Financial Results 2001 Compared with 2000 BMO FINANCIAL GROUP ANNUAL REPORT 2002 45 Investment Banking Group  ($ millions, except as noted) Investment Banking Group net income rose $115 million or 24%. Excluding a write-down of $178 million ($105 million after tax) in the group’s equity investment in its own CBOs in 2001, which was categorized as a non-recurring item for reporting purposes, net income for fiscal 2002 improved by $10 million to $592 mil- lion. There were no non-recurring items in 2002. Difficult capital markets and credit conditions created a much more challenging environment in 2002. The improvement in this year’s net income was reflective of a significantly lower provision for credit losses, which was primarily due to a change in BMO’s loan loss alloca- tion methodology, as discussed below. Revenue declined $263 million to $2,534 million. Excluding non-recurring items, revenue declined $441 million or15%. Weak North American economic and credit environments contributed to a general downturn in investment banking fees and downward pressure on corporate lending volumes. Trading-related revenue declined $204 million to $383 million, having been particularly robust in 2001. Net investment securities losses totalled $142 mil- lion in 2002, including final CBO write-downs of $103 million, compared with net losses of $195 million in 2001. Notwithstand- ing the challenging business and market environments, revenue benefited from strong restructuring activity and income trust origination in Investment and Corporate Banking, from increased spreads in our interest-rate-sensitive businesses in Capital Mar- kets and from strong fee-based revenue growth in Securitization and Credit Investment Management. Provisions for credit losses declined $318 million to $227 mil- lion in 2002. In 2002, the provision for credit losses was based on expected losses over an economic cycle. Corporate Support is charged for differences between expected loss provisions charged to the client groups and provisions required under GAAP. As explained more fully on page 48, in 2001 there were some differ- ences in how loan loss provisions were charged to client groups and to Corporate Support. Accordingly, the provision for credit losses should be considered in conjunction with provisions charged to Corporate Support for comparative purposes.  Non-interest expenses were reduced $91 million or 6%, largely due to a reduction in performance-based compensation and a disciplined approach to cost management. These improvements were partly offset by severance costs in 2002. Net income in 2001 was $477 million, a decrease of $207 million. Excluding the write-down of equity investments in our own CBOs, net income was $582 million, or $102 million below 2000. Revenue increased 4% but excluding non-recurring items, rev- enue rose $278 million or 10%, driven by significantly improved results in Capital Markets, which benefited from interest rate reductions and improved client-driven trading activity. Strong dividend income, securitization fees and increased loan spreads also contributed to the increase. Merger and acquisition activi- ties, new issue activities and equity market volumes all declined  in the weaker business environment. The provision for credit losses increased $389 million due to the effect of deteriorating economic conditions in North America on our U.S. mid-market corporate and Canadian portfolios. Expenses increased $96 mil- lion or 7% due to higher performance-based compensation and increased employee costs. 12.04 12.68 11.17 2002 2001 2000 CIBC UBS TD Scotia RBC BMO NB 2002 2001 2000 1999 1,295 1,180 154 140 270 995 860 1,246 136 90 1998 Value of deals ($ billions) Number of deals 2002 2001 2000 34 25 24 15 27 14 Market BMO NB participation 2002 2001 2000 60 53 47 North American Equity GLYPH<CR> Underwriting — Canadian GLYPH<CR> Issuers  ($ billions) U.S. Contribution to GLYPH<CR> IBG Net Income  (%) Market Share of Canadian GLYPH<CR> Equity Block Trading Volume  (%) Canadian M&A ActivityGLYPH<CR> (for the 12 months ended September) Reported (As at or for the year ended October 31) 2002 2001 2000 Net interest income (teb) 1,466 1,497 1,320 Non-interest revenue 1,068 1,300 1,377 Total revenues (teb) 2,534 2,797 2,697 Provision for credit losses 227 545 156 Non-interest expense 1,421 1,512 1,416 Income before provision for income taxes,  non-controlling interest in subsidiaries and goodwill amortization 886 740 1,125 Income taxes (teb) 294 256 434 Amortization of goodwill, net of  applicable income taxes — 7 7 Net income 592 477 684 Net economic profit (3) (50) 160  Cash return on equity (%) 10.4 9.4 14.8 Average net interest margin (%) 1.04 1.03 0.92 Non-interest expense-to-revenue ratio (%) 56.1 54.1 52.5 Average common equity 5,112 4,509 4,216 Average assets 140,760 145,092 143,259 Total risk-weighted assets 55,933 68,545 75,316 Average current loans  49,810 58,318 60,052 Average deposits 58,798 64,950 73,810 Assets under administration 71,833 84,317 75,644 Assets under management 20,283 16,485 11,404 Full-time equivalent staff 2,140 2,158 2,136 Excluding non-recurring items Total revenues (teb) 2,534 2,975 2,697 Net income 592 582 684 Cash return on equity (%) 10.4 11.7 14.8 Non-interest expense-to-revenue ratio (%) 56.1 50.8 52.5