Viki Lazaris - SVP of IR Bill Downe - President and CEO Tom Flynn - EVP of Finance, Acting CFO and Treasurer Bob McGlashan - Chief Risk Officer Yvan Bourdeau - CEO of BMO Capital Markets and Head of Investment Banking Group Frank Techar - Head of P&C Canada

Jim Bantis - Credit Suisse Darko Mihelic - CIBC World Markets Andre Hardy - RBC Capital Markets Robert Sedran - National Bank Financial Michael Goldberg - Desjardins Securities Brad Smith - Blackmont Capital Ian De Verteuil - BMO Capital Markets

Good afternoon and welcome to the BMO Financial Group's first quarter 2008 conference call for March 4. Your host for today is Viki Lazaris, Senior Vice President of Investor Relations. Ms. Lazaris, please go ahead.

Thank you and good afternoon, everyone, and thanks for joining us today. Presenting today are Bill Downe, BMO's CEO; Tom Flynn, Treasurer and Acting Chief Financial Officer; and Bob McGlashan, our Chief Risk Officer. The following members of the management team are also with us this afternoon; Yvan Bourdeau and Tom Milroy from BMO Capital Markets; Gilles Ouellette from the Private Client Group; Frank Techar, Head of P&C Canada; Ellen Costello from P&C US; and Barry Gilmour, Head of Technology and Operations. After our presentation, the management team will be available to answer questions from pre-qualified analysts. To give everyone an opportunity to participate today, we ask you that you please ask only one or two questions and then re-queue. At this time, we'd like to caution our listeners by stating the following on behalf of those speaking today. Forward-looking statements may be made during this call, and there are risks that actual results could differ materially from forecasts, projections or conclusions in the forward-looking statements. Certain material factors and assumptions were applied in drawing the conclusions or making the forecasts or projections in these forward-looking statements. You may find additional information about such material factors and assumptions and the material factors that could cause actual results to so differ in the caution regarding forward-looking statement set forth in our news release or on the Investor Relations website. With that said, I will hand things over to Bill now to start off the call.

Thanks, Viki, and good afternoon, everyone. Thanks for joining us today from Quebec City, where this morning BMO held its 190th Annual Meeting with shareholders. As noted, my comments may include some forward-looking statements. Tom is going to take you through the financial results in a few moments, but clearly the quarter was dominated by charges we announced in the environment in which we are operating. I'm going to address these issues upfront including steps we've proactively taken and will be taking to manage our businesses in this challenging environment. That said I want to continue with the theme prevalent in recent meetings we've had with the investor community around momentum in P&C Canada. I can tell you we're addressing market difficulties and maintaining a focus on our core business simultaneously, and most importantly, a focus on our customers. We recognize that the US market is already slowing and we are cautious with respect to the impact that this may have on the Canadian market. Since last fall, we've taken prudent actions to build excess liquidity, further diversify our funding sources and to extend the maturity of our obligations. By these actions, our NIM is only down 2 basis points quarter-over-quarter. From a credit perspective, we supplemented our general allowance this quarter. Given concerns about the slowdown in the economy, the increase has been allocated entirely to the US, and we've been highly vigilant with respect to our specific provision. Moving on to the operating groups, let me first address BMO Capital Markets where our overall results have been disappointing even in the context of recent capital markets. While a number of our businesses in this group have been performing well, in particular equity underwriting and some trading operations, our objective to produce a consistent and stable 20% return on equity has been undermined by credit market losses. We're coming out of a period where banks have not been fully compensated for risk taking. We expect the repricing of risk will have a positive impact on our business in the future. And as I described in our AGM this morning, our efforts to de-risk the business are continuing. More specifically, we're reducing the size of our off balance sheet businesses and seeking a better balance between risk and return. In order to reduce volatility, we are ensuring that our trading activities are supporting clients with whom we have broad and valued relationships with reduced capital allocated to other trading areas as well. We'll also reduce capital allocated to certain lending portfolios where the returns are not sufficiently attractive. The business represents the first line of defense in risk and are accountable for ensuring that they remain in line with our risk appetite, and this has been reinforced. Lastly, our risk management group will have increased direct corporate oversight into risk return decisions made by the businesses. In line with the commitment we made last spring, we've succeeded in significantly reducing the risk in our commodities business over the past nine months, and I have confidence in BMO Capital Markets' ability to de-risk other businesses and generate consistent and strong returns. BMO has been making every effort to complete the restructuring of Apex. This included investing $705 million in the vehicle to support it, despite not having an obligation to do so. In order to support a successful restructuring, we may provide additional support. The problems with Apex are primarily due to a widening of credit spreads, not due to the underlying quality of the assets. The asset quality is very good, and if we hold these assets to maturity, we can avoid crystallizing the mark-to-market loss that exists today. If a restructuring can be achieved, we believe this course of action is in the best interest of shareholders. Turning now to the SIVs, as you are aware, we announced on February 19 our decision proposing to provide senior rank support for the lending of Links and Parkland. Although the SIVs have been very successful to-date in their plan to reduce the size of the portfolios, and that's been via asset sales and capital note swaps, the capacity of the credit market to absorb MTN maturities without impacting price levels has slowed. These new facilities will bridge the retirements of MTNs, which occur a little bit faster than the maturing assets or asset sales, and it will provide them with supplemental funding, permit them to continue to sell assets in an orderly manner and facilitate SIVs access to further senior funding. Importantly, we're now in a better position to provide the support given the significantly lower size of the SIVs and the reduction in the ABC inventory on our balance sheet. The rating agencies recognize this fact when they confirmed our ratings. The maintenance of the SIVs ratings was very important because investors facing a significant downgrade could have been required to sell their notes due to investment restrictions. We're satisfied by our team's progress to-date and we'll continue to keep you updated. Since we announced our intention to provide senior rank support to the SIVs on February 19, we've had asset reductions of $1.5 billion in Links and EUR250 million in Parkland. Bob is going to make some further comments in his remarks, but as of this morning, Links is below $10 billion and Parkland is below EUR1 billion. Looking at the other operating groups, we've had a solid performance in our retail business. We've seen positive momentum from the investments we've made. In P&C Canada, core revenues were up 1.6% quarter-over-quarter, while expenses were held essentially flat. As a result, earnings of $302 million were up 5% versus Q4 2007. We're encouraged by the quarter-over-quarter market share improvements in personal deposits, and are very pleased to see continued share growth in both personal and business loans. This quarter we saw improved mortgage growth and spread, and branch-originated mortgage growth outpaced the impact of our exit of third-party and broker mortgages last year. In fiscal 2008, we've implemented individual scorecards to provide a clear indication of performance against expectation. It's showing up an accelerated balance sheet growth. In addition, we're encouraged by improvements in Net Promoter Scores across most of our operating districts in the last three months. As you know, we've made significant investments in customers-facing initiatives such as 22 new and 31 redeveloped branches last year, and we're going to stay the course on our strategic initiatives. At the same time, we're going to manage discretionary expenses and we'll slow hiring where necessary until we have greater clarity on how the economy is going to unfold. In P&C US, cash net income of $33 million for the quarter was up from $30 million in Q1 '07, although down $5 million from Q4 when as I said at the time, the stars had definitely lined up for the group. Yesterday, we announced the completion of the acquisitions of Ozaukee Bank and Merchants and Manufacturers Bancorporation, both based in Wisconsin and that will add 41 full service branches to our network. The US remains highly competitive, but we are facing soft housing markets and lower economic growth. But management has focused on effectively managing expenses, for example flowing new branch openings and shifting investments to faster payback opportunities like business banking. Our marketplace has been somewhat disrupted by a large transaction by one of our competitors and this has created opportunity. In both P&C and capital markets, we have successfully recruited teams and in the commercial marketplace, we are converting clients. PCG earnings were down 5% to $98 million as revenues were up 2% and expenses up 3%. Year-over-year net income, however, was up 8%. The first quarter includes expenses that will not recur for the balance of the year, and this was solid performance in the current environment. Based on this management team's track record for managing expenses, I'm confident they can deliver positive operating leverage for the year. And the Dalbar Mutual Fund Service awarded in January for the best overall customer service confirms our commitment to our customers. This morning we announced the second quarter dividend of $0.70 per share unchanged from the prior quarter. This was a prudent decision given the uncertainty of the economic outlook in the next couple of quarters and what the impact of the US recession might mean to Canada. Our current dividend is the midpoint of our payout range of 45% to 55%, the highest among peers and over the last two years, we've increased our common share dividend by 32%. Further that I would like to speak about our revised economic outlook while we hope the US will still have slightly positive growth in the first two quarters. It's unlikely we will see the full benefit of fiscal stimulus and interest rate cuts until Q3 and Q4. Looking at Canada, while the situation is better and the economy is continuing to grow, growth is slower than when we announced our 2008 targets. There is still a significant amount of uncertainty in the market and all of our businesses will clearly be impacted by future events. While we continue to believe the conditions in both countries will be better in the latter half of the year, we do not expect to achieve our original financial targets. However, we still intend to measure our performance against them. And now Tom will walk us through the financials.

Thanks, Bill, and good afternoon. Certain of my comments may be forward-looking so please note the caution regarding forward-looking statements on slide one. On slide three, and as Bill mentioned, you can see that reported earnings were $255 million or $0.47 per share, down 30% year-over-year. These earnings reflect a challenging capital market and economic environments. There were a number of significant items in Q1 that lowered earnings by $362 million or $0.72 per share. These items are noted on slide 4. Excluding these items, earnings were $670 million and cash EPS was $ 1.21. The tier 1 ratio remained strong at 9.48% based on Basel II capital and 9.05% based on Basel I capital. Slide four shows the significant items taken in Q1 and they make up the $362 million charge I referred to. The first five items on the slide relate to the capital markets environment. First, we recorded a charge of $158 million related to exiting positions we had hedged with the monoline insurer ACA Financial Guarantee Corporation. The next two items relate primarily to the impact of widening credit spreads on a number of our trading portfolios. We had a charge of $99 million due to trading and structured credit-related positions, preferred shares and third-party Canadian conduits and a charge of $78 million for counter-party credit risks on our derivative assets, approximately half related to monocline insurers other than ACA and credit derivative companies. Finally, we took a charge of $130 million on our investment in Apex/Sitka Trust, a structured finance vehicle to which the bank does not provide backup liquidity and a $23 million charge related to the capital notes at the Links and Parkland SIVs. In addition, we increased our general allowance by $60 million this quarter, and Bob will comment further on this item later. Moving to slide six; you'll see that revenues were down about 8% quarter-over-quarter. Revenue was down 1% excluding significant items. Year-over-year revenues decreased 2% on a reported basis and 2.4% excluding the significant items. Turning to the components of revenue starting on slide seven; you can see that net interest income was $1.2 billion in Q1, up slightly on both comparative quarters. Looking more specifically at the margins, total bank margins declined by a modest 2 basis points from Q4. Margins increased in P&C Canada quarter-over-quarter due to an improved prime to BA deferential and a positive impact of product mix from growth and higher spread products. Margins in P&C US declined 15 basis points, excluding the impact of the transfer of a small client driven investment portfolio from corporate. The decline is attributable to competitive pressures and shifting client preferences in both consumer and commercial. The total bank margin has also been impacted by items that lowered corporate net interest revenue. On slide eight, we look at non-interest revenue. Non-interest revenue was impacted by the capital market charges reflected in trading revenues. In Q4 '07, we increased our liability for future customer redemptions related to our customer loyalty rewards program and recorded a gain on the sale of our Master Card shares which is shown in security gains. On a quarter-over-quarter basis, NIR in P&C Canada was flat as higher insurance and securitization revenues were offset by lower cards and investment products revenue. PCG NIR improved due to higher fee-based revenue in private banking. BMO capital markets revenues were lower due to lower M&A, debt underwriting and lending fees with some higher trading revenue and equity underwriting fees. Moving to slide 10; you can see that we remain focused on managing expenses in this environment. Expenses have declined both quarter-over quarter-and year-over-year. I would remind you that in Q1 of each year, we expense performance-based compensation for employees eligible to retire. This amounted to approximately $49 million in Q1 of '08 compared to $42 million in Q1 of '07. While we continue to make strategic investments in our businesses to support the future growth, we will be cautions with our level of spend in this environment. Moving to slide 11; you can see that our capital ratios on both Basel II and Basel I basis remain strong. Under Basel II, our Tier 1 capital ratio was 9.48% and that is well above our target minimum of 8%. On a Basel I basis, our Tier 1 capital ratio was 9.05%. Risk weighted assets were up approximately $10 billion under Basel I, with this primarily due to the effect of foreign exchange and higher loans and acceptances. Under Basel II, our risk rated assets were $179 billion, and Bob will make some comments on RWA in Basel II. As a result of the Basel II implementation, obviously measures of risk-rated assets, capital and capital ratios are not fully comparable relative to Q4. Looking ahead, the balance of the year will be challenging, given the weaker economic outlook and the capital market environment. We remain cautiously optimistic that P&C Canada will build moment through the year. Our Private Client Group will be impacted by markets, but is well positioned and will continue to manage expenses well. In capital markets the performance of our trading businesses will be impacted by the environment in which we operate. And in corporate services, we expect that a number of individually small items that affected Q1 will not recur in subsequent quarters. And with that I'll turn things over to Bob.

Thanks, Tom, and good afternoon everyone. Before I begin, I would like to draw your attention to the caution regarding forward-looking statements from slide 2. Slide 3 identifies that a further deterioration in the credit environment that resulted in Q1 specific PCL of $170 million, as well as increased gross impaired loans and formation. Total PCL of $230 million included a $60 million increase in the general allowance. This increase reflects portfolio growth as well as some negative risk migration related to the credit cycle. Slide 4 shows an increase in US consumer delinquencies reflecting the current credit quality issues associated with the US housing market. Elevated US delinquency levels at 41 basis points, compares favorably to our US peer group at 71 basis points, and our Canadian consumer portfolio at 32 basis points is in line with our expectations. On slide 5, specific PCL has trended upward notably in Q1, driven in part by deterioration in the US real estate development sector. Our US real estate development portfolio is not large at 1% of total bank loan book, and is smaller proportion of our US book than our peer banks. However, we continue to pay a close attention to this portfolio. In addition, a single transaction accounted for $38.5 million, but we expect volatility to continue into 2008 given current market conditions. New specific provisions are also trending upward as expected at this stage of the credit cycle. On slide 6, on a competitive basis Q1 '08 Specific PCL represents 31 basis points of average net loans and acceptances, and remains below are 16 year average of 33 basis points, and our Canadian peer group average of 54 for the same period. As seen on slide 7, both gross impaired loans formation and balances have increased reflecting deterioration in the economic environment. The transaction reference on slide 5, however, accounted for $459 million of the increase. This US Company is in the business of purchasing troubled mortgages at a discount and asset coverage has declined along with US housing prices. Turning to slide 8 and looking forward, we're now anticipating that current market environment will produce a weaker credit environment in fiscal 2008, with additional pressure provided by continuing high energy prices, a strong Canadian dollar, and further softening in the US economy. As a result and in light of Q1 PCL, we're unlikely to achieve our Specific PCL target for fiscal 2008 of $475 million or less. A better indicator would be to use our Q1 specifics of $170 million as a run rate for the year. As shown on slides 9 and 10, SIV assets are less than half the amount they were on July 31, '07. Our position in the SIV is outlined on the slide. We currently have an investment value of $32 million in capital notes after Q1 write-downs, previously mentioned by Tom, and US$677 million and EUR72 million in outstanding senior notes. We finalize an agreement to provide senior-ranked support for the funding of Links and Parkland. Under the terms of the agreement, the amount facility is senior notes less cash capped at US$11 billion and EUR1.2 billion respectively, which will backstop the repayment of senior note obligations to facilitate access to senior funding, and support the continued management of the SIVs together with continuation of the strategy of selling assets in an orderly manner. Our analysis after extensive discussions with the rating agencies were that the SIVs would get downgraded to such an extent that a defeasance process would kick in. This process would likely result in our losing control of the pace of the wind down, which we felt would place the SIV senior investors at potential risk of loss. A facility has an 18 months terms and given the recent asset sales, the effective cap for these facilities has been reduced to US$10 billion and EUR950 million. The asset quality of the SIVs remained strong. 94% of the assets are rated AA or better by Moody's and over 80% by Standard & Poor's. To further substantiate asset quality, cumulative discounts on asset sales to-date have been 238 basis points for Links and 267 for Parkland. And our recent sales have been in the 431 basis points and 493 basis points range respectively. For a loss to be incurred by the senior debtholders, a discount of 664 basis points for Links and 1,253 basis points for Parkland would have to be incurred on the sale of the remaining assets before the capital notes were reduced to zero, thus providing a still significant margin protecting the senior debt from loss. There has not been a material increase in concentration risks to-date and as asset dispositions have been largely well spread across all risk categories. If the underlying assets are held to maturity, we're confident any losses would be small and well within the remaining capital note holder's amount. Our liquidity facilities will effectively allow Links and Parkland to avoid the liquidity discount the market currently has built into the NAV by providing us the flexibility to sell assets for the full economic value as the market is prepared to absorb them. On slide 11, the next five months maturity schedules are provided. Based on the maturity schedules, $2 billion cash-on-hand, our expectation of asset dispositions and the possibility of new senior notes given the support provided by our liquidity facility, we do not expect draws under our facility to exceed 50%. Turning to the subject of Apex and Sitka, as described previously by Bill and Tom, our current exposure net of cumulative evaluation adjustments of $210 million, is $495 million. As noted on slide 12 and 13, Apex/Sitka are standalone funding vehicles, setup to underwrite credit protection, to secure and fund the CDS obligations. Apex/Sitka issued $2.1 billion of ABCP and MTN's. Premium income received from the swaps counterparties is partially used to fund interest on these debt instruments. Apex/Sitka CDS portfolio was structured by the swaps counterparties with BMO administering the trust. BMO does not provide backup liquidity lines for those being provided by the swaps counterparties in the event of a market disruption. The portfolio quality remains high. ABCP and MTN's were rated R1 High and AAA respectively by DBRS. The CDS portfolio is comprised of 443 names diversified by name, industry and geography. The average credit rating of the 443 names is BBB. Credit default swaps are tranched for different levels of risks and Apex/Sitka's portfolio consist of super senior tranches, which are rated and continue to be rated AAA. There is no exposure to US subprime mortgages. When the August 2007 market disruption occurred Apex and Sitka were unable to sell more notes to cover collateral calls from the swap counterparties, which resulted from increased CDS spreads. Stand sell arrangements were put into place with swap counterparties to stake collateral calls and have now expired. Ratings for ABCP and MTNs were cut to R5 and CCC on February 28th. As a result of a restructuring not being finalized with swap counterparties and failing to rollover notes that came due that day. The two day cure period expired yesterday. However discussions with the stake holders relative to restructuring are continuing. As shown on slide 14 our exposure to monolines is not material. We've disposed of our positions related to ACCA at a total cost of $160 million and the mart- to-market exposure for the remaining monolines in aggregate is only $244 million for direct exposure. As shown on slide 15, the large trading and under writing losses on November 30th, January 23rd and January 31st were driven by the valuation adjustments addressed in Tom's remarks. You'll note that I've not included a slide in this presentation on commodities. Risk reduction remained the key objective for the commodities portfolio through Q1 and we're now comfortable with the progress to-date and are operating within an acceptable level of risk on a go forward basis. Accordingly, this will be our last specific update on commodities. Finally I would like to touch on our new Basel II disclosures in our subpart. As you know, we have formally implemented Basel II this quarter; we have disclosed our capital ratios capital for Basel II Asset Classes and information on securitization. For this quarter we have also disclosed Basel I data to enable us smoother transition. Basel II risk related assets are more indicative of underlying risk in the banks portfolio. Although, as you are aware, each institution develop their own methodology based on risk management strategies, processes, portfolio characteristics and historical loss experience. We recognize the challenge this creates for you and understanding the new disclosures. However, as subsequent quarters reporting accumulates useful trend analysis will be possible and components not yet disclosed on a Basel II basis will become available, such as exposures by probability of default basis. With that I will turn it back to Bill Downe.

Thanks very much Bob. I would like to comment briefly on the leadership changes that are effective tomorrow. After this meeting, Yvan Bourdeau will turning the investor conference call over to Tom Milroy, who has been appointed CEO of BMO capital markets. Tom is an experienced banker with a strong sense of markets. Highly regarded by clients in both Canada and the US, and posses a strong management oversight of the business. Yvan will continue as Vice Chairman of BMO capital markets. After 35 years of dedicated service to BMO, Tom Gerlacher will take a well deserved retirement. I want to thank him for the important contributions he has made to our company’s success. I want to convey how much I appreciate the tremendous commitment he has shown to BMO especially over the last 12 months. After this meeting Tom Flynn will be relinquishing the role of acting CFO and has been appointed Chief Risk Officer. Tom has built a track record for success, and has gained tremendous experience in the most complex aspects of the market and our business. Most recently as interim Chief financial Officer, Tom worked directly on a significant risk issues BMO has been managing. The timing of Tom’s appointment is excellent. He will lead the implementation of the renewal of our risk practices with the focus on ownership and accountability, both in the business and at corporate on transparency and on risk return optimization. And finally I am really pleased that Russ Robertson has joined us in the role of Interim Chief Financial Officer from Deloitte & Touche where he served as Vice Chairman since 2002. He brings extensive financial institutional experience to his role. He will lead a strong and very capable finance team. As I said at the outset we faced difficult issues this quarter. We are confident that we can continue to restore momentum in our businesses and with that I will turn it over to the operator and we can ring in the Q&A session of the call.

Thank you (Operator Instructions) Our first question is from Jim Bantis from Credit Suisse. Please go ahead. Jim Bantis - Credit Suisse: Hi. Good afternoon. Bill in your opening comments you talked about basically a new type of BMO Capital Markets derisking a number of businesses, eliminating on tail risk and other such of type of risks, can you talk about how this BMO Capital Markets' earnings profile will be going forward. I mean it is also becoming a little bit more plain vanilla than it had been in the past. But what does that mean in terms of what you look at this organization whether it can contribute to net income for the year?

Well, Jim I am not going put a number on the year, obviously the environment is a little bit unpredictable. I think you have to start with, what are the strengths of BMO Capital Markets? What are the things that really standout and we have built a tremendous business around clients? Our reputation in the investment business is based upon high quality research and really being a strong equity underwriting business, very good debt underwriting business and a large corporate banking business; it's tied into those businesses and a strong operating service business. But these are all built around client relationships and they constituted a very, very significant part of the earnings of BMO capital markets. I think the focus on the management of risk really relates to making certain where we are engaged in trading activities. Where we are using our capital? It is in support of our client business. And there has been a period of retrenchment in the last six months where the risk return of a number of trading businesses have just tied rate down and I think the rationing of capital in those areas is a prudent thing to do. We're really focused on return of equity and it's really a question of the deployment of capital within BMO as an enterprise. BMO Capital Markets is an important part of the company, it does use a significant portion of capital. And I think in this environment there are opportunities to make better use of it within BMO capital market and within the organization of some of that capital. Jim Bantis - Credit Suisse: Got it. If I can just follow-up on that and perhaps, I mean I was really looking for the potential earnings power bank had in the wholesale division on the normalized basis. But, maybe looking at it, would it contribute to the bank's total earnings, were you looking for perhaps more of a percentage basis closer to 20% - 25% rather than plus 30%?

The one thing about the wholesale business, Jim, is that it does have larger swings in it than some of the other businesses. If you go back and listen to the conversations that we've had over the last couple of years, I think I pretty consistently said that I think our wholesale business ought to be somewhere between a third, a little bit more of the bank. And that's a good place for it to be, and similarly with the allocation of capital. Jim Bantis - Credit Suisse: Got it. Thanks very much, Bill. And my second question relates to the retail bank and the efficiency ratio. Obviously, we saw a tick up to 57% coming from the higher investment spend versus the 52%, 55% run rate of several quarters ago. And my question to Frank is do you see, given the softening in the Canadian retailer and economic conditions here in Canada, can you foresee getting back to that deficiency ratio based on revenue enhancements?

Yeah, Jim. We obviously have been investing in the business. And as Bill mentioned earlier, we are going to continue investing in our strategic agenda going forward, but also recognizing some of the pressures in the marketplace. In particular, on the spread side, we are going to be looking at our tactical spend much more closely as we go through the year. So my expectation is that the spend levels on a year-over-year basis are going to moderate as we go through the year. And when you look at the [mix] growth on a linked basis, we are relatively flat and we're going to try to manage the remainder of the year on that basis. Jim Bantis - Credit Suisse: Got it. Thanks very much. I'll re-queue.

Thank you. The following question is from Darko Mihelic of CIBC World Markets. Please go ahead. Darko Mihelic - CIBC World Markets: Hi. I have a couple of question as well. Maybe the first place to start is if you can provide a little more information on Fairway and why was your decision to write-down the drawn facility and is it capable of fully drawing the facility down to the $10.2 billion?

Darko, I'll just try and make sure I got your numbers right. You are talking about Links and Parkland, I think. Darko Mihelic - CIBC World Markets: Talking about Fairway.

Fairway? So the backup liquidity facilities of $10 billion, is that your question? Darko Mihelic - CIBC World Markets: That's right.

And how much of that might we expect to be drawn? Darko Mihelic - CIBC World Markets: And why did you take a provision against the drawn amount?

Yeah. So what we actually did was we removed a facility from Fairway and put it onto our balance sheet, so it wouldn't have a negative impact on Fairway as the aggregate asset quality. And that facility is the one I was referencing throughout comments, a $459 million deal and we took $39 million provision against it. That company is in the business of purchasing at a discount troubled mortgage. But the current market swings in the US just pushed the house prices down through the discounts that they purchased. So we're not expecting further draws. Darko Mihelic - CIBC World Markets: So you are not expecting further draws? Okay. Your language however suggested there is a $10.2 billion backup facility to Fairway in your notes. I mean if you like we can follow-up on this afterwards?

I'm wondering if we're confused between the SIVs. Darko Mihelic - CIBC World Markets: Okay. And I guess my second question is with respect to Apex and Sitka. I guess which is it, I mean it looks as though you are willing to -- if you're not able to restructure, you'll have to write-off $495 million or around $500 million. But then there are these other components whether its disputes with note holders and with swap counterparties. So am I to look at that and say to myself that the worst case scenario here is, at least, a $1.5 billion loss for BMO plus lawsuits. Is that the way I should look at that or what would your comment be on that?

I would like to comment, Darko. We have basically two issues that were outlined. One amounts to $400 million. It's really an operational issue between two professional counterparties. And the other one is the $600 million and is an issue that is related to the conduit itself, and basically it will be resolved once the structuring is in place. So, given the situation that we're in at this point in time, I just would like to mention that based on the facts that we have reviewed so far and discussions that we've had with our counsel, in fact, we are confident in our positions. But as you can appreciate, as these manners may result in litigation, it is very difficult for us to comment on this point and, in fact, we are not in a position to comment any further. Darko Mihelic - CIBC World Markets: Okay.

And Darko, on your first question, I'm going to put it back to Tom Flynn. We were looking for the place that you had made that reference from.

I think we were thinking of the SIV amount which is a comparable amount. But Fairway is our US commercial paper conduit vehicle and that vehicle is similar to traditional bank sponsored asset-backed commercial paper vehicles that exist in the Canadian markets and likely backup the traditional Canadian conduits. We have provided normal global style backup liquidity lines for Fairway and those backup lines approximate $10 billion. We have talked about this I think on our last call, but the Fairway paper has rolled consistently throughout the market conditions that we have been experiencing since August and all of the paper rolled throughout the entire disturbance that took place in the market. And as Bob mentioned, the draw that was made against the liquidity lines related to one credit that was within the vehicles that had some credit issues. Darko Mihelic - CIBC World Markets: I see, okay. If I could just follow up or follow this, just a broader question for Bill. Difficult times, new Basel II treatment, the worst case scenario looks like calculating on the back of the envelope could be between $1.5 billion to $2.5 billion. How bad does it have to get before you raise equity and/or consider cutting your dividend?

With respect to the current situation, it's not something that we have contemplated given the pieces that we are working with. We have a strong Tier 1 capital ratio, but also we have pretty good visibility to those exposures. And I would say that six months ago, there was a lot of uncertainty, but where the markets were going, the size of Links and Parkland, what would happen with the larger universe of non-bank sponsored commercial paper in the United States and Canada. And so I actually have a higher degree of confidence in the way that things are working out. With the position that we have, we can put these things behind us in the next while and I think Yvan had some comments specifically on the number that Darko was asking about?

The item that I would like to mention Darko was basically reiterating what was said earlier, but I would like to stress it. In the case of Apex and Sitka, the things we are giving you is a very good description as to the quality of the underlying asset and also our position in terms of the CDS and we are not only the only ones realizing to what extent the quality of the asset is very strong, but also all of the stakeholders with whom we are actually in discussion. And because of that, there is no question that we are having constructive discussions with these stakeholders. And therefore, I will not on my own estimate any how a similar potential range that you have just described. Darko Mihelic - CIBC World Markets: Sorry, well, I was throwing a few other things into the mix, but I appreciate that. So basically Bill I guess your position is that you haven't contemplated any equity issue yet. And the dividend cut is simply not even on a table at this point.

No, and that's totally consistent with our estimates of what our exposures are and the reason why we had a press release on February 19th in which we identified approximately $500 million of exposure with respect to Apex was to make it clear of the magnitude, the order of exposure that we were talking about. Darko Mihelic - CIBC World Markets: Okay, great. That is very helpful. One last question, if I could sneak one in for Bob. One of the things that helps me out is credit protection that you might have in single name exposures in the portfolio. Do you have, is that number being released at this quarter?

The answer is, I don't think it actually was. I will tell you, it's a $1.1 billion in aggregate and $100 million of that is specific to those mandated by the credit decision process. So the answer is, it's very small and hasn't changed very much from last quarter. Darko Mihelic - CIBC World Markets: Great. Thanks very much.

Thank you. The following question is from Andre Hardy of RBC Capital Markets. Please go ahead. Andre Hardy - RBC Capital Markets: My first question is for Bill. Did I hear you say in your introductory remarks that you would look at reducing non-core lending relationships?

You did. This is a process, Andre that we do on a fairly regular basis. We go back to the portfolio and we look at accounts where we may have extended credit. Let's say 24 months ago, participation in revolving credit where we've been working under the development of ideas, things that that would move us either into an advisory position or an underwriting position. And those commitments are predicated on a belief that a bigger or a broader relationship will ultimately develop. It is a discipline that I have to say is recurring, but this is a good time to go through that discipline and particularly because I think that we're right on the edge of an increase in pricing, in segments of the market and those conversations with a number of those clients will be towards a visibility of other sources of income other than lending income or perhaps price renegotiations or in the case that neither of those is visible then we would reduce our commitments to those names. It's a pretty standard process of discipline, but I think this is a really good time to do it because I do believe there is some pricing power going to come back into the market. Andre Hardy - RBC Capital Markets: And do you have any sense of how big that non-core portfolio may be?

I don't as long as it may jump in with an estimate of what he thinks can be achieved, although I think it's really days you recall that five or six years ago, we've reduced our assets very materially in that regard from about $90 billion, about $65 billion of risk weighted assets. My guess is, in terms of the kinds of relationships that we could optimize and while maybe it's 10% or 15% of the portfolio and -- hear from that.

So approximately, I can only give you a range at this point in time, Andre, just because we're beginning to investigate more specifically into that initiative. But I would say looking at the preliminary estimates and I was speaking not so much in terms of risk-weighted assets, but now in terms of capital because then it was because of Basel I and Basel II; it's more difficult to [tuck in] risk-rated assets. But in terms of capital, I would think that a potential reduction between 250 and 500 is possible. Now, this is like the same thing we did in 1999 and 2000, when we reduced as Bill was saying the structure of our balance sheet, it takes time. But I would say over the next 12 months to 24 months as we go through this exercise and as those facilities are rolling over, and if indeed we are unable to increase the pricing associated with facility that actually is not meeting our hurdles nor do we think that we're going to able to achieve the hurdle in looking forward, then you could see that kind of structural adjustment in our capital allocation. Andre Hardy - RBC Capital Markets: Okay. And my other question is probably for Bob. You've increased dramatically your guidance for loan losses this year. And is that because you are seeing specific names popup on your watch list or are you seeing a broader deterioration? And you mentioned the US, but I would say US and Canada.

Yeah. Thanks, Andre. Canada is actually not too bad. I expected that it may start to surface some deterioration in the back half of the year depending on how things unfold in the US. In the US, it's where we are seeing most of the activity. I mentioned the real estate development portfolios we have are, well, not large. We've been seeing some reservations come out of that shop. Looking at the flow of accounts into watch list category and into impaired category, the early indications of deterioration are certainly there. It's not going to be very much of a stretch to get to the $170 million number for each of the remaining quarters. Andre Hardy - RBC Capital Markets: Okay. It sounds like you're talking about a fair amount of accounts.

Yeah. It's not the two layers [my earlier point]. This is not three or four or some specific names that we see coming down the track at it. Andre Hardy - RBC Capital Markets: Thanks, Bob.

Thank you. The following question is from Robert Sedran from National Bank Financial. Please go ahead. Robert Sedran - National Bank Financial: :

Robert, I am going to start on that question. I know Bob has a great deal of pride in the way these numbers come through and would want to comment. But this is a little bit reminiscent for me of 2000 when our discipline, our consistent discipline to reviewing the portfolio had a similar effect and the question was raised, well, have you changed your lending standards? And I -- upfront, I'd like to say before Bob comes in that the discipline we use around evaluation of credit, the speed at which we move assets into special assets or onto a watch list when we identify them, is one of the reasons why our recoveries tend to be superior through the cycle. And from my perspective, it's the right way to approach the recognition. In the last three months, there has been a change in the economy and in the environment, and it's being reflected in the behavior of a small number of customers and the time to deal with the emergence of those issues is right at the front. Bob, I know you'd like to make some specific comments.

Yeah. Just to reinforce actually. Actually two comments and to respond specifically to the question about whether or not we're a high risk credit bank and/or have chosen to shift our position on the risk curve. We are not and have not chosen to move up the risk curve on our credit portfolio. The historical relative performance I would fully anticipate will continue to unfold over the course of this cycle. We do and quite with intent move early identifying a deteriorating account; as a result the number of times they actually end up turning into a loss is somewhat less for us. It's a material part for reason through the cycle we perform better. In addition, why the change quarter-over-quarter, a lot of things happened in the last quarter, during the last quarter in the marketplace. And the depths of the challenges that the marketplace are experiencing are certainly more than what we were anticipating when we first set the number. And then you look at the first quarter actual number you don't have to stretch very far to get to the suggested guidance I'm giving you. Robert Sedran - National Bank Financial: And just a follow up on the credit, again. I guess the second question is about the general. I guess the theory, the way I look at the general is that you add to it in the good times and at least in theory drive down in bad times and this is the second straight quarter you have added to it. I would have thought in this environment that every little bit of capital would count and so I guess I want to know why your adding to it and if perhaps the regulator is recommending that you add to your general.

The position we are taking on our general is our own position. We have not been influenced directly or otherwise relative to what we are doing. Our approach relates to coverage of our expected loss and as you move through the credit cycle from the best part of it where we were to the worse part but which we are on a way to here, the amount of the coverage you require should in fact go down. However, if your portfolio is growing and/or you have some negative risk migration your [yield] goes up then clearly the amount that you require to cover your general goes up. So the coverage rate is coming down, but some of the other drivers are going up on balances. So it's a relatively small upward adjustment in the general. Robert Sedran - National Bank Financial: Thank you.

Before we go to the next question. I can see that there is a still a list of questions developing. So its inline with Viki's request if you are able to go with one question and perhaps re-queue if there’s time it would be really helpful.

The following question is from Michael Goldberg for Desjardins Securities. Please go ahead. Michael Goldberg - Desjardins Securities: : First of all why sponsor conduits only with levered credit default swaps in them, rather than just plain vanilla typical securitization and secondly once you saw the problems in these types of conduits back in August, why did you not get Apex and Sitka included in the Montreal Accord and you have no obligation to backstop liquidity in Apex and Sitka, your own sponsored conduits and so you are not doing so. That being the case, why would you participate in the Montreal Accord to backstop liquidity on conduits that you did not sponsor and finally commercial paper and medium-term notes that you don’t own, I guess it is about $1.4 billion in these two conduits. How much is commercial paper and how did you continue to sell these papers to investors, even as a market maker with the potential that of the uncertainty in the liquidity of the conduits?

So let me try to answer the several points that you raised Michael. The overarching decision on our part not to link Sitka and Apex with Montreal Accord was from the outset that something that we stressed again today, that the type of underlying assets that we have in Apex and Sitka are definitely of a very different quality than the Montreal Accord had certainly at the beginning in August and September when their issues surfaced. And therefore we felt that it was not appropriate for us to actually be linked given the quality of our asset with the Montreal Accord. In terms of the other points and you have several. I think and why levered, I think the question is was a normal structure that we had in place and that was prevalent in the marketplace. And therefore, that's why you have that type of leverage in a conduit that we have at this point in time. Michael Goldberg - Desjardins Securities: Do you have any other conduits that only consist of leverage credit default swaps?

The answer is no. Michael Goldberg - Desjardins Securities: So this isn't a typical conduit. These aren't typical conduits.

Well, typical to other conduits, if you wish, where you would have leverage, sometimes even greater than the one that we have. Michael Goldberg - Desjardins Securities: Okay. And so, if you're not going to backstop these conduits, why would you participate in the Montreal Accord to backstop liquidity on conduits that you didn't sponsor?

So I think on that front it's a situation where we didn't have some exposure to the ABCP from third parties as we were acting -- and measuring the marketplace. So that's one aspect. And the other aspect is, at this point in time, I think we're considering given our role as a financial -- an important financial institutional in the marketplace, as to whether or not, we should actually participate and bring a solution to this issue. Michael Goldberg - Desjardins Securities: What does that mean?

Well, that means, that we feel that we are part of the overall Canadian financial system and there is an issue out there. And we have some exposure to that type of paper. And therefore, I don't think we can just side-side -- sit on the side and not try to bring a solution to that issue that is actually affecting the Canadian financial system.

Michael, we wanted to state a single question and your three or four part question had a lot of elements. And if I might just try to sum it up. I think that that the structure of Apex and Sitka with respect to leverage is similar to credits in the Montreal Accord. The reason why we didn't take Apex to the Montreal Accord is as Yvan said, it was consistent corporate credit portfolio typically BBB obligations. And so it didn't match up with the asset mix, but the type of solution that we're pursuing for Apex and the type of solution that the Montreal Accord is pursuing is very similar. And in that case the original providers of paper backup have fallen away; they were there in the original case, BMO wasn't. The restructurings involve additional investments, as I understand it, additional investments in those portfolios. So to the extent that there are high quality assets and the leverage has required additional capital in order to cover margin calls at any expectable level of default. That's what makes the solutions work. As far as the Montreal Accord goes, we have been on record from the outside that we are supportive of orderly solutions supported by the Canadian banks because we think it's in the best interest of the market and it's in the best interest of the country, and that's why we're prepared to be supportive. Michael Goldberg - Desjardins Securities: Thank you.

You're welcome.

Thank you. The following question is from Brad Smith from Blackmont Capital. Please go ahead. Brad Smith - Blackmont Capital: Yes. Thanks very much. I just wanted to revisit US ABCP and the impaired loan. I want to make sure I'm clear on what happened there. It strikes me that you basically acquired an impaired loan for about $460 million from this sponsored conduit and that the credit in question related to distressed mortgage financial institution purchaser, and you established I believe $50 million allowance for that position to roughly 11%, which is kind of a lower level than your overall allowance relative to your impaired loan portfolio. Two questions, could you explain what gives you the confidence so that your recovery is going to be as high as the 11% allowance makes it appear? And how did that credit, like what happened with that credit that caused it to go back in and otherwise highly rated conduit collateral pool? I just want to get some assurance that there aren't other credits like that in that ABCP conduits.

So let me start with the relapsed part of that, Brad, there were not other credits like that in those conduits. And this is a company that was buying distressed paper out of the subprime market but not only that. The way it made sense to them was they would buy it at a relatively deep discount and it would provide some reasonable loan-to-value coverage on each of the mortgages that they would acquire. And that worked and this is the model it had been operating for many years worked very successfully. And it typically recovered, I think they would take a -- revive a 30% discount and they would recover an additional kind of 15%. So it was a very profitable business for them. As the subprime market deteriorated and with its housing prices, the discount of 30% that they would buy this paper at was burned up as a result of the reduction in the values of the underlying properties. The amount of reservation that we have taken on this transaction is $39 million -- 38.5 actually million dollars. And we have taken it with a view to what we believe the underlying real estate values were supporting those mortgages and we did a fair bit of work on that and as to where we thought those things might go. So, a couple of things; one that's the nature of that particular entity. It was -- it is in difficulty and we didn't want it to mess up the view of the asset quality and [share], which is otherwise excellent. Brad Smith - Blackmont Capital: Okay. So, again, I'm correct you actually just paid cash for the asset -- for the credit?

Yeah we understand we're providing global-style liquidity backup facilities for the conduits in the US and always have. So, in the end that was going to back into the global-style liquidity facility in any event. So, there was no point in having this occur as well as impacting the balance of the funding or the excess with funding to that conduit. So, we pulled it out and put on our balance sheet. Brad Smith - Blackmont Capital: Is there a plan to actively exit that position or is it a hold to maturity-type position now?

Which, the 495? Brad Smith - Blackmont Capital: Yeah.

Yeah. We'll absolutely work on every angle we possibly can to minimize or whatever the loss impact in the end may turn out to be. Some of that paper has -- none of that paper has immediate maturity. So, in some cases it has maturity over 18 months in other cases you maybe able to sell the paper in another marketplace. But we're working our way through as quickly as we can. Brad Smith - Blackmont Capital: Thanks very much

All right.

Thank you. The following question is from Ian De Verteuil from BMO Capital Markets. Please go ahead. Ian De Verteuil - BMO Capital Markets: Hi, my question is for Bill. Bill, when we look at what's going on here the start of 2007 was a -- you know the problems on natural gas and commodity trading late in 2007 the problem was structured credit and that's carried over. And now we're starting to see credit deterioration that certainly by any metric appears to be within any of the other bank peers. I guess, it's hard to associate all three of these things with a bank that used to be described as a high return low risk institution. I guess from a macro point of view, what has changed to put the bank in the [arms wave] on so many fronts?

Well, I actually don't see the connection. It is clear that we had a significant problem in our commodities business last year and we see it as a discreet circumstance. We've taken steps to address that business directly and we've seen immediate benefit from that. It was a significant risk exposure even after it was identified and we worked our risks down very quickly inside the time, that I thought, it would take to get into it's current level or about in ordinary operating parameters and de-risked without a great deal of cost it could have been very expensive to move out of those positions quickly. So, I think the underlying capability of the organization was actually demonstrated in that regard. With respect to the structured credit market, we were one of the first banks to establish multi contributor conduits in Canada. It's a natural extension of our commercial banking business and it not only was the very large business globally but it's a large business for the Bank of Montreal and it continues top perform well. And similarly, I'd say with the two SIVs in the UK, Links and Parkland. They have been problematic because of the fact that the market has been so difficult from a funding perspective. But if you look at the underlying assets in Links and Parkland and the size of those programs, we were at $27 billion at the end of July. We've done exactly what we've said we were going to do in the reduction of them. We've done it in an orderly way and we protected the investors, the capital note holders and the senior note holders in those programs as well as the small amount of capital participation we had. So, we protected the interest of the bank and its shareholders as well as its customers. And at the last quarter end I know, there was commentary about how difficult it would be to continue to reduce these programs in the environment when they were sitting above $15 billion. But once again the quality of the assets and the quality of the people managing their business resulted in a reduction. So, that at the time February 19 when we said that they were now small enough that we felt that it was appropriate for us to provide backstop. They have come down once again significantly and where we sit today with Links at $9.9 billion is once again a very short period of time conformation of the strategy. And I think Parkland this morning was EUR880 million. And so, I guess I would -- not to dispute that the risky or non-risky nature of the business the underlying part of the assets and our strategy has proven itself. With respect to credit risk, it's hard to say whether we're in a complete credit cycle, the part of a complete credit cycle, where defaults are going to escalate rapidly across the whole system. But if you go back over the last 16 years and look at the credit cycle BMO has ramped up in the system has been early to recognize its own portfolio, any credits that require extra supervision. And as Bob said, in periods of benign credit, we've had significant recoveries because of the way we manage it. So, I think the characterization needs to be accurate and we take full responsibility for the first item that you mentioned. The commodity trading business was not something that was consistent with the way we operate. The structured products business we're working on our way through and the credit cycle will be what it is. But as Bob said, we've not changed the people in the key credit granting jobs in the company and we haven't changed the discipline. And as a consequence, we stand by the belief that we'll continue to have superior performance. Ian De Verteuil - BMO Capital Markets: I guess though when I think about all the actions you've detailed, everyone you've detailed -- will come after -- (inaudible) inflicted on shareholders. And so, I mean isn't it the job of risk management and the senior executives to ensure you don't take the $800 million loss before you fix the problem?

Well, not to prolong this discussion, we could carry on for a long time. But with respect to the $850 million, you're absolutely right. With respect to the other items, I believe that we're in the process of putting them behind us and when we do I'd expect that the revenue generating capability of the core businesses, which is very, very strong will be reflected in the share price of the stock once again. We have time, I think for one more question and then I think we probably run out.

Thank you. This concludes today's Q&A session. I'd like to turn the meeting back over to Ms. Lazaris.

Thanks for joining us today. We're looking forward seeing you on our Investors Day scheduled for April 15 in Toronto. At this event, we're going to focus on our Canadian and US Personal Commercial group and the Private Client Group. You will also have the opportunity to meet our leadership team there. Thanks again for joining us and if you've any further questions please give Investor Relations a call.

Thank you. This concludes today's conference call. Please disconnect your lines and thank you for your participation.