Investor Presentaiton

BOARD OF DIRECTORS' REPORT Changes in the Executive Board In January-December 2021, KONE announced the following changes in the Executive Board. Johannes Frände was appointed Executive Vice President, General Counsel and a member of the Executive Board at KONE as of February 1, 2021. He succeeds Klaus Cawén, who has served in different roles at KONE for 38 years. Thomas Hinnerskov was appointed Executive Vice President, responsible for the South Europe, Middle East and Africa region as of April 1, 2021. He succeeds Pierre Liautaud, who has served 10 years at KONE as Executive Vice President, South Europe, Middle East and Africa region. Prior to this, Thomas Hinnerskov served as KONE's Executive Vice President, Central and North Europe. Axel Berkling was appointed Executive Vice President, Central and North Europe. Prior to this, Axel Berkling served as KONE's Executive Vice President, Asia-Pacific region, excluding China. Samer Halabi was appointed Executive Vice President, responsible for the Asia-Pacific region and a member of the Executive Board as of May 1, 2021. After the reporting period, on January 18, 2022, KONE announced that Thomas Hinnerskov, Executive Vice President responsible for South Europe, Middle East and Africa, has decided to leave KONE for a position outside the company latest at the end of May 2022. Thomas has served as a member of KONE's Executive Board since 2016. Other events In 2007, a decision was issued by the European Commission concerning alleged local anticompetitive practices before early 2004 in Germany, Luxembourg, Belgium and the Netherlands by leading elevator and escalator companies, including KONE's local subsidiaries. Also, the Austrian Cartel Court issued in 2007 a decision concerning anti-competitive practices that had taken place before mid-2004 in local Austrian markets by leading elevator and escalator companies, including KONE's local subsidiary. As announced by KONE earlier, a number of civil damage claims by certain companies and public entities relating to the two 2007 decisions, are pending in related countries. The claims have been made against various companies concerned by the decisions, including certain KONE companies. All claims are independent and are progressing procedurally at different stages. The total capital amount claimed jointly and severally from all of the defendants together was EUR 154 million at the end of December 2021 (December 31, 2020: EUR 144 million). KONE's position is that the claims are without merit. No provision has been made. Most significant risks KONE is exposed to risks that may arise from its operations or changes in the operating environment. The most significant risk factors described below can potentially have an adverse effect on KONE's business operations and financial position and, as a result, on the value of the company. Other risks, which are currently either unknown or considered immaterial to KONE may, however, become material in the future. STRATEGIC RISKS Demand for KONE's products and services and the competitive environment are impacted by the general economic cycles and especially the level of activity within the construction industry. As China accounts for approximately 35% of KONE's sales, a sustained market decline in the Chinese construction industry, in particular, could have an adverse effect on KONE's growth and profitability. Liquidity constraints in the Chinese property markets raised market concerns as of the third quarter of 2021, and the financing environment for Chinese property developers remains tight. KONE's customer portfolio is well diversified, limiting individual customer risks. However, a worsening liquidity situation among Chinese property developers could impact construction activity in China and, consequently, the demand for KONE's solutions. Following the COVID-19 outbreak in 2020, many governments across the world have taken significant measures to contain the pandemic by restricting the movement of people and limiting some business activities. In 2021, construction markets started to recover in many countries despite the continuing pandemic thanks to successful vaccination campaigns, easing restrictions, and government stimulus. However, a deterioration of the situation could have an adverse impact on the overall economic environment, construction activity, availability of workforce and the demand for KONE's services and solutions. Geopolitical tensions and protectionism continue to expose KONE to various business risks. In addition to the potential adverse impacts on general economic activity, geopolitical tensions and protectionism could impact the competitiveness of KONE's supply chain, and lead to increased costs from trade and customs tariffs. A significant portion of KONE's component suppliers and global supply capacity is located in China. KONE aims to reduce the above risks to its supply chain with regionally diversified second source suppliers and safety stocks. In addition to the level of market demand, the competitiveness of KONE's offering is a key driver for growth and profitability. A failure to anticipate or address changes in customer requirements and in competitors' offerings, ecosystems and business models or in the regulatory environment could result in a deterioration of the competitiveness of KONE's offering. Furthermore, structural changes in the competitive landscape of the elevator and escalator industry, such as increased competition and customer consolidation in China, could affect market dynamics and KONE's market share. OPERATIONAL RISKS Empowered employees with relevant competencies and skills are key to the successful execution of our strategy. With business models and ways of working changing in the elevator and escalator industry, KONE needs new organizational capabilities, as well as new competencies and talent on the individual employee level in the field of, for example, digitalization. At the same time, the competition over talent, such as skilled field workforce, is increasing. Securing the needed resources and their competence management is critical. A failure to develop and retain the required capabilities or obtain them through recruitment could have an adverse impact on KONE's growth and profitability. The majority of components used in KONE's supply chain are sourced from external suppliers. KONE also subcontracts a significant amount of installation activity, outsources certain business support processes and works with partners in e.g. digital services and logistics. This exposes KONE to component and subcontracted labor availability and cost risk as well as to continuity risk in partnerships. A failure to secure the needed materials, components or resources, or quality issues within these, could cause business disruptions and cost increases. Labor availability constraints may also impact 20 KONE ANNUAL REVIEW 2021