Bank of Montreal 2003 Annual Report Download - page 97

BMO Financial Group 186th Annual Report 2003 93
The following table summarizes information about our stock option plan:
(Canadian $, except as noted) 2003 2002 2001
Number Weighted- Number Weighted- Number Weighted-
of stock average of stock average of stock average
options exercise price options exercise price options exercise price
Outstanding at beginning of year 38,374,627 $ 30.21 32,997,743 $ 28.31 33,548,918 $ 18.64
Granted 2,244,800 40.90 7,485,500 35.70 6,774,750 38.45
Exercised 5,325,916 23.45 1,923,115 18.87 6,177,235 17.72
Forfeited/cancelled 81,071 34.00 185,501 31.63 1,148,690 28.31
Outstanding at end of year 35,212,440 31.89 38,374,627 30.21 32,997,743 28.31
Exercisable at end of year 13,337,147 28.29 11,955,097 23.95 7,443,288 21.92
Available for grant 6,080,612 3,097,341 10,342,140
Outstanding stock options as a % of outstanding shares 7.05% 7.79% 6.75%
No stock options expired during the years ended October 31, 2003, 2002 and 2001.
(3) The benefit liability and the fair value of plan assets in respect of plans that are not fully funded are as follows:
(Canadian $ in millions) Pension benefit plans Other employee future benefit plans
2003 2002 2001 2003 2002 2001
Accrued benefit liability $ 883 $ 926 $ 763 $ 711 $ 595 $ 537
Fair value of plan assets 544 572 596 55 55 54
Unfunded benefit liability $ 339 $ 354 $ 167 $ 656 $ 540 $ 483
(4) A continuity of the unrecognized cost (benefit) of plan amendments is as follows:
(Canadian $ in millions) Pension benefit plans Other employee future benefit plans
2003 2002 2001 2003 2002 2001
Unrecognized cost of plan amendments at beginning of year $ 33 $ 20 $ 78 $ – $ – $ –
Adoption of new accounting standard on November 1, 2000 –– (83) –––
Cost (benefit) of plan amendments initiated during the year – 15 24 (66) ––
Recognition in expense of a portion of the unrecognized cost of plan amendments (3) (2) (1) –––
Impact of foreign exchange (1) – 2 –––
Unrecognized cost (benefit) of plan amendments at end of year $ 29 $ 33 $ 20 $ (66) $ – $ –
Sensitivity of Assumptions
Key weighted-average economic assumptions used in measuring
the pension benefit liability, the other employee future benefits
liability and related expenses are outlined in the adjoining table.
The sensitivity analysis provided in the table should be used with
caution as it is hypothetical and changes in each key assumption
may not be linear. The sensitivities in each key variable have been
calculated independently of changes in other key variables.
Actual experience may result in changes in a number of key
assumptions simultaneously. Changes in one factor may result
in changes in another, which could amplify or reduce certain
sensitivities.
Other employee
Pension future benefits
Benefit Benefits Benefit Benefits
(Canadian $ in millions, except as noted) liability expense liability expense
Expected rate of return on assets (%) na 6.9 na –
Impact of: 1% increase na $ (31) na $ –
1% decrease na $31 na $ –
Discount rate (%) 6.2 6.5 6.4 6.7
Impact of: 1% increase $ (368) $ (13) $ (91) $ (4)
1% decrease $ 450 $ 16 $ 115 $ 4
Rate of compensation increase (%) 4.2 4.1 4.1 3.7
Impact of: .25% increase $26 $3 $ 1 $
–
.25% decrease $ (24) $ (3) $ (1) $ –
Assumed overall health care cost trend (%) na na 8.4 (1) 5.3 (2)
Impact of: 1% increase na na $91 $8
1% decrease na na $ (73) $ (6)
(1) Trending to 4.5% in 2013 and remaining at that level thereafter.
(2) Trending to 4.3% in 2005 and remaining at that level thereafter.
na
– not applicable
Stock Option Plan
We maintain a Stock Option Plan for designated officers and
employees. The options granted under the plan from 1995 to 1999
vest five fiscal years from November 1 of the year in which the
options were granted to the officer or employee, if we have met cer-
tain performance targets. The options granted since 1999 vest 25%
per year over a four-year period starting from their grant date. A
portion of the options granted since 1999 are subject to performance
targets. All options expire 10 years from the date they are granted.
Prior to November 1, 2002, when stock options were granted, no
compensation expense was recorded. When stock options were
exercised, we included the amount of the proceeds in share capital.
Note 19 Employee Compensation – Stock-Based Compensation