NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13 Other Liabilities Acceptances Securities Sold but not yet Purchased Securities Sold under Repurchase Agreements NOTE 14 Subordinated Debt NOTE 15 Share Capital Preferred Shares Acceptances represent a form of negotiable short-term debt that is issued by our customers and which we guarantee for a fee. We have an offsetting claim, equal to the amount of the acceptances, against our customers when the instrument matures. The amount due under acceptances is recorded as a liability and our  corresponding claim is recorded as an asset in our Consolidated Balance Sheet. Securities sold but not yet purchased represent our obligation to deliver securities which we did not own at the time of sale. These obligations are recorded at their  market value. Adjustments to the market value as at the balance sheet date and  gains and losses on the settlement of these obligations are recorded as interest,  dividend and fee income from securities in our Consolidated Statement of Income. Securities sold under repurchase agreements represent short-term funding transactions where we sell securities that we already own and simultaneously commit to repurchase the same securities at a specified price on a specified date in the future. These securities are recorded at their original cost. The interest expense related to these liabilities is recorded on an accrual basis. Subordinated debt represents our direct unsecured obligations to our debt holders and forms part of our regulatory capital. The rights of the holders of our notes and debentures are subordinate to the claims of depositors and certain other creditors. We require approval from the Superintendent of Financial Institutions Canada before we can redeem any part of our subordinated debt. Our subordinated debt consists of notes and debentures with interest rates ranging from 1.99% to 10.85%. The maturity dates extend from June 2003 to December 2040. The interest rates on certain debenture series are variable based on various indices. In addition, certain series of subordinated debt  are redeemable at our option on various dates prior to February 2012. Included in subordinated debt are debentures and subordinated notes denominated in U.S. dollars totalling US$950 as at October 31, 2002 and 2001. The Canadian dollar equivalent of these was $1,480 and $1,510 as at October 31, 2002 and 2001, respectively.  Outstanding (Canadian $ in millions, except per share information) 2002 2001 2000 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 1 — $  — $  — — $  — $ 0.57 10,000,000 $ 250 $ 2.25 Class B — Series 2 — — — — — US$ 1.28 10,000,000 381 US$ 1.69 Class B — Series 3 16,000,000 400 1.39 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 12,000,000 467 US$ 1.39 — — — — — — 1,517 1,050 1,681 Common Shares 492,504,878 3,459 1.20 489,084,527 3,375 1.12 522,583,894 3,173 1.00 Total Outstanding Share Capital $ 4,976 $ 4,425 $ 4,854 We are authorized by our shareholders to issue an unlimited num- ber 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 31,2002 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. During the year ended October 31, 2001 we redeemed all of our Class B – Series 1 preferred shares for $25.00 per share or $250, and all of our Class B – Series 2 preferred shares for US$25.00 per share or US$250. 80 BMO FINANCIAL GROUP ANNUAL REPORT 2002 Included in liabilities of subsidiaries, other than deposits are other short-term borrowings totalling $156 and $1,467 as at October 31, 2002 and 2001, respectively. Included in non-controlling interest in subsidiaries as at Octo- ber 31, 2002 and 2001 are capital trust securities totalling $1,150 that form part of our Tier 1 regulatory capital. During the year ended October 31,2002 we redeemed our Series 24 Debentures of $250, our Series 14 Debentures of $150 and our Series A medium term Debentures of $450. During the year ended October 31, 2001 we redeemed our Series 23 Debentures of $300. There was no gain or loss on redemption. Repayments of our subordinated debt required over the next five years and thereafter are: 20 03 $ 250 20 04 — 20 05 467 2 006 — 20 07 467 Ther eafter 2,610 To tal $ 3,794 2002 2001 Accep tances $ 6,901 $ 7,936 Securities sold but not yet purchased 7,654 6,609 Securities sold under repurchase agreements 24,796 17,480 $ 39,351 $ 32,025 Accounts payable, accrued expenses and other items 11,028 9,718 Liabilities of subsidiaries, other than deposits 168 1,481 Accrued interest payable 1,125 1,314 Unrealized losses and amounts payable  on derivative contracts (Note 23) 22,095 23,646 Non-controlling interest in subsidiaries 1,571 1,579 Ot her $ 35,987 $ 37,738 To tal $ 75,338 $ 69,763