Share-based remuneration plan

Share-based remuneration scheme 2017-2020

In February 2017, Kesko’s Board of Directors made a decision on management’s new, long-term share-based remuneration scheme for the years 2017–2020. The new share-based remuneration scheme includes three share plans, under which the Board of Directors can annually decide on starting new share plans. The primary plan is the Performance Share Plan (PSP), the Bridge Plan covers the transition year 2017, and the Restricted Share Plan (RSP) is applied in special situations. Shares issued under the share-based remuneration plans are given to the grantees after expiry of the transfer restriction period, provided that the grantee is still in the service of a Kesko Group company.

The purpose of the share-based remuneration scheme is to promote Kesko's business and increase the value of the Company by aligning the objectives of shareholders and executives. In addition, the scheme is aimed to make the persons committed to Kesko Group and provide them with the opportunity to receive Company shares, as the targets set in the scheme are achieved.

The primary Performance Share Plan (PSP) consists of rolling four-year share plans, each with a two-year performance period followed by a two-year commitment period. Kesko Corporation’s Board of Directors makes the decisions on new share plans commencing annually. The PSP, which commenced at the beginning of 2017, includes a two-year performance period (from 1 January 2017 to 31 December 2018), after which a two-year commitment period will follow (from 1 January 2019 to 10 February 2021).

The Bridge Plan, covering the transitional year 2017, has a one-year performance period, after which a three-year commitment period follows. In other respects, the rules correspond to the rules of thePSP. The Bridge Plan, which commenced at the beginning of 2017, includes a one-year performance period (from 1 January 2017 to 31 December 2017), after which a three-year commitment period will follow (from 1 January 2018 to 10 February 2021).

The secondary Restricted Share Plan (RSP) for special situations is a share plan applied in special situations decided separately. It has a fixed share allocation, decided individually, the commitment period of which expires after three years from the establishment of the plan.

Share-based remuneration plans 2014-2016

Kesko operated the 2014–2016 share-based remuneration plan decided by the Board and intended for the Group's management personnel and other named key personnel. Under the plan, a total maximum of 600,000 own B shares held by the Company in treasury could be granted over the three-year period.

The share-based remuneration plan had three vesting periods, namely the calendar years 2014, 2015 and 2016. Kesko's Board decided the target group and vesting criteria of each vesting period separately based on the Remuneration Committee's proposal, and the award possibly paid after the expiry of each vesting period was based on the fulfilment of the vesting criteria decided by the Board for the vesting period. The criteria for the 2014­–2016 vesting periods were Kesko's basic earnings per share (EPS) excluding non-recurring items, the growth percentage of Kesko Group's sales exclusive of tax, and the percentage by which the total shareholder return of a Kesko B share exceeds the OMX Helsinki Benchmark Cap GI index.

The award possibly paid for a vesting period is paid partly in Kesko B shares and partly in cash. The cash component is used to pay the taxes and tax-like charges incurred by the award.

A commitment period of three calendar years following each vesting period is attached to the shares awarded as remuneration, during which the shares must not be transferred. If a person's employment or service relationship terminates prior to the end of the commitment period, he/ she must return the shares subject to transfer restriction to Kesko or its designate without consideration. The return obligation does not apply if the grantee retires or dies during the commitment period.

Further information on treasury shares held by the company is available in section "Own shares".

The company has not issued options or other special rights entitling to shares.

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