Major developments in the first half of 2013

Key events

KION GROUP AG became a listed company in the Prime Standard segment of the Frankfurt Stock Exchange on 28 June 2013. A total of 17.2 million new shares originating from a capital increase in June 2013 were placed at an issue price of € 24.00 per share and an additional 2.6 million shares from the stake held by original shareholder Superlift Holding S.à r.l., Luxembourg, were placed as part of an over-allotment option (see the over-allotment option information in the section Events after the reporting date).

Accompanying capital increases were also carried out in which Weichai Power (Luxembourg) Holding S.à r.l., Luxembourg, acquired 13.7 million new shares at a price of € 24.00 per share immediately before the offer closed and Superlift Holding S.à r.l., Luxembourg, acquired 4.0 million shares at a price of € 29.21 per share before the offer closed by way of an investment and conversion of an existing shareholder loan into equity.

As at 30 June 2013, the KION Group had received a total par value of € 30.9 million from the capital increase in the course of the IPO and the capital increase from Weichai. This amount was reported as cash and cash equivalents as at the reporting date. The total share premium of € 710.9 million, which resulted from the placement of the 17.2 million new shares for € 396.2 million and the € 314.7 million capital increase from Weichai, had not been received by the end of the half year and was consequently reported in other current assets. The share premium arising from the placement of new shares and the Weichai capital increase was received on 2 July 2013, net of the bank fees payable (see Events after the reporting date).

As a result of the boost to its equity and the repayment of financial debt on 5 July 2013 (see Events after the reporting date), the KION Group has significantly improved its funding structure, to the extent that none of its borrowings fall due before 2018, including the new € 995.0 million revolving loan facility.

Back in February 2013, KION Finance S.A. placed a senior secured bond with a total volume of € 650.0 million and a maturity date of 2020. The proceeds, net of the bank fees payable, were used to refinance all loans maturing in 2014 and 2015.

Key strategic initiatives

In May 2013, STILL agreed to acquire 51 per cent of the shares in Arser İş Makineleri Servis ve Ticaret A.Ş. (referred to below as “Arser”), which had previously acted as exclusive dealer for the substantial Turkish market. The transaction has not yet been closed, but it is expected to be completed in the third quarter of 2013.

On 30 April 2013, the KION Group signed a cooperation agreement in the area of container handling with Konecranes, a global market leader in the lifting business. Since then, Konecranes has become a long-term supplier of container handling equipment for Linde Material Handling’s global distribution network.

A further element in the reorganisation of the container handler and heavy truck businesses is the closure of the heavy truck plant in Merthyr Tydfil (Wales, UK), which is scheduled to take place by the end of October 2013. In the next few months, the bulk of Linde Material Handling’s heavy truck production will be outsourced to a contract production facility in the Czech Republic.

In March 2013, a new plant was officially opened in Brazil to enable the KION Group to benefit from the strong growth in this major market.

Group structure, organisation, management

In advance of the IPO, KION Holding 1 GmbH, the KION Group’s strategic management holding company, was converted into KION GROUP AG with effect from 4 June 2013. This company is now subject to the provisions of stock company law and as a publicly listed company it is governed by the German Securities Trading Act (WpHG). The new Executive Board consists of Gordon Riske (CEO / Chairman), Bert-Jan Knoef (STILL), Theodor Maurer (Linde Material Handling), Ching Pong Quek (Chief Asia Pacific Officer) and Dr Thomas Toepfer (CFO). In addition, KION GROUP GmbH, which is responsible for the management of operational business, has been renamed KION Material Handling GmbH.

Now that KION GROUP AG is a listed company, its Executive Board and Supervisory Board are required to submit an annual declaration of compliance with the German Corporate Governance Code (DCGK). The KION Group intends to comply with all but one of the recommendations in the current version of the DCGK dated 13 May 2013. The exception concerns clause 3.8 of the DCGK, which relates to directors’ and officers’ (D&O) insurance and requires companies to agree to a minimum deductible of 10 per cent of any loss, which must be equivalent to at least one-and-a-half times the annual fixed remuneration of the relevant member of the Executive or Supervisory Board. The D&O policy for the Executive Board complies with the DCGK recommendations but the Company’s D&O policy for the Supervisory Board does not include a deductible of this type. This is because the KION Group does not believe it is a suitable means of increasing the motivation and diligence with which members of the Supervisory Board carry out their duties.

With regard to clauses 5.4.1 and 5.4.2 of the DCGK, the KION Group has declared that it has not yet set any specific targets for an appropriate degree of female representation on its Supervisory Board (diversity). The Supervisory Board also believes that two independent members is an appropriate number in relation to the Group’s capital structure.

Provided no interim submission is required by law, it is planned that the first joint declaration of compliance by the Executive and Supervisory Boards of KION GROUP AG will be submitted in the first quarter of 2014 at the same time as the publication of the 2013 annual report. Additional information is available on the KION Group website under Investor Relations / Corporate Governance.

The Supervisory Board, which was formed in accordance with the German Codetermination Act (MitbestG), was increased from 12 members to 16 members when the legal form of the Company was changed in advance of the IPO. On 5 June 2013, Hans Peter Ring and Tan Xu Guang were elected as shareholder representatives. Hans Peter Ring qualifies as both an independent member within the meaning of clause 5.4.2 of the DCGK and as an independent member with expertise in the fields of accounting and auditing as required by section 100 (5) of the German Stock Corporation Act (AktG). Denis Heljic and Özcan Pancarci were appointed as additional members representing the Company’s employees.

In order to make its activities more efficient and to meet the standards required for a publicly listed company, the Supervisory Board also reformulated its committees at the end of May 2013. Consequently, the Mediation Committee pursuant to section 27 (3) MitbestG, the Executive Committee and the Audit Committee, which were already in existence, have been supplemented by the Nomination Committee, one of whose functions is to propose new candidates for the Supervisory Board at the Shareholders’ Meeting. When the new members were appointed to the committees on 27 June 2013, Hans Peter Ring took over as chairman of the Audit Committee.

In the run-up to the IPO, the Supervisory Board signed new contracts of employment with all Executive Board members and, at the same time, the term of CEO Gordon Riske’s new contract was extended until 2017.

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