Headnote National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions and National Instrument NI 81-102 Mutual Funds - relief granted from NI 81-102 to permit mutual funds to invest up to 100% of net asset value in related underlying ETFs that are mutual funds and to allow the top funds to pay brokerage commissions for purchase and sale of ETF securities – relief needed because underlying ETFs are mutual funds that do not file a simplified prospectus under NI 81-101 and are not index participation units – underlying ETFs are subject to NI 81-102 and are not commodity pools under NI 81-104 – underlying ETF securities will be primarily bought or sold over the exchange on the same conditions as other securities traded on the exchange – relief subject to terms and conditions mimicking investment restrictions of NI 81-102 such that top mutual funds cannot do indirectly via investment in underlying ETFs what they cannot do directly under NI 81-102. Applicable Legislative Provision Sections 2.1(1), 2.5(2)(a), 2.5(2)(e), 2.5(2)(f) and 19.1 of National Instrument 81-102 Mutual Funds.

June 12, 2013

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

AND

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

AND

IN THE MATTER OF BMO ASSET MANAGEMENT INC. (the Filer)

AND

IN THE MATTER OF the existing mutual funds (the Existing Top Funds) and the future mutual funds (the Future Top Funds) subject to National Instrument 81-102 Mutual Funds (NI 81-102) and National Instrument 41-101 General Prospectus Requirements (NI 41-101) or National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) managed by the Filer or an affiliate of the Filer (the Existing Top Funds and the Future Top Funds, collectively, the Top Funds)

Decision

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) granting an exemption to the Top Funds from the following prohibitions in NI 81-102 (the Exemption Sought):

(a) subsection 2.1(1) (the Concentration Restriction), to permit each Top Fund to purchase a security of an Underlying ETF (as defined below) or enter into a specified derivatives transaction with respect to an Underlying ETF even though, immediately after the transaction, more than 10 percent of the net asset value (NAV) of the Top Fund would be invested, directly or indirectly, in the securities of the Underlying ETF;

(b) paragraph 2.5(2)(a), to permit each Top Fund to invest in securities of an Underlying ETF, as defined below; and

(c) paragraphs 2.5(2)(e) and 2.5(2)(f), to permit each Top Fund to pay brokerage commissions in relation to its purchase and sale on a recognized exchange (as defined in the Securities Act (Ontario)) in Canada of securities of an Underlying ETF.

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

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

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

Interpretation

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

Representations

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

The Filer

1. The Filer is a corporation incorporated under the laws of the Province of Ontario. The head office of the Filer is located in Toronto, Ontario.

2. The Filer or an affiliate of the Filer acts, or will act, as the investment fund manager of the Top Funds.

3. None of the Filer, the Existing Top Funds, or the Existing Underlying ETFs (as defined below), is in default of any of its obligations under the securities legislation of any of the provinces or territories of Canada.

The Top Funds

4. The Top Funds are, or will be, open-ended mutual funds organized and governed by the laws of a jurisdiction of Canada.

5. The Top Funds are, or will be, governed by the provisions of NI 81-102, subject to any exemptions therefrom that have been, or may in the future be, granted by the securities regulatory authorities.

6. Each Top Fund distributes, or will distribute, its securities pursuant to a simplified prospectus prepared pursuant to NI 81-101 and Form 81-101F1, or a long form prospectus, prepared pursuant to NI 41-101 and Form 41-101F2.

7. The Top Funds are, or will be, reporting issuers in the provinces and territories of Canada in which their securities are distributed.

8. Each Top Fund wishes to have the ability to invest up to 100% of its NAV in any of the exchange traded mutual funds listed in Schedule A (the Existing Underlying ETFs) and in any other similar exchange traded mutual funds as may be established and managed by the Filer or an affiliate of the Filer in the future (together with the Existing Underlying ETFs, the Underlying ETFs).

9. Each investment by a Top Fund in securities of an Underlying ETF will be made in accordance with the investment objectives of the Top Fund and will represent the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Top Fund.

The Underlying ETFs

10. The Filer, or an affiliate of the Filer acts, or will act, as the investment fund manager of each Underlying ETF.

11. Each Underlying ETF is, or will be:

(a) an open-ended mutual fund, subject to NI 81-102 and NI 41-101, subject to any exemptions therefrom that have been, or may in the future be, granted by the securities regulatory authorities;

(b) a reporting issuer in the provinces and territories of Canada in which its securities are distributed; and

(c) listed on the Toronto Stock Exchange (the TSX) or another recognized exchange in Canada.

12. Each Underlying ETF distributes, or will distribute, its securities pursuant to a long form prospectus prepared pursuant to NI 41-101 and Form 41-101F2.

13. No Underlying ETF holds, or will hold, more than 10% of its NAV in securities of other mutual funds unless the Underlying ETF is a clone fund, as defined in NI 81-102, or the securities of the other mutual fund are securities of a money market fund, as defined in NI 81-102, or index participation units (IPUs), as defined in NI 81-102, issued by a mutual fund.

14. The securities of the Underlying ETFs do not, or will not, constitute IPUs.

15. Each Underlying ETF does not, or will not, pay management or incentive fees which to a reasonable person would duplicate a fee payable by the Top Fund for the same service.

16. Holders of securities of an Underlying ETF may:

(a) sell such securities on the TSX or other recognized exchange in Canada on which the securities are listed for trading;

(b) redeem such securities in any number for cash at a redemption price equal to 95% of the closing price for the security on the applicable exchange on the effective day of redemption; or

(c) exchange with the Underlying ETF a prescribed number of securities (a PNU) (or an integral multiple thereof) of the Underlying ETF for cash and securities, the exchange price being equal to the NAV of the securities of the Underlying ETF tendered for exchange on the effective day of the exchange request.

17. No Underlying ETF is, or will be, a commodity pool governed by National Instrument 81-104 Commodity Pools (NI 81-104).

18. No Underlying ETF has, or will have, a net market exposure greater than 100% of its NAV.

19. The Existing Underlying ETFs primarily achieve, and any Future Underlying ETFs will primarily achieve, their investment objectives through direct holdings of securities and, in some circumstances, through investments in specified derivatives for hedging and non-hedging purposes, in accordance with their investment objectives and strategies and with NI 81-102.

20. All brokerage costs related to trades in securities of the Underlying ETFs will be borne by the Top Funds in the same manner as any other portfolio transactions made on an exchange.

21. Each Top Fund is, or will be, subject to National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) generally and in respect of conflicts of interest matters arising from trades in securities of an Underlying ETF.

22. If a Top Fund makes a trade in securities of an Underlying ETF with or through an affiliate of the Filer acting as dealer, the Filer will comply with its obligations under NI 81-107 in respect of any proposed related party transactions. All such related party transactions will be disclosed to securityholders of the relevant Top Fund in its management report of fund performance.

23. The securities of each Underlying ETF are highly liquid, as designated brokers and underwriters act as intermediaries between investors and each Underlying ETF, standing in the market with bid and ask prices for such securities to maintain a liquid market for them.

24. The following Existing Underlying ETFs have obtained relief from the Concentration Restriction in the following decisions:

(a) BMO S&P/TSX Equal Weight Bank Index ETF and BMO Covered Call Canadian Banks ETF in a decision dated October 31, 2011; and

(b) BMO Covered Call Dow Jones Industrial Average Hedged to CAD ETF in a decision dated November 19, 2012.

Reasons for the Exemption Sought

25. An investment in an Underlying ETF by a Top Fund is an efficient and cost effective alternative to administering one or more investment strategies directly.

26. Absent the Exemption Sought, a Top Fund would be prohibited by subsection 2.1(1) of NI 81-102 from investing more than 10 percent of its NAV in the securities of an Underlying ETF. The Exemption Sought would only grant each Top Fund relief from the Concentration Restriction in respect of the Top Fund’s direct or indirect holdings of securities issued by an Underlying ETF. The Exemption Sought would not relieve a Top Fund from the obligation to comply with the Concentration Restriction in respect of the Top Fund’s indirect holdings in securities held by an Underlying ETF and each Top Fund will comply with the Concentration Restriction in respect of the Top Fund’s indirect holdings in securities held by an Underlying ETF and apply sections 2.1(3) and (4) of NI 81-102.

27. Absent the Exemption Sought, an investment by a Top Fund in an Underlying ETF would be prohibited by paragraph 2.5(2)(a) of NI 81-102 because the Underlying ETF does not and will not have offered securities under a simplified prospectus in accordance with NI 81-101 as contemplated by section 2.5(2)(a) of NI 81-102.

28. An investment by a Top Fund in an Underlying ETF would not qualify for the exemption in paragraph 2.5(3)(a) of NI 81-102 from paragraph 2.5(2)(a) of NI 81-102 because the Underlying ETF does not issue IPUs.

29. It is anticipated that many of the trades conducted by the Top Funds would not be of the size necessary for a Top Fund to be eligible to purchase or redeem a PNU directly from the Underlying ETF. As a result, it is anticipated that the majority of trading in respect of securities of the Underlying ETFs will be conducted in the secondary market using the facilities of the TSX or of another recognized exchange in Canada.

30. Absent the Exemption Sought, when a Top Fund trades securities of an Underlying ETF on the TSX or other recognized exchange in Canada, paragraphs 2.5(2)(e) and 2.5(2)(f) would not permit the Top Fund to pay any brokerage fees incurred in connection with the trade.

Decision

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

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

(a) the investment by a Top Fund in securities of an Underlying ETF is in accordance with the investment objectives of the Top Fund;

(b) a Top Fund does not sell securities of an Underlying ETF short;

(c) the Underlying ETF is not a commodity pool governed by NI 81-104;

(d) the Underlying ETF does not rely on exemptive relief from:

(i) the requirements of section 2.3 of NI 81-102 regarding the purchase of physical commodities;

(ii) the requirements of sections 2.7 and 2.8 of NI 81-102 regarding the purchase, sale or use of specified derivatives; or

(iii) subsections 2.6(a) or 2.6(b) of NI 81-102 with respect to the use of leverage.

(e) the relief from the Concentration Restriction only applies in respect of the Top Fund’s direct or indirect holdings of securities issued by an Underlying ETF, and a Top Fund will comply with the Concentration Restriction in respect of the Top Fund’s indirect holdings in securities held by an Underlying ETF and apply sections 2.1(3) and (4) of NI 81-102.

(f) the relief from section 2.5(2)(e) and 2.5(2)(f) will only apply to the brokerage fees incurred for the purchase and sale of Underlying ETFs by the Top Funds; and

(g) the prospectus of each Top Fund discloses, or will disclose the next time it is renewed after the date of this decision, the fact that the Top Funds have obtained the Exemption Sought to permit the relevant transactions on the terms described in this decision.

“Vera Nunes”

Vera Nunes Manager, Investment Funds Ontario Securities Commission

SCHEDULE “A”

EXISTING UNDERLYING ETFs

BMO Canadian Dividend ETF

BMO Covered Call Canadian Banks ETF

BMO Covered Call Dow Jones Industrial Average Hedged to CAD ETF

BMO Covered Call Utilities ETF

BMO Low Volatility Canadian Equity ETF

BMO Monthly Income ETF

BMO S&P/TSX Equal Weight Banks Index ETF

BMO 2013 Corporate Bond Target Maturity ETF

BMO 2015 Corporate Bond Target Maturity ETF

BMO 2020 Corporate Bond Target Maturity ETF

BMO 2025 Corporate Bond Target Maturity ETF

BMO US Dividend Hedged to CAD ETF

BMO US Dividend ETF

BMO Low Volatility US Equity ETF