Bank of Montreal and BMO Capital Trust

Headnote

Application by bank (the Bank) and capital trust subsidiary (the Trust) for an order granting the Trust relief from the requirement in OSC Rule 13-502 Fees (the Fees Rule) to pay participation fees - Bank has paid, and will continue to pay, participation fees applicable to it under s. 2.2 of the Fees Rule, and Bank includes capitalization of Trust in its fee calculation - relief analogous to relief for "subsidiary entities" contained in s. 2.9(2) of the Fees Rule - Trust may not, from a technical accounting perspective, be considered to be a "subsidiary entity" of Bank for Canadian GAAP purposes and may not be entitled to rely on the exemption in s. 2.9(2) of the Fees Rule - Trust and Bank satisfy conditions of exemption in s. 2.9(2) but for definition of "subsidiary entity" - Trust exempt from requirement to pay participation fees, subject to conditions.

Applicable Legislative Provisions

OSC Rule 13-502 Fees, s. 2.9(2).

IN THE MATTER OF

ONTARIO SECURITIES COMMISSION

RULE 13-502 FEES

AND

IN THE MATTER OF

BANK OF MONTREAL AND

BMO CAPITAL TRUST

ORDER

WHEREAS the Director has received an application from Bank of Montreal (the "Bank") and BMO Capital Trust (the "Trust") for an order, pursuant to Section 6.1 of OSC Rule 13-502 Fees (the "Fees Rule"), that the requirement to pay a participation fee under Section 2.2 of the Fees rule shall not apply to the Trust, subject to certain terms and conditions.

AND WHEREAS the Bank and the Trust have represented to the Ontario Securities Commission (the "OSC") that:

1. The Trust is a trust established under the laws of the Province of Ontario by BMO Trust Company as trustee (the "Trustee"), pursuant to a declaration of trust dated October 11, 2000, as amended. The Trust has a financial year-end of December 31. The Trust is a reporting issuer in Ontario and, to its knowledge, is not in default of any requirement under the securities legislation of the Province of Ontario. The Bank is the administrative agent of the Trust pursuant to an administration and advisory agreement pursuant to which the Trustee has delegated to the Bank certain of its obligations in relation to the administration of the Trust, including the day-to-day operations of the Trust and such other matters as may be requested from time to time by the Trustee.

2. The outstanding securities of the Trust consist of (i) transferable trust units called Trust Capital Securities, or "BMO BOaTS", which are non-voting except in limited circumstances, and (ii) Special Trust Securities. All outstanding Special Trust Securities are held by the Bank. The Trust has distributed five series of BMO BOaTS to date pursuant to public offerings. Subject to certain conditions and after a specified date for each Series, the Trust may redeem each Series of BMO BOaTS. In certain circumstances, some series of BMO BOaTS may be exchanged at the option of the holder thereof into preferred shares of the Bank. In addition, each series of BMO BOaTS would be exchanged for preferred shares of the Bank upon the occurrence of certain specified events. The Bank has undertaken to list any such preferred shares that may be issued on the Toronto Stock Exchange.

3. The Trust's only business is to invest its assets and its objective is to acquire and hold specified trust assets that will generate income for distribution to holders of BMO BOaTS and Special Trust Securities. The Trust does not carry on any independent business activities other than to acquire and hold assets to generate income for distribution to holders of the BMO BOaTS and Special Trust Securities (collectively "Trust Securities").

4. Pursuant to the MRRS Decision Document dated May 16, 2001 (the "Continuous Disclosure Exemption") granted to the Trust by the OSC, as principal regulator, on behalf of itself and other decision makers (collectively, the "Decision Makers"), the Decision Makers determined that the requirement contained in the securities legislation of the Province of Ontario and in other applicable jurisdictions (collectively, the "Legislation") to:

(i) file interim financial statements and audited annual financial statements and deliver same to the security holders of the Trust;

(ii) file interim and annual management's discussion and analysis ("MD&A") of the financial conditions and results of operations and deliver same to the security holders of the Trust; and

(iii) file an annual information form and deliver same to the security holders of the Trust;

(the obligations set out in clause (i) to (iii) are collectively defined as the "Continuous Disclosure Obligations"),

shall not apply to the Trust for so long as:

(i) the Bank remains a reporting issuer under the Legislation;

(ii) the Bank sends its annual financial statements, interim financial statements, annual MD&A and interim MD&A to security holders of the Trust at the same time and in the same manner as if the security holders of the Trust were holders of common shares of the Bank;

(iii) all outstanding securities of the Trust are either BMO BOaTS or Special Trust Securities;

(iv) the rights and obligations of holders of additional series of BMO BOaTS are the same in all material respects as the rights and obligations of the holders of the BMO BOaTS -- Series A and BMO BOaTS --Series B as of the date of the Continuous Disclosure Exemption; and

(v) the Bank is the beneficial owner of all Special Trust Securities.

The Continuous Disclosure Exemption shall expire 30 days after the date a material change occurs in the affairs of the Trust.

5. The Trust was established by the Bank in order to comply with the regulatory requirements of the Office of the Superintendent of Financial Institutions ("OSFI") relating to the issuance of innovative Tier 1 capital instruments (as contained in OSFI's Principles Governing inclusion of Innovative Instruments in Tier 1 Capital (the "OSFI Guidelines").

6. OSFI maintains strict guidelines and standards with respect to the capital adequacy requirements of federally regulated financial institutions, including the Bank, and, in particular, specifies minimum required amounts of Tier 1 capital to be maintained by such institutions. Tier 1 capital consists of common shareholders' equity, qualifying non-cumulative perpetual preferred shares, qualifying innovative instruments and qualifying non-controlling interests arising on consolidation from Tier 1 capital instruments. Innovative Instruments, such as the BMO BOaTS, must satisfy the detailed requirements of the OSFI Guidelines to be included in Tier 1 capital. Accordingly, the innovative instruments (BMO BOaTS) must be issued by a special purpose vehicle (BMO Capital Trust), whose primary purpose is to raise innovative Tier 1 capital. OSFI approved the inclusion of the BMO BOaTS as Tier 1 capital of the Bank.

7. No continuous disclosure documents concerning only the Trust will be filed with the OSC.

8. The Trust is a "Class 2 reporting issuer" under the Fees Rule and would be required (but for this Order) to pay participation fees under such rule.

9. The Bank, as a legal and factual matter, controls the Trust through its ownership of the Special Trust Securities issued by the Trust and its role as administrative agent of the Trust. The Bank has paid, and will continue to pay, participation fees applicable to it under Section 2.2 of the Fees Rule.

10. The Fees Rule includes an exemption for "subsidiary entities" in subsection 2.9(2) of the Fees Rule. The Bank and the Trust meet all of the substantive requirements to rely on the exemption in subsection 2.9(2) of the Fees Rule, but for the definition of "subsidiary entity". The Fees Rule defines "subsidiary entity" by reference to the accounting definition under Canadian GAAP, rather than by reference to a legal definition based on control.

11. On November 1, 2004, the Canadian Institute of Chartered Accountants adopted Guideline 15, Consolidation of Variable Interest Entities. Accordingly, the Trust may not, from a technical accounting perspective, be considered to be a "subsidiary entity" of the Bank for Canadian GAAP purposes and may not be entitled to rely on the exemption in subsection 2.9(2) of the Fees Rule.

THE ORDER of the OSC under the Fees Rule is that the requirement to pay a participation fee under Section 2.2 of the Fees Rule shall not apply to the Trust, for so long as:

(i) the Bank and the Trust continue to satisfy all of the conditions contained in the Continuous Disclosure Exemption; and

(ii) The capitalization of the Trust represented by the outstanding BMO BOaTS and any additional Trust Securities that may be issued, from time to time, by the Trust is included in the participation fee calculation applicable to the Bank and the Bank has paid the participation fee calculated on this basis.

DATED April 22, 2008.