MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANC IAL CONDITION Investment and Corporate Banking Equity Division Lines of Business Overview of Line Performance 2003 Focus Overview of Line Performance 2003 Focus  Capital Markets Overview of Line Performance Securitization and Credit Investment Management Description and Strategy Description and Strategy Overview of Line Performance Description and Strategy Description and Strategy 2003 Focus 46 BMO FINANCIAL GROUP ANNUAL REPORT 2002 Investment and Corporate Banking (I&CB) provides a full suite of financial services to clients throughout North America and Europe. Services include advising on mergers and acquisitions, restructurings and recapitalizations, as well as providing valua- tion and fairness opinions. I&CB also provides capital raising services through debt and equity underwriting and a full range of lending products, balance sheet management solutions and cash management services. Our strategy is to reinforce our leadership position in Canada while growing in the U.S. Midwest mid-market through Harris Nesbitt and expanding our coverage of the media and communications and the energy sectors in North America. A weak economic and credit environment contributed to a  general downturn in investment banking fees and downward pressure on lending volumes. Strong restructuring activity and income trust origination were among the bright spots in an  otherwise soft new issues market in 2002. The Equity Division offers a comprehensive suite of Canadian equity products globally. These products are complemented  by high-quality sales, trading and research capabilities, and  an intense client focus. We continue to maintain and enhance our leadership position in Canada, while selectively growing in  the United States.  In an extraordinarily difficult market environment, the Equity Division produced solid performance. The Brendan Wood Inter- national Survey of institutional investors ranked BMO Nesbitt Burns Top Overall Research Team for the 22nd consecutive year. The same survey also ranked the firm first in Sales and Trader services. We also maintained top market share of block trading dollar value on the Toronto Stock Exchange, with 12.86%. The Securitization and Credit Investment Management (CIM) line of business offers both issuers and investors products and services that use credit as a tool for asset management and funding alter- natives. Our strategy is to utilize existing capabilities to create a highly profitable, market-leading structured credit business. Results were affected by write-downs of equity investments in CBOs. Otherwise, performance was solid, led by a 27% increase in fee revenue.  Securitization maintained its dominant market position in Canada, reflecting consistent performance and innovation,  with specialized capabilities and a profitable niche focus in the United States. In the United Kingdom, CIM’s portfolio manage- ment skills continued to provide a competitive advantage as we increased our investor base and assets under management to US$10 billion and delivered consistent performance. CIM North America continues to deliver top-quartile returns to our investors on assets of US$3 billion. Both groups experienced slower than expected asset growth due to difficult credit market conditions. Capital Markets used its business diversity effectively to generate strong net income despite difficult market conditions. Overall, reduced client activity was offset by increased spreads in our interest-rate sensitive businesses. In 2002, we significantly en- hanced the U.S. debt origination and credit derivatives franchises. The Capital Markets line of business provides integrated debt, currency, interest rate and commodity solutions to targeted whole- sale, commercial and retail clients. The unit also provides efficient funding and liquidity management to BMO and its clients. b Deepen and expand client penetration while broadening the product offering in growth areas such as interest rate, com- modity and credit derivatives. b Continue to implement integrated client coverage initiatives with the Equity Division. b Continue investing in technology and process improvements. b Enhance and expand our Canadian franchise while growing  a more fully integrated investment and corporate bank in key industry sectors and markets in the United States.  b Deepen relationships with targeted clients by providing them with superior client service and integrated financial solutions. b Further diversify our U.S. business mix by increasing fee-based revenues.  b Expand our U.S. proprietary derivatives trading and our research coverage of U.S. stocks.  b Continue to implement integrated client coverage initiatives with the Capital Markets unit.