Our credit exposure to securitized assets as at October 31, 2002 was limited to our deferred purchase price of $149 ($146 in 2001), certain cash deposits of $93 ($120 in 2001) and investments in securitization vehicles of $56 ($32 in 2001). The adjoining table outlines the key economic assumptions used in measuring the deferred purchase price and the sensitivity of the cur- rent value of the deferred purchase price as at October 31, 2002 to immediate 10% and 20% adverse changes in those assumptions. The sensitivity analysis should be used with caution as it is hypothetical and changes in each key assumption may not be linear. The sensi- tivities in each key variable have been calculated independently of changes in the other key variables. Actual experience may result in changes in a number of key assumptions simultaneously. Changes in one factor may result in changes in another, which could amplify or reduce certain sensitivities. For additional information concerning our off-balance sheet special-purpose entities refer to Note 7. Off-balance sheet special-purpose entities (“SPEs”) are either cor- porate entities or trusts whose activities are set out in the legal agreements that govern them. We have ongoing relationships with two types of SPEs: asset securitization SPEs and asset manage- ment SPEs. We securitize our loans either for capital management purposes or to provide alternative sources of funding. Our securitizations are more fully described in Note 6.  We assist our customers with the securitization of their assets to provide them with alternative sources of funding. In exchange for providing this service we earn fees for providing structuring advice related to the securitizations as well as administrative fees for sup- porting the ongoing operations of the customer securitization SPEs. We conduct asset management activities through SPEs that pro- videinvestorswithcustomized,diversifieddebtportfoliosinavariety of asset and rating classes. We earn investment management fees for managing these portfolios. We have two types of asset manage- ment SPEs: our High Yield Collateralized Bond Obligation SPEs and our High Grade Structured Investment SPEs. Our investments to sponsor these off-balance sheet SPEs were $109 at October 31, 2002 ($187 at October 31, 2001). The Canadian Institute of Chartered Accountants has issued a draft guideline on the consolidation of SPEs. We are currently reviewing the draft guideline to deter- mine whether it will require us to consolidate any of our off-balance sheet SPEs. Included in customer securitization SPEs is $6,700 of loans securitized by the Bank. land and buildings are the costs of Bank-owned branches, of which we owned 457 as at October 31, 2002 and 460 as at October 31, 2001, and other properties, located in Canada, the United States and other countries. On September 12, 2002, we sold our 25% undivided interest in the land located at King and Bay Streets in Toronto for cash proceeds of $122. The gain on sale of $112 ($87 after tax) was deferred and will be recorded as a reduction in rental expense over the term of our leases in the building, which expire between 2013 and 2023. We have entered into a number of non-cancellable leases for prem- ises and equipment. Our total contractual rental commitments outstanding as at October 31, 2002 are $1,096. The commitments for each of the next five years are $195 for 2003, $163 for 2004, $136 for 2005, $99 for 2006 and $82 for 2007 and $421 thereafter. Included in these amounts are the commitments related to 677 leased Bank branch locations as at October 31, 2002. Net rent expense for premises and equipment reported in our Consolidated Statement  of Income was $223, $175 and $165 for the years ended October 31, 2002, 2001 and 2000, respectively. Amortization expense for the years ended October 31, 2002, 2001 and 2000 amounted to $396, $406 and $402, respectively. Included in We record all premises and equipment at cost. Buildings, computer and other equipment and leasehold improvements are amortized on a straight-line basis over their estimated useful lives. The maximum estimated useful lives we use to amortize our assets are:  Future Change in Accounting Policy NOTE 8 Premises and Equipment Lease Commitments  NOTE 7 Off-Balance Sheet Special-Purpose Entities Consumer instalment and other  Residential personal Credit card  mortgages loans loans Deferred purchase price $ 117 $ 7 $ 25 Weighted average life (in years) 2.68 2.19 0.17 Prepayment rate (%) 12.75—13.19 5.0—8.0 33.0 Impact of: 10% adverse change $1.0—$1.1 $0.1 $0.1 20% adverse change $1.9—$2.2 $0.2 $0.2 Interest rate (%) 0.98—2.49 1.81—3.17 8.68 Impact of: 10% adverse change $6.7—$7.8 $0.8 $2.5 20% adverse change $13.3—$15.6 $1.7 $5.1 Expected credit losses (%) — 1.25—1.50 1.95 Impact of: 10% adverse change $ — $1.1 $0.6 20% adverse change $ — $2.3 $1.2 Discount rate (%) 5.95—13.30 13.30—13.73 13.30 Impact of: 10% adverse change $0.5—$0.9 $0.1 $0.1 20% adverse change $0.9—$1.7 $0.3 $0.2 We provide liquidity support for the securities issued by some off-balance sheet SPEs. We also enter into derivative transactions to assist them in hedging their interest rate exposure. The terms and conditions for these transactions are the same as for those with third-party customers. The majority of the funding issued by these off-balance sheet SPEs is rated by one or more rating agencies that review the terms of the SPE to ensure that investors are appropriately protected. The following table summarizes the financial position of our SPEs as at October 31, 2002: High Yield Collateralized High Grade Customer Bond Structured Securitization Obligation Investment SPEs SPEs SPEs Assets $ 28,092 $ 3,397 $ 16,539 Liabilities $ 27,228 $ 3,546 $ 15,222 2002 200 1 Land $ 269 292 Buildings 1,309 1,387 Computer and other equipment 2,737 2,483 Leasehold improvements 529 491 4,844 4,653 Accumulated amortization (2,685) (2,483) Total $ 2,159 $ 2,170 Gains and losses on disposal are included in non-interest revenue in our Consoli- dated Statement of Income. b Buildings 40 ye ars b Computer and other equipment 10 ye ars b Leasehold improvements 15 year s BMO FINANCIAL GROUP ANNUAL REPORT 2002 77