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ANNUAL FINANCIAL STATEMENTS

BMO MSCI USA High Quality Index ETF (ZUQ)December 31, 2019

To the Unitholders and Trustee ofBMO Mid Federal Bond Index ETFBMO S&P/TSX Capped Composite Index ETFBMO S&P 500 Hedged to CAD Index ETFBMO Dow Jones Industrial Average Hedged to CAD Index ETFBMO Short Federal Bond Index ETFBMO Short Provincial Bond Index ETFBMO Short Corporate Bond Index ETFBMO High Yield US Corporate Bond Hedged to CAD Index ETFBMO Equal Weight Banks Index ETFBMO Equal Weight Oil & Gas Index ETFBMO MSCI EAFE Hedged to CAD Index ETFBMO MSCI Emerging Markets Index ETFBMO Equal Weight Global Base Metals Hedged to CAD Index ETFBMO Mid Corporate Bond Index ETFBMO Long Corporate Bond Index ETFBMO Aggregate Bond Index ETFBMO Global Infrastructure Index ETFBMO China Equity Index ETFBMO India Equity Index ETFBMO Equal Weight Utilities Index ETFBMO Nasdaq 100 Equity Hedged to CAD Index ETFBMO Junior Gold Index ETFBMO Equal Weight REITs Index ETFBMO Junior Oil Index ETFBMO Junior Gas Index ETFBMO Equal Weight US Health Care Hedged to CAD Index ETFBMO Equal Weight US Banks Hedged to CAD Index ETFBMO Long Federal Bond Index ETFBMO Real Return Bond Index ETFBMO Emerging Markets Bond Hedged to CAD Index ETFBMO Covered Call Canadian Banks ETFBMO Monthly Income ETFBMO Ultra Short-Term Bond ETFBMO Covered Call Utilities ETFBMO Covered Call Dow Jones Industrial Average Hedged to CAD ETFBMO Canadian Dividend ETFBMO Low Volatility Canadian Equity ETFBMO Equal Weight Global Gold Index ETFBMO Equal Weight Industrials Index ETFBMO Laddered Preferred Share Index ETFBMO S&P 500 Index ETFBMO Mid Provincial Bond Index ETFBMO Long Provincial Bond Index ETFBMO US Dividend Hedged to CAD ETFBMO US Dividend ETF

BMO Low Volatility US Equity ETFBMO Mid-Term US IG Corporate Bond Index ETFBMO Mid-Term US IG Corporate Bond Hedged to CAD Index ETFBMO MSCI Europe High Quality Hedged to CAD Index ETFBMO US High Dividend Covered Call ETFBMO Floating Rate High Yield ETFBMO Short-Term US IG Corporate Bond Hedged to CAD Index ETFBMO Discount Bond Index ETFBMO Equal Weight US Banks Index ETFBMO MSCI EAFE Index ETFBMO International Dividend ETFBMO MSCI USA High Quality Index ETFBMO MSCI All Country World High Quality Index ETFBMO Low Volatility International Equity ETFBMO Europe High Dividend Covered Call Hedged to CAD ETFBMO US Put Write ETFBMO International Dividend Hedged to CAD ETFBMO Low Volatility Emerging Markets Equity ETFBMO Low Volatility International Equity Hedged to CAD ETFBMO Low Volatility US Equity Hedged to CAD ETFBMO Canadian High Dividend Covered Call ETFBMO US Put Write Hedged to CAD ETFBMO Global Consumer Discretionary Hedged to CAD Index ETFBMO Global Consumer Staples Hedged to CAD Index ETFBMO US Preferred Share Hedged to CAD Index ETFBMO Long-Term US Treasury Bond Index ETFBMO Mid-Term US Treasury Bond Index ETFBMO Short-Term US Treasury Bond Index ETFBMO US Preferred Share Index ETFBMO MSCI Canada Value Index ETFBMO MSCI EAFE Value Index ETFBMO MSCI USA Value Index ETFBMO Corporate Bond Index ETFBMO Government Bond Index ETFBMO Short-Term Bond Index ETFBMO High Yield US Corporate Bond Index ETFBMO Europe High Dividend Covered Call ETFBMO US High Dividend Covered Call Hedged to CAD ETFBMO Global Communications Index ETFBMO Conservative ETFBMO Balanced ETFBMO Growth ETFBMO Equal Weight US Health Care Index ETFBMO Covered Call US Banks ETFBMO NASDAQ 100 Equity Index ETFBMO Ultra Short-Term US Bond ETF

(individually, an ETF)

Independent Auditor’s Report

Our opinionIn our opinion, the accompanying December 31, 2019 financial statements of each ETF present fairly, in all material respects, the financialposition of each ETF, its financial performance and its cash flows as at and for the periods indicated in note 1 in accordance with InternationalFinancial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

What we have auditedThe financial statements of each ETF comprise:

• the statements of financial position as at the period-end dates indicated in note 1;• the statements of comprehensive income for the periods indicated in note 1;• the statements of changes in net assets attributable to holders of redeemable units for the periods indicated in note 1;• the statements of cash flows for the periods indicated in note 1; and• the notes to the financial statements, which include a summary of significant accounting policies.

Basis for opinionWe conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards arefurther described in the Auditor’s responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

IndependenceWe are independent of each ETF in accordance with the ethical requirements that are relevant to our audit of the financial statements inCanada. We have fulfilled our other ethical responsibilities in accordance with these requirements.

Other informationManagement is responsible for the other information of each ETF. The other information comprises the Annual Management Report of FundPerformance of each ETF.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusionthereon.

In connection with our audit of the financial statements of each ETF, our responsibility is to read the other information identified above and,in doing so, consider whether the other information is materially inconsistent with the financial statements of each ETF or our knowledgeobtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required toreport that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the financial statementsManagement is responsible for the preparation and fair presentation of the financial statements of each ETF in accordance with IFRS, and forsuch internal control as management determines is necessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the ability of each ETF to continue as a going concern,disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management eitherintends to liquidate any ETF or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the financial reporting process of each ETF.

Auditor’s responsibilities for the audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole for each ETF are free from materialmisstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high levelof assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will alwaysdetect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or inthe aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financialstatements of each ETF.


As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of each ETF, whether due to fraud or error, design andperform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for ouropinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of each ETF.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bymanagement.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidenceobtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of each ETF tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report tothe related disclosures in the financial statements of each ETF or, if such disclosures are inadequate, to modify our opinion. Our conclusionsare based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause any ETF tocease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements of each ETF, including the disclosures, and whether thefinancial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit andsignificant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regardingindependence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on ourindependence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is Joseph Pinizzotto.

Chartered Professional Accountants, Licensed Public AccountantsToronto, OntarioMarch 20, 2020


Statement of Financial Position(All amounts in thousands of Canadian dollars, except per unit data)

As atDecember 31

2019December 31

2018

Assets

Current AssetsCash 411 1,023Investments

Non-derivative financial assets 315,930 245,915Receivable for investments sold 698 —Dividends receivable 251 197Total assets 317,290 247,135

Liabilities

Current LiabilitiesPayable for investments purchased 1 —Distributions payable 1,128 926Accrued expenses 243 206Total liabilities 1,372 1,132Net assets attributable to holders of

redeemable units 315,918 246,003

Net assets attributable to holders ofredeemable units per unit $ 42.02 $ 32.29

Statement of Comprehensive Income(All amounts in thousands of Canadian dollars, except per unit data)

For the periods endedDecember 31

2019December 31

2018

IncomeInterest income 0 —Dividend income 4,451 4,232Other changes in fair value of

investments and derivativesNet realized gain 25,135 17,595Change in unrealized appreciation

(depreciation) 46,564 (9,684)Net gain in fair value of investments and

derivatives 76,150 12,143Securities lending (note 8) 26 0Foreign exchange (loss) gain (9) 117

Total other income 17 117Total income 76,167 12,260

ExpensesManagement fees (note 6) 902 778Independent review committee fees

(note 6) 1 1Withholding taxes 645 593ETF summary document fees 0 0Commissions and other portfolio

transaction costs (note 6) 8 7Total expenses 1,556 1,379

Increase in net assets attributable toholders of redeemable units 74,611 10,881

Increase in net assets attributable toholders of redeemable units per unit(note 8) 10.30 1.50

BMO MSCI USA High Quality Index ETF

The accompanying notes are an integral part of these financial statements.

Statement of Changes in Net Assets Attributable to Holders of Redeemable Units(All amounts in thousands of Canadian dollars)


2019December 31

2018Net assets attributable to holders of

redeemable units at beginning ofperiod 246,003 264,251

Increase in net assets attributable toholders of redeemable units 74,611 10,881

Distributions to holders of redeemable units from:Net investment income (2,914) (2,909)Net realized gains on investments and

derivatives (10,498) (5,525)Return of capital (414) (167)Total distributions to holders of

redeemable units (13,826) (8,601)

Redeemable unit transactionsProceeds from redeemable units issued 74,258 80,599Reinvestments of distributions to

holders of redeemable units 10,750 5,942Redemption of redeemable units (75,878) (94,088)Capital gain redemptions in-kind — (12,981)Net increase (decrease) from

redeemable unit transactions 9,130 (20,528)Net increase (decrease) in net assets

attributable to holders ofredeemable units 69,915 (18,248)

Net assets attributable to holders ofredeemable units at end of period 315,918 246,003



Statement of Cash Flows(All amounts in thousands of Canadian dollars)


2019December 31

2018

Cash flows from operating activitiesIncrease in net assets attributable to

holders of redeemable units 74,611 10,881Adjustments for:

Foreign exchange (gain) loss on cash (6) 26Net realized gain on sale of

investments and derivatives (25,135) (17,595)Change in unrealized (appreciation)

depreciation of investments andderivatives (46,564) 9,684

(Increase) decrease in dividendsreceivable (54) 41

Increase (decrease) in accruedexpenses 37 (15)

Purchases of investments (72,368) (66,514)Proceeds from sale and maturity of

investments 71,719 66,113Net cash from operating activities 2,240 2,621

Cash flows from financing activitiesDistributions paid to holders of

redeemable units, net of reinvesteddistributions (2,874) (2,797)

Proceeds from issuances of redeemableunits+ 108 278

Amounts (paid) received on redemptionof redeemable units+ (92) 22

Net cash used in financing activities (2,858) (2,497)

Foreign exchange gain (loss) on cash 6 (26)Net (decrease) increase in cash (618) 124Cash at beginning of period 1,023 925Cash at end of period 411 1,023

Supplementary InformationInterest received, net of withholding

taxes* 0 —Dividends received, net of withholding

taxes* 3,752 3,680

+ Excludes in-kind transactions, if any.* These items are from operating activities.



Number ofShares or Units

Cost+

($)

FairValue

($)

EQUITIESCommunication Services — 5.1%Alphabet Inc., Class A......................................... ............4,330............. 5,769............. 7,531Alphabet Inc., Class C......................................... ............4,516............. 5,961............. 7,841Omnicom Group Inc............................................ ............7,201.................763.................757.................................................................................................. ........... 12,493........... 16,129

Consumer Discretionary — 8.7%Best Buy Co., Inc................................................. ............8,610.................771.................982Booking Holdings Inc. ........................................ ............1,904............. 4,577............. 5,078BorgWarner, Inc.................................................. ............5,716.................339.................322Burlington Stores, Inc......................................... ............2,078.................456.................615Darden Restaurants, Inc..................................... ............4,023.................544.................570Dollar General Corporation................................. ............7,798............. 1,074............. 1,579Gap, Inc., The,..................................................... ............7,088.................225.................163Garmin Ltd. ......................................................... ............4,016.................393.................509Lear Corporation ................................................. ............1,685.................338.................300lululemon athletica Inc. ..................................... ............4,013.................706............. 1,207NIKE, Inc., Class B............................................... ..........49,265............. 4,596............. 6,481NVR, Inc. ............................................................. ...............124.................469.................613Ross Stores, Inc. ................................................. ..........15,525............. 1,702............. 2,347TJX Companies, Inc., The .................................... ..........51,899............. 3,114............. 4,115Tractor Supply Company..................................... ............4,263.................456.................517Ulta Beauty, Inc. ................................................. ............2,112.................735.................694V.F. Corporation ................................................... ..........10,932............. 1,009............. 1,415.................................................................................................. ........... 21,504........... 27,507

Consumer Staples — 11.7%Altria Group, Inc. ................................................ ..........58,951............. 5,011............. 3,821Brown-Forman Corporation, Class B .................. ............9,225.................598.................810Costco Wholesale Corporation ........................... ..........13,216............. 3,780............. 5,044Estee Lauder Companies Inc., The, Class A........ ............8,199............. 1,469............. 2,199Hershey Company, The....................................... ............4,375.................634.................835Hormel Foods Corporation ................................. ............8,571.................430.................502Lamb Weston Holdings, Inc. .............................. ............7,804.................869.................872Monster Beverage Corporation.......................... ..........13,299.................945............. 1,097PepsiCo, Inc. ....................................................... ..........48,533............. 7,670............. 8,613Procter & Gamble Company, The ....................... ..........70,794............. 8,407........... 11,482Sysco Corporation............................................... ..........14,693............. 1,392............. 1,632.................................................................................................. ........... 31,205........... 36,907

Financials — 1.6%Ameriprise Financial, Inc.................................... ............3,829.................705.................828East West Bancorp, Inc....................................... ............4,148.................325.................262Eaton Vance Corporation .................................... ............3,363.................205.................204Erie Indemnity Company, Class A....................... ...............872.................232.................188FactSet Research Systems Inc............................ ............1,415.................518.................493Franklin Resources, Inc....................................... ............8,732.................417.................295MarketAxess Holdings Inc.................................. ............1,313.................537.................646SEI Investments Company.................................. ............4,506.................338.................383T. Rowe Price Group, Inc..................................... ............8,284............. 1,058............. 1,311TD Ameritrade Holding Corporation................... ............8,192.................546.................529.................................................................................................. ............. 4,881............. 5,139


Cost+

($)

FairValue

($)

Health Care — 17.6%ABIOMED, Inc. ..................................................... ............1,419.................365.................314Align Technology, Inc. ........................................ ............2,657.................715.................963Amgen Inc. ......................................................... ..........19,998............. 5,105............. 6,260Biogen Inc........................................................... ............6,614............. 2,459............. 2,549Bristol-Myers Squibb Company.......................... ..........36,227............. 2,429............. 3,020Edwards Lifesciences Corporation ..................... ............6,660............. 1,327............. 2,018Eli Lilly and Company ......................................... ..........35,205............. 4,715............. 6,008IDEXX Laboratories, Inc. ..................................... ............4,763............. 1,599............. 1,615Intuitive Surgical, Inc. ........................................ ............3,344............. 2,232............. 2,567Johnson & Johnson ............................................. ..........82,514........... 13,959........... 15,630Merck & Co., Inc.................................................. ..........79,561............. 9,229............. 9,396Mettler-Toledo International Inc. ....................... ...............998.................768............. 1,028Regeneron Pharmaceuticals, Inc. ...................... ............2,463............. 1,282............. 1,201ResMed Inc. ........................................................ ............3,942.................484.................793Varian Medical Systems, Inc. ............................. ............2,645.................363.................488Veeva Systems Inc., Class A............................... ............3,768.................730.................688Waters Corporation............................................. ............3,087.................791.................937.................................................................................................. ........... 48,552........... 55,475

Industrials — 8.4%3M Company....................................................... ..........19,597............. 4,832............. 4,490A. O. Smith Corporation...................................... ............4,547.................309.................281Acuity Brands, Inc. ............................................. ............1,190.................268.................213Allegion Public Limited Company ...................... ............3,272.................454.................529C.H. Robinson Worldwide, Inc............................ ............4,426.................462.................449Copart, Inc. ......................................................... ............7,165.................620.................846Cummins Inc. ...................................................... ............4,998............. 1,041............. 1,161Emerson Electric Co. ........................................... ..........17,296............. 1,476............. 1,713Expeditors International of Washington, Inc. .... ............6,044.................515.................612Fastenal Company .............................................. ..........19,436.................710.................933Huntington Ingalls Industries, Inc...................... ............1,409.................393.................459IDEX Corporation................................................. ............2,179.................418.................487Illinois Tool Works Inc......................................... ..........11,798............. 2,276............. 2,752J.B. Hunt Transport Services, Inc. ....................... ............2,388.................324.................362Manpowergroup Inc. .......................................... ............1,749.................213.................221Old Dominion Freight Line, Inc. ......................... ............1,986.................385.................489Raytheon Company ............................................ ............8,329............. 1,949............. 2,377Robert Half International Inc. ............................ ............4,526.................326.................371Rockwell Automation, Inc. ................................. ............5,091............. 1,104............. 1,340Rollins, Inc. ......................................................... ............5,260.................229.................227Snap-on Incorporated ........................................ ............1,729.................377.................380Southwest Airlines Co. ....................................... ............3,755.................267.................263Union Pacific Corporation................................... ..........20,476............. 3,626............. 4,807W.W. Grainger, Inc. ............................................. ............1,483.................512.................652WABCO Holdings Inc........................................... ............1,461.................266.................257.................................................................................................. ........... 23,352........... 26,671

Information Technology — 45.5%Accenture plc, Class A ........................................ ..........23,503............. 4,744............. 6,427Adobe Inc. .......................................................... ..........14,472............. 5,103............. 6,198Amphenol Corp, Class A ..................................... ............9,096............. 1,004............. 1,278Apple Inc............................................................. ..........43,967............. 9,813........... 16,765Applied Materials, Inc. ....................................... ..........32,709............. 2,060............. 2,593Arista Networks, Inc........................................... ............1,749.................563.................462


Schedule of Investment PortfolioAs at December 31, 2019 (All amounts in thousands of Canadian dollars, unless otherwise noted)


Cost+

($)

FairValue

($)

Automatic Data Processing, Inc. ........................ ..........16,612............. 2,823............. 3,678Broadridge Financial Solutions Inc. ................... ............3,697.................461.................593Cadence Design Systems, Inc. ........................... ............9,061.................605.................816CDW Corporation................................................. ............4,257.................774.................790Cisco Systems, Inc. ............................................. ........142,280............. 9,075............. 8,861Cognex Corporation ............................................ ............4,872.................377.................355Cognizant Technology Solutions Corporation,

Class A ............................................................. ..........16,664............. 1,394............. 1,342F5 Networks, Inc. ............................................... ............2,158.................405.................391Intel Corporation................................................. ........137,524............. 8,070........... 10,688International Business Machines Corporation... ..........27,184............. 5,427............. 4,732Intuit Inc. ............................................................ ..........10,188............. 2,517............. 3,465IPG Photonics Corporation ................................. ............1,068.................275.................201Jack Henry & Associates, Inc.............................. ............2,381.................391.................450KLA-Tencor Corporation ...................................... ............5,309.................791............. 1,228Lam Research Corporation ................................. ............4,815............. 1,131............. 1,828Mastercard Incorporated, Class A ...................... ..........39,213............. 9,405........... 15,204Maxim Integrated Products, Inc......................... ..........10,348.................734.................826Microsoft Corporation......................................... ..........78,009............. 9,317........... 15,975NetApp, Inc......................................................... ............8,643.................750.................699NVIDIA Corporation............................................. ..........16,002............. 3,860............. 4,889Oracle Corporation.............................................. ..........70,372............. 4,960............. 4,841Paychex, Inc. ...................................................... ..........12,463............. 1,137............. 1,377Paycom Software, Inc. ....................................... ............1,547.................442.................532Seagate Technology Public Limited Company... ............7,601.................598.................587Skyworks Solutions, Inc. .................................... ............5,690.................666.................893TE Connectivity Ltd. ............................................ ..........11,127............. 1,319............. 1,385Teradyne, Inc. ..................................................... ............5,373.................455.................476Texas Instruments Incorporated ........................ ..........40,265............. 5,241............. 6,708Visa Inc., Class A................................................. ..........59,233............. 9,893........... 14,453Western Union Company, The, ........................... ..........19,663.................714.................684Xilinx, Inc. ........................................................... ............8,674.................913............. 1,101.................................................................................................. ......... 108,207......... 143,771

Materials — 0.9%Amcor PLC........................................................... ..........58,885.................794.................829Avery Dennison Corporation .............................. ............2,534.................440.................431Celanese Corporation, Series A.......................... ............3,618.................509.................578LyondellBasell Industries N.V., Class A .............. ............8,381............. 1,017............. 1,028.................................................................................................. ............. 2,760............. 2,866

Real Estate — 0.5%Public Storage..................................................... ............5,296............. 1,526............. 1,465

Total Investment Portfolio — 100.0% .............. ..................... .........254,480.........315,930Other Assets Less Liabilities — 0.0%.............................................................. ................ (12)NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS — 100.0% ... ......... 315,918+ Where applicable, distributions received from holdings as a return of capital are used to reduce the

adjusted cost base of the securities in the portfolio.


Schedule of Investment Portfolio (cont'd)As at December 31, 2019 (All amounts in thousands of Canadian dollars, unless otherwise noted)

1. The FundBMO MSCI USA High Quality Index ETF (“the ETF”) isan exchange-traded fund established as an open-endedtrust by a Declaration of Trust under the laws of theProvince of Ontario. BMO Asset Management Inc. (“theManager”) is the Manager and trustee of the ETF. TheManager is a wholly owned subsidiary of Bank ofMontreal. The address of the ETF’s registered office is100 King Street West, Toronto, Ontario, M5X 1A1.

The Statement of Financial Position and related notesof each of the ETFs are as at December 31, 2019 andDecember 31, 2018, except for ETFs established in 2019,in which case the information is only as atDecember 31, 2019. The Statement of ComprehensiveIncome, Statement of Changes in Net AssetsAttributable to Holders of Redeemable Units, Statementof Cash Flows and related notes are for the period(s)ended December 31, 2019 and December 31, 2018,except for ETFs established during either period, whichis presented from the date of establishment (as noted inNote 8) to December 31, of the applicable period.Financial information provided for a class of unitsestablished during the period(s) is presented from theestablishment date as noted in Note 8 to December 31 ofthe applicable period.

The financial statements were authorized for issue bythe Manager on March 3, 2020.

2. Basis of preparation and presentationThese audited financial statements have been preparedin accordance with International Financial ReportingStandards (“IFRS”), as issued by the InternationalAccounting Standards Board (“IASB”). The financialstatements have been prepared on a historic cost basis,except for the revaluation of financial assets andfinancial liabilities (including derivative financialinstruments) measured at fair value through profit orloss ("FVTPL").

3. Summary of significant accounting policiesFinancial instrumentsInvestments include financial assets and financialliabilities such as equity and debt securities,investment funds and derivatives. These financial

instruments are part of a group of financial instrumentsthat are managed and their performance is evaluatedon a fair value basis and in accordance with the ETF'sinvestment strategy.

The ETF classifies and measures financial instrumentsin accordance with IFRS 9 Financial Instruments(“IFRS 9”). Upon initial recognition, financialinstruments are recorded at fair value. A financialinstrument is recognized when the ETF becomes aparty to the contractual requirements of the instrumentand is derecognized when the right to receive cashflows from the instrument has expired or the ETF hastransferred substantially all risks and rewards ofownership. As such, investment purchase and saletransactions are recorded as of the trade date.Investments and derivatives are subsequentlymeasured at FVTPL, with changes in fair valuerecognized in the Statement of Comprehensive Incomeas “Change in unrealized appreciation (depreciation)”.

All financial assets and financial liabilities arerecognized in the Statement of Financial Position.

The ETF’s redeemable units, which are puttableinstruments, are held by different types of unitholdersthat are entitled to different redemption rights. SeeNote 5 for details of unitholders’ transactions in theunits of the ETF.

The different redemption features create equallysubordinate but not identical units or classes of theunits of the ETF. Redemption of units at 95% of the NetAsset Value (“NAV”) for some type of unitholdersredemptions also results in a situation where theredemption value of this puttable instrument is notbased substantially on the net assets of the ETF. As aresult, the ETF’s obligations for net assets attributableto holders of redeemable units ("Net Assets") areclassified as financial liabilities and presented at theredemption amounts.

Cost of investmentsThe cost of investments represents the amount paid foreach security and is determined on an average costbasis, and excludes commissions and other portfolio


Notes to the Financial Statements(All amounts in thousands of Canadian dollars, except per unit data)December 31, 2019

transaction costs, which are separately reported in theStatement of Comprehensive Income. Realized gainsand losses on disposition are determined based on thecost of the investments.

Fair value measurementFair value is defined as the price that would be receivedto sell an asset or paid to transfer a liability in anorderly transaction between market participants at themeasurement date.

For exchange-traded securities, close prices areconsidered to be fair value if they fall within the bid-askspread. In circumstances where the close price is notwithin the bid-ask spread, the Manager determines thepoint within the bid-ask spread that is mostrepresentative of fair value based on the specific factsand circumstances.

Procedures are in place to fair value equities traded incountries outside of North America daily, to avoid staleprices and to take into account, among other things,any significant events occurring after the close of aforeign market.

For bonds, debentures, asset-backed securities andother debt securities, fair value is determined as the lasttraded market price or close price, or other such prices,that falls within the bid-ask spread of the security.Short-term investments, if any, are held at amortizedcost, which approximates fair value due to theirshort-term nature.

The ETF may enter into forward currency contracts forhedging purposes either directly or indirectly, or fornon-hedging purposes. The fair value of forwardcurrency contracts entered into by the ETF is recordedas the difference between the fair value of the contracton the Valuation Date (the “Valuation Date” is each dayon which the Toronto Stock Exchange (“TSX”) is openfor trading) and the fair value on the date the contractoriginated.

The ETF may engage in option contract transactions bypurchasing (long positions) or writing (short positions)call or put option contracts. These contracts havedifferent risk exposures for the ETF, whereas the risk

for long positions will be limited to the premium paidto purchase the option contracts, the risk exposure forthe short positions is potentially unlimited until closedor expired.

The premium paid for purchasing an option is recordedas an asset in the Statement of Financial Position. Theoption contract is valued on each Valuation Date at anamount equal to the fair value of the option that wouldhave the effect of closing the position. The change inthe difference between the premium and the fair valueis shown as “Change in unrealized appreciation(depreciation)” in the Statement of ComprehensiveIncome.

When a purchased option expires, the ETF will realizea loss equal to the premium paid. When a purchasedoption is closed, the gain or loss the ETF will realizewill be the difference between the proceeds and thepremium paid. When a purchased call option isexercised, the premium paid is added to the cost ofacquiring the underlying security. When a purchasedput option is exercised, the premium paid is subtractedfrom the proceeds from the sale of the underlyingsecurity that had to be sold.

The premium received from writing a call or put optionis recorded as a liability in the Statement of FinancialPosition.

When a written option expires, the ETF will realize again equal to the premium received. When a writtenoption is closed, the ETF will realize a gain or lossequal to the difference between the cost at which thecontract was closed and the premium received. When awritten call option is exercised, the premium receivedis added to the proceeds from the sale of the underlyinginvestments to determine the realized gain or loss.When a written put option is exercised, the premiumreceived is subtracted from the cost of the underlyinginvestment the ETF had purchased.

The gain or loss that the ETF realizes when apurchased or written option is expired or closed isrecorded as “Net realized gain (loss)” in the Statementof Comprehensive Income.


Notes to the Financial Statements (cont'd)(All amounts in thousands of Canadian dollars, except per unit data)December 31, 2019

A credit default swap contract is an agreement totransfer credit risk from one party, a buyer ofprotection, to another party, a seller of protection. TheETF, as a seller of protection, would be required to paya notional or other agreed upon value to the buyer ofprotection in the event of a default by a third-party. Inreturn, the ETF would receive from the counterparty aperiodic stream of payments over the term of thecontract provided that no event of default occurs. If nodefault occurs, the ETF would keep the stream ofpayments and would have no payment obligations.

In connection with the agreement, securities or cashmay be identified as collateral or margin in accordancewith the terms of the agreement to provide assets ofvalue in the event of default or bankruptcy/insolvency.

The ETF, as a buyer of protection, would receive anotional or other agreed upon value from the seller ofprotection in the event of a default by a third-party. Inreturn, the ETF would be required to pay to thecounterparty a periodic stream of payments over theterm of the contract provided that no event of defaultoccurs.

Credit default swap contracts are fair valued dailybased upon quotations from independent securitypricing sources. Premiums paid or received, if any, areincluded in “Net realized gain (loss)” in the Statementof Comprehensive Income. Net periodic payments areaccrued daily and recorded as “Income fromderivatives” in the Statement of ComprehensiveIncome. When credit default swap contracts expire orare closed out, gains or losses are recorded as “Netrealized gain (loss)” in the Statement of ComprehensiveIncome.

For securities where market quotes are not available,unreliable or not considered to reflect the currentvalue, the Manager may determine another valuewhich it considers to be fair and reasonable, or use avaluation technique that, to the extent possible, makesmaximum use of inputs and assumptions based onobservable market data, including volatility,comparable companies, NAV (for exchange-traded

funds) and other applicable rates or prices. Theseestimation techniques include discounted cash flows,internal models that utilize observable data orcomparisons with other securities that are substantiallysimilar. In limited circumstances, the Manager may useinternal models where the inputs are not based onobservable market data.

CashCash is comprised of cash and deposits with banks,which include bankers’ acceptances and overnightdemand deposits. The carrying amount of cashapproximates its fair value because it is short-term innature.

Other assets and other liabilitiesOther assets and other liabilities generally includereceivable for investments sold, subscriptionsreceivable, dividends receivable, redemptions payable,distributions payable and accrued expenses. Thesefinancial assets and financial liabilities are short-termin nature and are subsequently measured at amortizedcost, which approximates their fair value.

Investments in subsidiaries, joint ventures and associatesSubsidiaries are entities over which the ETF hascontrol through its exposure or rights to variablereturns from its investment and has the ability to affectthose returns through its power over the entity. TheManager has determined that the ETF is an investmententity and as such, it accounts for subsidiaries, if any, atfair value. Joint ventures are investments where theETF exercises joint control through an agreement withother shareholders, and associates are investments inwhich the ETF exerts significant influence overoperating, investing, and financing decisions (such asentities in which the ETF owns 20% - 50% of votingshares), all of which, if any, have been classified atFVTPL.

Unconsolidated structured entitiesThe Manager has determined that the underlying fundsin which the ETF may invest are unconsolidatedstructured entities. This determination is based on thefact that decision making about the underlying funds isnot governed by the voting right or other similar right



held by the ETF. Similarly, investments insecuritizations, asset-backed securities andmortgage-backed securities are determined to beinterests in unconsolidated structured entities.

The ETF may invest in underlying funds whoseinvestment objectives range from achieving short-termto long-term income and capital growth potential.Underlying funds may use leverage in a mannerconsistent with their respective investment objectivesand as permitted by Canadian securities regulatoryauthorities. Underlying funds finance their operationsby issuing redeemable units which are puttable at theholders’ option and entitles the holder to aproportionate stake in the respective fund’s Net Assets.The change in fair value of each of the underlyingfunds during the periods is included in “Change inunrealized appreciation (depreciation)” in theStatement of Comprehensive Income.

Mortgage-related securities are created from pools ofresidential or commercial mortgage loans, includingmortgage loans made by savings and loan institutions,mortgage bankers, commercial banks and others.Asset-backed securities are created from many types ofassets, including auto loans, credit card receivables,home equity loans, and student loans.

The ETF does not provide and has not committed toproviding any additional significant financial or othersupport to the unconsolidated structured entities otherthan its investment in the unconsolidated structuredentities.

Additional information on the ETF’s interest inunconsolidated structured entities, where applicable, isprovided in Note 8.

Offsetting of financial assets and financial liabilitiesFinancial instruments are presented at net or grossamounts on the Statement of Financial Positiondepending on the existence of intention and legal rightto offset opposite positions of such instruments heldwith the same counterparties. Amounts offset in theStatement of Financial Position are transactions forwhich the ETF has legally enforceable rights to offset

and intends to settle the positions on a net basis.Amounts not offset in the Statement of FinancialPosition relate to transactions where a master nettingarrangement or similar agreement is in place with aright to offset only in the event of default, insolvency orbankruptcy, or where the ETF has no intention ofsettling on a net basis. Refer to Note 8 for details.

Income recognitionDividend income and distributions received frominvestment trusts are recognized on the ex-dividendand ex-distribution date, respectively.

Interest income from interest bearing investments isrecognized in the Statement of Comprehensive Incomeusing the effective interest rate. Interest receivableshown in the Statement of Financial Position is accruedbased on the interest bearing investments’ stated ratesof interest.

Interest on inflation-indexed bonds is paid based on aprincipal value, which is adjusted for inflation. Theinflation adjustment of the principal value isrecognized as part of "Interest income" in the Statementof Comprehensive Income. If held to maturity, the ETFwill receive, in addition to a coupon interest payment, afinal payment equal to the sum of the par value and theinflation compensation accrued from the original issuedate. Interest is accrued on each Valuation Date basedon the inflation adjusted par value at that time and isincluded in “Interest income” in the Statement ofComprehensive Income.

Foreign currency translationThe fair value of investments and other assets andliabilities in foreign currencies are translated into theETF’s functional currency at the rates of exchangeprevailing at the period-end date. Purchases and salesof investments, and income and expenses aretranslated at the rates of exchange prevailing on therespective dates of such transactions. Realized foreignexchange gains (losses) on investment transactions areincluded in “Net realized gain (loss)” in the Statementof Comprehensive Income and unrealized foreignexchange gains (losses) are included in “Change inunrealized appreciation (depreciation)” in the



Statement of Comprehensive Income. Foreignexchange gains (losses) relating to cash, receivablesand payables are included in "Foreign exchange gain(loss)” in the Statement of Comprehensive Income.

Securities lendingAn ETF may engage in securities lending pursuant tothe terms of an agreement with State Street and BNYMellon (the “securities lending agent” and the "formersecurity lending agent", respectively). BNY Mellon wasthe security lending agent until November 3, 2018 whenState Street became the lending agent. The aggregatemarket value of all securities on loan by an ETF cannotexceed 50% of the NAV of the ETF. An ETF will receivecollateral of at least 102% of the value of the securitieson loan. Collateral will generally be comprised ofobligations of or guarantee by the Government ofCanada or a province thereof, or by the United Statesgovernment or its agencies, but may includeobligations of other governments with appropriatecredit ratings. Further, the program entered intoprovides for 100% indemnification by the securitieslending agent and parties related to the ETF’scustodian, to the ETF for any defaults by borrowers.

For those ETFs participating in the program, aggregatevalues of securities on loan and the collateral held as atDecember 31, 2019 and December 31, 2018 andinformation about the security lending income earnedby the ETF are disclosed in Note 8, where applicable.

Income from securities lending, where applicable, isincluded in the Statement of Comprehensive Incomeand is recognized when earned. The breakdown of thesecurities lending income is disclosed in Note 8, whereapplicable.

Increase or decrease in net assets attributable to holders ofredeemable units per unit“Increase (decrease) in net assets attributable toholders of redeemable units per unit” of a class in theStatement of Comprehensive Income represents theincrease (decrease) in net assets attributable to holders

of redeemable units of the class divided by theweighted average number of units of the classoutstanding during the period. Refer to Note 8 fordetails.

TaxationThe ETF qualifies as a mutual fund trust under theprovisions of the Income Tax Act (Canada).Distributions of all net taxable income and sufficientamounts of net realized capital gains for each taxationyear will be paid to unitholders so that the ETF will notbe subject to income tax. As a result, the ETF hasdetermined that it is in substance not taxable andtherefore does not record income taxes in theStatement of Comprehensive Income nor does itrecognize any deferred tax assets or liabilities in theStatement of Financial Position.

The ETF may incur withholding taxes imposed bycertain countries on investment income and capitalgains. Such income and gains are recorded on a grossbasis with the related withholding taxes shown as aseparate expense in the Statement of ComprehensiveIncome.

4. Critical accounting judgements and estimatesThe preparation of financial statements requires theuse of judgement in applying the ETF's accountingpolicies and to make estimates and assumptions aboutthe future. The following discusses the most significantaccounting judgements and estimates that the ETF hasmade in preparing its financial statements.

Accounting judgements:Functional and presentation currencyThe ETF’s unitholders are mainly Canadian residents,with the subscriptions and redemptions of theredeemable units denominated in Canadian dollars.The ETF invests in Canadian and U.S. dollars and otherforeign denominated securities, as applicable. Theperformance of the ETF is measured and reported tothe investors in Canadian dollars. The Managerconsiders the Canadian dollar as the currency that mostfaithfully represents the economic effects of the



underlying transactions, events and conditions. Thefinancial statements are presented in Canadian dollars,which is the ETF's functional and presentationcurrency.

Classification and measurement of investment portfolioIn classifying and measuring financial instrumentsheld by the ETF, the Manager is required to make anassessment of the ETF's business model for managingfinancial instruments. In classifying and measuringfinancial instruments held by the ETF, the Manager isrequired to make significant judgements indetermining the most appropriate classification inaccordance with IFRS 9. The Manager has assessed theETF’s business model with respect to the manner inwhich financial assets and financial liabilities aremanaged as a group and performance is evaluated on afair value basis, and has concluded that FVTPL inaccordance with IFRS 9 provides the most appropriatemeasurement and presentation of the ETF’s investmentportfolio. The collection of principal and interest isincidental to the fair value business model.

Accounting estimates:Fair value measurement of securities not quoted in an activemarketThe Manager has established policies and controlprocedures that are intended to ensure these estimatesare well controlled, independently reviewed, andconsistently applied from period to period. Theestimates of the value of the ETF’s assets and liabilitiesare believed to be appropriate as at the reporting date.

The ETF may hold financial instruments that are notquoted in active markets. Note 3 discusses the policiesused by the ETF for the estimates used in determiningfair value.

5. Units and unit transactionsThe redeemable units of the ETF are classified asfinancial liabilities. The units have no par value and areentitled to distributions, if any. Upon redemption, aunit is entitled to a proportionate share of the ETF’sNAV. The ETF is required to pay distributions in anamount not less than the amount necessary to ensurethe ETF will not be liable for income taxes on realized

capital gains, dividends and interest. The ETF has norestrictions or specific capital requirements on thesubscriptions and redemptions of units except asdisclosed in Note 8. The relevant movements inredeemable units are shown in the Statement ofChanges in Net Assets Attributable to Holders ofRedeemable Units.

In accordance with its investment objectives andstrategies, and the risk management practices outlinedin Note 7, the ETF endeavours to invest thesubscriptions received in appropriate investments,while maintaining sufficient liquidity to meetredemptions, with such liquidity being augmented byshort-term borrowings or disposal of investmentswhere necessary.

The ETF is authorized to issue an unlimited number ofunits of each class. On any trading day, a designatedbroker or underwriter may place a subscription orredemption order for an integral multiple of theprescribed number of units of the ETF. A trading day iseach day on which the TSX is opened for business.

If the subscription or redemption order is accepted, theETF will issue or redeem units to/from the designatedbroker or underwriter by no later than the third tradingday after the date on which the subscription orredemption order is accepted. For each prescribednumber of units issued or redeemed, a designatedbroker or underwriter must deliver or receive paymentconsisting of:

• A basket of applicable securities and cash in anamount sufficient so that the value of the securities,and the cash received is equal to the NAV of the unitssubscribed/redeemed; or

• Cash in the amount equal to the NAV of the unitssubscribed/redeemed.

On any trading day, unitholders may redeem units forcash or exchange units for baskets of securities andcash. Units redeemed for cash will be redeemed at aredemption price per unit equal to 95% of the closingprice for the units on the exchange on the effective dayof the redemption. Units exchanged for baskets of



securities will be exchanged at a price equal to the NAVof the units on the effective date of the exchangerequest, payable by delivery of baskets of securities andcash.

Unitholders that redeem units prior to the distributionrecord date will not be entitled to receive thedistribution.

The NAV per unit of a class for the purposes ofsubscription or redemption is computed by dividing theNAV of the ETF (that is, the total fair value of the assetsattributable to the class of the ETF less the liabilitiesattributable to the class) by the total number of units ofthe class of the ETF outstanding at such time on eachValuation Day, in accordance with Part 14 NationalInstrument (“NI”) 81-106 Investment Fund ContinuousDisclosure for the purpose of processing unitholdertransactions. Net Assets are determined in accordancewith IFRS and may differ from the ETF’s NAV. Wherean ETF’s NAV is not equal to its Net Assets, areconciliation is shown in Note 8.

6. Related party transactions(a) Management feesThe Manager is responsible for all other costs andexpenses of the ETF, including the fees payable to theCustodian, Registrar and Transfer Agent and PlanAgent fees payable to other service providers, includingthe index providers retained by the Manager.

The ETF will pay the Manager a management fee asdisclosed in Note 8 based on the NAV of the class of theETF. The management fee, plus applicable taxes, willbe accrued daily and paid quarterly in arrears. TheManager may, from time to time in its discretion, waivea portion of the management fee charged at any giventime.

The Manager may agree to charge a reducedmanagement fee it otherwise would be entitled toreceive from the ETF with respect to investments in theETF by certain unitholders. An amount equal to thedifference between the fee otherwise chargeable andthe reduced fee of the ETF will be distributed in cash tothose unitholders as Management Fee Distributions.

(b) Other related party transactionsAll expenses are recognized in the Statement ofComprehensive Income on the accrual basis.

The ETF is responsible for the costs and expensesincurred in complying with NI 81-107 (including anyexpenses related to the implementation and on-goingoperation of an Independent Review Committee),brokerage expenses and commissions, income andwithholding taxes as well as other applicable taxes, thecosts of complying with any new governmental orregulatory requirement introduced after the date theETF was established and extraordinary expenses.

From time to time, the Manager may on behalf of theETF, enter into transactions or arrangements with orinvolving subsidiaries and affiliates of Bank ofMontreal, or certain other persons or companies thatare related or connected to the Manager of the ETF.These transactions or arrangements may includetransactions or arrangements with or involvingsubsidiaries and affiliates of Bank of Montreal, BMOAsset Management Corp., BMO Asset Management Inc.,BMO Nesbitt Burns Inc., BMO Private InvestmentCounsel Inc., BMO InvestorLine Inc., BMOInvestments Inc., or other investment funds offered byBank of Montreal and may involve the purchase or saleof portfolio securities through or from subsidiaries oraffiliates of Bank of Montreal, the purchase or sale ofsecurities issued or guaranteed by subsidiaries oraffiliates of Bank of Montreal, entering into forwardcontracts with subsidiaries or affiliates of Bank ofMontreal acting as counterparty, the purchase orredemption of units of other Bank of Montreal affiliatedinvestment funds or the provision of services to theManager.

BMO Nesbitt Burns Inc. is one of the designated brokersthat have entered into an underwriting agreement withthe Manager. As a Designated Broker, under theunderwriting agreement, BMO Nesbitt Burns Inc. maysubscribe for and or be issued units of the ETF by theManager from time to time.



7. Financial instruments risksThe ETF’s activities expose it to a variety of risksassociated with the financial instruments, asfollows: market risk (including currency risk, interestrate risk and other market risk), credit risk and liquidityrisk. The concentration table groups securities by assettype, geographic location and/or market segment. TheETF’s risk management practice focuses on processesand strategies to minimize the tracking error betweenthe ETF’s performance and the performance of itsrelevant index.

(a) Currency riskCurrency risk is the risk that the fair value of financialinstruments denominated in currencies, other than thefunctional currency of the ETF, will fluctuate due tochanges in foreign exchange rates. Investments inforeign markets are exposed to currency risk as theprices denominated in foreign currencies are convertedto the ETF’s functional currency in determining fairvalue. The ETF may enter into forward currencycontracts for hedging purposes to reduce foreigncurrency exposure. IFRS 7 considers the foreignexchange exposure relating to non-monetary assets andliabilities to be a component of market price risk notforeign currency risk. However, the Manager monitorsthe exposure on all foreign currency denominatedassets and liabilities. The ETF’s exposure to currencyrisk, if any, is further disclosed in Note 8.

(b) Interest rate riskInterest rate risk is the risk that the fair value of theETF's interest bearing investments will fluctuate due tochanges in market interest rates. The ETF's exposure tointerest rate risk is concentrated in its investment indebt securities (such as bonds, money marketinvestments, short-term investments and debentures)and interest rate derivative instruments, if any. Otherassets and liabilities are short-term in nature and/ornon-interest bearing. The ETF's exposure to interestrate risk, if any, is further discussed in Note 8.

(c) Other market riskOther market risk is the risk that the fair value of afinancial instrument will fluctuate as a result ofchanges in market prices (other than those arising frominterest rate risk or currency risk), whether thosechanges are caused by factors specific to the individualfinancial instrument or its issuer, or factors affecting allsimilar financial instruments traded in a market ormarket segment. The Manager moderates this riskthrough the use of investment strategies that seek tominimize the ETF’s tracking error versus a marketindex, within the parameters of the investment strategy.The maximum risk resulting from financialinstruments is equivalent to its fair value.

The Manager monitors the ETF’s overall marketpositions on a daily basis and positions are maintainedwithin established ranges. Other assets and liabilitiesare monetary items that are short-term in nature, andas such they are not subject to other market risk. TheETF's exposure to other market risk, if any, is furtherdiscussed in Note 8.

(d) Credit riskCredit risk is the risk that a loss could arise from asecurity issuer or counterparty to a financialinstrument not being able to meet its financialobligations. The fair value of debt securities includesconsideration of the credit worthiness of the debtissuer. Credit risk exposure for over-the-counterderivative instruments is based on the ETF's unrealizedgain of the contractual obligations with thecounterparty as at the reporting date. The creditexposure of other assets is represented by its carryingamount. The ETF's exposure to credit risk, if any, isfurther discussed in Note 8.

The ETF may enter into securities lending transactionswith approved counterparties. Credit risk associatedwith these transactions is considered minimal as allcounterparties have a sufficient approved credit ratingand the market value of collateral held by the ETF mustbe at least 102% of the fair value of securities loaned, asdisclosed in Note 8, where applicable.



(e) Liquidity riskThe ETF's exposure to liquidity risk is concentrated inthe daily redemptions of units, and other liabilities.Since the settlement of redemptions is primarily bydelivery of securities, the ETF is not exposed to anysignificant liquidity risk. The ETF primarily invests insecurities that are traded in active markets and can bereadily disposed. In addition, the ETF retains sufficientcash positions to maintain liquidity. The ETF may, fromtime to time, enter into over-the-counter derivativecontracts or invest in unlisted securities, which are nottraded in an organized market and may be illiquid.Securities for which market quotation could not beobtained and may be illiquid are identified in theSchedule of Investment Portfolio. The proportion ofilliquid securities to the NAV of the ETF is monitoredby the Manager to ensure it does not exceed theregulatory limit and does not significantly affect theliquidity required to meet the ETF's financialobligations.



8. ETF specific information(a) ETF information and change in unitsThe ETF was established on November 3, 2014. Theunits are listed on the TSX under the symbol ZUQ.

The last close price as at December 31, 2019 was$42.00 (December 31, 2018 — $32.21).

The number of units that have been issued and areoutstanding are disclosed in the table below.

For the periods ended(in thousands of units)

Dec. 31,2019

Dec. 31,2018

Units issued and outstanding,beginning of period 7,618 8,512

Units issued 1,900 2,406Issued on reinvestment of distributions 264 190Units consolidated (264) (190)Redeemed during the period (2,000) (3,300)

Units issued and outstanding,end of period 7,518 7,618

Unit consolidationThe units of the ETF are consolidated immediatelyafter a distribution is reinvested so that the number ofunits of the ETF held by investors after theconsolidation is the same as before the distribution.This does not result in a disposition of the investors’units. On consolidation, the aggregate Adjusted CostBase (“the ACB”) of units held by the investors will notchange, but the ACB per unit will increase.

(b) Reconciliation of NAV to Net AssetsAs at December 31, 2019 and December 31, 2018, therewere no differences between the ETF’s NAV per unitand its Net Assets per unit calculated in accordancewith IFRS.

(c) Increase (decrease) in net assets attributable toholders of redeemable units per unitThe increase (decrease) in net assets attributable toholders of redeemable units per unit for the periodsended December 31, 2019 and December 31, 2018 iscalculated as follows:

For the periods endedDec. 31,

2019Dec. 31,

2018

Increase in net assets attributable to holders ofredeemable units 74,611 10,881

Weighted average units outstanding during the period(in thousands of units) 7,244 7,256

Increase in net assets attributable to holders ofredeemable units per unit 10.30 1.50

(d) Income taxesAs at the tax year-ended December 15, 2019, there wereno capital and non-capital losses carried forward.

(e) Related party transactionsManagement feesThe Manager is entitled to receive a management fee of0.300% per annum of the NAV of the ETF, plusapplicable taxes, accrued daily and paid quarterly inarrears.

The outstanding accrued management fees due to theManager are included in “Accrued expenses” in theStatement of Financial Position and as at December 31,2019 amounted to $242 (December 31, 2018 — $205).

Brokerage commissionsBrokerage commissions paid (excluding transactioncosts) on security transactions and amounts paid torelated parties of the Manager for brokerage servicesprovided to the ETF for the periods are as follows:

For the periods endedDec. 31, 2019

($)Dec. 31, 2018

($)

Total brokerage amounts paid 7 7Total brokerage amounts paid to related

parties 0 0

There were no ascertainable soft dollars paid orpayable to dealers by the ETF during the periods.

(f) Financial instruments risksThe ETF’s objective is to replicate, to the extentpossible, the performance of an index of US equities,net of expenses. Currently, the ETF seeks to replicatethe performance of the MSCI USA Quality Index. Theinvestment strategy of the ETF is to invest in and holdthe US equity constituent securities of the MSCI USA



Quality Index in the same proportion as they arereflected in the MSCI USA Quality Index or securitiesintended to replicate the performance of the MSCI USAQuality Index.

No changes affecting the overall level of risk ofinvesting in the ETF were made during the period.

Currency riskThe ETF’s exposure to currency risk is summarized inthe tables below. Amounts shown are based on thecarrying value of monetary and non-monetary assets(including derivatives and the underlying principal(notional) amount of forward currency contracts, ifany).

As at Dec. 31, 2019

Currency

Cash and othercurrent

receivables& payables

($)

Investments(monetary &

non-monetary)($)

Forwardcurrencycontracts

($)

Net currencyexposure

($)

As a % ofNet Assets

(%)

U.S. Dollar 1,302 315,930 — 317,232 100.4

As at Dec. 31, 2018

Currency

Cash and othercurrent

receivables& payables

($)

Investments(monetary &

non-monetary)($)

Forwardcurrencycontracts

($)

Net currencyexposure

($)

As a % ofNet Assets

(%)

U.S. Dollar 1,200 245,902 — 247,102 100.4

As at December 31, 2019 and December 31, 2018, if theCanadian dollar had strengthened or weakened by 5%in relation to all foreign currencies, with all variablesheld constant, the Net Assets of the ETF could possiblyhave decreased or increased, respectively, byapproximately $15,862 (December 31, 2018 — $12,355).In practice, actual results may differ from thissensitivity analysis and the difference could bematerial.

Interest rate riskAs at December 31, 2019 and December 31, 2018, theETF did not have any significant exposure to interestrate risk.

Other market riskThe ETF has a significant exposure to other market riskarising from its investment in equity securities. Usinghistorical correlation between the ETF's return and thereturn of its benchmark, if the benchmark, MSCI USAQuality Index, had increased or decreased by 10%, withall other variables held constant, the Net Assets of theETF would have increased or decreased, respectively,by $30,821 (December 31, 2018 — $23,827). Historicalcorrelation may not be representative of futurecorrelation, and accordingly, actual results may differand the difference could be material.

Credit riskAs at December 31, 2019 and December 31, 2018, theETF did not have any significant exposure to creditrisk.

Securities lendingThe ETF had assets involved in securities lendingtransactions outstanding as at December 31, 2019 andDecember 31, 2018 as follows:

Aggregate Value ofSecurities on Loan

($)

Aggregate Value of CollateralReceived for the Loan

($)

Dec. 31, 2019 14,636 15,814Dec. 31, 2018 10,642 11,849

The table below is a reconciliation of the gross amountgenerated from securities lending transactions to thesecurity lending revenue for the periods endedDecember 31, 2019 and December 31, 2018:

For the periods ended Dec. 31, 2019 Dec. 31, 2018

Amount

% of GrossSecuritiesLendingRevenue Amount

% of GrossSecuritiesLendingRevenue

Gross securities lending revenue 35 100.0 0 100.0Withholding taxes — — — —

35 100.0 0 100.0Payment to securities lending agents 9 25.0 0 25.0

Net securities lending revenue 26 75.0 0 75.0



Concentration riskThe ETF's concentration risk is summarized in thefollowing table:

As atDec. 31,

2019Dec. 31,

2018

EquitiesCommunication Services 5.1% 12.6%Consumer Discretionary 8.7% 11.5%Consumer Staples 11.7% 10.2%Financials 1.6% 2.3%Health Care 17.6% 13.0%Industrials 8.4% 11.1%Information Technology 45.5% 38.3%Materials 0.9% 0.5%Real Estate 0.5% 0.5%

Other Assets Less Liabilities 0.0% 0.0%

100.0% 100.0%

(g) Fair value hierarchyThe ETF classifies its financial instruments into threelevels based on the inputs used to value the financialinstruments. Level 1 securities are valued based onquoted prices in active markets for identical securities.Level 2 securities are valued based on significantobservable market inputs, such as quoted prices fromsimilar securities and quoted prices in inactive marketsor based on observable inputs to models. Level 3securities are valued based on significant unobservableinputs that reflect the Manager's determination ofassumptions that market participants might reasonablyuse in valuing the securities. The tables below show therelevant disclosure.

As at Dec. 31, 2019Financial assets Level 1 Level 2 Level 3 Total

Equity Securities 315,930 — — 315,930

As at Dec. 31, 2018Financial assets Level 1 Level 2 Level 3 Total

Equity Securities 245,915 — — 245,915

Transfers between levelsThere were no transfers between the levels during theperiods.



The accompanying financial statements have been prepared by management of BMO Investments Inc. Management isresponsible for the information and representations contained in these financial statements.

BMO Asset Management Inc. has maintained appropriate processes to ensure that relevant and reliable financial information isproduced. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)as issued by the International Accounting Standards Board (IASB) and include certain amounts that are based on estimates andjudgements. The significant accounting policies which management believes are appropriate for the ETFs are described innote 3 to the financial statements.

The Board of Directors is responsible for reviewing and approving the financial statements and overseeing management’sperformance of its financial reporting responsibilities.

PricewaterhouseCoopers LLP is the external auditor of the ETFs. The auditor has been appointed by the Board and cannot bechanged without the prior approval of the Independent Review Committee and 60 days notice to the unitholders. They haveaudited the financial statements in accordance with generally accepted auditing standards in Canada to enable them to expressto the unitholders their opinion on the financial statements. Their report is included as an integral part of the financialstatements.

Ross F. Kappele, Robert J. Schauer,Head Chief Financial OfficerBMO Asset Management Inc. BMO Exchange Traded FundsMarch 3, 2020 March 3, 2020

Management’s Responsibility for Financial Reporting

BMO Asset Management Inc.First Canadian Place, 43rd Floor100 King Street WestToronto, Ontario M5X 1A1

Independent AuditorPricewaterhouseCoopers LLPPwC Tower18 York Street, Suite 2600Toronto, Ontario M5J 0B2

BMO ETFs are managed and administered by BMO Asset Management Inc., an investment fund manager and portfolio managerand separate legal entity from Bank of Montreal.®/TM Registered trade-marks/trade-mark of Bank of Montreal, used under license.

www.bmo.com/etflegalFor more information please call 1-800-361-1392

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