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2017-02-02

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

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.

DISTRIBUTION

Nasdaq Helsinki Ltd

Main new media

www.kesko.fi

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This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Kesko Oyj via Globenewswire

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