BMT.PR.A: Distribution Policy on Capital Shares Changed

According to the original 2004 prospectus:

It will be the policy of the Board of Directors to declare and pay quarterly dividends on the Capital Shares in an amount equal to the dividends received by the Company on the BMO Shares minus the distributions payable on the Preferred Shares and all administrative and operating expenses. Based on the current BMO Share dividends and estimated expenses of the Company, the Company expects to pay quarterly dividends of $0.0180 per Capital Share ($0.0720 per year or 0.47% of the Capital Share offering price).

The company has announced today:

that the Board has changed the dividend policy on the Capital Shares. As a result of the declining downside asset coverage on the Preferred Shares during the quarter, the Company has determined that any excess of the dividends received by the Company on the Bank of Montreal common shares minus the distributions payable on the Preferred Shares and all administrative and operating expenses will be invested in short-term debt securities or Bank of Montreal common shares until the scheduled redemption of the Company’s Capital Shares and Preferred Shares on August 5, 2009.

The preferred shares have asset coverage of 1.2-:1 as of January 2. They were caught up in the DBRS Mass Review of Splits and are currently under Review-Negative. I suspect the change in policy was prompted by discussions of this review.

BMT.PR.A is tracked by HIMIPref™. It would normally be included in the SplitShare index but has been relegated to “Scraps” on volume concerns.

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