BMO Mutual Funds has unveiled changes to the BMO Monthly Income Fund, increasing the monthly income distribution for investors by over 40%, from $0.0425 to $0.06 per unit, effective January 16, 2002.

Based on the current forecast, an investment in the BMO Monthly Income Fund would provide 7.3% in distribution income over the course of a year, which would be equal to receiving a pre-tax interest rate of approximately 10 per cent on an interest bearing investment.

“Given the current interest rate environment, after-tax returns from traditional income investments can be in the 2 per cent range,” says Ed Legzdins, president and CEO, BMO Mutual Funds. “Not only is the income from the BMO Monthly Income Fund much higher, it is taxed more efficiently than regular investment income.”

The fund’s tax-effective income is a result of the composition of the monthly distribution, which is made up primarily of interest and dividend income and unrealized capital appreciation. With the unrealized capital appreciation treated for tax purposes as a return of capital and with the preferential tax treatment afforded dividend income, the monthly distribution is more tax-efficient when compared to straight interest income. In addition,
the BMO Monthly Income Fund offers the potential for capital gains distributions, which are declared at year-end.

The BMO Monthly Income Fund is part of a class of innovative mutual funds that provide tax-effective monthly income while offering the potential for capital growth over the long term. The fund is a conservatively managed Canadian balanced fund with a risk/return profile that falls between a traditional bond fund and equity fund.

The fund is co-managed by Mary Jane Yule and Michael Stanley of Jones Heward Investment Counsel Inc., part of Bank of Montreal’s Private Client Group. As Chief Investment Officer at Jones Heward and Manager of the BMO Dividend and BMO Equity Funds, Mr. Stanley will oversee the equity component of the BMO Monthly Income Fund. Ms. Yule will oversee the fixed income component.