SEMI-ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE BMO Equity Linked Corporate Bond ETF (ZEL) (the “ETF”) For the six-month period ended June 30, 2016 (the “Period”) Manager: BMO Asset Management Inc. (the “Manager” and “portfolio manager”) Management Discussion approximately 5%, followed by corporate bonds at of Fund Performance approximately 4% and Government of Canada bonds at approximately 3%. Results of Operations The ETF returned 5.21% versus the FTSE TMX Canada Mid The ETF’s exposure to shorter dated bonds detracted from Term Corporate Bond Index (the “Index”) return of 4.71%. its performance over the Period, as did its allocations in the The change in total net asset value during the Period from Financials and Infrastructure sectors. The ETF’s holdings approximately $6 million to approximately $4 million had in corporate A-rated bonds also detracted from performance no impact to the performance of the ETF. as they underperformed other credit segments. Contributing to the ETF’s performance, from a sector perspective, were Market Conditions holdings in the corporate Communications and Industrials During the Period, Canadian fixed income markets were up, sectors. BBB-rated corporate bonds also contributed to the mostly as a result of heightened uncertainty. Since January, ETF’s performance as they outperformed other segments, the Bank of Canada maintained a “wait-and-see” bias and returning 5.13%. The portfolio’s option overlay strategy indicated that financial conditions were improving while oil contributed to performance as Canadian equities performed prices rebounded. However, with macroeconomic well over the Period. challenges in Europe and China plaguing global markets, the Canadian economy remained sluggish. In the U.S., the Recent Developments U.S. Federal Reserve Board (the “Fed”) was eager to The U.K.’s decision to leave the European Union dominated continue to raise interest rates, but, with weakening headlines for the Period. The Brexit vote increased employment growth in June and global financial risk volatility, globally, leading investors to take risk off the table around the “Brexit” referendum vote (the U.K.’s departure and allocate out of equities and into bonds. Brexit and poor from the European Union), the Fed’s policy interest rate economic data out of the U.S. has shifted the expectations of remained on hold. the Fed’s interest rate policy. To start the year, between two and four interest rate hikes were forecasted by the market. Over the Period, Canadian bonds returned approximately This volatility and uncertainty has lowered expectations of 4%, as measured by the FTSE TMX Canada Universe Bond another interest rate hike for 2016. The portfolio manager Index. Canadian bonds posted positive returns across all expects bonds to rally, while the markets remain hesitant to maturities and sectors, however, bonds with long-dated adding risk. The Bank of Canada has maintained interest maturities generated higher total returns than short-dated rate stability and looks to continue this stance, exposing the bonds. Specifically, long-term bonds (10+ years) returned portfolio to possible underperformance due to its shorter approximately 8%, with short-term bonds (1 to 5 years) duration positioning, relative to the Canadian bond returning approximately 1%. Mid-term bonds (5 to 10 years) universe. The portfolio should outperform shorter duration returned approximately 4%. From a sector perspective, funds, as longer term bonds should outperform during this provincial bonds posted the highest returns at period of interest rate stability. Credit spreads look to This semi-annual management report of fund performance contains financial highlights but does not contain the complete semi-annual or annual financial statements of the ETF. If the semi-annual financial statements of the ETF do not accompany the mailing of this report, you may obtain a copy of the semi-annual financial statements at your request, and at no cost, by calling 1-800-361-1392, by writing to us at 250 Yonge Street, 9th Floor, Toronto, Ontario, M5B 2M8 or by visiting our website at www.bmo.com/etflegal or SEDAR at www.sedar.com. You may also contact us using one of these methods to request a copy of the ETF’s proxy voting policies and procedures, proxy voting disclosure record and/or quarterly portfolio disclosure. 284 BMO Equity Linked Corporate Bond ETF remain stable, even tightening slightly, which should In accordance with the IRC’s approval and standing contribute to performance over the next period. The instruction, in making a decision to cause the ETF to make portfolio’s exposure to Canadian equities should provide a Related Party Transaction, the Manager, as manager and significant upside to the portfolio. portfolio manager of the ETF, is required to comply with the Manager’s written policies and procedures governing the Related Party Transactions Related Party Transaction and report periodically to the IRC, The Manager, an indirect, wholly-owned subsidiary of Bank describing each instance that the Manager relied on the of Montreal (“BMO”), is the portfolio manager, trustee and approval and standing instruction and their compliance or promoter of the ETF. From time to time, the Manager may, non-compliance with the governing policies and procedures. on behalf of the ETF, enter into transactions or The governing policies and procedures are designed to arrangements with or involving other members of BMO ensure the Related Party Transaction (i) is made free from Financial Group, or certain other persons or companies that any influence of BMO, BMO Nesbitt Burns Inc. or an are related or connected to the Manager (each a “Related associate or affiliate of BMO and/or BMO Nesbitt Burns Inc. Party”). The purpose of this section is to provide a brief and without taking into account any considerations relevant description of any transactions involving the ETF and a to BMO, BMO Nesbitt Burns Inc. or an associate or affiliate Related Party. of BMO and/or BMO Nesbitt Burns Inc., (ii) represents the Designated Broker business judgment of the Manager, uninfluenced by The Manager has entered into an agreement with considerations other than the best interests of the ETF, and BMO Nesbitt Burns Inc., an affiliate of the Manager, to act (iii) achieves a fair and reasonable result for the ETF.. as designated broker and dealer for distribution of BMO Management Fees exchange traded funds, on terms and conditions that are The Manager is responsible for the day-to-day management of comparable to arm’s length agreements in the exchange the business and operations of the ETF. The Manager monitors traded funds industry. The material terms and conditions and evaluates the ETF’s performance, manages the portfolio of the agreement have been disclosed in the ETF’s prospectus. and provides certain administrative services required by The Manager has also entered into agreements with other the ETF. As compensation for its services, the Manager is major dealers in Canada to act as dealers for the creation entitled to receive a management fee payable quarterly and and redemption of units of BMO exchange traded funds. calculated based on the daily net asset value of the ETF at the maximum annual rate set out in the table below. Buying and Selling Securities Investments in Bank of Montreal Debt Securities The following table shows the allocation of management fees. in the Secondary Market , Related-Party Underwritings, As a Percentage Trading as Principal of Management Fees Maximum Annual During the Period, the Manager relied on an approval and Ticker Management Fee Rate Distribution(1) Other(2) standing instruction provided by the ETF’s Independent %%% Review Committee (“IRC”) with respect to the following ZEL 0.40 72.2 27.8 related party transactions: (1) Distribution expenses include filing and listing fees. (2) Other includes all costs related to general administration, advertising and marketing, and profit. (a) investments in common shares or preferred shares of BMO, an affiliate of the Manager; Brokerage Commissions The ETF pays standard brokerage commissions at market (b) investments in a class of non-government debt securities rates to BMO Nesbitt Burns Inc., an affiliate of the Manager, and/or equity securities of an issuer during the period for executing a portion of its trades. The brokerage of distribution of those securities to the public and/or the commissions charged to the ETF (excluding exchange 60-day period following the distribution period where and other fees) during the periods were as follows: BMO Nesbitt Burns Inc., an affiliate of the Manager, acted 2016 2015 as an underwriter in the distribution; and Total brokerage commissions $ 1,150 5,770 (c) trades in debt securities in the secondary market with Total brokerage commissions paid to related parties $ 190 2,188 BMO Nesbitt Burns Inc. who is trading with the ETF as principal (each, a “Related Party Transaction”). 285 BMO Equity Linked Corporate Bond ETF Financial Highlights Past Performance The following tables show selected key financial information The ETF’s performance information assumes that all about the ETF and are intended to help you understand the distributions made by the ETF in the periods shown were ETF’s financial performance for the periods indicated. used to purchase additional units of the ETF and is based on the net asset value of the ETF. The ETF’s Net Assets per Unit(1) Financial years The performance information does not take into account ended Dec. 31 sales, redemption, distribution or other optional charges Period ended Jun. 30, 2016 2015 2014(4) that, if applicable, would have reduced returns or Net assets, beginning of period $ 19.63 20.02 20.00 performance. Please remember that how the ETF has Increase (decrease) from operations performed in the past does not indicate how it will Total revenue $ 0.32 0.65 0.10 perform in the future.