BMO Asset Management Liability Sensitive Equity Strategy

LiabilitySensitive Equity

9-11% 12-14% 16% 16%

FundamentalLarge Cap

CanadianCore Alpha

S&P/TSX CappedComposite Index

Total Expected Risk

PhilosophyWe believe that combining the best of Fundamental and Quantitative investment methodologies using our unique Quantamental approach provides clients the following benefits: a greater hedge against interest rate movements; stable returns; higher yield than the market, and significantly reduced equity risk.

StrategyThe LSE strategy is a long-only Canadian equity strategy. It com-bines the alpha insights generated from BMO Asset Management’s (BMO AM) Quantamental process with an improved correlation to long-term liabilities, and delivers it in a strategy that only experiences approximately 2/3 of the total market volatility. This thoughtful strategy drives smarter returns and helps institutional investors to extract more from their Canadian equities by explicitly bridging the gap between return generating and liability matching assets.

Investment processThe key points of distinction in BMO AM’s approach are twofold:

1. Our comprehensive models of interest rate sensitivity for each stock in the universe;

About the StrategyA long-only total return Canadian equity strategy designed for liability-sensitive institutional investors.Team:Broad, deep and tenured investment teamDiscipline:Explicitly bridges the gap between return generating and liability matching assetsStrong Risk/Return Pro�le:Defensive strategy that delivers strong performance relative to Canadian long bonds in rising and declining interest rate environments; and offers an impressive equity market capture ratioProcess:Combines the best of Fundamental and Quantitative investment methodologies, together with proprietary models, to generate alpha with significantly less risk than the overall Canadian equity marketInception Date:June 17, 2011

ObjectiveThe BMO Asset Management Liability Sensitive Equity (LSE) Strategy’s primary goals are to construct a diversi-fied Canadian equity portfolio that is more interest rate sensitive than stan-dard market capitalization indices, and to favour stocks that are expected to provide excess returns. Subject to these goals, the strategy attempts to minimize total risk using a comprehensive risk model.

and2. Our proprietary framework and process for collecting and managing data in order to generate new investment insights that drive alpha.

Continuous Research Process

The investment process of the Strat-egy is driven exclusively by in-house proprietary research. We maintain a large library of investment themes that we believe may drive relative stock performance, such as valuation, earnings growth, etc. From this broad universe, we select the themes that have proven effective over time. The themes we use are relatively stable, but may change based on the market.

Underlying each theme is a collection of metrics designed to quantify the exposure of a given security to the investment theme. BMO AM’s approach provides flexibility to evaluate firms across a wide range of sectors, as well as evolving with a specific firm as it experiences changes over its lifecycle.

Portfolio Construction andManagement

The Strategy’s approach to portfolio construction and management

BMO AM Canadian Equity Risk Continuum

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combines the quantitative rigour of optimization techniques with tactical rebalancing based on market opportunities. To construct the portfolio, an optimiza-tion procedure is used to maximize our measures of interest rate sensitivity and expected return, and then to minimize the forecasted risk and forecasted transac-tion costs. The Strategy’s universe of potential stocks is represented by the S&P/TSX Composite Index.

A typical portfolio consists of 50 to 60 securities.

PhilosophyWe believe that combining the best of Fundamental and Quantitative investment methodologies using our unique Quantamental approach provides clients the following benefits: a greater hedge against interest rate movements; stable returns; higher yield than the market, and significantly reduced equity risk.

StrategyThe LSE strategy is a long-only Canadian equity strategy. It com-bines the alpha insights generated from BMO Asset Management’s (BMO AM) Quantamental process with an improved correlation to long-term liabilities, and delivers it in a strategy that only experiences approximately 2/3 of the total market volatility. This thoughtful strategy drives smarter returns and helps institutional investors to extract more from their Canadian equities by explicitly bridging the gap between return generating and liability matching assets.

Investment processThe key points of distinction in BMO AM’s approach are twofold:

1. Our comprehensive models of interest rate sensitivity for each stock in the universe;

and2. Our proprietary framework and process for collecting and managing data in order to generate new investment insights that drive alpha.

Continuous Research Process

The investment process of the Strat-egy is driven exclusively by in-house proprietary research. We maintain a large library of investment themes that we believe may drive relative stock performance, such as valuation, earnings growth, etc. From this broad universe, we select the themes that have proven effective over time. The themes we use are relatively stable, but may change based on the market.

Underlying each theme is a collection of metrics designed to quantify the exposure of a given security to the investment theme. BMO AM’s approach provides flexibility to evaluate firms across a wide range of sectors, as well as evolving with a specific firm as it experiences changes over its lifecycle.

Portfolio Construction andManagement

The Strategy’s approach to portfolio construction and management

Risk Management

ST-022013-LSE-E

TM/® Trade-marks/registered trade-marks of Bank of Montreal, used under licenceThe information provided herein does not constitute a solicitation of an offer to buy, or an offer to sell securities nor should the information be relied upon as investment advice. All Rights Reserved. The information contained herein: (1) is confidential and proprietary to BMO Asset Management Inc. (“BMO AM”); (2) may not be reproduced or distributed without the prior written consent of BMO AM; and (3) has been obtained from third party sources believed to be reliable but which have not been independently verified. BMO AM and its affiliates do not warrant or make any representations regarding the use or the results of the information contained herein in terms of its correctness, accuracy, timeliness, reliability or otherwise, and do not accept any responsibility for any loss or damage that results from its use. ® Registered trade-mark/trade-marks of Bank of Montreal, used under license..

Call to ActionFor more information about this strategy or our line-up of Equities, Fixed Income,Currency solutions and ETFs, please contact Marija Finney:Marija Finney, Senior Vice President, Head of Institutional Sales & ServiceTél. : 416-359-5003marija.finney@bmo.com

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combines the quantitative rigour of optimization techniques with tactical rebalancing based on market opportunities. To construct the portfolio, an optimiza-tion procedure is used to maximize our measures of interest rate sensitivity and expected return, and then to minimize the forecasted risk and forecasted transac-tion costs. The Strategy’s universe of potential stocks is represented by the S&P/TSX Composite Index.

A typical portfolio consists of 50 to 60 securities.

We use a multi-factor risk model built for the Canadian equity market to manage systematic risk in a quantita-tive manner. The primary factors in these models consist of sector or industry classification and other style factors including firm size, value, financial leverage, historical volatility, price momentum, and growth. The team also computes, monitors and man-ages certain macroeconomic factors such as the portfolio’s exposure to the price of oil and the price of gold. From a qualitative perspective, we also monitor firms that have either particularly narrow business focus or exposure to unique circumstances that can result in risk beyond that forecasted by our multi-factor risk model.Additionally, operational risk controls ensure a strong governance structure is in place to safeguard client’s assets. These include segregation of portfolio manage-ment, research, and trading responsibilities, which are reinforced by pre- and post-trade compliance activi-ties, as well as daily monitoring of client and strategy guidelines.

BMO Global Asset Management, our global brand, is a multi-asset management business with offices located worldwide. BMO Asset Management Inc. (BMO AM), is the operating entity in Canada.

BMO AM is a multi-disciplined provider of investment solutions across a diverse set of investment approaches:

■ Pure beta■ Risk controlled alpha■ Fundamental strategies■ Market neutral and long-short

We also offer customized solutions based on clients’ investment beliefs and risk preferences.

Key Investment Professionals

Firm Overview

George Patterson, CFA, CFP, Ph.D.Senior Vice President, Chief Investment Officer,Quantamental StrategiesGeorge is responsible for overseeing the portfolio management

and research functions for our quantamental strategies, as well

as the firm’s equity trading area. He has 16 years of investment

experience in portfolio management, research and investment

model development.

Greg Gipson, M. Econ., M. ORVice President & Head of Portfolio Management,Quantamental StrategiesGreg is responsible for portfolio management, bringing withhim 15 years of investment, portfolio management and tradingexperience.

James Thai, CFA, MAScPortfolio Manager, Quantamental Strategies

James joined BMO Asset Management Inc. in March 2011 onthe Quantitative line of funds. His 11 years of experience havefocused on programming, quantitative analysis, andquantitative portfolio management. Most recently James wasa Partner and Portfolio Manager at an investment fund heco-launched in 2008. Prior to this, he spent six years at LeggMason as a quantitative analyst and portfolio manager.James is a CFA charterholder and has both a Bachelors andMasters of Applied Science in Computer Engineering from theUniversity of Waterloo. He has also been registered with theOSC as a Portfolio Manager, Commodity Trading Manager,and Exempt Market Dealer.