[46] Variable remuneration

KEEP Employee Equity Program

KEEP is a share matching plan. Participating employees acquire KION shares for their own investment purposes. Each set of three KION shares represents a share package. Once the three-year holding period has expired, employees are entitled to another free matching share (bonus share) for each share package. However, KION GROUP AG has the right to satisfy each program participant’s entitlement by paying a cash settlement instead of granting a bonus share.

Each year, the Executive Board of KION GROUP AG decides whether there will be an offer made under the Employee Equity Program that year and which companies will participate. The most recent active program, KEEP 2019, expired in 2022. There are no other programs currently running.

The right to obtain a bonus share lapses if participants sell their own investment in KION shares or cease to work for the KION Group. The holding period for KEEP 2019 ended on October 2, 2022 and the bonus shares were issued to the eligible employees at no cost. The change in the number of bonus shares granted was as follows:

In 2022, an expense totaling €0.3 million was recognized under the relevant functional costs for bonus shares in connection with the Employee Equity Program (2021: €0.6 million).

KION performance share plan (PSP) for managers

The 2022 tranche of the long-term, variable remuneration component for the managers in the KION Group (LTI 2022) was granted with effect from January 1, 2022 and has a term of three years. For the 2022 tranche, 50 percent of the remuneration component (2020 and 2021 tranches: 50 percent) measured over the long term is based on the total shareholder return (TSR) of KION GROUP AG shares compared with the performance of the MDAX index (market-oriented measure of performance) and 30 percent (2020 and 2021 tranches: 50 percent) is based on return on capital employed (ROCE) (internal measure of performance). Starting with the 2022 tranche, 20 percent of the performance share plan is now linked to the achievement of ESG targets. The remuneration component also depends on the performance of KION GROUP AG shares during the relevant period.

The performance period for the 2022 tranche ends on December 31, 2024 (2021 tranche: December 31, 2023). The 2020 tranche expired on December 31, 2022 and will be paid out in the first quarter of 2023.

At the beginning of the performance period on January 1, 2022 (2021 tranche: January 1, 2021; 2020 tranche: January 1, 2020), the managers were allocated a total of 266,172 phantom shares for this tranche (2021 tranche: 191,733 phantom shares; 2020 tranche: 264,191 phantom shares). The allocation was based on a particular percentage of each manager’s individual gross annual remuneration at the time of grant. At the end of the performance period, the number of the phantom shares is amended depending on the degree to which the relevant targets are achieved. The resulting final number of phantom 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 KION Group has the right to adjust the amount payable at the end of the performance period in the event of exceptional occurrences or developments. The maximum amount payable is limited to 200.0 percent (2021 tranche) and 250.0 percent (2022 tranche) 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 phantom shares on each valuation date is carried out using Monte Carlo simulation. The measurement parameters used to value the phantom shares on the reporting date were as follows:

Taking account of the remaining term of two years (2022 tranche) and one year (2021 tranche), the historic volatility of KION shares was used to determine the volatility on which the valuation is based. As at December 31, 2022, the fair value of one phantom share was €10.41 for the 2021 tranche (December 31, 2021: €76.53) and €12.51 for the 2022 tranche. On that date, the total fair value was €2.0 million for the 2021 tranche based on 194,255 phantom shares (December 31, 2021: €15.9 million) and €3.8 million for the 2022 tranche based on 302,100 phantom shares. The amount of €1.0 million that is expected to be paid out for the 2020 tranche (2021: €22.5 million for the 2019 tranche) was calculated on the basis of a preliminary total target achievement rate.

In March 2022, a payment from the 2019 tranche was made on the basis of the achievement of the long-term targets that were defined in 2019 at the start of the performance period.

The total carrying amount for liabilities in connection with share-based remuneration was €3.6 million as at December 31, 2022 (December 31, 2021: €42.7 million). Of this amount, €1.0 million related to the 2020 tranche (2021: €15.0 million), €1.3 million to the 2021 tranche (2021: €5.3 million), and €1.3 million to the 2022 tranche. In 2021, there had also been an amount of €22.5 million relating to the 2019 tranche. In 2022, pro rata income for twelve months of €14.0 million in respect of the 2020 tranche (2021: expense of €10.6 million), income of €3.9 million for the 2021 tranche (2021: expense of €5.3 million), and an expense of €1.3 million for the 2022 tranche were recognized under the relevant functional costs. Furthermore, an expense of €13.1 million for the 2019 tranche had been recognized under the relevant functional costs in 2021.

KION performance share plan (PSP) for the Executive Board

The members of the Executive Board have been promised a multiple-year variable remuneration component in the form of a performance share plan with a three-year term in each case. The financial performance targets for the 2022 tranche are the relative total shareholder return (TSR) for the shares of KION GROUP AG compared with the MDAX (market-oriented measure of financial performance), with a weighting of 40 percent (2020 tranche: 50 percent; 2021 tranche: 40 percent), and return on capital employed (ROCE) (internal measure of financial performance), with a weighting of 40 percent (2020 tranche: 50 percent; 2021 tranche: 40 percent). For the 2021 and 2022 tranches, 20 percent of the performance share plan is linked to the achievement of ESG targets. The remuneration component also depends on the performance of KION GROUP AG shares during the relevant period.

The performance period for the 2022 tranche ends on December 31, 2024 (2021 tranche: December 31, 2023).

At the beginning of the performance period on January 1, 2022 (2021 tranche: January 1, 2021; 2020 tranche: January 1, 2020), the Executive Board members were allocated a total of 61,222 phantom shares for this tranche (2021 tranche: 96,785 phantom shares; 2020 tranche: 76,656 phantom shares) on the basis of the starting price of KION shares (60-day average). The shares were allocated on the basis of 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 phantom shares is amended depending on the degree to which the relevant targets are achieved. The resulting final number of phantom 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 individual performance multiple to adjust the final payment at the end of the performance period by + / – 30.0 percent. The maximum amount payable is limited to 200.0 percent 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 phantom shares on each valuation date is carried out using Monte Carlo simulation. The measurement parameters used to value the phantom shares on the reporting date are shown in the > table ‘Significant measurement parameters of the KION Performance Share Plans’.

Taking account of the remaining term of two years (2022 tranche) and one year (2021 tranche), the historic volatility of KION shares was used to determine the volatility on which the valuation is based. As at December 31, 2022, the fair value of one phantom share was €13.45 for the 2021 tranche (December 31, 2021: €78.76) and €13.07 for the 2022 tranche. On that date, the total fair value was €0.9 million for the 2021 tranche based on 68,539 phantom shares (December 31, 2021: €6.3 million) and €0.7 million for the 2022 tranche based on 56,333 phantom shares.

The total carrying amount for liabilities in connection with share-based remuneration was €1.3 million as at December 31, 2022 (December 31, 2021: €16.2 million). Of this amount, €0.2 million related to the 2020 tranche (2021: €4.6 million), €0.8 million to the 2021 tranche (2021: €2.5 million), and €0.3 million to the 2022 tranche. In 2022, pro rata income for twelve months of €4.4 million in respect of the 2020 tranche (2021: expense of €3.2 million), income of €1.6 million for the 2021 tranche (2021: expense of €2.5 million), and an expense of €0.3 million for the 2022 tranche were recognized under the relevant functional costs. Furthermore, an expense of €5.3 million for the 2019 tranche had been recognized under the relevant functional costs in 2021.

The total carrying amount for liabilities in connection with share-based remuneration was €4.9 million as at December 31, 2022 (December 31, 2021: €58.9 million). In 2022, total income of €22.1 million for twelve months was recognized for share-based remuneration (2021: total expense of €40.5 million).