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The Annual General Meeting of KONE Corporation

Stock Exchange Release Published 19/12/2003

The shareholders of KONE Corporation are hereby summoned to the Annual General Meeting of Shareholders to be held at the Colonial Cabinet of Hotel Kalastajatorppa (address Kalastajatorpantie 1), Helsinki, on Friday, 27 February, 2004 at 11.00 a.m.

The meeting shall decide on:

1. Matters to be decided upon under Article 12 of the Articles of Association.

2. The Board of Directors’ proposal that the Annual General Meeting would authorize the Board of Directors to repurchase the Company’s own shares with assets distributable as profit as follows:

The Company’s own repurchased shares shall be used as compensation in possible acquisitions and in other arrangements as well as to develop the Company’s capital structure.

Altogether no more than 3,173,180 shares may be repurchased, of which no more than 476.304 are class A shares and 2,696,876 are class B shares, taking into consideration the provisions of the Companies Act regarding the maximum amount of own shares that the Company is allowed to possess.

The class A shares shall be purchased in proportion to the existing shareholdings at the price equivalent to the average price of class B shares paid in the Helsinki Stock Exchange at the time of purchase. Any holder who wants to offer his class A shares to the Company must state his intention in writing to the Board of Directors. The Company may deviate from the obligation of purchasing shares in proportion to the shareholding if all the holders of class A shares give their permission.

Class B shares shall be purchased at public trading in the Helsinki Stock Exchange at the market price. The purchase price will be paid to the shareholders according to rules of the Helsinki Stock Exchange and the rules of the Finnish Central Securities Depository Ltd. The shares are not repurchased in proportion to the holdings of the shareholders as they are purchased in public trading.

The maximum amount of the shares to be repurchased shall not exceed 5% of the share capital nor 5% of the voting rights attached to the shares of the Company. The repurchase is divided between class A shares and class B shares in proportion to the existing number of shares and voting rights. Therefore, the purchase does not significantly affect the division of shareholdings nor voting rights in the Company. The repurchase of shares decreases the free equity of the Company.

This authorization shall remain in effect for a period of one year from the date of decision of the Annual General Meeting.

3. The Board of Directors propose that the Annual General Meeting authorize the Board of Directors to decide on the distribution of any shares repurchased by the Company as follows:

The authorization is limited to a maximum of 476,304 class A shares and 2,696,876 class B shares repurchased by the Company. The Board of Directors is authorized to decide to whom and in which order the repurchased shares will be transferred. The Board of Directors may decide on the distribution of repurchased shares otherwise than in proportion to the existing pre-emptive right of shareholders to purchase the Company’s own shares.

The repurchased shares may be used as compensation in acquisitions and in other arrangements in the manner and to the extent decided by the Board of Directors.

The shares shall be transferred at least at the market price quoted for class B shares in the Helsinki Stock Exchange at the moment of their transfer.

This authorization shall remain in effect for a period of one year from the date of decision of the Annual General Meeting.

4. Proposal by the Board of Directors that the Shareholders’ Meeting would confirm the option program, which will implement the decision by the Extraordinary General Meeting of Shareholders on 17 November, 2000 to issue option rights to the key personnel of KONE Group.

The Shareholders’ Meeting decided on 17 November, 2000 to issue option rights to the key personnel of the Group. The option rights have not yet been issued because the receiving of the option rights and the share subscription pursuant to the terms and conditions of the option program is connected to the development of KONE Group’s aggregated net income (after taxes) during three years period (2001 to 2003) shown in the Consolidated Financial Statements. On the basis of the decision made by the Shareholders’ Meeting on 17 November, 2000 it is proposed that the Shareholders’ Meeting decides to confirm the option program, the terms and conditions of which materially correspond with the option program approved on 17 November, 2000. The main content of the proposal is as follows:

a. A maximum number of 350,000 option rights shall be issued and they entitle to subscribe for a maximum number of 1,050,000 class B shares in KONE Corporation.

b. Subject to the meeting of the Group’s net income targets each option right shall give its holder the right to subscribe for three (3) class B shares in KONE Corporation with a nominal value of one (1) euro. As a result of the subscriptions the maximum increase in the share capital of the Company shall be 1,050,000 euros corresponding to 1,050,000 new shares.

c. Deviating from the shareholders’ pre-emptive right to subscription, the option rights for subscription are offered to the key persons of the KONE Group, who have received the temporary option certificates entitling to subscribe for the option rights pursuant to the option program approved on 17 November, 2000. KONE Capital Oy, a wholly owned subsidiary of KONE Corporation, shall also have the right to subscription. KONE Capital Oy can later transfer the option rights to key personnel of KONE Group. Deviation from the shareholders’ pre-emptive right to subscription is proposed, as the option program constitutes a part of the incentive plan of the Group, and a weighty financial reason for the Company thus exists.

Some of the persons entitled to subscribe belong to the inner circle of the Company. Prior to the granting of the option rights entitling to new issue the persons belonging to this group own directly a total of 0.16 per cent of the share capital of the Company and a total of 0.07 per cent of the votes carried by all shares and indirectly 31.46 per cent of the share capital and 66.59 per cent of the voting rights. If the persons belonging to the inner circle exchange their temporary option certificates into option rights and if shares are subscribed for based on all of these option rights, the persons belonging to this group and entitled to subscribe for shares own directly a total of 0.25 per cent of the share capital of the Company and a total of 0.13 per cent of the votes carried by all shares and indirectly 31.55 per cent of the share capital of the Company and 66.63 per cent of the votes carried by all shares of the Company.

d. The subscription period in respect of the option rights is from 1 March, 2004 to 19 March, 2004. The option rights will be given free of charge and they shall be issued in the book-entry system.

e. The option rights have been divided into A and B option rights. The maximum number of A option rights is of 180,000, and the maximum number of B option rights is 170,000.

Option rights entitle the holders to subscribe for shares subject to the development of the KONE Group’s cumulative net income (after taxes), as shown in the Consolidated Statement of Income over a three-year (3) period (2001-2003) as follows:

Minimum Accumulated Income Level for exercising the option rights and bonusesCumulative number of option rights in use
330 M euros70,000
350 M euros140,000
380 M euros210,000
420 M euros280,000
470 M euros350,000

Where income targets are not achieved, the option rights shall expire without value.

f. The A option rights are issued to be subscribed for by the key persons, who have received the temporary option certificates entitling to the A option rights pursuant to the option program approved on 17 November, 2000. The B option rights are issued to be subscribed for by KONE Capital Oy. KONE Capital Oy shall exchange the option rights to temporary option certificates received pursuant to the option program approved on 17 November, 2000, subsequent to the commencement of the share subscription period with the B option rights, i.e., as of 1 April, 2005.

The meeting of the net income targets and the right to the option rights become evident subsequent to the approval of the financial statements concerning the year 2003 of KONE Group in the Shareholders’ Meeting.

g. A separate cash bonus of 40 euros pertains to the A option rights provided that the income targets in conformity with the option program have been reached.

h. Shares may be subscribed for on the basis of the option rights annually between January 2 and November 30 on dates to be determined by the Board of Directors of the Company. In respect of the A option rights the subscription period commences on 1 April, 2004 and ends on 31 March, 2008. In respect of the B option rights the subscription period commences on 1 April, 2005 and ends on 31 March, 2009.

In accordance with the option program approved 17 November, 2000 the subscription price of a share is the trade volume weighted average price of class B shares on the Helsinki Stock Exchange between 1.8.2000 and 23.10.2000 increased by 10 per cent. The subscription price, thus, is EUR 24.67 per share.

Information

Copies of documents concerning the financial statements, the Board of Directors´ proposal to repurchase the Company’s own shares and the use of repurchased shares as well as documents concerning the option program may be inspected by the shareholders one week prior to the Annual General Meeting at the headquarters of the Company at Kartanontie 1, Helsinki and on the Company’s internet site www.kone.com/agm.

Right to participate

In order to take part in the Annual General Meeting, shareholders must be registered in the shareholders’ register maintained by the Finnish Central Securities Depository by 17 February, 2004. Shareholders who have placed their shares in trust must temporarily re-register the shares in their own names in order to participate in the meeting. Such re-registration must be made by 17 February, 2004.
A shareholder may attend and vote at the meeting in person or by proxy. However, in accordance with Finnish practice the Company does not send forms of proxy to its shareholders. Shareholders wishing to vote by proxy should submit their own forms of proxy to the Company.

Notifying of participation

A shareholder who wishes to participate in the Annual General Meeting must notify the Company not later than 23 February, 2004 before 4:00 p.m. Notification can be done as follows:
- by mail at address: KONE Corporation, Kartanontie 1, 00330 Helsinki
- by telefax: + 358 20 475 4309
- by telephone: +358 20 475 4332 / Ulla Silvonen
- by using the electronic registration form available on address www.kone.com/agm

Shareholders are also requested to notify the Company of any proxies for the Annual General Meeting so that they are in Company´s possession by 23 February, 2004.

Helsinki, 19 December, 2003

The Board of Directors

Sender:

KONE Corporation

Tapio Hakakari
Secretary to the Board of Directors

Aimo Rajahalme
Executive Vice President,
Finance and Information Services

KONE is a global service and engineering company that specializes in moving people and goods. Annual net sales total EUR 5,500 million, and we employ nearly 35,000 people. KONE's B shares are listed on the Helsinki Exchanges.

www.kone.com