[42] KION performance share plan (PSP)

In May 2013, the Company entered into new service contracts with Executive Board members which were contingent on the Company’s IPO going ahead. Consequently, they did not come into force until the day after the initial listing on the Frankfurt Stock Exchange on 28 June 2013. The provisions of these new service contracts specify that long-term variable remuneration (the KION GROUP AG performance share plan) is to be introduced so that the remuneration structure is based on the sustainable performance of the Company.

As part of the KION GROUP AG performance share plan, the Executive Board members are allocated virtual shares over a fixed period (two-and-a-half years for the 2013 tranche and three years for all subsequent tranches). The remuneration component measured over the long term is based in equal parts on the total shareholder return (TSR) of KION GROUP AG shares compared with the STOXX^® Europe TMI Industrial Engineering index as a measure of market performance, and with return on capital employed (ROCE) as an internal measure. It also depends on the performance of KION GROUP AG shares during the relevant period.

The first performance period for the 2013 tranche ends on 31 December 2015. At the beginning of the performance period, the Executive Board members were granted a total of 0.3 million virtual shares for this tranche with a specific fair value based on an allocation value in euros specified in each Executive Board member’s service contract. At the end of the performance period, the number of the virtual shares is amended depending on the degree to which the relevant targets are achieved. The resulting final number of virtual shares multiplied by the smoothed price of KION GROUP AG shares at the end of the performance period determines the amount of cash actually paid. The Supervisory Board can also use a discretionary personal performance factor to adjust the final payment at the end of the performance period by +/–20 per cent. The maximum amount payable is limited to 200 per cent of the value of the shares allotted to an individual at the grant date.

The pro-rata expense calculation based on the fair value of the virtual shares on each valuation date is carried out using Monte-Carlo simulation. The following valuation parameters were used to value the virtual shares on the reporting date: >> Table 116

The historic volatility of shares in similar companies (peer group) was used to determine the volatility of KION shares on which the valuation is based. As at 31 December 2013, the fair value of one virtual share was €23.74 and the total fair value based on 0.3 million virtual shares was €6.2 million on that date. Because the performance period for the 2013 tranche has been set at 30 months, a liability of €1.2 million was recognised as a pro-rata expense for six months in 2013.