Cogeco 2014 Annual Report Download - page 88

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Consolidated financial statements COGECO CABLE INC. 2014 87
At August 31, 2014, the range of exercise prices, the weighted average exercise price and the weighted average remaining contractual life
of options are as follows:
Options outstanding Options exercisable
Range of exercise prices Number
outstanding
Weighted
average
remaining
contractual life
(years)
Weighted
average
exercise price Number
exercisable
Weighted
average
exercise price
$$ $
26.63 to 34.46 158,050 3.12 29.85 149,537 27.40
38.08 to 40.45 184,663 7.85 39.08 47,590 39.08
41.95 to 49.82 116,039 5.74 48.29 73,327 48.75
50.10 to 58.12 271,950 9.16 50.12 — —
730,702 6.98 42.66 270,454 36.54
The weighted average fair value of stock options granted for the period ended August 31, 2014 was $10.56 ($8.00 in 2013) per option. The
weighted average fair value of each option granted was estimated at the grant date for purposes of determining share-based payment
expense using the Black-Scholes option pricing model based on the following weighted-average assumptions:
Years ended August 31, 2014 2013
%%
Expected dividend yield 2.05 2.56
Expected volatility(1) 24.87 26.49
Risk-free interest rate 1.87 1.53
Expected life (in years) 6.3 6.2
(1) The expected volatility is based on the historical volatility of the Corporation's subordinate voting shares for a period equivalent to the expected life of
the options.
ISU plan
The Corporation also offers a senior executive and designated employee ISU Plan. According to this plan, senior executives and designated
employees periodically receive a given number of Incentive Share Units (“ISUs”) which entitle the participants to receive subordinate voting
shares of the Corporation after three years less one day from the date of grant. For the year ended August 31, 2014, the Corporation granted
137,071 (112,347 in 2013) ISUs of which 12,550 (12,280 in 2013) ISUs were granted to COGECO Inc.’s senior executives who are also
senior executives of Cogeco Cable Inc. The Corporation establishes the value of the compensation related to the ISUs granted based on
the fair value of the Corporation’s subordinate voting shares at the date of grant and a compensation expense is recognized over the vesting
period, which is three years less one day. A trust was created for the purpose of purchasing these shares on the stock market in order to
protect against stock price fluctuation. The Corporation instructed the trustee to purchase 137,416 (101,047 in 2013) subordinate voting
shares of the Corporation on the stock market. These shares were purchased for cash consideration aggregating $6,934,000 ($4,076,000
in 2013) and are held in trust for the participants until they are fully vested. The trust, considered as a special purpose entity, is consolidated
in the Corporation’s financial statements with the value of the acquired shares presented as subordinate voting shares held in trust under
the ISU Plan in reduction of share capital. A compensation expense of $4,022,000 ($2,117,000 in 2013) was recorded for the year ended
August 31, 2014 related to this plan.
Under the ISU Plan, the following ISUs were granted by the Corporation and are outstanding at August 31:
Years ended August 31, 2014 2013
Outstanding, beginning of the year 209,608 149,802
Granted 137,071 112,347
Distributed (84,700) (44,141)
Cancelled (14,700) (8,400)
Outstanding, end of the year 247,279 209,608
DSU plan
The Corporation also offers a DSU Plan for members of the Board to assist in the attraction and retention of qualified individuals to serve
on the Board of the Corporation. Each existing or new member of the Board may elect to be paid a percentage of the annual retainer in the
form of deferred share units (“DSUs”) with the balance, if any, being paid in cash. The number of DSUs that a member is entitled to receive
is based on the average closing price of the subordinate shares on the TSX for the twenty consecutive trading days immediately preceding
the date preceding by one day the date of grant. Dividend equivalents are awarded with respect to DSUs in a member's account on the
same basis as if the member was a shareholder of record of subordinate shares on the relevant record date, and the dividend equivalents
are credited to the individual's account as additional DSUs. DSUs are redeemable upon an individual ceasing to be a member of the Board
or in the event of the death of the member. For the year ended August 31, 2014, the Corporation issued 7,228 DSUs (5,573 in 2013) to the