蒙特利爾銀行 (BMO) 2005年年度報告「TSX」.pdf

《蒙特利爾銀行 (BMO) 2005年年度報告「TSX」.pdf》由會員分享，可在線閱讀，更多相關《蒙特利爾銀行 (BMO) 2005年年度報告「TSX」.pdf（142頁珍藏版）》請在三個皮匠報告上搜索。

1、188th Annual Report 2005Every customer.Every shareholder.Every employee.Every community.Every business.Every market.Every industry.Every stakeholder.Every individual.Every partnership.Every plan.Every goal.Every objective.Every answer.Every share.Every idea.Every policy.Every service.Every practice.

2、Every priority.Every target.Every initiative.Every value.Every experience.Every dream.Every aspiration.Every investment.Every opportunity.Every perspective.Every transaction.Every contribution.Every commitment.Every promise.Every loan.Every acquisition.Every channel.Every branch.Every department.Eve

3、ry group.Every action.Every intention.Every decision.Every solution.You can count on us.This is BMO today.Every Day2005 Awards and Recognition HighlightsTrim this areaFor the year ended October 312005 Target200520042003Income Statement Highlights(Canadian$in millions)Total revenue(teb)(a)(c)9,9589,4

4、889,149Provision for(recovery of)credit losses179(103)455Non-interest expense6,3276,1576,087Net income2,4002,3061,781Common Share Data($)(b)Earnings per share4.644.423.44Cash earnings per share(c)4.794.573.59Key Financial Measures(%)(b)Five-year average annual total shareholder return13.818.912.9Ear

5、nings per share growth(b)52928on a targeted basis(c)3%8%(d)9nanaReturn on equity17%18%18.819.416.4Revenue growth(teb)(c)5.03.74.7Cash productivity ratio(teb)(c)62.663.865.4targeted improvement(bps)150200 bps120160260Provision for credit losses as a%of average net loans and acceptances0.11(0.07)0.30t

6、argeted specific provision($millions)$40021967455Tier 1 Capital Ratio 8%10.259.819.55All ratios in this report are based on unrounded numbers.(a)All revenues in this report,except in the Consolidated Financial Statements,are reported on a taxable equivalent basis(teb).See pages 35 and 37.(b)All earn

7、ings per share(EPS)measures in this report refer to diluted EPS,unless otherwise specified.(c)This is a non-GAAP measure.See page 35.(d)Targeted EPS growth from a base of$4.21(excluding changes in the general allowance).na not applicable200520042003200220011,4021,3731,7812,3062,400Net Income(Cdn$mil

8、lions)20052004200320022001Earnings per Share(Cdn$)2.662.683.444.424.6420052004200320022001Return on Equity(%)13.813.416.419.418.820052004200320022001One-Year TotalShareholder Return(%)(1.2)16.233.420.03.72005 Financial HighlightsOne of Canadas MostRespected CorporationsBMO Financial Group ranked7th

9、on The Globe and MailsTop 25 of Canadas MostRespected Corporations list,up from 9th in 2003 and 20th in 2002.Best Corporate Citizen BMO was named CanadasBest Corporate Citizen of the Year by CorporateKnights.The top-50 ranking is based on performance indicators,including executive gender diversity,t

10、axgeneration and executiveretention rate as well as board independence and diversity.Leading CorporateGovernanceThe Globe and Mails Reporton Business annual review of corporate governancepractices ranked BMO secondoverall among 209 Canadianreporting issuers.Best Private BankFor the second year in a

11、row,Euromoney magazine hasselected BMO Harris PrivateBanking as the best privatebank in Canada.Excellence in DiversityBMO Financial GroupPresident and CEO TonyComper was named Diver-sity Leader of the Year at the International Quality&Productivity Centers(IQPC)2005 Diversity ExcellenceAwards.IQPC al

12、so awardedBMO its Best in ClassDiversity Program Award.Excellence in Communicating to InvestorsIR Magazine Canada gaveBMO its“Best Communica-tions with the Retail Market”award,recognizing the BMO Investor Relations web site for its quality,easeof navigation and presen-tation of information to theret

13、ail investor.Leader in Equity Research For the 25th consecutiveyear,BMO Nesbitt Burns was ranked the top Equity Research Group by Canadas leadinginstitutional investors inthe 2005 Brendan WoodInternational Survey.Sustainability:Best in Class BMO Financial Group waschosen to be among the firstCanadia

14、n companies listedon the newly created DowJones Sustainability NorthAmerica Index,modelled onthe benchmark Dow JonesSustainability World Index.BMO Board Ranked#1 In its fifth annual survey,Canadian Business magazineranked BMO Financial Groups Board of Directorsfirst among Canadas Top 25 boards.Excel

15、lence in Corporate ReportingThe Canadian Institute ofChartered Accountantsannual Corporate ReportingAwards gave us the Award of Excellence in the financialinstitutions category andgave BMO an HonourableMention for Excellence inElectronic Disclosure.Top Online Brokerage BMO InvestorLineranked#1 in Th

16、e Globe and Mails annual review ofCanadas online broker-age firms for the fourthconsecutive year.Employer of ChoiceBMO was named one ofCanadas Top 100 Employersby Macleans magazine and Mediacorp for the fourthconsecutive year and wasthe only major Canadianbank to be named to this prestigious list.BM

17、O Financial Group also ranked 16th overall in Trainingmagazines Top 100 NorthAmerican corporations in 2005 and was the topCanadian company on the list.Excellence in SecurityManagementBMO was the first companyin Canada to be awardedcertification from the BritishStandards Institution formeeting the hi

18、ghest interna-tional standard for operatingan Information SecurityManagement System.Established in 1817 as Bank of Montreal,BMO Financial Group(TSX,NYSE:BMO)is a highly diversified financial servicesorganization.With total assets of$298 billionat October 31,2005 and more than 34,000 employees,BMO pr

19、ovides a broadrange of retail banking,wealth managementand investment banking products and solutions.We serve our clients through three customer groups.Personal and Commercial Client GroupPersonal and Commercial Client Group(P&C)provides more than eight and a half million customers across Canada and

20、 the United States with fully integrated personal and commercialbanking solutions.These include deposit accounts,loans and credit cards,insurance products and personal investment products.Our products andservices are delivered by a highly skilled team of professionals through 1,180 BMO Bank of Montr

21、ealand Harris branches,through telephone and onlinebanking at and ,andthrough a network of almost 2,500 automatedbanking machines.2005 Key InitiativesFocus for 2006Canadian OperationsWe serve Canadian clients through BMO Bank of Montreal,our personal and commercial banking business,and BMO Nesbitt B

22、urns*,one of Canadas leading full-service investment and wealth management firms.?Achieved strong net income growth of 23.1%.?Achieved strong balance sheet growth,with deposit growth of 7%and average loans and acceptances growth of 7.9%including the effects of securitizations.?Improved cash producti

23、vity by 310 basis points to 57.3%.?Applied more discipline to our sales managementthrough initiatives such as integrating financial planners into our delivery model and aligningdesired customer experience with employee performance measurement and incentives.?Upgraded technology to streamline workflo

24、w and improve the quality of our customer information,allowing us to better recognize and meet the needsof our customers.?Continued to distinguish ourselves in commercial banking as reflected by the second-largest marketshare in business lending.?Enhance the quality of salesand service delivery to b

25、uildlasting relationships throughexceptional service,leading to revenue growth,increasedmarket share and improvedcustomer loyalty.?Simplify processes and enhance technology for front-line sales and service representatives,increasingcapacity and effectiveness to improve customer service.?Continue our

26、 track record of improving our cash productivity ratio.?Invest further in our distribution network,including the replacement of our ABM network.?Continue expanding programsand offers to meet our customers financial needs.U.S.OperationsIn the United States,clients are servedthrough Harris,a major U.S

27、.Midwestfinancial services organization with a network of community banks in theChicago area and wealth managementoffices across the United States,as well as Harris Nesbitt1,a leading mid-market investment and corporate bank.?Achieved U.S.-dollar net income growth of 22.5%.?Improved cash productivit

28、y by 150 basis points,driven by higher revenues and continued expensemanagement.?Increased average total loans and acceptances by 19%to US$15.9 billion.?Opened eight new branches in Chicagoland andacquired Mercantile Bancorp with 19 branches in Northwest Indiana,increasing Harris CommunityBanking ne

29、twork to 195 locations.?Consolidated 26 bank charters into one national bank charter at the end of May 2005 with no disruption to customer service.?Our Net Promoter Score,a measure of the intensityof our customers loyalty,rose from 26%in 2003 to 34%in 2005 triple the network average.?Improve our fin

30、ancial performance,focusing on revenue growth.?Continue to build our branchnetwork in Chicagoland byopening five new branches and exploring acquisition opportunities in the Midwest.?Continue to refine our customerexperience to provide the high customer service levels of a community bank.?Invest in o

31、ur strategic infrastructure by refreshing thebranch technology platform.BMO Financial Group at a GlanceNet Income:P&C(Canadian$in millions)2005200420039149821,199BMO Financial Group at a GlancePrivate Client GroupPrivate Client Group(PCG)offers clients a full range of wealth management products and

32、services,including full-service and direct investing,privatebanking and investment products.Our highly trainedprofessionals are dedicated to serving the needs and goals of our clients to accumulate,protect andgrow their financial assets.Private Client Groupserves clients through BMO Bank of Montreal

33、 andHarris branches,as well as through stand-alone BMO InvestorLine,BMO Nesbitt Burns and BMO HarrisPrivate Banking offices in Canada,and through Harris Private Bank offices in key U.S.centres,including family office services and customizedinvestment services to the ultra affluent.Investment Banking

34、 GroupInvestment Banking Group(IBG)combines all of ourbusinesses serving corporate,institutional and govern-ment clients.In Canada,operating under the BMONesbitt Burns brand,our client base comprises largecorporations and institutions across a broad range ofindustry sectors.In the United States,oper

35、ating underthe Harris Nesbitt brand,we serve corporate and insti-tutional clients in selected sectors.Investment BankingGroup offers clients complete financial solutions acrossthe entire balance sheet,including public and privatedebt and equity underwriting,corporate lending,securitization,cash mana

36、gement,risk managementand trade finance.We also offer leading financial advisory services in mergers and acquisitions andrestructurings,and we provide investing clients withindustry-leading research,sales and trading services.2005 Key InitiativesFocus for 20062005 Key InitiativesFocus for 2006?BMO N

37、esbitt Burns introduced the Architect Program the first of its kind in Canada to provideclients with customized portfolios that combine separately managed accounts,mutual funds,exchange-traded funds,and alternative investmentproducts in a single account.?BMO Harris Private Banking was named the best

38、 private bank in Canada by Euromoney magazine forthe second consecutive year.?BMO Harris Private Banking introduced the enCircleprogram,an innovative solution for mature clients,offering a range of services from bill payments and investment management to estate planning and home health-care educatio

39、n.?BMO InvestorLine was chosen by The Globe and Mail as best online broker for the fourth consecutive year,its 14th top ranking in the past five years.?BMO Mutual Funds and Guardian Group of Funds outperformed the mutual fund industry,with annual net sales exceeding the industry average.?BMO Term In

40、vestments introduced the BMO Dividend Fund Linked GIC,the first of its kind offered by any of Canadas major banks.?Continue to leverage our leadership position in clientservice and award-winningofferings,and increase our share of our existing clients investable assets.?Continue to improve performanc

41、e through salesforce productivity and operational efficiencies.?Participated in 513 Canadian corporate debt andequity transactions that raised a total of$69 billion.?Advised on$21 billion of completed Canadian mergers and acquisitions.?Ranked the top Equity Research Group for the 25thconsecutive yea

42、r in the Brendan Wood InternationalSurvey of institutional investors,and ranked first for Overall Quality of Trader Service.?Ranked first overall in the 2004 StarMine CanadianAnalysts survey.?Canadian Securitization unit ranked first in marketshare of asset-backed commercial paper conduit outstandin

43、gs.?Expanded Real Estate investment and corporatebanking practice.?Introduced Canadian mutual fund and equity linkednotes,establishing a strong presence and setting the pace as the largest and fastest-growing issuer in Canada in 2005.?Continue to reinforce our leading position.?Continue to broaden a

44、nd deepen relationships with prospects and clients.?Harris Private Bank enhanced its investment capabilities by expanding the range of alternativeinvestments and third party managers,providingsolutions for a broader client base.?Harris Private Bank was ranked among the top ten private banks in the U

45、.S.market byEuromoney magazine.?Sold Harrisdirect,allowing the redeployment of capital to higher-return businesses.?Introduced a successful new referral program thatexceeded expectations.?Accelerate growth in the United States by increasing our share of our existing clients investable assets and lev

46、eraging the Banks U.S.expansion strategy.?Improve performance throughsales force productivity andoperational efficiencies.?Undertook a major initiative to improve our overall client coverage,capitalize on top-line growth oppor-tunities and win more business from IBG clients.?Expanded and upgraded Ha

47、rris Nesbitts pool of expertise with a number of key senior-level hires,including heads of Healthcare,FinancialInstitutions and Consumer and Leisure Groups.?Expanded Mergers and Acquisitions,Equity CapitalMarkets,Commodity Derivatives and Equity Research and Sales Groups.?Refine sector focus to matc

48、hour product and service capabilities to high-growthopportunities in the United States.?Develop U.S.investor strategyto accelerate growth.200520042003Net Income andCash Net Income:PCG(Canadian$in millions)Cash Net IncomeNet Income137227320184270357200520042003691832852Net Income:IBG(Canadian$in mill

49、ions)Group Initiatives?Focused management of non-revenue basedcosts helped achieve relatively low expensegrowth of 1%compared to strong revenuegrowth of 10%,while product refinement andstreamlined operations contributed to netincome growth of 41%.?Cash productivity ratio improved by 580 basispoints

50、in 2005 for a total of 1570 basis pointsin the past three years driven by revenuegrowth and sustainable cost containment initiatives.Group Focus?Deepen client relation-ships and enhance ourproduct offerings.?Drive revenue growth by expanding our salesforce in key businesses.?Continue to improve our

51、cash productivityratio through revenuegrowth and expensemanagement initiatives.Group Initiatives?Acquired a local currency Chinese Renminbibanking licence in Guangzhou the onlyCanadian bank to do so.?Became the first Canadian bank to be granteda licence to sell derivatives in China.?The only Canadia

52、n bank in a group of tenbanks selected to act as market-makers for foreign exchange trading in China.?Ranked#2 in the world for Canadian dollarforeign exchange by FX Week.?Launched eFXpedite,an online foreignexchange trading system enabling users toaccess real-time foreign exchange prices andexecute

53、 trades on the spot.Group Focus?Continue focus on integrated coverage tobring the best solutionsto our clients.?Implement high-valueinitiatives that build onboth existing expertiseand businesses,and new business ideas.?Continuously improve the profitability of client relationships.?Improve our cash

54、productivity ratio.BMO Financial Group 188th Annual Report 2005|1Every day,BMOs Board,leadership team and employees are driving us closer to achieving our vision.It is,simply,to be the top-performing financial servicescompany in North America.?Advancing our strategic prioritiespage 2?Delivering cons

55、istently to our shareholderspage 4?Providing exceptional customer servicepage 10?Focusing on our strength in credit risk managementpage 16?Leading in corporate governancepage 17?Valuing every employeepage 20?Helping our communitiespage 21?Caring about the environmentpage 22ContentsBMO Financial Grou

56、p at a Glance/Financial HighlightsInside Front CoverFinancial Performance and Condition at a Glancepage 242005 Awards and Recognition HighlightsInside Front CoverSupplemental Informationpage 79Vision and Priorities Overviewpage 2Consolidated Financial Statementspage 92Chairmans Message to Shareholde

57、rspage 4Notes to Consolidated Financial Statementspage 96Chief Executive Officers Message to Shareholderspage 5Members of Management Boardpage 135Financial Reviewpage 8Glossary of Financial Termspage 136Managements Discussion and Analysis page 23Shareholder InformationInside Back CoverBank of Montre

58、al uses a unified branding approach that links all of the organizations member companies.Bank of Montreal,together with its subsidiaries,is known as BMOFinancial Group.As such,in this document,the names BMO and BMO Financial Group mean Bank of Montreal,together with its subsidiaries.2|BMO Financial

59、Group 188th Annual Report 2005Long-Term Shareholder ReturnAt the end of 2005,the five-year annual TotalShareholder Return on BMO common shares was 13.8%.Excellence in Credit Risk ManagementBMO has a proven ability to deliver strong returns at acceptable levels of risk.Our philosophyis to manage risk

60、 in a way that is disciplined and consistent an approach that works for our business and our clients in both good timesand bad.Commercial Leadership in Canada and the United StatesOur commercial business is a growth engine for BMO in both Canada and the United States.Particularly,we view our ability

61、 to serve our customers on both sides of the border as a unique advantage.Canadas First BankOur core established business in Canada,focusedon meeting the banking,investment and insuranceneeds of individual Canadians and businesses,is the financial backbone of BMO Financial Group.Canadian Leader in U

62、.S.BankingHarris is one of the top three banks serving the Chicagoland area.Our strong personal andcommercial presence in the U.S.Midwest continues to distinguish us as the Canadian leader in U.S.banking.Technological StrengthBMO has a history of delivering innovative tech-nology solutions to provid

63、e consistent,reliable andsecure financial services that our customers trust.We are recognized for adopting best practices andachieving the highest standards for our productsand services.Commitment to Productivity ImprovementProductivity improvement is an important measureof BMOs long-term financial

64、health.Our strategy is to continue making progress in containing costswhile at the same time investing strategically to boost revenues.Our PeopleOur people understand the importance of customer loyalty.They understand that it is theirjob to make BMO the only bank our customers will ever need.Leaders

65、hip in Corporate GovernanceBMO continues to be a recognized leader in corporate governance.We were named BestCorporate Citizen for 2005 by Corporate Knights and received a#1 ranking in CanadianBusiness magazines annual corporate governance survey.Vision and Priorities OverviewStrategyOur strategy is

66、 to grow our core Canadian businesses and accelerate our expansion in the United States.?For a more detailed description of our strategy,please see page 28.Core ValuesWe pursue our vision and realize our strategy through our steadfast commitmentto our core values:?We care about our customers,shareho

67、lders,communities and each other.?We draw our strength from the diversity of our people and our businesses.?We insist upon respect for everyone and encourage all to have a voice.?We keep our promises and stand accountable for our every action.?We share information,learn and innovate to create consis

68、tently superior customer experiences.Our vision is to be the top-performing financial servicescompany in North America.We will achieve our vision with an unwavering focus on our strategic prioritiesBeing the best means becoming the top-performing financial services company in North America.Its a bol

69、d vision one we will strive to achieve by building on our enduring strengths and by advancing our growth strategy.Every day.Our Enduring StrengthsBMO Financial Group 188th Annual Report 2005|32005 Targets2005 PerformanceTargets for 20063%to 8%EPS growth from abase of$4.21(excluding changesin the gen

70、eral allowance)9.0%to$4.59?See page 335%to 10%EPS growth from a base of$4.59(excluding changes in the general allowance)ROE of 17%to 18%18.8%?See page 34ROE of 17%to 19%Specific provision for creditlosses of$400 million or less$219 million?See page 40Specific provision for credit losses of$400 milli

71、on or less Tier 1 Capital Ratio of at least 8.0%10.25%?See page 59Tier 1 Capital Ratio of at least 8.0%Improve cash productivity ratio by 150 to 200 bps120 bps improvement?See page 41Improve cash productivity ratio by 100 to 150 bpsStrategic PrioritiesAchieve financial targets with a particular focu

72、s on revenue growth to improve productivity.?See pages 5,8,9 and 28Drive revenue growth by providing a superior client experience,earning a larger share of customers business.?See pages 7,8,28 and 45Continue to improve U.S.performance.?See pages 5,28 and 47Accelerate growth in the United States both

73、 organically and through acquisitions.?See pages 7,28 and 47Grow net income in Canada through operational efficiency andimproved market share,accelerating our growth in commercial banking and wealth management.?See pages 8,28 and 45Build a high-performance organization by developing our people,livin

74、g our values and being an employer of choice.?See pages 20 and 28 Maintain our world-class foundation of leading governance,sound risk management,productive systems and excellent after-sales service.?See pages 16,17,28 and 674|BMO Financial Group 188th Annual Report 2005Building shareholder value co

75、ntinued to be BMOs primary objective in 2005In what proved to be a challenging year for the North American financial servicessector,BMO focused on actions that will create value for our shareholders byexecuting our business strategyand maintaining focus onour foundational strengthswhich include soun

76、d corporate governance and strong credit risk management.Chairmans Message to Fellow Shareholdersgood operational performance and enhanced share-holder value.Each of our Board Committees had a full agendaover the course of the year,and we were successful inachieving our key priorities.I am particula

77、rly proud of the work that was done on strategy as we continue to focus on evolving trends and the opportunities we see ahead.During the year,top talent development,including succession planning across executive ranks,remained very much a focus.I am confident that BMOsattention to nurturing and deve

78、loping talent will serveshareholders well now and into the future.I would like to take this opportunity to express mythanks to the Board members for their contribution anddedication.I also extend a special thank you to departingBoard member Frank McKenna.Former premier ofNew Brunswick and now Canada

79、s ambassador to theUnited States,Frank served on our Board for eight years.He was an absolutely outstanding director and his contributions have been superb.All of us wish him well.On behalf of our Board of Directors,we look forward to continuing to serve our fellow shareholdersas we focus on our rol

80、e in helping to make BMO the top-performing North American financial services provider.David A.GallowayChairmanConsistent performance has long been a hallmark of BMO and something I believe all shareholders can be proud of.In 2005,the company faced tough financialtargets as a result of strong perfor

81、mance the previousyear.The previous years results were enhanced by loanlosses being at an all time low.It is especially pleasing,therefore,to congratulate Tony Comper and the manage-ment team,as well as each BMO employee,for thesuccesses that they achieved during the year.The Board remained highly e

82、ngaged and vigilant asBMO continued to operate in an ever more complex andtightly regulated financial services sector.The companysproven strengths have never been more important,and I am very proud of the Boards work on behalf of allstakeholders in ensuring the integrity of internal con-trols and pr

83、ocesses and the effectiveness of compliancewith external requirements.As the company movescloser to Basel II and proceeds with our efforts to giveeffect to the provisions of the Sarbanes-Oxley Act,the Board will continue to make this a priority.All of us associated with BMO are proud of our leadersh

84、ip position in corporate governance and recognize that this key foundational strength adds tremendous value to our company.Most recently,wewere ranked number one among the top 25 Boards in Canada,according to a survey by Canadian Businessmagazine.While this is gratifying and a tribute to the calibre

85、 of my fellow Board members,we can only be satisfied to win awards when they accompany“All of us associated with BMO are proud of our leadership position in corporate governance and recognize that this key foundational strengthadds tremendous value to our company.”David A.GallowayChairmanBMO Financi

86、al Group 188th Annual Report 2005|5Chief Executive Officers Message to Fellow ShareholdersIntense customer focus,unlimited growth potentialEvery day and in every way,my colleagues and I are aligning our hopes and ambitions for business success with our customersfinancial hopes and ambitions.Tony Com

87、perPresident and Chief Executive Officer“Investors look to BMO for relatively high returns at relatively low risk.”As the customer stories featured in this report so vividlyillustrate,at BMO Financial Group we are dedicated to the proposition that the surest route to strong returnsfor our shareholde

88、rs is to deliver,first and foremost,truly exceptional service to our customers exceedingtheir expectations and meeting more of their needs.This intense focus on developing lasting customer relationships requires disciplined execution of everytask by every colleague every day.Investors look to BMO fo

89、r relatively high returns at relatively low risk.Stable,consistent and reliablereturns.We are working hard to live up to our reputation,building on the distinctive BMO strengths highlighted in this report,notably credit and commercial leadershipand our unparalleled U.S.operations.We increased earnin

90、gs per share by 9%in 2005(excluding changes in the general allowance),bringingBMOs three-year annual EPS growth rate to an out-standing 20%.Return on equity was 18.8%.We also raised dividends twice as the value of dividends declaredrose 16%from 2004 to$1.85 per share.Overall we surpassed four of our

91、 five financial targets for the year(see page 3),falling short on our aggressive pro-ductivity target while still delivering the second-best productivity ratio in our Canadian peer group.We haveimproved the cash productivity ratio by a total of 540 basis points over the past three years,creating a s

92、trong culture of cost discipline that will serve BMO well for years to come.We are also aware that revenue growth is the primary driver of shareholder value creation for top-performing companies,and we are determined to continue to improve productivity in 2006 through a stronger emphasis on increasi

93、ng revenues.While preserving BMOs hard-won achievements in productivity improvement,we will seek opportu-nities to accelerate revenue growth both organically and through acquisitions.Our financial targets for the year ahead(see next page)reflect the management teams continuingconfidence in BMOs ente

94、rprise growth strategy,whichis to grow our core Canadian businesses and accelerateour expansion in the United States.The targets alsoreflect our assessment of economic and market conditionsin 2006.An ongoing challenge for BMO and our entireindustry is the narrowing of the spread between lending and

95、borrowing rates.Nonetheless,our domestic bank has done a good job of maintaining margins and we are encouraged by the favourable relative performance of our Canadian personal and commercialand private client businesses.In the United States,where relative performance was also very good after factorin

96、g out the impact of acquisition costs,we continue our hunt for personal and commercialacquisitions that will accelerate progress toward our goal to transform Harris into a“super-regional”player as the leading personal and commercial bank in the U.S.Midwest.6|BMO Financial Group 188th Annual Report 2

97、005Management is confident in the strategic course we have set.In its five-year global ranking of large capfinancial services companies published in May 2005,The Boston Consulting Group ranks BMO second in the world with an average Risk-adjusted Relative Total Shareholder Return of 12.9%.We believe

98、our consistent and disciplined approach,in combinationwith BMOs differentiating strengths,will enable us to continue to outperform globally,propelling BMO closerto our long-term vision to become the top-performingfinancial services organization in North America.BMO has led the Canadian banking indus

99、try in credit performance in 14 of the past 15 years.The onlyexception was 2001,when our advanced credit culture led us to be early recognizers of emerging problems that hit our peers results harder the following year.We believe this strength will increasingly differentiateBMO as the credit cycle pr

100、ogresses and investors recognize the value of our ability to maintain consistentunderwriting standards through good and bad times.There is good alignment of BMO values with the valuesand needs of our customers.They know they can count on BMO.While we are using our credit expertise to drivegrowth in

101、all our businesses,we believe it will be particularly helpful in extending our existing leadershipin commercial banking in North America.Even in an increasingly competitive Canadian market where others are re-focusing on their personal and commercialbusinesses,BMOs relationship-building approach has

102、 enabled us to gain and maintain a market leadershipposition over time.And we are a leading commercialplayer in our chosen U.S.markets,through both Harrisincreasing business banking operations in the greaterChicago area and Harris Nesbitts well-entrenched mid-market client base in the Midwest.We are

103、 not content to see ourselves as one of the big Canadianbanks with a niche play in the U.S.market.We want to be acknowledged as#1 in the markets where we have chosen to compete.And we want to be seen for what we are:the most successful Canadian bank in the United States.Chief Executive Officers Mess

104、age to Fellow ShareholdersTargets for 20065%to 10%EPS growth from a base of$4.59(excluding changes in the general allowance)ROE of 17%to 19%Specific provision for credit losses of$400 million or lessTier 1 Capital Ratio of at least 8.0%Improve our cash productivity ratio by 100 to 150 bps9.0%Earning

105、s per Share Growth(excluding changes in the general allowance)18.8%Return on Equity$219millionSpecific Provision for Credit Losses10.25%Tier 1 Capital Ratiobasis120pointsImprovement in Cash Productivity RatioBMO Financial Group 188th Annual Report 2005|7than our competitors,lead the market in custom

106、er service scores,continue to improve productivity and profitability,and acquire suitable properties as theybecome available.And this is what we intend to do.We are not content to see ourselves as one of the bigCanadian banks with a niche play in the U.S.market.We want to be acknowledged as#1 in the

107、 markets wherewe have chosen to compete.And we want to be seen for what we are:the most successful Canadian bank in the United States.In my message to shareholders last year I explainedthat we have set our sights on becoming our industrystop performer because we should(we need to reach for the top i

108、n order to get there);and because we can.I continue to believe that BMOs most important differentiating strength is the quality of our people,whose expertise,dedication and sheer enthusiasm are unsurpassed in our industry.It is great to see my colleagues rising to the challenge of creating a peak-co

109、ndition,higher-performing organization.Despite the growing complexity of financial services perhaps because of it our fundamental job has never been simpler.We come to work each day to help our customers achieve their financial hopes andambitions.If we keep this top of mind,there is no limit to BMOs

110、 potential for growth.Tony ComperPresident and Chief Executive OfficerGiven all the work under way to meet more of our customers needs,our commercial clients provide an excellent pipeline to expand our personal bankingand wealth management businesses.And we are gathering evidence of a new growth opp

111、ortunity:seamless solutions for customers with financial interests in both Canada and the United States.None of our competitors is as well positioned as we are to fill thisgrowing need.A singular strength in this regard is our well-established,integrated U.S.operations.Including ouracquisition of Ha

112、rris in 1984,we have invested$2.4 billionin U.S.retail acquisitions,transforming a handful of private Chicago banks into a community banking network of nearly 200 branches in the Chicago area and Northwest Indiana.A highlight of 2005 was the successful consolidation of the Harris bank charters intoo

113、ne national charter with no disruption to customerservice the latest in a series of major investments tocreate a highly efficient back office while maintainingthe best of the Harris community banking heritage.These investments,plus the invaluable experience wehave gained from our acquisitions to dat

114、e,position us well to increase revenues while managing costs as we continue the expansion of our Harris personal andcommercial operations beyond the Chicago area andNorthwest Indiana in the Midwest.We are now aiming to double our network to 350 to 400 branches over the next five years.What will it t

115、ake for Harris to become the leadingpersonal and commercial bank in the U.S.Midwest?We need to grow faster from a core business perspectiveBMOs most important differentiating strength is the quality of our people,whose expertise,dedication and sheer enthusiasm are unsurpassed in our industry.It is g

116、reat to see my colleagues rising to the challenge of creating a peak-condition,higher-performing organization.8|BMO Financial Group 188th Annual Report 20052005 Canadian Bank Scorecard(%)BMORBCCIBCScotiaTDNationalAverage annual total shareholder return(5-year)13.814.811.918.19.122.5EPS growth5.021.3

117、(108.3)11.7(5.6)21.0Return on equity18.818.0(1.6)20.915.320.7Net economic profit growth2(0.3)30.3(162.2)16.3(29.7)31.9Revenue growth1,25.06.16.24.211.75.5Cash productivity ratio262.668.285.556.167.464.9PCL as a%of average net loans and acceptances0.110.200.430.120.030.06BMO equal to or better than o

118、ther bank(17/35)BMO worse than other bank(18/35)2005 Financial ReviewIn more challenging times,we continue to perform wellIn 2005,BMO once again achieved record results.We attribute our success to our focus every day on revenue growth,continued productivity improvement and superior credit management

119、.Karen MaidmentSenior Executive Vice-President and Chief Financial Officer“Over the past five years,shareholders have earned an average annual total return of nearly 14%.”Every day at BMO Financial Group,our goal is to ensure that wegrow and protect the long-term value of our shareholders invest-men

120、ts.While in 2005 we produced a total shareholder return for the year of 4%,over the past five years shareholders have earnedan average annual total return of nearly 14%.This compared to theS&P/TSX Composite average annual total return of 3%over thesame period.Net Economic Profit(NEP),another key val

121、ue meas-ure,remained high at$1,120 million,just below last years recordlevel,despite higher capital,as each operating groups NEP rose.We surpassed four of the five financial targets we set for the year,including targets for earnings growth and return onequity.Our productivity ratio improved signific

122、antly by 120 basis points,but was short of our target in a challengingrevenue environment.We earned record net income of$2,400 million for the fiscal year,an increase of$94 million or4%from our extremely successful result in 2004.Our earningsper share(EPS)rose 5%to$4.64,representing an annual compou

123、nd EPS growth rate of 20%over the last three years,and cash EPS was$4.79,also up 5%.Operating GroupsEach of our client operating groups delivered record resultswith our retail and business banking and wealth managementbusinesses contributing significantly to our success.OurPersonal and Commercial Cl

124、ient Group(P&C)earned netincome of$1,199 million,up$217 million or 22%from a yearago.Our Private Client Group(PCG),meanwhile,earned net income of$320 million,up$93 million or 41%.InvestmentBanking Group(IBG)earned net income of$852 million,up$20 million or 3%from 2004.Increased RevenueRevenue contin

125、ued to grow,increasing$470 million or 5%to$9,958 million.There was strong growth in P&C,which benefited from higher product volumes,insurance and card fee revenues.There was also growth in PCG full-service investing,mutual fund and term investment product revenues.Not surprisingly,revenue declined i

126、n IBG as increased tradingrevenues and advisory fees were more than offset by reducedrevenues from interest-rate-sensitive businesses,which wereadversely affected by a flatter yield curve and competitive market conditions.1.On a taxable equivalent basis.2.Non-GAAP measure.See page 35.BMO Financial G

127、roup 188th Annual Report 2005|920052004200320022001BMO Share Price($)Last Trading Day of Fiscal Year(20012005)33.8638.1049.3357.5557.81Productivity ImprovementImproving cash productivity,particularly through top-line rev-enue growth,is a key component of enhanced shareholder valueand continues to be

128、 a top priority at BMO.Over the last threeyears,we have improved our productivity ratio by 540 basis points while continuing to invest in our business.In 2005,our cashproductivity ratio was 62.6%,a 120 basis point improvement from 2004.Both P&C and PCG made significant improvements in productivity,d

129、riven by strong revenue growth,but IBGs productivity worsened in the challenging interest rate environ-ment described above.Although we fell short of our target toimprove our productivity ratio by 150 to 200 basis points in 2005,we remain encouraged by our significant and steady progress in recent y

130、ears.Credit Risk ManagementIn 2005,provisions for credit losses increased by$282 million,mostly due to lower reversals and recoveries and a lower reduction in the general allowance this year.The provision in2005 was$179 million,consisting of$219 million of specific pro-visions and a$40 million reduc

131、tion in the general allowance for credit losses.Although in marked contrast to a$103 millionnet recovery of credit losses in 2004,which included specificprovisions of$67 million and a$170 million reduction in thegeneral allowance,our provisions in 2005 were actually lowerthan the targets we establis

132、hed at the beginning of the year when we anticipated a weaker credit environment.BMOs top-tier credit management continues to distinguish us from our peers.Foreign ExchangeAlthough the Canadian dollar continued to strengthen in 2005,we managed the effects of foreign exchange fluctuationseffectively,

133、holding the negative impact on our bottom line to$42 million.CapitalIn 2005,our Tier 1 Capital Ratio increased to 10.25%,up from9.81%a year ago and well above our target.Its a result that mirrors our strong earnings,particularly in the fourth quarterOver the last five years,our average annual TotalS

134、hareholder Return was 13.8%.2005 Economic Climate:Weathering the StormsFlatter Yield CurveThe flattening of the yield curve the narrowing gap between longand short-term interest rates caused some investors to worryabout a potential market slow-down.The flatter curve also had a significant impact on

135、ourindustry,resulting in lower netinterest margins which reducedrevenue growth,particularly in wholesale businesses.Dollars Up and DownIn Canada,exporters were nega-tively affected as the Canadiandollar rose to its highest levels in13 years.Meanwhile,businessesand consumers in the UnitedStates grapp

136、led with the downsideof a falling dollar.Soaring Oil PricesCanadians and Americans alsofound themselves coping withhigher prices for gasoline,homeheating oil and natural gas asenergy prices soared.Although oil production and refining opera-tions located along the U.S.GulfCoast did not suffer the ful

137、l forceof hurricanes Katrina and Rita,theres no question that the dam-age caused by the great stormsput upward pressure on alreadyhigh oil and natural gas prices.Consumer ConfidenceAs the year moved into the thirdquarter,its perhaps not surprisingthat the combination of currencyfluctuations,higher c

138、ommodityprices and natural disasters causeda drop in consumer confidence on both sides of the border.Fundamental StrengthIn spite of these developments,the Canadian and Americaneconomies remained funda-mentally strong.In 2005,the U.S.economy is estimated to have expanded at an above-potential pace w

139、hile the Canadian economy recorded a respectable,albeit more moderate advance.Meanwhile,on both sides of the border,consumers continued to spend and take advantage of the still-low interest rate environment to buy homes and other goods.For its part,business ramped up investment spending.$4.64Earning

140、s per share up 5%$2,400millionNet income up 4%13.8%Average annual total shareholder return(5-year)$9,958millionRevenue(teb)up 5%of the year when our net income increased by 20%,and alsoreflects the sale of Harrisdirect.We have the right strategy to grow our business and bestserve our shareholders.BM

141、Os differentiating strengths,ourfocus on growing revenues to improve our productivity as wellas our strong capital base position us well for the future.10|BMO Financial Group 188th Annual Report 2005“BMO looked at our financial needsand came back with a solution that recognized our success andreflec

142、ted our growth strategy and vision.”Dave Munro,President and CEOGienow Windows and Doors Income FundCommercial bankingclients since 2001BMO has the second largest market share in business lending in Canada.#2$34billionBMO participated in 268 corporate equity transactions that raised$34 billion for C

143、anadian companies.“BMOs people took the time to understand our business and our industry.”We are committed to helping our clients across Canada succeed.This means tailoring financial solutions that meet all of their individualfinancial needs and providing exceptional service that can help themachiev

144、e every goal,every dream.Taking the time to understandClient Profile:Gienow Windows and Doors Income FundIn CanadaAcross Canada,we have a total of 1,900 investmentprofessionals located in BMO branches and offices a reflection of BMOs commitment to providingour customers with the depth and breadth of

145、 financial products and services they need.1,900When a group of Calgary businessmen,including Dave Munroand Dennis Zentner,purchased Gienow Building Products Ltd.in 1983,their vision was to transform the local window and doormanufacturer into a leading national company.Its a goal theyhave realized.T

146、oday,Gienow employs 1,400 people,boastsmanufacturing and distribution facilities from British Columbiato Quebec,and sells its products across Canada as well as in the United States,Europe and Asia.BMO has been a partner in Gienows journey.Says NeilRunions,Senior Manager,Corporate Finance Division at

147、 BMOBank of Montreal,“Although our relationship with Gienow isrelatively new,it has proven to be significant.”BMO has helpedthe company obtain the financing it needed to grow its businessboth organically and through acquisitions,and has providedtailored cash management services.In 2001,BMO Bank ofMo

148、ntreal provided senior debt financing to Gienow,enablingthe company to consolidate its presence in Western Canada.More recently,the Bank led a loan syndication to expandGienows credit facilities and BMO Nesbitt Burns co-led a syndication that assisted Gienow in its conversion to an incomefund.Capita

149、l raised through Gienows initial public offering in 2004,combined with loan facilities,made it possible for the company to acquire Farley Windows of Alexandria,Ontario in 2004 and Chantecler Windows and Doors Inc.of Gatineau,Quebec in 2005,giving Gienow a firm foothold in Eastern Canada.“BMOs people

150、 took the time to understand our businessand our industry,”explains Dave Munro,President and CEO atGienow.“Representatives from across the BMO organizationcame together,looked at our financial needs and came back witha solution that recognized our success and reflected our growthstrategy and vision.

151、We feel that BMO is part of our team.”BMO Financial Group 188th Annual Report 2005|11Left to right:David Farmer,Vice President and Underwriter CorporateFinance Loan Syndications,BMO Bank of MontrealDebra Puckett,Business Development Leader,Cash Management,BMO Bank of MontrealNeil Runions,Senior Mana

152、ger,Corporate Finance Division,BMO Bank of Montreal Dave Munro,President and CEO,Gienow Windows and Doors Income Fund12|BMO Financial Group 188th Annual Report 2005“I particularly appreciate thatHarris Private Bank has taken thetime to help my sons learn aboutmatters ranging from portfoliomanagement

153、 to buying a car.”Gary Gardner,PresidentNamast LaboratoriesCommercial banking clients since 1998In the United States“Harris is a bank that stands for continuity and trust in our community.”Through organic growth and acquisition,and by providing every customer every day a range and depth of products

154、and services,Harris is well on the way toward achieving our goal of becoming the leading Midwest personal and commercial bank in the United States.#1Looking out for our interestsClient Profile:Namast LaboratoriesHarris is tied for first in both the small and micro-business segments and is among the

155、Top 3 in the commercial mid-market segment in Chicagoland.In 1998,shortly after the sale of a family business,ChicagoanGary Gardner turned to Harris to help him manage his financial affairs.He sought the services of Harris Private Bank to oversee his personal accounts as well as those belonging to h

156、is wife,Denise,and their two college-aged sons.He alsolooked to Harris to provide lending and cash management services for a new business venture,Namast Laboratories,which develops and markets natural organic hair,skin andbody renewal products to the multicultural market.Why Harris?“Thats easy,”says

157、 Gardner.“There is so much change going on in the financial services industry in the U.S.Midwest.Amid all the flux,Harris is a bank that stands for continuity and trust in our community.”Seven years later,Gardner remains more than pleased by his choice.“Harris is a strong partner,”he says.“It provid

158、edthe support we needed when Namast was developing its business.And it continues to look out for our interests as weexpand.Just recently,for instance,Joe Dillon and his Harrisrelationship team encouraged us to take advantage of an interest rate risk management strategy that would protect ourterm loa

159、n against any future interest rate hikes.Its alreadyproven to be good advice.”Gardner is equally happy with his private banking service.“I particularly appreciate that Mike Stanton and his colleaguesat Harris Private Bank have taken the time to help my sonslearn about matters ranging from portfolio

160、management to buying a car,”he says.“Its very important to me that they have a knowledge and understanding of financial matters.After all,the family business will be theirs one day.”Harris community banking network has grown to195 branches offering personal and business clientsa full suite of financ

161、ial products and services.Harris retains 89%of its business banking customers,compared to the industry average of 83%.89%195branchesBMO Financial Group 188th Annual Report 2005|13Left to right:Joe Dillon,Market Manager,Harris Nellie Tomicich,Assistant Vice President,Cash Management Specialist,Harris

162、 Mike Stanton,Managing Director,Harris Private BankRight:Gary Gardner,President,Namast Laboratories with model and stylist14|BMO Financial Group 188th Annual Report 2005“BMOs people share our excitement and enthusiasmabout our plans and future.”Martin Couture,PresidentSanimal Inc.Commercial banking

163、clients since 2005BMOs more than 50 years of expertise in the food and agricultural business in the UnitedStates is well recognized.50yearsHarris has become one of the leading com-mercial banks in the Chicago area,adding US$1.4 billion in business banking loans andUS$900 million in business banking

164、depositsbetween 2001 and 2005.$1.4billion(US)In 2005,our Personal and Commercial Client Group established its first Chicago-based unit to coordinate organization-wide capabilities for customers needing banking services on bothsides of the border.“We liked the all-encompassing nature ofBMOs offering

165、on both sides of the border.”Every day,BMO is winning business thanks to our unique and provenability to provide integrated North American solutions that help our Canadian and American clients expand their operations across our shared border.Sharing our excitement and our futureClient Profile:Sanima

166、l Inc.Cross Border1stfor customersIn the summer of 2004,the executive team at Sanimal Inc.agreed to acquire Wisconsin-based Anamax Group of Companies.Sanimal,a family-owned business,is the largestanimal rendering company in eastern Canada,employing over 900 people.As the deal was being completed in

167、January 2005,Martin Couture,President,Sanimal Inc.received a telephonecall.It was Richard Nadeau,Vice-President Corporate Financeat BMO Bank of Montreal.“When we learned of Sanimalsplans,we thought that given our scope and expertise in both Canada and the United States,BMO had much to offer,”says Na

168、deau.After an initial meeting with BMO,Sanimals leadershipteam agreed.“We liked the all-encompassing nature of BMOsoffering on both sides of the border,”says Sanimal CFO ClaudeSaulnier.He was also pleased to see at the table Brian Moeller,Managing Director,Food Group at Harris Nesbitt in Chicagoand

169、a well-known expert in the rendering industry.It was the beginning of a lasting relationship.Over the nextseveral months,BMO put together a North American solutionfor Sanimal that included a private placement arranged byHarris Nesbitts New York office as well as senior debt financingpackaged jointly

170、 by BMO Bank of Montreal in Montreal andHarris Nesbitt in Chicago.Sanimal,which had been the client ofa competitor for 25 years,also transferred its cash managementbusiness on both sides of the border to BMO Bank of Montreal.At the same time,the companys principals chose to transfertheir personal ac

171、counts to BMO Harris Private Banking.“It was not an easy decision to change our financial services provider,”says Couture.“But BMOs offer was simplybetter.Just as important is that BMOs people share our excitement and enthusiasm about our plans and future.Our company wants to continue to expand in t

172、he United States.We believe BMO is a partner with the expertise,professionalismand will to help us realize our goal.”BMO Financial Group 188th Annual Report 2005|15Left to right:Brian Moeller,Managing Director,Food Group,Harris NesbittLuc Bernier,Senior Manager,Corporate Finance Division,Personal an

173、d Commercial Client Group,BMO Bank of MontrealAmy Lauterjung,Director,U.S.Debt Products Group,Harris NesbittRichard Nadeau,Vice-President,Corporate Finance Division,Personal and Commercial Client Group,BMO Financial GroupNorman Shaffer,Managing Director,U.S.Debt Product Group,Harris NesbittLeft to r

174、ight(all from Sanimal Inc.):Claude Saulnier,Vice-President Finance;Andr Couture,Chairman;Julie Couture,Board Member;Martin Couture,President16|BMO Financial Group 188th Annual Report 20050.0 0.5 1.0 1.5 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 Credit Performance Mea

175、sure Specific Provision for Credit Losses as a%of Average Net Loans and Acceptances(including securities borrowed or purchased under resale agreements)BMO Canadian competitors average for the yearCanadian competitors 15-year averageBMO 15-year average Over the past 15 years(15 years ended October 31

176、,2005),our credit losses on loans and acceptances averaged 0.38%per annum,compared with 0.59%for our peers.Credit Risk ManagementAt BMO,a disciplined,consistent and prudent approach tocredit risk is a core value.We don t follow the pack to embracethe latest favourite sector or product,nor do we chan

177、ge ourlending criteria according to whether the economy is growingor slowing.All significant commercial and corporate lendingproposals are thoroughly investigated and analysed and credit decisions are made by experienced,well-trained andfully qualified personnel supported by time-tested policies and

178、 procedures.As a result of our industry-leading credit loss history and our transparency in credit reporting,we are a recognized leader in credit risk management.A Better Deal for our ClientsWhat does BMOs disciplined,consistent and prudent approachto credit risk management mean to our clients?It me

179、ans that they can rely on us in good times and,moreimportantly,in bad times.Our focus on consistency means we maintain the same underwriting standards throughout the credit cycle,whereas many lenders tighten their standardsin response to deteriorating loan portfolios.Its a fact thatlenders who have

180、opened the vaults too wide in bullish timesoften retrench when the economy contracts.Its a pattern that can be unsettling at the least,and at the worst,disastrousfor clients.BMOs approach is rather to deal with tough times by doingwhat we reasonably can to maintain valued relationships withour clien

181、ts.Across Canada,members of our risk managementgroups have the mandate,training and resources necessary to work closely with customers to provide meaningful solutionstailored to their situations and needs.A case in point involves our partnership with Canadiancattle ranchers following the crisis that

182、 developed when an Alberta cow tested positive for Bovine Spongiform Encepha-lopathy(BSE)in 2003.It was an event that prompted countriesincluding the United States and Japan to close their borders to Canadian cattle.Reasoning that this difficult situation wasbeyond our customers ability to contend w

183、ith on their own,we introduced BMO Bank of Montreals BSE Disaster AssistanceProgram,which allowed customers dealing with hundreds ofthousands of dollars in lost income to defer principal paymentson their loans until conditions improved.As expected,conditions did improve.Last summer,theUnited States

184、reopened its border to young Canadian cattle andour clients were back in business.And that,after all,is the point.Better Results for ShareholdersWhat does our credit risk management approach mean for our shareholders?Its simple.We gain market share withoutincreased risks as the credit cycle deterior

185、ates while many of our peers tighten their credit standards.It also means better returns.Excellence in managing credit risk assets enables us to provide more predictable andconsistent returns over time than our peers.Over the past 15 years BMOs average credit loss was 36%below the averageof its Cana

186、dian peer group.In 14 of those 15 years BMOs credit losses were better than the average of its peer group.The one exception was 2001 when BMO recognized early losses associated with the telecom industry.This early recognition of credit losses is a hallmark of our leading credit disclosures:we are vi

187、gilant in recognizingdeterioration in credit assets and continually seek to provide the most meaningful information for shareholders and investorsto enable them to accurately assess our credit quality.In 2004 we were the first Canadian bank to distinguish new specific pro-visions from reversals and

188、recoveries in our specific provision forcredit losses.This information assists investors in understandingemerging losses.Similarly,our disclosure of new impaired loans provides a leading indicator of potential future loss.Leadership in Credit Risk ManagementOur record of excellence in credit risk ma

189、nagement is a fundamental strength that benefits both our customers and our shareholders.BMO Financial Group 188th Annual Report 2005|17Corporate GovernanceThrough our steadfast commitment to sound principles of corporate governance,we strive to retain the trust of every shareholder.Robert M.AstleyW

190、aterloo,ONCorporate Director and former President and Chief Executive Officer Clarica Life Insurance Companyand former President Sun Life Financial CanadaStephen E.BachandPonte Vedra Beach,FL Corporate Director and retired President and Chief Executive Officer Canadian Tire Corporation,LimitedDavid

191、R.Beatty,O.B.E.Toronto,ONChairman and ChiefExecutive Officer Beatinvest LimitedBMO Financial Group has a long-standing tradition as a leader in corporate governance.As we move forward,we striveto remain at the forefront of best practices.Board Leadership,Independence and AccountabilitySound governan

192、ce and ethical behaviour begin with our Board of Directors,which represents and is accountable to our shareholders and also sets the standard of good governance for the entire enterprise.The Boards Governanceand Nominating Committee is responsible for shaping our corporate governance policies and pr

193、actices.The committeekeeps abreast of developments in the world of corporate governance and oversees our compliance.When appropriate,it recommends new practices to the Board that will keep us at the forefront of best practices.At BMO we believe that having independent directors including our chairma

194、n helps the Board operate autonomouslyand ensures that we are accountable to all our stakeholders.All our directors,with the exception of the CEO,are currentlyindependent.Chairman David Galloway ensures that the Boardoperates independently of management and that directors have access to an independe

195、nt leader.Mr.Galloway is an ex-officio member of all Board committees of which he is not a member.In that role he is able to manage the affairs of the Board,assisting the committees and the Board to function effectively and meet their responsibilities.Annual Director and Committee ReviewsThe effecti

196、veness of the Boards operations is monitored byannual evaluations of the Board,its committees and each direc-tor.The director evaluations are carried out through a“peer”performance review one of the first of its kind in Canada Board of DirectorsThe Board of Directors,either directly or through Board

197、 committees,is responsible for the management or supervisionof management of the business and affairs of the Bank with the objective of enhancing shareholder value.Our Board iscomprised of 14 independent directors and one managementdirector,the President and CEO Tony Comper.Recognition for Excellenc

198、e in Disclosure and Corporate GovernanceIn 2005,Canadian Business magazine named BMOs Board of Directors“Best Board in Canada.”BMO scored 99 out of a possible 100 points in the survey,which assessed companies on the basis of accountability,board independence,disclosure,three-year total return and th

199、ree-year return vs.the S&P/TSX.The Globe and Mails Report on Business annual review of corporate governance practices ranked BMO second overallamong 209 Canadian reporting issuers.The Canadian Institute of Chartered Accountants annualCorporate Reporting Awards gave us the Award of Excellence inthe f

200、inancial institutions category and gave BMO an HonourableMention for Excellence in Electronic Disclosure.E,a Europe-based researcher and publisher thatconducts an annual review of corporate annual reports,hasranked each of our last six Annual Reports among the worldstop 30.Our last Annual Report was

201、 ranked 20th best in the world and our“Financial and Performance Reporting”was ranked No.1.I.R.Global Rankings recognized our investor relations web sitefor its timely and accurate disclosure of information for investors.Corporate Governance18|BMO Financial Group 188th Annual Report 2005Corporate Go

202、vernance at BMO Financial GroupFor more details regarding corporate governance at BMO,pleasesee the following documents,which are posted on our web site .Notice of Annual Meeting of Shareholders and Proxy Circular Shareholders are invited to attend our Annual Meeting on March 2,2006 at 9:30 a.m.in C

203、algary,Alberta or view a webcast of the event.Details of the webcast are available on our web site.Corporate Governance Our web site contains information on our corporate governance practices,including our code of conduct,titled First Principles,our Director Independence Standards andBoard and Commi

204、ttee Charters.Proxy Circular Our Proxy Circular contains information on each of the directors,Board Committee reports and a completediscussion of our corporate governance practices.BMO Corporate Social Responsibility Report including our PublicAccountability Statement This annual report documents ou

205、r corporate citizenship activities throughout the year.The 2005report will be released in February 2006.Each of the above documents is available in print to any shareholder upon request.which is a comprehensive survey that requires all directors to assess the contribution of each of their peers on m

206、easures ranging from ethics to strategic insight,financial literacy andbusiness judgment.Governance Beyond ComplianceThe Board of Directors serves as an example to our entireorganization by affirming that sound corporate governancemeans not just abiding by the rules but also embracing the spirit of

207、those rules.In fact,some of our corporate gover-nance practices go beyond the requirements of the law.We are committed to building on our success in the area of corporate governance,so that we remain at the forefrontof best practices.At BMO,we recognize that our governancestandards must respond to c

208、hanges in our organization,stake-holder expectations,regulatory requirements and evolving best practices.Continuously Enhancing DisclosureBMO considers disclosure to be an essential component of effective corporate governance.To a large extent,the success of the multitude of regulatory requirements,

209、voluntarybest practices and an organizations own culture of integrity is determined by the degree to which all stakeholders of theorganization are able to truly understand its operations,goalsand values as well as the extent of its assets in comparison to its liabilities.Our efforts to continuously

210、enhance public disclosure have made us an innovator in this area.Our Board encourages,and management actively seeks,ways to provide more infor-mation,clarity and insight to our stakeholders.A hallmark ofour annual report is our financial performance scorecard,whichmade us a pioneer in financial disc

211、losure.The scorecard is areport and comparison of eleven important financial measuresincluding shareholder return,return on equity,earnings pershare growth,productivity and credit performance.We discloseour performance on these measures relative to Canadas majorbanks and our North American peer grou

212、p.We believe that assessing performance relative to our competition puts results in an appropriate context for our stake-holders and provides further clarity.BMO has disclosed thesecomparatives every year since it started the practice in 1992,David A.GallowayToronto,ONChairman of the Board Bank of M

213、ontrealHarold N.KvisleCalgary,ABPresident and ChiefExecutive OfficerTransCanada CorporationEva Lee KwokVancouver,BCChair and Chief Executive OfficerAmara International Investment Corp.Corporate GovernanceRobert Chevrier,F.C.A.Montreal,QCPresident Socit de gestion Roche Inc.Tony ComperToronto,ONPresi

214、dent and ChiefExecutive OfficerBMO Financial GroupRonald H.FarmerMarkham,ONManaging DirectorMosaic Capital Partners TorontoBMO Financial Group 188th Annual Report 2005|19Charles F.BairdSkillman,NJ,U.S.A.Ralph M.BarfordToronto,ONMatthew W.Barrett,O.C.,LL.D.London,ENGPeter J.G.Bentley,O.C.,LL.D.Vancou

215、ver,BC Claire P.BertrandMontreal,QCFrederick S.Burbidge,O.C.Frelighsburg,QCPierre C t,C.M.Quebec City,QCC.William Daniel,O.C.,LL.D.Toronto,ONGraham R.DawsonVancouver,BCLouis A.Desrochers,C.M.,c.r.Edmonton,ABA.John Ellis,O.C.,LL.D.,O.R.S.Vancouver,BCJohn F.Fraser,O.C.,LL.D.Winnipeg,MBThomas M.GaltTor

216、onto,ONJ.Peter Gordon,O.C.Burlington,ONRichard M.Ivey,C.C.,Q.C.London,ONSenator Betty Kennedy,O.C.,LL.D.Campbellville,ONJ.Blair MacAulayOakville,ONRonald N.Mannix,O.C.Calgary,ABThe Honourable Frank McKennaCap Pel,NBRobert H.McKercher,Q.C.Saskatoon,SKEric H.MolsonMontreal,QCWilliam D.Mulholland,LL.D.

217、Georgetown,ONJerry E.A.Nickerson North Sydney,NSLucien G.Rolland,O.C.Montreal,QCJoseph L.Rotman,O.C.,LL.D.Toronto,ONMary Alice Stuart,C.M.,O.Ont.,LL.D.Toronto,ONHonorary DirectorsBruce H.MitchellToronto,ONChairman and ChiefExecutive OfficerPermian Industries LimitedPhilip S.Orsino,O.C.,F.C.A.Toronto

218、,ONCorporate DirectorJ.Robert S.Prichard,O.C.,O.Ont.Toronto,ONPresident and ChiefExecutive Officer Torstar CorporationJeremy H.ReitmanMontreal,QCPresident and ChiefExecutive Officer Reitmans(Canada)LimitedGuylaine Saucier,C.M.,F.C.A.Montreal,QCCorporate DirectorNancy C.SouthernCalgary,ABPresident an

219、d Chief Executive OfficerATCO Ltd.and Canadian Utilities Limited reporting in good years and in bad.We believe that when weare open and honest in explaining results we earn the trust of stakeholders over the long term.Stock Exchange GuidelinesAs a Canadian reporting issuer with securities listed on

220、theToronto Stock Exchange(TSX)and the New York Stock Exchange(NYSE),our corporate governance practices meet,and in some cases exceed,the applicable guidelines adopted by theCanadian Securities Administrators(CSA),the rules of the U.S.Securities and Exchange Commission(SEC)which giveeffectto the prov

221、isions of the Sarbanes-Oxley Act and the NYSE standards.Our governance practices differ significantly in only one respect from those required of U.S.domestic issuersunder the NYSE standards.The NYSE standards require shareholder approval of all equity compensation plans and any material revisions to

222、 such plans,regardless of whether the securities to be delivered under such plans are newly issuedor purchased on the open market,subject to a few limitedexceptions.The TSX rules only require shareholder approval ofequity compensation plans that involve newly issued securities,subject to a few limit

223、ed exceptions.The TSX rules require that equity compensation plans that do not provide for a fixedmaximum number of securities to be issued must have a rolling maximum number of securities to be issued based on afixed percentage of the issuers outstanding securities and mustbe approved by shareholde

224、rs every three years.If the plan provides a procedure for its amendment,the TSX rules requireshareholder approval of amendments only where the amend-ment involves a reduction in the exercise price or an extensionof the term of options held by insiders.20|BMO Financial Group 188th Annual Report 2005E

225、mployees2005 AwardsAwarded byCanadas Top 100EmployersBMO was named one of Canadas Top 100Employers by Macleans magazine and MediacorpInc.for the fourth consecutive year.Once again,BMO was the only major Canadianbank included on this prestigious list.Best in Class DiversityProgram AwardBMO was recogn

226、ized by International Quality&Productivity Center for having a successfuldiversity program,which demonstrates bestpractices and has key leadership support.Diversity Leader of the Year AwardTony Comper,President and CEO of BMO FinancialGroup,was recognized by International Quality&Productivity Center

227、 for his leadership in initiating and implementing successful diversityprograms that are integrated throughouttheorganization.Training Top 100BMO Financial Group ranked 16th overall inTraining magazines Top 100 North American corporations in 2005.For the fourth consecutiveyear,BMO was the top Canadi

228、an company on the list.Award of Excellence:Corporate CategoryThe Canadian Race Relations Foundation recog-nized BMO Financial Group for excellence andinnovation in race relations practice in Canada.Most InnovativeRecruiting&Staffing Program/InitiativeBMO Financial GroupBank-wide Student TrainingProg

229、ramwas recognized with a Recruiting&Staffing Best in Class Award from InternationalQuality&Productivity Center.Diamond Club BMO was recognized by the Canadian ParaplegicAssociation for outstanding corporate philanthropyand service.At BMO,we are proud of our reputation as an employer ofchoice.It atte

230、sts to the emphasis we place on getting it right withour employees,which helps enhance our ability to attract andretain top people and fosters top performance.Getting it rightwith our employees helps them get it right with our customers.Listening to Our People:Annual Employee SurveyGetting it right

231、involves an ongoing dialogue.For more than 20 years,we have sought out and listened to the views of ourpeople through our Annual Employee Survey(AES).The AESprovides vital information about our employees experiencesand opinions.It is an essential part of our journey to be the top-performing financia

232、l services company in North America and a vital tool in honing our customer service practices.The results of our 2005 AES were encouraging.The par-ticipation rate of 88%was the highest ever.Meanwhile,ourEnterprise Engagement Index,which represents the strength of our overall relationship with employ

233、ees,is at its highest point since the index was introduced in 2001.Diversity:An Ongoing CommitmentBMOs commitment to ensuring a diverse culture remainsstrong.In 1990,we launched groundbreaking task forces on theadvancement of women,visible minorities,people with disabil-ities and Aboriginal employee

234、s.The reports helped generatefact-based diversity and workplace equity goals and led directlyto the development of numerous tools and programs designedto recognize,monitor,and eliminate barriers to advancement.We are proud of our diversity achievements.But we are not satisfied.We recently introduced

235、 an initiative designed to build on our current leadership position and set our diversitystrategy for the next 10 years.Entitled Above&Beyond,the program will ensure that we maintain and strengthen our international recognition for diversity and equity.Ours is a culture that embraces diversity,deliv

236、ers opportunity and demands respect for allWe are committed to ensuring a workplace where the voice of every colleague is listened to and encouraged.BMO Financial Group 188th Annual Report 2005|21Donations:Where the Money Goes(2005)Federated Appeals 19%(includes United Way)Health 24%Arts and Culture

237、 9%Civic and Community Initiatives 16%Education 24%Other 8%CommunityBMO is one of Canadas most generous corporate benefactors.Through our donations and sponsorship programs,we contribute to causes that include education,health,arts andculture,community development and sports and athletics.Our effort

238、s are augmented by our people,thousands of whomgive substantial amounts of their time,energy and income to support their communities.Physicians for the NorthProviding excellent health care to every Canadian is a societalresponsibility and a challenge.With both these truths inmind,we announced our su

239、pport for two innovative programsdeveloped to train physicians for practice in northern and ruralcommunities.In British Columbia,BMO committed$150,000over five years to support the Northern Medical Programs Trustat the University of Northern British Columbia in PrinceGeorge.It is expected by 2015 th

240、at 150 students will have gradu-ated from this program.In Ontario,we have pledged$100,000over four years to establish the BMO Financial Group BursaryFund at Northern Ontario School of Medicine(NOSM).Withmain campuses located in Thunder Bay and Sudbury,NOSM isthe first new medical school in Canada in

241、 more than 30 years.Supporting the ArtsBMO Financial Group is the founding sponsor of the Elinore andLou Siminovitch Prize in Theatre,which this year was awardedto playwright John Mighton at a gala celebration in Toronto.Hewas awarded a$100,000 prize,the largest in Canadian theatre.In Times of NeedB

242、MO Financial Group provided support to people and regionsaffected by the many environmental disasters during the past year.For example,BMO donated funds to help Red CrossProvincial Disaster Response Team relief efforts for flood victimsin south and central Alberta.BMO and its U.S.subsidiary Harrispr

243、ovided donations to relief efforts along the U.S.Gulf Coast following the destruction from Hurricane Katrina.In addition,BMO and HarrisTM1employees volunteered their time and support.We also donated funds to Canadian Red Cross relief efforts inSoutheast and South Asia in the aftermath of the Tsunami

244、 tragedy,and to aid victims of a devastating earthquake in South Asia.Learning to SkateCanadians love to skate and BMO is intent on supporting the tradition.We are major sponsors of the Canadian NationalFigure Skating Team as well as presenter of CanSkate2,SkateCanadas national learn-to-skate progra

245、m.Over the past year,wepresented BMO Financial Group CanSkate Champions Medalsto more than 4,000 young people from across the country.For more examples of our commitment to our communities,please see our Corporate Social Respon-sibility Report including our Public Accountability Statement online at

246、tradition of giving back to our communitiesEvery day,we are helping to make our communities stronger,happier places to live and work.Each year,thousands of BMO and Harris employeesgive generously of their time and money to supporttheir communities.In 2005,our employees raised a record$7.9 million th

247、rough BMO Fountain of Hope,a national charitable foundation managed by BMOFinancial Group employees and over US$1 millionthrough the United Way in Chicagoland.In 2005,BMO contributed$37.9 million in corporate donations,sponsorships and events,supporting communities,charities and not-for-profitorgani

248、zations in Canada and the United States.$37.9million$9millionFocus on LearningBMO remains particularly focused on supporting programs that encouragelearning.As part of our continuing investment in learning,BMO committed$8.2 million in new funding over the next 10 years to 25 colleges and universitie

249、s across Canada.?$750,000 to create an endowment to support BMO Financial GroupLeadership Scholarships at the University of Manitoba.?$1.3 million to create the BMO Financial Group Scholarship Program tohelp fund entrance scholarships for top students in need at the Universityof Waterloo.?$1.5 milli

250、on to University of Western Ontario to establish BMO FinancialGroup Graduate Scholarships for Masters and Doctoral students.?$250,000 for BMO Financial Group Graduate Student ResearchScholarshipsat the University of Prince Edward Island.?$500,000 for Seneca College to establish the BMO Customer Cont

251、actCentre Lab for professional development and hands-on training.?$525,000 gift to Laval University and their entrepreneurship centre,Entrepreneuriat Laval.In addition,BMO Nesbitt Burns raised$1.6 million for Equity through Education,a diversity initiative that provides financial assistance to stude

252、nts.22|BMO Financial Group 188th Annual Report 2005EnvironmentAt BMO,we believe that the quality of our lives improves wheneconomic growth is integrated with respect for the environment.By supporting and abiding by the principles of sustainabledevelopment,we act in the best interests of our sharehol

253、ders,customers,employees,communities and our future.Environmental FrameworkBMOs Environmental Policy and Principles provide the framework by which we address our commitment to both theprotection of the environment and the principles of sustain-able development.As guided by our principles,we pledge t

254、o:?Promote environmental stewardship across our business.?Respect,protect and act to serve the environment around us.?Engage our employees in our environmental managementprograms.?Provide credit to borrowers in a manner that respects environmental management.?Take responsibility for our environmenta

255、l performance.?Work with others to protect and preserve our environment.Energy Audit ProgressDuring the past year,in partnership with property managers anda third-party energy consultant,we completed energy audits ofthe nine major office towers and specialty buildings BMO ownsacross Canada.Moving fo

256、rward,we have begun to assess theresults and prioritize opportunities to improve energy efficiency.FTSE4GoodAgain this year,BMO was included in the FTSE4Good Index.Launched by the Financial Times and the London StockExchange,the Index recognizes the performance of companiesthat meet globally recogni

257、zed corporate responsibility stan-dards according to the criteria of environmental sustainability,social issues and stakeholder relations and human rights.Committed to sustainable developmentEvery day,we insist that respect for the environment be a living part of our culture.Dow Jones Sustainability

258、 North America Index BMO Financial Group was chosen to be among the firstCanadian companies listed on the newly created Dow JonesSustainability North America Index(DJSI North America).Modelled on the benchmark Dow Jones Sustainability WorldIndex,DJSI North America recognizes the regions top companie

259、s in terms of economic,environmental and social sustainability principles and practices.Equator PrinciplesIn September 2005,BMO became a signatory to the EquatorPrinciples,a voluntary set of environmental and social guidelines for project financing adopted by leading banks.The Equator Principles wer

260、e established in 2002 by theInternational Finance Corporation,a member of the WorldBank Group that promotes sustainable,private sector investment in developing countries as a way to reduce poverty and improve peoples lives.United Nations Environment ProgramBMO Financial Group is a signatory to the U

261、NEP Statement by Financial Institutions on the Environment and SustainableDevelopment.As a signatory,we acknowledge globally recognized principles of environmental protection and sustainable development.Carbon Disclosure ProjectIn 2005,we also became a signatory to the Carbon DisclosureProject,a coo

262、rdinating secretariat for a coalition of the worlds largest institutional investors.Members of the Projectvoluntarily disclose investment-relevant information concern-ing greenhouse gas emissions.For more on BMO and the Environment,see our web site at Index SeriesDow Jones SustainabilityNorth Americ

263、a IndexThe Equator PrinciplesMD&ABMO Financial Group 188th Annual Report 2005|23BMOs President and Chief Executive Officer and Chief Financial Officer have signed a statement outlining managements responsibility for financial information in this Annual Report.The statement,which can be found on page

264、 91,also explains the roles of the Audit Committee and Board of Directors in respect of financial information in the Annual Report.Managements Discussion and Analysis(MD&A)comments on BMOs operations and financial condition for the years ended October 31,2005 and 2004.The commentary is as of Novembe

265、r 29,2005,except for peer group comparisons,which are as of December 8,2005.Unless otherwise indicated,all amounts are in Canadian dollars and have been derived from financial statements prepared in accordance with Canadian generally accepted accounting principles(GAAP).Certain prior year data has b

266、een reclassified to conform with the current years presentation,including reclassifications arisingfrom transfers of certain businesses between operating groups.In addition,Note 20 on page 119 of the financial statements detailsthe impact on previously reported amounts arising from a change in accou

267、nting policy that was adopted on a retroactive basis.Managements Discussion and AnalysisFinancial Performance and Condition at a Glance provides a snapshot of our results on 11 key financial performance and condition measures used by management to monitor performance relative to our peer groups.Who

268、We Are provides an overview of BMO Financial Group,outlines our 2005 and 2006 targets and explainsthe links between our annual targets and our overall vision.Enterprise-Wide Strategy outlines our enterprise strategy and our progress in relation to our 2005 strategic priorities.Caution Regarding Forw

269、ard-Looking Statements warns readers about the limitations and inherent risksand uncertainties of forward-looking information.Factors That May Affect Future Results outlines certain industry and company-specific factors that investors should ensure they consider when assessing BMOs earnings prospect

270、s.Economic Developments includes commentary on the impact of economic developments on our businessesin 2005 and expectations for the economy in 2006.Value Measures reviews financial performance on the four key measures that assess or most directly influenceshareholder return.2005 Financial Performan

271、ce Review provides a detailed review of BMOs consolidated financial performanceby major income statement category.It also includes explanations of the use of non-GAAP measures and the impacts of changes in foreign exchange rates and acquired businesses.Operating Group Review outlines the visions and

272、 strategies of our operating groups and the major businessrisks they face,along with the strengths and competencies that help them execute their strategies in supportof their visions.It also includes a summary of their achievements in 2005,their priorities for 2006 and areview of their financial per

273、formance for the year.Financial Condition Review discusses our assets and liabilities by major balance sheet category.It reviewsour capital adequacy and our approach to ensuring we optimize our capital position to support our businessstrategies and maximize returns to shareholders.It also discusses

274、off-balance sheet arrangements and financial instruments.Accounting Matters and Disclosure Controls reviews critical accounting estimates and changes in accountingpolicies in 2005 and for future periods.It also discusses our evaluation of disclosure controls and proceduresand internal controls over

275、financial reporting.Enterprise-Wide Risk Management outlines our approach to managing the key financial and related risks we face.These reviews comment on results for periods of relevance other than fiscal 2005.Supplemental Information presents many useful financial tables and provides more historic

276、al detail.Index23Index24Financial Performance and Condition at a Glance27Who We Are28Enterprise-Wide Strategy29Caution Regarding Forward-Looking Statements29Factors That May Affect Future Results31Economic DevelopmentsValue Measures 32Total Shareholder Return33Earnings per Share Growth34Return on Eq

277、uity34Net Economic Profit Growth352005 Financial Performance ReviewOperating Group Review43Summary 44Personal and Commercial Client Group 50Private Client Group 53Investment Banking Group 56Corporate Support,including Technology and SolutionsFinancial Condition Review57Balance Sheet59Enterprise-Wide

278、 Capital Management61Off-Balance Sheet Arrangements62Financial Instruments Accounting Matters and Disclosure Controls63Critical Accounting Estimates65Changes in Accounting Policies in 200566Future Changes in Accounting Policies66Disclosure Controls and Procedures67Enterprise-Wide Risk Management75Re

279、view of Fourth Quarter Performance,Quarterly Earnings Trends and 2004Financial Performance Review79Supplemental InformationRegulatory FilingsOur continuous disclosure materials,including our interim filings,annual MD&A and audited consolidated financial statements,our Annual Information Formand the

280、Notice of Annual Meeting of Shareholders and Proxy Circular are available on our web site at ,on the Canadian Securities Administratorsweb site at and on the EDGAR section of the SECs web site at www.sec.gov.BMOs CEO and CFO each certify the appropriateness and fairnessof BMOs annual and interim fin

281、ancial statements and MD&A and Annual Information Form,and have reported on the effectiveness of BMOs disclosure controls and procedures.Managements Discussion and AnalysisMD&A24|BMO Financial Group 188th Annual Report 2005Net Economic Profit(NEP)Growth?NEP,a measure of added economic value,remained

282、 high in2005,declining marginally because of increased capital aftergrowing 92%in 2003 and 60%in 2004.?Each of the client operating groups generated higher NEP in2005 but these increases were offset by lower NEP in CorporateSupport primarily due to higher provisions for credit losses.Total Sharehold

283、er Return(TSR)?BMOs average annual five-year TSR of 13.8%declined from 18.9%a year ago,but is consistent with returns from the financial services industry and better than the broader market indices.?BMOs one-year TSR of 3.7%in 2005 lowered our five-year TSR,but follows returns of 33%and 20%in the tw

284、o prior years.Return on Equity(ROE)?ROE of 18.8%was down from 19.4%in 2004,but was the second highest in the past 20 years and above our 2005 target of 17%to 18%.Revenue Growth?Revenue*increased$470 million or 5%in 2005.There wasstrong growth in Personal and Commercial Client Group andPrivate Client

285、 Group and in the fee-based businesses inInvestment Banking Group.?The weaker U.S.dollar lowered revenue growth by 2.2 percentage points.Earnings per Share(EPS)Growth?EPS rose 5%to a record$4.64,after having grown strongly in2003 and 2004.The increase was driven by business growth anda lower effecti

286、ve tax rate,partially offset by higher provisionsfor credit losses due to lower reversals and recoveries.?EPS grew 9%excluding changes in the general allowance forcredit losses in 2005 and 2004,exceeding our 2005 target of 3%to 8%growth on this basis.Expense-to-Revenue(Productivity)Ratio?The product

287、ivity ratio improved 140 basis points to 63.5%in2005.The cash productivity ratio improved 120 basis points to62.6%,following 420 basis points of total improvement in thetwo prior years.We had targeted an improvement of 150 to 200 basis points in the cash productivity ratio in 2005.See page 26 for fu

288、rther comments on peer group comparisons.Certain prior year data has been restated.See Note 1 on page 26.*Revenue and income taxes in the MD&A are reported on a taxable equivalent basis.See pages 35,37 and 42.Our PerformancePeer Group ComparisonBMO Financial GroupCanadian peer group averageNorth Ame

289、rican peer group averageFurther details are provided on page 32.Further details are provided on page 33.Further details are provided on page 34.Further details are provided on page 34.Further details are provided on page 37.Further details are provided on page 41.NEP Growth(%)?NEP growth of 0.3%in 2

290、005 was wellabove the Canadian peer group average of 27%but well below the NorthAmerican peer group average of 16%,in large part due to the effect of litigationprovisions of certain of our peers.Five-Year TSR(%)?BMOs average annual five-year TSR of13.8%was below the Canadian peer group average of 15

291、.4%but substantiallyabove the North American peer group average of 10.1%.?Performance declined from a year ago on this measure because of the exclusion of the strong returns in 2000.EPS Growth(%)?BMOs EPS growth of 5.0%in 2005 wasabove the Canadian peer group average of 8.2%but below the North Ameri

292、canpeer group average of 12.3%.?Litigation provisions recorded by some of our peers in 2004 and 2005 significantlyreduced the Canadian peer group averagein 2005 but increased the North Americanpeer group average.ROE(%)?ROE of 18.8%in 2005 was well above the Canadian peer group average of 15.8%and th

293、e North American peergroup average of 15.6%.?BMO has earned ROE of more than 13%in each of the past 16 years,the onlymajor North American bank to do so.Revenue Growth(%)?Revenue growth of 5.0%in 2005 wasbelow the Canadian peer group average of 6.6%and the strong North Americanpeer group average of 1

294、2.9%.?BMOs revenue growth improved in 2005 and had outpaced the Canadian peer group average in 2003 and 2004.Expense-to-Revenue Ratio(%)?BMOs productivity ratio of 63.5%was better than the Canadian peer group average of 69.5%but above the NorthAmerican peer group average of 60.5%.The impact of litig

295、ation provisions of certain peers increased our advantage over the average Canadian peer.?BMOs productivity ratio remains secondbest of the Canadian peer group.Financial Performance and Condition at a Glance2005200420032002200113.818.912.97.914.32005200420032002200128.45.028.50.8(18.2)20052004200320

296、02200118.819.416.413.413.820052004200320022001(0.3)60(15)(43)922005 2004 2003 2002 2001 5.03.7(0.1)2.14.72005 2004 2003 2002 2001 63.5 64.966.569.0 65.5MD&ACredit Losses?The provision for credit losses increased$282 million.Specificprovisions were$152 million higher,driven by lower reversalsand reco

297、veries,and the reduction in the general allowance was$130 million lower.?The provision represented 11 basis points of average net loansand acceptances,up from 7 basis points in 2004.Liquidity Ratio?Cash and securities as a percentage of total assets was largely consistent with 2004 at 26.2%.?Liquidi

298、ty remains sound and continues to be supported bybroad diversification of deposits.Capital Adequacy?The Tier 1 Capital Ratio was 10.25%,up from 9.81%last yearand above our minimum target of 8.0%.?The Total Capital Ratio was 11.76%,up from 11.31%in 2004.?BMO has$3.4 billion of excess capital relative

299、 to our targetedTier 1 Capital Ratio.Credit Rating(Standard&Poors)?Our credit rating,as measured by Standard&Poors3(S&P)senior debt ratings,remained at AA,matching two competitors and exceeding the rating of the three other major Canadian banks.?The S&P ratings outlook on BMO remains stable.Credit R

300、ating(Moodys)?Our credit rating,as measured by Moodys4senior debt ratings,remained at Aa3,slightly below the highest-rated Canadian bank and consistent with the highest-rated of the other major Canadian banks.?The Moodys ratings outlook on BMO remains stable.Impaired Loans?Gross impaired loans and a

301、cceptances totalled$804 million,compared with$1,119 million in 2004,representing 4.9%ofequity and allowances for credit losses versus 7.5%a year ago.?Formations of new impaired loans and acceptances,a key driver of credit provisions,totalled$423 million,down from$607 million in 2004 and$1,303 millio

302、n in 2003.Our PerformancePeer Group ComparisonBMO Financial GroupCanadian peer group averageNorth American peer group averageFurther details are provided on pages 40 and 69.Further details are provided on pages 40 and 69.Further details are provided on pages 72 and 73.Further details are provided on

303、 pages 59 and 60.Further details are provided on page 60.Further details are provided on page 60.Provision for Credit Losses as a%ofAverage Net Loans and Acceptances?BMOs provision for credit losses of 0.11%of average net loans and acceptances was better than the Canadian peer group average of 0.17%

304、and the North Americanpeer group average of 0.56%.?BMOs credit loss experience has been better than the Canadian peer group average in 14 of the past 15 years.Gross Impaired Loans andAcceptances as a%of Equity andAllowances for Credit Losses?BMOs ratio of 4.9%was marginally betterthan the Canadian p

305、eer group average of5.0%but worse than the North Americanpeer group average of 3.0%.?BMOs ratio has approximated the Canadianaverage but has been higher than theNorth American average in recent years.Cash and Securities as a%of Total Assets?BMOs liquidity ratio of 26.2%was below the Canadian peer gr

306、oup average of 32.0%and the North American peergroup average of 30.8%.?Our liquidity ratio was higher than a year ago and remains at an acceptable level.Tier 1 Capital Ratio(%)?Our Tier 1 Capital Ratio at 10.25%was the highest in recent years and above theCanadian peer group average of 9.95%.?On a U

307、.S.regulatory basis,our Tier 1Capital Ratio was 9.96%and was abovethe North American peer group average of 8.33%.Credit Rating(Standard&Poors)?BMOs credit rating of AA,as measured by S&Ps senior debt ratings,was in the upper half of the Canadian peer group,with two of the banks in our peergroup rate

308、d as highly as BMO and threerated lower.BMOs rating was consistentwith the median rating of the NorthAmerican peer group.Credit Rating(Moodys)?BMOs credit rating of Aa3,as measured by Moodys senior debt ratings,was comparable to the median of the Canadianpeer group but slightly higher than theNorth

309、American peer group median.See page 26 for further comments on peer group comparisons.Certain prior year data has been restated.See Note 1 on page 26.200520042003200220010.11(0.07)0.300.560.66200520042003200220014.97.513.917.416.52005 2004 2003 2002 2001 26.225.829.124.923.12005200420032002200110.25

310、9.819.558.808.15AAAAAAAAA+A+A+A+AA20052004200320022001Aa3 Aa3 Aa3 Aa3Aa3Aa220052004200320022001BMO Financial Group 188th Annual Report 2005|25Managements Discussion and AnalysisMD&A26|BMO Financial Group 188th Annual Report 2005Canadian and North American Peer Group Comparisons2004Five-Year Average2

311、005(Note 1)(Note 1)Cdn.N.A.N.A.Cdn.N.A.N.A.Cdn.N.A.N.A.RankbankbankbankRankbankbankbankRankbankbankbankBMOof sixavg.avg.qtileBMOof sixavg.avg.qtileBMOof sixavg.avg.qtileFinancial Performance Measures(%)Five-year total shareholder return(TSR)13.8 415.4 10.1 118.9 420.1 12.0 113.8 415.4 10.1 1Diluted

312、earnings per share(EPS)growth5.0 4(8.2)12.3 328.5 222.2 9.8 17.4 55.2 7.5 3Return on common shareholders equity(ROE)18.8 315.8 15.6 219.4 218.3 16.2 216.4 415.0 15.3 2Net economic profit(NEP)growth(0.3)4(26.8)16.1 359.6 255.5 12.4 18.0 54.6 4.0 3Revenue growth5.0 56.6 12.9 33.7 33.3 11.4 33.0 53.7 7

313、.1 3Expense-to-revenue(productivity)ratio63.5 269.5 60.5 364.9 267.2 63.1 365.9 368.1 62.1 3Provision for credit losses as a%of average net loans and acceptances0.11 30.17 0.56 1(0.07)20.11 0.54 10.31 10.46 0.86 1Financial Condition Measures(%)Gross impaired loans and acceptances as a%of equity and

314、allowances for credit losses4.9 45.0 3.0 47.5 37.3 4.3 412.0 510.7 6.7 4Liquidity ratio26.2 632.0 30.8 325.8 630.6 31.0 325.8 630.2 30.0 3Tier 1 Capital Ratio10.25 29.95 8.33 19.81 410.40 8.40 19.31 59.68 8.12 1Credit rating Standard&PoorsAA1AAAA1AA1AAA+1AA1AAA+1MoodysAa32Aa3Aa22Aa32Aa3Aa32Aa32Aa3Aa

315、32The Canadian peer group averages are based on the performance of Canadas six largest banks:BMO Financial Group,Canadian Imperial Bank of Commerce,National Bank of Canada,RBC FinancialGroup,Scotiabank and TD Bank Financial Group.The North American peer group averages are basedon the performance of

316、North Americas largest banks,consisting of 15 banks in North America havingshareholders equity that is at least 75%as large as BMOs.It includes the Canadian peer group,except National Bank of Canada,as well as Bank of America Corporation,Citigroup,J.P.Morgan Chase&Co.,KeyCorp,National City Corporati

317、on,The PNC Financial Services Group Inc.,SunTrust Banks Inc.,U.S.Bancorp,Wachovia Corporation,and Wells Fargo&Company.Results are as at or for the years ended October 31 for Canadian banks and as at or for the yearsended September 30 for U.S.banks,as appropriate.For consistency with our peer groups,

318、the non-interest expense-to-revenue ratios include amortization of goodwill for all banks for 2001 in the calculation of the five-year average.Note 1.Certain BMO and peer group prior year data has been restated to conform with the currentyears basis of presentation.In our Managements Discussion and

319、Analysis in 2004,weindicated that we expected provisions for credit losses to increasefrom the unusually low levels of 2004 and that as a result,certainof our performance growth measures in 2005 might be less robust than in 2004.Our provisions did increase significantly in 2005 and our rankings have

320、 declined somewhat from 2004.Our 2005 performance was better than our five-year average performance on 7 of 11 measures and was consistentwith our average on another 2.Our five-year average resultswere better than the comparable Canadian peer group averageon 5 of 7 financial performance measures but

321、 were below average on 3 of 4 financial condition measures.North American Peer Group ComparisonOur 2005 rankings in the North American peer group slippedfrom the strong rankings of a year ago.North American peergroup performance in 2004 was affected by two of the largestbanks recording multi-billion

322、-dollar provisions for litigation and other settlement costs associated with certain high-profileinsolvencies.This improved BMOs 2004 North American rankings and comparative performance but lowered our rank-ings and relative growth performance measures in 2005.Our quartile ranking was unchanged on a

323、ll 4 financial condition measures and on 5 of the 7 financial performancemeasures,but declined on the remaining 2.Our performancewas better than average on 3 of 7 financial performance measures in 2005,compared with above-average performance on 5 measures in 2004.Our financial condition was better t

324、hanaverage on 1 of 4 measures in 2005 and average on another.Our five-year average performance was better than theNorth American peer group average on 4 of 7 financial perfor-mance measures and on 2 of 4 financial condition measures.Canadian Peer Group ComparisonBMOs performance in 2005 improved fro

325、m 2004 on 5 of our 11 key financial performance and condition measures,and was unchanged on another.These measures are considered key because we monitor our performance on them relative to our peer groups.In 2004,our performance improved on 7 of the 11 measures and was unchanged on another.Significa

326、nt litigation provisions recorded by certain of our Canadian peers affected the Canadian peer group averages in 2005.Although some of our Canadian peers also recorded litigation or restructuring provisions in 2004,the impact on the average of peer group performance measures was muchmore pronounced i

327、n 2005.In 2005,our performance was better than the Canadian peergroup average on 5 of 7 financial performance measures,com-pared with above-average performance on 6 measures in 2004.Our rankings in 2005 were unchanged on 2 of the 7 financial performance measures but declined somewhat on the others.I

328、mproving productivity was again BMOs top priority for 2005.Our expense-to-revenue(productivity)ratio improved 140 bps in 2005 and remains the second best of our Canadian peer group.BMOs cash productivity ratio(see page 35)improved 120 bps to 62.6%in 2005,building on the significant improve-ment of t

329、he past two years,during which the cash productivityratio improved 420 basis points.This ratio also remains the second best of Canadas major banks.In 2006,a top priority is to focus on revenue growth to achieve a further 100 to 150basis point improvement in our cash productivity ratio.We were better

330、 than average on 2 of the 4 financial con-dition measures in 2005,average on 1 and below average on 1.Our ranking improved on 1 measure,deteriorated on 1 and wasunchanged on the other 2.MD&ABMO Financial Group 188th Annual Report 2005|27Who We AreBMO Financial Group is one of the largest financial s

331、ervicesproviders in North America,offering comprehensive retail banking,wealth management and investment banking products,services and solutions.Canadian clients are served through BMO Bank of Montreal,our personal and commercial bankingbusiness,and BMO Nesbitt Burns,one of Canadas leading full-serv

332、ice investment and wealth management firms.In theUnited States,clients are served through Harris,a major Midwestfinancial services organization with a network of communitybanks in the Chicago area and wealth management offices acrossthe United States,as well as Harris Nesbitt,a leading mid-marketinv

333、estment and corporate bank.Our financial services profes-sionals can provide access to any service our customers requireacross the entire enterprise.BMO Financial Group comprisesthree client operating groups:Personal and Commercial ClientGroup,Private Client Group and Investment Banking Group.Our Financial TargetsBMOs overall governing objective,medium-term financialobjectives and annual targets f