10. Stock options and share incentives

10. STOCK OPTIONS AND SHARE INCENTIVES
 
Tieto 2009 Stock Options
 
2009 C Stock Options
           
Initial number of Stock Options   600 000
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
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   96 159
Number of stock options expired during the year   145 675
Number of stock options converted during the year   0
Total number of stock options outstanding on 31 December 2016 0
Number of stock options held by Tieto Corporation on 31 December 2016 0
Total number of stock options exercisable on 31 December 2016 0
     
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 expiration the share subscription price was EUR 7.78.
 
 
Information related to stock options 2015
      Number of shares Weighted average exercise price
Shares under option at 31 December 2015 103 159 9.13
Granted       0 0.00
Exercised 1)       96 159 7.78
Forfeited       0 0.00
Expired       7 000 7.78
Shares under option at 31 December 2016 0 0.00
           
           
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 2016.
           
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 began 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.

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 2015, 3 768 shares were returned to the Company according to the terms and conditions of the Programme.

On 9 March 2016 a total of 53 402 Tieto Corporation shares were delivered to the Plan participants. This was divided as follows: from the third EPS Performance Period based on criteria attainment 12 897 shares and from TSR period 40 505 shares. In addition, a cash payment was made to cover taxes and tax related costs. On 31 December 2016 a total of 37 089 shares were under lock-up, the lock-up lasts until publication of year 2016 results.
           
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 2016 the plan includes 19 participants and the rewards to be paid in spring 2017 represents a value of 54 700 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 2015–2017 and a Restricted Share Plan 2015–2017. Tieto nominated 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 2015–2017

The potential reward from the Performance Share Plan 2015–2017 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 2015–2017 correspond to the value of an approximate maximum of 430 000 Tieto shares, including the proportion to be paid in cash.

On 31 December 2016 the plan includes 124 participants and the rewards to be paid in spring 2018 represents a value of 370 588 Tieto shares in the maximum (gross, including share and cash portions).

Restricted Share Plan 2015–2017

The reward from the Restricted Share Plan 2015–2017 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 2016 the plan includes 54 participants and the rewards to be paid in spring 2018 represents a value of 42 812 Tieto shares in the maximum (gross, including share and cash portions).
           
Share-based programmes 2016–2018
           
On 3 February 2016 the Board of Directors decided to establish new share-based incentive plans for key employees of Tieto and its subsidiaries, a Performance Share Plan 2016-2018 and a Restricted Share Plan 2016–2018. Tieto nominated 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 2019. 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 2016–2018

The potential reward from the Performance Share Plan 2016–2018 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 2016-2018. The rewards to be paid on the basis of the Performance Share Plan 2016–2018 correspond to the value of an approximate maximum of 430 000 Tieto shares, including the proportion to be paid in cash.

On 31 December 2016 the plan includes 130 participants and the rewards to be paid in spring 2019 represents a value of 401 600 Tieto shares in the maximum (gross, including share and cash portions).

Restricted Share Plan 2016–2018

The reward from the Restricted Share Plan 2016–2018 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 2016–2018. The rewards to be paid on the basis of the Restricted Share Plan 2016–2018 correspond to the value of an approximate maximum of 50 000 Tieto shares, including the proportion to be paid in cash.

On 31 December 2016 the plan includes 77 participants and the rewards to be paid in spring 2019 represents a value of 38 000 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.

For Performance Share Plans and Restricted share plans 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, expected outcome and expected dividends.

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

For share plan grants made in 2016, the fair value for the equity settled portion has been determined at grant using the following share price and expected dividends; cash portion is based on share price at year end:
Share price at grant: EUR 24.62
Expected dividends: EUR 3.89
Share price at year end: EUR 25.92
 
Stock Options, and Share-based Incentives effect on the result and financial position
           
EUR million         2016
Expenses for the financial year, share-based payments, equity settled 1.3
Expenses for the financial year, share-based, cash settled 2.1
Total expenses for the financial year, share-based payments 3.4
           
Liabilities arising from share-based payments 31 December 2016 3.4