Core Deposits as a % of GLYPH<CR> Total Deposits 50.9 48.8 56.8 60.0 59.6 2002 2001 2000 1999 1998 Cash and Securities as a % of GLYPH<CR> Total Assets 28.4 29.2 27.8 23.1 24.9 2002 2001 2000 1999 1998 commitments, even in times of stress. Our liquidity and funding management framework includes: at October 31, 2001. The increase in the ratio was primarily attributable to growth in Canadian dollar trading securities. In the ordinary course of business, a portion of cash resources and securities is pledged as collateral to support trading activities and participation in clearing and payment systems, in Canada and abroad. At October 31, 2002, $18.9 billion of cash and secu- rities had been pledged, up from $16.1 billion pledged a year earlier. This change resulted from increased trading activity.  In addition, BMO is a party to certain agreements that could require incremental collateral under certain circumstances. These potential incremental collateral requirements are not material. Additional information on cash and securities can be found in Table 5 on page 53 and in Notes 2 and 3 on page 72 of the financial statements. The second key measure is the core deposits-to-total deposits ratio. Core deposits are more stable than other deposit sources as they are comprised of individual customer operating and savings deposits and smaller fixed-date deposits. The ratio represents total deposits less fixed-date deposits greater than 100,000 units of any currency, as a percentage of total deposits. Core deposits totalled $96.5 billion at the end of the year,  up from $92.5 billion in 2001, while total deposits increased  $7.5 billion to $161.8 billion. BMO’s core deposits-to-total deposits ratio at October 31, 2002 was 59.6%, down from 60.0% at Octo- ber 31, 2001. The ratio remained stable as core deposits grew at the same pace as total deposits.  Our large base of core deposits, along with our strong cap- ital base, reduces reliance on less stable wholesale funding. Wholesale funding is largely short-term in nature and primarily supports trading and underwriting assets and investment  securities. Wholesale funding activities are performed by pro- fessional teams accessing major financial markets worldwide. Additional contractual information on deposits can be found in Table 24 on page 64. We continuously monitor liquidity and funding risk and actively manage the balance sheet to minimize this risk. Management establishes minimum liquid asset holding requirements, together with limits for liability diversification, credit commitments, asset pledging and cash flow mismatches. Liabilities are diversified by customer, type, market, maturity term, currency and geog- raphy. These limits encompass both on- and off-balance sheet arrangements and are approved by the Risk Review Committee of the Board of Directors annually. There are two primary types of off-balance sheet arrangements that could potentially affect liquidity and funding – off-balance sheet special purpose entities (SPEs) and customer credit com- mitments. SPEs are used to securitize our assets in support of capital or funding management. Information on the securiti- zation of BMO assets can be found in Note 6 on page 76 of the financial statements. We also have ongoing relationships with off-balance sheet SPEs that customers use to securitize their assets, and we conduct asset management activity through SPEs that provide investors with customized, diversified debt port- folios in a variety of asset and rating classes. Information on Cash and securities totalled $63.0 billion at the end of the year, up from $55.3 billion in 2001, while total assets increased $13.5 billion to $252.9 billion. BMO’s cash and securities-to- total assets ratio at October 31, 2002 was 24.9%, up from 23.1% We use two key measures to manage liquidity and funding risk. The first key measure is the cash and securities-to-total assets ratio. This measure provides an assessment of the extent to which assets can be readily converted into cash or cash substi- tutes to meet financial commitments, as cash resources and securities are more liquid than loans. The ratio represents the sum of deposits with other banks, other cash resources and securities as a percentage of total assets.  BMO’s liquidity and funding position remains sound and there are no trends, demands, commitments, events or uncertainties that are reasonably likely to materially impact the position. Liquidity and funding data provided in this section reflect BMO’s consolidated position. BMO subsidiaries include regu- latedandforeignentities.Movementof fundsbetweencompanies in the group are necessarily subject to the liquidity, funding and capital adequacy considerations of the subsidiaries and to tax considerations. Such considerations do not materially affect BMO’s liquidity and funding.  In addition, we monitor developments in industry practices relating to the management of liquidity and funding risk and incorporate improvements where appropriate.  b  oversight by senior governance committees, including the Liquidity and Funding Management Committee and Risk Management Committee through to the Risk Review Com- mittee of the Board of Directors;  b  an independent liquidity and funding risk oversight group within Corporate Treasury; b  a Board-approved limit structure to support active liquidity and funding risk management; b  effectiveprocessesandmodelstomonitorandmanageliquidity and funding risk; b  strong controls over processes and models and their uses; b  a framework of scenario tests for stressed operating condi- tions; and  b  contingency plans to facilitate managing through a liquidity and funding disruption. Off-Balance Sheet Arrangements Limits Measurement BMO FINANCIAL GROUP ANNUAL REPORT 2002 33