Note 4: Employee benefits

The average number of employees working outside the Netherlands was 41,200 (2014: 43,100).

At year-end 2015, the workforce reduced by 3 percent to 45,600 employees (year-end 2014: 47,200 employees), mainly due to ongoing restructuring and divestments.

Share-based compensation

Share-based compensation relates to the performance-related share plan, as well as the share-matching plan. Charges recognized in the 2015 statement of income for share-based compensation amounted to €33 million and are included in salaries and wages (2014: €34 million).

Performance-related share plan

Under the performance-related share plan, a number of conditional shares are granted to the members of the Board of Management, members of the Executive Committee and executives each year. The number of participants of the performance-related share plan at year-end 2015 was 593 (2014: 635).

The 2013 conditional grant of shares is linked for 30 percent to the ranking of the company in the RobecoSAM benchmark (SAM), 35 percent to the return on investment (ROI) performance of the company and the remaining 35 percent to the relative TSR performance of the company compared with the peer group.

The shares of the series 2012-2014 have vested and were delivered to the participants in 2015.

The conditional shares of the 2013-2015 series vested as follows:

• Our TSR performance over the period 2013-2015 resulted in an eighth position within the ranking of the peer group companies. This did not result in vesting of conditional shares
• Our ROI performance at the end of 2015 resulted in a vesting of 129 percent for this part of the long-term incentive
• The average position in the RobecoSAM benchmark resulted in a first position within the ranking. This resulted in a vesting of 150 percent for this part of the long-term incentive

As a result, the conditional shares of the 2013-2015 series vested for 90.29 percent (series 2012-2014: 75 percent), including dividend shares of 7.96 percent, the final vesting percentage amounted to 97.48 percent (series 2012-2014: 82.22 percent).

The fair value of the performance-related share plan at grant date is amortized as a charge against income over the three-year vesting period. The fair value for the shares conditionally granted in 2015 without a holding restriction was €54.11 and €45.47 with a holding restriction (2014: €57.37 without and €46.91 with a holding restriction).

The share price of a common AkzoNobel share at year-end amounted to €61.68 (2014: €57.65). For further details on our performance-related share plan, refer to the Remuneration report.

Fair value of performance-related shares

The fair value of the performance-related shares (€54.11) was for 35 percent based on a market condition (TSR: €39.61) and for 65 percent based on non-market based performance conditions (€61.92).

The TSR part of the award is valued applying a Monte Carlo simulation model and the other part is valued based on the share price at grant date discounted for the present value of expected dividends over the vesting period.

Furthermore, for members of the Executive Committee, an additional holding restriction applies after the vesting period, up to a total of five years. Regarding this restriction an additional discount is taken into account. This leads to a lower fair value for their awards (€45.47).

The parameters applied for the fair value calculations are: share price at date of grant (opening of January 2, 2015): €57.50, expected volatility: 24.41 percent, expected dividend yield: 2.63 percent; and risk-free interest rate: 0.21 percent.

For the peer group (TSR) please refer to the Remuneration report.

Share-matching plan

The members of the Board of Management and the members of the Executive Committee are eligible to participate in the share-matching plan. Under certain conditions, members who invest part of their short-term incentives in AkzoNobel shares may have such shares matched by the company. The investment in AkzoNobel shares in 2015 resulted in a total of 4,529 potential matching shares (2014: 5,205).

The fair value of the potential matching shares at the date of the share investment is amortized as a charge against income over the three-year vesting period. The fair value was €67.81 per potential matching share in 2015 (2014: €49.96).