Expanding Our U.S. Wealth Management Franchise

Expanding Our U.S. Wealth Management Franchise

Bank of MontrealNovember 28, 2001

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• The Transaction

• Transaction Terms

• Strategic Rationale - Expanding Our U.S. Wealth Management Franchise

• Combined CSFBdirect and InvestorLine

• Financial Impact

• Comparable Transactions

• Conclusion

INDEX

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• Acquiring CSFBdirect’s direct investing business for US$520 million

• Aligned with bank’s strategy to grow selectively and substantially in the U.S.

• Cash earnings per share neutral in Year 1, excluding one-time costs, and accretive thereafter

• Establishing a national platform to accelerate the expansion of The Harris wealth management franchise in the U.S.

• Increasing our U.S. client base

THE TRANSACTION

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TRANSACTION TERMS

Purchase Price US$520MM

Consideration 100% cashAllocation of Purchase Price

Net book valueGoodwill and identifiable intangibles

US$54MMUS$466MM

Tax Benefit (PV) US$85MMConditions Regulatory approvalsFinancing Non-common tier 1 capital of

approximately US$500 millionAnticipated Closing February 2002

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• Establishes a national U.S. wealth management business (Private Client Group “PCG”) based around The Harris brand

• Harris has been in the wealth management business since 1892

• Builds upon the North American wealth management platform

• As at October 31, 2001, our wealth management business consists of:

STRATEGIC RATIONALE - EXPANDING OUR U.S. WEALTH MANAGEMENT FRANCHISE

U.S. PCG Total PCG

Revenue (US$MM)

AUA/AUM (US$B)

Revenue (C$MM)

AUA/AUM (C$B)

Direct investing 30 7 143 18

Full service investing na na 687 58

Retail investment products 19 28 247 91

Private banking 162 32 334 56

Investment management 28 6 86 14

Total 239 73 1,497 237* Includes Harris AdvantEdge

** Includes $9B of Harris Insight Funds

**

**

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Recent Growth Initiatives and Performance• Direct investing

acquisition of BCL for US$45MM (1999) formation of Harris InvestorLine acquisition of Freeman Welwood for US$93MM (2000) expanded to 116,000 active accounts from less than 5,000 in 1999

• Full service investing launched Harris AdvantEdge (2001)

• Mutual funds 21 funds of which 8 received 4-star Morningstar ratings (Sept 2001)

• Private banking acquisition of Village Banc of Naples for US$13MM (2000) acquisition of Century Bank in Phoenix for US$16MM (2000) de novo openings in Phoenix, Minneapolis, Seattle


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Acquisition of CSFBdirect provides:1. Attractive business with stand-alone economics

• 467,000 active accounts

• 1,000,000 total accounts

• US$16.3 billion in AUA

• 450 employees

• Strong client demographics: Over 85% of clients are college educated Over 40% of clients have incomes greater than US$75,000

• Significant revenue base:


US$MM

2000 2912001 (YTD annualized) 180

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Acquisition of CSFBdirect provides:2. Addition of Key Markets


Marketing Area Active AccountsNew York 86,251Los Angeles 28,657San Francisco-Oakland-San Jose 19,115Chicago 18,864Boston 16,546Philadelphia 16,264Washington, DC-Hagerstown 14,549Atlanta 9,004Seattle-Tacoma 8,611Dallas-Ft. Worth 8,449Houston 8,103

Marketing Area Active AccountsDetroit 7,967Miami-Ft. Lauderdale 7,454Hartford & New Haven 6,242Denver 6,187Tampa-St. Pete (Sarasota) 6,122San Diego 5,485Minneapolis-St. Paul 5,309Phoenix 5,089Cleveland 4,915All Other Markets 177,475Total 466,658

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Acquisition of CSFBdirect provides:3. National Foot Print – Pre CSFBdirect and de novo openings


WASHINGTON- Seattle - Bellevue- Tacoma - Spokane

OREGON - Portland

CALIFORNIA - San Francisco

COLORADO - Denver

UTAH - Salt Lake City

ARIZONA - Phoenix

HAWAII - Honolulu

ILLINOIS- Chicago - Hinsdale- Barrington - Lake Forest- Naperville - St. Charles- Palatine - Woodstock- Winnetka - Community Banks

ARIZONA- Phoenix - Scottsdale- Tucson - Sun City- Carefree - Pinnacle Peak- Biltmore

FLORIDA- Ft. Meyers - Sarasota- Vero Beach - Naples- West Palm Beach

ILLINOIS OHIO -Chicago -Cleveland WISCONSIN -Milwaukee

MICHIGAN -Detroit

Harris Private Bank

Burke, Christensen & LewisFreeman Welwood

Future Targets

1999 Presence

Acquisitions since 1999

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ILLINOIS- Chicago - Hinsdale- Barrington - Lake Forest- Naperville - St. Charles- Palatine - Woodstock- Winnetka - Community Banks

ARIZONA- Phoenix - Scottsdale- Tucson - Sun City- Carefree - Pinnacle Peak- Biltmore

FLORIDA- Ft. Meyers - Sarasota- Vero Beach - Naples- West Palm Beach

Harris Private Bank

Burke, Christensen & LewisFreeman Welwood CSFBdirect physical locations- San Francisco - Boca Raton - New York City- Sandy City - Atlanta - Jersey City- Dallas - Chicago - Philadelphia

- Charlotte

Acquisition of CSFBdirect provides:3. National Foot Print – Post CSFBdirect and de novo openings


WASHINGTON- Seattle - Bellevue- Tacoma - Spokane

OREGON - Portland

CALIFORNIA - San Francisco

COLORADO - Denver

UTAH - Salt Lake City

ARIZONA - Phoenix

HAWAII - Honolulu

ILLINOIS OHIO -Chicago -Cleveland WISCONSIN -Milwaukee

MICHIGAN -Detroit

Future Targets

1999 Presence

Acquisitions since 1999

De novo openings - Phoenix-- Minneapolis-- Seattle

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Acquisition of CSFBdirect provides:4. Recognized technology leadership

“Best Online Brokerage Service” – March 2001

“Best of the Web” – March 2001

Number one “4-Stars” rating – March 2001

“Top Online Broker” – 2000 Worth Magazine Readers’ Choice Awards


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Acquisition of CSFBdirect provides:5. Rapid integration with low risk

• CSFBdirect clients experience seamless transition

• Successfully integrated operations and converted brands of BCL and Freeman Welwood

• Minimal client attrition in previous acquisitions

• Depth of experience in direct investing


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Acquisition of CSFBdirect provides:6. Overall enhanced wealth management franchise

• Opportunity to cross-sell full range of wealth management products to CSFBdirect clients

• Enriches our research, product offering, online services and tools for existing Harris InvestorLine clients

• Expands physical footprint for all wealth management businesses

• Import superior technology to Canadian client base


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COMBINED CSFBdirect AND INVESTORLINE

• Combined new entity to be named Harris Direct Investing

• Led by Bruce Schwenger, Head of Global Direct Investing

• Moves us to 7th largest North American direct investing firm in AUA and 7th in active accounts ( up from 11th )

• Continuity of CSFBdirect senior executives – 4 of 6 remain

• Headquartered in New Jersey

• 23 combined retail locations in 15 states

• Recognized leading technology platform

• Combined North American active accounts of 852,000

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CSFBdirect Financial Summary

Selected Information for CSFBdirect (US$MM)

1999 2000 2001E* Year 1** Forecast

Total Revenue 208 291 180 197

Total Expenses 198 288 254 154

Pre-tax Earnings 10 3 (74) 43

FINANCIAL IMPACT

* YTD Q3 annualized

** Excluding one-time costs

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BMO Financial Impact

• Cash earnings per share neutral in Year 1, excluding one-time costs, and accretive thereafter

• Purchase price implies a multiple of 18.8 times Year 1 cash net income

• IRR of approximately 18%

BMO (C$MM)Year 1

Forecast

Cash Net Income* 62

Cash EPS** neutral

FINANCIAL IMPACT

* Excluding one-time costs and financing

** Excluding one-time costs

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Sources of Projected Earnings Turnaround in Year 1

• Operating cost improvements included in year 1 total $100MM:Staffing US$26MMAdvertising US$18MMTechnology US$41MM Professional FeesUS$12MMOther US$3MM

• Most of the cost improvements have already been achieved or initiated

• Assumes current market activity levels

• Prudent financial projections – exclude benefit of cross-selling

FINANCIAL IMPACT

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• Non-common, tier 1 capital will be raised

• Tier 1 ratio improves through 2002 as a result of: earnings retention managed reduction in risk-weighted assets

• One-time pre-tax charge of US$50-55MM plus up to US$10MM of transaction costs which increases goodwill

FINANCIAL IMPACT

BMO Capital RatiosYear-end

2001Pro Forma

TransactionYear-end

2002E

Tier 1 Ratio 8.15% 8.13% 8.5%

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COMPARABLE TRANSACTIONS

• The purchase price multiples are within the bounds of comparable transactions and well below averages of a year ago

AnnouncementDate

Acquirer Target Price/Active Account

Price/ Revenue

10 Oct 2001 TD Bank TD Waterhouse 1,104 2.9x21 May 2001 E-Trade Web Street 1,324 1.8x26 Mar 2001 Credit Suisse Group CSFB Direct

(18%)1,168 2.2x

15 Jun 2000 Bank of Montreal Freeman Welwood 1,602 3.3x01 Dec 1999 Bank of Montreal BCL 1,552 3.5x

Mean 1,350 2.8xMedian 1,324 2.9x

Bank of Montreal CSFBdirect * 1,114 2.4x

* The price/active account for this transaction is $931 when the $85MM present value of the tax benefit is deducted from the $520MM purchase price

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CONCLUSION

• Establishing a national platform to accelerate the expansion of The Harris wealth management franchise in the U.S.

• Acquisition of a quality business at an attractive price

• Acquisition neutral to cash earnings per share in Year 1, excluding one-time costs, and accretive thereafter

• Consistent with North American wealth management strategy to expand distribution network and U.S. presence

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WEALTH MANAGEMENT FRANCHISE

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FORWARD LOOKING STATEMENTS

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This financial presentation includes forward-looking statements, which are made pursuant to the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, comments with respect to our objectives, targets, strategies, financial condition, the results of our operations and our businesses, our outlook for our businesses and for the Canadian and U.S. economies, and risk management.

By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this report not to place undue reliance on these forward-looking statements as a number of important factors could cause actual future results to differ materially from the plans, objectives, targets, expectations, estimates and intentions expressed in such forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by the following factors: fluctuations in interest rates and currency values; regulatory developments; statutory changes; the effects of competition in the geographic and business areas in which we operate, including continued pricing pressure on loan and deposit products; and changes in political and economic conditions including, among other things, inflation and technological changes. We caution that the foregoing list of important factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider the foregoing factors as well as other uncertainties and potential events. The Bank does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Bank.

Expanding Our U.S. Wealth Management Franchise

Documents

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community

san francisco

wealth management

csfb direct

cash earnings

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