United states securities and exchange commission

The dividend yield was set at zero because at the time the management incentive plan was valued and as of the date of this annual report, we do not have any plans to pay a dividend.

The volatility was determined based on average historical volatilities. Such volatilities were calculated according to a database including up to 18 months of historical stock price returns of U.S. and Latin American publicly traded airlines. The expected volatility reflects the assumption that the historical volatility of comparable companies is indicative of future trends, which may not necessarily be the actual outcome.

The risk-free interest rate is the interbank interest rate in Mexico, continuously expressed, accordingly to the corresponding term.

The expected life of the share options is an output of the valuation model, and represents the average time the option is expected to remain viable, assuming the employee does not leave during the vesting period.

The management incentive plan explicitly incorporates expectations of the employee’s early exercise behavior by assuming that early exercise happens when the stock price is a certain multiple, M, of the exercise price. The exercise multiple M, of 1.1x incorporates the assumption that the employee’s exercise of the options can occur when the share prices are 1.1 times the exercise price, i.e. 10% above the exercise price.

 

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On September 18, 2013, the key employees participating in the management incentive plan exercised 4,891,410 shares. As a result, the key employees paid Ps.25.9 million to the Management Trust corresponding to the exercised shares. Thereafter, we received from the Management Trust the payment related to the exercised shares by the key employees as a repayment of the loan between the Company and the Management Trust.

On November 16, 2015, as part of the secondary follow-on equity offering, the key employees exercised 4,414,860 Series A shares. The key employees paid Ps.23.5 million to the Management Trust corresponding to the exercised shares. Thereafter, we received from the Management Trust the payment related to the exercised shares by the key employees as a repayment of the loan between the Company and the Management Trust.

During 2016, the key employees participating in the management incentive plan exercised 3,299,999 Series A shares. The key employees paid Ps.17.5 million to the Management Trust corresponding to the exercised shares. Thereafter, we received from the Management Trust the payment related to the exercised shares by the key employees as a repayment of the loan between the Company and the Management Trust.

Movements during the year

The following table illustrates the number of share options and fixed exercise prices during the year:

 

		Number				Exercise price in Mexican pesos				Total in thousands of Mexican pesos
Outstanding as of December 31, 2012			25,164,126			Ps.	5.31			Ps.	133,723
Granted during the year			—				—				—
Forfeited during the year			—				—				—
Exercised during the year			(4,891,410	)			5.31				(25,993	)
Outstanding as of December 31, 2013			20,272,716			Ps.	5.31			Ps.	107,730
Granted during the year			—				—				—
Forfeited during the year			—				—				—
Exercised during the year			—				—				—
Outstanding as of December 31, 2014			20,272,716			Ps.	5.31			Ps.	107,730
Granted during the year			—				—				—
Forfeited during the year			—				—				—
Exercised during the year			(4,414,860	)			5.31				(23,461	)
Outstanding as of December 31, 2015			15,857,856			Ps.	5.31			Ps.	84,269
Granted during the year			—				—				—
Forfeited during the year			—				—				—
Exercised during the year			(3,299,999	)			5.31				(17,536	)
Outstanding as of December 31, 2016			12,557,857			Ps.	5.31			Ps.	66,733