures commission merchant as margin are equal to the market value of the instruments underlying the futures contract. These amounts will be marked to market on a daily basis, resulting in adjustments to the amounts maintained with the custodian. Alternatively, the fund may “cover” its position by purchasing a put option on the same futures contract with a strike price not lower than the price of the contract held by the fund.

When selling a futures contract, a fund will maintain assets determined to be liquid by its adviser with its custodian in an amount that is equal to the market value of the instruments underlying the contract. These amounts will be marked to market on a daily basis, resulting in adjustments to the amounts maintained with the custodian. Alternatively, the fund may “cover” its position by owning the instruments underlying the contract (or, in the case of an index futures contract, a portfolio with a volatility substantially similar to that of the index on which the futures contract is based), or by holding a call option permitting the fund to purchase the same futures contract at a price no higher than the price of the contract written by the fund (or at a higher price if the difference is maintained in liquid assets with a fund’s custodian).

When selling a call option on a futures contract, a fund will maintain assets determined to be liquid by the Adviser with its custodian in an amount that, when added to the amounts deposited with a futures commission merchant as margin, is equal to the market value of the futures contract underlying the call option. These amounts will be marked to market on a daily basis, resulting in adjustments to the amounts maintained with the custodian. Alternatively, the fund may cover its position by entering into a long position in the same futures contract at a price no higher than the strike price of the call option, by owning the instruments underlying the futures contract, or by holding a separate call option permitting the fund to purchase the same futures contract at a price not higher than the strike price of the call option sold by the fund.

When selling a put option on a futures contract, a fund will maintain assets determined to be liquid by the Adviser with its custodian in an amount that is equal to the purchase price of the futures contract, less any margin on deposit. These amounts will be marked to market on a daily basis, resulting in adjustments to the amounts maintained with the custodian. Alternatively, the fund may cover the position either by entering into a short position in the same futures contract, or by owning a separate put option permitting it to sell the same futures contract, so long as the strike price of the purchased put option is not lower than the strike price of the put option sold by the fund.

To the extent that securities with maturities greater than one year are used to cover a fund’s obligations under futures contracts and related options, such use will not eliminate the risk of a form of leverage, which may tend to exaggerate the effect on net asset value of any increase or decrease in the market value of a fund’s portfolio and may require liquidation of portfolio positions when it is not advantageous to do so. However, any potential risk of leverage resulting from the use of securities with maturities greater than one year may be mitigated by the overall duration limit on a Fund’s portfolio securities.

The requirements for qualification as a regulated investment company (RIC) under the Code also may limit the extent to which a fund may enter into futures, futures options, or forward contracts.

Risks Associated with Futures and Options Generally. The following describes the general risks of investing in futures and options:

Management Risk. Financial futures contracts and related options are highly specialized instruments that require investment techniques and risk analyses different from those associated with stocks and bonds. A fund’s use of financial futures and options may not always be a successful strategy and using them could lower a fund’s return. Further, if an adviser incorrectly forecasts interest rates or other economic factors and has taken positions in financial futures contracts or options contrary to prevailing market trends, a fund could be exposed to a risk of loss.

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Correlation Risk. Imperfect correlation between the change in market values of the securities held by a fund and the prices of related futures contracts and options on futures purchased or sold by a fund may result in losses in excess of the amount invested in these instruments.

Market Risk. Financial futures contracts and related options, like most other investments, are subject to the risk that the market value of the investment will decline. Adverse movements in the value of the underlying assets can expose the funds to losses.

Exchange Limit Risk. Futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of the current trading session. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may work to prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.

Liquidity Risk. There can be no assurance that a liquid market will exist at a time when a fund seeks to close out a futures or a futures option position, in which case the fund would remain obligated to meet margin requirements until the position is closed. In addition, many of the contracts discussed herein are relatively new instruments without a significant trading history. As a result, there can be no assurance that an active secondary market will develop or continue to exist.

Counterparty Risk. A loss may be sustained as a result of the failure of another party to the contract to make required payments or otherwise fulfill its obligations under the contract’s terms.

Risks Associated with Hedging Transactions. Several risks are associated with the use of futures contracts and futures options as hedging techniques. A purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract. No guarantee exists that there will be a correlation between price movements in the hedging vehicle and in the fund securities being hedged. In addition, significant differences may exist between the securities and futures markets that could result in an imperfect correlation between the markets, causing a given hedge not to achieve its objectives. The degree of imperfection of correlation depends on circumstances such as variations in speculative market demand for futures and futures options on securities, including technical influences in futures trading and futures options and differences between the financial instruments being hedged and the instruments underlying the standard contracts available for trading in such respects as interest rate levels, maturities, and creditworthiness of issuers. A decision as to whether, when, and how to hedge involves the exercise of skill and judgment. Even a well-conceived hedge may be unsuccessful to some degree because of market behavior or unexpected interest rate trends.

Options on Securities and Indexes. A fund may purchase and sell both put and call options on fixed income or other securities or indexes in standardized contracts traded on foreign or domestic securities exchanges, boards of trade or similar entities, or quoted on NASDAQ or on an over-the-counter market, and agreements, sometimes called cash puts, which may accompany the purchase of a new issue of bonds from a dealer.

An option on a security (or index) is a contract that gives the holder of the option, in return for a premium, the right to buy from (in the case of a call) or sell to (in the case of a put) the writer of the option the security underlying the option (or the cash value of the index) at a specified exercise price at any time during the term of the option. The writer of an option on a security has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price or to pay the exercise price upon delivery of the underlying security. Upon exercise, the writer of an option on an index is obligated to pay the difference between the cash value of the index and the exercise price multiplied by the specified multiplier for the index option. (An index is designed to reflect features of a particular financial or securities market, a specific group of financial instruments or securities, or certain economic indicators.)

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A fund will not write a call option or put option unless the option is “covered.” In the case of a call option on a security, the option is “covered” if the fund owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration upon conversion or exchange of other securities held by the fund (or, if additional cash consideration is required, cash or other assets determined to be liquid in such amount are segregated). For a call option on an index, the option is covered if the fund maintains with its custodian assets determined to be liquid by the adviser in an amount equal to the contract value of the index. A call option also is covered if the fund holds a call on the same security or index as the call written where the exercise price of the call held is (i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written, provided the difference is maintained by the fund in segregated assets determined to be liquid by the adviser. A put option on a security or an index is “covered” if the fund segregates assets determined to be liquid by the adviser equal to the exercise price. A put option is also covered if the fund holds a put on the same security or index as the put written where the exercise price of the put held is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put written, provided the difference is maintained by the Fund in segregated assets determined to be liquid by the Adviser.

If an option written by a fund expires unexercised, the fund realizes a short-term capital gain equal to the premium received at the time the option was written. If an option purchased by a fund expires unexercised, the fund realizes a capital loss equal to the premium paid. Prior to the earlier of exercise or expiration, an exchange traded option may be closed out by an offsetting purchase or sale of an option of the same series (type, exchange, underlying security or index, exercise price, and expiration). No assurance exists, however, that a closing purchase or sale transaction can be effected when the fund desires.

A fund may sell a put or call option it has previously purchased, which could result in a net gain or loss depending on whether the amount realized on the sale is more or less than the premium and other transaction costs paid on the put or call option being sold. Prior to exercise or expiration, an option may be closed out by an offsetting purchase or sale of an option of the same series. A fund will realize a capital gain from a closing purchase transaction if the cost of the closing option is less than the premium received from writing the option or, if it is more, the fund will realize a capital loss. If the premium received from a closing sale transaction is more than the premium paid to purchase the option, the fund will realize a capital gain or, if it is less, the fund will realize a capital loss. The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security or index in relation to the exercise price of the option, the volatility of the underlying security or index, and the time remaining until the expiration date.

The premium paid for a put or call option purchased by a fund is an asset of the fund. The premium received for an option written by a fund is recorded as a deferred credit. The value of an option purchased or written is marked to market daily and is valued at the closing price on the exchange on which it is traded or, if not traded on an exchange or no closing price is available, at the mean between the last bid and asked prices.

A fund may write a covered straddle consisting of a combination of a call and a put written on the same underlying security. A straddle will be covered when sufficient assets are designated for such purpose on the fund’s books to meet the fund’s immediate obligation. The fund may use the same liquid assets to cover both the call and put options where the exercise price of the call and put are the same, or the exercise price of the call is higher than that of the put. In such a case, the fund will also segregate liquid assets equivalent to the amount, if any, by which the put is “in the money.”

Several risks are associated with transactions in options on securities and on indexes. For example, significant differences exist between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objective. A decision as to whether, when, and how to use options involves the exercise of skill and judgment. Even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events.

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During the option period, the covered call writer has, in return for the premium on the option, given up the opportunity to profit from a price increase in the underlying security above the exercise price, but, as long as its obligation as a writer continues, has retained the risk of loss should the price of the underlying security decline.

The writer of an option has no control over the time when it may be required to fulfill its obligation as a writer of the option. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction to terminate its obligation under the option and must deliver the underlying security at the exercise price. If a put or call option purchased by the fund is not sold when it has remaining value, and if the market price of the underlying security remains equal to or greater than the exercise price (in the case of a put) or remains less than or equal to the exercise price (in the case of a call), the fund will lose its entire investment in the option. Also, where a put or call option on a particular security is purchased to hedge against price movements in a related security, the price of the put or call option may move more or less than the price of the related security.

No assurance exists that there will be a liquid market when a fund seeks to close out an option position. If a fund were unable to close out an option that it had purchased on a security, it would have to exercise the option to realize any profit or the option may expire worthless. If a fund were unable to close out a covered call option that it had written on a security, it would not be able to sell the underlying security unless the option expired without exercise. As the writer of a covered call option, a fund forgoes, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the exercise price of the call.

If trading were suspended in an option purchased by a fund, the fund would not be able to close out the option. If restrictions on exercise were imposed, the fund might be unable to exercise an option it had purchased. Except to the extent that a call option on an index written by the fund is covered by an option on the same index purchased by the fund, movements in the index may result in a loss to the fund; however, such losses may be mitigated by changes in the value of the fund’s securities during the period the option was outstanding.

Foreign Currency Transactions. Foreign currency transactions generally are used to obtain foreign currencies to settle securities transactions. They also can be used as a hedge to protect assets against adverse changes in foreign currency exchange rates or regulations. When a fund uses foreign currency exchanges as a hedge, it also may limit potential gain that could result from an increase in the value of such currencies. A fund may be affected either favorably or unfavorably by fluctuations in the relative rates of exchange between the currencies of different nations. Foreign currency hedging transactions include forward foreign currency exchange contracts, foreign currency futures contracts, and purchasing put or call options on foreign currencies.

Exchange-Traded Futures Contracts. Exchange-traded futures contracts for the purchase or sale of foreign currencies (Foreign Currency Futures) are used to hedge against anticipated changes in exchange rates that might adversely affect the value of a fund’s portfolio securities or the prices of securities that a fund intends to purchase in the future. The successful use of Foreign Currency Futures depends on the ability to forecast currency exchange rate movements correctly. Should exchange rates move in an unexpected manner, a fund may not achieve the anticipated benefits of Foreign Currency Futures or may realize losses.

Forward Foreign Currency Exchange Contracts. Forward foreign currency exchange contracts (Forward Contracts) are used to minimize the risks associated with changes in the relationship between the U.S. dollar and foreign currencies. They are used to lock in the U.S. dollar price of a foreign security. A Forward Contract is a commitment to purchase or sell a specific currency for an agreed price at a future date.

If an adviser believes a foreign currency will decline against the U.S. dollar, a Forward Contract may be used to sell an amount of the foreign currency approximating the value of a fund’s security that is denominated in the foreign currency. The success of this hedging strategy is highly uncertain due to the difficulties of predicting the values of foreign currencies, the challenges of precisely matching Forward Contract amounts, and because of the constantly changing value of the securities involved. A fund will not enter into Forward Contracts for hedging purposes in a particular currency in an amount in excess of a fund’s assets denominated in that currency. Conversely, if the Adviser believes that the U.S. dollar will decline against a foreign currency, a Forward Contract may be used to buy that foreign currency for a fixed dollar amount, which is known as cross-hedging.

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In these transactions, a fund will segregate assets with a market value equal to the amount of the foreign currency purchased. Therefore, the fund will always have cash, cash equivalents, or high quality debt securities available to cover Forward Contracts or to limit any potential risk. The segregated assets will be priced daily.

Forward Contracts may limit potential gain from a positive change in the relationship between the U.S. dollar and foreign currencies. Unanticipated changes in currency prices may result in poorer overall performance for a Fund than if it had not engaged in such contracts.

Foreign Currency Options. A fund that invests in foreign currency-denominated securities may buy or sell put and call options on foreign currencies, either on U.S. or foreign exchanges or in the over-the-counter market. A put option on a foreign currency gives the purchaser of the option the right to sell a foreign currency at the exercise price until the option expires. A call option on a foreign currency gives the purchaser of the option the right to purchase the currency at the exercise price until the option expires. Currency options traded on U.S. or other exchanges may be subject to position limits that may limit the ability of a Fund to reduce foreign currency risk using such options. Over-the-counter options differ from traded options in that they are two-party contracts with price and other terms negotiated between buyer and seller and generally do not have as much market liquidity as exchange-traded options.

Purchasing and writing put and call options on foreign currencies are used to protect a fund’s portfolio against declines in the U.S. dollar value of foreign portfolio securities and against increases in the dollar cost of foreign securities to be acquired. Writing an option on foreign currency constitutes only a partial hedge, up to the amount of the premium received. A fund could lose money if it is required to purchase or sell foreign currencies at disadvantageous exchange rates. If exchange rate movements are adverse to a fund’s position, the fund may forfeit the entire amount of the premium as well as incur related transaction costs.

Swap Agreements and Options on Swap Agreements. A fund may engage in swap transactions, including, but not limited to, swap agreements on interest rates, security indexes, specific securities, and credit and event-linked swaps. To the extent a fund may invest in foreign currency-denominated securities, it also may invest in currency exchange rate swap agreements. A fund also may enter into options on swap agreements (swap options).

A fund may enter into swap transactions for any legal purpose consistent with its investment objective and policies, such as for the purpose of attempting to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of instruments in other markets, to protect against currency fluctuations, as a duration management technique, to protect against any increase in the price of securities a fund anticipates purchasing at a later date, or to gain exposure to certain markets in the most economical way possible.

Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or swapped between the parties are generally calculated with respect to a “notional amount,” i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a basket of securities representing a particular index. A “quanto” or “differential” swap combines both an interest rate and a currency transaction. Other forms of swap agreements include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or “cap”; interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified rate, or “floor”; and interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels. With a floating rate, the fee may be pegged to a base rate, such as the LIBOR and is adjusted each period. Therefore, if interest rates increase over the term of the swap contract, the fund may be required to pay a higher fee at each swap reset date.

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A fund may enter into credit default swap agreements. The buyer in a credit default contract is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay the buyer the full notional value, or “par value,” of the reference obligation in exchange for the reference obligation. A fund may be either the buyer or seller in a credit default swap transaction. If the fund is a buyer and no event of default occurs, the fund will lose its investment and recover nothing. However, if an event of default occurs, the fund (as the buyer) will receive the full notional value of a reference obligation that may have little or no value. As a seller, the fund receives a fixed rate of income throughout the term of the contract, which typically is between six months and three years, provided that there is no default event. If an event of default occurs, the seller must pay the buyer the full notional value of the reference obligation. Credit default swap transactions involve greater risks than if a fund had invested in the reference obligation directly.

A swap option is a contract that gives a counterparty the right (but not the obligation) in return for payment of a premium, to enter into a new swap agreement or to shorten, extend, cancel, or otherwise modify an existing swap agreement at some designated future time on specified terms. A fund may write (sell) and purchase put and call swap options.

Most swap agreements entered into by a fund would calculate the obligations of the parties to the agreement on a net basis. Consequently, a fund’s current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the net amount). A fund’s current obligations under a swap agreement will be accrued daily (offset against any amounts owed to the fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the segregation of assets determined to be liquid by the Adviser, to avoid any potential leveraging of the fund’s portfolio. Obligations under swap agreements so covered will not be construed to be senior securities for purposes of the fund’s investment restriction concerning senior securities. A fund will not enter into a swap agreement with any single party if the net amount owed or to be received under existing contracts with that party would exceed 5% of the fund’s total assets.

Whether a fund’s use of swap agreements or swap options will be successful in furthering its investment objective will depend on the ability of the Adviser to predict correctly whether certain types of investments are likely to produce greater returns than other investments. Because they are two-party contracts and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid. Moreover, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. A fund will enter into swap agreements only with counterparties that meet certain standards of creditworthiness (generally, such counterparties would have to be eligible counterparties under the terms of the Fund’s repurchase agreement guidelines).

Depending on the terms of the particular option agreement, a fund will generally incur a greater degree of risk when it writes a swap option than it will incur when it purchases a swap option. When a fund purchases a swap option, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when a fund writes a swap option, upon exercise of the option the fund will become obligated according to the terms of the underlying agreement.

Structured Notes. Structured notes are derivative debt securities, the interest rate or principal of which is determined by an unrelated indicator. Indexed securities include structured notes as well as securities other than debt securities, the interest rate or principal of which is determined by an unrelated indicator. Indexed securities may include a multiplier that multiplies the indexed element by a specified factor and, therefore, the value of such securities may be very volatile. To the extent a fund invests in these securities, however, the Adviser analyzes these securities in its overall assessment of the effective duration of the fund’s portfolio in an effort to monitor the fund’s interest rate risk.

Hybrid Instruments. A hybrid instrument is a type of potentially high-risk derivative that combines a traditional stock, bond, or commodity with an option or forward contract. Generally, the principal amount, amount payable upon maturity or redemption, or interest rate of a hybrid is tied (positively or negatively) to the price of some commodity, currency or securities index, or another interest rate, or some other economic factor (each a benchmark). The interest rate

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or (unlike most fixed income securities) the principal amount payable at maturity of a hybrid security may be increased or decreased, depending on changes in the value of the benchmark. An example of a hybrid could be a bond issued by an oil company that pays a small base level of interest with additional interest that accrues in correlation to the extent to which oil prices exceed a certain predetermined level. Such a hybrid instrument would be a combination of a bond and a call option on oil.

Hybrids can be used as an efficient means of pursuing a variety of investment objectives, including currency hedging, duration management, and increased total return. Hybrids may not bear interest or pay dividends. The value of a hybrid or its interest rate may be a multiple of a benchmark and, as a result, may be leveraged and move (up or down) more steeply and rapidly than the benchmark. These benchmarks may be sensitive to economic and political events, such as commodity shortages and currency devaluations, that cannot be readily foreseen by the purchaser of a hybrid. Under certain conditions, the redemption value of a hybrid could be zero. Thus, an investment in a hybrid may entail significant market risks that are not associated with a similar investment in a traditional, U.S. dollar-denominated bond that has a fixed principal amount and pays a fixed rate or floating rate of interest. A fund’s purchase of a hybrid also exposes the fund to the credit risk of the issuer of the hybrid. Those risks may cause significant fluctuations in the net asset value of the fund. Each fund will not invest more than 5% of its total assets at time of investment in hybrid instruments.

Certain issuers of structured products such as hybrid instruments may be deemed to be investment companies as defined in the 1940 Act. As a result, a fund’s investments in those products may be subject to limits applicable to investments in investment companies and may be subject to restrictions contained in the 1940 Act.

Dollar Rolls are transactions whereby a fund sells mortgage-backed securities with a commitment to buy similar, but not identical, mortgage-backed securities on a future date at a lower price. Normally, one or both securities involved are “to be announced” mortgage-backed securities. Dollar rolls are subject to interest rate risks and credit risks. These transactions may create leverage risks. Dollar roll transactions will cause a Fund to have an increased portfolio turnover rate.

Duration is a measure of volatility in the price of a bond prior to maturity. Volatility is the magnitude of the change in the price of a bond relative to a change in the market interest rate. Volatility is based upon a bond’s coupon rate, maturity date and the level of market yields of similar bonds. Generally, bonds with lower coupons or longer maturities will be more volatile than bonds with higher coupons or shorter maturities. Duration combines these variables into a single measure of price sensitivity to interest rate changes. For example, if interest rates decline by 1%, the market value of a portfolio with a duration of five years would rise by approximately 5%. Conversely, if interest rates increase by 1%, the market value of the portfolio would decline by approximately 5%.

Equity Securities are fundamental units of ownership in a company.

Common Stocks are the most prevalent type of equity security. Common stockholders are entitled to the net value of the issuer’s earnings and assets after the issuer pays its creditors and any preferred stockholders. As a result, changes in an issuer’s earnings directly influence the value of its common stock.

Common Stocks of Foreign Companies are equity securities issued by a corporation domiciled outside of the United States that trade on a domestic securities exchange.

Master Limited Partnerships (MLPs) and Other Publicly Traded Partnerships are limited partnerships (or limited liability companies), the units of which are listed and traded on a securities exchange. A Fund may invest in publicly traded partnerships that are expected to be treated as “qualified publicly traded partnerships” for federal income tax purposes. These include MLPs and other entities qualifying under limited exceptions in the Code. Many MLPs derive income and capital gains from the exploration, development, mining or production, processing, refining, transportation or marketing of any mineral or natural resource, or from real property. The value of MLP units fluctuates predominantly based on prevailing market conditions and the success of the MLP. A Fund may purchase common units of an MLP on an exchange as well as directly from the MLP or other parties in private placements. Unlike owners of common stock of a corporation, owners of common units have limited voting rights and have no ability to annually elect directors.

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MLPs generally distribute all available cash flow (cash flow from operations less maintenance capital expenditures) in the form of quarterly distributions, but a Fund will be required for federal income tax purposes to include in its taxable income its allocable share of the MLP’s income regardless of whether any distributions are made by the MLP. Thus, if the distributions received by a fund are less than that fund’s allocable share of the MLP’s income, the fund may be required to sell other securities so that it may satisfy the requirements to qualify as a RIC and avoid federal income and excise taxes. Common units typically have priority as to minimum quarterly distributions. In the event of liquidation, common units have preference over subordinated units, but not debt or preferred units, to the remaining assets of the MLP.

Holders of MLP units of a particular MLP also are exposed to a remote possibility of liability for the obligations of that MLP under limited circumstances not expected to be applicable to the Funds. In addition, the value of a Fund’s investment in MLPs depends largely on the MLPs being treated as “qualified publicly traded partnerships” for federal income tax purposes. If an MLP does not meet current federal income tax requirements to maintain partnership status, or if it is unable to do so because of federal income tax law changes, it could be taxed as a corporation. In that case, the MLP would be obligated to pay federal income tax at the entity level and distributions received by a fund generally would be taxed as dividend income for federal income tax purposes. As a result, there could be a reduction in a Fund’s cash flow and there could be a material decrease in the value of the fund’s shares. In addition, if an MLP in which a fund invests does not qualify as a “qualified publicly traded partnership” (and is otherwise not taxed as a corporation), the Fund must look through to the character of the income generated by the MLP. Such income may not qualify as “good income,” and therefore, could adversely affect the Fund’s status as a RIC.

Preferred Stocks have the right to receive specified dividends or distributions before the payment of dividends or distributions on common stock. Some preferred stocks also participate in dividends and distributions paid on common stock. Preferred stocks may provide for the issuer to redeem the stock on a specified date. A fund may treat redeemable preferred stock as a fixed income security.

Warrants provide an option to buy the issuer’s stock or other equity securities at a specified price. When holding a warrant, a fund may buy the designated shares by paying the exercise price before the warrant expires. Warrants may become worthless if the price of the stock does not rise above the exercise price by the stated expiration date. Rights are the same as warrants, except they are typically issued to existing stockholders.

Fixed Income Securities generally pay interest at either a fixed or floating rate and provide more regular income than equity securities. However, the returns on fixed income securities are limited and normally do not increase with the issuer’s earnings. This limits the potential appreciation of fixed income securities as compared to equity securities. Fixed-rate securities and floating rate securities react differently as prevailing interest rates change.

Callable Securities. Certain fixed income securities in which a fund invest are callable at the option of the issuer. Callable securities are subject to call risks. Call risks include the risk that the securities in which a fund invests may be redeemed by the issuer before maturity. If this occurs, a fund may have to reinvest the proceeds in securities that pay a lower interest rate, which may decrease the fund’s yield.

Fixed Rate Debt Securities. Debt securities that pay a fixed interest rate over the life of the security and have a long-term maturity may have many characteristics of short-term debt. For example, the market may treat fixed-rate/long-term securities as short-term debt when a security’s market price is close to the call or redemption price, or if the security is approaching its maturity date when the issuer is more likely to call or redeem the debt.

As interest rates change, the market prices of fixed-rate debt securities are generally more volatile than the prices of floating rate debt securities. As interest rates rise, the prices of fixed-rate debt securities fall, and as interest rates fall, the prices of fixed-rate debt securities rise. For example, a bond that pays a fixed interest rate of 10% is

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more valuable to investors when prevailing interest rates are lower; this value is reflected in a higher price, or premium. Conversely, if interest rates are over 10%, the bond is less attractive to investors, and sells at a lower price, or discount.

Floating Rate Debt Securities. The interest rate paid on floating rate debt securities is reset periodically (e.g., every 90 days) to a predetermined index rate. Commonly used indices include 90-day or 180-day Treasury bill rates; one month or three month London Interbank Offered Rates (LIBOR); commercial paper rates; or the prime rate of interest of a bank. The prices of floating rate debt securities are not as sensitive to changes in interest rates as fixed rate debt securities because they behave like shorter-term securities and their interest rate is reset periodically.

Foreign Securities include securities (i) of issuers domiciled outside of the United States, including securities issued by foreign governments, (ii) that primarily trade on a foreign securities exchange or in a foreign market, or (iii) that are subject to substantial foreign risk based on factors such as whether a majority of an issuer’s revenue is earned outside of the United States and whether an issuer’s principal business operations are located outside of the United States.

Investing in foreign securities, including foreign corporate debt securities and foreign equity securities, involves certain risks not ordinarily associated with investments in securities of domestic issuers. Foreign securities markets have, for the most part, substantially less volume than the U.S. markets and securities of many foreign companies are generally less liquid and their prices more volatile than securities of U.S. companies. Less government supervision and regulation exist of foreign exchanges, brokers, and issuers than in the U.S. The rights of investors in certain foreign countries may be more limited than those of shareholders of U.S. issuers and investors may have greater difficulty taking appropriate legal action to enforce their rights in a foreign court than in a U.S. court. Investing in foreign securities also involves risks associated with government, economic, monetary, and fiscal policies (such as the adoption of protectionist trade measures), possible foreign withholding taxes on dividends and interest, possible taxes on trading profits, inflation, and interest rates, economic expansion or contraction, and global or regional political, economic, or banking crises. Furthermore, the risk exists of possible seizure, nationalization, or expropriation of the foreign issuer or foreign deposits, and the possible adoption of foreign government restrictions such as exchange controls. Also, foreign issuers are not necessarily subject to uniform accounting, auditing, and financial reporting standards, practices, and requirements comparable to those applicable to domestic issuers and, as a result, less publicly available information on such foreign issuers may be available than a domestic issuer.

Emerging Markets Securities are fixed income and equity securities of foreign companies domiciled, headquartered, or whose primary business activities or principal trading markets are located in emerging and less developed markets (“emerging markets”). Investments in emerging markets securities involve special risks in addition to those generally associated with foreign investing. Many investments in emerging markets can be considered speculative and the value of those investments can be more volatile than investments in more developed foreign markets. This difference reflects the greater uncertainties of investing in less established markets and economies. Costs associated with transactions in emerging markets securities typically are higher than costs associated with transactions in U.S. securities. Such transactions also may involve additional costs for the purchase or sale of foreign currency.

Certain foreign markets (including emerging markets) may require governmental approval for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. A fund could be adversely affected by delays in, or a refusal to grant, required governmental approval for repatriation of capital, as well as by the application to the fund of any restrictions on investments.

Many emerging markets have experienced substantial rates of inflation for extended periods. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the economies and securities markets of certain emerging market countries.

Governments of many emerging market countries have exercised and continue to exercise substantial influence over many aspects of the private sector through ownership or control of many companies. The future actions of

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those governments could have a significant effect on economic conditions in emerging markets, which, in turn, may adversely affect companies in the private sector, general market conditions and prices and yields of certain of the securities in the fund’s portfolio. Expropriation, confiscatory taxation, nationalization and political, economic, and social instability have occurred throughout the history of certain emerging market countries and could adversely affect Fund assets should any of those conditions recur. In addition, the securities laws of emerging market countries may be less developed than those to which U.S. issuers are subject.

Funding Agreements (Agreements) are investment instruments issued by U.S. insurance companies. Pursuant to such Agreements, a fund may make cash contributions to a deposit fund of the insurance company’s general or separate accounts. The insurance company then credits guaranteed interest to the Fund. The insurance company may assess periodic charges against an Agreement for expense and service costs allocable to it and the charges will be deducted from the value of the deposit fund. The purchase price paid for an Agreement becomes part of the general assets of the issuer and the Agreement is paid from the general assets of the issuer. Generally, Agreements are not assignable or transferable without the permission of the issuing insurance companies and an active secondary market in Agreements does not currently exist.

High Yield Securities (“Junk Bonds”) are securities rated below investment grade. A fund may hold high yield securities if securities it holds are not rated, rated below investment grade, or are downgraded below investment grade. While generally offering higher yields than investment grade securities with similar maturities, non-investment grade debt securities involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. Refer to the Appendix of this SAI for a discussion of securities ratings.

Effect of Interest Rates and Economic Changes. All interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of high yield securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. High yield securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of high yield securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuers of high yield securities are typically more leveraged, and the risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a high yield security defaulted, a fund might incur additional expenses to seek recovery. Periods of economic uncertainty and changes would also generally result in increased volatility in the market prices of these securities and thus in the fund’s net asset value.

Payment Expectations. High yield securities typically contain redemption, call, or prepayment provisions that permit the issuer of such securities containing such provisions to redeem the securities at its discretion. During periods of falling interest rates, issuers of these securities are likely to redeem or prepay the securities and refinance them with debt securities with a lower interest rate. To the extent an issuer is able to refinance the securities, or otherwise redeem them, a fund may have to replace the securities with a lower yielding security, which could result in a lower yield and return for the fund.

Credit Ratings. Credit ratings issued by credit-rating agencies evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of high yield securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality. Investments in high yield securities will be more dependent on an adviser’s credit analysis than would be the case with investments in investment-grade debt securities. The Adviser employs its own credit research and analysis, which includes a study of existing debt, capital structure, ability to service debt and to pay dividends, the issuer’s sensitivity to economic conditions, its operating history, and the current trend of earnings.

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Liquidity and Valuation. A fund may have difficulty disposing of certain high yield securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all high yield securities, there is no established retail secondary market for many of these securities. Such securities are sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for a fund to obtain accurate market quotations for purposes of valuing the fund. Market quotations are generally available on many high yield issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. During periods of thin trading, the spread between bid and asked prices is likely to increase significantly. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of high yield securities, especially in a thinly traded market.

Lending of Portfolio Securities. In order to generate additional income, a fund may lend portfolio securities. When a fund lends portfolio securities, it will receive either cash or liquid securities as collateral from the borrower. The fund will reinvest cash collateral in short-term liquid securities that qualify as an otherwise acceptable investment for the fund. If the market value of the loaned securities increases, the borrower must furnish additional collateral to a fund. During the time portfolio securities are on loan, the borrower pays the fund any dividends or interest paid on such securities. Loans are subject to termination at the option of the fund or the borrower. The lending fund may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or equivalent collateral to a securities lending agent or broker. Certain of the affiliated underlying funds currently lend their portfolio securities through BMO Harris Bank, as agent.

Securities Lending Risks. When a fund lends its portfolio securities, it may not be able to get them back from the borrower on a timely basis, in which case the fund may lose certain investment opportunities, as well as the opportunity to vote the securities. A fund is also subject to the risks associated with the investments of cash collateral, usually fixed income securities risk. If a fund receives a payment from a borrower in lieu of the dividends on the loaned securities, such payment will generally be taxed as ordinary income for federal income tax purposes and will not be treated as “qualified dividend income.”

Leverage Risks. Leverage risk is created when an investment exposes the funds to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the fund’s risk of loss and potential for gain.

Municipal Securities are fixed income securities issued by states, counties, cities, and other political subdivisions and authorities. Although most municipal securities are exempt from regular federal income tax, municipalities also may issue securities subject to federal alternative minimum tax (AMT) and taxable securities. Tax-exempt securities are generally classified by their source of payment. The ability of a governmental issuer to make payments on its municipal obligations can be adversely affected by factors such as budget shortfalls, weak economic conditions, and reduced levels of aid to governments. Other uncertainties applicable to municipal securities may include legislation or litigation that changes the taxation of municipal securities or the rights of municipal security holders in the event of bankruptcy. Certain provisions of the U.S. Bankruptcy Code governing such bankruptcies are unclear, and the application of state law to municipal security issuers could provide varying results among the states or among the municipal security issuers within a state. These uncertainties could have a significant impact on the prices of the municipal securities in which a Fund invests.

General obligation bonds are supported by the issuer’s full faith and credit. The issuer must levy and collect taxes sufficient to pay principal and interest on the bonds. However, the issuer’s authority to levy additional taxes may be limited by its charter or state law.

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Special revenue bonds are payable solely from specific revenues received by the issuer. The revenues may consist of specific taxes, assessments, tolls, fees, or other types of municipal revenues. For example, a municipality may issue bonds to build a toll road, and pledge the tolls to repay the bonds. Bondholders could not collect from the municipality’s general taxes or revenues. Therefore, any shortfall in the tolls normally would result in a default on the bonds.

Private activity bonds are special revenue bonds used to finance private entities. For example, a municipality may issue bonds to finance a new factory to improve its local economy. The municipality would lend the proceeds to the company using the factory, and the company would agree to make loan payments sufficient to repay the bonds. The bonds would be payable solely from the company’s loan payments, and not from any other revenues of the municipality. Therefore, any default on the loan normally would result in a default on the bonds.

The interest on many types of private activity bonds is subject to the federal AMT. The funds may invest in bonds subject to the federal AMT.

Anticipation notes are securities issued in anticipation of the receipt of taxes, grants, bond proceeds, or other municipal revenues. For example, many municipalities collect property taxes once a year. Such municipalities may issue tax anticipation notes to fund their operations prior to collecting these taxes. The issuers then repay the tax anticipation notes at the end of their fiscal year, either with collected taxes or proceeds from newly issued notes or bonds.

Tax increment financing bonds are payable from increases in taxes or other revenues attributable to projects financed by the bonds. For example, a municipality may issue these bonds to redevelop a commercial area. The tax increment financing bonds would be payable solely from any increase in sales taxes collected from merchants in the area. The bonds could default if merchants’ sales, and related tax collections, failed to increase as anticipated.

Municipal Securities include:

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TRANs: tax and revenue anticipation notes issued to finance working capital needs in anticipation of receiving taxes or other revenues;

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TANS: tax anticipation notes issued to finance working capital needs in anticipation of receiving taxes;

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RANs: revenue anticipation notes issued to finance working capital needs in anticipation of receiving revenues;

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BANS: bond anticipation notes that are intended to be refinanced through a later issuance of longer term bonds;

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municipal commercial paper and other short-term notes;

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variable rate demand notes;

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industrial development bonds;

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municipal bonds (including bonds having serial maturities and pre-refunded bonds) and leases;

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construction loan notes insured by the Federal Housing Administration and financed by Fannie Mae or GNMA; and

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participation, trust, and partnership interests in any of the foregoing obligations.

Municipal Leases. A fund may purchase participation interests that represent an undivided proportional interest in lease payments by a governmental or nonprofit entity. Lease obligations may be limited by a municipal charter or by

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the inclusion in leases or contracts of “non-appropriation” clauses that relieve governmental issuers of any obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body. If the entity does not appropriate funds for future lease or contract payments, the entity cannot be compelled to make such payments. Furthermore, a lease may provide that the participants cannot accelerate lease obligations upon default. The participants would only be able to enforce lease payments as they became due. In the event of a default or failure of appropriation, it is unlikely that the participants would be able to obtain an acceptable substitute source of payment unless the participation interests are credit enhanced.

The following factors may be used by advisers in determining the liquidity of municipal lease securities: (1) the frequency of trades and quotes for the security; (2) the volatility of quotations and trade prices for the security; (3) the number of dealers willing to purchase or sell the security and the number of potential purchasers; (4) dealer undertakings to make a market in the security; (5) the nature of the security and the nature of the marketplace trades; (6) the rating of the security and the financial condition and prospects of the issuer of the security; (7) such other factors as may be relevant to a fund’s ability to dispose of the security; (8) whether the lease can be terminated by the lessee; (9) the potential recovery, if any, from a sale of the leased property upon termination of the lease; (10) the lessee’s general credit strength; (11) the likelihood that the lessee will discontinue appropriating funding for the leased property because the property is no longer deemed essential to its operations; and (12) any credit enhancement or legal recourse provided upon an event of non-appropriation or other termination of the lease.

Variable Rate Municipal Securities. Variable interest rates generally reduce changes in the market value of municipal securities from their original purchase prices. Accordingly, as interest rates decrease or increase, the potential for capital appreciation or depreciation is less for variable rate municipal securities than for fixed rate obligations. Many municipal securities with variable interest rates purchased by a fund are subject to repayment of principal (usually within seven days) on the fund’s demand. For purposes of determining a fund’s average maturity, the maturities of these variable rate demand municipal securities (including participation interests) are the longer of the periods remaining until the next readjustment of their interest rates or the periods remaining until their principal amounts can be recovered by exercising the right to demand payment. The terms of these variable rate demand instruments require payment of principal and accrued interest from the issuer of the municipal obligations, the issuer of the participation interests or a guarantor of either issuer.

Geographic Diversification is achieved by purchasing issues of municipal securities representative of various areas of the U.S. and general obligations of states, cities, and school districts as well as some revenue issues that meet that fund’s acceptable quality criteria.

Repurchase Agreements and Reverse Repurchase Agreements. A repurchase agreement is a transaction in which a fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price exceeds the sale price, reflecting an agreed upon interest rate effective for the period the buyer owns the security subject to repurchase. The agreed upon interest rate is unrelated to the interest rate on that security. The Adviser will continually monitor the value of the underlying security to ensure that the value of the security always equals or exceeds the repurchase price. A fund’s custodian is required to take possession of the securities subject to repurchase agreements. These securities are marked to market daily. To the extent that the original seller defaults and does not repurchase the securities from the fund, the fund could receive less than the repurchase price for such securities. In the event that such a defaulting seller files for bankruptcy or becomes insolvent, disposition of such securities by the fund might be delayed pending court action. The funds believe that, under the procedures normally in effect for custody of the portfolio securities subject to repurchase agreements, a court of competent jurisdiction would rule in favor of the funds and allow retention or disposition of such securities. The funds will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, that the Adviser has determined to be creditworthy.

Reverse repurchase agreement transactions are similar to borrowing cash. In a reverse repurchase agreement, a fund sells a portfolio security to another person, such as a financial institution, broker or dealer, in return for a percentage of the instrument’s market value in cash, and agrees that on a stipulated date in the future the fund will repurchase the portfolio security at a price equal to the original sale price plus interest. A fund may use reverse repurchase agreements for liquidity and for avoiding a sale of portfolio instruments at a time when the sale may be deemed disadvantageous.

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When effecting reverse repurchase agreements, liquid assets of a fund, in a dollar amount sufficient to make payment for the obligations to be purchased, are segregated on the trade date. These securities are marked to market daily and maintained until the transaction is settled.

Risks Related to Company Size. Generally, the smaller the market capitalization of a company, the fewer the number of shares traded daily, the less liquid its stock, and the more volatile its price. Market capitalization is determined by multiplying the number of the company’s outstanding shares by its current market price per share.

Companies with smaller market capitalizations also tend to have unproven track records, a limited product or service base, and limited access to capital. These factors also increase risks and make these companies more likely to fail than companies with larger market capitalizations.

Securities of Other Investment Companies. The Target Date and Target Risk Funds may invest in the securities of other investment companies within the limits prescribed by the 1940 Act and the rules promulgated thereunder. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a the Target Date and Target Risk Funds become a shareholder of that investment company. As a result, shareholders indirectly will bear the underlying fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Target Date and Target Risk Funds’ own operations. The Target Date and Target Risk Funds may also invest in investment companies that are not organized under the laws of the United States (Offshore Funds). In addition to the risks of investing in securities of other investment companies, Offshore Funds are also subject to the risks described under Foreign Securities, above.

Sovereign Debt. Sovereign debt differs from debt obligations issued by private entities in that, generally, remedies for defaults must be pursued in the courts of the defaulting party. Legal recourse is therefore limited. Political conditions, especially a sovereign entity’s willingness to meet the terms of its debt obligations, are of considerable significance. Also, there can be no assurance that the holders of commercial bank loans to the same sovereign entity may not contest payments to the holders of sovereign debt in the event of default under commercial bank loan agreements. Financial markets have recently experienced increased volatility due to the uncertainty surrounding the sovereign debt of certain European countries, which may have significant adverse effects on the economies of these countries and increase the risks of investing in sovereign debt.

A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including among others, its cash flow situation, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward principal international lenders, and the political constraints to which a sovereign debtor may be subject. A country whose exports are concentrated in a few commodities could be vulnerable to a decline in the international price of such commodities. Increased protectionism on the part of a country’s trading partners, or political changes in those countries, could also adversely affect its exports. Such events could diminish a country’s trade account surplus, if any, or the credit standing of a particular local government or agency. Another factor bearing on the ability of a country to repay sovereign debt is the level of the country’s international reserves. Fluctuations in the level of these reserves can affect the amount of foreign exchange readily available for external debt payments and, thus, could have a bearing on the capacity of the country to make payments on its sovereign debt.

To the extent that a country has a current account deficit (generally when its exports of merchandise and services are less than its country’s imports of merchandise and services plus net transfers (e.g., gifts of currency and goods) to foreigners), it may need to depend on loans from foreign governments, multilateral organizations or private commercial banks, aid payments from foreign governments, and inflows of foreign investment. The access of a country to these forms of external funding may not be certain and a withdrawal of external funding could adversely affect the capacity of a government to make payments on its obligations. In addition, the cost of servicing debt obligations can be adversely affected by a change in international interest rates, since the majority of these obligations carry interest rates that are adjusted periodically based upon international rates.

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With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt.

Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis, which led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds (discussed below), and obtaining new credit to finance interest payments. Holders of sovereign debt, including a fund, may be requested to participate in the rescheduling of such debt and to extend further loans to sovereign debtors, and the interests of holders of sovereign debt could be adversely affected in the course of restructuring arrangements or by certain other factors referred to below. Furthermore, some of the participants in the secondary market for sovereign debt also may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants, such as the fund. Obligations arising from past restructuring agreements may affect the economic performance and political and social stability of certain issuers of sovereign debt. There is no bankruptcy proceeding by which sovereign debt on which a sovereign has defaulted may be collected in whole or in part.

Foreign investment in certain sovereign debt is restricted or controlled to varying degrees. These restrictions or controls may at times limit or preclude foreign investment in such sovereign debt and increase the costs and expenses of a fund. Certain countries in which the fund may invest require governmental approval prior to investments by foreign persons, limit the amount of investment by foreign persons in a particular issuer, limit the investment by foreign persons only to a specific class of securities of an issuer that may have less advantageous rights than the classes available for purchase by domiciliaries of the countries or impose additional taxes on foreign investors. Certain issuers may require governmental approval for the repatriation of investment income, capital, or the proceeds of sales of securities by foreign investors. In addition, if a deterioration occurs in a country’s balance of payments, the country could impose temporary restrictions on foreign capital remittances. The fund could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application to the fund of any restrictions on investments. Investing in local markets may require the fund to adopt special procedures, seek local government approvals, or take other actions, each of which may involve additional costs to the fund.

The sovereign debt in which a fund may invest includes Brady Bonds, which are securities created through the exchange of existing commercial bank loans to public and private entities in certain emerging markets for new bonds in connection with debt restructurings under a debt restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady. Brady Bonds may be collateralized or uncollateralized and are issued in various currencies (but primarily the dollar). Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally collateralized in full as to principal by U.S. Treasury zero coupon bonds having the same maturity as the Brady Bonds. Interest payments on these Brady Bonds generally are collateralized by cash or securities in an amount that, in the case of fixed rate bonds, is equal to at least one year of rolling interest payments or, in the case of floating rate bonds, initially is equal to at least one year’s rolling interest payments based on the applicable interest rate at that time and is adjusted at regular intervals thereafter. Brady Bonds are often viewed as having several valuation components: (1) the collateralized repayment of principal, if any, at final maturity, (2) the collateralized interest payments, if any, (3) the uncollateralized interest payments, and (4) any uncollateralized repayment of principal at maturity (these uncollateralized amounts constitute the “residual risk”). In light of the residual risk of Brady Bonds and, among other factors, the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, investments in Brady Bonds have speculative characteristics. A fund may purchase Brady Bonds with no or limited collateralization, and will be relying for payment of interest and (except in the case of principal collateralized Brady Bonds) principal primarily on the willingness and ability of the foreign government to make payment in accordance with the terms of the Brady Bonds.

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Temporary Investments. There may be times when market conditions warrant a defensive position. During these market conditions, a Fund may temporarily invest without limit in short-term debt obligations (money market instruments). These investments may include commercial paper, bank instruments, U.S. government obligations, repurchase agreements, securities of other investment companies investing in short-term debt securities, and foreign short-term debt securities. The funds’ temporary investments must be of comparable quality to their primary investments.

U.S. Government Securities. U.S. government securities include direct obligations of the U.S. government, including U.S. Treasury bills, notes, and bonds of varying maturities, and those issued or guaranteed by various U.S. government agencies and instrumentalities. Treasury securities are direct obligations of the federal government of the United States. Agency securities are issued or guaranteed by a federal agency or other government sponsored entity acting under federal authority. Some government entities are supported by the full faith and credit of the United States. Other government entities receive support through federal subsidies, loans, or other benefits. A few government entities have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities.

A fund treats mortgage-backed securities guaranteed by a government sponsored entity as if issued or guaranteed by a federal agency. Although such a guarantee protects against credit risks, it does not reduce the market and prepayment risks.

Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac). Fannie Mae and Freddie Mac were placed into conservatorship by the Federal Housing Finance Agency (FHFA), an independent regulator, in 2008, and FHFA succeeded to all of their rights, titles, powers, and privileges. At the time Fannie Mae and Freddie Mac were placed in conservatorship, the U.S. Treasury established preferred stock purchase agreements pursuant to which the U.S. Treasury will contribute cash capital to maintain a positive net worth in each enterprise. These agreements were amended in December 2009 to permit the U.S. Treasury’s funding commitment to increase as necessary to accommodate any cumulative reduction in net worth of the enterprises for a three-year period. FHFA has the right to transfer or sell any asset or liability of Fannie Mae or Freddie Mac without any approval, assignment or consent, although FHFA has stated that it has no present intention to do so. In addition, holders of mortgage-backed securities issued by Fannie Mae or Freddie Mac may not enforce certain rights related to such securities against FHFA, or the enforcement of such rights may be delayed, during the conservatorship.

When-Issued and Delayed Delivery Transactions. These transactions are made to secure what is considered to be an advantageous price or yield. Settlement dates may be a month or more after entering into these transactions and the market values of the securities purchased may vary from the purchase prices. Other than normal transaction costs, no fees or expenses are incurred. However, liquid assets of a fund are segregated on the fund’s records on the trade date in an amount sufficient to make payment for the securities to be purchased. These assets are marked to market daily and are maintained until the transaction has been settled.

Zero Coupon Securities. Zero coupon securities in which a fund may invest do not pay interest or principal until final maturity, unlike debt securities that provide periodic payments of interest (referred to as a “coupon payment”). Investors buy zero coupon securities at a price below the amount payable at maturity. The difference between the purchase price and the amount paid at maturity represents interest on the zero coupon security. Investors must wait until maturity to receive interest and principal, which increases the interest rate and credit risks of a zero coupon security. An investment in zero coupon securities may cause a fund to recognize income and make distributions to shareholders before it receives any cash payments on its investment. A fund may have to dispose of its portfolio investments under disadvantageous circumstances to generate sufficient cash to satisfy the distribution requirements for maintaining the fund’s status as an RIC.

Portfolio Turnover. A fund’s portfolio investments may be sold for a variety of reasons, such as a more favorable investment opportunity, market conditions, or other factors. A high rate of portfolio turnover (over 100%) may involve correspondingly greater transaction costs to the fund and its shareholders. High portfolio turnover may result in the realization of substantial capital gains, including short-term capital gains taxable to shareholders at ordinary income rates.

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NON-FUNDAMENTAL INVESTMENT OBJECTIVES

The investment objective of each Target Date and Target Risk Fund shown below may be changed by the Board without shareholder approval.

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BMO Target Retirement 2010 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increasingly increase its emphasis on income and conservation of capital.

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BMO Target Retirement 2020 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increasingly increase its emphasis on income and conservation of capital.

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BMO Target Retirement 2030 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increasingly increase its emphasis on income and conservation of capital.

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BMO Target Retirement 2040 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increasingly increase its emphasis on income and conservation of capital.

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BMO Target Retirement 2050 Fund: to achieve growth, income, and conservation of capital to varying degrees depending on its proximity to its target date. As the Fund approaches and passes its target date, the Fund will reduce its emphasis on growth and increasingly increase its emphasis on income and conservation of capital.

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BMO Diversified Income Fund: to provide total return primarily from income, secondarily from appreciation.

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BMO Moderate Balanced Fund: to provide total investment return from income and appreciation.

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BMO Growth Balanced Fund: to provide total investment return from income and appreciation.

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BMO Aggressive Balanced Fund: to provide total investment return from income and appreciation.

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BMO Diversified Stock Fund: to provide total investment return primarily from appreciation, secondarily from income.

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BMO Aggressive Stock Fund: to provide capital appreciation.

INVESTMENT POLICIES AND LIMITATIONS

With respect to each Target Date and Target Risk Fund’s investment policies and limitations, if a percentage limitation is adhered to at the time of investment, a later increase or decrease in percentage resulting from any change in value or net assets will not result in a violation of such limitation, except in the case of borrowing money. For purposes of such policies and limitations, each Target Date and Target Risk Fund considers instruments (such as certificates of deposit and demand and time deposits) issued by a U.S. branch of a domestic bank or savings and loan having capital, surplus, and undivided profits in excess of $100,000,000 at the time of investment to be cash items. Under the 1940 Act, the authorization of a “majority of the outstanding voting securities” means the affirmative vote of the holders of the lesser of (i) 67% of the shares of a fund represented at a meeting at which the holders of more than 50% of the fund’s outstanding shares are represented or (ii) more than 50% of the outstanding shares of the fund.

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Fundamental Limitations

The following investment limitations are fundamental and cannot be changed for a Target Date or Target Risk Fund unless authorized by the “majority of the outstanding voting securities” of the specific fund, as defined by the 1940 Act.

Issuing Senior Securities and Borrowing Money

A fund will not issue senior securities or borrow money, except as the Investment Company Act of 1940, any rule, regulation or exemptive order thereunder, or any SEC staff interpretation thereof, may permit.

Lending Cash or Securities

A fund will not lend any of its securities, or make any other loan, in excess of one-third of the value of the Fund’s total assets. This shall not prevent a fund from purchasing or holding U.S. government obligations, money market instruments, variable rate demand notes, bonds, debentures, notes, certificates of indebtedness, or other debt securities, entering into repurchase agreements, or engaging in other transactions where permitted by the Fund’s investment goal, policies, and limitations.

Investing in Commodities

A fund will not purchase or sell commodities unless acquired as a result of ownership of securities or other instruments and provided that this restriction shall not prevent the fund from (i) purchasing or selling futures contracts, options, and other derivative instruments or (ii) investing in securities or other instruments backed by physical commodities.

Investing in Real Estate

A fund will not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments and provided that this restriction shall not prevent the fund from investing in (i) securities of issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein or (ii) securities or other instruments backed by real estate or interests therein.

Diversification of Investments

With respect to securities comprising 75% of the value of its total assets, a fund will not purchase securities issued by any one issuer (other than cash, cash items, or securities issued or guaranteed by the government of the United States or its agencies or instrumentalities, repurchase agreements collateralized by such securities, and securities of other investment companies) if, as a result, more than 5% of the value of its total assets would be invested in the securities of that issuer or if it would own more than 10% of the outstanding voting securities of such issuer.

Concentration of Investments

The Target Date and Target Risk Funds will not invest 25% or more of the value of their respective total assets in any one industry, except that the Funds may invest 25% or more of the value of their respective total assets in any one affiliated underlying fund, cash or cash items, securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities, and repurchase agreements collateralized by such securities for temporary defensive purposes.

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Underwriting

A fund will not underwrite securities of other issuers, except to the extent it may be deemed to be an underwriter within the meaning of the 1933 Act in connection with the purchase and sale of portfolio securities.

Non-Fundamental Limitations

The following investment limitations are non-fundamental and, therefore, may be changed by the Board without shareholder approval. Shareholders will be notified before any material change in these limitations becomes effective.

Selling Short and Buying on Margin

A fund will not sell any securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, or unless it covers such short sale as required by the current rules and positions of the SEC or its staff, and provided that transactions in futures contracts or other derivatives are not deemed to constitute selling securities short.

A fund will not purchase any securities on margin, except that it may obtain such short-term credits as may be necessary for clearance of transactions, and provided that margin deposits in connection with futures contracts or other derivatives shall not constitute purchasing securities on margin.

Pledging Assets

A fund will not mortgage, pledge, or hypothecate any assets owned by the fund, except as may be necessary in connection with permissible borrowings or investments and then such mortgaging, pledging, or hypothecating may not exceed 33 1/3% of the fund’s total assets at the time of the borrowing or investment.

Investing in Illiquid and Restricted Securities

A fund will not invest more than 15% of the value of its net assets in illiquid securities, including repurchase agreements providing for settlement in more than seven days after notice, non-negotiable fixed time deposits with maturities over seven days, OTC options, guaranteed investment contracts, and certain restricted securities not determined to be liquid (including certain municipal leases).

Purchasing Securities to Exercise Control

The Funds will not purchase securities of a company for the purpose of exercising control or management.

Investing in Securities of Other Investment Companies

The Corporation and the Adviser intend to submit an application to the SEC seeking an order to permit the Funds to invest in underlying funds in amounts in excess of the statutory limits imposed by the Investment Company Act of 1940, as amended. If the order is granted, the Funds may invest up to 100% of their assets in shares of other investment companies and will invest substantially all of their assets in shares of both affiliated and unaffiliated investment companies.

Investing in Options

Except for bona fide hedging purposes, a fund may not invest more than 5% of the value of its net assets in the sum of (a) premiums on open option positions on futures contracts, plus (b) initial margin deposits on financial futures contracts.

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A fund will not purchase put options or write call options on securities unless the securities are held in the Fund’s portfolio or unless the Fund is entitled to them in deliverable form without further payment or has segregated liquid assets in the amount of any further payment.

A fund will not write call options in excess of 25% of the value of its total assets.

Other Investment Policies

Pursuant to Rule 35d-1 under the 1940 Act, the Diversified Stock and Aggressive Stock Funds have each adopted a non-fundamental investment policy to invest at least 80% of its assets (defined as net assets plus any borrowings for investment purposes) in the types of securities and investments suggested by its name. Each such Fund will provide its shareholders with at least 60 days’ prior written notice of any changes to such policy as required by Rule 35d-1.

VALUATION OF SECURITIES

Because the assets of the Target Date and Target Risks Funds consist primarily of shares of underlying funds, the NAV is determined based on the NAV of the underlying funds. It is not anticipated that the Pricing Committee of the Board will need to fair value any of the investments of the Funds. However, an underlying fund may need to fair value one of its investments which may require the Target Date and Target Risk Funds to do the same because of delays in obtaining the underlying funds’ NAV.

WHAT DO SHARES COST?

Except under certain circumstances described in the Prospectus, shares of each class of the Target Date and Target Risk Funds are sold at their NAVs on days the NYSE is open for business.

The procedure for purchasing shares is explained in the Prospectus under “How to Buy Shares.”

HOW ARE FUND SHARES SOLD?

M&I Distributors, LLC (MID), located at 111 East Kilbourn Avenue, Milwaukee, Wisconsin 53202, serves as the principal distributor of the Funds’ shares (the Distributor). Under a Distribution Agreement with the Funds, MID offers the Funds’ shares on a continuous, best-efforts basis. MID is an affiliate of the Adviser and BMO Harris Bank.

12b-1 Plan (Retirement Class (R-3) Shares Only)

The Corporation has adopted a compensation-type distribution plan pursuant to Rule 12b-1 under the 1940 Act (the “Plan”). The Plan is designed to stimulate brokers, dealers, and administrators to provide distribution and/or administrative support services to holders of the R-3 shares. The Plan authorizes payments by the R-3 shares for these services. The Plan provides that the Distributor shall act as the distributor of R-3 shares, and it permits the payment of fees to brokers (including BMO Harris Financial Advisors, an affiliate of the Adviser), dealers, and administrators for distribution and/or administrative services. These services are to be provided by representatives who have knowledge of the shareholders’ particular circumstances and goals, and include, but are not limited to:

(1) providing office space, equipment, telephone facilities, and various personnel, including clerical, supervisory, and computer, as necessary or beneficial to establish and maintain shareholder accounts and records; (2) processing purchase and redemption transactions and automatic investment of client account cash balances; (3) answering client inquiries regarding the R-3 shares; (4) assisting clients in changing dividend options, account designations, and addresses; and (5) providing such other services as a Fund reasonably requests.

Other benefits of the Plan include, but are not limited to, the following: (1) an efficient and effective administrative system; (2) a more efficient use of assets of holders of R-3 shares by having them rapidly invested in a Fund with a minimum of delay and administrative detail; and (3) an efficient and reliable records system for holders of R-3 shares and prompt responses to shareholder requests and inquiries concerning their accounts.

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Shareholder Services (Investor Class and Retirement Class (R-3) Shares Only)

The Adviser is the shareholder servicing agent for the Target Date and Target Risk Funds. As such, it provides shareholder services to the Funds that include, but are not limited to, distributing the Prospectuses and other information, providing shareholder assistance, and communicating or facilitating purchases and redemption of shares.

The Investor Class and R-3 Classes may pay the Adviser a shareholder servicing fee equal to 0.25% of the assets of the Investor Class and R-3 Class Shares for providing shareholder services and maintaining shareholder accounts. The Adviser may select others to perform these services for their customers and may pay them fees. The Adviser may voluntarily waive fees it receives for providing shareholder services and maintaining shareholder accounts. The Adviser may terminate such voluntary waivers at any time. No shareholder services fee information is provided since the Funds were not offered for sale prior to the date of this SAI.

HOW TO BUY SHARES

Exchanging Securities for Shares

A shareholder may contact the Funds to request a purchase of shares in an exchange for securities owned by the shareholder. The Funds reserve the right to determine whether to accept the securities and the minimum market value to accept. The Funds will value the securities in the same manner as it values its assets. This exchange is treated as a sale of a shareholder’s securities for federal income tax purposes.

Redemption In Kind

Although the Funds intend to pay share redemptions in cash, the Funds reserve the right, as described below, to pay the redemption price in whole or in part by a distribution of a Fund’s portfolio securities.

Because the Corporation has elected to be governed by Rule 18f-1 under the 1940 Act, each Target Date and Target Risk Fund is obligated to pay share redemptions to any one shareholder in cash only up to the lesser of $250,000 or 1% of the Fund’s net assets represented by such share class during any 90-day period. Any share redemption payment greater than this amount will be in cash unless the Adviser determines that payment should be in kind. In such a case, a Fund will pay all or a portion of the remainder of the redemption in portfolio securities, valued in the same way as the Fund determines its NAV. The portfolio securities will be selected in a manner that the Adviser deems fair and equitable and, to the extent available, such securities will be readily marketable.

A redemption in kind is not as liquid as a cash redemption. If a redemption is made in kind, the redeeming shareholder would incur transaction costs in selling the portfolio securities received, and the proceeds of such sales, when made, may be more or less than the value on the redemption date. Redemptions in kind are taxable for federal income tax purposes in the same manner as redemptions for cash.

In addition, the Target Date and Target Risk Funds have adopted procedures, consistent with SEC guidelines, to permit a redemption in kind to an affiliate.

ACCOUNT AND SHARE INFORMATION

Voting and Distribution Rights

Shareholders of each Target Date and Target Risk Fund are entitled: (i) to one vote per full share of common stock; (ii) to distributions declared by the Board; and (iii) upon liquidation of a Fund, to participate ratably in the assets of the Fund available for distribution. Each share of a Fund gives the shareholder one vote in the election of directors and other matters submitted to shareholders for vote and is entitled to participate equally in net income and capital gains distributions by the Fund. All shares of each Fund or class in the Corporation have equal voting rights, except that only shares of a particular Fund or class are entitled to vote on matters affecting that Fund or class. Consequently, the holders of more than 50% of the Corporation’s shares of common stock voting for the election of directors can elect the entire Board, and, in such event, the holders of the Corporation’s remaining shares voting for the election of directors will not be able to elect any person or persons to the Board.

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The WBCL permits registered investment companies, such as the Corporation, to operate without an annual meeting of shareholders under specified circumstances if an annual meeting is not required by the 1940 Act. The Corporation holds meetings of shareholders as required by the 1940 Act, the Corporation’s Articles of Incorporation or By-laws. Directors may be removed by the shareholders at a special meeting. A special meeting of the shareholders may be called by the Board upon written request of shareholders owning at least 10% of the Corporation’s outstanding voting shares.

The shares are redeemable and transferable. All shares issued and sold by the Corporation will be fully paid and nonassessable.

Control Persons and Principal Shareholders

Any person who beneficially owns more than 25% of the outstanding shares of a Target Date Fund or a class may be considered a “controlling person” of the Fund or class. Shareholders with a controlling interest could affect the outcome of proxy voting or the direction of management of the Fund.

Information regarding control persons and principal shareholders of the Target Date and Target Risk Funds is not provided because the Funds were not offered for sale until the date of this SAI. As of the date of this SAI, the current officers and directors of the Corporation did not own any shares of the Funds.

WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES?

This section is not intended to be a full discussion of federal income tax laws and does not discuss state, local, or foreign tax laws. Please consult your own tax adviser regarding federal, state, local, or foreign tax considerations.

Fund Taxation

Each Target Date and Target Risk Fund intends to elect to be treated and qualify each year as a RIC under Subchapter M of the Code. In order to so qualify, each Fund must, among other things, (i) derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies, and net income derived from interests in qualified publicly traded partnerships, (ii) distribute at least 90% of its investment company taxable income each year and 90% of its net tax-exempt income, and (iii) at the end of each fiscal quarter (a) maintain at least 50% of the value of its total assets in cash and cash items, U.S. government securities, securities of other regulated investment companies, and other securities of issuers that represent, with respect to each issuer, no more than 5% of the value of the Fund’s total assets and 10% of the outstanding voting securities of such issuer, and (b) have no more than 25% of the value of its total assets invested in the securities (other than those of the U.S. government or other regulated investment companies) of any one issuer or of two or more issuers that the Fund controls and that are engaged in the same, similar, or related trades and businesses or the securities of one or more qualified publicly traded partnerships.

To the extent that a Fund qualifies for treatment as a RIC, it will not be subject to federal income tax on income paid to shareholders in the form of distributions of investment company taxable income or net capital gain. In the event a Fund fails to qualify as a RIC under Subchapter M, and does not obtain relief from such failure, it will be treated as a regular corporation for federal income tax purposes. Accordingly, the Fund would be subject to federal income taxes on its taxable net income and gains, and any distributions that the Fund makes would not qualify for any dividends paid deduction. This would increase the cost of investing in the Fund for shareholders and would make it more economical for shareholders to invest directly in securities held by the Fund instead of investing indirectly in such securities through the Fund.

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Each Fund will be treated as a single, separate entity for federal income tax purposes so that income earned and capital gains and losses realized by the Corporation’s other portfolios will be separate from those realized by each Fund.

Each Fund generally will be subject to a 4% nondeductible federal excise tax to the extent the Fund does not meet certain minimum distribution requirements by the end of the calendar year. To avoid the imposition of the 4% excise tax, a Fund must distribute at least 98% of its taxable ordinary income for the calendar year and at least 98.2% of the excess of its capital gains over capital losses realized during the one-year period ending October 31 (in most cases) of such year as well as amounts that were neither distributed nor taxed to the Fund during the prior calendar year. Each Fund intends to make distributions during the calendar year in an amount sufficient to prevent imposition of this 4% excise tax.

Generally, the character of the income or capital gains that a Fund receives from an underlying fund will pass through to the Fund’s shareholders as long as the Fund and the underlying investment company each qualify as a RIC. However, to the extent that another investment company that qualifies as a RIC realizes net losses on its investments for a given taxable year, a Fund will not be able to recognize its share of those losses until it disposes of shares of such investment company. Moreover, even when a Fund does make such a disposition, a portion of its loss may be recognized as a long-term capital loss, which will not be treated as favorably for federal income tax purposes as an ordinary deduction. In particular, a Fund will not be able to offset any capital losses from its dispositions of shares of other investment companies against its ordinary income. As a result of the foregoing rules, and certain other special rules, it is possible that the amounts of investment company taxable income and net capital gain that a Fund will be required to distribute to shareholders will be greater than such amounts would have been had the Fund invested directly in the securities held by the investment companies in which it invests, rather than investing in shares of the investment companies. For similar reasons, the character of distributions from a Fund (e.g., long-term capital gain, qualified dividend income, etc.) will not necessarily be the same as it would have been had the Fund invested directly in the securities held by the investment companies in which it invests.

Under the Code, gains or losses attributable to fluctuations in exchange rates that occur between the time a Fund accrues income or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivable or pays such liabilities generally are treated as ordinary income or loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of certain other instruments, gains or losses attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security or contract and the date of disposition also may be treated as ordinary gain or loss. These gains and losses may increase or decrease the amount of a Fund’s investment company taxable income to be distributed to its shareholders.

Distributions from a Fund may be based on estimates of book income for the year. Book income generally consists solely of the income generated by the securities in the portfolio, whereas tax-basis income includes, in addition, gains or losses attributable to currency fluctuation. Due to differences in the book and tax treatment of fixed income securities denominated in foreign currencies, it is difficult to project currency effects on an interim basis. Therefore, to the extent that currency fluctuations cannot be anticipated, a portion of distributions to shareholders could later be designated as a return of capital, rather than income, for federal income tax purposes, which may be of particular concern to simple trusts.

If a Fund receives an “excess distribution” with respect to the stock of a passive foreign investment company (PFIC), the Fund itself may be subject to federal income tax on a portion of the excess distribution, whether or not the corresponding income is distributed by the Fund to shareholders. In general, a foreign corporation is classified as a PFIC for a taxable year if at least 50% of its assets produce or are held to produce passive income or 75% or more of its gross income is passive income.

Under the PFIC rules, an excess distribution is treated as having been realized ratably over the period during which the Funds held the PFIC stock. A Fund itself will be subject to U.S. federal income tax (including interest) on the portion, if any, of an excess distribution that is so allocated to prior taxable years. Certain distributions from a PFIC as well as gain from the sale of PFIC stock are treated as excess distributions. Excess distributions are characterized as ordinary income even though, absent application of the PFIC rules, certain excess distributions might have been classified as capital gain.

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Rather than being taxed on the PFIC income as discussed above, a Fund may be eligible to elect alternative tax treatment. Under an election that currently is available in certain circumstances, a Fund generally would be required to include in its gross income its share of the PFIC’s income and net capital gain annually, regardless of whether distributions are received from the PFIC in a given year. In addition, another election may be available that would involve marking to market a Fund’s PFIC shares at the end of each taxable year (and on certain other dates prescribed in the Code), with the result that unrealized gains are treated as though they were realized and treated as ordinary income or loss (subject to certain limitations). If this election were made, federal income tax at the Fund level under the PFIC rules would generally be eliminated, but the Fund could, in limited circumstances, incur nondeductible interest charges. A Fund’s intention to qualify annually as a RIC may limit its options with respect to PFIC shares.

Because the application of the PFIC rules may affect, among other things, the character of gains and the amount of gain or loss and the timing of the recognition of income with respect to PFIC shares, and may subject a Fund itself to tax on certain income from PFIC shares, the amount that must be distributed to shareholders and that will be taxed to shareholders as ordinary income or long-term capital gain may be increased or decreased as compared to a fund that did not invest in PFIC shares.

Taxation of U.S. Shareholders

Shareholders will be subject to federal income tax on distributions made by the Target Date and Target Risk Funds whether received in cash or additional shares of the Funds, unless the shareholder is investing in the Fund through a tax-deferred arrangement such as an IRA or a 401(k) plan. Distributions of investment company taxable income (which includes any net short-term capital gain in excess of any net long-term capital loss) generally will be taxable to shareholders as ordinary income (for non-corporate shareholders, currently taxed at a maximum rate of 39.6%). Distributions of net capital gain (the excess of net long-term capital gains over net short-term capital losses), if any, will be taxable to non-corporate shareholders at long-term capital gain rates (currently taxed at a maximum rate of 20%), without regard to how long a shareholder has held shares of a Fund. A portion of a Fund’s distributions of investment company taxable income may qualify in part for the 70% dividends-received deduction available to corporate shareholders to the extent that the Fund receives dividend income directly or indirectly from U.S. corporations and reports the amount distributed as eligible for the deduction, provided that certain holding period and other requirements under the Code are satisfied.

Dividend income received by a Target Date and Target Risk Fund and distributed to a Fund shareholder may not be treated as “qualified dividend” income by the shareholder unless the Fund satisfies certain holding period and other requirements with respect to the stock in its portfolio generating such dividend income and the shareholder meets certain holding period and other requirements with respect to the Fund’s shares. A dividend will not be treated as qualified dividend income (at either the Fund or shareholder level) (1) if the dividend is received with respect to any share of stock held for fewer than 61 days during the 121-day period beginning on the date that is 60 days before the date on which such share becomes ex-dividend with respect to such dividend (or, in the case of certain preferred stock, fewer than 91 days during the 181-day period beginning 90 days before such date), (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, or (3) if the recipient elects to have the dividend income treated as investment income for purposes of the limitation on deductibility of investment interest. For purposes of determining the holding period for stock on which a dividend is received, such holding period is reduced for any period the recipient has an option to sell, is under a contractual obligation to sell or has made (and not closed) a short sale of substantially identical stock or securities, and in certain other circumstances. In order for a dividend paid by a foreign corporation to constitute qualified dividend income, the foreign corporation must (1) be eligible for the benefits of a comprehensive income tax treaty with the United States (or the stock on which the dividend is paid must be readily tradable on an established securities market in the United States), and (2) not be treated as a PFIC.

In addition to the regular federal income tax, certain individuals, trusts, and estates may be subject to a Medicare tax of 3.8%. For individual taxpayers, the Medicare tax is imposed on the lesser of the taxpayer’s (i) investment income, net of deductions properly allocable to such income, or (ii) the amount by which the taxpayer’s modified adjusted gross income exceeds certain thresholds ($250,000 for married individuals filing jointly, $200,000 for unmarried individuals,

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and $125,000 for married individuals filing separately). The Funds’ distributions will be includable in a shareholder’s investment income for purposes of this Medicare tax. In addition, any capital gain realized on the sale, redemption, or exchange of Fund shares is includable in a shareholder’s investment income for purposes of this Medicare tax.

To the extent a Fund is unable to use its capital losses in a given taxable year, it may be entitled to carry forward the capital loss, which may reduce the taxable capital gain that the Fund would realize and on which the shareholder would be subject to federal income tax in the future. Any capital loss carried forward by a Fund will generally retain its character as short-term or long-term and may be carried forward indefinitely.

Distributions declared by a Target Date or Target Risk Fund during October, November, or December to shareholders of record and paid by January 31 of the following year will be taxable in the year they are declared, rather than the year in which they are received. Each Fund will notify its shareholders each year of the amount and type of distributions paid.

Gain or loss realized upon a sale, redemption, or other disposition (such as an exchange) of shares of a Fund by a shareholder will generally be treated as long-term capital gain or loss if the shares have been held for more than one year and, if held for one year or less, as short-term capital gain or loss. Any loss on the sale, redemption, or exchange of shares held for six months or less will be treated as a long-term capital loss to the extent of any net capital gain distributions paid to the shareholder with respect to such shares. Any loss a shareholder realizes on a sale, redemption, or exchange of shares will be disallowed if the shareholder acquires other shares of the same Fund (whether through the automatic reinvestment of distributions or otherwise) or substantially identical stock or securities within a 61-day period beginning 30 days before and ending 30 days after the shareholder’s sale, redemption, or exchange of the shares. In such case, the shareholder’s tax basis in the shares acquired will be adjusted to reflect the disallowed loss. Capital losses may be subject to limitations on their use by a shareholder.

Purchasing shares shortly before a distribution may not be advantageous. If the distribution is taxable, it will essentially result in a taxable return of a portion of the purchase price.

State and Local Taxes

Shareholders may be subject to state and local taxes on distributions received from a Fund (including exempt interest dividends) and on redemptions of Fund shares. Rules of state and local taxation of distributions from regulated investment companies often differ from rules for federal income taxation described above. You are urged to consult your tax adviser as to the consequences of these and other state and local tax rules affecting an investment in a Fund.

Backup Withholding and Other Considerations

If a shareholder does not furnish a Target Date or Target Risk Fund with a correct social security number or taxpayer identification number, certify that it is correct, and certify that he, she or it is not subject to backup withholding and/or the Fund receives notification from the IRS requiring backup withholding, the Fund is required by federal law to withhold federal income tax from all distributions and redemption proceeds paid to the shareholder at the rate set forth in the Code. Amounts withheld may be applied to the shareholder’s federal income tax liability and the shareholder may obtain a refund from the IRS if withholding results in an overpayment of federal income tax for such year.

Taxation of Non-U.S. Shareholders

The foregoing discussion relates solely to U.S. federal income tax law as applied to U.S investors. Non-U.S. investors should consult their tax advisers concerning the tax consequences of ownership of shares of the Funds, including the possibility that distributions may be subject to a 30% U.S. withholding tax (or a reduced rate of withholding provided by an applicable tax treaty).

Under the Foreign Account Tax Compliance Act (“FATCA”), a Fund may be required to withhold a generally non-refundable 30% tax on distributions of investment company taxable income paid after December 31, 2013 and distributions of net capital gain and the gross proceeds of a sale, redemption, or exchange of Fund shares paid after

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December 31, 2016 to (i) certain “foreign financial institutions” unless such foreign financial institution agrees to verify, monitor, and report to the IRS the identity of certain of its accountholders, among other things, and (ii) certain “non-financial foreign entities” unless such entity certifies to the Fund that it does not have any substantial U.S. owners or provides the name, address, and taxpayer identification number of each substantial U.S. owner, among other things. This FATCA withholding tax could also affect a Fund’s return on its investments in foreign stocks or securities or affect a shareholder’s return if the shareholder holds its Fund shares through a foreign intermediary. You are urged to consult your tax adviser regarding the application of this FATCA withholding tax to your investment in a Fund and the potential certification, compliance, due diligence, reporting, and withholding obligations to which you may become subject in order to avoid this withholding tax.

This section is not intended to be a full discussion of federal income tax laws and the effect of such laws on an investor. There may be other federal, state, local, or foreign tax considerations applicable to a particular investor. Investors are urged to consult their own tax advisers.

Cost Basis Reporting

Each Target Date and Target Risk Fund is required to report to you and the IRS the cost basis of shares acquired on or after January 1, 2012 (“covered shares”) when you sell, redeem, or exchange such shares. These requirements do not apply to shares held through a tax-deferred arrangement, such as a 401(k) plan or an IRA, or to shares held by tax-exempt organizations, financial institutions, corporations (other than S corporations), banks, credit unions, and certain other governmental bodies. Shares acquired before January 1, 2012 (“non-covered shares”) are treated as if held in a separate account from covered shares. The Funds are not required to determine or report your cost basis in non-covered shares and are not responsible for the accuracy and reliability of any information provided for non-covered shares.

The cost basis of a share is generally its purchase price adjusted for distributions, returns of capital, and other corporate actions. Cost basis is used to determine whether the sale, redemption, or exchange of a share results in a capital gain or loss. If you sell, redeem, or exchange covered shares during any year, the Fund will report the gain or loss, cost basis, and holding period of such covered shares to you and the IRS on Consolidated Form 1099.

A cost basis method is the method by which a Fund determines which specific covered shares are deemed to be sold, redeemed, or exchanged when you sell, redeem, or exchange less than your entire position in the Fund and have made multiple purchases of Fund shares on different dates at differing net asset values. If you do not affirmatively elect a cost basis method, each Fund will use the average cost method, which averages the basis of all Fund shares in your account regardless of holding period, and covered shares sold, exchanged or redeemed are deemed to be those with the longest holding period first. You may elect in writing (and not over the telephone) any alternate IRS-approved cost basis method to calculate the cost basis in your covered shares. The default cost basis method applied by a Fund or the alternate method elected by you may not be changed after the settlement date of a sale of Fund shares.

If you hold Fund shares through a broker or another nominee, please contact that broker or nominee with respect to the reporting of cost basis and available elections for your account.

You are encouraged to consult with your tax adviser regarding the application of these cost basis reporting rules and, in particular, which cost basis calculation method you should elect.

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DIRECTORS AND OFFICERS

Directors

The Board of Directors is responsible for overseeing the business and affairs of the Corporation. Information regarding the directors of the Corporation, and their age and business experience during the past five years, are shown in the following table. The address of each director is 111 East Kilbourn Avenue, Suite 200, Milwaukee, Wisconsin 53202. Each director with two asterisks (**) is deemed to be an “interested person” of the Corporation as defined in the 1940 Act. Current directors who are not considered to be “interested persons” of the Corporation are referred to in this SAI as “independent directors.” The Corporation currently offers [25] separate portfolios or funds. Information in the following table is as of [August 31, 2012] unless otherwise indicated.

INTERESTED DIRECTORS


Name and Age	Position(s) Held with the Corporation	Term of Office and Length of Time Served⁽¹⁾	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Director	Other Directorships Held by Director
John M. Blaser⁽²⁾ Age: 55	Director and President	Since May 1999	Managing Director of the Adviser, since June 2012; Vice President of BMO Harris Bank, since 1998⁽³⁾; Vice President of the Adviser, from 1998 to 2012.	[25]	None

Ellen M. Costello⁽²⁾ Age: 57	Director	Since September 2011	Director, President, and Chief Executive Officer of BMO Financial Corp. and U.S. Country Head, since July 2011; Director, BMO Harris Bank and the Adviser, since 2006; President, and CEO of BMO Financial Corp., from 2006 to July 2011; Director, Chair, and Chief Executive Officer of Harris Bankcorp, Inc., from 2006 to November 2011 and of its wholly-owned subsidiary, Harris N.A., from 2006 to July 2011.	[25]	None

⁽¹⁾	Each director serves an indefinite term until he or she retires or otherwise resigns, is removed, dies, or until his or her successor is duly elected. Retirement for a director occurs no later than August 31 following his or her 75th birthday.

⁽²⁾	Mr. Blaser is an “interested person” of the Corporation (as defined in the 1940 Act) due to the positions that he holds with the Corporation, the Adviser, and BMO Harris Bank. Ms. Costello is an “interested person” of the Corporation due to the positions that she holds with the Adviser and BMO.

⁽³⁾	Effective September 1, 2012, M&I Trust merged into BMO Harris Bank.

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INDEPENDENT DIRECTORS


Name and Age	Position(s) Held with the Corporation	Term of Office and Length of Time Served⁽¹⁾	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Director	Other Directorships Held by Director
Larry D. Armel Age: 70	Independent Director	Since September 2006	Retired; formerly, Chairman, Gold Bank Funds, from 2002 to 2005.	[25]	None
Ridge A. Braunschweig Age: 59	Independent Director	Since October 2009	President and Chief Executive Officer, CPL Industries, Inc. (a manufacturing holding company prior to May 2009 and a family office, since May 2009), since January 2012; Executive Vice President and Chief Financial Officer, CPL Industries, Inc., from 2000 to 2012.	[25]	None
Benjamin M. Cutler Age: 67	Independent Director	Since July 2004	Chairman, CEO and President, USHEALTH Group, Inc. (a health insurance company), since September 2004.	[25]	None
John A. Lubs Age: 64	Independent Director	Since July 2004	Retired; formerly, Vice Chairman, Mason Companies, Inc. (a footwear distributor), from 2004 to 2010.	[25]	None
James Mitchell Age: 65	Independent Director	Since March 1999	Chief Executive Officer, NOG, Inc. (a metal processing and consulting company), since 1999; Chairman, Ayrshire Precision Engineering (a precision machining company), since 1992; Chairman, Golner Precision Products, Inc. (a supplier of machine parts), from 2004 to 2008; Chief Executive Officer, General Automotive Manufacturing, LLC (an automotive parts manufacturing company), from 2001 to 2007.	[25]	None

B-35

Name and Age

Position(s)
Held with the

Corporation

Term of Office

and Length of

Time Served⁽¹⁾

Principal Occupation(s)

During Past 5 Years

Number of
Portfolios in
Fund
Complex
Overseen by
Director

Other

Directorships

Held by

Director

Barbara J. Pope

Age: 64

Independent Director

Since March 1999

President of Barbara J. Pope, P.C. (a financial consulting firm), since 1992; President of Sedgwick Street Fund LLC (a private investment partnership), since 1996; formerly, Tax Partner, Price Waterhouse.

[25]

None

⁽¹⁾	Each director serves an indefinite term until he or she retires or otherwise resigns, is removed, dies, or until his or her successor is duly elected. Retirement for a director occurs no later than August 31 following his or her 75th birthday.

Some of the independent directors, personally or through business relationships, have banking, investment management, custodial, or borrowing relationships with BMO Harris Bank and other affiliates of the Adviser.

Officers

The officers of the Corporation are elected annually by the Board and hold the same position with all of the Funds of the Corporation. Each officer holds office for one year and until the election and qualification of his or her successor. The address of each officer is 111 East Kilbourn Avenue, Suite 200, Milwaukee, Wisconsin 53202. Officers of the Corporation, together with information as to their principal business occupation during the past five years and certain other information, are shown in the following table as of [August 31, 2012] unless otherwise indicated.

PRINCIPAL OFFICERS


Name and Age	Position(s) Held with the Corporation	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years
Timothy M. Bonin Age: 39	Treasurer	Elected by the Board annually; since February 2006	Vice President of the Adviser, since February 2006.
John D. Boritzke Age: 56	Vice President	Elected by the Board annually; since October 2001	Senior Vice President of the Adviser and BMO Harris Bank, since 2008⁽¹⁾; Vice President of the Adviser and BMO Harris Bank, 1993 to 2008.
Stephen R. Oliver Age: 61	Chief Compliance Officer and Anti-Money Laundering Compliance Officer	Elected by the Board annually, Chief Compliance Officer; since July 2008, and Anti-Money Laundering Officer; since January 2009	Vice President of BMO Harris Bank, since March 2006⁽¹⁾; Vice President of M&I Distributors, LLC, since 2007.
Michele L. Racadio Age: 37	Secretary	Elected by the Board annually; since November 2012	Senior Counsel and Vice President of BMO Harris Bank, since 2012; Associate, Godfrey & Kahn, S.C., 2006 to 2012.

⁽¹⁾	Effective September 1, 2012, M&I Trust merged into BMO Harris Bank.

B-36

Board of Directors

The primary responsibility of the Board is to provide oversight of the management of the Funds. The Board is responsible for managing the Funds’ business affairs. During the fiscal year ended August 31, 2012, the Board held eight meetings. The Board has established two standing committees, the Audit Committee and the Nominating and Governance Committee, to which it has delegated certain responsibilities. These Committees are comprised solely of independent directors.

The day-to-day operations of the Funds are managed by the Adviser with assistance from other service providers approved by the Board. The Board, directly and through its Committees, oversees the services provided by the Adviser and other Fund service providers. The Board does not have a chairperson. The President of the Corporation, or such other person designated by the Board, serves as the chair of the Board meetings. Counsel to the Funds and independent directors attends all Board meetings. The Board is structured to encourage equal participation by all members and to provide for and to promote open and candid communication between the Board and Adviser and the other service providers to assist the Board in fulfilling its oversight responsibilities. The Board believes that this structure is appropriate in recognition of the historical relationship between the Funds and the Adviser and its affiliates, the assets and number of the Funds overseen by the Board, and the nature of the Funds’ investments.

As part of its general oversight responsibilities, the Board, directly and through its Committees, is involved in the risk oversight of the Funds. The Funds, the Adviser, and other Fund service providers have adopted policies, procedures and controls to address the Funds’ operational, investment, and compliance risks. The Board and its Committees meet regularly during the year to review, among other information related to the Funds’ operations, the contractual arrangements with the Adviser and other service providers for the Funds, the Funds’ performance, investment strategies, and limitations, and compliance and regulatory matters. The Board, directly and through its Committees, reviews information from the Adviser, other Fund service providers, the Funds’ independent registered public accounting firm and counsel to the Funds, and independent directors to assist it in its oversight responsibilities. The Board reviews the Funds’ performance and meets with the Adviser and Sub-Advisers, as applicable, and the Funds’ portfolio managers. As part of its compliance oversight, the Board receives and reviews the annual report prepared by the Chief Compliance Officer (CCO) as required by Rule 38a-1 under the 1940 Act and quarterly reports regarding the operation of the compliance policies and procedures, including any material compliance issues that arose during the quarter for the Funds. The independent directors also meet quarterly with the CCO in executive session. In addition, any material changes to a Fund’s investment objective, strategies, and restrictions must be approved by the Board.

The Audit Committee serves to provide an open avenue of communication among the Board, the Funds’ independent registered public accounting firm and the internal accounting staff serving the Funds. The Board has adopted a written charter of the Audit Committee pursuant to which the Audit Committee evaluates the independence of and approves the retention of the independent registered public accounting firm to audit the financial statements of the Funds, reviews the results of Fund audits and preapproves, or establishes preapproval policies and procedures concerning, all audit and non-audit services provided to the Funds. The Audit Committee monitors the accounting policies of the Funds, as well as the work of the independent registered public accounting firm. Messrs. Armel, Braunschweig, Cutler, Lubs, and Mitchell and Ms. Pope (Chair) currently serve as members of the Audit Committee. During the fiscal year ended August 31, 2012, the Audit Committee held three meetings.

The Nominating and Governance Committee oversees the administration of the Corporation’s Governance Guidelines and Procedures. In addition, the Board has adopted a written charter of the Nominating and Governance Committee, pursuant to which the Nominating and Governance Committee evaluates and nominates, or recommends for nomination, candidates for the Board. The Nominating and Governance Committee may consider candidates for the Board submitted by shareholders if a vacancy were to exist. Shareholders who wish to recommend a nominee may do so by submitting the appropriate information about the candidate to the Corporation’s Secretary. Messrs. Armel (Chair), Braunschweig, Cutler, Lubs, and Mitchell and Ms. Pope currently serve as members of the Nominating and Governance Committee. During the fiscal year ended August 31, 2012, the Nominating and Governance Committee held no meetings.

B-37

The Board also oversees a Pricing Committee. The Pricing Committee meets as necessary and is comprised of members of the Adviser and UMB Fund Services, Inc. (UMBFS), the Fund’s sub-administrator. The Pricing Committee is responsible for monitoring the valuation of Fund securities and other investments as well as determining the fair value of securities for which market quotations are not readily available, after consideration of all relevant factors, in accordance with the pricing procedures adopted by the Board. Any determinations by the Pricing Committee are subsequently reported to and reviewed by the full Board.

Director Experience and Qualifications

Following is a brief discussion of the experiences and qualifications that led to the conclusion, as of the date of this SAI, that each current Board member should serve as a director of the Corporation. Generally, each director’s professional, business, and educational background, judgment, ability to work effectively with the other directors and commitment to act in the best interests of the Funds were considered in determining his or her qualifications to serve on the Board. With respect to each director, the Board considered, among other factors, the following experiences and qualifications:

The Board considered that Mr. Armel has served as a director since 2006, and that he serves as chair of the Nominating and Governance Committee. The Board also considered his professional and financial industry experience serving as an executive, counsel, and director of various mutual fund complexes. The Board considered the executive, regulatory, investment, and operations experience that Mr. Armel gained over the course of his career and through his financial industry experience.

The Board considered that Mr. Blaser has served as a director and President of the Corporation since 1999, Managing Director of the Adviser since June 2012, and Vice President of BMO Harris Bank since 1998. He also served as Vice President of the Adviser from 1998 to 2012. The Board also considered his professional and financial industry experience serving as chief financial officer for various fund complexes. The Board considered the audit, executive, financial, investment, and operations experience that Mr. Blaser gained over the course of his career and through his financial industry experience. The Board also considered that because of Mr. Blaser’s positions with the Adviser and BMO Harris Bank, he is involved in the day-to-day management of the Adviser and the Corporation.

The Board considered that Mr. Braunschweig has served as a director of the Corporation since 2009. The Board considered his professional experience serving in various executive positions with CPL Industries, Inc. and his auditing experience. The Board also considered Mr. Braunschweig’s experience serving as an executive and director of a private charitable foundation. The Board considered the audit, executive, financial, and operations experience that Mr. Braunschweig gained over the course of his career.

The Board considered Ms. Costello’s professional experience serving in various positions with BMO entities since 1983, including her most recent appointment as CEO of BMO Financial Corp. and U.S. Country Head. The Board also considered the executive, financial, and operations experience that Ms. Costello gained over the course of her career and through her financial industry experience. The Board also considered that because of Ms. Costello’s positions with BMO, she is involved in the day-to-day management of the Adviser’s parent organization and has responsibility for overseeing the operational transitions following BMO’s acquisition of Marshall & Ilsley Corporation.

The Board considered that Mr. Cutler has served as a director of the Corporation since 2004. The Board considered his professional experience serving in various executive positions with large health insurance companies, including most recently as Chairman, CEO, and President of USHEALTH Group, Inc. The Board also considered the executive, financial, and operations experience that Mr. Cutler gained over the course of his career.

The Board considered that Mr. Lubs has served as a director of the Corporation since 2004. The Board considered his professional experience serving in various executive positions with Mason Companies, Inc. Mr. Lubs also serves as a trustee of Third Order of St. Francis Foundation and of North Bay Trading Co. The Board also considered the executive, financial, and operations experience that Mr. Lubs gained over the course of his career.

B-38

The Board considered that Mr. Mitchell has served as a director of the Corporation since 1999. The Board considered his professional experience serving in various executive positions, including most recently as Chief Executive Officer of NOG, Inc. The Board also considered the executive, financial, and operations experience that Mr. Mitchell gained over the course of his career.

The Board considered that Ms. Pope has served as a director of the Corporation since 1999, and that she serves as chair of the Audit Committee. The Board considered her professional experience serving as President of Barbara J. Pope, P.C. and President of Sedgwick Street Fund LLC, as well as her experience as a tax partner at an accounting firm. The Board also considered the executive, financial, and investment experience that Ms. Pope gained over the course of her career.

References to the experience and qualifications of the directors of the Corporation are pursuant to requirements of the SEC, do not constitute holding out the Board or any director as having any special expertise and shall not impose any greater responsibility or liability on any such person or on the Board by reason thereof.

Compensation of Directors

The Corporation pays each independent director an aggregate annual retainer of $60,000. The Corporation does not pay any fees to its interested directors or officers. Neither the Corporation nor the Funds maintain any deferred compensation, pension or retirement plans, and no pension or retirement benefits are accrued as Corporation or Fund expenses. The following table shows the fees paid to the directors by the Corporation for the fiscal year ended August 31, 2012.


Name	Aggregate Compensation from the Corporation⁽¹⁾		Total Compensation from the Corporation and Fund Complex Paid to Directors⁽¹⁾
Larry D. Armel	$	60,000	$	60,000
Ridge A. Braunschweig	$	60,000	$	60,000
Benjamin M. Cutler	$	60,000	$	60,000
John A. Lubs	$	60,000	$	60,000
James Mitchell	$	60,000	$	60,000
Barbara J. Pope	$	60,000	$	60,000

(1)

The BMO Funds Complex currently offers [25] Funds. Each Fund pays an equal portion of the total compensation received by each independent director. The Target Date and Target Risk Funds had not commenced operations prior to the date of this SAI, and, therefore, did not pay any share of the total annual fees paid to the Independent Directors.

Board Ownership of Shares in the Target Date and Target Risk Funds and in the BMO Funds Family as of [December 31, 2012].


Name of Director⁽¹⁾	Dollar Range of Shares Owned in the Target Date and Target Risk Funds	Aggregate Dollar Range of Shares Owned in BMO Funds

Larry D. Armel Independent Director	None	over $100,000

John M. Blaser Interested Director	None	over $100,000

Ridge A. Braunschweig Independent Director	None	over $100,000

Benjamin M. Cutler Independent Director	None	over $100,000

B-39


Name of Director⁽¹⁾	Dollar Range of Shares Owned in the Target Date and Target Risk Funds	Aggregate Dollar Range of Shares Owned in BMO Funds

John A. Lubs Independent Director	None	over $100,000

James Mitchell Independent Director	None	over $100,000

Barbara J. Pope Independent Director	None	over $100,000

Ellen M. Costello Interested Director	None	None

INFORMATION ABOUT THE ADVISER

Adviser to the Funds

The Funds’ investment adviser is BMO Asset Management Corp., a Delaware corporation headquartered in Chicago, Illinois. The Adviser conducts investment research and makes investment decisions for the Funds. The Adviser provides investment management services for investment companies, financial institutions, individuals, corporations, and not-for-profit organizations, and is registered as an investment adviser with the SEC. The Adviser shall not be liable to the Corporation, the Funds, or any shareholder of a Fund for any losses that may be sustained in the purchase, holding, or sale of any security, or for anything done or omitted by it, except acts or omissions involving willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties imposed upon it by its contract with the Corporation. Because of the internal controls maintained by the Adviser’s affiliates to restrict the flow of non-public information, Fund investments are typically made without any knowledge of the lending relationships that affiliates of the Adviser may have. The control persons of the Adviser are described in the Adviser’s Uniform Application for Investment Adviser Registration (Form ADV) as filed with the SEC.

The Adviser does not receive a management fee for the services it performs for the Target Date and Target Risk Funds. However, the Adviser is entitled to receive a management fee from each of the affiliated BMO Funds that serve as underlying funds. In addition, since each Fund pursues its investment objective by primarily investing in other mutual funds, you will bear the proportionate share of a Fund’s operating expenses and also indirectly, the operating expenses of the underlying funds in which it invests.

The Adviser has agreed to waive or reduce its fees and reimburse expenses to the extent necessary to prevent class total annual operating expenses (including acquired funds fees and expenses but excluding interest, taxes, brokerage commissions, other investment-related costs and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of a Fund’s business) from exceeding the percentage of the average daily net assets of each class of the following Funds (the “Expense Limit”), as set forth below. The Adviser may not terminate this arrangement prior to December 31, 2014 unless the investment advisory agreement is terminated.


Fund	Expense Limit
BMO Target Retirement 2010 Fund
Investor Class		0.88	%
Institutional Class		0.63	%
R-3 Class		1.13	%
R-6 Class		0.48	%

B-40


Fund	Expense Limit
BMO Target Retirement 2020 Fund
Investor Class		0.94	%
Institutional Class		0.69	%
R-3 Class		1.19	%
R-6 Class		0.54	%

BMO Target Retirement 2030 Fund
Investor Class		1.01	%
Institutional Class		0.76	%
R-3 Class		1.26	%
R-6 Class		0.61	%

BMO Target Retirement 2040 Fund
Investor Class		1.01	%
Institutional Class		0.76	%
R-3 Class		1.26	%
R-6 Class		0.61	%

BMO Target Retirement 2050 Fund
Investor Class		1.01	%
Institutional Class		0.76	%
R-3 Class		1.26	%
R-6 Class		0.61	%

BMO Diversified Income Fund
Investor Class		0.93	%
Institutional Class		0.63	%
R-3 Class		1.23	%
R-6 Class		0.48	%

BMO Moderate Balanced Fund
Investor Class		0.93	%
Institutional Class		0.63	%
R-3 Class		1.23	%
R-6 Class		0.48	%

BMO Growth Balanced Fund
Investor Class		0.99	%
Institutional Class		0.69	%
R-3 Class		1.29	%
R-6 Class		0.54	%

BMO Aggressive Balanced Fund
Investor Class		0.99	%
Institutional Class		0.69	%
R-3 Class		1.29	%
R-6 Class		0.54	%

B-41


Fund	Expense Limit
BMO Diversified Stock Fund
Investor Class		1.06	%
Institutional Class		0.76	%
R-3 Class		1.36	%
R-6 Class		0.61	%

BMO Aggressive Stock Fund
Investor Class		1.06	%
Institutional Class		0.76	%
R-3 Class		1.36	%
R-6 Class		0.61	%

PORTFOLIO MANAGERS

Other Accounts Managed by Portfolio Managers of the Funds

As described in the Funds’ Prospectus, the portfolio managers listed below are responsible for the day-to-day management of the Funds. The portfolio managers are jointly responsible for the day-to-day management of the Funds and the other accounts are generally managed jointly with the other portfolio manager(s). Unless noted otherwise, none of the mutual fund clients listed in the table pays a performance-based fee to the Adviser.

B-42

Other Accounts Managed by the Portfolio Managers of the Target Retirement Funds and Target Risk Funds

As of [ , 2013]

Other Registered
Investment Companies
Managed by Portfolio
Manager

Other Pooled Investment Vehicle
Managed by Portfolio Manager

Other Accounts Managed by
Portfolio Manager

Portfolio Manager

Number

Total
Assets ($)

Number

Total
Assets ($)

Number with
Performance-
Based Fees

Total Assets
of
Pooled
Investment
Vehicles with
Performance-
Based Fees ($)

Number

Total
Assets ($)

Number with
Performance-
Based Fees

Total Assets of
Accounts with
Performance-
Based Fees ($)

John D. Boritzke

Sandy Lincoln

Alan W. Schwartz

B-43

Conflicts of Interest

A conflict of interest may arise as a result of a portfolio manager being responsible for multiple accounts, including the Funds, which may have different investment guidelines and objectives. In addition to the Funds, these accounts may include other mutual funds managed on an advisory or subadvisory basis, separate accounts, and collective trust accounts. An investment opportunity may be suitable for a Fund as well as for any of the other managed accounts. However, the investment may not be available in sufficient quantity for all of the accounts to participate fully. In addition, there may be limited opportunity to sell an investment held by a Fund and the other accounts. The other accounts may have similar investment objectives or strategies as the Funds, they may track the same benchmarks or indexes as the Funds track, and they may sell securities that are eligible to be held, sold or purchased by the Funds. A portfolio manager may be responsible for accounts that have different advisory fee schedules, which may create the incentive for the portfolio manager to favor one account over another in terms of access to investment opportunities. A portfolio manager also may manage accounts whose investment objectives and policies differ from those of the Funds, which may cause the portfolio manager to effect trading in one account that may have an adverse effect on the value of the holdings within another account, including a Fund.

To address and manage these potential conflicts of interest, the Adviser has adopted compliance policies and procedures to allocate investment opportunities and to ensure that each of their clients is treated on a fair and equitable basis. Such policies and procedures include, but are not limited to, trade allocation and trade aggregation policies, cross trading policies, portfolio manager assignment practices, and oversight by investment management, and/or compliance departments.

The portfolio managers must make investment decisions without taking into consideration or being in possession of, material non-public information about the underlying funds. The Adviser has established procedures to prevent portfolio managers from trading on material, non-public information. In the event that the portfolio manager comes into possession of material, non-public information about an underlying affiliated fund the portfolio managers’ ability to initiate transactions in the underlying affiliated fund could potentially be restricted as a result of the portfolio manager’s possession of such information. The trading restriction could have an adverse effect on the ability of a fund managed by the portfolio managers to participate in any potential gains or avoid any potential losses in the restricted underlying affiliated fund. In some instances, these trading restrictions could continue in effect for a substantial period of time.

Compensation of Portfolio Managers

Compensation for the Adviser’s portfolio managers consists of base salary, which is monitored to ensure competitiveness in the external marketplace. In addition to base salary, portfolio managers have a portion of their compensation tied to the investment performance of client accounts. The formula for each professional varies according to their level of portfolio responsibility and seniority. Investment professionals may also receive bonuses of restricted share units or other units linked to the performance of BMO.

Ownership of Fund Shares by Portfolio Managers

No ownership information is provided because the Funds were not offered for sale prior to the date of this SAI.

B-44

VOTING PROXIES ON FUND PORTFOLIO SECURITIES

The Board has delegated the authority to vote proxies relating to the securities held in the Funds’ portfolios to the Adviser.

Adviser’s Proxy Voting Policy and Guidelines

The Adviser has adopted proxy voting policies and procedures reasonably designed to ensure that proxies are voted in the best interest of clients. The policies and procedures were developed by a Proxy Advisory Committee established by the Adviser with certain affiliates of BMO Financial Corp. The proxy policies and procedures generally address issues related to boards of directors, compensation plans, auditors, and shareholder rights. In situations where there is a conflict of interest, the Adviser will obtain a proxy voting recommendation from an independent proxy voting advisory service and will ultimately vote proxies in the best economic interests of clients without consideration of any benefit to the Adviser or its affiliates. If an underlying affiliated fund has a shareholder meeting, a Fund will vote its shares in the underlying affiliated fund in the same proportion as the votes of the other shareholders of the underlying fund.

Proxy Voting Record

Each Fund is required to disclose annually its proxy voting record for the most recent 12-month period ended June 30 and files it with the SEC by August 31. Each Fund’s proxy voting record will be available at that time without charge, either upon request, by calling toll free, 1-800-236-FUND (3863), or by accessing the SEC’s website at http://www.sec.gov.

PORTFOLIO HOLDINGS DISCLOSURE POLICY

The Funds do not provide or permit others to provide information about the Funds’ portfolio holdings to any third party, except as permitted by the Corporation’s policy regarding disclosure of portfolio holdings (Disclosure Policy). This Disclosure Policy also applies to the Adviser and BMO Harris Bank. Pursuant to the Disclosure Policy, information about the Funds’ portfolio holdings may be disclosed as required by SEC regulations and in the following circumstances:

•

As required by SEC regulations, a Fund’s portfolio holdings are disclosed in publicly available filings with the SEC including Form N-CSR, Form N-Q, and Form N-MFP;

•

Fund portfolio holdings may be disclosed in regulatory filings (including in Form N-CSRs, Form N-Qs, and Form N-MFPs);

•

Fund portfolio holdings may be disclosed from time to time, to the Funds’ service providers, including the administrator, sub-administrator, custodians, fund accountant, transfer agent, independent accountant, legal counsel, and financial printer, in connection with the fulfillment of their duties to the Funds and the Corporation;

•

Each Fund makes a complete list of its portfolio holdings publicly available on the Funds’ website, http://www.bmofundsus.com, approximately thirty days after the end of each month;

•

The Funds’ portfolio holdings as of each month end are disclosed to certain approved institutional databases and rating agencies that rate a Fund; and

The Corporation is prohibited from entering into any other arrangements to disclose information regarding the Funds’ portfolio securities prior to public availability without prior approval of the Board. Third parties who receive portfolio holdings information are subject to restrictions by contract or by law that prohibit the disclosure or misuse of the holdings information to ensure that the information remains confidential. No compensation or other consideration

B-45

may be received by the Funds, the Adviser or BMO Harris Bank in connection with the disclosure of portfolio holdings in accordance with this policy. The Funds’ Chief Compliance Officer monitors compliance with the Disclosure Policy and reports any violations to the Board.

The Board will review any disclosures of Fund portfolio holdings outside of the permitted disclosures described above on a quarterly basis to ensure that disclosure of information about portfolio holdings is in the best interest of Fund shareholders and to address any conflicts between the interests of Fund shareholders and those of the Adviser or any other Fund affiliate.

B-46

BROKERAGE TRANSACTIONS

The Target Date and Target Risk Funds will not incur any brokerage commissions for purchasing shares of the underlying funds. However, the Funds may incur brokerage commissions and/or investment dealer concessions when purchasing short-term and other securities for the Funds. Portfolio transactions for the Funds may be executed as part of concurrent authorizations to purchase or sell the same security for other funds advised by the Adviser. When such concurrent authorizations occur, the objective is to allocate the executions in an equitable manner.

Each underlying fund has policies with respect to the execution of its portfolio transactions which are described in the applicable statement of additional information.

The Adviser generally seeks to allocate portfolio transactions equitably whenever concurrent decisions are made to purchase or sell securities by the Funds and other advisory accounts. There can be no assurance that a particular purchase or sale opportunity will be allocated to a Fund. In making allocations between the Funds, and between a Fund and other advisory accounts, certain factors considered by the Adviser are the respective investment objectives, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, and the size of investment commitments generally held.

INFORMATION ABOUT THE FUNDS’ SERVICE PROVIDERS

Code of Ethics Restrictions on Personal Trading

As required by SEC rules, the Funds, the Adviser and the Distributor have adopted codes of ethics. These codes govern securities trading activities of investment personnel, Fund directors, and certain other employees (Access Persons). Although the codes permit Access Persons to trade in securities, including those that the Funds could buy, they also contain significant safeguards designed to protect the Funds and their shareholders from abuses in this area, such as requirements to obtain prior approval for, and to report, particular transactions.

Administrator and Shareholder Servicing Agent

The Adviser serves as the administrator to the Funds. As administrator, the Adviser is entitled to receive an annual fee equal to 0.15% of each Fund’s Class Y, Class I and Class R-3 assets.

The Advisor is currently waiving the administrative fee for each Fund’s Class R shares.

No administrative fee information is provided for the Funds because they were not offered for sale prior to the date of this SAI.

The administrator may choose voluntarily to reimburse a portion of its fee at any time.

The functions performed by the administrator include, but are not limited, to the following:

•

preparation, filing, and maintenance of the Corporation’s governing documents, minutes of Board meetings, and shareholder meetings;

•

preparation and filing with the SEC and state regulatory authorities, the Corporation’s registration statement and all amendments, and any other documents required for the Funds to make a continuous offering of their shares;

•

preparation, negotiation, and administration of contracts on behalf of a Fund;

•

supervision of the preparation of financial reports;

•

preparation and filing of federal and state tax returns;

B-47

•

assistance with the design, development, and operation of a Fund; and

•

provision of advice to the Funds and the Board.

The Adviser also serves as the shareholder servicing agent to the Funds. The services provided by the Adviser and the fees received for these services are described under “How are Fund Shares Sold? — Shareholder Services.”

Sub-Administrator

UMBFS is the Funds’ sub-administrator pursuant to the Sub-Administration Agreement with the administrator. Under the Sub-Administration Agreement, the functions performed by UMBFS include and relate to, but are not limited to, the following:

•

review and filing with the SEC and state regulatory authorities of the Corporation’s registration statement and all amendments, and any other documents required for the Funds to make a continuous offering of their shares;

•

drafting and reviewing of the Funds’ annual and semi-annual reports;

•

various services relating to the shareholder and Board meetings, such as preparing and obtaining executed authorized signatures, attendance at Board meetings, and drafting of proxy materials;

•

obtaining CUSIPs, NASDAQ symbols, and IRS tax identification numbers;

•

coordination and facilitation of external audits by the Corporation’s independent auditors and regulatory examinations of the Corporation;

•

follow-up on any issues surrounding reporting of performance for the Funds; and

•

preparation of the Corporation’s tax returns.

For its services, UMBFS is entitled to receive from the administrator with respect to each of the Funds, in addition to a monthly multi-class fee of $200 per class and out-of-pocket expenses, fees at the following annual rates as a percentage of the Fund’s ADNA.


ADNA	Fee (Domestic Funds)			Fee (International Funds)
Up to $200 million		0.0090	%		0.0300	%
Next $200 million		0.0085			0.0250
Next $200 million		0.0075			0.0200
Next $200 million		0.0065			0.0175
Next $200 million		0.0055			0.0150
Next $200 million		0.0045			0.0125
Over $1.2 billion		0.0035			0.0100

Payments to Financial Intermediaries

The Adviser, BMO Harris Bank, BMO Harris Financial Advisors, Inc., MID, and/or their affiliates may pay compensation, out of their own assets and not as an additional charge to each Fund, to financial intermediaries, including their affiliates, for services provided to clients who hold Fund shares, for introducing new shareholders to the Funds and for other services. These payments may vary in amount and generally range from 0.05% to 0.40%.

B-48

The Adviser, BMO Harris Bank, BMO Harris Financial Advisors, Inc., MID, and/or their affiliates currently anticipate that such payments may be made to the following financial intermediaries.


Financial Intermediaries
American United Life Insurance Co.		Linsco Private Ledger
AXA Advisors		Mesirow Financial Inc.
BB&T Investment Services Inc.		MG Trust Company LLC
Charles Schwab & Co. Inc.		Mid Atlantic Capital Corp.
DA Davidson & Company		Money Concepts Capital Corp.
Eagle One Investments LLC		National Financial Services
Edward D. Jones & Co.		Northwestern Mutual Investment
ETrade Clearing LLC		P.J. Robb Variable Corp.
First Clearing Corporation LLC		Penson Financial Services Inc.
GWFS Equities Inc.		Pershing, LLC
HC Denison Company		PNC Capital Markets
Hartford Life Insurance Co.		Prudential Investment
Morgan Stanley Smith Barney LLC		Prudential Retirement
RBC Dain Rauscher Inc.		TD Ameritrade Inc.
Reliance Trust Company		Trust Company of America
Robert W. Baird		US Bancorp Investments Inc.
Securian Financial Services Inc.		UBS Financial Services Inc.
Securities America Inc.		USAA Investment Management Co.
Sterne Agee & Leach Inc.		Vanguard Group, Inc.
Stifel Nicolaus & Company Inc.		Wells Fargo Bank NA
LaSalle Bank		Well Fargo Advisors LLC
Legent Clearing

Transfer Agent and Dividend Disbursing Agent

Boston Financial Data Services, Inc., 2000 Crown Colony Drive, Quincy, Massachusetts, maintains all necessary shareholder records. For its services, the transfer agent receives a fee based on the size, type, and number of accounts and transactions made by shareholders. The fee is based on the level of the Funds’ average net assets for the period plus out-of-pocket expenses.

Each Fund may pay amounts to third parties, such as banks, broker-dealers, or affiliated entities, including BMO Harris Bank, that provide recordkeeping services, shareholder servicing, and/or other administrative services to the Funds.

Fund Accountants

UMBFS, 803 West Michigan Street, Milwaukee, Wisconsin, provides fund accounting services to the Funds.

For their services, UMBFS and State Street Bank & Trust Company receive a fee based on net assets of the Funds.

Custodian

BMO Harris Bank, 111 W. Monroe Street, Chicago, Illinois 60603, an indirect wholly-owned subsidiary of BMO Corp., is a custodian for the securities and cash of the Funds. For its services as custodian, BMO Harris Bank receives an annual fee, payable monthly, based on a percentage of a Fund’s average aggregate daily net assets.

B-49

Independent Registered Public Accounting Firm

The independent registered public accounting firm for the Funds, KPMG LLP, 777 East Wisconsin Avenue, Milwaukee, WI 53202, conducts its audits in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require it to plan and perform its audits to provide reasonable assurance about whether the Funds’ financial statements and financial highlights are free of material misstatements.

PERFORMANCE

From time to time, when available, the yield and total return of the Investor Class, Institutional Class, R-3 Class and or R-6 Class Shares of a Fund may be quoted in advertisements, shareholder reports or other communications to shareholders. Performance information is generally available by calling the Funds (toll free) at 1-800-236-FUND (3863).

FINANCIAL STATEMENTS

A copy of the Annual Report, when available, for a Fund may be obtained without charge by contacting BMO Funds U.S. Services at the address located on the back cover of the SAI or by calling BMO Funds U.S. Services at 1-414-287-8555 or 1-800-236-FUND (3863).

B-50

APPENDIX A - RATINGS DEFINITIONS

Standard & Poor’s Issue Credit Rating Definitions

A Standard & Poor’s issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects Standard & Poor’s view of the obligor’s capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.

Issue credit ratings can be either long term or short term. Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 days — including commercial paper. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. The result is a dual rating, in which the short-term rating addresses the put feature, in addition to the usual long-term rating. Medium-term notes are assigned long-term ratings.

Short-Term Issue Credit Ratings

A-1

A short-term obligation rated ‘A-1’ is rated in the highest category by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.

A-2

A short-term obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.

A-3

A short-term obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

A short-term obligation rated ‘B’ is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitments.

App. A-1

A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.

A short-term obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation are not made on the due date, unless Standard & Poor’s believes that such payments will be made within any stated grace period. However, any stated grace period longer than five days will be treated as five business days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

SPUR (Standard & Poor’s Underlying Rating)

A SPUR rating is a rating of a stand-alone capacity of an issue to pay debt service on a credit-enhanced debt issue, without giving effect to the enhancement that applies to it. These ratings are published only at the request of the debt issuer/obligor with the designation SPUR to distinguish them from the credit-enhanced rating that applies to the debt issue. Standard & Poor’s maintains surveillance of an issue with a published SPUR.

Dual Ratings

Standard & Poor’s assigns “dual” ratings to all debt issues that have a put option or demand feature as part of their structure. The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term rating symbols are used for bonds to denote the long-term maturity and the short-term rating symbols for the put option (for example, ‘AAA/A-1+’). With U.S. municipal short-term demand debt, note rating symbols are used with the short-term issue credit rating symbols (for example, ‘SP-1+/A-1+’).

The analyses, including ratings, of Standard & Poor’s and its affiliates (together Standard & Poor’s) are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or make any investment decisions. Standard & Poor’s assumes no obligation to update any information following publication. Users of ratings or other analyses should not rely on them in making any investment decision. Standard & Poor’s opinions and analyses do not address the suitability of any security. Standard & Poor’s does not act as a fiduciary or an investment advisor except where registered as such. While Standard & Poor’s has obtained information from sources it believes to be reliable, Standard & Poor’s does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Ratings and credit related opinions may be changed, suspended, or withdrawn at any time.

Active Qualifiers (Currently applied and/or outstanding)

Standard & Poor’s assigns qualifiers to ratings when appropriate. This section details active and inactive qualifiers.

1.	Federal Deposit Insurance Limit: “L” qualifier

Ratings qualified with ‘L’ apply only to amounts invested up to federal deposit insurance limits.

App. A-2

2.	Principal Payment: “p” qualifier

This suffix is used for issues in which the credit factors, the terms, or both, that determine the likelihood of receipt of payment of principal are different from the credit factors, terms or both that determine the likelihood of receipt of interest on the obligation. The ‘p’ suffix indicates that the rating addresses the principal portion of the obligation only. The ‘p’ suffix will always be used in conjunction with the ‘i’ suffix, which addresses likelihood of receipt of interest. For example, a rated obligation could be assigned ratings of “AAAp NRi” indicating that the principal portion is rated “AAA” and the interest portion of the obligation is not rated.

3.	Interest Payment: “I” qualifier

This suffix is used for issues in which the credit factors, terms, or both, that determine the likelihood of receipt of payment of interest are different from the credit factors, terms or both that determine the likelihood of receipt of principal on the obligation. The ‘i’ suffix indicates that the rating addresses the interest portion of the obligation only. The ‘i’ suffix will always be used in conjunction with the ‘p’ suffix, which addresses likelihood of receipt of principal. For example, a rated obligation could be assigned ratings of “AAAp NRi” indicating that the principal portion is rated “AAA” and the interest portion of the obligation is not rated.

4.	Public Information Ratings: “pi” qualifier

Ratings with a ‘pi’ suffix are based on an analysis of an issuer’s published financial information, as well as additional information in the public domain. They do not, however, reflect in-depth meetings with an issuer’s management and therefore may be based on less comprehensive information than ratings without a ‘pi’ suffix. Ratings with a ‘pi’ suffix are reviewed annually based on a new year’s financial statements, but may be reviewed on an interim basis if a major event occurs that may affect the issuer’s credit quality.

5.	Preliminary Ratings: “prelim” qualifier

Preliminary ratings, with the ‘prelim’ suffix, may be assigned to obligors or obligations, including financial programs, in the circumstances described below. Assignment of a final rating is conditional on the receipt by Standard & Poor’s of appropriate documentation. Standard & Poor’s reserves the right not to issue a final rating. Moreover, if a final rating is issued, it may differ from the preliminary rating.

•

Preliminary ratings may be assigned to obligations, most commonly structured and project finance issues, pending receipt of final documentation and legal opinions.

•

Preliminary ratings are assigned to Rule 415 Shelf Registrations. As specific issues, with defined terms, are offered from the master registration, a final rating may be assigned to them in accordance with Standard & Poor’s policies

•

Preliminary ratings may be assigned to obligations that will likely be issued upon the obligor’s emergence from bankruptcy or similar reorganization, based on late-stage reorganization plans, documentation and discussions with the obligor. Preliminary ratings may also be assigned to the obligors. These ratings consider the anticipated general credit quality of the reorganized or postbankruptcy issuer as well as attributes of the anticipated obligation(s).

•

Preliminary ratings may be assigned to entities that are being formed or that are in the process of being independently established when, in Standard & Poor’s opinion, documentation is close to final. Preliminary ratings may also be assigned to these entities’ obligations.

App. A-3

•

Preliminary ratings may be assigned when a previously unrated entity is undergoing a well-formulated restructuring, recapitalization, significant financing or other transformative event, generally at the point that investor or lender commitments are invited. The preliminary rating may be assigned to the entity and to its proposed obligation(s). These preliminary ratings consider the anticipated general credit quality of the obligor, as well as attributes of the anticipated obligation(s), assuming successful completion of the transformative event. Should the transformative event not occur, Standard & Poor’s would likely withdraw these preliminary ratings.

•

A preliminary recovery rating may be assigned to an obligation that has a preliminary issue credit rating.

6.	Termination Structures: “t” qualifier

This symbol indicates termination structures that are designed to honor their contracts to full maturity or, should certain events occur, to terminate and cash settle all their contracts before their final maturity date.

Inactive Qualifiers

Inactive qualifiers are no longer applied or outstanding.

1.	*Contingent upon final documentation: “” inactive qualifier**

This symbol indicated continuance of the ratings is contingent upon Standard & Poor’s receipt of an executed copy of the escrow agreement or closing documentation confirming investments and cash flows. Discontinued use in August 1998.

2.	Termination of obligation to tender: “c” inactive qualifier

This qualifier was used to provide additional information to investors that the bank may terminate its obligation to purchase tendered bonds if the long-term credit rating of the issuer is below an investment-grade level and/or the issuer’s bonds are deemed taxable. Discontinued use in January 2001.

3.	U.S. direct government securities: “G” inactive qualifier

The letter “G” following the rating symbol when a fund’s portfolio consists primarily of direct U.S. Government securities.

4.	Provisional Ratings: “pr” inactive qualifier

The letters ‘pr’ indicate that the rating is provisional. A provisional rating assumes the successful completion of the project financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful, timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of or the risk of default upon failure of such completion. The investor should exercise his own judgment with respect to such likelihood and risk.

5.	Quantitative Analysis of publication information: “q” inactive qualifier

A ‘q’ subscript indicates that the rating is based solely on quantitative analysis of publicly available information. Discontinued use in April 2001.

6.	Extraordinary risks: “r” inactive qualifier

The ‘r’ modifier was assigned to securities containing extraordinary risks, particularly market risks, that are not covered in the credit rating. The absence of an ‘r’ modifier should not be taken as an indication that an obligation will not exhibit extraordinary non-credit related risks. Standard & Poor’s discontinued the use of the ‘r’ modifier for most obligations in June 2000 and for the balance of obligations (mainly structured finance transactions) in November 2002.

App. A-4

Other Identifiers

1.	Unsolicited: “unsolicited” identifier

Unsolicited ratings are those credit ratings assigned at the initiative of Standard & Poor’s and not at the request of the issuer or its agents.

2.	Structured finance: “sf” identifier

The (sf) suffix is assigned to all issues and issuers to which a regulation, such as the European Union Regulation on Credit Rating Agencies, requires the assignment of an additional symbol which distinguishes a structured finance instrument or obligor (as defined in the regulation) from any other instrument or obligor. The addition of this suffix to a credit rating does not change the definition of that rating or our opinion about the issue’s or issuer’s creditworthiness.

Local Currency and Foreign Currency Ratings

Standard & Poor’s issuer credit ratings make a distinction between foreign currency ratings and local currency ratings. An issuer’s foreign currency rating will differ from its local currency rating when the obligor has a different capacity to meet its obligations denominated in its local currency, vs. obligations denominated in a foreign currency.

App. A-5

Moody’s Credit Rating Definitions

Purpose

The system of rating securities was originated by John Moody in 1909. The purpose of Moody’s ratings is to provide investors with a simple system of gradation by which future relative creditworthiness of securities may be gauged.

Rating Symbols

Gradations of creditworthiness are indicated by rating symbols, with each symbol representing a group in which the credit characteristics are broadly the same. There are nine symbols as shown below, from that used to designate least credit risk to that denoting greatest credit risk:

Aaa Aa A Baa Ba B Caa Ca C

Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa.

Absence of a Rating

Where no rating has been assigned or where a rating has been withdrawn, it may be for reasons unrelated to the creditworthiness of the issue.

Should no rating be assigned, the reason may be one of the following:

1.	An application was not received or accepted.

2.	The issue or issuer belongs to a group of securities or entities that are not rated as a matter of policy.

3.	There is a lack of essential data pertaining to the issue or issuer.

4.	The issue was privately placed, in which case the rating is not published in Moody’s publications.

Withdrawal may occur if new and material circumstances arise, the effects of which preclude satisfactory analysis; if there is no longer available reasonable up-to-date data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons.

Changes in Rating

The credit quality of most issuers and their obligations is not fixed and steady over a period of time, but tends to undergo change. For this reason changes in ratings occur so as to reflect variations in the intrinsic relative position of issuers and their obligations.

A change in rating may thus occur at any time in the case of an individual issue. Such rating change should serve notice that Moody’s observes some alteration in creditworthiness, or that the previous rating did not fully reflect the quality of the bond as now seen. While because of their very nature, changes are to be expected more frequently among bonds of lower ratings than among bonds of higher ratings. Nevertheless, the user of bond ratings should keep close and constant check on all ratings — both high and low — to be able to note promptly any signs of change in status that may occur.

App. A-6

Limitations to Uses of Ratings*

Obligations carrying the same rating are not claimed to be of absolutely equal credit quality. In a broad sense, they are alike in position, but since there are a limited number of rating classes used in grading thousands of bonds, the symbols cannot reflect the same shadings of risk which actually exist.

As ratings are designed exclusively for the purpose of grading obligations according to their credit quality, they should not be used alone as a basis for investment operations. For example, they have no value in forecasting the direction of future trends of market price. Market price movements in bonds are influenced not only by the credit quality of individual issues but also by changes in money rates and general economic trends, as well as by the length of maturity, etc. During its life even the highest rated bond may have wide price movements, while its high rating status remains unchanged.

The matter of market price has no bearing whatsoever on the determination of ratings, which are not to be construed as recommendations with respect to “attractiveness”. The attractiveness of a given bond may depend on its yield, its maturity date or other factors for which the investor may search, as well as on its credit quality, the only characteristic to which the rating refers.

Since ratings involve judgments about the future, on the one hand, and since they are used by investors as a means of protection, on the other, the effort is made when assigning ratings to look at “worst” possibilities in the “visible” future, rather than solely at the past record and the status of the present. Therefore, investors using the rating should not expect to find in them a reflection of statistical factors alone, since they are an appraisal of long-term risks, including the recognition of many non-statistical factors.

Though ratings may be used by the banking authorities to classify bonds in their bank examination procedure, Moody’s ratings are not made with these bank regulations in mind. Moody’s Investors Service’s own judgment as to the desirability or non-desirability of a bond for bank investment purposes is not indicated by Moody’s ratings.

Moody’s ratings represent the opinion of Moody’s Investors Service as to the relative creditworthiness of securities. As such, they should be used in conjunction with the descriptions and statistics appearing in Moody’s publications. Reference should be made to these statements for information regarding the issuer. Moody’s ratings are not commercial credit ratings. In no case is default or receivership to be imputed unless expressly stated.

As set forth more fully on the copyright, credit ratings are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, selling or holding.

Short-Term Obligation Ratings

Moody’s assigns ratings to long-term and short-term financial obligations. Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default. Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect the likelihood of a default on contractually promised payments.

Moody’s employs the following designations to indicate the relative repayment ability of rated issuers:

P-1

Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

App. A-7

P-2

Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

P-3

Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.

Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

The following table indicates the long-term ratings consistent with different short-term ratings when such long-term ratings exist.

SHORT-TERM VS. LONG-TERM RATINGS

LOGO

App. A-8

Fitch’s National Credit Ratings

For those countries in which foreign and local currency sovereign ratings are below ‘AAA’, and where there is demand for such ratings, Fitch Ratings will provide National Ratings. It is important to note that each National Rating scale is unique and is defined to serve the needs of the local market in question.

The National Rating scale provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ Long-Term National Rating will be assigned to the lowest relative risk within that country, which, in most but not all cases, will be the sovereign state.

The National Rating scale merely ranks the degree of perceived risk relative to the lowest default risk in that same country. Like local currency ratings, National Ratings exclude the effects of sovereign and transfer risk and exclude the possibility that investors may be unable to repatriate any due interest and principal repayments. It is not related to the rating scale of any other national market. Comparisons between different national scales or between an individual national scale and the international rating scale are therefore inappropriate and potentially misleading. Consequently they are identified by the addition of a special identifier for the country concerned, such as ‘AAA(arg)’ for National Ratings in Argentina.

In certain countries, regulators have established credit rating scales, to be used within their domestic markets, using specific nomenclature. In these countries, the agency’s National Rating definitions may be substituted by the regulatory scales. For instance, Fitch’s National Short Term Ratings of ‘F1+(xxx)’, ‘F1(xxx)’, ‘F2(xxx)’ and ‘F3(xxx)’ may be substituted by the regulatory scales, e.g. ‘A1+’, ‘A1’, ‘A2’ and ‘A3’. The below definitions thus serve as a template, but users should consult the individual scales for each country listed on Fitch’s regional websites to determine if any additional or alternative category definitions apply.

Limitations of the National Rating Scale

Specific limitations relevant to National Rating scale include:

•

National scale ratings are only available in selected countries.

•

National scale ratings are only directly comparable with other national ratings in the same country. There is a certain correlation between national and global ratings but there is not a precise translation between the scales. The implied probability of default of a given national scale rating will vary over time.

•

The value of default studies for national ratings can be limited. Due to the relative nature of national scales, a given national scale rating is not intended to represent a fixed amount of default risk over time. As a result, a default study using only national ratings may not give an accurate picture of the historical relationship between ratings and default risk. Users should exercise caution if they wish to infer future default probabilities for national scale ratings using the historical default experience with international ratings and mapping tables to link the national and international ratings. As with ratings on any scale, the future will not necessarily follow the past.

•

Fitch attaches less confidence to conclusions about national scale default probabilities than for International Credit ratings. There has not been a comprehensive global study of default history among entities with national scales to show that their ex-post default experience has been consistent with ex-ante probabilities implied. This is due to the relatively short history of ratings in emerging markets and the restrictive relative nature of the national scales.

The above list is not exhaustive, and is provided for the reader’s convenience. Readers are requested to review the section Understanding Credit Ratings — Limitations and Usage for further information on the limitations of the agency’s ratings.

App. A-9

National Short-Term Credit Ratings

F1(xxx)

Indicates the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. Under the agency’s National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country. Where the liquidity profile is particularly strong, a “+” is added to the assigned rating.

F2(xxx)

Indicates a good capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. However, the margin of safety is not as great as in the case of the higher ratings.

F3(xxx)

Indicates an adequate capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. However, such capacity is more susceptible to near-term adverse changes than for financial commitments in higher rated categories.

B(xxx)

Indicates an uncertain capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. Such capacity is highly susceptible to near-term adverse changes in financial and economic conditions.

C(xxx)

Indicates a highly uncertain capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.

RD: Restricted default

Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only.

D(xxx)

Indicates actual or imminent payment default.

Notes to Long-Term and Short-Term National Ratings:

The ISO international country code is placed in parentheses immediately following the rating letters to indicate the identity of the National market within which the rating applies. For illustrative purposes, (xxx) has been used.

“+” or “-” may be appended to a National Rating to denote relative status within a major rating category. Such suffixes are not added to the ‘AAA(xxx)’ Long-Term National Rating category, to categories below ‘CCC(xxx)’, or to Short-Term National Ratings other than ‘F1(xxx)’.

App. A-10

LONG-TERM RATINGS

Standard & Poor’s Long-Term Issue Credit Ratings

Issue credit ratings are based, in varying degrees, on Standard & Poor’s analysis of the following considerations:

•

Likelihood of payment — capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;

•

Nature of and provisions of the obligation;

•

Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors’ rights.

Issue ratings are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)

AAA

An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

BBB

An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

BB, B, CCC, CC, and C

Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

App. A-11

An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

CCC

An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

An obligation rated ‘CC’ is currently highly vulnerable to nonpayment.

A ‘C’ rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the ‘C’ rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument’s terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

An obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation are not made on the due date, unless Standard & Poor’s believes that such payments will be made within five business days, irrespective of any grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of similar action if payments on an obligation are jeopardized. An obligation’s rating is lowered to ‘D’ upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate a particular obligation as a matter of policy.

Plus (+) or minus (-)

The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

See active and inactive qualifiers following Standard & Poor’s Short-Term Issue Credit Ratings beginning on page A-3.

App. A-12

Moody’s Long-Term Obligation Ratings

Long-Term Obligation Ratings

Moody’s Long-Term Rating Definitions:

Aaa

Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

Obligations rated A are considered upper-medium grade and are subject to low credit risk.

Baa

Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

Obligations rated B are considered speculative and are subject to high credit risk.

Caa

Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

App. A-13

Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aaa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a “(hyb)” indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.*

By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.

App. A-14

Fitch’s National Long-Term Credit Ratings

AAA(xxx)

‘AAA’ National Ratings denote the highest rating assigned by the agency in its National Rating scale for that country. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country.

AA(xxx)

‘AA’ National Ratings denote expectations of very low default risk relative to other issuers or obligations in the same country. The default risk inherent differs only slightly from that of the country’s highest rated issuers or obligations.

A(xxx)

‘A’ National Ratings denote expectations of low default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions may affect the capacity for timely repayment to a greater degree than is the case for financial commitments denoted by a higher rated category.

BBB(xxx)

‘BBB’ National Ratings denote a moderate default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher rated category.

BB(xxx)

‘BB’ National Ratings denote an elevated default risk relative to other issuers or obligations in the same country. Within the context of the country, payment is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.

B(xxx)

‘B’ National Ratings denote a significantly elevated default risk relative to other issuers or obligations in the same country. Financial commitments are currently being met but a limited margin of safety remains and capacity for continued timely payments is contingent upon a sustained, favorable business and economic environment. For individual obligations, may indicate distressed or defaulted obligations with potential for extremely high recoveries.

CCC(xxx)

‘CCC’ National Ratings denote that default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic conditions.

CC(xxx)

‘CC’ National Ratings denote that default of some kind appears probable.

C(xxx)

‘C’ National Ratings denote that default is imminent.

App. A-15

RD: Restricted default.

“RD” ratings indicated that an issuer that in Fitch Ratings’ opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased business. This would include:

•

a. the selective payment default on a specific class or currency of debt;

•

b. the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a bank loan, capital markets security or other material financial obligation;

•

c. the extension of multiple waivers or forbearance periods upon a payment default on one or more material financial obligations either in series or in parallel; or

•

d. execution of a distressed debt exchange on one or more material financial obligations.

D(xxx)

‘D’ National Ratings denote an issuer or instrument that is currently in default.

Notes to Long-Term and Short-Term National Ratings:

The ISO International country code is placed in parentheses immediately following the rating letters to indicate the identity of the National market within which the rating applies. For illustrative purposes, (xxx) has been used.

App. A-16

MUNICIPAL NOTE RATINGS

Standard & Poor’s Municipal Short-Term Note Ratings Definitions

A Standard & Poor’s U.S. municipal note rating reflects Standard & Poor’s opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, Standard & Poor’s analysis will review the following considerations:

•

Amortization schedule — the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and

•

Source of payment — the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.

Note rating symbols are as follows:

SP-1

Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

SP-2

Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

SP-3

Speculative capacity to pay principal and interest.

See active and inactive qualifiers following Standard & Poor’s Short-Term Issue Credit Ratings beginning on page A-3.

Moody’s US Municipal Short-Term Debt And Demand Obligation Ratings

Short-Term Obligation Ratings

While the global short-term ‘prime’ rating scale is applied to US municipal tax-exempt commercial paper, these programs are typically backed by external letters of credit or liquidity facilities and their short-term prime ratings usually map to the long-term rating of the enhancing bank or financial institution and not to the municipality’s rating. Other short-term municipal obligations, which generally have different funding sources for repayment, are rated using two additional short-term rating scales (i.e., the MIG and VMIG scales discussed below).

The Municipal Investment Grade (MIG) scale is used to rate US municipal bond anticipation notes of up to three years maturity. Municipal notes rated on the MIG scale may be secured by either pledged revenues or proceeds of a take-out financing received prior to note maturity. MIG ratings expire at the maturity of the obligation, and the issuer’s long-term rating is only one consideration in assigning the MIG rating. MIG ratings are divided into three levels — MIG 1 through MIG 3 — while speculative grade short-term obligations are designated SG.

App. A-17

MIG 1

This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

MIG 2

This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

MIG 3

This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

Demand Obligation Ratings

In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned: a long or short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation of risk associated with scheduled principal and interest payments. The second element represents Moody’s evaluation of risk associated with the ability to receive purchase price upon demand (“demand feature”). The second element uses a rating from a variation of the MIG scale called the Variable Municipal Investment Grade (VMIG) scale. The rating transitions on the VMIG scale, as shown in the diagram below, differ from those on the Prime scale to reflect the risk that external liquidity support generally will terminate if the issuer’s long-term rating drops below investment grade.

VMIG 1

This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

VMIG 2

This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

VMIG 3

This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.

App. A-18

US MUNICIPAL SHORT-TERM VS. LONG-TERM RATINGS

LOGO

*	For SBPA-backed VRDBS. The rating transitions are higher to allow for distance to downgrade to below-investment grade due to the presence of automatic termination events in the SBPAs

App. A-19

APPENDIX B - ADDRESSES

The Funds:

111 East Kilbourn Avenue, Suite 200

Milwaukee, Wisconsin 53202

P.O. Box 1348

Milwaukee, Wisconsin 53201-1348

Distributor:

M&I Distributors, LLC

111 East Kilbourn Avenue

Milwaukee, Wisconsin 53202

Adviser, Administrator, and Shareholder Servicing Agent:

BMO Asset Management Corp.

115 South LaSalle Street

Chicago, Illinois 60603

Custodian:

BMO Harris Bank N.A.

111 W. Monroe Street

Chicago, Illinois 60603

Transfer Agent and Dividend Disbursing Agent:

Boston Financial Data Services, Inc.

2000 Crown Colony Drive

Quincy, Massachusetts 02171

Sub-Administrator and Portfolio Accounting Services Agent:

UMB Fund Services, Inc.

803 West Michigan Street

Milwaukee, Wisconsin 53233

Legal Counsel:

Stradley Ronon Stevens & Young, LLP

2005 Market Street, Suite 2600

Philadelphia, Pennsylvania 19103

Independent Registered Public Accounting Firm:

KPMG LLP

777 East Wisconsin Avenue

Milwaukee, WI 53202

App. B-1

MARSHALL FUNDS, INC. d/b/a BMO FUNDS

PART C

OTHER INFORMATION

Item 28. Exhibits.


(a)(1)		Articles of Incorporation dated July 30, 1992⁴

(a)(2)		Amendment No. 1 to Articles of Incorporation dated August 11, 1992⁴

(a)(3)		Amendment No. 2 to Articles of Incorporation dated September 14, 1992⁴

(a)(4)		Amendment No. 3 to Articles of Incorporation dated April 23, 1993⁴

(a)(5)		Amendment No. 4 to Articles of Incorporation dated November 1, 1993²

(a)(6)		Amendment No. 5 to Articles of Incorporation dated July 25, 1994⁴

(a)(7)		Amendment No. 6 to Articles of Incorporation dated October 24, 1994⁶

(a)(8)		Amendment No. 7 to Articles of Incorporation dated July 22, 1996⁷

(a)(9)		Amendment No. 8 to Articles of Incorporation dated April 28, 1997⁸

(a)(10)		Amendment No. 9 to Articles of Incorporation dated October 26, 1998⁹

(a)(11)		Amendment No. 10 to Articles of Incorporation dated June 7, 1999¹⁰

(a)(12)		Amendment No. 11 to Articles of Incorporation dated January 31, 2000¹¹

(a)(13)		Amendment No. 12 to Articles of Incorporation dated July 10, 2000¹²

(a)(14)		Amendment No. 13 to Articles of Incorporation dated February 26, 2004¹⁵

(a)(15)		Amendment No. 14 to Articles of Incorporation dated July 30, 2004¹⁵

(a)(16)		Amendment No. 15 to Articles of Incorporation dated June 21, 2005¹⁷

(a)(17)		Amendment No. 16 to Articles of Incorporation dated October 26, 2005¹⁷

(a)(18)		Amendment No. 17 to Articles of Incorporation dated May 7, 2007¹⁹

(a)(19)		Amendment No. 18 to Articles of Incorporation dated January 29, 2008²¹

(a)(20)		Amendment No. 19 to Articles of Incorporation dated December 11, 2008²³

(a)(21)		Amendment No. 20 to Articles of Incorporation dated July 15, 2009²⁴

(a)(22)		Amendment No. 21 to Articles of Incorporation dated May 11, 2010²⁶

(a)(23)		Amendment No. 22 to Articles of Incorporation dated November 30, 2010²⁷

(a)(24)		Amendment No. 23 to Articles of Incorporation dated February 3, 2011²⁸

(a)(25)		Amendment No. 24 to Articles of Incorporation dated December 19, 2011³²

(a)(26)		Amendment No. 25 to Articles of Incorporation dated December 28, 2011³³

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(a)(27)		Amendment No. 26 to Articles of Incorporation dated September 7, 2012³⁴

(a)(28)		Amendment No. 27 to Articles of Incorporation dated September 25, 2012³⁴

(a)(29)		Amendment No. 28 to Articles of Incorporation dated , 2013³⁶

(a)(30)		Amendment No. 29 to Articles of Incorporation dated , 2013³⁶

(b)		By-Laws As Amended and Restated through July 8, 2009²⁴

(c)		Instruments Defining Rights of Security Holders — Incorporated by reference to the Articles of Incorporation and By-Laws

(d)(1)		Form of Investment Advisory Contract with BMO Asset Management Corp. (f/k/a M&I Investment Management Corp.)²⁹

(d)(2)		Form of Amended and Restated Schedules A and B to Investment Advisory Contract dated , 2013³⁶

(d)(3)		Form of Sub-Advisory Agreement with Pyrford International Ltd. for Pyrford International Stock Fund and Pyrford Global Strategic Return Fund³³

(d)(4)		Form of Sub-Advisory Agreement with Lloyd George Management (Hong Kong) Ltd. for Lloyd George Emerging Markets Equity Fund³³

(d)(5)		Form of Sub-Advisory Agreement with Taplin, Canida & Habacht, LLC for TCH Corporate Income Fund and TCH Core Plus Bond Fund³⁰

(d)(6)		Form of Sub-Advisory Agreement with Monegy, Inc. (f/k/a HIM Monegy, Inc.) for Monegy High Yield Bond Fund³³

(d)(7)		Form of Second Amendment to Sub-Advisory Agreement with Taplin, Canida & Habacht, LLC for TCH Emerging Markets Bond Fund³⁴

(e)(1)		Distribution Agreement with M&I Distributors, LLC dated July 5, 2011³¹

(e)(2)		Amended and Restated Schedule A to Distribution Agreement dated , 2013³⁶

(f)		Bonus or Profit Sharing Contracts — None

(g)(1)		Custodian Contract with Marshall & Ilsley Trust Company (now, BMO Harris Bank, N.A.) dated April 26, 1993³

(g)(2)		Amendment to Custodian Contract dated November 1, 1995¹⁷

(g)(3)		Amendment to Custodian Contract dated November 1, 2000¹⁷

(g)(4)		Amendment to Custodian Contract dated June 22, 2001¹³

(g)(5)		Custodian Agreement with State Street Bank and Trust Company (formerly, Investors Bank & Trust Company) dated September 1, 2004¹⁵

(g)(6)		Amendment to Custodian Agreement with State Street Bank and Trust Company dated August 13, 2012³⁴

(h)(1)		Administrative Services Agreement with M&I Trust Company dated January 1, 2000 and Amendment No. 1 to Administrative Services Agreement dated September 15, 2000¹⁴

(h)(2)		Amendment to Administrative Services Agreement dated June 22, 2001¹³

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(h)(3)		Amendment to Administrative Services Agreement dated November 1, 2007²⁰

(h)(4)		Amendment to Administrative Services Agreement dated July 1, 2008²²

(h)(5)		Form of Amendment to Administrative Services Agreement dated , 2013³⁶

(h)(6)		Sub-Administration Agreement with UMB Fund Services, Inc. dated September 1, 2004¹⁵

(h)(7)		Amended and Restated Schedule A to Sub-Administration Agreement dated , 2013³⁶

(h)(8)		Shareholder Services Agreement dated July 5, 2011³¹

(h)(9)		Form of Amended and Restated Exhibit 1 of Shareholder Services Agreement dated , 2013³⁶

(h)(10)		Transfer Agency and Service Agreement with Boston Financial Data Services, Inc. dated June 30, 2011³³

(h)(11)		Amendment to Transfer Agency Agreement dated December 21, 2012³⁵

(h)(12)		Form of Amended Schedule A to Transfer Agency and Service Agreement dated , 2013³⁶

(h)(13)		Fund Accounting Agreement with UMB Fund Services, Inc. dated September 1, 2004¹⁵

(h)(14)		Amended and Restated Schedule A to Fund Accounting Agreement with UMB Fund Services, Inc. dated , 2013³⁶

(h)(15)		Fund Accounting Agreement with State Street Bank and Trust Company (formerly Investors Bank & Trust Company) dated September 1, 2004¹⁵

(h)(16)		Amended and Restated Appendix A to Fund Accounting Agreement with State Street Bank & Trust Company dated , 2013³⁶

(h)(17)		Form of Expense Limitation Agreement³²

(h)(18)		Amended and Restated Schedule A to Expense Limitation Agreement dated , 2013³⁶

(i)(1)		Opinion and Consent¹

(i)(2)		Opinion and Consent of Godfrey & Kahn, S.C. dated May 31, 2007¹⁹

(i)(3)		Opinion and Consent of Godfrey & Kahn, S.C. dated January 29, 2008²¹

(i)(4)		Opinion and Consent of Godfrey & Kahn, S.C. dated December 15, 2008²³

(i)(5)		Opinion and Consent of Godfrey & Kahn, S.C. dated September 29, 2009²⁵

(i)(6)		Opinion and Consent of Godfrey & Kahn, S.C. dated August 30, 2010²⁶

(i)(7)		Opinion and Consent of Godfrey & Kahn, S.C. dated February 28, 2011²⁸

(i)(8)		Opinion and Consent of Godfrey & Kahn, S.C. dated December 29, 2011³³

(i)(9)		Opinion and Consent of Godfrey & Kahn, S.C. dated September 27, 2012³⁴

(i)(10)		Opinion and Consent of Godfrey & Kahn, S.C.³⁶

(j)		Consent of Independent Registered Public Accounting Firm³⁶

(k)		Omitted Financial Statements — None

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(l)		Initial Capital Understanding⁵

(m)(1)		Amended and Restated Rule 12b-1 Plan dated September 2, 2008²²

(m)(2)		Rule 12b-1 Plan dated , 2013³⁶

(m)(3)		Form of Sales and Services Agreement²²

(m)(4)		Form of Sales and Services Agreement, As Amended²⁶

(n)		Amended and Restated Multiple Class Plan dated , 2013³⁶

(o)		Reserved

(p)(1)		Code of Ethics for BMO Asset Management Corp., Monegy, Inc., Marshall Funds, Inc. (BMO Funds) and certain affiliated entities dated July 1, 2012³⁵

(p)(2)		Pyrford International Ltd. Code of Ethics³⁴

(p)(3)		Lloyd George Management (Europe) Ltd. Code of Ethics³⁵

(p)(4)		Taplin, Canida & Habacht, LLC Code of Ethics³⁵

(p)(5)		M&I Distributors, LLC Code of Ethics dated January 1, 2008²²

^#	Filed herewith.

¹	Exhibit to PEA No. 5 filed April 23, 1993.*

²	Exhibit to PEA No. 8 filed December 28, 1993.*

³	Exhibit to PEA No. 10 filed July 1, 1994.*

⁴	Exhibit to PEA No. 11 filed October 21, 1994.*

⁵	Exhibit to PEA No. 14 filed December 26, 1995.*

⁶	Exhibit to PEA No. 15 filed June 17, 1996.*

⁷	Exhibit to PEA No. 17 filed August 30, 1996.*

⁸	Exhibit to PEA No. 22 filed October 21, 1998.*

⁹	Exhibit to PEA No. 27 filed August 27, 1999.*

¹⁰	Exhibit to PEA No. 29 filed October 29, 1999.*

¹¹	Exhibit to PEA No. 31 filed March 1, 2000.*

¹²	Exhibit to PEA No. 33 filed October 30, 2000.*

¹³	Exhibit to PEA No. 34 filed October 29, 2001.*

¹⁴	Exhibit to PEA No. 37 filed October 30, 2003.*

¹⁵	Exhibit to PEA No. 42 filed December 30, 2004.*

¹⁶	Appendix to Definitive Proxy Statement filed July 13, 2005.

¹⁷	Exhibit to PEA No. 46 filed October 31, 2005.*

¹⁸	Exhibit to PEA No. 47 filed October 31, 2006.*

¹⁹	Exhibit to PEA No. 49 filed June 1, 2007.*

²⁰	Exhibit to PEA No. 51 filed November 30, 2007.*

²¹	Exhibit to PEA No. 52 filed January 29, 2008.*

²²	Exhibit to PEA No. 53 filed September 16, 2008.*

²³	Exhibit to PEA No. 55 filed December 15, 2008.*

²⁴	Exhibit to PEA No. 56 filed July 16, 2009.*

²⁵	Exhibit to PEA No. 58 filed September 30, 2009.*

²⁶	Exhibit to PEA No. 64 filed August 30, 2010.*

²⁷	Exhibit to PEA No. 66 filed December 15, 2010.*

²⁸	Exhibit to PEA No. 70 filed February 28, 2011.*

²⁹	Appendix B to Definitive Proxy Statement on Schedule 14A filed August 24, 2011.*

³⁰	Appendix C to Definitive Proxy Statement on Schedule 14A filed August 24, 2011.*

³¹	Exhibit to PEA No. 72 filed October 14, 2011.*

³²	Exhibit to PEA No. 75 filed December 23, 2011.*

³³	Exhibit to PEA No. 76 filed December 29, 2011. *

³⁴	Exhibit to PEA No. 79 filed September 27, 2012. *

³⁵	Exhibit to PEA No. 81 filed December 27, 2012. *

³⁶	To be filed by amendment.

*	Incorporated by reference.

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Item 29. Persons Controlled by or Under Common Control with Registrant.

The information in the Statement of Additional Information captions “Account and Share Information — Control Persons and Principal Shareholders” and “Directors and Officers — Adviser to the Fund” is incorporated by reference.

Item 30. Indemnification.

Reference is made to Article IX of the Registrant’s By-Laws and Section 4 of the Distribution Agreement between the Registrant and M&I Distributors, LLC.

The Registrant’s By-Laws provide for indemnification of its officers and directors to the fullest extent permitted by Wisconsin Business Corporation Law and applicable federal and state securities laws. Notwithstanding the foregoing, the By-Laws state that this indemnification will not protect any officer or director against liability to the Registrant or any shareholder by reason of his/her willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such officer’s or director’s office.

The Distribution Agreement between the Registrant and the Distributor provides that the Registrant will indemnify the Distributor and any of its officers, directors, employees and control persons against certain losses incurred under the securities laws or otherwise, arising out of or based upon any alleged untrue statement or omission of a material fact contained in the Registrant’s SEC filings or other documents and in certain other circumstances.

In addition, the Wisconsin Business Corporation Law requires the Registrant to indemnify each of its officers and directors against liability incurred by the officer or director in any proceeding to which the officer or director was a party because he or she is an officer or director, unless liability was incurred because the officer or director breached or failed to perform a duty owed to the Registrant and the breach or failure to perform constitutes (i) a willful failure to deal fairly with the Registrant or its shareholders in connection with a matter in which the officer or director has a material conflict of interest; (ii) a violation of criminal law, unless the officer or director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe it was unlawful; (iii) a transaction from which the officer or director derived an improper personal profit, or (iv) willful misconduct.

The Registrant’s directors and officers are insured under a policy of insurance maintained by the Registrant against certain liabilities that might be imposed as a result of actions, suit or proceedings to which they are parties by reason of being or having been such directors or officers.

In addition, each of the directors who is not an “interested person” (as defined under the Investment Company Act of 1940) of Registrant (a “Non-interested Director”) has entered into an indemnification agreement with Registrant, which agreement provides that the Registrant shall indemnify the Non-interested Director against certain liabilities which such Director may incur while acting in the capacity as a director, officer or employee of the Registrant to the fullest extent permitted by law, now or in the future, and requires indemnification and advancement of expenses unless prohibited by law. The indemnification agreement cannot be altered without the consent of the Non-interested Director and is not affected by amendment of the Articles of Incorporation. In addition, the indemnification agreement adopts certain presumptions and procedures which may make the process of indemnification and advancement of expenses more timely, efficient and certain. In accordance with Section 17(h) of the Investment Company Act of 1940, the indemnification agreement does not protect a Non-interested

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Director against any liability to the Registrant or its shareholders to which such Non-interested Director would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office.

Item 31. Business and Other Connections of the Investment Adviser.

BMO Asset Management Corp. (the “Adviser”) serves as the investment adviser for the Registrant. The Adviser is a registered investment adviser and wholly-owned subsidiary of BMO Financial Corp., a financial services company headquartered in Chicago, Illinois, and an indirect wholly-owned subsidiary of the Bank of Montreal (“BMO”), a Canadian bank holding company. The business and other connections of the Adviser, as well as the names and titles of the executive officers and directors of the Adviser, are further described in the Adviser’s Uniform Application for Investment Adviser Registration (“Form ADV”) as filed with the SEC.

Pyrford International Ltd. (“Pyrford”) serves as the sub-adviser with respect to the Registrant’s Pyrford International Stock Fund and Pyrford Global Strategic Return Fund. Pyrford is a registered investment adviser. The business and other connections of Pyrford, as well as the names and titles of the executive officers and directors of Pyrford, are further described in Pyrford’s Form ADV as filed with the SEC.

Lloyd George Management (Europe) Limited (“LGM(E)”) serves as a sub-adviser with respect to the Registrant’s Lloyd George Emerging Markets Equity Fund. LGM(E) is a registered investment adviser. The business and other connections of LGM(E), as well as the names and titles of the executive officers and directors of LGM(E), are further described in LGM(E)’s Form ADV as filed with the SEC.

Taplin, Canida & Habacht, LLC (“TCH”) serves as the sub-adviser with respect to the Registrant’s TCH Corporate Income Fund, TCH Core Plus Bond Fund and TCH Emerging Markets Bond Fund. TCH is a registered investment adviser. The business and other connections of TCH, as well as the names and titles of the executive officers and directors of TCH, are further described in TCH’s Form ADV as filed with the SEC.

Monegy, Inc (“Monegy”) serves as the sub-adviser with respect to the Registrant’s Monegy High Yield Bond Fund. Monegy is a registered investment adviser. The business and other connections of Monegy, as well as the names and titles of the executive officers and directors of Monegy, are further described in Monegy’s Form ADV as filed with the SEC.

BMO is the ultimate parent company of the Adviser, Pyrford, LGM(E), TCH and Monegy. Accordingly, the Adviser, Pyrford, LGM(E), TCH and Monegy are affiliates. To the best of Registrant’s knowledge, none of the Adviser’s directors or executive officers is or has been engaged in any other business, profession, vocation or employment of a substantial nature for the past two fiscal years, except as noted in the “Directors and Officers” section of the Registrant’s Statement of Additional Information, which is incorporated herein by reference.

Item 32. Principal Underwriters.

(a)

None.

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(b)

To the best of Registrant’s knowledge, the executive officers of M&I Distributors, LLC are as follows:


Name and Principal Business Address*	Positions and Offices with M&I Distributors, LLC	Positions and Offices with Registrant

Michael Miroballi	Director, President and CEO	None

William J. Crain, Jr.	Director, Senior Vice President and Chief Financial Officer	None

Alberta S. Roberts	Chief Compliance Officer and Vice President	None

*	The address of each of the foregoing is 111 East Kilbourn Avenue, Suite 200, Milwaukee, Wisconsin 53202.

(c)

Not applicable.

Item 33. Location of Accounts and Records.

The books and records required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules under that section are maintained in the following locations:


Records Relating to:		Are located at:

Registrant’s Transfer Agent and Dividend Disbursing Agent		Boston Financial Data Services Inc. 2000 Crown Colony Drive Quincy, MA 02171

Registrant’s Sub-Administrator and Portfolio Accounting Services Agent (except Pyrford International Stock Fund, Lloyd George Emerging Markets Equity Fund, Pyrford Global Strategic Return Fund and TCH Emerging Markets Bond Fund)		UMB Fund Services, Inc. 803 West Michigan Street Milwaukee, WI 53233

Registrant’s Investment Adviser, Administrator and Shareholder Servicing Agent		BMO Management Corp. 111 East Kilbourn Avenue, Suite 200 Milwaukee, WI 53202

Registrant’s Sub-Adviser to Pyrford Global Strategic Return Fund and Pyrford International Stock Fund		Pyrford International Ltd. 79 Grosvenor Street London United Kingdom

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Records Relating to:		Are located at:

Registrant’s Sub-Adviser to Monegy High Yield Bond Fund		Monegy, Inc. 302 Bay Street, 12^th Floor Toronto, ON, Canada M5X 1A1

Registrant’s Sub-Adviser to Lloyd George Emerging Markets Equity Fund		Lloyd George Management (Europe) Limited 78 Brook Street London United Kingdom

Registrant’s Sub-Adviser to TCH Corporate Income Fund, TCH Core Plus Bond Fund and TCH Emerging Markets Bond Fund		Taplin, Canida & Habacht, LLC 1001 Brickell Bay Drive, Suite 2100 Miami, Florida 33131

Registrant’s Custodian (except Pyrford International Stock Fund, Lloyd George Emerging Markets Equity Fund, Pyrford Global Strategic Return Fund and TCH Emerging Markets Bond Fund)		BMO Harris Bank N.A. 111 East Kilbourn Avenue, Suite 200 Milwaukee, WI 53202

Registrant’s Custodian and Portfolio Accounting Services Agent (Pyrford International Stock Fund, Lloyd George Emerging Markets Equity Fund, Pyrford Global Strategic Return Fund and TCH Emerging Markets Bond Fund)		State Street Bank & Trust Company 200 Clarendon Street P.O. Box 9130 Boston, MA 02116

Registrant’s Distributor		M&I Distributors, LLC 111 East Kilbourn Avenue, Suite 200 Milwaukee, WI 53202

Item 34. Management Services.

None.

Item 35. Undertakings.

Not applicable.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Post-Effective Amendment No. 83 to the Registration Statement on Form N-1A to be signed on its behalf by the undersigned, duly authorized, in the City of Milwaukee and the State of Wisconsin on the 16th day of April, 2013.


		MARSHALL FUNDS, INC.
		(Registrant)

By:		/s/ John M. Blaser
		John M. Blaser
		President

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 83 to the Registration Statement on Form N-1A has been signed below on April 16, 2013 by the following persons in the capacities indicated.


Signature		Title

/s/ John M. Blaser John M. Blaser		President (principal executive officer) and Director

/s/ Timothy M. Bonin Timothy M. Bonin		Treasurer (principal financial officer)

* Larry D. Armel		Director

Ridge A. Braunschweig		Director

** Ellen M. Costello		Director

* Benjamin M. Cutler		Director

* John A. Lubs		Director

* James Mitchell		Director

* Barbara J. Pope		Director

*By:	/s/ John M. Blaser
	John M. Blaser
	Attorney in fact pursuant to Power of Attorney filed with Post-Effective Amendment No. 59 to the Registration Statement on Form N-1A

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**By:		/s/ John M. Blaser
		John M. Blaser
		Attorney in fact pursuant to Power of Attorney filed with Post-Effective Amendment No. 72 to the Registration Statement on Form N-1A

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