EMPLOYEE BENEFITS:

Restricted Stock Awards

We have issued restricted shares to our employees and non-employee directors. The Plan reserves shares of Westwood common stock for issuance to eligible employees, directors and consultants of Westwood or its subsidiaries in the form of restricted stock and stock options. In April 2017, stockholders approved an additional 250,000 shares to be authorized under the Plan, increasing the total number of shares issuable under the Plan (including predecessor plans to the Plan) to 4,648,100 shares. In the event of a change in control of Westwood, the Plan contains provisions providing for the acceleration of the vesting of restricted stock. At December 31, 2017, approximately 454,000 shares remain available for issuance under the Plan.

The following table presents the total stock-based compensation expense recorded and the total income tax benefit recognized for stock-based compensation arrangements for the years indicated (in thousands):



	For the years ended December 31,
	2017		2016		2015
Service condition restricted stock expense	$	10,334	$	10,377	$	9,439
Performance-based restricted stock expense	5,387		4,927		7,403
Restricted stock expense under the Plan	15,721		15,304		16,842
Canadian Plan restricted stock expense	709		650		732
Total stock-based compensation expense	$	16,430	$	15,954	$	17,574
Total income tax benefit recognized related to stock-based compensation	$	6,168	$	4,749	$	6,217

Restricted Stock

Under the Plan, we have granted to employees and non-employee directors restricted stock subject to service conditions and to certain key employees restricted stock subject to both service and performance conditions. We accrue dividends on unvested restricted stock, which are due and payable upon vesting of restricted stock. Accrued dividends coming due within the next twelve months are included in "Dividends payable" on the Consolidated Balance Sheets, with the remaining noncurrent portion of accrued dividends included in "Accrued dividends" on the Consolidated Balance Sheets. At December 31, 2017, we had recorded $7.4 million and $1.7 million in Dividends payable and Accrued dividends, respectively. At December 31, 2016, we had recorded $6.7 million and $1.8 million in Dividends payable and Accrued dividends, respectively.

As of December 31, 2017, there was approximately $22.1 million of unrecognized compensation cost for restricted stock grants under the Plan, which we expect to recognize over a weighted-average period of 1.9 years. In order to satisfy tax liabilities that employees will owe on their shares that vest, we may withhold a sufficient number of vested shares from employees on the date vesting occurs to cover minimum tax withholding requirements. We withheld 87,946 shares in 2017 for this purpose. Our two types of restricted stock grants under the Plan are discussed below.

Restricted Stock Subject Only to a Service Condition

For the years ended December 31, 2017, 2016 and 2015, we granted restricted stock to employees and non-employee directors. Employee shares generally vest over four years and Director shares vest over one year. We calculate compensation cost for restricted stock grants using the fair market value of our common stock at the date of grant, the number of shares issued and an adjustment for restrictions on dividends. This compensation cost is amortized on a straight-line basis over the applicable vesting period.

The following table details the status and changes in our restricted stock grants that are subject only to a service condition for the year ended December 31, 2017:



	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested, January 1, 2017	607,501		$	54.67
Granted	143,460		61.20
Vested	(187,295	)	57.47
Forfeited	(44,291	)	54.99
Non-vested, December 31, 2017	519,375		$	55.44

The following table shows the weighted-average grant date fair value for shares granted and the total fair value of shares vested during the years indicated:



	Years ended December 31,
	2017		2016		2015
Weighted-average grant date fair value	$	61.20	$	47.97	$	61.42
Fair value of shares vested (in thousands)	$	10,764	$	9,497	$	7,797

Restricted Stock Subject to Service and Performance Conditions

Under the Plan, certain key employees were provided agreements for grants of restricted shares that vest over multiple year periods subject to achieving annual performance goals established by the Compensation Committee of Westwood’s Board of Directors. Each year the Compensation Committee establishes a specific goal for that year’s vesting of the restricted shares. For 2017, the goal is based on Income before income tax from our audited Consolidated Statement of Comprehensive Income for 2017. The date that the Compensation Committee establishes the annual goal is considered to be the grant date and the fair value measurement date to determine expense on the shares that are likely to vest. The final shares earned are determined when the Compensation Committee formally approves the performance-based restricted stock vesting based on the Income before income tax from the Company’s audited financial statements, and the service vesting period ranges from one to three years. If a portion of the performance-based restricted shares is not earned or does not vest, no compensation expense is recognized for that portion and any previously recognized compensation expense related to shares that are not earned or do not vest is reversed. In March 2017, the Compensation Committee established the 2017 goal for our Chief Executive Officer and Chief Information Officer as Income before income taxes of $24.0 million for 50% of their respective awards and an Income before income taxes target of $34.0 million (ranging from 25% of target for threshold performance of $30.3 million to 185% of target for maximum performance of $42.5 million) for the remaining 50% of their respective awards. For all other restricted stock grants subject to performance conditions, the Compensation Committee established the fiscal 2017 goal as Income before income taxes of at least $24.0 million. These performance grants allow the Compensation Committee to exclude certain items, including legal settlements, from the Income before income taxes target. At the Committee's discretion, we excluded the $4.0 million legal settlement expense recorded during the third quarter of 2017 from our Income before income taxes target. Throughout 2017, we concluded that it was probable that we would exceed the target performance goals required to vest the applicable percentage of the performance-based restricted shares this year and recorded expense related to the shares expected to be earned and vested.

The following table details the status and changes in our restricted stock grants subject to service and performance conditions for the year ended December 31, 2017:



	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested, January 1, 2017	153,620		$	55.90
Granted	160,340		54.86
Vested	(102,367	)	56.58
Forfeited	(45,675	)	55.86
Non-vested, December 31, 2017	165,918		$	55.85

The following table shows the weighted-average grant date fair value for shares granted and the total fair value of shares vested during the years indicated:



	Years ended December 31,
	2017		2016		2015
Weighted-average grant date fair value	$	54.86	$	55.90	$	61.29
Fair value of shares vested (in thousands)	$	5,792	$	6,209	$	5,936

The above amounts as of December 31, 2017 do not include 16,300 non-vested restricted shares that potentially vest over performance years subsequent to 2017, inasmuch as the Compensation Committee has not set annual performance goals for later years and therefore no grant date has been established.

Canadian Plan

As discussed in Note 2, the Canadian Plan provides compensation in the form of common stock for services performed by employees of Westwood International Advisors. Under the Canadian Plan, no more than $10 million CDN (or $8.0 million in U.S. Dollars using the exchange rate on December 31, 2017) may be funded to the Plan Trustee to fund purchases of common stock with respect to awards granted under the Canadian Plan. At December 31, 2017, approximately $3.4 million remains available for issuance under the Canadian Plan, or approximately 52,000 shares based on the closing share price of our stock of $66.21 as of the last business day of 2017. During 2017, the trust formed pursuant to the Canadian Plan purchased in the open market 23,822 Westwood common shares for approximately $1.3 million. On December 1, 2017, 22,091 shares vested at a total fair value of approximately $1.2 million. As of December 31, 2017, the trust holds 33,327 shares of Westwood common stock. As of December 31, 2017, unrecognized compensation cost related to restricted stock grants under the Canadian Plan totaled $676,000, which we expect to recognize over a weighted-average period of 1.8 years.

Mutual Fund Share Incentive Awards

We grant annually to certain employees mutual fund incentive awards, which are bonus awards based on our mutual funds achieving specific performance goals. Awards granted are notionally credited to a participant account maintained by us that contains a number of mutual fund shares equal to the award amount divided by the net closing value of a fund share on the date the amount is credited to the account.

For awards earned prior to 2017, the award vested after approximately one year of service following the year in which the participant earned the award. Beginning in 2017, the award vests after approximately two years of service following the year in which the participant earned the award. We begin accruing a liability for mutual fund incentive awards when we believe it is probable that the award will be earned and record expense for these awards over the service period of the award, which is either two or three years. During the year in which the amount of the award is determined, we record expense based on the expected value of the award. After the award is earned, we record expense based on the value of the shares awarded and the percentage of the vesting period that has elapsed. Our liability under these awards may increase or decrease based on changes in the value of the mutual fund shares awarded, including reinvested income from the mutual funds during the vesting period. Upon vesting, participants receive the value of the mutual fund share awards adjusted for earnings or losses attributable to the underlying mutual funds. For the years ended December 31, 2017, 2016, and 2015, we recorded expense of $1.2 million, $1.3 million and $1.2 million, respectively, related to mutual fund share incentive awards. As of December 31, 2017 and 2016, we had an accrued liability of $1.8 million and $1.7 million, respectively, related to mutual fund incentive awards.

Deferred Share Units

We have a deferred share unit (“DSU”) plan for employees of Westwood International Advisors. A DSU is an award linked to the value of Westwood’s common stock and is represented by a notional credit to a participant account. The value of a DSU is initially equal to the value of a share of our common stock. DSUs vest 20%, 40%, 60%, and 80% after two, three, four and five years of service, respectively. DSUs become fully vested after six years of service and the liability for these units is settled in cash upon termination of the participant’s service. We record expense for DSUs based on the number of units vested on a straight line basis, which may increase or decrease based on changes in the price of our common shares, and will increase for additional units received from dividends declared on our shares. As of December 31, 2017, we had an accrued liability of $632,000 for 10,796 deferred share units related to the 2012, 2013, 2014, 2015 and 2016 awards issued in 2013, 2014, 2015, 2016 and 2017, respectively, which is based on the $66.21 per share closing price of our common stock on the last trading day of the year ended December 31, 2017.

Benefit Plans

Westwood has a defined contribution and profit-sharing plan that was adopted in July 2002 and covers substantially all of our employees. Beginning with the 2017 contribution, discretionary employer profit-sharing contributions become fully vested after four years of service by the participant. Contributions prior to 2017 vest after six years of service by the participant. For U.S. employees, Westwood provides a 401(k) match of up to 6% of eligible compensation. For Westwood International Advisors employees, Westwood provides a Registered Retirement Savings Plan match of up to 6% of eligible compensation. These retirement plan matching contributions vest immediately.

The following table displays our profit-sharing and retirement plan contributions for the periods presented (in thousands):



	Years ended December 31,
	2017		2016		2015
Profit-sharing contributions	$	1,613	$	1,001	$	965
Retirement plan matching contributions	1,602		1,518		1,319