Securities Law & Instruments


NP 11-203 -- Exemptive relief granted to exchange-traded fund for initial and continuous distribution of units, including: relief from dealer registration requirement to permit promoter to disseminate sales communications promoting the funds subject to compliance with Part 15 of NI 81-102, relief to permit the funds' prospectus to not contain an underwriter's certificate, and relief from take-over bid requirements in connection with normal course purchases of units on the Toronto Stock Exchange subject to undertaking by unitholders not to exercise any votes attached to units which represent more than 20% of the votes attached to all outstanding units of the funds -- Securities Act (Ontario).

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1), 59(1), 74(1), 95-100, 104(2)(c), 147.

Rules Cited

National Instrument 81-102 Mutual Funds.

May 8, 2009




(the Jurisdiction)








(the Filer)




The principal regulator has received an application from the Filer under the securities legislation of the Jurisdiction (the Legislation) for a decision (the Exemption Sought) that:

1. Exempts the Filer from the dealer registration requirement of the Legislation in connection with its dissemination of sales communications relating to the distribution of units (Units) of BMO Canadian Government Bond Index ETF, BMO Dow Jones Canada Titans 60 Index ETF, BMO US Equity Index ETF, BMO International Equity Index ETF, BMO Emerging Markets Equity Index ETF, BMO Global Infrastructure Index ETF and BMO Dow Jones Diamonds Index ETF (the Existing Funds) and any additional exchange-traded funds of which the Filer, or an affiliate of the Filer, may be the trustee and/or manager and which operate on a similar basis as the Existing Funds (the Future Funds, which together with the Existing Funds are collectively referred to as the Funds).

2. Exempts purchasers of Units from the requirements of the Legislation related to take-over bids, including the requirement to file a report of a take-over bid and the accompanying fee with each applicable Jurisdiction (the Take-over Bid Requirements) in respect of take-over bids for the Funds.

3. Exempts the Funds from the requirement that the prospectus of the Funds contain a certificate of the underwriter or underwriters who are in a contractual relationship with the issuer whose securities are being offered.

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

1. the OSC is the principal regulator for this application; and

2. the Filer has provided notice that section 4.7(1) 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.


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

Basket of Securities means a group of securities determined by the Filer from time to time representing the constituents of the investment portfolio then held by the Funds.

Designated Brokers means registered brokers and dealers that enter into agreements with the Funds to perform certain duties in relation to the Funds.

Prescribed Number of Units means the number of Units of the Funds determined by the Filer from time to time for the purpose of subscription orders, exchanges, redemptions or for other purposes.

Underwriters means registered brokers and dealers that have entered into underwriting agreements with the Funds and that subscribe for and purchase Units from the Funds and Underwriter means any one of them.

Unitholders means beneficial and registered holders of Units.

Terms defined in National Instrument 14-101 -- Definitions, Multilateral Instrument 11-102 -- Passport System and NI 81-102 -- Mutual Funds (NI 81-102) have the same meaning if used in this decision, unless otherwise defined.


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

1. The Funds are or will be mutual fund trusts governed by the laws of Ontario and will be reporting issuers under the Legislation.

2. The Filer has applied to list the Units on the TSX and the TSX has conditionally approved the listing of the Units. The Filer will file a final prospectus for the Funds to qualify the distribution of the Units.

3. The Units issued by the Existing Funds will be index participation units within the meaning of NI 81-102. The Funds will be generally described as exchange-traded funds.

4. The Filer, a registered investment counsel and portfolio manager and limited market dealer in Ontario and Newfoundland and Labrador, is the trustee and manager of the Funds and is responsible for the administration of the Funds.

5. Each of the Existing Funds will seek investment results that correspond generally to the price and yield performance of an index (the Index) by replicating generally the portfolio of securities which constitutes such Index, net of fees and expenses.

6. Units may only be subscribed for or purchased directly from the Funds by Underwriters or Designated Brokers and orders may only be placed for Units in the Prescribed Number of Units (or an integral multiple thereof) on any day when there is a regular trading session on the TSX.

7. The Funds will appoint Designated Brokers to perform certain functions which include standing in the market with a bid and ask price for Units of the Funds for the purpose of maintaining liquidity for the Units.

8. Each Underwriter or Designated Broker that subscribes for Units must deliver, in respect of each Prescribed Number of Units to be issued, a Basket of Securities and cash in an amount sufficient so that the value of the Basket of Securities and cash delivered is equal to the net asset value of the Units subscribed for next determined following the receipt of the subscription order. In the discretion of the Filer, the Funds may also accept subscriptions for Units in cash only or in a combination of cash and securities in an amount equal to the net asset value of the Units next determined following the receipt of the subscription order.

9. The net asset value per Unit of each the Funds will be calculated and published daily on

10. Upon notice given by the Filer from time to time and, in any event, not more than once quarterly, a Designated Broker will subscribe for Units in cash in an amount not to exceed 0.3% of the net asset value of the Funds, or such other amount established by the Filer and disclosed in the prospectus of the Funds, next determined following delivery of the notice of subscription to that Designated Broker.

11. Neither the Underwriters nor the Designated Brokers will receive any fees or commissions in connection with the issuance of Units to them. The Filer may, at its discretion, charge an administration fee on the issuance of Units to the Designated Brokers or Underwriters.

12. Except as described in paragraphs 6 through 10 above, Units may not be purchased directly from the Funds. Investors are generally expected to purchase Units through the facilities of the TSX. Designated Brokers and Underwriters have agreed to offer the Units for sale to the public only as permitted under the Legislation. The Legislation requires a prospectus to be delivered to purchasers buying Units as part of a distribution, including first purchasers of Units in a distribution on the TSX. Provided that the Designated Brokers and Underwriters comply with applicable Legislation, first purchasers of Units in the distribution on the TSX will receive a prospectus from the Designated Brokers and Underwriters. Units may be issued directly to Unitholders upon the reinvestment of distributions of income or capital gains.

13. Unitholders that wish to dispose of their Units may generally do so by selling their Units on the TSX through a registered broker or dealer, subject only to customary brokerage commissions. A Unitholder that holds a Prescribed Number of Units or an integral multiple thereof may exchange such Units for Baskets of Securities and cash. Unitholders may also redeem their Units for cash at a redemption price equal to 95% of the closing price of the Units on the TSX on the date of redemption.

14. As manager, the Filer receives a fixed annual fee from the Funds. Such annual fee is calculated as a fixed percentage of the net asset value of the Funds.

15. Unitholders will have the right to vote at a meeting of Unitholders in respect of the Funds in certain circumstances, including prior to any change in the fundamental investment objective of the Funds, any change to their voting rights, the introduction of a fee or expense to be charged to the Funds or to Unitholders or a change in the basis of the calculation of a fee or expense charged to the Funds or Unitholders where such change could result in an increase in the amount of fees or expenses payable by the Funds or Unitholders.

16. No investment dealer will act as principal distributor for the Funds. The Filer will be the only entity desiring to foster market awareness and promote trading in the Units through the dissemination of sales communications.

17. The application of the Take-over Bid Requirements to the Funds would have an adverse impact upon Unit liquidity because they could cause Designated Brokers and other large Unitholders to cease trading Units once prescribed take-over bid thresholds are reached.

18. Although the Units will trade on the TSX and the acquisition of Units can be subject to the Take-Over Bid Requirements:

(a) it will not be possible for one or more Unitholders to exercise control or direction over a Fund as the master declaration of trust governing the Funds will ensure that there can be no changes made to a Fund which do not have the support of the Filer;

(b) it will be difficult for purchasers of Units to monitor compliance with Take-Over Bid Requirements because the number of outstanding Units will always be in flux as a result of the ongoing issuance and redemption of Units by the Funds; and

(c) the way in which Units will be priced deters anyone from either seeking to acquire control of, or offering to pay a control premium for, outstanding Units because pricing of a Unit will depend on the performance of the portfolio of the ETF as a whole.


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 is that the Exemption Sought is granted so long as:

1. The Filer complies with Part 15 of NI 81-102 in connection with its dissemination of sales communications relating to the distribution of Units.

2. A purchaser of Units (Unit Purchaser), and any person or company acting jointly or in concert with the Unit Purchaser (a Concert Party), prior to making any take-over bid for Units that is not otherwise exempt from the Take-over Bid Requirements, provides the Filer with an undertaking not to exercise any votes attached to the Units held by the Unit Purchaser and any Concert Party which represent more than 20% of the votes attached to the outstanding Units of a Fund.

"James Turner"

"Wendell S. Wigle"