Bank of Montreal 2004 Annual Report Download - page 112

BMO Financial Group Annual Report 2004108
Notes to Consolidated Financial Statements
Notes
Preferred Shares
We are authorized by our shareholders to issue an unlimited
number of Class A Preferred shares and Class B Preferred shares
without par value, in series, for unlimited consideration. Class B
Preferred shares may be issued in a foreign currency.
During the year ended October 31, 2004, we redeemed all of our
Class B Preferred shares, Series 3, at a price of $25.50 per share plus
any declared and unpaid dividends. The excess of the redemption
price over carrying value of $8 million was charged to retained
earnings in preferred share dividends.
During the year ended October 31, 2002, we issued 12,000,000
5.95% Non-Cumulative Class B Preferred shares, Series 10, at
a price of US$25.00 per share, representing an aggregate issue
price of US$300 million.
Preferred Share Rights and Privileges
Class B – Series 4 shares are redeemable at our option starting
August 25, 2005 for $25.00 cash per share, plus a premium if
we redeem the shares before August 25, 2007, or an equivalent
value of our common shares, and are convertible at the shareholder’s
option starting May 25, 2008 into our common shares; however,
we have the right to pay $25.00 cash per share instead. The shares
carry a non-cumulative quarterly dividend of $0.30 per share.
Class B – Series 5 shares are redeemable at our option starting
February 25, 2013 for $25.00 cash per share, and are not convertible.
The shares carry a non-cumulative quarterly dividend of $0.33125
per share.
Interest Rate Gap Position
The determination of the interest rate sensitivity or gap position
by necessity encompasses numerous assumptions. It is based
on the earlier of the repricing or maturity date of assets, liabilities
and derivatives used to manage interest rate risk.
The gap position presented is as at October 31 of each year.
It represents the position outstanding at the close of the business
day and may change significantly in subsequent periods based
on customer behaviours and the application of the Bank’s asset
and liability management policies.
The assumptions for 2004 were as follows:
Assets
Fixed term assets, such as residential mortgage loans and
consumer loans, are reported based upon the scheduled
repayments and estimated prepayments that reflect expected
borrower behaviour.
Trading and underwriting (mark-to-market) assets and
interest bearing assets on which the customer interest
rate changes with the prime rate or other short-term market
rates are reported in the zero to three months category.
Fixed rate and non-interest bearing assets with no
defined maturity are reported based upon expected account
balance behaviour.
Deposits/Liabilities
Fixed rate liabilities, such as investment certificates, are reported
at scheduled maturity with estimated redemptions that reflect
expected depositor behaviour.
Interest bearing deposits on which the customer interest
rate changes with the prime rate or other short-term market
rates are reported in the zero to three months category.
Fixed rate and non-interest bearing liabilities with no
defined maturity are reported based upon expected account
balance behaviour.
Capital
Common shareholders’ equity is reported as non-interest sensitive.
Yields
Yields are based upon the contractual interest rates in effect for
the assets or liabilities on October 31, 2004.
Class B – Series 6 shares are redeemable at our option starting
November 25, 2005 for $25.00 cash per share, plus a premium
if we redeem the shares before November 25, 2007, or an equivalent
value of our common shares, and are convertible at the share-
holder’s option starting November 25, 2008 into our common shares;
however, we have the right to pay $25.00 cash per share instead.
The shares carry a non-cumulative quarterly dividend of $0.296875
per share.
Class B – Series 10 shares are redeemable at our option starting
February 25, 2012 for US$25.00 cash per share, and are convertible
at our option starting February 25, 2012 into our common
shares. The shares carry a non-cumulative quarterly dividend
of US$0.371875 per share.
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 us on a quarterly basis
and the amount can vary from quarter to quarter.
Normal Course Issuer Bid
On August 10, 2004, we commenced a normal course issuer bid,
effective for one year. Under this bid, we may repurchase up
to 15,000,000 common shares, approximately 3% of our outstanding
common shares.
Note 18 Share Capital
Outstanding
(Canadian $ in millions, except as noted) 2004 2003 2002
Dividends Dividends Dividends
Number declared Number declared Number declared
of shares Amount per share of shares Amount per share of shares Amount per share
Preferred Shares
Class B – Series 3 – $ – $ 1.18 16,000,000 $ 400 $ 1.39 16,000,000 $ 400 $ 1.39
Class B
– Series 4 8,000,000 200 1.20 8,000,000 200 1.20 8,000,000 200 1.20
Class B
– Series 5 8,000,000 200 1.33 8,000,000 200 1.33 8,000,000 200 1.33
Class B
– Series 6 10,000,000 250 1.19 10,000,000 250 1.19 10,000,000 250 1.19
Class B – Series 10 12,000,000 396 US$ 1.49 12,000,000 396 US$ 1.49 12,000,000 467 US$ 1.39
1,046 1,446 1,517
Common Shares 500,896,857 3,857 1.59 499,632,368 3,662 1.34 492,504,878 3,459 1.20
Total outstanding share capital $ 4,903 $ 5,108 $ 4,976