Notes to the Consolidated Financial Statement

 

20. Share-based payments  

The Group has had stock option schemes in place since 15 September 1999 and has also offered share-based bonuses as part of the key personnel commitment and incentive scheme as of 31 May 2007. Options granted after 2003 have been recognised in the financial statements for 2005 in accordance with the standard IFRS 2 Share-based Payment.

At the end of the financial year, all A options in the 2005 scheme had expired. The Group operated the stock option scheme described below in the 2011 financial year:

Option scheme 2005

There were 900,000 options in the 2005 option scheme, entitling holders to subscribe a maximum of 900,000 shares in Digia Plc. The warrants marked 2005A expired on 30 November 2009, the warrants marked 2005B expired on 30 November 2010, and the warrants marked 2005C expired on 30 November 2011.

The options and related transactions are presented in full below:

 

Warrants 2005

2011

2005 A
2005 B
2005 C
       

Maximum number of options

300,000

300,000

300,000

Shares available for subscription per option

1

1

1

Original subscription price*

€4.33

 €3.98

 €3.93

Dividend adjustment

Yes

Yes

Yes

Subscription price, 31 December 2008

€4.10

  €3.80

€3.83

Subscription price, 31 December 2009

expired

 €3.75

€3.78

Subscription price, 31 December 2010 expired  €3.61    €3.64
Subscription price, 31 December 2011 expired expired expired

Vesting date

1/11/2007

1/11/2008

1/11/2009

Expiry date

30/11/2009

30/11/2010

30/11/2011

Exercise period, years

expired

expired

expired

Persons at end of financial period

 expired

expired

expired

 

 

 

 

Events in 2011 fiscal year

 

 

 

Amounts 1 January 2011      

Options in reserve

-

-

300,000

 

 

 

 

Changes during the period

 

 

 

Options expired

-

-

300,000

 

 

 

 

Amounts 31 December 2011

 

 

 

Options in reserve

-

-

       

* At the end of the fiscal year, the subscription price for warrants in force was determined as follows:
2005A: Trading-weighted average share price on the Helsinki Stock Exchange calculated for the 20 days following the publication of Digia’s Interim Report Q1/2005.
2005B: Trading-weighted average share price on the Helsinki Stock Exchange calculated for the 20 days following the publication of Digia’s Interim Report Q1/2006.
2005C: Trading-weighted average share price on the Helsinki Stock Exchange calculated for the 20 days following the publication of Digia’s Interim Report Q1/2007.


On the recorded date for each distribution of dividends, the share subscription price will be deducted by the amount of dividends for which the decision to distribute has been made between the beginning of the price-setting period and the date of subscription.

Determination of fair value

The fair value of the options is determined using the Black-Scholes option pricing model. A fair value is determined for the date of granting the options and charged to personnel expenses over the vesting period. The granting date is the date of the decision by Board of Directors. The company incurred no expenses from share options or from the conversion offer made as a part of the scheme in 2011 or 2010.

Comparison data for 2010

The following table presents the situation on 31 December 2010 as comparative data:

 

Option scheme

2010

 

2005 A

 

 2005 B

 

2005 C

 

Total

Amounts, 1 January 2010

-      

Options granted

 -

  148,000

 60,000

 208,000

Options returned

-

126,000

 60,000

 186,000

Shares subscribed using options

-

-

 -

 -

Options outstanding

-

 22,000

 0

 22,000

Options in reserve

-

 278,000

300,000

578,000

 

 

 

 

 

Changes during the period

 

 

 

 

Shares subscribed using options

-

11,000

-

11,000

     

 

 

Amounts, 31 December 2010

 

 

 

 

Options granted

-

148,000

60,000

208,000

Options returned

-

126,000

60,000

186,000

Shares subscribed with options (not yet registered)

-

11,000

-

11,000

Options outstanding

-

-

-

-

Options in reserve

-

278,000

300,000

578,000

         

Share-based bonuses

In addition to stock option schemes, the company offers share-based bonuses as part of its key personnel commitment and incentive scheme. The share-based bonus scheme offers the target group an opportunity to receive shares in Digia Plc shares as a reward for the achievement of specified goals set for an earning period. The Board of Directors decides the earning criteria for the scheme and specifies the targets, as well as the maximum remuneration for the earning period for each person belonging to the target group.

On 30 September 2009, the Board of Directors made the following decisions regarding share-based bonus systems for management and key personnel:

The CEO’s share-based incentive scheme covers the earnings periods 2009 and 2010. It entitles the CEO to a maximum bonus equal to the value of 160,000 company shares according to the terms of the scheme, based on the company’s EPS. The bonus is payable 50/50 in shares and cash and is made available to the CEO annually after the financial statements are approved.

In a system directed at key personnel, a maximum bonus totalling the value of 200,000 shares will be payable as a 50/50 combination of shares and cash. The earnings periods are 2009, 2010, 2011 and 2012. The bonus will be paid annually, without any disposition restrictions, beginning on 30 January 2010, depending on the fulfilment of certain goals set by the Board and on the condition that the recipient is still employed by the company on the payment date.


On 27 May 2010, the Board of Directors decided on a new share incentive scheme for the CEO and other members of the Group Management Team, as follows:

The scheme comprises four earning periods, which are the calendar years 2010–2013. The earnings principles are the consolidated earnings per share and the growth in consolidated net sales compared to the budget, according to formulae settled separately by the Board.

According to the scheme, rewards totalling a maximum value equivalent to 40,000 shares will be paid for the 2010 earning period, and a maximum value of 200,000 shares will be paid for each of the earning periods from 2011 to 2013. Of the rewards paid, one half will be awarded to the CEO and one half to the other management team members in total. The reward will be paid as a 50/50 combination of shares and cash. The cash portion of the bonus will primarily be used to cover taxes and other comparable costs of the scheme.

The scheme is a continuation of the management share incentive scheme initiated in 2009, which remains effective as planned.

The basic details of the schemes are listed in the table below. 

 

 

  Management group share-based incentive scheme 2010–2013

 

CEO's share-based incentive scheme
2009–2010

Key personnel share-based incentive scheme
2009–2010

 

 

 

 

Granting date

  27/05/2010

30/09/2009

30/09/2009

Instrument

 

Shares and cash

Shares and cash

 

Shares and cash

Target group

 

Management group

CEO

 

Key personnel

Maximum number of shares *

 

640,000

160,000

 

200,000

Beginning of the earning period

 28/05/2010

1/10/2009

1/10/2009

End of the earning period

31/3/2011 / 31/3/2012/ 31/3/2013 /31/3/2014

30/3/2010 / 30/3/2011

30/1/2010 / 30/1/2011/ 30/1/2012 /30/1/2013

Vesting condition

 

Earnings per share,
net sales growth and
employment requirement

 

Earnings per share, employment requirement

Earnings criterion, employment requirement

Maximum validity, years

3.2

1.5

3.3

Remaining validity, years

2.2

0.0

1.1

Number of persons (31 December 2011)

7

1

22

       

* In addition to the bonus payment in shares, a cash bonus is paid to cover the cost of taxes and similar expenses.

The items related to share-based incentive schemes in 2011 are given in the table below. Because the cash portion of the bonus payment is also recorded as a share-based expense, the sums below are gross, i.e. the bonuses include the shares and the equivalent cash sum.

Events in 2011 fiscal year

 

 

 Management group
share-based incentive scheme
2010–2013

 

CEO's share-based incentive scheme
2009–2010

Key personnel share-based incentive scheme
2009–2010

 

 

 

Total

Gross amounts, 1 January 2011 **

 

 

 

 

  Outstanding at beginning of period

640,000

80,000

150,000

870,000

 

 

 

 

 

Changes during the period

 

 

 

 

  Forfeited during the year

12,500

26,000

9,248

47,748

  Exercised during the year

27,500

54,000

40,752

122,252

 

 

 

 

 

Gross amounts, 31 December 2011 **

 

 

 

 

  Outstanding at end of period

600,000

0

100,000

700,000

  Available for exercising at end of period

600,000

0

100,000

700,000

         

** The amounts include the cash portion (in shares) granted according to the terms of the incentive scheme.

Determination of fair value

The fair value of share-based payments is determined on the day on which the scheme is agreed between the company and the recipient group. As the share-based bonus is paid as a combination of shares and cash, the determination of its fair value is divided into two parts in accordance with the IFRS 2 standard: the part settled in shares and the part settled in cash. The part settled in shares is recognised as shareholders’ equity and the part settled in cash as a liability. The fair value of the part settled in cash is revalued on each reporting date until the end of earning period, and thus the fair value of the liability changes in accordance with the price of the Digia share.

Expense effect of share-based incentive schemes on 2011 income statement


Effect on earnings
and financial position, € 000
 Management group
share-based
incentive scheme
2010–2013
CEO's
share-based
incentive scheme
2009–2010
Key personnel
share-based
incentive scheme
2009–2010
Total
Share-based payment expense for the fiscal year 160 48 87 296
Share-based payment expense for the
fiscal year, shareholders' equity 
122 23  54 199
Liabilities from share-based
payments, 31 December 2011
38 25  34 97
         

Comparison data for 2010

Effect on earnings
and financial position, € 000

 

 Management group

share-based incentive scheme 2010–2013

 

 CEO’s
share-based incentive scheme 2009–2010

 Key personnel
share-based
incentive scheme 2009–2010

Total

Share-based payment expense for the fiscal year

156

295

268

     720

Share-based payment expense for the fiscal year, shareholders' equity

72

96

100

267

Liabilities from share-based payments, 31 December 2010

84

101

114

299