Statement on Digia Management Emoluments

Statement on Digia Management Emoluments

This management emolument statement sets forth a summary of the financial benefits, remuneration system and thereto related decision-making pertaining to Board members and operative management of Digia Plc.

A) Description of the decision-making procedures concerning the remuneration of the Directors, the Managing Director, and the Other Executives

Board of Directors

Digia Plc's Nomination Committee prepares the emoluments payable to the Board of Directors and grounds for the compensation of expenses. The Shareholders' Meeting decides on emoluments payable to the Board of Directors and grounds for the compensation of expenses.

Managing Director and Other Executives

Digia Plc's Nomination Committee prepares the emoluments payable and other rewards and benefits for the Managing Director. Digia Plc's Nomination Committee prepares also, in co-operation with the Managing Director, the emoluments payable and other rewards and benefits for the Other Executives. If necessary, also outside experts and market surveys shall be used for the preparation. The Board of Directors decides on emoluments payable to the Managing Director and other rewards and benefits. The Board of Directors decides, based on Managing Director's proposal, on emoluments payable to the Other Executives and other rewards and benefits.

Digia's Annual General Meeting in 2015 has authorised the Board of Directors to decide on share issue and granting of special rights prescribed in the Companies Act, as decided by the Board of Directors. The authorisation includes the Board of Directors' right to decide on all terms relating to the share issue and granting of special rights. The authorisation is valid for 18 months from the issue date of the authorisation, i.e. until September 12, 2016. Digia's Board of Directors has not yet used the authorisation.

Digia Plc has conducted an agreement with Evli Alexander Management Ltd for coordination of company's share-based remuneration systems and related governance of shares and payment of rewards to the persons in question subject to the terms of the systems.


B) The most important principles regarding the remuneration of the Board of Directors, the Managing Director, and the Other Executives

Board Emoluments

The 2015 Annual General Meeting decided to pay monthly emoluments of EUR 2,500 to Board members, EUR 3,500 to the Vice Chairman and EUR 5,500 to the Chairman for their work on the Board. In addition, the AGM approved EUR 500 in fees per Board or committee meeting for all Board members. Moreover, the Shareholders' Meeting decided that standard and reasonable costs resulting from work on the Board would be reimbursed against invoice.

The company does not grant stock options or share-based remuneration for work on the Board.

Summary of the Managing Director (CEO) remuneration system

CEO Varelius's remuneration package comprises a monthly salary in accordance with his director agreement, a bonus payable on the basis of reaching the set targets and the share bonus payable pursuant to CEO’s share incentive scheme. In 2015 the CEO was paid EUR 282,045 in salary and fringe benefits.

In addition to the monthly salary the CEO is paid a bonus which is based on bonus schemes confirmed to domestic and Qt segments.

Based on domestic bonus scheme the CEO is paid annually a bonus which equals 1.5 month base salary upon fulfilment of annual net sales and profit budget targets set by the Board of Directors. 70% of the bonus is attributable to net sales target and 30% to profit target. Upon exceeding the said targets, the bonus shall increase up to a maximum amount equal to four and half (4.5) months base salary. Maximum bonus shall become payable if the net sales target is exceeded by a minimum of 8.2% and the profit target is exceeded by a minimum of 19.3%. Both targets are evaluated biannually independently, irrespective of each other, provided however that in the event the profit remains below 70.2% of the set target, no bonus shall be paid, irrespective of the net sales outcome. CEO Varelius is eligible for bonus under the domestic bonus scheme for as long as he remains CEO of Digia Plc, before starting as CEO of the new Qt company to be established upon the contemplated demerger of Digia Plc taking effect.

As for the Qt segment bonus scheme the earning criteria for the bonus is the increase of Qt net sales. Upon fulfilment of set net sales target, the CEO is paid a bonus equaling 40% of his annual base salary. Upon exceeding said target, the bonus will increase in a way that half of each euro that exceeds the net sales target is used for CEO's and other Qt business personnel's bonus rewards including social costs. The maximum bonus for CEO under the Qt bonus scheme is 120% of his annual base salary. No bonus shall, however, be paid if the profit of Qt business falls more than one million euros short of the profit budget target set. Fulfilment of bonus criteria is evaluated and possible rewards are paid biannually. As long as CEO Juha Varelius is eligible for a bonus also under the Domestic segment bonus scheme, he shall be paid 50% of the above rewards under the Qt bonus scheme.

The share-based remuneration schemes for the top management of the Company were decided by the Board in a meeting held on 12 March 2015 pursuant to authority given by the AGM. According to Board’s decision there will be two separate bonus schemes, one for the domestic business and another for the Qt business.


Based on the target outcome in fiscal year 2015, the CEO shall, under the domestic share bonus scheme, be entitled to a bonus equal to the value of 41,333 shares. Said bonus will be paid in a 50/50 combination of shares and cash after the adoption of the financial statements following the close of the respective earning period in spring 2016. Targets for the year 2016 under the current domestic share bonus scheme have not been set, as the Board has started preparations for an entirely new share bonus scheme for Digia.

Under the current Qt share bonus scheme, CEO Varelius is entitled to share bonus in the amount of the 36,000 shares, in case Digia share price reaches the minimum of EUR 4.50 at the end of the earning period in spring 2018. Bonus increases as the share price increases. Maximum bonus equal to the value of 180,000 shares will become payable if Digia’s share price will at the end of the earning period reach EUR 8.50. Said share bonus scheme shall, under its terms, terminate prematurely upon Digia's contemplated demerger taking effect. Consequently, also the earning period for the rewards shall expire upon such termination of the bonus scheme and the rewards payable for CEO Varelius shall be evaluated based on the average of Digia share price as emphasised with trading volume over a period of two weeks period preceding the demerger. Possible share bonus shall be paid in cash within one month after the effective date of demerger. Upon the demerger taking effect, the current share bonus scheme is intended to be replaced by a new long-term share-based incentive scheme for Qt key persons. Preparations for said new scheme have already been started.

Relating to Juha Varelius's role as a CEO of the new Qt company to be established in connection with the contemplated demerger taking effect, it has been agreed with Mr. Varelius that in addition to the above bonus schemes, Mr. Varelius is also eligible for a personal share based bonus scheme whereunder a bonus starts to accrue in case the share price of the new Qt company shall, after three years from the effective date of demerger, reach the minimum level EUR 4.50 whereupon CEO Varelius would be entitled to a share bonus equal to the value of 18,000 Qt shares. The amount of bonus will increase in linear upon increase of share price such that the maximum reward of 90,000 shares is payable when Qt share price reaches the limit of EUR 8.50. Should the share price exceed the maximum value of EUR 8.50 at the time of evaluation, the reward shall nevertheless be capped to a maximum amount of EUR 765,000. Bonus will be paid in a 50/50 combination of shares and cash.

None of the above bonus schemes include any lock-up periods designed to restrict the disposal of shares already granted to the CEO.

The company may terminate the CEO’s service contract with six (6) months' notice. Upon such termination, he will receive remuneration for the notice period plus severance pay equaling twelve (12) months' salary. The CEO’s retirement age is as stipulated by law, and he has no supplementary pension agreement with the company.

Summary of the remuneration system of Other Executives

Company's top management consist of the CEO, the CFO who together with the CEO forms the Group Management Team (GMT) and the Head of Domestic Segment. During the fiscal year 2015, CEO Juha Varelius has been heading both Domestic segment and Qt segment, and Juha Varelius will continue to head the Qt segment also in year 2016. Timo Levoranta has started as the Head of Domestic Segment in January 2016, and it has been agreed that Mr. Levoranta shall become the new CEO for Digia upon the contemplated demerger of Digia taking effect. Regarding information given in this statement for year 2015, Other Executives is deemed to consist of the substitute for the Head of Domestic Segment.

Total remuneration package of said directors comprises a monthly salary and the bonus payable on the basis of reaching the set targets. Annual salaries including fringe benefits for the CFO and Head of Domestic Segment (without possible bonuses and share-based incentives) amount the total of EUR 387,566 for the year 2016.


CFO is entitled to a merit bonus on same terms as the CEO. CFO shall, however, be a part of Qt bonus scheme only until the contemplated demerger of Digia taking effect. As of the demerger taking effect, only the domestic bonus scheme shall apply for the CFO and the maximum bonus for the CFO thereunder shall annually amount to CFO's six (6) months' base salary. Bonuses payable to the Head of Domestic Segment are tied to reaching the targets of Domestic segment on the same terms as the CEO, the maximum bonus amounting annually his nine (9) months' base salary. Bonus shall remain the same upon Timo Levoranta becoming the new CEO of Digia.

In addition, Other Executives are a part of share bonus scheme applicable to company's top management. Based on results of Domestic segment in year 2015, CFO and the substitute Head of Domestic Segment will be paid a total bonus of 12,105 Digia's shares on the same terms as the CEO.

In addition, based on share bonus scheme applicable to the Qt Segment, the CFO will, upon the contemplated demerger of Digia taking effect, be paid a bonus amounting to maximum of 15,000 Digia shares on the same terms as the CEO.

Retirement age of the directors is stipulated by law, and no one has a supplementary pension agreement with the company.

C) Remuneration report; information on the remuneration paid during the previous financial period

Board Emoluments

In the 2015 financial year, emoluments to the members of the Board of Directors for their work on the Board and Committees, were paid as follows:

Name Emoluments/EUR Share benefits/EUR  Total/EUR
Päivi Hokkanen 39,500

-

39,500
Robert Ingman 55,000 - 55,000
Kari Karvinen* 9,250 - 9,250
Pertti Kyttälä 77,500 - 77,500
Seppo Ruotsalainen 38,500 - 38,500
Leena Saarinen 40,500 - 40,500
Tommi Uhari 40,000 - 40,000
Kai Öistämö** 28,250 - 28,250
Yhteensä 328,500 - 328,500
* Member of the Board of Directors until 12 March 2015
** Member of the Board of Directors from 12 March 2015 onwards 
 

Emoluments of the CEO

In the 2015 financial year, emoluments and other benefits for the CEO for his work, were paid as follows:

Name

Salary (including fringe benefits)/EUR

Bonus/EUR

Share-based

part of

the bonus /EUR

Total/EUR

Juha Varelius 281,725

240,001

177,204 521,726
 

Emoluments of the Other Executives

In the 2015 financial year, emoluments and other benefits for the Other Executives for their work, were paid as follows:

Name

Salary (including fringe benefits)/EUR

Bonus/EUR

Share-based

part of

the bonus /EUR

 Total/EUR

Other Executives (two (2) persons) 276,298

127,803

56,960 404,101
 

Share-based incentives paid during fiscal year 2015

Share-based incentives for the CEO and Other Executives during fiscal year 2015 have been paid in accordance with Digia Plc's agreement with Evli Alexander Management Ltd for management of company's share incentive systems and payment of rewards to the persons in question under the terms of such systems.