Kesko's new share-based long-term incentive scheme and share-based compensation for performance period 2016 of the 2014 - 2016 share-based compensation plan

KESKO CORPORATION STOCK EXCHANGE RELEASE 02.02.2017 AT 09.30 1(3)

Kesko's new share-based long-term incentive scheme and share-based compensation for performance period 2016 of the 2014 - 2016 share-based compensation plan

Kesko Corporation's Board of Directors has decided to establish a new share-based long-term incentive scheme for Kesko's top management and key persons selected separately. In addition, the Board of Directors has decided to grant a total of 192,822 own B shares held by the Company as treasury shares, based on the fulfilment of the performance criteria of the 2016 performance period of Kesko's share-based compensation plan 2014-2016, to 130 Kesko management employees and other named key persons.

Kesko Corporation's Board of Directors has decided to grant a total of 192,822 own B shares held by the Company as treasury shares, based on the fulfilment of the performance criteria of the 2016 performance period of the share-based compensation plan 2014-2016, to 130 Kesko management employees and other named key persons. The shares will be transferred to the grantees by the end of April 2017 in accordance with the terms and conditions of the plan. The grantees cannot transfer or pledge these shares prior to the expiry of the related commitment period on 31 December 2019. In addition to shares granted based on the fulfilment of the performance criteria, a cash component will be paid to cover the taxes and tax-like charges incurred by the award. The granting of shares is based on the authorization given to the Board of Directors by the Annual General Meeting held on 4 April 2016.

In addition, Kesko Corporation's Board of Directors has decided to establish a new share-based long-term incentive scheme for Kesko's top management and key persons selected separately. The scheme consists of a performance share plan (PSP) as the main structure, and of a restricted share pool (RSP), which is a complementary share plan for special situations. Besides the PSP, the Board has made a decision to establish a share-based bridge plan to cover the transitional phase during which Kesko transfers from a one-year performance period to a longer performance period in its incentive scheme structure as described below.

The share-based long-term incentive scheme is aimed to promote Kesko's business and increase the value of the Kesko share in the long term by motivating management to fulfil the performance criteria and by aligning the interests of shareholders and management. In addition, the scheme is aimed to make management committed to Kesko by providing them with the opportunity to receive Kesko B shares as share awards based on the achievement of the targets set in the scheme.

Performance share plan (PSP)

The performance share plan consists of annually commencing individual share plans, each with a two-year performance period and a two-year commitment period following the potential payment of a share award. During the commitment period, the plan participants do not have the right to transfer or otherwise dispose of the shares. If the participant's employment or service relationship with Kesko Group terminates before the end of the commitment period, the participant, as a rule, forfeits the share award without compensation.

The commencement of each individual plan within the Performance Share Plan structure is subject to a separate approval of the Board. The first plan (PSP 2017 - 2020) commences as of the beginning of 2017 and any potential share awards thereunder will be paid out in spring 2019, if the performance criteria set by the Board are achieved. Potential awards will be paid in listed series B shares of the Company.

The performance criteria applied to the first plan, PSP 2017 - 2020, are the absolute total shareholder return (TSR) of a Kesko B share, Kesko Group's comparable return on capital employed (ROCE) and the development of Kesko Group's tax free sales in the period 2017 - 2018.

Approximately 140 members of the top management and other selected key persons of Kesko Group are eligible to participate in the PSP 2017 - 2020 plan.

If the performance criteria set for the PSP 2017 - 2020 plan are achieved in full, the maximum number of series B shares to be paid based on this plan is 340,000 shares. This number of shares represents gross earnings, from which the applicable withholding tax is deducted and the remaining net amount is paid to the participants in shares.

Bridge plan

The bridge plan is a one-off, four-year plan aimed to cover the transitional phase from Kesko's previous long-term incentive scheme with a one-year performance period to the new structure with a two-year performance period.

The bridge plan includes one year performance period comprising the year 2017 and a commitment period following the potential payment of share awards, comprising the years 2018 - 2020. The potential share awards payable under the Bridge Plan will be paid in spring 2018, if the performance criteria set by the Board are achieved. The potential share awards will be paid in the listed series B shares of the Company and the terms applied to them during the commitment period are the same as those applied under the Performance Share Plan described above.

The performance criteria applied to the Bridge Plan are the same as those applied to the PSP 2017 - 2020.

Approximately 140 members of the top management and other separately selected key persons of Kesko Group are eligible to participate in the Bridge Plan. If all the performance criteria set for the Bridge Plan are achieved in full, the maximum number of series B shares to be paid based on the Bridge Plan is 340,000 shares. This number of shares represents gross earnings, from which the applicable withholding tax is deducted and the remaining net amount is paid to the participants in shares.

Restricted Share Plan (RSP)

The Restricted Share Plan complementing the main structure consists of annually commencing individual share plans. Each plan includes a three-year commitment period, after which the potentially granted share awards will be paid to the participants in series B shares of the Company provided that their employment or service relationships with Kesko Group continue until the payment of the awards.

The purpose of the Restricted Share Plan is to serve as a complementary long-term share plan to be used as a commitment instrument in special situations.

In addition to the above employment precondition, Kesko may set participant specific or company specific criteria, the fulfilment of which is a precondition for the payment of restricted share awards.

The commencement of each individual plan within the Restricted Share Plan structure is subject to a separate approval of the Board. The first plan (RSP 2017 - 2019) commences as of the beginning of 2017 and any potential share awards thereunder will be paid out in spring 2020.

The total maximum amount of share awards payable under the RSP 2017 - 2019 is 20,000. This number of shares represents gross earnings, from which the applicable withholding tax is deducted and the remaining net amount is paid to the participants in shares.

Other terms and conditions of the scheme

The amount of long-term award paid to a share plan participant on a single year must not exceed the maximum amount separately set by the Board of Directors.

Kesko applies a share ownership recommendation policy to the members of Kesko's Group Management Board. According to the recommendation, each Group Management Board member shall maintain a holding of at least fifty per cent of the net shares they have received under the Company's share-based compensation schemes until their holding of Kesko shares corresponds to at least their fixed gross annual salary.

Further information is available from Executive Vice President Matti Mettälä, tel. +358 105 322 200.

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Nasdaq Helsinki Ltd

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www.kesko.fi




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Source: Kesko Oyj via GlobeNewswire

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