NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We have entered into derivative instruments in order to hedge our exposure to these plans.  three years following the year in which the bonus is earned, or in  a lump sum at the end of the three-year period. The bonus may be paid in cash, common shares or a combination of both.  Employee compensation expense related to these plans for the years ended October 31, 2002, 2001 and 2000 was $18, $25 and $3, respectively, net of the impact of hedging.  Changes in the fair value of these derivatives are recorded as employee compen- sation expense in the period in which they arise.  Employee compensation expense for these plans is recorded in the year the bonus is earned. Changes in the amount of the bonus payable as a result of dividends and share price movements are recorded as employee compensation expense in the period of the change.  During the years ended October 31, 2002, 2001 and 2000, payments of $8, $23 and $48, respectively, were made. The restructuring accrual as at October 31, 2002 was $6 and related to severance  payments to former employees in the form of salary continuance. In October 1999, we recorded a charge of $141 for exit costs  associated with restructuring initiatives. During the year ended October 31, 2000, we revised our estimate of the remaining costs  to execute our restructuring plan and reduced the liability by $43. NOTE 17 Restructuring Charge NOTE 18 Income Taxes We report our provision for income taxes in our Consolidated Statement of Income based upon transactions recorded in our consolidated financial statements regard- less of when they are recognized for income tax purposes, with the exception noted below for repatriation of retained earnings from our foreign subsidiaries. In addition, we record income tax expense or benefit directly in retained earn- ings for the tax effects of those items recorded in shareholdersGLYPH<213> equity. The net future income tax asset included in other assets is the cumulative amount of tax applicable to temporary differences between the accounting and tax values of our assets and liabilities. Future income tax assets and liabilities are measured at the tax rates expected to apply when these differences reverse. Changes in future income tax assets and liabilities related to a change in tax rates are recorded in income in the period of the tax rate change. We review the valuation of our future income tax assets on an ongoing basis and adjust our valuation allowance, as necessary, to reflect the realizable amount of our future income tax assets. We expect that we will realize our future income tax assets in the normal course of our operations. Provision for Income Taxes 2002 2001 2000 Consolidated Statement of Income Provision for income taxes $ 424 $ 501 $ 989  I ncome tax (benefit) related to amortization of goodwill — (6) (5) ShareholdersGLYPH<213> Equity I ncome tax expense (benefit) related to items recognized directly in retained earnings 77 (350) (153) To tal $ 501 $ 145 $ 831 Components of Total Income Taxes Canada: Current income taxes Federal $ 207 $ 95 $ 279 Provincial 46 32 109 253 127 388 Canada: Future income taxes Federal 132 (108) 43 Provincial 44 (36) 14 176 (144) 57  To tal Canadian 429 (17) 445  Foreign: Current income taxes (35) 198 312 Future income taxes 107 (36) 74  To tal Foreign 72 162 386  To tal $ 501 $ 145 $ 831 Components of Future Income Tax Balances 2002 2001 Future Income Tax Assets Allowance for credit losses $ 508 $ 572  Future employment benefits 165 165  Deferred compensation benefits 140 80  Other 119 181  932 998 Valuation allowance — — Total Future Income Tax Assets 932 998 Future Income Tax Liabilities Premises and equipment (394) (283) Pension (290) (186) Amortization of intangibles (81) (63) Other (58) (74) Total Future Income Tax Liabilities (823) (606) Net Future Income Tax Asset $ 109 $ 392  Set out below is a reconciliation of our statutory tax rates and income t ax that would be payable at these rates to the effecti ve income tax rates and provision for income taxes that we have recorded in our Consoli dated Statement of Income: 2002 2001 2000 Combined Canadian federal and provincial income taxes and statutory tax rate $ 727 38.3% $ 848 41.0% $ 1,230 42.2% Increase (decrease) resulting from: Tax-exempt income (99) (5.2) (93) (4.5) (128) (4.4) Foreign operations subject to different tax rates (197) (10.3) (161) (7.8) (151) (5.2) Non-taxable portion of gain on sale of investment in Bancomer — — (83) (4.0) — — Large corporations tax 15 0.8 15 0.7 14 0.5 Financial institutions temporary surcharge — — — — 11 0.4  Change in tax rate for future income taxes 9 0.4 38 1.9 11 0.4 Intangible assets not deductible for tax purposes 16 0.8 11 0.5 4 0.1 Other (47) (2.5) (74) (3.6) (2) (0.1) Provision for Income Taxes and Effective Tax Rate $ 424 22.3% $ 501 24.2% $ 989 33.9% 84 BMO FINANCIAL GROUP ANNUAL REPORT 2002