Bank of Montreal 1999 Annual Report Download - page 93

Bank of Montreal Group of Companies 1999 Annual Report 87
Authorized
We are authorized by our shareholders to issue an unlimited num-
ber of our common shares, without par value, providing the aggre-
gate
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 considera-
tion 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, liquid-
ity or any other regulatory directives issued under the Bank Act.
In addition, common share dividends cannot be paid unless all
dividendsdeclaredandpayableonourpreferredshareshavebeen
paid or sufficient funds have been set aside to do so.
Common Shares
We maintain a Stock Option Plan for designated officers and
employees. The options granted under this plan can be exercised
starting five fiscal years from November 1 of the fiscal year in
whichtheoptionsaregrantedtotheofficeroremployee after
we have met certain performance targets. The options expire
ten years from the date they are granted. When the stock options
are exercised we include the amount of the proceeds in share-
holders’ equity.
In 1996 we also granted options to Grupo Financiero Bancomer
to purchase up to 9,957,285 of our common shares as part of
the
consideration paid for our investment in Grupo Financiero
Bancomer. The options can be exercised starting March 29, 2001
and expire on March 29, 2003. The options can only be exercised
if Grupo Financiero Bancomer meets certain performance targets.
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.
As at October 31, 1999, we had reserved 5,804,301 common
shares for potential issue in respect of our Shareholder Dividend
Reinvestment and Share Purchase Plan, 4,112,913 common
shares in respect of the exchange of Class B, C, E and F shares of
Bank of Montreal Securities Canada Limited and 28,601,085
common shares for the potential exercise of stock options.
Potential Share Issuances
The following table sets out the number of common shares which
we may issue in various circumstances:
1999 1998
Issue Number Price per Number Price per
date of shares share of shares share
Stock Option Plan 1995 2,028,100 $ 25.50 2,296,200 $ 25.50
1996 2,523,300 31.00 2,760,700 31.00
1997 2,437,550 39.85 2,649,050 39.85
1997 75,000 57.50 75,000 57.50
1998 1,937,900 65.80 1,947,600 65.80
1998 51,500 85.40 56,200 85.40
1999 4,754,600 60.35 ––
13,807,950 9,784,750
Other options 1996 9,957,285 $ 36.50 9,957,285 $ 36.50
23,765,235 19,742,035
Other convertible
issuances 1992
– $ – 1,605,021 $ 56.28
1992 1,450,312 13.79 2,003,840 14.04
1994 320,447 18.80 662,622 19.09
1,770,759 4,271,483
Total 25,535,994 24,013,518
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 674,500 shares were exercised during the
current year and options for 269,600 shares were exercised dur-
ing the prior year. The number of stock options cancelled during
the year ended October 31, 1999 was 89,200 and options for
51,8 00
shares were cancelled during the prior year. The weighted
average
exercise price of all the options outstanding as at October
31, 1999 was $47.10 per share, $39.56 per share as at October 31,
1998 and $32.64 per share as at October 31, 1997.
At a weighted average exercise price of $42.58 per share,
819,750
stockoptionswereexercisableasatOctober31,1999;ata
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.
The weighted average fair value of options granted during the
year ended October 31, 1999 was $12.33, $13.69 for those granted
during the year ended October 31, 1998 and $7.84 for those granted
during the year ended October 31, 1997. We determine the fair
value of each option granted using the Rolle-Geske Option Pricing
Model with the following assumptions:
■risk-free interest rate of 4.9% for 1999, 5.8% for 1998 and 6.7%
for 1997;
■expected period until exercise of 7.5 years for 1999, 7.5 years
for 1998 and 7.5 years for 1997;
■expected stock volatility of 19.8% for 1999, 16.0% for 1998 and
17.2% for 1997;
■expected dividend yield of 8.8% for 1999, 8.8% for 1998 and
6.2% for 1997.
Note 14 Restructuring Charge
In October 1999, we recorded a charge of $141 ($81 after tax)
for exit costs associated with restructuring initiatives of which
$13 had been paid as at October 31, 1999. We plan to complete
these restructuring initiatives by October 31, 2000.
The charge is comprised of $106 to eliminate 1,430 positions, $19
to meet leasehold obligations and $16 to write down fixed assets.
The charge includes exit costs related to the activities of
each of our operating groups: $67 for costs to realign the Bank’s
distribution system, including the closure of 105 branches in the
Personal and Commercial Client Group; $16 for costs to realign
investment and corporate banking activities, including certain
businesses in our London, England branch in the Investment
Banking Group; $6 for strategic repositioning of our wealth
management business into six new lines of business in the
Private Client Group; and $52 for costs to exit certain centrally
managed functions that are no longer required to support our
strategic initiatives.