Notes to the consolidated financial statements (IFRS)

21. STOCK OPTIONS AND SHARE INCENTIVES
 
Tieto 2009 Stock Options
 
2009 B Stock Options
Initial number of Stock Options   600 000
Number of stock options outstanding on 31 December 2014 262 866
Number of stock options held by Tieto Corporation on 31 December 2014 117 250
Number of stock options granted during the year   0
Number of stock options forfeited during the year   0
Number of stock options annulled during the year   0
Number of stock options exercised during the year   153 181
Number of stock options expired during the year   226 935
Number of stock options converted during the year   0
Total number of stock options outstanding on 31 December 2015 0
Number of stock options held by Tieto Corporation on 31 December 2015 0
Total number of stock options exercisable on 31 December 2015 0
       
Share subscription period 1 March 2013–31 March 2015  
Share subscription terms 1 share in exchange for 1 stock option. The share subscription price is EUR 16.87.1) The amount of the dividend or funds distributed through a distribution of funds from the distributable equity fund decided after the beginning of the share subscription price determination period but before the share subscription will be deducted from the share subscription price of stock options as per the relevant record date. At the expiration the share subscription price was EUR 11.89.
 
 
2009 C Stock Options
Initial number of Stock Options   600 000
Number of stock options outstanding on 31 December 2014 264 979
Number of stock options held by Tieto Corporation on 31 December 2014 123 800
Number of stock options granted during the year   0
Number of stock options forfeited during the year   14 875
Number of stock options annulled during the year   0
Number of stock options exercised during the year   146 945
Number of stock options expired during the year   0
Number of stock options converted during the year   0
Total number of stock options outstanding on 31 December 2015 103 159
Number of stock options held by Tieto Corporation on 31 December 2015 138 675
Total number of stock options exercisable on 31 December 2015 103 159
     
Share subscription period 1 March 2014–31 March 2016  
Share subscription terms 1 share in exchange for 1 stock option. The share subscription price is EUR 12.91.1) The amount of the dividend or funds distributed through a distribution of funds from the distributable equity fund decided after the beginning of the share subscription price determination period but before the share subscription will be deducted from the share subscription price of stock options as per the relevant record date. At the end of year 2015 the share subscription price was EUR 9.13.
 
 
Information related to stock options 2015
      Number of shares Weighted average exercise price
Shares under option at 31 December 2014 527 845 11.80
Granted       0 0
Exercised 1)       300 126 10.54
Forfeited       14 875 10.43
Expired       109 685 11.89
Shares under option at 31 December 2015 103 159 9.13
           
Based on the outstanding options 31 December 2015, the total number of shares may increase, at the maximum, as follows:
           
Stock option series Maximum of new shares based on outstanding options 1) Subscription period Exercise price, EUR
Stock option 2009 C 103 159 01.03.2014–31.03.2016 9.13
Total 103 159      
 
           
Tieto Corporation holds 138 675 options under the 2009 C stock options scheme. The Board of Directors shall decide on the allocation of these options to key employees of the Group at a later date. If all option rights in the company's possession are also taken into account, the number of shares could increase by a maximum of 241 834. In all the current option schemes, the persons covered by the scheme shall keep the options allocatecd to them if they are employed by Tieto on the starting date of the subscription period and if the performance criteria, if any, applicable to each allocation is achieved. Under the terms of the 2009 option scheme, the subscription price will be reduced annually by the amount of dividend per share.
           
The share subscription period of 2009 A stock options started on 1 March 2012 and ended on 31 March 2014, of 2009 B stock options the share subscription period started on 1 March 2013 and ended on 31 March 2015, and of 2009 C stock options the share subscription period started on 1 March 2014. A total of 300 126 shares were subscribed for with stock options during 2015.
           
The options outstanding by range of exercise prices at 31 December 2015
           
  Options outstanding Vested options outstanding
Exercise price EUR Number of shares Weighted average remaining contractual
life in years
Weighted average
exercise
price EUR
Number
of shares
Weighted average exercise
price EUR
9.13 103 159 0.3 9.13 103 159 9.13
           
Assumptions made in determining the fair value of the Stock Options
           
The fair grant value of the stock options has been determined using the Black & Scholes method.
No options were granted during 2015.
           
Share-based incentive plans      
           
Long-term Incentive Programme 2012–2014      
On 15 December 2011 the Board of Directors decided to establish a new share-based incentive plan, The Long-Term Incentive Programme 2012–2014. The Programme contains three annual performance periods based on EPS (Earnings per Share) measurement and one parallel three-year period based on relative TSR (Total Shareholder Return) measurement. The first performance period begun on 1 January 2012 and the final performance period ended on 31 December 2014.

The estimated maximum number of shares to be delivered to participants as a reward is 1.6 million gross shares. The share rewards delivered under the programme will entitle to dividends or the value thereof beginning from the dividend payout in 2013. The share rewards are to be acquired from the market and hence, the incentive programme will have no dilutive effect. Individual performance periods are followed by a lock-up period of two years for the executive management or one year for the other participants. The possible reward will be paid in the form of Tieto shares and a cash payment to cover taxes.

From the first EPS Performance Period based on criteria attainment 13 398 Tieto Corporation shares were delivered to the Leadership Team members in May 2013. In addition, a cash payment was made to cover taxes and tax related costs. The delivered shares were under transfer restriction until publication of the financial results from year 2014. In December 2013, 1 492 shares were returned to the Company according to the terms and conditions of the Programme. For other Participants, on 14 March 2014 a total of 30 975 Tieto Corporation shares were delivered as a reward from Performance Period 2012. In addition, a cash payment was made to cover taxes and tax related costs.

From the second EPS period no rewards were paid since the target performance criteria were not achieved.

On 5 March 2015 a total of 38 815 Tieto Corporation shares were delivered to the Leadership Team members. This was divided as follows: from the third EPS Performance Period based on criteria attainment 8 492 shares and from TSR period 30 323 shares. In addition, a cash payment was made to cover taxes and tax related costs. The delivered shares are under transfer restriction until publication of the financial results from year 2016. On 27 March, 3 768 shares were returned to the Company according to the terms and conditions of the Programme. For other Participants, the rewards will be paid in spring 2016. On 31 December 2015 the rewards to be paid in spring 2016 represents a value of 123 243 Tieto shares (gross, including share and cash portions).
           
Share-based reward plan
On 24 April 2014 the Board of Directors decided to establish a new share-based reward plan. The Plan consists of one earning period and it will run until the end of 2016. The rewards to be paid correspond to the value of 62 500 Tieto shares in the maximum.

The Board of Directors anticipates that shares to be delivered to the participants under the plan would consist of shares in the possession of the company or shares to be acquired from the market. Thus, no new shares will be issued in connection with the plan and, therefore, the incentive plan will have no dilutive effect. The possible reward will be paid in the beginning of 2017 in the form of Tieto shares and a cash payment to cover taxes. On 31 December 2015 the rewards to be paid in spring 2017 represents a value of 60 100 Tieto shares (gross, including share and cash portions).
 
           
Share-based programmes 2015–2017
           
On 4 February 2015 the Board of Directors decided to establish new share-based incentive plans for key employees of Tieto and its subsidiaries, a Performance Share Plan 2015 and a
Restricted Share Plan 2015. Tieto will nominate approximately 150 key employees, including Tieto's Leadership Team, to the plans.

The potential rewards from these incentive plans will be paid partly in the company's shares and partly in cash in 2018. The cash proportion is intended to cover taxes and tax-related costs arising from the reward. As a rule, no reward will be paid, if a participant's employment or service ends before the reward payment. The Board of Directors anticipates that share rewards to be delivered to the participants under the plan will consist of shares to be acquired from the market. Thus, no new shares will be issued in connection with the plan and, therefore, the incentive plan will have no dilutive effect.

Performance Share Plan 2015

The potential reward from the Performance Share Plan 2015 will be based on the relative Total Shareholder Return of Tieto share (TSR), strategic target related to Tieto's growth and on Tieto's Earnings per Share (EPS). Performance will be measured during 2015–2017. The rewards to be paid on the basis of the Performance Share Plan 2015 correspond to the value of an approximate maximum of 430 000 Tieto shares, including the proportion to be paid in cash.

On 31 December 2015 the rewards to be paid in spring 2018 represents a value of 391 948 Tieto shares in the maximum (gross, including share and cash portions).

Restricted Share Plan 2015

The reward from the Restricted Share Plan 2015 will be based on a valid employment or director agreement of a key employee upon the reward payment. The reward will be paid after the end of a three-year vesting period 2015–2017. The rewards to be paid on the basis of the Restricted Share Plan 2015 correspond to the value of an approximate maximum of 50 000 Tieto shares, including the proportion to be paid in cash.

On 31 December 2015 the rewards to be paid in spring 2018 represents a value of 20 232 Tieto shares in the maximum (gross, including share and cash portions).
           
Assumptions made in determining the fair value of the Share-based incentive plans
           
In LTI 2012–2014 the grant was made in EUR and the fair value was that EUR amount divided into liability and equity portions. After the Performance Period, the amount is converted into shares after which the liability will change in accordance with Tieto Corporations share price.

The fair value for the cash settled portion is remeasured at each reporting date until the possible share delivery.

For share plan grant made in 2015, the fair value for the equity settled portion has been determined at grant using the fair value of Tieto Corporation share as of the grant date and expected dividends.
Share price at grant: EUR 22.65
Expected dividends: EUR 3.58
Share price at year end: EUR 24.72
 
Stock Options, and Share-based Incentives effect on the result and financial position
           
EUR million         2015
Expenses for the financial year, share-based payments, equity settled 1.0
Expenses for the financial year, share-based, cash settled 1.7
Total expenses for the financial year, share-based payments 2.7
           
Liabilities arising from share-based payments 31 December 2015 2.9