Share-based compensation plans

At December 31, 2017, Belmond had two share-based compensation plans, the 2004 stock option plan and the 2009 share award and incentive plan. The compensation cost that has been charged to selling, general and administrative expense for these plans was $5,809,000 for the year ended December 31, 2017 (2016 - $6,272,000; 2015 - $6,707,000). Cash received from exercised options and vested awards was $305,000 for the year ended December 31, 2017 (2016 - $17,000; 2015 - $35,000). The total compensation cost related to unexercised options and unvested share awards at December 31, 2017 to be recognized over the period January 1, 2018 to December 31, 2022, was $6,531,000 and the weighted average period over which it is expected to be recognized is 30 months. Measured from the grant date, substantially all awards of deferred shares and restricted shares have a maximum term of four years, and substantially all awards of share options have a maximum term of ten years. There were no grants under the 2004 stock option plan during the year ended December 31, 2017.

(a) 2004 stock option plans

Under the Company’s 2004 stock option plan, options to purchase up to 1,000,000 class A common shares could be awarded to employees of Belmond at fair market value at the date of grant. Options are exercisable three years after award and must be exercised ten years from the date of grant. At December 31, 2017, 15,300 class A common shares were reserved under the 2004 plan. At December 31, 2017, no shares remain available for future grants under the 2004 plan as these have been transferred to the 2009 plan described below which became effective in 2009.

Details of share option transactions under the 2004 stock option plan are as follows:



	Number of shares subject to options		Weighted average exercise price $	Weighted average remaining contractual life in years	Aggregate intrinsic value $’000

Outstanding — January 1, 2016	85,650		36.30
Exercised	(2,548	)	5.89
Forfeited, canceled or expired	(16,752	)	27.75

Outstanding — December 31, 2016	66,350		39.63
Exercised	(3,907	)	5.89
Forfeited, canceled or expired	(47,143	)	47.90

Outstanding — December 31, 2017	15,300		15.99	0.7	54

Exercisable — December 31, 2017	15,300		15.99	0.7	54

The options outstanding under the 2004 plans at December 31, 2017 were as follows:



Exercise prices $	Outstanding at 12/31/2017	Exercisable at 12/31/2017	Remaining contractual lives in years	Exercise prices for outstanding options $	Exercise prices for exercisable options $

5.89	8,500	8,500	0.9	5.89	5.89
35.85	2,600	2,600	0.7	35.85	35.85
46.08	2,200	2,200	0.4	46.08	46.08
51.90	2,000	2,000	0.2	51.90	51.90

	15,300	15,300

The fair value of options which were exercised in the year to December 31, 2017 was $8,000. No options vested and no options were granted under the plans during the year ended December 31, 2017.

(b) 2009 share award and incentive plan

The Company's 2009 share award and incentive plan became effective in June 2009 and replaced the 2000 stock option plan, 2004 stock option plan and 2007 performance share plan (the “Pre-existing Plans”). A total of 1,084,500 class A common shares plus the number of class A common shares subject to outstanding awards under the Pre-existing Plans which become available after June 2009 as a result of expirations, cancellations, forfeitures or terminations, were reserved for issuance for awards under the 2009 share award and incentive plan. In 2010, the 2009 plan was amended to increase by 4,000,000 the number of class A shares authorized for issuance under the plan, and in 2012 by another 5,000,000 class A shares.

The 2009 plan permits awards of stock options, stock appreciation rights, restricted shares, deferred shares, bonus shares and awards in lieu of obligations, dividend equivalents, other share-based awards, performance-based awards, or any combination of the foregoing. Each type of award is granted and vests based on its own terms, as determined by the Compensation Committee of the Company’s board of directors.

During 2017, the following awards were made under the 2009 share award and incentive plan on the following dates. Estimates of fair values of share options and deferred shares with and without performance criteria were made using the Black-Scholes options pricing model.



2009 share award and incentive plan	Class A common shares	Date granted	Vesting date	Exercise price	Expected share price volatility	Risk-free interest rate	Expected dividends per share	Expected life of awards
Share options	104,425	December 9, 2017	December 9, 2018	$12.25	27%	1.92%	$—	2.5 years
Share options	104,425	December 9, 2017	December 9, 2019	$12.25	27%	1.92%	$—	3.5 years
Share options	104,425	December 9, 2017	December 9, 2020	$12.25	28%	2.14%	$—	4.5 years
Share options	104,425	December 9, 2017	December 9, 2021	$12.25	31%	2.14%	$—	5.5 years
Share options	40,900	June 11, 2017	June 11, 2018	$13.45	29%	1.50%	$—	2.5 years
Share options	40,900	June 11, 2017	June 11, 2019	$13.45	29%	1.50%	$—	3.5 years
Share options	40,900	June 11, 2017	June 11, 2020	$13.45	30%	1.77%	$—	4.5 years
Share options	40,900	June 11, 2017	June 11, 2021	$13.45	34%	1.77%	$—	5.5 years

During the year ended December 31, 2017, the following deferred and restricted share awards were made under the 2009 share award and incentive plan on the following dates:



2009 share award and incentive plan	Class A common shares	Date granted	Vesting date	Purchase price

Restricted shares without performance criteria	56,390	June 11, 2017	June 11, 2018	$0.01
Restricted shares without performance criteria	48,872	June 11, 2017	June 11, 2020	$0.01
Restricted shares without performance criteria	11,278	June 11, 2017	On retirement	$0.01
Restricted shares without performance criteria	34,450	March 17, 2017	March 17, 2018	$0.01
Restricted shares without performance criteria	34,450	March 17, 2017	March 17, 2019	$0.01
Restricted shares without performance criteria	117,231	March 17, 2017	March 17, 2020	$0.01
Restricted shares without performance criteria	34,450	March 17, 2017	March 17, 2021	$0.01
Restricted shares with performance criteria	228,500	March 17, 2017	March 17, 2020	$0.01

Transactions relating to share options under the 2009 plan have been as follows:



	Number of shares subject to options		Weighted average exercise price $	Weighted average remaining contractual life in years	Aggregate intrinsic value $’000

Outstanding — January 1, 2016	2,702,957		10.97
Granted	518,300		11.61
Exercised	(59,833	)	9.35
Forfeited, canceled or expired	(516,935	)	10.77

Outstanding — December 31, 2016	2,644,489		11.17
Granted	581,300		12.59
Exercised	(107,552	)	8.76
Forfeited, canceled or expired	(428,830	)	11.22

Outstanding — December 31, 2017	2,689,407		10.75	7.3	2,940

Exercisable — December 31, 2017	1,516,388		11.34	6.0	2,087

The options outstanding under the 2009 plan at December 31, 2017 were as follows:



Exercise prices $	Outstanding at 12/31/2017	Exercisable at 12/31/2017	Remaining contractual lives in years	Exercise prices for outstanding options $	Exercise prices for exercisable options $


8.91	24,800	24,800	1.9	8.91	8.91
8.37	13,600	13,600	2.4	8.37	8.37
11.44	54,650	54,650	2.9	11.44	11.44
11.69	44,600	44,600	3.4	11.69	11.69
8.06	132,250	132,250	3.9	8.06	8.06
9.95	31,700	31,700	4.2	9.95	9.95
8.42	50,600	50,600	4.4	8.42	8.42
11.32	152,050	152,050	4.9	11.32	11.32
9.95	31,700	31,700	5.1	9.95	9.95
11.74	82,800	82,800	5.4	11.74	11.74
14.51	184,450	184,450	6.0	14.51	14.51
14.08	97,100	97,100	6.5	14.08	14.08
11.57	251,083	251,083	7.0	11.57	11.57
12.50	79,000	39,650	7.5	12.50	12.50
13.75	96,165	48,083	7.7	13.75	13.75
8.98	332,709	163,493	7.9	8.98	8.98
9.64	152,900	38,225	8.5	9.64	9.64
12.75	301,450	75,554	8.9	12.75	12.75
13.45	159,100	—	9.5	13.45	—
12.25	416,700	—	10.0	12.25	—

	2,689,407	1,516,388

The fair value of option grants made in the year to December 31, 2017 was $1,887,000. The fair value of options which became exercisable in the year to December 31, 2017 was $2,158,000. The fair value of options which were exercised in the year was $505,000. The number of options which vested during the year was 588,739.

Transactions relating to deferred shares and restricted shares under the 2009 plan have been as follows:



	Number of shares subject to awards		Weighted average exercise price $	Aggregate intrinsic value $'000

Outstanding — January 1, 2016	1,162,187		0.01
Granted	624,261		0.01
Vested and issued	(331,299	)	0.01
Forfeited, canceled or expired	(261,374	)	0.01

Outstanding — December 31, 2016	1,193,775		0.01
Granted	565,621		0.01
Vested and issued	(334,958	)	0.01
Forfeited, canceled or expired	(152,700	)	0.01

Outstanding — December 31, 2017	1,271,738		0.01	15,566

At December 31, 2017, awards of deferred shares and restricted shares on 1,271,738 class A common shares were reserved under the 2009 plan. Of these awards, 687,335 deferred shares and restricted shares do not specify any performance criteria and will vest up to March 2020. The remaining awards of up to 584,403 deferred shares are subject to performance criteria.

The fair value of deferred shares and restricted shares awarded in the year to December 31, 2017 was $4,923,000. The fair value of deferred shares vested in the year to December 31, 2017 was $3,925,000.

There were no vested and unissued deferred share or restricted shares awards as of December 31, 2017.

Estimates of the fair value of the share options on the grant date using the Black-Scholes options pricing model were based on the following assumptions:



Year ended December 31,	2017	2016	2015

Expected share price volatility	27% - 34%	29% - 40%	28% - 58%
Risk-free interest rate	1.50% - 2.14%	0.76% - 1.84%	0.65% - 1.83%
Expected annual dividends per share	$—	$—	$—
Expected life of share options	2.5 - 5.5 years	2.5 - 5.5 years	2.5 - 6.9 years