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BMO Financial Group (NYSE:BMO)

194th Annual Meeting

March 20, 2012 8:30 am ET

Executives

David A. Galloway - Chairman, Member of Audit Committee, Member of Governance & Nominating Committee, Member of Human Resources Committee and Member of Risk Review Committee

William A. Downe - Chief Executive Officer, President, Director, Chief Executive Officer of BMO Financial Group and President of BMO Financial Group

David A. Galloway

Good morning, fellow shareholders, and welcome to the 194th Annual Meeting of the Bank of Montreal. I am David Galloway, Chairman of the Board, and I call this meeting to order.

On behalf of all members of the Board of Directors, I want to say how pleased we are to be here in Halifax and to express our appreciation for the genuine hospitality we have received. The last time we had our annual meeting in Halifax was 13 years ago, in February 1999.

BMO's ties with Halifax are as old as Confederation. In fact, we opened our first branch here at the request of the fledging Dominion government in 1867, a rather modest and temporary location on the 4th floor of a building on Bedford Row.

I am delighted to be joined on stage this morning. On my immediate right, Bill Downe, President and Chief Executive Officer; Tom Flynn, Chief Financial Officer; Simon Fish, Executive Vice President and General Counsel; and Barbara Muir, Senior Vice President, Deputy General Counsel, Corporate Affairs and Corporate Secretary. Also joining me here today, seated in the front rows of the ballroom are members of the Board of Directors and the bank's senior management team.

I appoint Steve Gilbert and Joseph Chirico, representatives of the Computershare Trust Company of Canada, to act as scrutineers for the meeting; and Barbara Muir to act as Secretary. The secretary has confirmed that notice of this meeting was duly given in accordance with the Bank Act and that a quorum of shareholders, as prescribed by the bylaws of the bank, is present in person or is represented by proxy. Therefore, I declare this meeting to be properly constituted for the transaction of such business as may be properly brought before it. The shareholders' auditors for 2011, KPMG LLP, are present today and represented by Bill Thomas, Reinhard Dotzlaw and Jim Newton.

Now on to some procedural matters. Closed captioning is being provided here in the room for those who are hearing-impaired. The meeting is being broadcast live on the Internet in both official languages, and shareholders watching on the Internet are able to submit questions to the -- or comments to the meeting. Those wishing to do so should follow the instructions on the Annual Meeting webcast launch page. We would ask that any questions or comments be related to the matters currently before the meeting and when submitting questions, that individuals provide their name and indicate whether they are a shareholder or a proxy holder. We will do our best to respond to all such questions during the meeting, but any questions not answered will be responded to by e-mail following the meeting. Facilities for simultaneous English-French interpretation have been provided, and you will find English on channel 1 and French on channel 2. You are welcome, of course, to address your questions or comments in either English or French.

At the appropriate time, any shareholder or proxy holder wishing to speak should raise their hand, move to the closest aisle and wait for an attendant to approach them with a microphone. Each microphone is numbered, and once your microphone is recognized by the Chairman, you should ask your question.

In order to allow as many shareholders as possible to have the opportunity to speak, we would ask that you observe the following guidelines: each shareholder will be allowed to speak once on the matter before the meeting. Please keep any comments to a maximum of 5 minutes.

Regarding the physical layout of the room, in the event of any unforeseen emergency, I would like to point out that there are exits on both sides of the room.

The agenda today will consist of an address by Bill Downe followed by 4 resolutions proposed by management: to elect the Board of Directors for 2012, to appoint the shareholders' auditors for 2012, to consider an advisory resolution on the bank's approach to executive compensation and to consider amendments to the bank's Qualified Employee Share Purchase Plan, as well as 3 shareholder proposals.

Finally, I caution those attending this meeting by stating the following on behalf of those speaking today: forward-looking statements may be made during this meeting. They are subject to risks and uncertainties. Actual results could differ materially from forecasts, projections or conclusions in the forward-looking statements. Information about material factors that could cause results to differ and material factors and assumptions underlying those forward-looking statements can be found in our 2011 annual MD&A and our first quarter 2012 report to shareholders.

I would like to begin the formal part of our agenda, and I will do so by calling on our Chief Executive Officer, Bill Downe, to address the meeting.

William A. Downe

Well, thank you, Chairman, and good morning, everyone. On behalf of our entire team in Nova Scotia and 47,000 employees across Canada, in the U.S. and our locations outside of North America, welcome to the 194th Meeting of the BMO Financial Group.

In particular, let me welcome one of the bank's honorary directors, John Ellis, who, at 96 years of age, has been attending our annual meeting for more than 5 decades. Mr. Ellis? Mr. Ellis retired in 1975 as Vice Chairman of the Board and continued to serve as a Director until 1986. And he managed all of the bank's branches here in Atlantic Canada between 1954 and 1958, and he does us a great honor by joining us today. And it's a pleasure to have so many other shareholders here with us this morning in the room and online via our webcast.

[French]

As many of you know, when the original Bluenose was launched in 1921, it was financed by a group of Halifax businesses to compete in an international race. And when I spoke here last fall, the theme was really the same objective: international competition. The occasion was the 4Front Atlantic, a conference of business, political and academic leaders. It was spearheaded by George Cooper and BMO's Vice-Chair, Kevin Lynch, who hails from Cape Breton. The conference focused on mobilizing for change and competing differently as Atlantic Canada positions itself to be at the forefront of success in a new global economy. Discussions at the conference centered on 3 principal points: leveraging our competitive advantages, developing new markets and enhancing the value of products and services that the Atlantic provinces sell abroad. In short, we were working on a road map.

4Front is part of BMO's commitment to the development of good public policy. It reflects our belief that bringing customers into the discussion can stimulate innovation and competitiveness. And we're creating many forums where business leaders can share perspectives about economic growth and its importance in ensuring a society that's fair and offers opportunity to everyone. To do that, these discussions are centered regionally, like today's meeting, in the cities and communities where our customers live and where business gets done. The dialogue that took place at 4Front drives change, and we push for these kinds of discussions because we believe that being a for-profit company doesn't mean that we're here simply to maximize profit. Great companies care, and in order to serve customers well, we care about the same things that customers care about. Above all, great companies want employees to be proud of what they do, and we are.

The annual meeting is a fixed point in the calendar when we can review BMO's performance on a number of dimensions. And in preparation for this meeting, we've had a great dialogue with our shareholders, the people who have an intense interest in our success and in how it's achieved.

And this morning, I want to look at 3 key elements that were central to our performance in 2011: First, our belief that there can be no compromise when it comes to the importance of customers. Our success as a business depends entirely on our customer's success and on helping them succeed. Taking good care of our customers and acting in the long-term interest of our shareholders represent a single commitment at BMO. This is at the heart of who we are. It differentiates us. It defines us. It's the key to our profitable growth and to the acceleration of growth.

The second element, the progress we're making in the U.S., building new customer relationships, bringing our customer vision to new markets and unlocking tremendous potential that BMO's expanded North American footprint gives us.

And third, our strategy, underpinned by a strong, consistent brand; predicated on managing within a sound regulatory framework; and as I note in this year's annual report, grounded in our belief that the keys to prosperity and growth in North America are not lost.

And if there's one overall message I hope you'll carry away from today's meeting, it's this: by giving customers what they expect from a great bank and nothing less, BMO, the bank you have invested in, will outperform where it counts. This is not about aspiration. Our confidence is built on a solid foundation, and it's validated by the record results I'll review with you this morning.

But let me begin by drilling deeper into the first of my 3 themes, how BMO's attention to making every customer an advocate, translates into long-term growth. BMO has staked out a distinct position in the marketplace. Our preoccupation with customer's success and with understanding what they need so they can feel confident about their finances has established the bank as a leader, not an imitator. A case in point is the initiative we took beginning in January to differentiate BMO in the home mortgage marketplace. We took a long hard look at the Canadian housing market and concluded on the one hand there was a legitimate concern that housing prices, particularly in the largest cities, had been rising at a rate that was simply unsustainable. With growing concerns over household debt, a soft landing in housing is in the best interest of our customers and the national economy.

At the same time, our customers need access to financing so they can become homeowners today. In the current low interest rate environment, there's risk to borrowers given the national trend to longer amortization periods. The U.S. 10-year treasury rate has increased 60 basis points since September, a sign of upward pressure on interest rates that's coming. And it's for this reason we're emphasizing a 25-year amortization with a 5- or 10-year fixed rate and the logic is this: with a shorter amortization, homeowners are able to build equity faster and have the confidence of knowing what their monthly payments will be, no matter where interest rates go in the future. Both our 5-year and 10-year offers have competitive rates that help keep homeownership affordable, whether for people who are refinancing a mortgage renewal or for those who now have a chance to buy their first home. We acknowledge the possibility of greater regulatory change in the market framework, but BMO is being proactive, structuring our offers to speak directly to customers.

When we launched a similar offer in January, it turned a lot of heads. It also generated a significant volume of new business, more than half of it from customers who did not previously have mortgages with BMO. Our home mortgage campaign is resonating across Canada. It's created new traffic in our branches, in the call center, on the web, giving us the opportunity to talk to customers about other dimensions of their financial lives where we can be of help.

The bottom line is we're encouraging existing and prospective customers to make better financial decisions, and we're forming the foundation for new and expanded long-term relationships. And if all of this means we're changing the competitive landscape in the Canadian marketplace, well, we're changing it for the better. This is what customers have come to expect from BMO in every area of the bank.

When we committed to providing $15 billion of new loans to small and medium-size businesses in Canada and the U.S. over the next 3 years, the decision was grounded in our ability to understand and anticipate our customers' needs, and it reflected our belief that we have a key role to play in economic growth. Banks are vital intermediaries in the creation of economic prosperity, and we take that responsibility very seriously. It's this focus on the customer that keeps BMO at the forefront of Canadian commercial banking and is establishing BMO Harris Bank as a market leader in the U.S. Midwest.

And this brings me to my second main topic this morning, the expansion of our North American footprint. You may recall that 2 years ago, at our annual meeting, we said unprecedented opportunities would emerge from the disruptions in the competitive marketplace: new regulation, higher capital and liquidity standards and the withdrawal of competitors from some segments of the market. Smart companies that acted quickly with a full assessment of risk have been able to accelerate growth and performance. For us, the creation of BMO Life Insurance, the purchase of the North American franchise of Diners Club, the acquisition of Lloyd George Management and our incorporation in China, are prime examples.

At this meeting last year, I briefed you on the most transformative example of our disciplined acquisition strategy. The purchase of Marshall & Ilsley was the largest in the bank's history and one of the landmark financial service combinations of recent years. When the transaction closed in July, we'd completed 6 months of work as part of a disciplined, well-planned agenda to combine 2 highly regarded U.S. banks. And with the introduction of BMO Harris Bank, we doubled our U.S. presence.

As with all sound acquisitions, the assumptions underlying the decision were necessarily prudent given the economic backdrop. We continue to have confidence in those assumptions and, since the announcement, have increased our estimate of cost synergies from $250 million to a figure in excess of $300 million. And to date, we've captured more than $100 million in annual run rate savings, about $40 million ahead of where we expected to be at this point in the integration. The platform conversion, which will capture a major portion of the remaining synergies, is on track to be largely completed by the end of the year.

But the real story about our U.S. expansion is revenue as we combine the strengths of 2 banks to create a business that delivers greater value than either bank could achieve on its own. Each day, our bankers are in the community, having conversations and winning business, contributing to the economic recovery that we're beginning to see in the U.S., and helping to fuel the economic engine of the nation, the Midwest. A critical point here is the value of our U.S. investment is not just in what we own but where it is. Our strategy has consistently called for growth in the contiguous states around Illinois. We have a strong presence in Chicago, America's third largest city, with a metropolitan population of almost 10 million. In the 6 surrounding states, we see a resurgence of traditional economic strength, along with a new focus on innovation in areas like precision manufacturing, which are reenergizing the export component of the U.S. economy. Signs of recovery in the Midwest outpaced the national trend. According to the Chicago Fed, manufacturing output in January for 5 key Midwest states increased by 9%, while the national output rose 4.7%.

We have a #1 market position in Wisconsin. We have a #2 deposit share in Chicago and a #3 market share overall in the Midwest states that we serve. To add some perspective, we now have as many branches in Milwaukee as in Vancouver. BMO is not simply a Canadian bank with significant U.S. holdings, we're a North American bank headquartered in Canada and well positioned to pursue further growth.

At last year's annual meeting, we expressed our belief that we could generate $1 billion in annual earnings in the U.S. in the medium term, and our progress to date gives me confidence that this goal is within our reach. We have a strong, diversified, growing revenue opportunity and a valuable foundation for future growth in personal banking, in commercial and investment banking and in wealth management.

And this brings me to the third and final topic I wanted to touch on today: BMO’s consistent adherence to a clearly defined strategy. Our strategy rests on a number of specific commitments, starting with a pursuit of our vision to define great customer experience. To do this and grow profitably, we have to ensure that our service commitments and the products and offers we develop are delivering value to the customer and capturing value to the bank. Building a high level of satisfaction in every channel and matching customer needs to the most efficient ways they can be met is the bottom line of successful-relationship banking. This is all part of our uncompromising focus on the supremacy of customers at BMO. Our employees come to work each day, confident in what the bank stands for, bringing the energy and talent necessary to fulfill our customer promise.

The essence of the bank's strategy is to build on our market-leading presence in our North American businesses, on our growing service capabilities in select global markets, on sound governance and on the strength of our brand across every business and customer segment.

And the transformation we've experienced as a company extends beyond our Personal and Commercial business. BMO's Private Client Group is delivering in distinct businesses where we have strong positions: online and full-service brokerage, global asset management, private banking and insurance.

Last month, we agreed to acquire just under 20% of a Chinese trust company, COFCO Trust, as we continue to build our presence in China, in India and in the Middle East. We're in these emerging markets because our customers are there. And as they succeed, so will we.

BMO Capital Markets is pursuing a strategy anchored in a reputation for expertise in the coverage of North American mid-cap companies and a global specialization in industry sectors.

Turning now to our financial performance. In 2011, BMO had a record year as net income increased 16% to $3.3 billion. This historic performance was driven by double-digit revenue growth and double-digit earnings growth across our operating groups. On a Canadian GAAP basis, revenue increased 12% to $13.7 billion, and earnings per share increased by more than 10% to $5.26.

Our 3-year total shareholder return was 17.4%, in the top tier of our Canadian and North American peer groups. Our return equity was 15.3%. In fact, BMO has achieved a return on equity of 13% or better in 21 of the past 22 years. Only one other bank among our North American peers has matched this achievement. Disciplined risk management is a foundational pillar of our strategy, and it has contributed to earnings stability.

Beginning with the first quarter of 2012, Canadian companies now report results in accordance with international financial reporting standards. And BMO's earnings for the first quarter were exceptionally strong. Our net income of $1.1 billion, the highest in our history, marked a gain of 34% year-over-year. Revenue increased 19% to $4.1 billion, driven by our recent acquisitions, and earnings per share increased 22% to $1.63.

Record earnings provide tangible evidence that the course that we've charted for BMO is the right one. And in light of these results, some shareholders have expressed interest in our dividend outlook. The bank has demonstrated its capacity to pay and grow dividends over time. BMO's dividends have grown at a compound annual rate of more than 9% over the past 15 years, above our peer group average.

Earnings growth will drive future dividend increases consistent with disciplined capital management. Over the last 4 quarters, we've paid out approximately 50% of our earnings, and the current yield above 4.7% is highly attractive to shareholders who value a strong dividend. At the most fundamental level, BMO's strategy has succeeded because we've stuck to our principles. Our financial achievements are grounded in a dedication to responsible management and backed by our insistence on transparency and ethical governance. We understand that banks are entrusted with a unique role in society. Banks are vital intermediaries, helping to create jobs, open new markets and drive economic well-being. As at the 4Front Conference, this means stressing the themes of innovation and productivity in the belief that both are important contributors to North American competitiveness. Accordingly, improving the bank's own productivity is an area of renewed focus, and everyone at BMO is participating in this effort. We clearly have a responsibility to ensure that as BMO achieves top line growth, we're also managing our expenses, and I think we can do a better job. We know that a cumbersome process for employees, more than likely, is also inconvenient for customers. We intend to be a more efficient bank with greater operating leverage and a strong culture of expense management while, at the same time, investing in parts of the business that will generate high-quality earnings.

I began this morning by saying that I was going to talk about the importance of customers, the future impact of BMO Harris Bank on our U.S. business and the overall strategic direction of BMO. When we look back over our own progress against this strategic roadmap, the milestones are clear. Five years ago, we had just under 35,000 employees. Today, we have more than 47,000. Those employees serve our customers in more than 1,600 branches across North America, up from 1,200 in 2006.

BMO's assets under management and administration have grown from $361 billion to $526 billion in 5 years. Since 2006, revenue has climbed from $10 billion to $13.7 billion, and it is in this context that I'd like to recognize the contribution of David Galloway, Chairman of our Board of Directors, who, since 2004, has overseen BMO's evolution into a bank that delivers quality, sustainable earnings.

David retires today after serving as a valued member of the board for a total of 14 years, the past 8 as our first non-executive Chair. During his tenure, we shaped the customer-centric vision that defines BMO today and will drive our future success. During my time of working with David, I've been struck by his acute sense of obligation to the customer and his appreciation for how important it is to deliver to shareholders the return that they expect. I know I speak for everyone at the bank in thanking David for his wise counsel and his steadfast leadership.

Today, subject to the shareholder vote, we also welcome Rob Prichard as our new Chairman. In a distinguished career spanning business, education and law, Rob has combined consummate leadership with a dedication to the highest principles of responsible management. He brings to the role a rare combination of intellect, empathy, practical business sense and a commitment to superior performance in everything that he does. I know he shares the BMO view that being accountable to our shareholders, to all of you in this room, is the cornerstone on which all of our other responsibilities rest. Rob and I, like everyone at BMO, also share a belief that creating shareholder value and acting in our customers' interest are 2 sides of the same coin. This is the fundamental insight driving our confidence in the future.

We know our overall strategy is working. We can see it from the results. It's working because every commitment we make is aimed at advancing the needs of our customers. In the U.S., we have confidence in our expansion strategy for the same reason. Our acquisition is a perfect fit for a bank that makes great customer experience its #1 priority. And when it comes to developing specific products and initiatives, we're confident of success because we know we're moving the needle in the marketplace. And as we say in our annual report, the conversation begins and ends with customers.

We may be guiding a Wisconsin company as it pursues business opportunities in Ontario, or showing a Halifax couple how they can responsibly own their first family home. Wherever we carry on the conversation, we know that by helping our customers succeed, by sticking to our strategy and delivering on our vision, we'll continue to drive BMO's success and the success of all of our stakeholders. Thank you.

David A. Galloway

Thank you, Bill. Before we proceed with the rest of the agenda, I simply want to acknowledge the excellent job that you and your management team have been doing on behalf of shareholders. As this is the last time I'm presiding over one of these meetings, I wanted to express my personal thanks for the job you have done. As directors, we rely on management to be responsive, to be transparent and to be frank in all dealings with the board. And I'm happy to advise my fellow shareholders that your board has been well-served by Bill Downe and his leadership team. Thank you very much.

Now before -- I'd like everyone to notice how well Bill's suit is pressed today. He called downstairs -- he wanted to look good today, this is an annual meeting. He called downstairs to see if he could get his suit pressed, and they came up with the iron and the ironing board. So if he looks good, he did it.

For the information of shareholders here this morning, I am informed by our transfer agent that 237,742,522 votes have been received in respect of the matters of the business to come before the meeting, representing 37.1% of the total shares -- outstanding shares eligible to be voted. Given that our employees represent a significant portion of our shareholder base and to facilitate the proceedings, we have asked certain employee shareholders to move and second certain motions. I will call on them at the appropriate time.

The votes on all matters of business before this meeting will be conducted by an electronic ballot. When we get to that part of the meeting, I will walk you through the voting process. Any procedural motion would be voted on by a show of hands. On registering for the meeting today, all shareholders or proxy holders who have not yet voted and wish to vote in person at the meeting should have received a handheld electronic voting device. With these new devices, we will no longer be marking, collecting and counting paper ballots as in prior years.

At this point, I'd like to be sure that those shareholders or proxy holders wishing to vote this morning have their electronic voting devices. Remember that if you completed and returned your form of proxy, it's not necessary to vote today unless you wish to change your vote.

Anyone entitled to vote who does not have an electronic voting device, please raise your hand. Okay. Anyone who wishes to change their original vote submitted by form of proxy, please raise your hand.

And for those of you who are voting this morning, after each proposal is submitted to the meeting, we will ask you to vote by pressing one of the buttons on your keypad which are numbered 1, 2 or 3, to indicate your voting preference. Once you have made your choice, the word "Received" will appear on your screen of your handheld device to indicate that your vote has been counted. If you would like to change your vote, simply press the appropriate button. The last button you press before the ballot closes will be the vote counted on the system.

To ensure that everyone is comfortable with this electronic voting process, we will proceed with a practice test question. When the poll opens, the handset will display the voting options. Our test question will be: Is Mr. Downe the most handsome man in the room?

William A. Downe

The answer is no, David Galloway is.

David A. Galloway

Yes. We're coming to that. Okay, the poll is now open. If you agree with this statement about Bill, press 1 to vote for. If you disagree with this statement, press 2 to vote against. Or press 3 to withhold or abstain.

[Voting]

David A. Galloway

So I can see that there are 32 handheld devices, and 23 people have voted so far. So we're not -- when we move into the voting, we're going to do it faster than that. So just be ready. Thank you. The poll then is now closed, and the voting results are -- will be -- God, that's a lot of incorrect answers.

Okay. Now to our first item of business, the submission of financial statements. In February 2012, copies of our annual report for 2011 were forwarded to shareholders, together with the Management Proxy Circular and notice of this meeting. The financial statements for the October 31, 2011, year-end were included on pages 115 to 180 of the annual report.

Are there any questions on the financial statements, including questions from the Internet? I wish to stress that the questions must be related to the financial statements and not to other matters.

Okay. The auditor's report appended to the bank's financial statements can be found on Page 114 of the annual report and will be taken as read.

This brings me to the election of directors for the ensuing year. As determined by the board, the number of directors to be elected today is 14. At this time, I would like to acknowledge 2 directors, David Beatty and Robert Chevrier, who will not be standing for reelection this year. On behalf of the board, management and the shareholders of the bank, I'd like to thank them both for the years of dedication and contribution as members of the Board of Directors of the Bank of Montreal.

Before proceeding any further, I'd like to highlight the board policy that if votes in favor of the election of a director nominee represents less than a majority of the shares voted and withheld, the nominee will submit his or her resignation promptly after the meeting for consideration by the board's Governance and Nominating Committee. This policy is set out on Page 3 of our Management Proxy Circular.

I will now nominate the following persons to be elected directors of the bank until the succeeding annual meeting of shareholders of the bank, or until their successors are elected or appointed. I note that Mr. Eric La Flèche, President and CEO of Metro Inc. is standing for election as a Director of the Bank of Montreal for the first time today. The nominations are: Robert Astley, Sophie Brochu, George Cope, William Downe, Christine Edwards, Ronald Farmer, Harold Kvisle, Eric La Flèche, Bruce Mitchell, Philip Orsino, Martha Piper, Robert Prichard, Guylaine Saucier and Don Wilson.

I will now call on Patrick Hemsworth [ph] to second this motion.

Unknown Shareholder

Thank you, Mr. Chairman. Good morning, my name is Patrick Hemsworth [ph]. I'm a BMO shareholder. I've been with the bank for the past 8 years and currently a commercial account manager at the Halifax main office. I second the motion.

David A. Galloway

Thank you, Patrick. Do we have any questions or discussions on this matter?

Let me remind you that only registered shareholders and those duly appointed representatives are entitled to vote at this meeting, In addition, if you have already submitted your completed form of proxy or have otherwise voted your shares, your votes have already been tabulated by the scrutineers, and you do not need to vote again unless you wish to change the votes or instructions you submitted earlier.

We remind you that the Board of Directors recommends you vote for all 14 nominees set out in the Management Proxy Circular. You will have to vote one at a time for each of the 14 nominees for director. The names of the nominees for director will appear on the screen behind me. Every time the name of a nominee is highlighted, you should vote with regard to that candidate by pressing 1 to vote for, or 3 to vote withhold. You may change your vote by making another choice as long as the voting remains open. We will now proceed with the voting.

The poll is now open for Mr. Astley.

[Voting]

David A. Galloway

Okay, the poll is now closed. The poll is now open for Ms. Brochu.

[Voting]

David A. Galloway

Poll is now closed. The poll is now open for Mr. Cope.

[Voting]

David A. Galloway

Poll is now closed. The poll is now open for Mr. Downe.

[Voting]

David A. Galloway

Poll is now closed. The poll is now open for Ms. Edwards.

[Voting]

David A. Galloway

Poll is now closed. Poll is now open for Mr. Farmer.

[Voting]

David A. Galloway

Poll is now closed. The poll is now open for Mr. Kvisle.

[Voting]

David A. Galloway

Poll is now closed. The poll is now open for Mr. La Flèche.

[Voting]

David A. Galloway

Poll is now closed. The poll is now open for Mr. Mitchell.

[Voting]

David A. Galloway

Poll is now closed. The poll is now open for Mr. Orsino.

[Voting]

David A. Galloway

Poll is now closed. The poll is now open for Dr. Piper.

[Voting]

David A. Galloway

Poll is now closed. Poll is now open for Mr. Prichard. He really wants to be Chair so...

[Voting]

David A. Galloway

Poll is now closed. The poll is now open for Madame Saucier.

[Voting]

David A. Galloway

Poll is now closed. Poll is now open for Mr. Wilson.

[Voting]

David A. Galloway

Poll is now closed. Thank you.

Next item of business is the appointment of auditors for the ensuing year. I will call on Corinne Dixon [ph] to present this motion.

Unknown Shareholder

Thank you, Mr. Chairman. My name is Corinne Dixon [ph], and I am a BMO shareholder. I have been with BMO for 25 years, and I'm currently the Senior Manager, Human Resources for Atlantic division. I propose that the firm of KPMG LLP be appointed as auditors of the bank for the ensuing year.

David A. Galloway

Thank you, Corinne [ph]. I ask Avic Roy [ph] to second the motion.

Unknown Shareholder

Thank you, Mr. Chairman. My name is Avic Roy [ph], and I am a BMO shareholder. I am currently a customer service representative here in the heart of Halifax, and I second this motion.

David A. Galloway

Thank you, Avic [ph]. Are there any questions?

If there are no questions, I would ask those wishing to vote for the appointment of auditors to use your electronic device. Management recommends voting for the appointment of shareholder auditors. We now proceed with voting. The poll is open to receive your votes. Press 1 to vote for, or 3 to withhold.

[Voting]

The poll is now closed for this item of business.

The next item on the agenda is a consideration of the advisory resolution of the bank's approach to executive compensation. I call on Helen Lewis [ph] to present this motion.

Unknown Shareholder

Thank you, Mr. Chairman. My name is Helen Lewis [ph] and I'm a BMO shareholder. I have worked for BMO for 5 years, and I'm currently a Financial Services Manager at our Clayton Park West branch here in Halifax. I move that the advisory resolution on the bank's approach to executive compensation, as set out on Page 3 of the Management Proxy Circular, be approved.

David A. Galloway

Thank you, Helen. I call on Heather Gautreau to second the motion.

Heather Gautreau

Thank you, Mr. Chairman. My name is Heather Gautreau, and I'm a BMO shareholder. I've worked for BMO for 12 years, and I'm currently an Assistant Branch Manager here in Halifax with a staff of 12. I second this motion.

David A. Galloway

Thank you, Heather. Are there any questions?

Unknown Shareholder

Mr. Chairman?

David A. Galloway

Yes?

Unknown Shareholder

Good morning. Good morning, shareholders. My name is Daniel Thouin [ph]. I represent the MÉDAC, the Mouvement d’éducation et de défense des actionnaires.

[French]

David A. Galloway

Well, first of all, let me thank you for your question. I certainly recognize that MÉDAC, over the years, has done an excellent job of bringing issues forward. And I think that a number of proposals, which you bring forward, whether today or in other years, whether they're approved or not approved, they do have an impact, and we do listen. So I think your organization has done an excellent job. With regard to your specific question, in terms of impact on others, it's a little hard to comment. I think we all try to be fair in executive compensation. We look at what the job's being done, we look at the industry that we're in, we look at what other people are being paid on a competitive basis. So we want to be fair to our executives. We need to be able to attract the best and the brightest to work for our bank on behalf of the shareholders. We also compete in a North American environment. You heard Bill talk about M&I, and so we not only compete for talent in Canada, but we compete for talent across North America. And that's not always easy in that the U.S. compensation is significantly higher than it is in Canada. So I just kind of want to make that point in terms of what impact it's going to have on the specific jobs you mentioned. I'm not quite sure what those were. I do want to make a comment that may come up later -- I do want to make a comment about our CEO's compensation this year, you mentioned was up 51% over 2 years. I think 2008 was a pretty tough year, and people withheld bonuses, turned bonuses down, things like that. So I mean, you're working off a low base there. But if we look at last year, one of the things -- I think it's very important to recognize that in terms of our management team, we have a salary, a short-term bonus and then what we call a midterm plan and a long-term plan which looks at stock. And the majority of the compensation, the higher you are in the organization, the more is in the long term -- the midterm and the long term. So that's would -- in Bill's case, 70% at least would be in the long -- in the midterm and long-term. And we compare ourselves that -- we have a target, and that target is changed by how we do relative to the other banks in terms of our total shareholder return. So that would be our increase in stock price and dividends over a 3-year period. So if we go back to 2008 and we look back 3 years, we were #4. And so what the target was, we only paid 80% out. And if we go back to 2009, we looked and we were #3, and our target was -- we only paid out 90% of the target. Last year, we were #2, and when we looked at the shareholder return relative to the other banks, we were on a par. And so we paid out at 100% of our target. In 2011, looking back 3 years, we were #1 in total shareholder return, and we were 17% above the average of the other banks. So when we look at Bill's compensation, you're looking at what happened -- potentially this year, we're looking at what happened over 3 years, and his midterm and long-term target would be multiplied by 117. So a pretty good year. So we don't apologize for Bill's compensation this year. I don't know if I'm answering your question, sir, but I had a little trouble understanding it.

Unknown Shareholder

May I make a final word?

David A. Galloway

Yes.

Unknown Shareholder

[French]

David A. Galloway

Well, I can't help but -- we respectfully disagree that the -- I guess, number one, on the dividend -- and when we do -- Bill spoke to this in his remarks, but we do have the highest payout, I think, of any bank at this moment in time. So we haven't increased it for a while, but it's still a very high dividend payout ratio. The second thing is I think you have to look at the environment the banking industry is in. And sometimes, the economy is really good and there's a rising tide and -- but if we perform in a really good economy and we're #5, not #1, then we're going to have a multiplier at 80% on compensation. Even though things look really good, we're going to look and say, well, they may be really good, but we didn't perform as well as the other banks and we can compare. So we knock down compensation. And in a tough time, and these are not easy times, if we perform -- outperform the other banks, then we have a higher multiplier. So you have to take the good with the bad. There are going to be times when we're in a very good economy, and we actually could see compensation go down rather than up. Because as a board, we think looking at relative performance is very important, that we shouldn't just pay for a rising tide. That relevant performance is what we key on. So I leave that with you. We think that's fair to the shareholders. And we can tell whether our management's performing or not.

Are there any other questions? If not, I would ask those wishing to vote on the advisory resolution on the bank's approach to executive compensation to use your electronic advice -- or device, sorry. Management recommends voting for the advisory resolution on the bank's approach to executive compensation. We will now proceed with the voting. The poll is open to receive your votes. Press 1 to vote for, and 2 to vote against.

[Voting]

David A. Galloway

Okay, the voting is now closed. The next item on the agenda is a resolution to approve the amendments to the Bank of Montreal Qualified Employee Share Purchase Plan. The proposed amendments are discussed on Page 4 of the Management Proxy Circular. I call on James Refuse [ph] to present the motion.

Unknown Shareholder

Thank you, Mr. Chairman. My name is James Refuse [ph], I'm a BMO shareholder. I have worked for BMO for 2 years, currently as a Commercial Account Manager here in downtown Halifax at main branch. I move that the resolution approving amendments to the Bank of Montreal Qualified Share Purchase Plan as set out on Page 4 of the Management Proxy Circular be approved.

David A. Galloway

Thank you, James. I call in Jennifer Green Heisler [ph] to second the motion.

Unknown Shareholder

Thank you, Mr. Chairman. My name is Jennifer Green Heisler [ph]. I am a BMO shareholder, and I've worked with BMO for 12 years. I'm currently a Financial Service Manager in our Bridgewater branch, and I second the motion.

David A. Galloway

Thank you, Jennifer. Are there any questions? I would ask those wishing to vote on the amendments to the Bank of Montreal Qualified Employee Share Purchase Plan to use your electronic device. Management recommends voting for the amendments to the Bank of Montreal Qualified Employee Share Purchase Plan. We will now proceed with the voting. The poll is open. Press 1 to vote for, or 2 for against.

[Voting]

David A. Galloway

Poll is now closed. Next item of business is the shareholder proposals. The 3 proposals to be presented today were submitted by MÉDAC. MÉDAC's proposals on their -- and their supporting comments were set out verbatim in the Management Proxy Circular that was sent to shareholders. For your convenience, an extract from the Management Proxy Circular containing the 3 shareholder proposals was provided to you this morning.

As we focus on the 3 shareholder proposals, we will address questions from shareholders or proxy holders. The questions, of course, must relate to the proposal before the meeting at that time.

I would ask that presenters make their comments brief. Your positions are well stated in your written summaries, which have been made available to everyone in the room.

Mr. Twen [ph], would you please present MÉDAC's first proposal dealing with stock options and actual performance of officers?

Unknown Shareholder

Mr. Chairman, it's a pleasure for me to speak [indiscernible] to present the proposal of MÉDAC.

[French]

David A. Galloway

Thank you. May I have a seconder for this proposal?

Unknown Shareholder

Thank you, Mr. Chairman. My name is Derek Fuhrer [ph], I second the motion.

David A. Galloway

Thank you. Is there further discussion on the proposal? I might say that we're not going to comment on the proposals. We've made our comments in the documents, so we won't be making further comment.

There's no further comments, so I would ask those wishing to vote on shareholder proposal #1 to use your electronic device. This is shareholder proposal #1 dealing with stock options and actual performance of officers. Management recommends voting against shareholder proposal #1 for the reasons outlined in the Management Proxy Circular. We'll now proceed with voting. The poll is open to receive your votes. Press 1 to vote for, 2 to vote against and 3 to withhold.

[Voting]

David A. Galloway

The poll is now closed. Mr. Twen [ph], would you please present MÉDAC's second proposal dealing with performance-based pay? And I hope you remember that it is -- your argument is written here ahead of time.

Unknown Shareholder

Yes. Mr. Chairman, thank you for giving time.

[French]

David A. Galloway

Thank you. May I have a seconder for this proposal?

Unknown Shareholder

I second the motion.

David A. Galloway

Thank you. Is there any further discussion on this proposal? Given there are no further comments, I would ask those wishing to vote on shareholder proposal #2 to use your electronic device. Shareholder proposal #2 dealing with performance-based pay. Management recommends voting against shareholder proposal #2 for the reasons outlined in the proxy circular. We'll now proceed with the voting. The poll is open. Press 1 to vote for, 2 against and 3 to withhold.

[Voting]

David A. Galloway

The poll is now closed. Mr. Twen [ph], would you please present MÉDAC's third proposal dealing with the independence of compensation advisors?

Unknown Shareholder

Mr. Chairman, the third proposition of MÉDAC is this:

[French]

David A. Galloway

Thank you. May I have a seconder for this proposal?

Unknown Shareholder

I second that motion.

David A. Galloway

Thank you. Is there any further discussion on this proposal? I'd ask those wishing to vote on shareholder proposal #3 to use your electronic device. Shareholder proposal #3 is dealing with independence of compensation advisors. Management recommends voting against for reasons outlined in the proxy circular. We'll now proceed with the voting. The poll is open. Press 1 to vote for, 2 against, 3 to withhold.

[Voting]

David A. Galloway

The poll is now closed. I will now take questions. Questions should be by shareholders or proxy holders only and should be of general interest to all shareholders and not of a personal nature. If you have questions of a personal nature, please approach Neil Puddicombe located at the back of the ballroom. I would just ask that in order for everyone to hear, please move to the closest aisle, wait for a microphone attendant to approach you and standby to be recognized by the Chair. And just a reminder that questions from those on the Internet are welcome as well.

Question-and-Answer Session

David A. Galloway

Are there questions? Yes? Can you come forward, perhaps to this aisle so that...

Unknown Shareholder

Good morning, everyone. I have a question but I -- because I want to drill [ph] my issue before you so you can understand. My name is Claudio Westavino [ph], and I used to work for Infinity Rubber in Toronto. I worked there for 33 years like a maintenance mechanic for mixing preparation of rubber. This was a hard time, a hard and very dangerous job because we have exposures to dangerous chemicals. But I make a good living to support my family. In December 2009, 27 months ago, the company forced us out of a strike. We don't know what the company just want to rid of all the workers and replace us with younger low-waged temporary workers. We had taken big wage cut to allow to the company to get through hard time. After that, the managers drove the company into bankruptcy. And they bought the company from the previous owner for one of the third of what is -- what's worse of the [indiscernible]. Most creditors were never paid back. Then this manager now, the new owner were not satisfied and then asking to us to take more cut in our wages. It was a very hard decision to go on a strike for all our member -- all our coworkers. But we are people, not animals. We have dignity. We couldn't take anymore abuse, so we start [ph]. We have no choice. A few weeks ago, they wanted to have us a new offer to further reduce our wages again to less than half of what we have earning before. The owner said if you accept the new agreement and end the strike, that they could decide -- could come back to work, but only if the replacement worker leave the job place. The strike is now one of the longest strike in the history of Toronto. The Bank of Montreal is the chief sources of finances for Infinity Rubber and for the same management who dropped the company into bankruptcy. We have never understood why the Bank of Montreal could finance a company like this. We want shareholders and all Canadians to know what Bank of Montreal is bankrolling this attack on workers. We have lost our home, cars, security, retirement, while for your fellow working, I have 7 children, and the dream is to send them to the college or a university. But we have no hope. We will never go away until we're served justice. So here's my question. Why do you still financing Infinity Rubber and show shareholder and the public that you not support this attack? Thank you, very much.

David A. Galloway

Thank you, sir, for your question. This is obviously a very difficult time for you, and we understand that. And we respect the right of individuals and trade unions. But the bank isn't going to take a position in this dispute between you and management and the owners. That's just not our role. We have a loan outstanding to the company. We could just as easily have a loan outstanding to you, and we're just -- we're not going to become involved. It's that simple. But I am very sorry for what you personally are going through.

Unknown Shareholder

Just a quick comment on your answer to Claudio's question. You did take a stance. By financing this company, you did take a stance between the 2. You chose to finance a company that was -- you're bankrolling a company that's attacking workers and families within a community. So you did take a stance in this matter.

David A. Galloway

I respect your opinion. I don't agree, but I respect your opinion.

Unknown Shareholder

My question is I just want to -- good morning, ladies and gentlemen. My name is Wayne Ree [ph], I'm a proxy holder. I'm a representative of the Steelworkers. I'm here today representing the workers of Infinity Rubber. I believe that the Bank of Montreal has provided a loan to Infinity Rubber, which is in direct contravention of the bank's code of conduct and your ethics policy. Under this code, Bank of Montreal is held to what is fair and right and legal. The bank's corporate responsibility is to make the right choices that affect communities in which it operates. My question to the room is did your underwriter properly investigate this company before providing this loan? Because if he or she did, a number of red flags should have been raised. The first flag, that the same management team that drove this company into bankruptcy is managing it now, and they secured this loan with BMO. The second flag, Infinity Rubber was involved in a bitter labor dispute, which directly affects the ability to manufacture its product and make payments on this loan. The third flag, by lending money to a company that refuses to bargain in good faith, constitutes ethical -- does that constitute ethical behavior? When a company does business with another that is considered to be unethical, both companies are links in this unethical chain. Fourth, and the most important, I believe, to shareholders and to the bank, does the bank want negative press associated with entering into such agreement? Recently, Lang & O'Leary Exchange interviewed the director of the Steelworkers about pulling its pension money from the BMO bank. The USW will ask the entire labor movement to do the same. Would the Teachers' Union removing $100 million from the Bank of Montreal make the Bank of Montreal take interest in our plight? Your strategic plan to enter into United States, which you talked about here today, we are an international union. We're connected throughout the States, we have over 1 million members. This market plan you have will be met with direct opposition throughout the States. So we're asking the Bank of Montreal to please -- we're not here in advice -- look, we're not here to cause havoc. We're here to ask you to use -- the shareholders to use their strength and the Bank of Montreal to persuade this company to get back to the table. This company has refused to bargain. They actually came across and threw a contract across the table and said if you don't accept it, we're going to hire a bunch of Mexicans to do your job. This is a slap in the face to our members and their families and is illegal. So I ask the Bank of Montreal to do what's ethical and what's right and step in and persuade Infinity Rubber back to the table. Thank you.

David A. Galloway

Thank you, sir. You've made your point very well. We don't want to get involved in between the 2 of you, but we're listening. And I appreciate you coming today. Thank you.

Are there any other questions to come before the meeting? We do have a question regarding the bank's common share dividend received ahead of the meeting from shareholder Kenneth Massey [ph], which I think was referred to by MÉDAC as well. When is the bank intending to increase its common share dividend? All other banks have raised theirs during the past 18 months. And I think Bill addressed that in his remarks, and I'll just say, over the past 15 years, our common share dividend has increased at a compound annual rate of 9% above our peer group average. And I believe we're still the highest pay out. Are we not, Bill? If not, close to.

Unknown Shareholder

My name is Bill MacGregor [ph]. I'm a BMO shareholder. Mr. Downe did not answer the question. Mr. Downe danced around or skipped around the question. If you'd bought Royal in October, it would have had a higher payout than BMO is now. So as a shareholder, I would like a reasonably straightforward -- forward-looking statement, that's fine, but a reasonably straightforward assessment of what the bank intends to do with respect to common share dividends. They have not increased in a long time. So let's have a straightforward answer, please. Thank you.

William A. Downe

Thank you for your question, Mr. MacGregor [ph]. The straightforward answer is that we have a defined target payout ratio of between 45% and 55% of earnings. As I said in the last 4 quarters, we paid out 50%, right in the center of the range. And as the earnings of the bank increase, the dividend will be increased.

Unknown Shareholder

Yes, can the minutes of the meeting show that we have not had a reasonably clear and straightforward answer.

David A. Galloway

Mr. MacGregor [ph], I appreciate your concern. I don't know what more you expect the Chief Executive to say. He can't say we're going to increase it 2 quarters from now. He can't do that. So I think he's said what is possible to say in a most straightforward way.

Any other questions to come before the meeting? If not -- sorry. That was it, no? The scrutineers have completed their report on the results of the voting, and I will call on Steve Gilbert to read those results. The scrutineer's report in the final form will be available shortly after the meeting. And I think the voting will show up on the screen.

Steve Gilbert

Good morning, Mr. Chairman. Joe Chirico and I, as scrutineers for this meeting, hereby confirm the following result of the votes by ballot. On proposal #1, no director standing for election today received less than 94% of the votes cast for director. On the appointment of auditors, 97% of the votes were in favor and 3% were withheld. On the special resolution for the executive compensation, 91% of the votes were in favor and 9% were against. On the amendments to the Employee Share Purchase Plan, 98% of the votes were in favor and 2% were against. And on the shareholder proposals, proposal #1, 5% of the votes were in favor, 94% voted against and 1% of the votes were withheld on the proposal. On shareholder proposal #2, 4% were in favor, 95% were against and 1% of the votes were withheld. And on the last shareholder proposal, 20% voted in favor, 79% against and 1% withheld. And that concludes the results of the vote by ballot.

David A. Galloway

Thank you. I therefore declare that the 14 nominees listed in the Management Proxy Circular are duly elected as directors, KPMG LLP is duly appointed as auditors for the ensuing year, the advisory resolution on the bank's approach to executive compensation has been approved, the amendments to the Bank of Montreal Qualified Employee Share Purchase Plan has been approved, the 3 shareholder proposals have been defeated.

I would like to thank all the people who were involved in supporting today's meeting, including those who handled the close captioning, the English and French interpretation and the electronic voting process.

As this is my last meeting, I want to say to the shareholders that it's been a privilege to serve as the Chair of BMO. Your company is in good hands with Bill Downe and his management team. I also want to congratulate and wish every success to Rob Prichard, the incoming Chair. I'm confident that he will do an excellent job. Thank you for coming. I declare this meeting terminated.

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