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Bank of Montreal Group of Companies
182nd Annual Report 1999
To the Owners of Bank of Montreal

Table of contents

  • Page 1
    B a n k of Mo nt rea l G ro u p of Co m pa n ie s 182 nd A n n u a l Re po r t 1999 To t he O w ne r s of B a n k of M o nt rea l

  • Page 2
    ... 4 10 5 C h a i r m a n 's M e s s a g e Personal and Commercial Client Group Investment Banking Group Private Client Group Enterprise-Wide Mandates Our Workforce Our Community Management Analysis of Operations Consolidated Financial Statements Corporate Governance Glossary Shareholder Information

  • Page 3
    ... you a total return, from dividends and the growth in value of your shares, that will be in the top 25% of investments in comparable North American financial services companies. In an ever more competitive world, achieving that goal means building relationships with our customers that will set new...

  • Page 4
    ...with a very close and strong relationship with its customers: a bank so helpful and respected - and indeed admired - that employees and customers loved it and viewed it as their own; a bank that was an involved and positive force in the community. Tony Comper Chairman and Chief Executive Officer 2

  • Page 5
    ...one banking channel, the priority is to create a seamless client experience regardless of access channel. We are also targeting high-opportunity growth markets. In Canada we are allocating additional resources to lines of business serving small Bank of Montreal Group of Companies 1999 Annual Report...

  • Page 6
    ... share ownership plan for all employees which reinforces the shareholder value focus of our performance and medium-sized business clients and to those devoted to consumer lending, including mortgages and consumer finance. In the United States we are continuing to develop our valuable Harris Bank...

  • Page 7
    ... about our progress and our plans. Suffice to say that we have the structure, the leadership and the strategies in place to recreate the "my bank" of my memories - and update and improve upon the original. Our vision is to become the first Canadian-based bank in the new millennium to finally get...

  • Page 8
    ... and financing have helped her Montrealbased company expand its line of aloe-based first aid gels and creams and food supplements into Europe and Latin America. Trudel has seen sales grow from $700,000 in 1995 to nearly $2 million this year. 6 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 9
    ... service at the centre of our strategy, we will grow our core businesses while maximizing value for all Bank of Montreal shareholders. As a first step in the implementation of this strategy we have reorganized the Bank of Montreal Group of Companies by client group. The Personal and Commercial...

  • Page 10
    ... located across Canada. Our commercial clients are demanding more ï¬,exibility in service levels, and we're responding. In 1999 we provided the benefits of Everyday Banking plans to our small and medium-sized business customers, while offering for the first time a direct 8 Bank of Montreal Group...

  • Page 11
    ... customers. We will work toward common architecture, service levels and standards across all lines of business. More information on Personal and Commercial Client Group is available on page 45 of the Management Analysis of Operations. FinanciaLinx In March, Bank of Montreal and Newcourt Credit...

  • Page 12
    ... of Harris/Bank of Montreal/Nesbitt Burns/Bancomer services to our middle-market customer base. Both are businesses that create value for clients and shareholders alike. Since 1993, Harris Community Banking has tripled its branch network. Today, from 139 locations, Harris serves the banking needs...

  • Page 13
    ...Nesbitt Burns with those of Bank of Montreal's Global Treasury and Trading, Corporate Banking and Asset Portfolio Management businesses, together with those of our Merchant Bank, to form IBG. in Canada is to strengthen our leadership position across our full range of products and services to address...

  • Page 14
    ... of credit investments. We can provide superior service in the area of credit portfolio management because of the increasing liquidity of loans, the development of the credit derivatives market, the depth of our experience and our strong reputation with institutional investors. Collaterized bond...

  • Page 15
    ... services and the provision of: $2.3 billion senior bridge finance facility $150 million subordinated loan $1.1 billion initial public debt offering - the largest corporate bond offering in Canadian history $650 million real return bond $400 million additional public debt issue. Merchant Banking...

  • Page 16
    ...led to RRSPs, savings bonds and investments in the stock market. Today, they play golf four times a week and winter in Florida knowing that their children receive the same level of expert advice and support they have relied on for 39 years. 14 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 17
    ...allows clients to view their accounts via the Internet, track model portfolios, check current and previous RRSP contributions and much more. Over 16,000 clients went online with Nesbitt Burns Gateway in Bank of Montreal Group of Companies 1999 Annual Report Six Strategic Lines of Business When Bank...

  • Page 18
    ... long-term shareholder value. * Brendan Wood International Survey: Institutional Equity Sales, Research and Trading in Canada - 1999. More information on Private Client Group is available on page 52 of the Management Analysis of Operations. 16 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 19
    ... group that delivers technology strategy, systems development and operational services to the Bank of Montreal Group of Companies. Encompassing Solutions & Applications, Global Information Technology, Business Process Improvement, Network & Systems, Global Dealing, Strategic Sourcing and Corporate...

  • Page 20
    ... new programs to improve our competitive edge. By changing the proportion of fixed and variable costs in its compensation program, the Bank has strengthened the relationship between business performance and pay for all employees. Between 1995 and 1999 the percentage of total compensation accounted...

  • Page 21
    .... Bank of Montreal is a founding sponsor of Kids Help Phone, Canada's only national, 24-hour counselling and referral service for children and youth. The Bank Education Civic Causes/ Community Hospitals/ (such as YMCA) Health Care Miscellaneous Culture Federated Appeals (such as United Way) boards...

  • Page 22
    ... Growth Expense-to-Revenue Ratio Credit Risk Liquidity Ratio Capital Adequacy Enterprise-Wide Risk Management Operating Review of Client Groups Personal and Commercial Client Group Private Client Group Investment Banking Group Economic Outlook 20 Bank of Montreal Group of Companies 1999 Annual...

  • Page 23
    ... Impaired Loans & Acceptances as a % of Equity and Allowance for Credit Losses Liquidity Ratio Tier 1 Capital Ratio Credit Rating *Total shareholder return (TSR) is equivalent to return on investment (ROI). To ensure consistency, TSR has replaced all references to ROI throughout the annual report...

  • Page 24
    ... Five-Year Total Shareholder Return (%) â- Our performance was slightly below the Canadian peer group average of 22.5%, and above the North American peer group average of 20.0%. 23.1 22.2 26.1 23.3 22.0 95 96 97 98 99 Net Economic Profit Growth (%) â- Our net economic profit growth in...

  • Page 25
    ... calculate the average were: Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and The Toronto Dominion Bank. (a) Ratios shown are based on actual reported results adjusted to conform with Bank of Montreal accounting methods...

  • Page 26
    ... business operations, continued investment in strategic initiatives, higher revenue-driven compensation and the one-time expense charge*. â- 95 96 97 98 99 * Please refer to page 27 for more information on the one-time charges. 22 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 27
    ... being unusually low as a result of non-recurring benefits related to collection activity on commercial real estate loans. Provision for Credit Losses as a % of Average Loans and Acceptances 0.30 0.23 0.23 0.09 95 96 97 98 99 0.22 More information can be found on page 33. â- â- Gross...

  • Page 28
    ...20 largest banks is based on the size of their 1998 common shareholders' equity: Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, The Toronto Dominion Bank, The Bank of New York Company, Inc., BankAmerica Corporation, Bank One Corporation, National...

  • Page 29
    ... Tier 1 ratio was 7.42% in 1999 compared to the North American peer group average of 8.10%. 95 96 97 98 99 Credit Rating â- AA- Our credit rating was average compared to both the Canadian and North American peer groups. Bank of Montreal Canadian Peer Group Average North American Peer Group...

  • Page 30
    ...an indicator of long-term success in increasing shareholder value. Five-year TSR 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 change in share price and the reinvestment of...

  • Page 31
    ...charge for the cost of common equity capital is then deducted to arrive at NEP. The rate applied to capital to determine this charge is calculated as the average yield on 10-year Government of Canada Bonds, plus a 5% premium for the risk of investing in Bank of Montreal common shares. This charge is...

  • Page 32
    ... across most lines of business including mortgage originations, commercial loans and corporate lending. In addition, volume growth occurred in credit card operations and other fee-related services, partly driven by product and distribution initiatives. The impact of volume growth was partly...

  • Page 33
    ... market activities including trading losses, as well as a lower contribution from Bancomer. Expense growth was 4.8%, reï¬,ecting strategic development spending, the foreign exchange rate impact on U.S.-based expenses and business volume growth. Bank of Montreal Group of Companies 1999 Annual Report...

  • Page 34
    ... impacted by the one-time charges, was outpaced by increases in common shareholders' equity. Refer to page 26 for more information on earnings growth and to page 35 for details on our capital management process. Return on Common Shareholders' Equity For the year ended October 31 (%) 1999 1998...

  • Page 35
    ...'s institutional businesses, net interest income was up over last year, principally due to increased volumes and spreads in the corporate lending portfolio and improved spreads in securities portfolios. †Defined in the glossary on page 104. Bank of Montreal Group of Companies 1999 Annual Report...

  • Page 36
    ... as a result of the increased volume of credit and debit card transactions, and increased numbers of merchant discount devices. Investment management and custodial fees were $12 million higher than a year ago, reï¬,ecting volume growth in estate and trust assets and accounts. Mutual fund revenues...

  • Page 37
    ...trading revenue, capital market fees and card services fees. The increased investment management fees, custodial fees and mutual fund revenues resulted from an increase in assets under management and administration. The decline in net interest income reï¬,ected lower revenues from equities and bonds...

  • Page 38
    ... solutions Value Based Management (VBM) - development of the VBM framework for executing our governing objective of maximizing shareholder value. Strategic development spending Foreign exchange impact Charge Revenue-driven compensation Nesbitt Burns additional month Ongoing business volume growth...

  • Page 39
    ... the year. Approach Gross Impaired Loans Ratio 20.48 15.71 7.65 6.66 8.53 Our approach to managing credit risk is further discussed in the Risk Management section on page 38. Outlook We expect the provision for credit losses in 2000 to increase in line with growth in the Bank's businesses, and...

  • Page 40
    ... portfolio management. Outlook We expect the liquidity ratio in 2000 to remain in the same range as in 1999. Deposits by Client (%) 19.4 38.9 41.7 Banks Business/Governments Individuals Deposits by Type (%) 22.6 10.4 67.0 Term Demand Notice 34 Bank of Montreal Group of Companies 1999 Annual...

  • Page 41
    ... shares. RWA growth was moderated by various balance sheet management initiatives including the securitization of corporate loans, mortgages and credit cards. Outlook We expect the Tier 1 Capital Ratio to be greater than 7.75% in 2000. Tier 1 Capital Ratio (%) Total Capital Ratio (%) Assets...

  • Page 42
    ... the line of business level, equity is managed on an economic basis, whereby it is allocated to support the various risks associated with the activities of each line of business. Securitization What is securitization? Securitizing assets involves selling financial assets to trusts or special-purpose...

  • Page 43
    ... prices charged for products and services reflect these risks. Risk is calculated in terms of impact on income and asset values. We assess the potential effect on our business of changes in political, economic, market and operating conditions, and the creditworthiness of our clients, using four risk...

  • Page 44
    ... (e.g. credit risk, market risk, operational risk) for a defined level of probability within a specified time interval. CaR then provides a unit of risk, which can be aggregated to provide total risk-based capital requirements. Using CaR ensures that management understands the true capital cost for...

  • Page 45
    ... loan portfolio) Market Diversification (% of loan portfolio) 55.2 38.6 0.3 5.8 0.1 45.1 36.7 18.1 0.1 Canada United States Mexico Other countries Designated LDCs Commercial Individuals Designated LDCs Corporate and Institutional The provision for credit losses as a percentage of average loans...

  • Page 46
    ...commercial and Canadian corporate instruments Money market: Bank placements and acceptances, and international loans and investments Trading: Instruments designated as trading and marked-to-market. †Defined in the glossary on page 104. 40 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 47
    ... capital calculation. The integrated VaR model measures the market risk associated with both foreign exchange and trading interest rate risk. I-VaR Summary for the Period from Feb. 1 to Oct. 31, 1999 (US$ millions)* High Low Average As at year-end *One-day measure using 99% confidence level...

  • Page 48
    ... and strategies are formulated to enable us to react to changes in an appropriate and timely manner. Performance Review: Reporting The Risk Management Group reports significant operational events (if any) that occur throughout the Bank to executive management and the Board of Directors. Corporate...

  • Page 49
    .... A credit working group has been managing Year 2000 risks across the lines of business and continues to assess the overall risks of major borrowers in targeted market segments which include Canadian commercial accounts, Harris clients, corporate accounts and financial institutions. This process...

  • Page 50
    ...effect to the current year's organization structure and presentation changes Net Income Business Mix and Average Assets by Operating Group For the year ended October 31 Personal & Commercial Client Group 1999 1998* 1997* 1999 Private Client Group 1998* 1997* 1999 Investment Banking Group 1998* 1997...

  • Page 51
    ... Service Managers to help manage their client portfolios in terms of retention and growth. Strategies for 2000: Continue investment in technology, and leverage of customer knowledge group, enabling close interaction with the branch system. Further development and expansion of direct banking...

  • Page 52
    ... credit quality. Strategies for 2000: Enhance profitability and growth of residential mortgage products through client value management and product improvements. Expand into new market segments by leveraging our loan decisioning capabilities, and develop new capabilities in related businesses...

  • Page 53
    ...Global Custody. e-business 1999 Accomplishments: Implemented the Harris Bank integrated suite of web sites, providing consistent, integrated online banking, trust and brokerage services. Launched Competix, which creates value for small U.S.-based financial institutions by providing an online credit...

  • Page 54
    ...: Corporate Trust group retained its national rank as fourth in shareholder services and ninth in bond indenture services, while achieving record growth in high value-added services relating to structured finance and mergers and acquisitions transactions. The group inaugurated a new, state-of...

  • Page 55
    ... growth was due to growth in our technology-related businesses and expanding banking operations in the United States. Both revenues and expenses for our U.S. operations were affected by the U.S./Canadian dollar exchange rate. Personal and Commercial Client Group As at or for the year ended October...

  • Page 56
    ... technology-related businesses. Personal and Commercial Client Group - Canada As at or for the year ended October 31 ($ millions except as noted) 1999 1998* 1997* 97 98 99 Average commercial loans Average commercial deposits *Represents volumes in Small Business and Commercial Mid-Market lines...

  • Page 57
    ... growth and pricing strategy, while improving productivity. Our Mid-Market Corporate Banking franchise will serve its clients through a relationship advisory approach with a particular emphasis on delivering investment banking and capital markets solutions. Personal and Commercial Client Group...

  • Page 58
    ...States are able to draw on the resources of the entire group to help meet their objectives for asset growth and preservation. Many of PCG's services are available through a variety of channels: traditional in-person service at Private Client Service Centres, Bank of Montreal and Nesbitt Burns branch...

  • Page 59
    ...Nesbitt Burns Investment Advisors will be hired and trained to provide retirement and investment planning/advice and insurance services.* Investment Advisors resident in the Bank's branches will work closely with Investment Funds Specialists to provide the full spectrum of wealth management services...

  • Page 60
    ... by market conditions and growth in the Retail Investment Products and Institutional Asset Management businesses. First Canadian Funds and Jones Heward experienced increased fee revenue compared to 1997 due to higher volumes and a shift to longer-term assets. Private Client Group Net interest income...

  • Page 61
    ...Investment & Corporate Banking, Capital Markets group, Merchant Banking, Securitization, Equity Research, Institutional Equities, Asset Portfolio Management, and Governments & International Financial Institutions, including Trade Finance. IBG provides a full range of financial products and services...

  • Page 62
    ... Nesbitt Burns, aligning all business operations and management structure. Rationalized and refocused our offshore operations. Leveraged our integrated approach to client/product coverage to participate in the largest-ever Canadian privatization deal (the $4 billion acquisition of Ontario's Highway...

  • Page 63
    ... next year, though at a more moderate pace than this year. As a result of these economic considerations, the Investment Banking Group has made the organizational changes required to maintain current financial performance levels into 2000. Bank of Montreal Group of Companies 1999 Annual Report 57

  • Page 64
    ... (%) (estimates for the year ending Dec. 31) 1999 2000 Canada United States Mexico 3.8 3.8 3.2 3.4 3.3 4.0 Annual Average Exchange Rates (estimates for the year ending Dec. 31) 1999 2000 Cdn$/US$ Peso/US$ 1.490 9.63 1.488 10.71 58 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 65
    ... - basic - fully diluted 272,573 Number of shareholder accounts 49,369 Total book value per common share ($) (a) 34.87 Total market value of common shares ($ billions) 15.1 Price-to-earnings ratio (times) 11.9 Market-to-book value (times) 1.62 Equity-to-assets ratio 4.93 264,433 262,511 269,048...

  • Page 66
    ... Year-over-year growth (%) Other Information (units - as at October 31) Number of employees (d) Number of bank branches Number of automated banking machines (Canada) Rates Average Canadian prime rate (%) Average U.S. prime rate (%) Canadian/U.S. dollar exchange rates ($) (e) High Low Average End...

  • Page 67
    ...Average balances Interest income Average balances Interest income Assets Canadian Dollars Deposits with other banks Securities Loans Residential mortgages Non-residential mortgages Consumer instalment and other personal loans Credit card loans Loans to businesses and governments (a) Total loans...

  • Page 68
    ...year ended October 31 Average balance Average rate Assets Canadian Dollars Deposits with other banks Securities Loans Residential mortgages Non-residential mortgages Consumer instalment and other personal loans Credit card loans Loans to businesses and governments (a) Total loans Change in Canadian...

  • Page 69
    ...As at October 31 4 to 6 months 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 1,811 13,019 36...

  • Page 70
    ... is a one-time restructuring charge, in 1997 is a charge for accelerated depreciation related to technology changes and credit process efficiency improvements, in 1996 is the Harris Savings Association Insurance Fund (SAIF) charge, in 1995 is the business process improvement initiative charge and in...

  • Page 71
    ... (1999 - $0, 1998 - $0, 1997 - $3 million, 1996 - $109 million, 1995 - $115 million). (d) Daily averages for 1990 to 1999. (e) Unrealized gains and losses may be offset by structural positions and hedge contracts. na - Not applicable Bank of Montreal Group of Companies 1999 Annual Report 65

  • Page 72
    ...United States (a) Mexico (a) 1996 1995 1999 1998 1997 1996 1995 As at October 31 1999 1998 1997 1996 1995 1999 1998 1997 Individuals Residential mortgages (b) Cards Personal loans Total loans to individuals Commercial, corporate and institutional Diversified commercial Securities purchased...

  • Page 73
    ... Cards Personal loans Total 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/Utilities Communications Other Total...

  • Page 74
    ... $93 million, 1996 - $108 million, 1995 - $360 million). (e) Segmented NIL as a percentage of segment net loans and acceptances. (f ) Includes allowance of U.S. subsidiary in excess of impaired loans. na - Not applicable NA - Not available 68 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 75
    ...Diversified Commercial Net Impaired Loans by Industry Financial institutions Commercial mortgages Construction (non-real estate) Commercial real estate Manufacturing Mining/Energy Service industries Retail trade Wholesale trade Agriculture Transportation/Utilities Communications Other (d) (f ) Total...

  • Page 76
    ... 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 letters of credit Commitments to extend credit: Original maturity of one year and...

  • Page 77
    ...chequing accounts which would have been classified as demand deposits under U.S. reporting requirements. As at October 31, 1999, 1998 and 1997, total deposits payable on a fixed date included $26,632 million, $33,738 million and $28,582 million respectively of federal funds purchased and commercial...

  • Page 78
    ... EPS Book value Market price High Low Close Primary Financial Measures (%) Five-year total shareholder return (a) Return on common shareholders' equity (b) Fully diluted earnings per share growth (c) Revenue growth Expense-to-revenue ratio (d) Provision for credit losses as a % of average loans and...

  • Page 79
    ... 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 Bank of Montreal Group of Companies 1999 Annual Report 73

  • Page 80
    ...' Equity The accompanying notes to consolidated financial statements are an integral part of this statement. $ 230,615 F. Anthony Comper (signed) Chairman and Chief Executive Officer Jeremy H. Reitman (signed) Chairman, Audit Committee 74 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 81
    ... 8,895 Net Interest Income Provision for credit losses 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...

  • Page 82
    ... merger, net of applicable income tax Share issue expense, net of applicable income tax Balance at End of Year Total Shareholders' Equity The accompanying notes to consolidated financial statements are an integral part of this statement. 76 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 83
    ... loan fees Net (increase) decrease in unrealized gains and amounts receivable on derivative contracts Net increase (decrease) in unrealized losses and amounts payable on derivative contracts Net (increase) decrease in trading securities Net increase (decrease) in current income taxes payable Changes...

  • Page 84
    ... on the same basis as loans as described in note 4. We did not own any securities issued by a single non-government entity where the book value, as at October 31, 1999 or October 31, 1998, was greater than 10% of our shareholders' equity. 78 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 85
    ... 18,791 361 $ 43,465 Yields in the table above are calculated using the book value of the security and the contractual interest or stated dividend rates associated with each security adjusted for any amortization of premiums and discounts and any country risk provision associated with a particular...

  • Page 86
    ... restructured $3 of loans classified as performing in the year ended October 31, 1999. No such restructurings occurred in the year ended October 31, 1998. No restructured loans were written off in the years ended October 31, 1999 and 1998. 80 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 87
    ... underwriting facilities and similar arrangements, including facilities under which we acquire short-term notes issued by our customers for a predetermined price in the event that the customer is unable to sell the notes to third parties. Bank of Montreal Group of Companies 1999 Annual Report 81

  • Page 88
    ... Institutions Canada that have restructured or experienced difficulties in servicing all or part of their external debt to commercial banks. These loans and securities are reviewed regularly by management within the Risk Management Group to assess the adequacy of the allowance based on the current...

  • Page 89
    ... these sales based upon the market value of the loans sold. The purchase and sale contracts provide for the payment to us of the proceeds of sale when the sum of interest and fees collected from customers exceeds the yield paid to investors on the assets, credit losses and other costs. We record...

  • Page 90
    ...54 to 57 of our Management Analysis of Operations. Payable after notice 1999 1998 Payable on a fixed date 1999 1998 Total 1999 1998 1998 Deposits by: Banks Businesses and governments Individuals Total Booked in: Canada United States Mexico Other countries Total $ 201 3,140 1,827 $ 308 2,966...

  • Page 91
    ... we pay interest. Our customers are often required to give us notice prior to withdrawing money from these accounts. Deposits payable on a fixed date are comprised primarily of various investment instruments purchased by our customers, such as term deposits and guaranteed investment certificates...

  • Page 92
    .... However, we have the right to pay $25.00 cash per share instead. Common Shares Not redeemable - - Not convertible - - Dividends on common shares are declared by us on a quarterly basis and the amount can vary from quarter to quarter. 86 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 93
    ... 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 94
    ... share is based on the assumption that the conversion or redemption of all securities which are convertible or redeemable at the option of the holder occurred at the beginning of the year or at the date the security was issued, if later. 88 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 95
    ... benefit obligation for employee service, end of year Fair value of plan assets, beginning of year Actual return on plan assets Bank contributions Voluntary employee contributions Benefits paid to pensioners Other, primarily foreign exchange Fair value of plan assets, end of year Funded status...

  • Page 96
    ... year actuarial (gain) loss Annual pension expense Canada and Quebec pension plan contribution Total annual pension expense Weighted Average Actuarial Assumptions Discount rate for projected benefit obligation Rate of compensation increase Expected long-term rate of return on pension plan assets...

  • Page 97
    ...derivative portfolio and related credit exposure: Notional amount: represents the amount to which a rate or price is applied in order to calculate the exchange of cash ï¬,ows. Replacement cost: represents the cost of replacing, at current market rates, all contracts which have a positive fair value...

  • Page 98
    ...Customer trading Total Replacement cost Credit risk equivalent Riskweighted balance Interest Rate Contracts Over-the-counter Swaps $ 356,803 $ 39,630 $ Forward rate agreements 128,706 8,239 Purchased options 82,838 1,848 Written options 53,565 - 621,912 Exchange traded Futures Purchased options...

  • Page 99
    ... swaps are floating interest rate swaps where amounts paid and received are based on different indices or pricing periods. Other swaps are contracts where the fixed side is denominated in a source currency other than Canadian $ or US $. Bank of Montreal Group of Companies 1999 Annual Report 93

  • Page 100
    ... 1998 Customer trading Gross assets Gross liabilities Gross assets Asset/liability management Gross liabilities Total Total Net Net Net Net Net Net Interest Rate Contracts Swaps Forward rate agreements Futures Purchased options Written options Foreign Exchange Contracts Cross-currency...

  • Page 101
    ... of Financial Institutions Canada. Set out below are the more significant differences which would result if United States generally accepted accounting principles were applied in the preparation of our consolidated financial statements. Bank of Montreal Group of Companies 1999 Annual Report 95

  • Page 102
    ... Resources Securities Loans, net of the allowance for credit losses Other Total Assets Liabilities and Shareholders' Equity Deposits Other Liabilities Subordinated Debt Shareholders' Equity (1) Total Liabilities and Shareholders' Equity Condensed Consolidated Statement of Income For the Year Ended...

  • Page 103
    ... Accounting Standards Board Exposure Draft. (5) Includes cumulative adjustment to shareholders' equity arising from current and prior years' GAAP differences. Future Changes in United States Accounting Policies Increase (decrease) Foreign currency translation (i) Merger costs (ii) Pension benefits...

  • Page 104
    ...-year period ended October 31, 1999 in accordance with Canadian generally accepted accounting principles including the accounting requirements of the Superintendent of Financial Institutions Canada. KPMG LLP (signed) Chartered Accountants 98 Bank of Montreal Group of Companies 1999 Annual Report...

  • Page 105
    ... of Montreal Global Capital Solutions, Inc. and subsidiary BMO Financial, Inc. BMO Managed Investments Corporation BMO Nesbitt Burns Equity Group (U.S.), Inc. and subsidiaries EFS (U.S.), Inc. and subsidiaries Harris Bankcorp, Inc. and subsidiaries Harris Bankmont, Inc. and subsidiaries Harris Trust...

  • Page 106
    ...to be received and addressed. The integrity of the Bank's internal control and management information systems is the responsibility of three Board Committees: the Audit Committee, the Conduct Review Committee and the Risk Review Committee. 100 Bank of Montreal Group of Companies 1999 Annual Report

  • Page 107
    ... is appropriate in relation to the responsibilities and risks involved. Directors' compensation is annually benchmarked against the Bank's Canadian and North American peer groups. Recommendations on the level and nature of compensation are made to the Board by the Governance Committee. It is...

  • Page 108
    ... Executive Officer Premdor Inc., Mississauga Jeremy H. Reitman Montreal, Que. President Reitmans (Canada) Limited Joseph L. Rotman , O.C., LL.D. Toronto, Ont. Chairman and Chief Executive Officer Clairvest Group Inc. Guylaine Saucier, C.M., F.C.A. Montreal, Que. Chairman, Board of Directors Canadian...

  • Page 109
    ... Executive Vice-President Human Resources Brian J. Steck* Vice-Chair Eric C. Tripp Head of Institutional Equity Nesbitt Burns Investment Banking Group Robert B. Wells Executive Vice-President Chief Financial Officer and Treasurer *Member of Management Board Executive Committee Corporate Officers...

  • Page 110
    ... management to allocate capital, and the related cost of capital, in respect of credit, market and operational risk by type of transaction, client and line of business. This facilitates the deployment of capital to business units that can provide the maximum shareholder value on the capital invested...

  • Page 111
    ... (international), or write to: The Trust Company of Bank of Montreal, 129 Saint-Jacques St., B Level North, Montreal, Quebec H2Y 1L6. For all other shareholder inquiries, please contact Shareholder Services at the Corporate Secretary's Department, 21st Floor, 1 First Canadian Place, Toronto, Ontario...

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