Investor Presentaiton

BOARD OF DIRECTORS' REPORT Changes in the Executive Board In January-December 2022, KONE announced the following changes in the Executive Board. Karla Lindahl was appointed Executive Vice President, South Europe and Mediterranean and a member of the Executive Board at KONE as of April 1, 2022. She succeeds Thomas Hinnerskov, Executive Vice President for South Europe, Middle East and Africa who left KONE at the end of April. As of April 1, 2022, Samer Halabi, Executive Vice President for the Asia-Pacific region excluding China, also assumed the responsibility for the Middle East and Africa region. Joe Bao was appointed Executive Vice President, responsible for the Greater China region and member of the Executive Board as of October 8, 2022. He succeeds William B. Johnson who has retired from the Executive Board after serving as Executive Vice President, Greater China since 2012. On October 21, 2022, KONE announced that Karla Lindahl would be on maternity leave as of December 2022, returning to her position during the summer of 2023. Ilkka Hara, Chief Financial Officer, was named interim leader for the South Europe and Mediterranean region in addition to his current role. 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 previously announced by KONE, 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 81 million at the end of December 2022 (December 31, 2021: EUR 154 million). The total capital amount claimed decreased due to a settlement during the fourth quarter. 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 The 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. High inflation, rising interest rates and supply chain disruptions have weakened the global economic outlook which represents a risk to KONE's business and profitability. KONE aims to mitigate these risks with more dynamic pricing strategies and contract models as well as ongoing actions to improve productivity and lower product costs. Additionally, geopolitical tensions could impact KONE's global manufacturing footprint and capabilities. As China accounts for approximately one third of KONE's sales, a sustained market decline in the Chinese construction industry represents a risk for KONE's financial performance. Liquidity restrictions in the Chinese property markets continued in 2022 and the financing environment remained tight throughout the year. The resulting decline in construction activity has adversely affected KONE's growth and profitability. KONE's customer portfolio is well diversified, which limits individual customer risks. However, prolonged liquidity constraints among Chinese property developers could further impact construction activity and customers' payment discipline in China and, consequently, the demand and commercial terms for KONE's solutions. The war in Ukraine increased geopolitical risks, added to the disruption of global supply chains and increased uncertainty in the European energy markets during the reporting year. The resulting shortage of energy, materials and services, as well as rising costs, may expose KONE to business disruptions, rescheduling of orders and profitability risks. Global supply chains also suffered from governmental lockdowns in China due to COVID-19 outbreaks during 2022. The lockdowns had adverse impacts on the Chinese economy, construction activity, availability of workforce and thereby the demand for KONE's services and solutions. 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, a significant number of which are located in China. 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 supply chain and logistics constraints, risks related to component and subcontracted labor availability and cost 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, rescheduling of orders and cost increases. Labor availability constraints may 26 KONE ANNUAL REVIEW 2022