Share-based compensation

The grant date fair value of restricted share units and performance share units is based on the market value of our ordinary shares on the date of grant.

The effect of recording share-based compensation expense for the three and nine months ended March 27, 2020 and March 29, 2019 was as follows:


	Three Months Ended				Nine Months Ended
(amount in thousands)	March 27, 2020		March 29, 2019		March 27, 2020		March 29, 2019

Share-based compensation expense by type of award :
Restricted share units		4,094		3,621		12,678		11,650
Performance share units		2,024		803		5,623		1,723

Total share-based compensation expense		6,118		4,424		18,301		13,373
Tax effect on share-based compensation expense		—		—		—		—

Net effect on share-based compensation expense	$	6,118	$	4,424	$	18,301	$	13,373

Share-based compensation expense was recorded in the unaudited condensed consolidated statements of operations and comprehensive income as follows:


	Three Months ended				Nine Months Ended
(amount in thousands)	March 27, 2020		March 29, 2019		March 27, 2020		March 29, 2019

Cost of revenue	$	1,489	$	1,237	$	4,800	$	4,384
Selling, general and administrative expense		4,629		3,187		13,501		8,989

Total share-based compensation expense	$	6,118	$	4,424	$	18,301	$	13,373

The Company did not capitalize any share-based compensation expense as part of any asset costs during the three and nine months ended March 27, 2020 and March 29, 2019.

Share-based award activity

On December 12, 2019, the Company’s shareholders approved Fabrinet’s 2020 Equity Incentive Plan (the “2020 Plan”). Upon the approval of the 2020 Plan, Fabrinet’s Amended and Restated 2010 Performance Incentive Plan (the “2010 Plan”) was simultaneously terminated. The 2020 Plan provides for the grant of equity awards thereunder with respect to (i) 1,700,000 ordinary shares, plus (ii) up to 1,300,000 ordinary shares that, as of immediately prior to the termination of the 2010 Plan, had been reserved but not issued pursuant to any awards granted under the 2010 Plan and are not subject to any awards thereunder. Upon termination of the 2010 Plan, 1,281,619 ordinary shares were reserved for issuance under the 2020 Plan pursuant to clause (ii) of the preceding sentence. As of March 27, 2020, there were 30,262 restricted

share units outstanding, 3,836 performance share units outstanding and 2,946,847 ordinary shares available for future grant under the 2020 Plan.

As of March 27, 2020, there were 739,838 restricted share units and 436,304 performance share units outstanding

under the 2010 Plan.

ordinary shares are available for future grant under the 2010 Plan.

On November 2, 2017, the Company adopted the 2017 Inducement Equity Incentive Plan (the “2017 Inducement Plan”) with a reserve of 160,000 ordinary shares authorized for future issuance solely for the granting of inducement share options and equity awards to new employees. The 2017 Inducement Plan was adopted without shareholder approval in reliance on the “employment inducement exemption” provided under the New York Stock Exchange Listed Company Manual. As of March 27, 2020, there were an aggregate of 24,327 restricted share units outstanding and 111,347 ordinary shares available for future grant under the 2017 Inducement Plan.

The 2010 Plan, 2017 Inducement Plan and 2020 Plan are collectively referred to as the “Equity Incentive Plans.”

Restricted share units and performance share units

Restricted share units and performance share units have been granted under the 2010 Plan, the 2017 Inducement Plan, and the 2020 Plan.

Restricted share units granted to employees generally vest in equal installments over three or four years on each anniversary of the vesting commencement date. Restricted share units granted to

non-employee

directors generally cliff vest 100% on the first of January, approximately one year from the grant date, provided the director continues to serve through such date.

Performance share units granted to executives will vest, if at all, at the end of a

two-year

performance period based on the Company’s achievement of

pre-defined

performance criteria, which consist of revenue and

non-GAAP

gross margin

operating margin targets. The actual number of performance share units that may vest at the end of the performance period ranges from 0% to 100% of the award grant.

The following table summarizes restricted share unit activity under the Equity Incentive Plans:


	Number of Shares			Weighted- Average Grant Date Fair Value Per Share

Balance as of June 28, 2019		800,751		$	42.48
Granted		343,792		$	50.32
Issued		(321,659	)	$	40.82
Forfeited		(28,457	)	$	42.80

Balance as of March 27, 2020		794,427		$	46.54


	Number of Shares			Weighted- Average Grant Date Fair Value Per Share

Balance as of June 29, 2018		1,073,580		$	35.19
Granted		341,748		$	48.77
Issued		(496,854	)	$	34.08
Forfeited		(104,194	)	$	38.50

Balance as of March 29, 2019		814,280		$	41.14

The following table summarizes performance share unit activity under the Equity Incentive Plans:


	Number of Shares			Weighted- Average Grant Date Fair Value Per Share
Balance as of June 28, 2019		548,500		$	40.97
Granted		242,310		$	48.65
Issued		—			—
Forfeited		(350,670	)	$	36.99

Balance as of March 27, 2020		440,140		$	48.37


	Number of Shares			Weighted- Average Grant Date Fair Value Per Share
Balance as of June 29, 2018		605,892		$	38.41
Granted		201,994		$	48.02
Issued		(227,268	)	$	40.48
Forfeited		(27,954	)	$	39.35

Balance as of March 29, 2019		552,664		$	41.02

As of March 27, 2020, there was $15.0 million and $7.7 million of unrecognized share-based compensation expense related to restricted share units and performance share units, respectively, under the Equity Incentive Plans that is expected to be recorded over a weighted-average period of 2.5 years and 1.3 years, respectively.

For the nine months ended March 27, 2020 and March 29, 2019, the Company withheld an aggregate of 91,481 shares and 231,624 shares, respectively, upon the vesting of restricted share units, based upon the closing share price on the vesting date to settle the employees’ minimum statutory obligation for the applicable income and other employment taxes. For the nine months ended March 27, 2020 and March 29, 2019, the Company then remitted cash of $4.7 million and $10.4 million, respectively, to the appropriate taxing authorities, and presented it as a financing activity within the unaudited condensed consolidated statements of cash flows. The payment was recorded as a reduction of additional

paid-in

capital.