Our business strategy is founded on building strong and lasting relationships with our clients. In 2004, we advanced this principle on several fronts with our business and institutional clients, including small and medium enterprises and commercial markets clients. Moreover, the ongoing dialogue that comes with a strong relationship enables us to anticipate client needs and structure solutions accordingly.

To more effectively meet the financing needs of our targeted mid-market clients, we invested in the development of a new Financial Analysis Certification program and introduced the designation of Financing Specialists for employees who complete the training.

This investment in the new program is paying dividends in the form of higher client satisfaction. The number of mid-market business clients who say they are very satisfied with our financial advice has increased 50 per cent over the past three years. Furthermore, when Canadian mid-market companies were asked in the latest Maritz Research Market Survey to name their main financial institution, more companies continued to name RBC Financial Group than any other institution.

In 2004, we trained and placed specialized relationship managers in key markets focused on the needs of specific client segments such as Canadian manufacturers who exhibit high growth and professionals. Loyalty scores for clients managed by these specialists are 25 to 50 per cent higher than the overall segment.

In Canada, we continued in a lead market share position in both business deposits and business financing in 2004, with a business deposit market share of 20.20 per cent among banks and a business financing market share of 11.30 per cent among all financial institutions, both as at August 31, 2004.

We are seeking to build on this success with new service and product enhancements. For example, we have the capability to consolidate the financial services of a commercial account on both sides of the Canada-U.S. border, including the provision of credit facilities, operating accounts and a complete suite of electronic services in both countries. From the client’s perspective, this opportunity to have its North American banking needs managed by one financial institution greatly simplifies the management of its banking arrangements and clearly sets us apart from the competition.

Business owners are also taking advantage of today’s low interest rate environment to acquire or refinance the premises housing their operations. In Canada, this trend has led to strong growth in the volume of commercial mortgage activity, and we originated over $1.4 billion in commercial mortgages in 2004. Volume of term financing of real estate assets by small and medium enterprise businesses and sales of our Bricks and Mortar mortgage product, tailored to the needs of small business owners, grew at double-digit rates in 2004.

In parallel with providing individual clients the ability to view cheques online through RBC Online Banking in July, we successfully provided the same feature to our business clients. Throughout 2004, additional innovative features were added to enhance the online client experience for all business and individual clients. In particular, business clients were also provided with the ability to view business deposit slips online.

Our commitment to creating a superior client experience drove a number of initiatives that came to fruition in 2004. For example, in February, we completed the integration of our U.S. capital markets businesses within a common operating platform, RBC Capital Markets Corporation. This resulted in significant streamlining and brought increased efficiency to our U.S. equity research sales and trading activities.

A vibrant and active capital markets environment contributed to a strong year for our Global Capital Markets division. In Canada, where we are the recognized leader for combined debt and equity underwriting as measured by Thomson Financial, we were selected by the Government of Canada to lead the underwriting syndicate that raised $3.2 billion in a secondary offering of common shares for Petro-Canada in September 2004. This was the largest ever transaction of its kind in the history of the Canadian capital markets and, on a global scale, ranked as the fifth-largest privatization add-on in the past 10 years. The transaction, which enjoyed strong retail and institutional demand, underscored our ability to generate strong institutional orders on a North American basis. Our business strategy for RBC Capital Markets is driven by the belief that we can only achieve our goals by forging strong, deep and lasting relationships with our clients. The Petro-Canada transaction exemplifies this. We were lead underwriter for the Canadian government’s initial public offering of Petro-Canada shares in 1991. Since that time we have acted as the company’s lead advisor with respect to numerous financings and mergers and acquisitions transactions and have consistently provided clients research coverage, as well as being the number one trader in its shares.

Earlier in 2004, we acted as co-lead and joint book-runner for the $1.5 billion offering of trust units for Yellow Pages Income Trust, the largest ever bought deal in Canadian history.

In October 2004, RBC Capital Markets led the first offering of Enhanced Income Securities, an innovative structure in the U.S., analogous to Canadian Income Trusts and Real Estate Investment Trusts. We were the sole structuring advisor to B&G Foods Holdings Corp. and book-running manager for the initial public offering that raised US$300 million for the client.

Our Global Financial Products division also raised the bar on the fixed income side of the business. In Canada, for example, it led a $5.5 billion issue for Canada Mortgage and Housing Corporation – the largest single tranche offering in Canadian history – and co-led a highly successful $US2.25 billion issue for Alcan Inc. In Europe, our international bond group, based in London, jointly led three inaugural bond issues, for a total of US$10 billion, for Network Rail Infrastructure Limited, the state-sponsored company that runs the British Rail network. This marquee transaction demonstrated the strength of our world-class global placement capabilities.

RBC Capital Markets also initiated the sale and acted as the sole advisor to BreitBurn Energy Company LLC in the purchase of the company by Provident Energy Trust for $139 million. This acquisition represents the first U.S. energy company to be purchased by a Canadian oil and gas income trust.

At the end of the fiscal year we announced plans to combine the fixed income activities of RBC Dain Rauscher and RBC Capital Markets. The resultant business is expected to have nearly 1,200 employees in 48 locations in the U.S., Canada, Europe and Asia, serving 10,000 clients. Importantly, it will more sharply focus our ability to originate and distribute a broader range of fixed income products to our global client base.

We completed 44 municipal derivatives transactions in 2004, a significant reflection of our ability to serve the financing needs of U.S. municipal government clients. Our largest transaction in the sector was completed with a major city in the Midwest and had a notional amount of US$200 million. In July, we completed our first municipal derivatives transaction with a Florida municipal entity. This high-profile client was brought to RBC Dain Rauscher’s Fixed Income Group through our February 2004 acquisition of William R. Hough & Co., exemplifying the value that deal provides.

With a growing move of institutional investors into hedge funds, our Hedge Funds Service Group leveraged our existing Canada-based business by expanding prime brokerage services into the U.S. market. This service provides our U.S.-based hedge fund clients with integrated, custom-tailored prime brokerage products and solutions, including centralized custody, trading flexibility, securities lending, an interactive web-based portfolio management system and other services designed to provide increased transparency into hedge funds’ balance sheets. In developing this service, our U.S. Prime Brokerage group partnered with our Institutional Equity group and our Alternative Asset group to cross-market U.S. prime brokerage facilities.

Further evidence of new value-added services to our clients includes the expansion of the Global Currency Strategy group. This team, headquartered in London with staff in Toronto, New York and Sydney, provides clients with top-ranked currency strategy, market research and intelligence. Our Global Treasury Services division has also expanded its presence in the precious metals markets through the acquisition of a team in September 2004, based in London, that provides world-class global bullion products and services to central banks, institutional investors, mining companies and hedge funds.

The businesses making up our Global Services operations continued to leverage a solid and innovative product line and high standards of client service while generating a 26 per cent increase in net income over the previous year.

During 2004, we added more services to our Internet-based cash management delivery channel, RBC Express. The channel allows business clients of all sizes to access cash management services more easily and efficiently through a single and secure website. With the growing number of services available, we are well positioned to offer business clients a choice of online cash management products.

For the fifth year in a row, Stewart and Associates’ 2004 Survey of Bank Fees rated us first overall for quality of service in cash management in Canada. According to the 2004 Maritz: Thompson Lightstone Cash Management and Electronic Business Banking Study, we are perceived as the leader in technology and in cash management expertise in Canada. According to the survey, we continue to enjoy a substantial lead in market share. And, for the second consecutive year, Global Finance magazine named RBC Global Services “Best Trade Finance Bank in Canada.”

In August, we introduced RBC Online Global Trade Services, building on our strategy to move to web-based technology for the delivery of cash management and trade products. This Internet-based service provides clients an easy and efficient way to manage global trade activities.

With our launch of the new Automated Securities Lending Exchange, we introduced the first fully automated global lending service in Canada. This new product provides institutional clients with continuous broadcasts of RBC Global Services’ equity and fixed income inventory, the ability for borrowers to locate single or multiple lines of securities in an instant, automated order execution for single or multiple lines of securities and electronic settlement of transactions as part of a single process. During 2004, RBC Global Services’ Securities Lending program achieved a significant milestone by reaching over $55 billion in outstanding securities loans. This represents significant growth, up from an average of $32 billion in 2003, and demonstrates the overall strength of our Securities Lending program.

In 2004, we were named the best overall global custodian in Global Investor magazine’s 2004 Global Custody Survey, measured by overall client service and value for money. We also ranked number one for Best Global Custody Service in the R&M Consultants annual global custodian survey.