Bank of Montreal 2013 Annual Report Download - page 166

Note 27: Related Party Transactions
Related parties include subsidiaries, associates, joint ventures, key
management personnel and employee future benefit plans. Key
management personnel are defined as those persons having authority
and responsibility for planning, directing and/or controlling the activities
of an entity, being the directors and nine most senior executives in 2013
(nine in 2012).
Key Management Personnel Compensation
The following table presents the compensation of key management
personnel.
(Canadian $ in millions) 2013 2012
Base salary and incentives 15 14
Share-based payments (1) 22 23
Total key management personnel compensation 37 37
Excluded from the table above are post-employment benefits of $2 million in 2013 and 2012.
Termination benefits and other long-term benefits were $nil in 2013 and 2012.
(1) Amounts included in share-based payments are the fair values of awards granted in the year.
We provide certain banking services and loans to our key
management personnel at market terms and conditions. Loans to key
management personnel totalled $3 million and $2 million as at
October 31, 2013 and 2012, respectively. Interest on these loans was
less than $1 million in the years ended October 31, 2013 and 2012.
None of the loans or mortgages to key management personnel are at
preferred rates.
Deferred Share Units
Members of our Board of Directors are required to take 100% of their
annual retainers and other fees in the form of either our common shares
(purchased on the open market) or deferred share units until such time
as the directors’ shareholdings are greater than eight times their annual
retainers as directors. Directors receive a specified amount of their
annual retainer fee in either common shares or deferred share units.
They may elect to take all or part of the remainder of the retainer fee in
cash, or in additional common shares or deferred share units.
Deferred share units granted under these deferred share unit plans
are adjusted to reflect dividends and changes in the market value of our
common shares. The value of these deferred share units is paid upon
termination of service as a director.
Liabilities related to these plans are recorded in other liabilities in
our Consolidated Balance Sheet and totalled $37 million and $31 million
as at October 31, 2013 and 2012, respectively.
Members of the Board of Directors of our wholly owned subsidiary,
BMO Financial Corp., are required to take a specified minimum amount
of their annual retainers and other fees in the form of deferred
share units.
Joint Ventures and Associates
We provide banking services to our joint ventures and associates on the
same terms that we offer to our customers for these services.
Our common share investment in a joint venture of which we own
50% totalled $125 million as at October 31, 2013 ($442 million in 2012).
Our investments in associates over which we exert significant
influence totalled $225 million as at October 31, 2013 ($291 million
in 2012).
Employees
A select suite of customer loan and mortgage products is offered to
employees at rates normally accorded to preferred customers. We also
offer employees a fee-based subsidy on annual credit card fees.
Note 28: Provisions and Contingent Liabilities
(a) Provisions
Provisions are recognized when we have an obligation as a result of past
events, such as contractual commitments, legal or other obligations. We
recognized as a provision the best estimate of the amount required to
settle the obligation as of the balance sheet date, taking into account the
risks and uncertainties surrounding the obligations.
Contingent liabilities are potential obligations that may arise from
past events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more future events not wholly within our
control. Contingent liabilities are disclosed in our consolidated financial
statements.
Changes in the provision balance during the year are as follows:
(Canadian $ in millions) 2013 2012
Balance at beginning of year 237 142
Additional provisions/increase in provisions 138 263
Provisions utilized (150) (136)
Amounts reversed (15) (32)
Exchange differences and other movements (1) –
Balance at end of year 209 237
(b) Legal Proceedings
BMO Nesbitt Burns Inc., an indirect subsidiary of the bank, has been
named as a defendant in several individual actions and proposed class
actions in Canada and the United States brought on behalf of
shareholders of Bre-X Minerals Ltd. Many of the actions have been
resolved as to BMO Nesbitt Burns Inc., including two during the year
ended October 31, 2010. Management believes that there are strong
defenses to the remaining claims and will vigorously defend them.
The bank and its subsidiaries are party to other legal proceedings,
including regulatory investigations, in the ordinary course of business.
While there is inherent difficulty in predicting the outcome of these
proceedings, management does not expect the outcome of any of these
other proceedings, individually or in the aggregate, to have a material
adverse effect on the consolidated financial position or the results of
operations of the bank.
Notes
BMO Financial Group 196th Annual Report 2013 177