Bank of Montreal 2013 Annual Report Download - page 153

Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the prevailing 3-month market rates plus a pre-determined spread,
established prior to each dividend declaration date.
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 Preferred 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 Preferred 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 Preferred 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.
Class B – Series 25 shares are redeemable at our option on August 25,
2016 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 26 Preferred shares
and, if converted, have the option to convert back to Series 25 Preferred
shares on subsequent redemption dates. The Series 25 Preferred shares
carry a non-cumulative quarterly dividend of $0.24375 per share until
August 25, 2016. Dividends payable after August 25, 2016 on the
Series 25 and Series 26 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 our Board of Directors on a quarterly basis and the amount
can vary from quarter to quarter.
During the year ended October 31, 2013, we issued 4,137,401
common shares primarily through our dividend reinvestment and share
purchase plan and the exercise of stock options (11,730,081 in 2012).
Normal Course Issuer Bid
On February 1, 2013, we commenced our normal course issuer bid,
effective for one year, to repurchase for cancellation up to 15,000,000 of
our common shares. During the year, we repurchased 10,737,100 of our
common shares at an average cost of $62.89 per share.
Our previous normal course issuer bid, which allowed us to
repurchase for cancellation up to 15,000,000 of our common shares,
expired on December 15, 2011. During the year ended October 31, 2012,
we did not repurchase any common shares.
Issuances Exchangeable into Common Shares
One of our subsidiaries, Bank of Montreal Securities Canada Limited
(“BMSCL”), had issued various classes of non-voting shares that could be
exchanged at the option of the holder for our common shares, based on
a formula. During the year ended October 31, 2012, all of these BMSCL
shares were converted into 227,850 of our common shares.
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 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
We offer a dividend reinvestment and share purchase plan (“DRIP”) for
our shareholders. 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. Commencing with the dividend paid in the fourth
quarter of 2013, common shares to supply the DRIP were purchased on
the open market.
We may issue these common shares 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, 2013, we issued a total of 2,069,269 common
shares from treasury (9,738,842 in 2012) and purchased 700,362
common shares (Nil in 2012) in the open market under the plan.
Potential Share Issuances
As at October 31, 2013, we had reserved 9,320,400 common shares
(11,389,669 in 2012) for potential issuance in respect of our Shareholder
Dividend Reinvestment and Share Purchase Plan. We also have reserved
15,801,966 common shares (15,801,966 in 2012) 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.
Non-Controlling Interest
Included in non-controlling interest in subsidiaries as at October 31,
2013 were capital trust securities including accrued interest totalling
$1,068 million ($1,068 million in 2012) related to non-controlling
interest in subsidiaries and formed part of our Tier 1 regulatory capital.
During 2013, we redeemed the U.S. $250 million, 7.375% preferred
shares issued by Harris Preferred Capital Corporation, a U.S. subsidiary.
164 BMO Financial Group 196th Annual Report 2013