During the year ended October 31, 2001, we paid a stock dividend of one common share, with no value, for each outstanding common share. The stock dividend had the same effect as a two-for-one stock split. All common share balances have been restated to reflect this stock dividend. Issuances Exchangeable into Common Shares Class B – Series 3 shares are redeemable at our option starting August 25, 2004 for $25.00 cash per share, plus a premium if we redeem the shares before August 25, 2006, or an equivalent value of our common shares, and are convertible at the shareholder’s option starting May 25, 2007 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 $0.346875 per share. 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. In 1996 we granted options to Grupo Financiero BBVA Bancomer  to purchase up to 19,914,570 of our common shares as part of the consideration paid for our investment in Grupo Financiero BBVA Bancomer. These options were cancelled on December 18, 2000.  As a result, the $22 option value that was included in share capital in 1996 was reversed and an after-tax gain of $18 was recorded directly in retained earnings when the options were cancelled. One of our subsidiaries, Bank of Montreal Securities Canada Limited, has issued various classes of non-voting shares which can be exchanged at the option of the holder for our common shares, based on a formula. There were 1,133,722 and 1,379,960 of these shares  outstanding with a weighted average conversion price per share  of $8.50 and $8.95 as at October 31, 2002 and 2001, respectively. 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. 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 shareholder’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. The Superintendent of Financial Institutions Canada 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 are, or 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 dividendscannot 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 BMO Capital Trust, one of our subsidiaries, fails to pay any required distribution on its capital trust securities, we will not declare dividends of any kind on any  of our preferred or common shares. We are authorized by our shareholders to issue an unlimited number of our common shares, without par value, for unlimited consid- eration. 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. During the year ended October 31, 2001, we repurchased 52,000,000 sharesatanaveragecostof$39.06pershare,totalling$2,031.During the year ended October 31, 2000, 15,728,000 shares were repurchased at an average cost of $31.80 per share, totalling $500. AsatOctober31,2002,wehadreserved8,127,324commonsharesfor potential issue in respect of our Shareholder Dividend Reinvestment and Share Purchase Plans, 5,839,505 common shares in respect of the exchange of certain shares of Bankof Montreal Securities Canada Limited. We also have 41,471,968 common shares for the potential exercise of stock options, as further described in Note 16. Pension and other future employee benefits expenses are determined as the cost of employee benefits earned in the current year, interest expense on the accrued benefit obligation, expected investment return on the market value of plan assets, the amortization of deferred past service costs and the amortization of deferred actuarial gains and losses in excess of a predetermined range. Past service costs arise when we make plan amendments that result in the granting of benefits that are calculated by reference to service already provided by employees. We defer and amortize past service costs to expense over the average remaining service period of active employees. We provide a range of benefits to our employees, the costs of which are recorded in the year services are provided as employee compen- sation expense in our Consolidated Statement of Income. Information on pension benefits, certain other future employee benefits and stock-based compensation plans is provided below. We have a number of arrangements in Canada, the United States and the United Kingdom which provide pension and future employee benefits to our retired and current employees. Pension arrangements include statutory pension plans as well as supplemental arrange- ments which provide pension benefits in excess of statutory limits. Generally, we provide retirement benefits based on employees’ years of service and average earnings at the time of retirement and do not require employees to make contributions. Voluntary contributions can be made by employees. Other future employee benefits, includ- ing health and dental care benefits and life insurance, are provided for current and retired employees. Actuarial gains and losses can arise in one of two ways: first, when the actual return on plan assets for a period differs from the expected return on plan assets for that period, and second, when the expected accrued benefit obligation differs from the actual accrued benefit obligation at the end of the year. We defer and amortize all experience gains and losses in excess of a predetermined range to pension and other future employee benefits expense over the average remaining service period of active employees. Our accrued benefit asset related to pension benefits is included in other assets in our Consolidated Balance Sheet. The accrued benefit liability relating  to our supplemental pension arrangements and other future employee benefits is included in other liabilities. Our actuaries perform regular valuations of our accrued benefit obligation for pension and other future employee benefits based  on assumptions about salary growth, retirement age, mortality, and health care cost trend rates. Assets are set aside to satisfy our pen- sion obligation related to statutory pension plans, and a retirement compensation arrangement was set up in 2001 to fund supplemental pension arrangements in Canada. Our other future employee bene- fits obligation in the United States is partially funded; and our other future employee benefits obligation in Canada is unfunded. On November 1, 2000 we adopted a new accounting policy for pension and other future employee benefits plans. The impact of adopting the new standard was recorded as a decrease of $250 (net of tax of $171) in opening retained earnings. BMO FINANCIAL GROUP ANNUAL REPORT 2002 81 Change in Accounting Policy  Pension and Other Future Employee Benefits Plans NOTE 16 Employee Compensation Potential Share Issuances  Common Shares Share Redemption and Dividend Restrictions