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Bank of Montreal 184th Annual Report 2001 Book One
Everyone has plans.

Table of contents

  • Page 1
    Everyone has plans. Bank of Montreal 184th Annual Report 2001 Book One

  • Page 2
    ... impacted the globe's financial markets, further weakening already slowing economies in the United States, Canada and internationally. The Bank of Montreal Group of Companies was not immune to the troubled times. In the fourth quarter of 2001, the slowing of the North American economies prompted the...

  • Page 3
    ... grow their financial assets. Operating under The Harris ®1 in the United States and BMO Private Client Group in Canada, PCG, through more than 5,100 employees, offers a full suite of wealth management products and services. The group has total assets under management and administration, including...

  • Page 4
    ... services in the United States. • Expanded access to mutual fund distribution channels in Canada with the acquisition of the Guardian Group of Funds. • Established an integrated wealth management offer in the United States with the opening of The Harris offices. These offices put Harris Private...

  • Page 5
    ...has not been affected; or any organization, including the Bank of Montreal Group of Companies. We lost one of our own, David Barkway of BMO Nesbitt Burns, and we lost many friends in the financial services industry. In common humanity, we felt and shared the outrage and sorrow - and the ongoing fear...

  • Page 6
    ... way in Canada and the United States - driven by the ongoing integration of the Canadian and American economies - is going to reconfigure North American financial services into three leagues. One league will feature about five mega-players headquartered in North America but operating globally. One...

  • Page 7
    ..., we trust clients will reward us with more business as conditions improve. We are well regarded for our ability to manage credit risk effectively, especially in the retail sector. For proof, just consider that by year-end, our consumer and commercial loan portfolios in Canada and the United States...

  • Page 8
    ... plan to build a visiting nurses program in Nigeria. Fidelis and Bonnie Umeh President and CEO, SEI Information Technology Co. Chicago, Illinois When Fidelis Umeh steps down from the helm of his company this year, he and his wife Bonnie will continue to look to Harris Bank, "our financial partner...

  • Page 9
    ... Bank in 1984, we have invested an additional $1.4 billion in strategic acquisitions. Today, we operate in 22 of the fastest-growing and most affluent urban markets in the United States, offering our customers a broad and integrated array of personal, commercial and investment products and services...

  • Page 10
    ... also focuses on the growth of our Private Client Group, through which we are building an integrated North American wealth management business. Integral to our plan is leveraging the Harris name, which for 120 years has been ➜ Harris Nesbitt served as the financial advisor to Virginiabased WLR...

  • Page 11
    ... Montreal 184th Annual Report 2001 A Wealth of Services This year, we opened our first group of wealth management offices harriswireless.com bmonesbittburns.com under The Harris brand. Distinctive in approach and design, The Harris delivers a full suite of wealth management services to our clients...

  • Page 12
    ... Simons family has enjoyed a "valued relationship" with Bank of Montreal since the first La Maison Simons opened in Quebec City in 1840. In recent times and with the Bank's support, the Simons expanded their retail clothing empire to six locations throughout Quebec and plan to open a seventh store...

  • Page 13
    ... array of cash management and financing products. We are now able to serve our commercial customers directly by telephone or the Internet through Bank of Montreal's Direct Bank for Business. Through such initiatives, we have become number two in Canada in market share in commercial banking - well on...

  • Page 14
    ... than 500 Investment Fund Specialists at key Bank of Montreal branches, and increased the ➜ With the acquisition of the Guardian Group of Funds, Bank of Montreal's mutual fund family increased total assets under management to $30 billion. ➜ Through an agreement with the Canadian Chamber of...

  • Page 15
    Bank of Montreal 184th Annual Report 2001 ➜ Bank of Montreal has extended its ultra-successful AIR MILES reward program to its business banking customers. number of Resident Investment Advisors across the country. The acquisition of the Guardian Group of Funds, which has given us access to a ...

  • Page 16
    ..., Nova Scotia Last spring, Nancy and Glen Holmes turned to Bank of Montreal to arrange the mortgage on their beautiful new five-bedroom "saltbox " home. The Holmes, both small-business owners, are now focused on building a financial "comfort zone" for themselves and their four young sons. 12

  • Page 17
    ...and investing services in North America, we remain committed to harnessing the power of technology to provide new and better solutions and bring value to our customers. Our achievements have been recognized by Global Finance magazine, which named Bank of Montreal Best Internet Bank in Canada in 2001...

  • Page 18
    ..., Our Communities Bank of Montreal actively supports our many employees who give so generously to their communities. our Toronto-based Institute for Learning (IFL), which develops and delivers both classroom and online training, focused on strengthening our marketing, sales, risk management and...

  • Page 19
    ...of Montreal 184th Annual Report 2001 Our communities: making change bmo.com/community Our plan is to help create healthier, stronger and happier communities by supporting learning opportunities and initiatives. As one of Canada's largest corporate donors, the Bank of Montreal Group Where the Money...

  • Page 20
    ...Media Group and Chief Operating Officer Torstar Corporation Jeremy H. Reitman Montreal, Que. President Reitmans (Canada) Limited Joseph L. Rotman, O.C., LL.D. Toronto, Ont. Chairman and Chief Executive Officer Roy-L Capital Corporation Guylaine Saucier, C.M., F.C.A. Montreal, Que. Corporate Director...

  • Page 21
    ... of Montreal 184th Annual Report 2001 Members of Management Board F. Anthony Comper* Chairman and Chief Executive Officer Yvan J.P. Bourdeau* President and Chief Operating Officer BMO Nesbitt Burns Investment Banking Group Ronald H. Call* Senior Vice-President Corporate Planning Office of Strategic...

  • Page 22
    ... about company news and initiatives please contact our Corporate Communications Department. Bank of Montreal's news releases are available on our web site at bmo.com Shareholder Inquiries For dividend information, change in share registration or address, lost certificates, estate transfers, or...

  • Page 23
    Our plan in action. A review of our financial plans and results. Bank of Montreal 184th Annual Report 2001 Book Two

  • Page 24
    ... Group of Companies Founded in 1817, Bank of Montreal is Canada's first bank and one of the largest financial institutions in North America. We offer clients a broad range of financial services across Canada and in the United States through BMO Nesbitt Burns and our Chicago-based subsidiary, Harris...

  • Page 25
    ... Value Measures Financial Statement Analysis Enterprise-Wide Strategic Management Enterprise-Wide Risk Management Enterprise-Wide Capital Management Review of Operating Groups Performance Personal and Commercial Client Group Private Client Group Investment Banking Group Emfisys and Corporate Support...

  • Page 26
    ... 00 01 Net Economic Profit Growth (%) Further details are provided on page 7. 90 37 (5) (14) (43) 97 98 99 00 01 Revenue Growth excluding non-recurring items Further details are provided on page 8. (%) 15 9 1 97 98 99 00 6 3 01 Expense-to-Revenue Ratio excluding non-recurring items...

  • Page 27
    ... financial performance objective is to grow cash ROE to 19% to 20% over time. • Reported ROE of 13.8% was the lowest in 12 years. • Bank of Montreal is the only major North American bank with a reported ROE of more than 13% for each of the last 12 years. Net Economic Profit Growth • (%) Net...

  • Page 28
    ...growth Expense-to-revenue ratio (b) Provision for credit losses as a % of average net loans and acceptances Financial Condition Measures (%) (a) Gross impaired loans and acceptances as a % of equity and allowance for credit losses Cash and securitiesto-total assets Tier 1 Capital Ratio Credit rating...

  • Page 29
    ... Impaired Loans and Acceptances as a % of Equity and Allowance for Credit Losses Further details are provided on page 19. 97 98 99 00 01 Cash and Securities-toTotal Assets (%) 35.6 Further details are provided on page 22. 28.4 29.2 27.8 23.1 97 98 99 00 01 Tier 1 Capital Ratio 8.83...

  • Page 30
    ...the Canadian peer group average of 14.0%, but worse than the North American peer group average of 8.7%. 97 98 99 00 01 Cash and Securities-to-Total Assets • The liquidity ratio decreased to 23.1% at October 31, 2001 from 27.8% last year. • The decrease was the result of declines in trading...

  • Page 31
    ... (a) Five-year total shareholder return (TSR) Diluted earnings per share (EPS) growth Return on common shareholders' equity (ROE) Net economic profit (NEP) growth Revenue growth Expense-to-revenue ratio (b) Provision for credit losses as a % of average net loans and acceptances Financial Condition...

  • Page 32
    ....9 Revenue growth of 3% An expense-to-revenue ratio of 65.1% A provision for credit losses of $880 million A tax rate (taxable equivalent basis) of 31.6% 2001 Financial Condition • Tier 1 Capital Ratio of 8.15% • Cash and securities-to-total assets ratio of 23.1% • Risk-weighted assets grew...

  • Page 33
    ...2001. Shareholder Value Bank of Montreal's governing objective is to maximize the total return to its shareholders and to generate, over time, first-quartile total shareholder returns relative to its Canadian and North American peer groups. 2001 Compared with 2000 The five-year average annual total...

  • Page 34
    ... Note 17 to the financial statements. Cash Earnings Measures Increasingly, we are using cash earnings measures as standard measures to assess performance. Cash measures adjust for the effects of differences between accounting principles in Canada and the United States for the treatment of business...

  • Page 35
    ... in shareholders' equity and a higher rate charged for capital. Net Economic Profit ($ millions, except as noted) For the year ended October 31 2001 2000 1999 1998 1997 NEP ($ millions) 763 487 464 401 433 Net economic profit (NEP) growth is the percentage change year-over-year in total NEP...

  • Page 36
    ... the Private Client Group, net interest income growth was attributable to businesses acquired in the United States, partially offset by the effects of lower margin lending and spread compression as market rates declined. Net interest income of the Investment Banking Group improved year-over-year as...

  • Page 37
    ...market fees, which relate to investment banking and capital markets transactions, decreased $93 million to $976 million in 2001. The decrease reflects reduced market activity during the year as equity trading volumes, mergers and acquisitions and new equity issues all declined from the record levels...

  • Page 38
    ... Trading Revenues For the year ended October 31 2001 2000 ($ millions) 1999 1998 1997 Deposit and payment service charges Lending fees Capital market fees Card services Investment management and custodial fees Mutual fund revenues Trading revenues Securitization revenues Investment securities...

  • Page 39
    ... P&C PCG 00 Total Bank 01 Expense growth was influenced by increased strategic initiatives spending in the operating groups and increased front-line staffing costs in the Personal and Commercial Client Group. Employee benefits costs increased, partly due to changes in accounting for pensions and...

  • Page 40
    ... more significant initiatives. • Credit Derivatives - expanded into a fee generating business that actively prices, trades and distributes credit risk. Personal and Commercial Client Group (P&C) • Consolidated Statements - development of programs to consolidate customers' accounts on one...

  • Page 41
    ...and Analysis of Operations and Financial Condition Balance Sheet As at October 31 ($ millions) 2001 2000 1999 1998 1997 Assets Cash resources Securities Loans (net) Acceptances Other assets Total assets Liabilities and Shareholders' Equity Deposits Other liabilities Subordinated debt Share capital...

  • Page 42
    ... stronger Ontario region. Loan quality is discussed in the credit risk section of the MD&A on page 18 and further details on loans are provided in Notes 4, 5 and 6 to the financial statements, starting on page 64. Net Loans - Excluding Securities Purchased under Resale Agreements ($ billions...

  • Page 43
    ...United States. • Become the dominant full-service bank in the "Chicagoland" area. Objectives of the Office of Strategic Management The objective of the Office of Strategic Management is to guide the development and implementation of strategies at the line of business level in support of operating...

  • Page 44
    ...risk review and risk reporting; • additional dedicated risk management units function within each of the Bank's operating groups; and • the Bank's management committee structure, which supports the Chief Executive Officer, includes: - the Risk Management Committee (and its sub-committees dealing...

  • Page 45
    ...quarterly basis to the Chief Executive Officer and the Risk Review Committee of the Board that the framework continues to support the reliable and comprehensive assessment of major initiatives across the Bank. Capital at Risk Capital at Risk (CaR) aggregates credit, market and operational risks into...

  • Page 46
    ... with the Bank's strategic objective. Operating practices include regular monitoring of credit risk exposures, regular review on an account and portfolio basis, and reporting to the Chief Executive Officer's Counterparty Risk Council and to the Risk Review Committee of the Board of Directors...

  • Page 47
    ... limits are reviewed at least annually by the Risk Review Committee of the Board of Directors. The Bank's credit risk governance structure helps to ensure that limits are observed and that any excesses are identified promptly, reported appropriately and resolved by management. Processes and Models...

  • Page 48
    .... Market risk is the risk of a negative impact on the Bank's balance sheet and income statement resulting from adverse changes in the value of financial instruments as a result of changes in interest rates, foreign exchange rates, equity or commodity prices and credit spreads. The Bank's trading...

  • Page 49
    ... level. This review takes into consideration the Bank's risk appetite and risk exposure. The market risk limits approved by the Risk Review Committee of the Board of Directors were not exceeded during the year. Processes and Models Processes and models are employed to measure and value our portfolio...

  • Page 50
    ... diversification, credit commitments and liquid asset pledging. Deposits are diversified by customer, type, market, maturity term, currency and geography. These limits are approved by the Risk Review Committee of the Board. Processes and Models We manage liquidity and funding risk by ensuring...

  • Page 51
    ... approval of risk control self-assessments, operational risk quantification and associated capital allocation results. The Risk Management Group reports on significant enterprise issues and operational events to the Chief Executive Officer and the Risk Review Committee of the Board. Internal Audit...

  • Page 52
    ...our share repurchase program, which returned excess capital to shareholders. We intend to maintain our capital ratios at target levels in future periods while continuing to provide adequate internal capital to support our strategic objectives. In January 2001, the Bank declared a 100% stock dividend...

  • Page 53
    ...PCG P&C IBG (3.3%) Emfisys and Corporate Support United States Canada Other countries ($ millions, except as noted) Investment Banking Group 2001 2000 1999 Emfisys and Corporate Support 2001 2000 1999 2001 Total Consolidated 2000 1999 Net income Canada United States Other countries Total Business...

  • Page 54
    ...asset-based lending operation and expanded the cash management and deposit specialist unit. We continued to expand our core corporate finance unit, which contributed to Commercial Banking revenue growth of over 20% for the fourth successive year. • Through continuing expansion of technology, state...

  • Page 55
    ... balance growth and double-digit revenue growth. • Added specialist sales staff to grow cash management and deposit business. • Established mid-market mergers and acquisitions unit, which will be formally launched next year. • Built sales momentum in our new asset-based lending unit. Outlook...

  • Page 56
    ... company, BMO Life. • Hired all key members of the BMO Life management team. Outlook • A weaker economy and slow loan growth will impact sales of creditor insurance. Focus • Capture a bigger share of customers' financial services spending through better penetration of insurance on lending...

  • Page 57
    ... Average current loans Non-interest expense-to-revenue ratio (including securities purchased under resale agreements) Average deposits Assets under administration Assets under management Full-time equivalent staff Excluding Non-Recurring Items Total revenues (teb) Net income Cash return on equity...

  • Page 58
    ... direct and full-service investing, private banking and institutional asset management. Operating under BMO Private Client Group in Canada, and The Harris in the United States, the group provides North American investors with the tools they need to accumulate, protect and grow their financial assets...

  • Page 59
    ... Institutional Asset Management provides traditional money management services for pension funds, endowments, trusts, insurance company reserves, corporate surpluses and our BMO-affiliated mutual funds in Canada and the United States. This line of business also makes managed futures and hedge funds...

  • Page 60
    ... growth, including growth from acquired operations in the United States, and strategic initiatives spending. Results in 1999 included an additional month's results of BMO Nesbitt Burns, which increased that year's revenues by $56 million and expenses by $53 million. Private Client Group Reported...

  • Page 61
    ... focus on high-grade asset structures. Business Environment and Outlook The Investment Banking Group operates in a competitive North American environment. Corporate and institutional clients are increasingly accessing financing and mergers and acquisitions opportunities in the United States and are...

  • Page 62
    ...credit market issues. Overall Business Strategy Challenges in 2001 2001 Highlights Business Outlook and Focus for 2002 Investment and Corporate Banking provides a full suite of financial services to clients throughout North America and Europe. Services include raising public and private capital...

  • Page 63
    ... Challenges in 2001 2001 Highlights Business Outlook and Focus for 2002 The Securitization and Credit Investment Management (CIM) line of business offers both issuers and investors products and services that use credit as a tool for asset management and funding alternatives. To create a highly...

  • Page 64
    ... the Capital Markets line of business, which benefited from several interest rate reductions by central banks and from improved client-driven trading activity. Strong dividend income, securitization fees and increased loan spreads also contributed to improved results. A weaker economy in both Canada...

  • Page 65
    ... better purchasing information and compliance with preferred programs. • Accelerate growth in the commercial market through the design and delivery of North American Cash Management products and services. - Developed and launched Harris Bank's DirectLine for Business, an Internet access service...

  • Page 66
    ...and 15 locations in Arizona and Florida. Together with Bank of Montreal, Harris offers its clients the range of services and depth of expertise of one of the largest financial institutions in North America. Our client base includes individuals, small and medium-sized businesses and corporate clients...

  • Page 67
    ..., our strong corporate and investment banking relationships with mid-market companies in the Midwest and beyond will position Harris well for profitable growth. Financial Results On a U.S. dollar/U.S. GAAP basis, Harris Bank's net income was $201 million, compared with $268 million a year ago. This...

  • Page 68
    ... against the U.S. dollar. Canadian and U.S. Economic and Financial Services Developments in 2001 Canada's economy slowed sharply in the first half of 2001 and will likely contract in the second half. Exports to a depressed U.S. economy plunged during the year. Business investment in computing...

  • Page 69
    ... 5 Shareholder Value - 10 years Earnings Growth - 10 years Profitability - 10 years Balance Sheet Summary - 10 years Liquid Assets - 10 years Total Revenue Detail - 10 years Non-Interest Expense and Expense-to-Revenue Ratios - 10 years Average Balances and Average Interest Rates (teb) of Assets and...

  • Page 70
    ... Number of shareholder accounts Total book value per common share ($) Total market value of common shares ($ billions) Price-to-earnings ratio (times) Excluding non-recurring items (times) Price-to-cash earnings ratio (times) Excluding non-recurring items (times) Market-to-book value (times) Equity...

  • Page 71
    ... Assets Cash resources Securities Loans (net) Acceptances Other assets Total assets Liabilities and Shareholders' Equity Deposits Other liabilities Subordinated debt Share capital Preferred Common Retained earnings Total liabilities and shareholders' equity Average Daily Balances Net loans Assets...

  • Page 72
    ... Lending fees Capital market fees Card services Investment management and custodial fees Mutual fund revenues Trading revenues Securitization revenues Other fees and commissions Revenue from insurance-related activities Gains (losses) on disposal of premises and equipment Foreign exchange revenues...

  • Page 73
    ... and Expense-to-Revenue Ratios ($ millions, except as noted) For the year ended October 31 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 Non-Interest Expense Detail Salaries Employee benefits Total salaries and employee benefits Premises and equipment Rental of real estate Premises, furniture...

  • Page 74
    ... Consumer instalment and other personal loans Credit card loans Loans to businesses and governments (b) Total loans Other non-interest bearing assets Total Canadian dollars U.S. Dollar and Other Currencies Deposits with other banks Securities Loans Residential mortgages (a) Non-residential mortgages...

  • Page 75
    ...Consumer instalment and other personal loans Credit card loans Loans to businesses and governments Total loans Other non-interest bearing assets Change in Canadian dollar interest income U.S. Dollar and Other Currencies Deposits with other banks Securities Loans Residential mortgages Non-residential...

  • Page 76
    ... 2001 United States (a) 2000 1999 1998 1997 2001 Other countries (a) 2000 1999 1998 1997 Individuals Residential mortgages (b) Cards Personal loans Total loans to individuals Commercial, corporate and institutional Diversified commercial Securities purchased under resale agreements Total commercial...

  • Page 77
    ...Ontario Prairie provinces British Columbia and Territories Total loans and acceptances in Canada (b) Net Diversified Commercial Loans by Industry Financial institutions Commercial mortgages Construction (non-real estate) Commercial real estate Manufacturing Mining/Energy Service... 3,686 2,200 2,185 59...

  • Page 78
    ...1997 Allowance for credit losses (ACL), beginning of year Provision for credit losses Transfer of allowance Recoveries Write-offs (b) Other, including foreign exchange ACL, end of year Allocation of Write-offs by Market Individuals Commercial, corporate and institutional Designated lesser-developed...

  • Page 79
    ... Residential mortgages Cards Personal loans Total loans to individuals Diversified commercial Financial institutions Commercial mortgages Construction (non-real estate) Commercial real estate Manufacturing Mining/Energy Service industries Retail trade Wholesale trade Agriculture Transportation...

  • Page 80
    ... 5 years Total Canadian Dollars Assets Cash resources Securities Loans Other Total assets Liabilities Deposits Subordinated debt Other Shareholders' equity Total liabilities and shareholders' equity On-balance sheet gap position Off-balance sheet gap position Total Interest Rate Gap Position 2001...

  • Page 81
    ... % 2001 Riskweighted balance 2000 Riskweighted balance Balance Balance sheet items Cash resources Securities Mortgages Other loans and acceptances Other assets Total balance sheet items Off-balance sheet items Guarantees and standby letters of credit Securities lending Documentary and commercial...

  • Page 82
    ... as noted) 2001 Average balance Average rate paid (%) Average balance 2000 Average rate paid (%) Average balance 1999 Average rate paid (%) Deposits Booked in Canada Demand deposits - interest bearing Demand deposits - non-interest bearing Payable after notice Payable on a fixed date Total deposits...

  • Page 83
    ... 2001 2000 1999 Other Income Gain on sale of Global Custody business Write-down of distressed securities portfolio Gain on sale of Partners First Gain on sale of U.S. Corporate Trust Gain on sale of branches Gain on sale of Bancomer Write-down of equity investments in CBOs Provision for Credit...

  • Page 84
    ...-recurring items Book value Market price High Low Close Financial Measures (%) Five-year total shareholder return Diluted earnings per share growth Excluding non-recurring items Diluted cash earnings per share growth Excluding non-recurring items Return on common shareholders' equity Excluding non...

  • Page 85
    ... Consolidated Statement of Income Consolidated Statement of Changes in Shareholders' Equity Consolidated Statement of Cash Flow Notes to Consolidated Financial Statements Statement of Management's Responsibility for Financial Information Shareholders' Auditors' Report Bank Owned Corporations 57

  • Page 86
    Consolidated Balance Sheet As at October 31 (Canadian $ in millions) 2001 2000 Assets Cash Resources (Note 2) Securities (Notes 3 & 5) Investment (market value $21,714 in 2001 and $24,654 in 2000) Trading Loan substitutes $ 17,656 21,470 16,200 6 37,676 $ 18,508 24,469 21,994 - 46,463 39,485 18,...

  • Page 87
    ... Net Interest Income After Provision for Credit Losses Other Income Deposit and payment service charges Lending fees Capital market fees Card services Investment management and custodial fees Mutual fund revenues Trading revenues Securitization revenues (Note 6) Other fees and commissions 4,499 980...

  • Page 88
    ... Shares (Note 14) Balance at beginning of year Issued under the Shareholder Dividend Reinvestment and Share Purchase Plan Issued under the Stock Option Plan Issued on the exchange of shares of subsidiary corporations Issued on the acquisition of businesses (Note 9) Cancellation of stock options...

  • Page 89
    ...of common shares Common shares repurchased for cancellation Dividends paid Costs of proposed merger Net Cash Provided by (Used in) Financing Activities Cash Flows from Investing Activities Net (increase) decrease in interest bearing deposits with banks Purchase of investment securities Maturities of...

  • Page 90
    ... business in a variety of foreign currencies and report our consolidated financial statements in Canadian dollars. Assets and liabilities related to both foreign currency transactions and foreign operations are translated into Canadian dollars at the exchange rate in effect at the balance sheet date...

  • Page 91
    Notes to Consolidated Financial Statements Term to maturity Within 1 year 1 to 3 years Yield % Yield % 3 to 5 years Yield % 5 to 10 years Yield % Over 10 years Yield % 2001 Total book value Yield % 2000 Total book value Investment Securities Issued or guaranteed by: Canadian federal government ...

  • Page 92
    ... amount 2001 2000 Specific allowance 2001 2000 General allowance 2001 2000 Net amount 2001 2000 Residential mortgages Credit card, consumer instalment and other personal loans Loans to businesses and governments Securities purchased under resale agreements Acceptances Non-sectoral Total $ 41...

  • Page 93
    ... of Financial Institutions Canada as having difficulty in servicing all or part of their external debt to commercial banks. We did not have any impaired loans to designated countries as at October 31, 2001 or October 31, 2000. Included in impaired loans are other real estate owned and securities...

  • Page 94
    ... for credit losses are reviewed by officers in the Risk Management Group. We use a variety of methods to determine the amount we expect to recover from impaired loans including the discounted value of estimated future cash flows, observable market values or the fair value of the underlying security...

  • Page 95
    ... Deferred purchase price receivable 2001 2000 Other Assets Cash deposits with securitization vehicles 2001 2000 Other Liabilities Gain on sale of loans 2001 2000 Servicing liability 2001 2000 Residential mortgages Consumer instalment and other personal loans Credit card loans Loans to businesses...

  • Page 96
    ... 150 18 518 Goodwill Harris Bankcorp, Inc. and subsidiaries BMO Nesbitt Burns Corporation Limited and subsidiaries First National Bank of Joliet Guardian Group of Funds Ltd. Moneris Solutions Corporation Other Intangible Assets Intangible assets which we acquire when we invest in subsidiaries or...

  • Page 97
    ... market and product mandate. Our Personal and Commercial Client Group provides financial services to personal and commercial customers in Canada and the United States; our Private Client Group provides wealth management services; and our Investment Banking Group offers corporate, institutional...

  • Page 98
    ... our customers, such as term deposits and guaranteed investment certificates, to earn interest over a fixed period. The term of these deposits can vary from one day to ten years. Deposits include federal funds purchased, which are overnight borrowings of other banks' excess reserve funds at a United...

  • Page 99
    ... potential issue in respect of our Shareholder Dividend Reinvestment and Share Purchase Plan, 6,131,921 common shares in respect of the exchange of Class B, C, E and F shares of Bank of Montreal Securities Canada Limited and 43,395,083 common shares for the potential exercise of stock options. 71

  • Page 100
    ... Commercial Client Group; $16 for costs to realign investment and corporate banking activities, including certain businesses in our London, England branch in the Investment Banking Group; $6 for strategic repositioning of our wealth management business into six new lines of business in the Private...

  • Page 101
    ...Shareholders' Equity Income tax expense (benefit) related to items recognized directly in retained earnings Total Components of Total Income Taxes Canada: Current income taxes Federal Provincial 2001 2000 1999 Components of Future Income Tax Balances Future Income Tax Assets Allowance for credit...

  • Page 102
    ... our Canadian other future employee benefits are unfunded. Pension and other future employee benefits expenses are determined as the cost of employee benefits earned in the current year, interest expense on the accrued benefit obligation, expected investment return on the market value of plan assets...

  • Page 103
    ... of year Transition adjustment to reflect prior funding by U.S. subsidiary Actual return on plan assets Bank contributions Voluntary employee contributions Benefits paid to pensioners and employees (a) Other, primarily foreign exchange Fair value of plan assets, end of year Plan funded status...

  • Page 104
    ... of our Management's Discussion and Analysis. Note 21: Contingent Liabilities (a) Legal Proceedings BMO Nesbitt Burns Inc., an indirect subsidiary of Bank of Montreal, has been named as a defendant in several class and individual actions in Canada and a class action in the United States brought on...

  • Page 105
    ...securities values, interest rates and foreign exchange rates. Options Options are contractual agreements that convey the right but not the obligation to either buy or sell a specific amount of a currency, commodity or financial instrument at a fixed price either at a fixed future date or at any time...

  • Page 106
    ... Asset/ liability management 2000 Customer trading Total Credit RiskReplacerisk weighted ment cost equivalent balance Customer trading Total Replacement cost Credit risk equivalent Riskweighted balance Interest Rate Contracts Over-the-counter Swaps Forward rate agreements Purchased options...

  • Page 107
    ... years Interest Rate Contracts Fixed/Floating Swaps Canadian $ pay fixed Canadian $ receive fixed US $ pay fixed US $ receive fixed Basis swaps Other swaps Total interest rate swaps Forward rate agreements, futures and options Total Interest Rate Contracts Foreign Exchange Contracts Cross-currency...

  • Page 108
    ...Gross assets Asset/liability management Gross liabilities Total Customer trading Total Net Net Net Net Net Net Interest Rate Contracts Swaps Forward rate agreements Futures Purchased options Written options Foreign Exchange Contracts Cross-currency swaps Cross-currency interest rate swaps...

  • Page 109
    ... if United States generally accepted accounting principles were applied in the preparation of our consolidated financial statements. Assets Cash Resources Securities Loans, net of the allowance for credit losses Other Total Assets Liabilities and Shareholders' Equity Deposits Other Liabilities...

  • Page 110
    ..., are as follows: 2001 2000 Unrealized gains on translation of net investments in foreign operations, net of hedging activities Net unrealized gains on available for sale securities (i) Unrealized gains on derivatives designated as cash flow hedges (ii) Total Accumulated Other Comprehensive Income...

  • Page 111
    ... 1, 2000, pension benefits were recognized in our Consolidated Statement of Income in the period services were provided by our employees, with the corresponding obligation valued using management's best estimate of the long-term rate of return on assets, while other future employee benefits were...

  • Page 112
    ... its Risk Review Committee. The Shareholders' Auditors and the Bank's Chief Auditor have full and free access to the Board of Directors and its committees to discuss audit, financial reporting and related matters. F. Anthony Comper Chairman and Chief Executive Officer Karen Maidment Executive Vice...

  • Page 113
    ... the Bank Book value of common and preferred shares owned by the Bank (Cdn $ in millions) Head office Bank of Montreal Assessoria e Serviços Ltda. Bank of Montreal Capital Corporation Bank of Montreal Capital Markets (Holdings) Limited BMO Nesbitt Burns Limited (U.K.) Bank of Montreal Finance Ltd...

  • Page 114
    ... at the Bank of Montreal Group of Companies. Effective corporate governance benefits our employees, shareholders, communities - and our business. Our Board of Directors is charged with responsibility for maintaining our high standards and encouraging the evolution of our corporate governance program...

  • Page 115
    ... with those of shareholders, effective in fiscal 2002, a share ownership guideline has been adopted by the Board requiring that a director hold Bank common shares or deferred share units with a value of not less than six times his or her annual retainer and, until the guideline level is achieved...

  • Page 116
    ...Media Group and Chief Operating Officer Torstar Corporation Jeremy H. Reitman Montreal, Que. President Reitmans (Canada) Limited Joseph L. Rotman, O.C., LL.D. Toronto, Ont. Chairman and Chief Executive Officer Roy-L Capital Corporation Guylaine Saucier, C.M., F.C.A. Montreal, Que. Corporate Director...

  • Page 117
    ... of Montreal Group of Companies, Quebec Investment Banking Group Thomas V. Milroy Vice-Chair, BMO Nesbitt Burns and Global Head of Investment & Corporate Banking Investment Banking Group Kathleen M. O'Neill Executive Vice-President BMO mbanx Direct and Customer Value Management Personal & Commercial...

  • Page 118
    ... cost by transaction, client or line of business and therefore promotes maximization of shareholder value. Net Economic Profit (NEP) Cash net income available to common shareholders less a charge for capital. Forwards and Futures Contractual commitments to either buy or sell a specified currency...

  • Page 119
    ... market factors, including interest and foreign exchange rates, equity and commodity prices, spread and basis risk. Return on Common Shareholders' Equity (ROE) This represents net income, less preferred share dividends, expressed as a percentage of average common shareholders' equity. Total...

  • Page 120
    Shareholder Information Common Share Trading Information during Fiscal 2001 Primary Stock Exchanges Ticker Year-end Price Oct. 31, 2001 High Low Total Volume of Shares Traded Toronto New York BMO BMO $ 33.86 US$ 21.37 $ 44.40 US$ 29.15 $ 32.75 US$ 20.75 357.2 million 9.3 million Dividends per...

  • Page 121
    ... trade mark of Harris Trust and Savings Bank The Harris is a registered trade mark of Harris Trust and Savings Bank Nesbitt Burns is a registered trade mark of BMO Nesbitt Burns Corporation Limited Moody's is a registered trade mark of Moody's Investor Services Inc. AIR MILES For Business Program...

  • Page 122
    ... about company news and initiatives please contact our Corporate Communications Department. Bank of Montreal's news releases are available on our web site at bmo.com Shareholder Inquiries For dividend information, change in share registration or address, lost certificates, estate transfers, or...