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SHARE-BASED INCENTIVES AND OPTIONS

KONE has two separate share-based incentive plans. KONE no longer has option programs in place.

Share-based incentive plans

In December 2015, KONE’s Board of Directors decided that KONE’s share-based remuneration will be based on two separate plans starting from the financial year 2016.

One share-based incentive plan is targeted for the senior management of KONE including the President & CEO, members of the Executive Board and other top management, consisting of approximately 60 individuals. A second plan is targeted for other key personnel of KONE, totaling approximately 450 individuals. The potential reward is based on KPIs as decided by the Board on an annual basis in line with the strategic targets. The potential reward is to be paid as a combination of KONE class B shares and a cash payment equivalent to the taxes and similar charges that are incurred from the receipt of shares.

The share-based incentive plans have a vesting period of two years. If the participant’s employment or service contract is terminated during the vesting period, they are either obliged to return the shares already received or lose the entitlement to the shares they have not yet received. As part of the plan for the senior management, a long-term target for their ownership has been set. For the Executive Board members, the long-term ownership target is that the members have an ownership of KONE shares corresponding to at least five years’ annual base salary. For other selected top management positions the ownership target is at least two years’ base salary.

In April 2018, a total of 372,560 KONE class B shares were granted to the management as a reward due to the achievement of the targets for the year 2017. In April 2019, a total of 266,830 class B shares will be granted to the senior management as a reward due to the achievement of the targets for the year 2018. To the other key personnel of KONE the total reward from the year 2018 is based on the value of 239,656 KONE class B shares to be delivered in January 2021 and reduced by such an amount of shares to be equivalent to the taxes and similar charges that are incurred by the receipt of shares.

Option programs

KONE no longer has option programs in place. More information on the previous option rights can be found below.

Previous option rights

Option rights 2007 were granted according to the decision of the Board of Directors on December 5, 2007 to approximately 350 employees of its global organization based on the authorization received from the shareholders meeting at February 26, 2007. The stock options were marked with the symbol 2007 and a maximum total of 2,000,000 options were offered. The original share subscription price on April 1, 2010 was EUR 22.845. The share subscription price was reduced in situations mentioned in the terms, for example with dividends distributed before the subscription of the shares. Each stock option entitled its holder to subscribe for two (2) class B KONE share. The share subscription period for stock options 2007 was April 1, 2010 - April 30, 2012. The Board of Directors confirmed on January, 26 2010 that the criteria of the stock option program 2007 had been attained and therefore resolved that the share subscription period would begin on April 1, 2010 as stated in the terms. The share subscription period was to begin only if the average turnover growth of the KONE Group for financial years 2008 and 2009 exceeded market growth and if the earnings before interest and taxes (EBIT) of the KONE Group for the financial year 2008 exceeded the EBIT for the financial year 2007, and the EBIT for the financial year 2009 exceeded the EBIT for the financial year 2008. KONE 2007 option rights were listed on the NASDAQ OMX Helsinki Ltd list on April 1, 2010 respectively. The subscription period for the 2007 option rights ended on April 30, 2012.

Option rights 2010 were granted according to the decision of the Board of Directors on July 20, 2010 to approximately 430 key employees. The decision was based on the authorization received from the Shareholders Meeting on March 1, 2010. A maximum total of 3,000,000 options could be granted. The original share subscription price for the option was EUR 17.50 per share and it was further reduced in situations mentioned in the terms, for example with dividends distributed before the subscription of the shares. Each option entitled its holder to subscribe for two (2) new class B share. The share subscription period for the stock option 2010 was April 1, 2013 - April 30, 2015. The share subscription period began on April 1, 2013, as the financial performance of the KONE Group for the financial years 2010–2012, based on the total consideration of the Board of Directors, was equal to or better than the average performance of key competitors of KONE. The 2010 stock options were listed on the NASDAQ OMX Helsinki Ltd as of April 2, 2013. The subscription period for the KONE 2010 option rights expired on April 30, 2015. The 896,000 KONE 2010 option rights held by KONE Capital Oy, a subsidiary of KONE Corporation, and otherwise unused 105 KONE 2010 option rights have expired upon the expiry of the subscription period.

Option rights 2013 were granted according to the decision of the Board of Directors on January 24, 2013 to approximately 480 employees. The decision was based on the authorization received from the shareholders' meeting on March 1, 2010. A maximum total of 750,000 options were granted. The original share subscription price for the stock option was 29.125 euros per share and it was further reduced in situations mentioned in the terms, for example with dividends distributed before the subscription of the shares. Each stock option entitled its holder to subscribe for two (2) new class B KONE shares. The share subscription period for the stock options 2013 was April 1, 2015 - April 30, 2017. The share subscription period began because the financial performance of the KONE Group for the financial years 2013-2014, based on the total consideration of the Board of Directors, was equal to or better than the average performance of the key competitors of KONE. The subscription period for the KONE 2013 option rights expired on April 30, 2017. The 55,000 KONE 2013 option rights held by KONE Capital Oy, a subsidiary of KONE Corporation, expired upon the expiry of the subscription period.

Option rights 2014 were granted according to the decision of the Board of Directors on December 20, 2013 to approximately 550 employees. The decision was based on the authorization received from the shareholders' meeting on March 1, 2010. The stock options were to be marked with the symbol 2014 and a maximum total of 1,500,000 options were granted. Each stock option entitled its holder to subscribe for one (1) new class B KONE share. The share subscription period for the stock options 2014 was April 1, 2016 - April 30, 2018. The share subscription period began as the financial performance of the KONE Group for the financial years 2014-2015 based on the total consideration of the Board of Directors was equal to or better than the average performance of the key competitors of KONE. The original share subscription price for the stock option was 31.80 euros per share and was further reduced in situations mentioned in the terms, for example with dividends distributed before the subscription of the shares. The subscription period for the KONE 2014 option rights expired on April 30, 2018. The 133,000 KONE 2014 option rights in possession of KONE Corporation’s subsidiary, and the 4,060 KONE 2014 option rights not exercised during the subscription period expired upon the end of the subscription period.

Option rights 2015 were granted according to the decision of the Board of Directors on December 18, 2014 to approximately 560 employees. The decision was based on the authorization received from the shareholders' meeting on March 1, 2010. The stock options were marked with the symbol 2015 and a maximum total of 1,500,000 options were to be granted. Each stock option entitled its holder to subscribe for one (1) new class B KONE share. The share subscription period for the stock options 2015 was April 1, 2017 - April 30, 2019. The share subscription period began as the financial performance of the KONE Group for the financial years 2015-2016 based on the total consideration of the Board of Directors was equal to or better than the average performance of the key competitors of KONE. The original share subscription price for the stock option was 36.20 euros per share and was further reduced in situations mentioned in the terms, for example with dividends distributed before the subscription of the shares. The share subscription period for the 2015 option rights ended on April 30, 2019. The 131,000 KONE 2015 option rights in possession of KONE Corporation’s subsidiary, and the 6,110 KONE 2015 option rights not exercised during the subscription period have expired upon the expiry of the subscription period.