NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

18. SHARE OPTION PLAN:

The Company established a share option plan in the year of its initial public offering. All employees of the Company and its affiliates are eligible to be granted options under the option plan. The plan provides that the number of shares reserved for issuance pursuant to stock options granted to any one person under the plan and all other share compensation arrangements cannot exceed 5 % of the outstanding common shares of the Company. 4,678,918 common shares of the Company have been reserved for issuance upon exercise of options granted under this plan, representing approximately 7% of the outstanding common shares of the Company.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2006: dividend yield of 2.75 percent; expected volatility of 25 percent; risk-free interest rate of 3.960 percent and expected life of seven years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2005: dividend yield of 2.5 percent; expected volatility of 25 percent; risk-free interest rate of 4 percent and expected life of seven years.

Options granted in 2006 have strike prices in the range of $47.304 to $49.635. Options granted in 2005 had strike prices in the range of $29.636 to $31.113.

Options granted will expire in 2011, 2012 and 2013.

Share options:

296,188 options were fully vested and exercisable at strike prices in the range of $10.529 to $31.113 at December 31, 2006.
During 2006, the Company recognized compensation cost of $2,553 (2005 - $2,023) in respect of its share option plan.