Bank of Montreal 2008 Annual Report Download - page 141

Notes
BMO Financial Group 191st Annual Report 2008 | 137
Note 23: Employee Compensation –Stock-Based Compensation
We determine the fair value of stock options on their grant date and
record this amount as compensation expense over the period that the
stock options vest, with a corresponding increase to contributed surplus.
When these stock options are exercised, we record the amount of
proceeds, together with the amount recorded in contributed surplus,
in share capital.
Stock Option Plan
We maintain a Stock Option Plan for designated officers, employees and
directors. Options are granted at an exercise price equal to the closing
price of our common shares on the day prior to the grant date. Options
granted under the plan from 1995 to 1999 vested five fiscal years from
November 1 of the year in which the options were granted to the officer
or employee, if we had met certain performance targets. 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
can only be exercised once certain performance targets are met.
All options expire 10 years from their grant date.
The following table summarizes information about our Stock Option Plan:
(Canadian $, except as noted) 2008 2007 2006
Weighted- Weighted- Weighted-
Number of average Number of average Number of average
stock options exercise price stock options exercise price stock options exercise price
Outstanding at beginning of year 20,656,713 $ 41.55 23,254,639 $ 38.55 26,919,349 $ 35.86
Granted 1,442,833 59.14 1,229,500 68.96 1,390,700 63.04
Exercised 1,778,586 31.65 3,774,644 31.86 5,014,557 30.87
Forfeited/cancelled 2,700 50.23 43,882 54.42 37,053 46.77
Expired 262,558 42.63 8,900 19.93 3,800 15.50
Outstanding at end of year 20,055,702 43.68 20,656,713 41.55 23,254,639 38.55
Exercisable at end of year 14,332,077 37.69 15,585,532 36.01 17,947,453 34.35
Available for grant 2,985,056 4,116,301 2,047,729
Outstanding stock options as a
percentage of outstanding shares 3.96% 4.14% 4.64%
Certain comparative figures have been reclassified to conform with the current year’s presentation.
Options outstanding and options exercisable as at October 31, 2008 and 2007 by range of exercise price were as follows:
(Canadian $, except as noted) 2008 2007
Options outstanding Options exercisable Options outstanding Options exercisable
Weighted- Weighted-
average Weighted- Weighted- average Weighted- Weighted-
Number remaining average Number average Number remaining average Number average
of stock contractual exercise of stock exercise of stock contractual exercise of stock exercise
Range of exercise prices options life (years) price options price options life (years) price options price
$20.01 to $30.00 2,227,815 1.0 $ 25.60 2,227,815 $ 25.60 2,492,855 2.0 $ 25.60 2,492,855 $ 25.60
$30.01 to $40.00 9,056,151 2.3 36.32 8,683,171 36.23 10,604,596 3.1 35.69 10,184,016 35.57
$40.01 to $50.00 1,991,004 4.2 41.16 1,720,703 40.90 2,019,800 4.8 40.95 1,855,104 40.96
$50.01 to $60.00 2,907,571 5.5 55.20 1,228,076 55.02 2,940,660 6.5 55.19 887,709 54.94
$60.01 and over 3,873,161 7.7 63.94 472,312 64.85 2,598,802 8.5 65.83 165,848 63.05
Certain comparative figures have been reclassified to conform with the current year’s presentation.
The following table summarizes nonvested stock option activity for the years ended October 31, 2008 and 2007:
(Canadian $, except as noted) 2008 2007
Weighted- Weighted-
Number of average grant Number of average grant
stock options date fair value stock options date fair value
Nonvested at beginning of year 5,071,181 $ 8.74 5,307,186 $ 8.89
Granted 1,442,833 8.24 1,229,500 7.56
Vested 790,389 10.61 1,442,754 8.25
Forfeited/cancelled ––22,751 10.16
Nonvested at end of year 5,723,625 $ 8.36 5,071,181 $ 8.74
Employee compensation expense related to this plan for the years
ended October 31, 2008, 2007 and 2006 was $12 million, $11 million and
$14 million before tax, respectively ($11 million, $10 million and $13
million after tax, respectively).
The intrinsic value of a stock option grant is the difference between
the current market price of our common shares and the strike price of
the option. The aggregate intrinsic value of stock options outstanding
at October 31, 2008, 2007 and 2006 was $104 million, $443 million
and $719 million, respectively. The aggregate intrinsic value of stock
options exercisable at October 31, 2008, 2007 and 2006 was $101 mil-
lion, $421 million and $629 million, respectively.