Bank of Montreal 2010 Annual Report Download - page 148

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes
146 BMO Financial Group 193rd Annual Report 2010
Class B – Series 15 shares are redeemable at our option starting
May 25, 2013 for $25.00 cash per share, plus a premium if we redeem
the shares before May 25, 2017. The shares carry a non-cumulative
quarterly dividend of $0.3625 per share.
Class B – Series 16 shares are redeemable at our option on
August 25, 2013 and every five years thereafter for $25.00 cash per
share. If the shares are not redeemed on the redemption dates,
investors have the option to convert the shares into Class B – Series 17
Preferred shares and, if converted, have the option to convert back to
Series 16 Preferred shares on subsequent redemption dates. The Series 16
shares carry a non-cumulative quarterly dividend of $0.325 per share
until August 25, 2013. Dividends payable after August 25, 2013 on
the Series 16 and Series 17 Preferred shares will be set based on
prevailing market rates plus a predetermined spread.
Class B – Series 18 shares are redeemable at our option on
February 25, 2014 and every five years thereafter for $25.00 cash
per share. If the shares are not redeemed on the redemption dates,
investors have the option to convert the shares into Class B – Series 19
Preferred shares and, if converted, have the option to convert back to
Series 18 Preferred shares on subsequent redemption dates. The Series 18
shares carry a non-cumulative quarterly dividend of $0.40625 per share
until February 25, 2014. Dividends payable after February 25, 2014
on the Series 18 and Series 19 Preferred shares will be set based on
prevailing market rates plus a predetermined spread.
Class B – Series 21 shares are redeemable at our option on
May 25, 2014 and every five years thereafter for $25.00 cash per
share. If the shares are not redeemed on the redemption dates,
investors have the option to convert the shares into Class B – Series 22
Preferred shares and, if converted, have the option to convert back to
Series 21 Preferred shares on subsequent redemption dates. The Series 21
shares carry a non-cumulative quarterly dividend of $0.40625 per share
until May 25, 2014. Dividends payable after May 25, 2014 on the Series 21
and Series 22 Preferred shares will be set based on prevailing market
rates plus a predetermined spread.
Class B – Series 23 shares are redeemable at our option on
February 25, 2015 and every five years thereafter for $25.00 cash
per share. If the shares are not redeemed on the redemption dates,
investors have the option to convert the shares into Class B – Series 24
Preferred shares and, if converted, have the option to convert back to
Series 23 Preferred shares on subsequent redemption dates. The Series 23
shares carry a non-cumulative quarterly dividend of $0.3375 per share
until February 25, 2015. Dividends payable after February 25, 2015
on the Series 23 and Series 24 Preferred shares will be set based on
prevailing market rates plus a predetermined spread.
Common Shares
We are authorized by our shareholders to issue an unlimited number
of our common shares, without par value, for unlimited consideration.
Our common shares are not redeemable or convertible. Dividends
are declared by the Board of Directors on a quarterly basis and the
amount can vary from quarter to quarter.
During the year ended October 31, 2010, we issued 14,752,536
common shares primarily through our dividend reinvestment and share
purchase plan and the exercise of stock options. We did not issue any
common shares through a public offering.
During the year ended October 31, 2009, we issued 33,340,000
common shares through a public offering at a price of $30.00 per share,
representing an aggregate issuance of $1.0 billion. We also issued
12,330,922 common shares primarily through our dividend reinvestment
and share purchase plan and the exercise of stock options.
Normal Course Issuer Bid
On October 27, 2010, we announced our intention to renew our
normal course issuer bid, subject to the approval of the Office of
the Superintendent of Financial Institutions Canada (“OSFI”) and the
Toronto Stock Exchange under which we may repurchase for cancellation
up to 15,000,000 BMO common shares (representing approximately
2.7% of our common shares outstanding).
We participated in a normal course issuer bid during the period
from December 2, 2009 to December 1, 2010 under which we were
able to repurchase for cancellation up to 15,000,000 common shares,
approximately 2.7% of our common shares then outstanding.
During the years ended October 31, 2010, 2009 and 2008, we did
not repurchase any common shares.
Issuances Exchangeable into Common Shares
One of our subsidiaries, Bank of Montreal Securities Canada Limited
(“BMSCL”), has issued various classes of non-voting shares that can
be exchanged at the option of the holder for our common shares, based
on a formula. If all of these BMSCL shares had been converted into
our common shares, up to 252,023, 252,507 and 263,397 of our common
shares would have been needed to complete the exchange as at
October 31, 2010, 2009 and 2008, respectively.
Share Redemption and Dividend Restrictions
OSFI must approve any plan to redeem any of our preferred share
issues for cash.
We are prohibited from declaring or paying dividends on our
preferred or common shares when we 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 addition,
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.
In addition, we have agreed that if either BMO Capital Trust or
BMO Capital Trust II (the “Trusts”), two of our subsidiaries, fail to pay any
required distribution on their capital trust securities, we will not declare
dividends of any kind on any of our preferred or common shares for a
period of time following the Trusts’ failure to pay the required distribution
(as defined in the applicable prospectuses) unless the Trusts first pay such
distribution to the holders of their capital trust securities (see Note 18).
Shareholder Dividend Reinvestment
and Share Purchase Plan (“the Plan”)
We offer a dividend reinvestment and share purchase plan for our
share holders. Participation in the Plan is optional. Under the terms of
the Plan, cash dividends on common shares are reinvested to purchase
additional common shares. Shareholders also have the opportunity
to make optional cash payments to acquire additional common shares.
We may issue common shares from treasury at an average of
the closing price of our common shares on the Toronto Stock Exchange
based on the five trading days prior to the last business day of the
month or we may purchase them on the open market at market prices.
During the year ended October 31, 2010, we issued a total of 9,749,878
common shares (9,402,542 in 2009) under the Plan.
Potential Share Issuances
As at October 31, 2010, we had reserved 24,076,259 common shares
for potential issuance in respect of the Plan and 252,017 common shares
in respect of the exchange of certain shares of BMSCL. We also have
reserved 15,232,139 common shares for the potential exercise of stock
options, as further described in Note 22.
Treasury Shares
When we purchase our common shares as part of our trading business,
we record the cost of those shares as a reduction in shareholders’ equity.
If those shares are resold at a price higher than their cost, the premium
is recorded as an increase in contributed surplus. If those shares are
resold at a price below their cost, the discount is recorded as a reduction
first to contributed surplus and then to retained earnings for any amounts
in excess of total contributed surplus related to treasury shares.