Bank of Montreal 1998 Annual Report Download - page 89

The Nesbitt Burns Corporation Limited, a subsidiary of Bank of
Montreal Securities Canada Limited, has issued non-voting Class D
shares which are exchangeable for our common shares. However,
we have the option of redeeming these shares for cash, if we choose,
with the amount based on the net book value of the shares.
As at October 31, 1998, we had reserved 6,327,942 common
shares for potential issue in respect of our Shareholder Dividend
Reinvestment and Share Purchase Plan, 5,074,783 common shares
in respect of the exchange of Class B, C, E and F shares of Bank of
Montreal Securities Canada Limited, 1,000,000 common shares in
respect of the exchange of Class D shares of The Nesbitt Burns
Corporation Limited and 29,275,585 common shares for the poten-
tial exercise of stock options.
Potential Share Issuances
The following table sets out the number of common shares which
we may issue in various circumstances:
1998 19 97
Issue Number Price per Number Price per
date of shares share of shares share
Stock Option Plan 1995 2,296,200 $ 25.50 2,414,400 $ 25.50
1996 2,760,700 31.00 2,838,500 31.00
1997 2,649,050 39.85 2,758,850 39.85
1997 75,000 57.50 75,000 57.50
1998 1,947,600 65.80 ––
1998 56,200 85.40 ––
9,784,750 8,086,750
Other options 1996 9,957,285 $ 36.50 9,957,285 $ 36.50
19,742,035 18,044,035
Other convertible
issuances 1992 1,605,021 $ 56.28 –$ –
1992 2,003,840 14.04 2,763,516 14.03
1994 662,622 19.09 2,237,474 18.07
4,271,483 5,000,990
To t a l 24,013,518 23,045,025
This table does not include certain share issues which are redeemable at our option or
subject to our ability to settle a conversion option with cash.
Stock options totalling 269,600 shares were exercised during the
current
year and options for 290,000 shares were exercised during
the prior year. The number of stock options cancelled during the
current year was 51,800 and options for 146,600 shares were can-
celled during the prior year. The weighted average exercise price of
all the options outstanding as at October 31, 1998 was $39.56 per
share and $32.64 per share as at October 31, 1997.
At a weighted average exercise price of $32.35 per share, 429,350
stock options were exercisable as at October 31, 1998 and at a
weighted average exercise price of $28.27 per share, 270,100 stock
options were exercisable as at October 31, 1997.
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BANK OF MONTREAL GROUP OF COMPANIES
We report our provision for income taxes in our Consolidated State-
ment of Income based upon transactions recorded in our consolidated
financial statements regardless of when they are recognized for income
tax purposes.
In addition, we record income tax expense or benefit directly in
retained earnings for those items recorded in shareholders’ equity.
NOTE 15 INCOME TAXES
Authorized
We are authorized by our shareholders to issue an unlimited
number of our common shares, without par value, providing the
aggregate consideration we receive for the shares does not exceed
$5.5 billion. We are authorized to issue an unlimited number of
Class A Preferred Shares and Class B Preferred Shares without par
value, in series, provided the aggregate amount of consideration
we receive for all Class A and Class B Preferred Shares does not
exceed $2.5 billion each. Class B Preferred Shares may be issued in
a foreign currency.
Redemption and Dividend Restrictions
The Superintendent of Financial Institutions Canada must approve
any plan to redeem any of our preferred share issues for cash.
We are prohibited from declaring dividends on our preferred or
common shares when we are, or would be as a result of paying such
a dividend, in contravention of the capital adequacy, liquidity or
any other regulatory directives issued under the Bank Act. In addi-
tion, common share dividends cannot be paid unless all dividends
declared and payable on our preferred shares have been paid or
sufficient funds have been set aside to do so.
Common Shares
We maintain a Stock Option Plan for designated officers and em-
ployees. The options granted under this plan can be exercised
starting five fiscal years from November 1 of the fiscal year in which
the options are granted to the officer or employee. The options
expire ten years from the date they are granted. The options can
only be exercised when we meet certain performance targets. When
the stock options are exercised we include the amount of the proceeds
in shareholders’ equity.
I
n 1996 we also granted options to Grupo Financiero Bancomer to
purchase up to 9,957,285 of our common shares as part of the con-
sideration paid for our investment in Grupo Financiero Bancomer.
The options can be exercised starting on March 29, 2001 and expire
on March 29, 2003. The options can only be exercised if Grupo
Financiero Bancomer meets certain performance targets. The value
we assigned to each option was $2.22, which has been included in
the value of common shares in shareholders’ equity.
One of our subsidiaries, Bank of Montreal Securities Canada
Limited, has issued various classes of non-voting shares which can
be exchanged for our common shares. Class B and C shares can be
exchanged at the option of the holder for our common shares. The
number of our common shares that will be issued on the exchange
of these shares is based on a formula. Class E and F shares can be
exchanged at the option of the holder on a one-for-one basis.