Bank of Montreal 1998 Annual Report Download - page 29

BANK OF MONTREAL GROUP OF COMPANIES
9897969594
CLOSING PRICE PER
COMMON SHARE ($)
63.10
60.85
40.55
29.75
25.13
9897969594
RETURN ON
INVESTMENT
Annual ROI (%)
Five-year ROI (%)
6.4
55.0
42.4
24.1
(2.3)
23.3
26.1
22.2
23.1
14.3
SHAREHOLDER VALUE
STRATEGY:
To maximize shareholder value
through consistent earnings
per share growth, focusing on
both profitability and respon-
sible capital management.
MEASURES:
Our primary measure is the
five-year return on common
shareholders’ investment
(five-year ROI), which is an
indicator of long-term success
in increasing shareholder value.
Five-year ROI is calculated
as the annualized total return
earned on an investment in
Bank of Montreal common shares
made at the beginning of a
five-year period. Total return
includes the effect of the
change in share price and the
reinvestment of received
dividends in additional Bank
of Montreal common shares.
BANK OF MONTREAL/ROYAL BANK OF CANADA MERGER
On January 23rd, 1998 we announced a definitive agreement, subject to regulatory and shareholder
approval, to merge with Royal Bank of Canada. This transaction is a merger of equals and will be
accounted for as a pooling of interests. Under the terms of the agreement, our shareholders will receive
0.97 of a common share of the merged entity for each common share held. Royal Bank of Canada
shareholders will receive one common share of the new bank for each common share held.
The expected date of the merger is dependent on approvals by the shareholders of each Bank and
upon receipt of approvals under the Bank Act and the Competition Act in Canada, as well as various
other Canadian, U.S. and international regulatory and other approvals. A Joint Management Proxy
Circular will be sent to all shareholders after regulatory approval is obtained, describing the proposed
merger in detail.
S&P 500
Index
TSE 300 IndexBMO
FIVE-YEAR RETURN
ON INVESTMENT (%)
19.3
10.1
23.3
®TSE 300 Composite Index is a registered trade mark of the Toronto Stock Exchange.
†Defined in the Glossary on page 92
21
CUMULATIVE GROWTH IN SHAREHOLDER
VALUE REMAINS HIGH
The cumulative growth in shareholder value is measured by
the change in market capitalization plus the dividends paid,
over a specified period of time. Over the past nine years
our cumulative growth in shareholder value was $15.9 billion,
comprised of $12.9 billion in increased market capitalization
and $3.0 billion in increased dividends.
Cumulative growth in shareholder value is equivalent to total
return to shareholders. 989796959493929190
CUMULATIVE GROWTH
IN SHAREHOLDER VALUE
($ billions)
15.9
14.6
8.8
5.8
4.2
4.0
2.8
1.2
(0.4)
FIVE-YEAR ANNUALIZED RETURN OF 23.3%
Return on common shareholders’ investment (ROI
†
) is the most important of our ten primary
measures of success. We consider ROI to be the best external measure of shareholder value.
Dedicated, competent people, ongoing technology investments and advanced management
sciences applied across our diversified lines of business work together to achieve our goal of
maximizing shareholder value.
Over the past five years our shareholders have received a return of 23.3% on their invest-
ment in Bank of Montreal. This return exceeded the market return, defined as the TSE 300
Composite Index®(TSE 300) for the same period, by 1320 basis points.†Our above-market
returns reflect a $36.23 appreciation in share price since the beginning of 1994 and an
increase of $0.58 in annual dividends paid on common shares. An investment of $1,000
in Bank of Montreal common shares at the beginning of 1994 would have been valued at
$2,847 at October 31, 1998, a return of $1,847 primarily due to the increase in share price.
RETURN ON COMMON SHAREHOLDERS’ INVESTMENT
For the year ended October 31 1998 1997 1996 1995 1994
Closing market price per common share ($) 63.10 60.85 40.55 29.75 25.13
Dividends paid ($ per share) 1.76 1.60 1.41 1.29 1.18
Dividend yield (%) (a) 2.9 3.9 4.7 5.1 4.4
Five-year ROI (%) 23.3 26.1 22.2 23.1 14.3
Annual ROI (%) 6.4 55.0 42.4 24.1 (2.3)
(a) Dividends paid in the year divided by the opening stock price
In 1998 our shareholders received a return of 6.4% on their investment in Bank of Montreal
common shares, which exceeded the negative market return of 7.8% by 1420 basis points.
Market returns during the year were hurt by global economic events, particularly in Asia.
Above-market return on an investment in Bank of Montreal in 1998 reflected continued
higher valuations accorded to our stock by the market.
In 1997, shareholders earned an annual return of 55%, which exceeded the TSE 300
return by 3060 basis points. The return in 1997 was driven by strong financial performance,
enhanced by higher valuations given to Canadian banks in general, and a robust North
American economy.