SSH Communications Security — Remuneration Information 2022

Mar 4, 2022

SSH

SSH COMMUNICATIONS SECURITY

Remuneration Report 2021 for Governing Bodies

INTRODUCTION

SSH Communication Security's ("SSH" or "Company") Remuneration Policy was presented in AGM 2020 and this annual Remuneration Report is compiled according to the Finnish Corporate Governance Code 2020.

The remuneration report is published annually in connection with SSH's corporate governance statement, and it will be presented to the shareholders in the annual general meeting following its publication.

Remuneration Policy sets out the principles for remuneration of the Board of Directors and the Chief Executive Officer ("CEO"). The remuneration of the Board and CEO in 2021 followed the Remuneration Policy framework and principles, and no deviations to the Policy have been made, nor have any claw backs of remunerations taken place.

This Remuneration Report presents information on the remuneration of the Board of Directors and CEO during the fiscal year 2021. It also presents the development of median employee remuneration and company performance over the past five financial years in comparison to CEO and Board remuneration.

REMUNERATION PRINCIPLES

Remuneration of SSH's governing bodies is based on the Remuneration Policy that was accepted in the Annual General Meeting held on March 26, 2020. The Remuneration Policy is applied until the Annual General Meeting in 2024, unless the Board of Directors decides to present it to the General Meeting earlier. The Remuneration Policy is available at the company website.

All remuneration intends to promote SSH's business strategy, long-term financial success and positive development of shareholder value while being fair, competitive, enhancing commitment and supporting SSH's general objectives.

Remuneration of personnel is based on a total remuneration, which include both variable and fixed components as well as normal personnel benefits. The remuneration of personnel is strongly guided by the performance- based remuneration which is applied throughout the organization.

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Entire personnel are subject to a performance-based (individual and company-wide) remuneration scheme. In addition, personnel are mainly part of a long-term remuneration scheme, such as a share- or stock option-based remuneration scheme.

This all aims to a personnel remuneration practice that is aligned with the interests of the Company and its shareholders and helps to engage and motivate key persons to operate in accordance with the shared goals.

The General Meeting decides on the remuneration payable for Board as well as the basis for its determination. Although the Board of Directors is not covered by the same overall remuneration as the personnel, the purpose of the remuneration of the board is also to steer activities towards the same long-term objectives of the Company.

The Board of Directors decides on the remuneration of the CEO in accordance with the Remuneration Policy. Remuneration of the CEO consists of fixed and variable remuneration, the proportions of which are assessed according to the company's business situation at hand and CEO's remuneration is partly based on the same variable components than other employees. The aim of variable remuneration is thus to steer the CEO and the personnel towards the same objectives and create a strong link between the Company's financial performance and CEO remuneration.

The following presents a comparison between the overall remuneration of the CEO and the Board, the average employee remuneration and company performance for the financial years 2017 to 2021. In below, also a graph of share price during the same period is presented.

	2017	2018	2019	2020	2021
Board remuneration in total (t€)	106,5	144,3	182,5	109,3	101,2
Change from previous year %		35,5 %	26,5 %	-40,1 %	-7,4 %
CEO remuneration in total (t€)	259,9	215,6	221,8	396,4	262,7
Change from previous year %		-17,0 %	2,9 %	78,7 %	-33,7 %
Average employee pay, Finland (t€)	69,3	84,4	77,2	83,5	84,1
Average employee pay, Global (t€)	100,9	100,7	95,4	95,3	96,7
Annual turnover (M€)	16,2	18,3	14,4	11,3	15,9

Note: number of board members may change from year to year. More detailed breakdown of board remuneration can be found in CG statements.

Note: Annual total CEO remuneration described above may include remuneration of more than one CEO's and include additional termination compensations. In 2020, termination compensation of 111.450,67 € was paid.

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Share price of Company's share SSH1V during 2017-2022

REMUNERATION OF THE BOARD OF DIRECTORS IN 2021

As stated in the Remuneration Policy of the Governing Bodies approved by the Annual General Meeting in 2020, Board remuneration consists of annual fees for Board members and Chairman.

Decisions on the remuneration of the Board of Directors are made annually by the Annual General Meeting. According to the resolution made by the Annual General Meeting of 2021 the annual remunerations are:

Chairman of the Board	28.800 €
Member of the Board	24.000 €

No separate attendance remuneration is paid. Company has no Committees of the Board.

Annual remuneration of the Board of Directors was not paid partially in shares, share-based rights or in cash with an obligation to acquire Company shares. The members of the Board are not part of the Company's long-term incentive plan and they have not received other financial benefits. The members of the Board do not have an employment or service contract with the SSH.

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Remunerations paid to the Board of Directors during 2021:

Fees to Members of the Board of Directors

	EUR
Fredrikson Christian (as of 25 March 2021)	18.435
Kellomäki Sampo	24.000
Kiianmies Aino-Mari (until of 25 March 2021)	6.000
Tavakka Kai	24.000
Ylönen Tatu (until 25 March 2021)	0
Österlund Henri (Chairman of the Board)	28.800
Total	101.235

Remuneration paid to the members of the Board of Directors during the financial year 2021 was based on the decision of General Meeting and is in compliance with the Remuneration Policy.

REMUNERATION OF THE CEO IN 2021

The CEO’s remuneration includes the fixed monthly salary, fringe benefits and annually agreed variable remuneration components, which may include short-term incentives and long-term incentives such as share- or stock option-based remuneration schemes.

Board of Directors and CEO annually agrees on the incentives/bonuses and related targets. CEO has no extraordinary fringe benefits. During 2021, the CEO was paid a short-term performance bonus of 10.000€ based on the performance of year 2020.

The CEO does not have any extraordinary fringe benefits. Additionally, the company does not have any extraordinary pension arrangements for the CEO or other senior management.

The period of notice for the CEO is three months, with 3 months’ severance payment.

The CEO’s annual salary and other benefits in 2021 were:

• Teemu Tunkelo
  salary 262.703€

Remuneration paid to the CEO during the financial year 2021 is in compliance with the Remuneration Policy.

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SHORT-TERM INCENTIVES

The annual performance bonus of the CEO may be based on the Company's financial result and other financial and operative targets decided annually by the Board of Directors. In 2021, annual performance bonus was 100 per cent of the annual salary at the target level. The annual performance bonus is always paid in the financial period following the earning period.

During 2021, CEO's short term incentives were based on the following factors: Turnover (65%) and Operating Profit / EBITDA (35%)

In 2021, the earning criteria was fulfilled by approx. 30%: the target for turnover was not met, but the target for operating profit / EBITDA was met by 85%. The performance bonus will be paid in 2022.

In 2021, the annual performance bonus was increased from 30% to 100% of annual salary at target level. Earning criteria for the short-term incentives remained the same but their proportions were changed: Turnover (50% -> 65%) and Operating Profit / EBITDA (50% -> 35%). These changes were made to unite the interests of the management and the shareholders, to further encourage the work of the CEO, and to ensure retention factors.

LONG TERM INCENTIVES

CEO's long-term incentives may consist of share- or stock option-based remuneration schemes or other long-term schemes. Board of Directors will decide on all long-term schemes based on the authorization from the General Meeting. In share- and option-based remuneration schemes, the continuation of the service contract may be the sole earning criterion. In addition to the actual remuneration, the objective of the long-term renumeration schemes is to adhere the CEO to the Company and align the interests of the CEO and the Company shareholders.

The Board of Directors did not decide on new stock option plans in 2021. During 2021, the CEO Teemu Tunkelo was not granted stock options. CEO's current stock options:

Option Plan	amount	Subscription Period
2018	50.000	Subscribed on 16.11.2021
2019 A	50.000	1.12.2022-31.3.2024
2020 A	375.000	1.12.2023-31.3.2025

Earning criteria is the continuation of the service contract. Long-term incentives were granted in compliance with the Remuneration Policy.