Teleste Oyj — Remuneration Information 2023

Mar 14, 2023

TELESTE
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TELESTE - REMUNERATION REPORT FOR THE COMPANY'S GOVERNING BODIES 2022

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Table of contents

1. Introduction 3
2. Fees of the Board of Directors 4
3. Remuneration of the CEO 5

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1. Introduction

This Remuneration Report follows the guidelines of the Corporate Governance Code 2020. The remuneration paid or due to the Board members and the CEO for the year 2022 is in line with the Remuneration Policy of the Governing Bodies of Teleste approved at the Annual General Meeting ("the AGM") 2020. The materialized remuneration of the Board members and the CEO in the year 2022 reflects the targets of remuneration principles which Teleste has set with its Remuneration Policy.

The remuneration paid or due to the Board members and the CEO for the year 2022 promotes the long-term financial performance and success of Teleste Oyj ("Teleste" or "the Company") as described below.

The purpose of the total compensation of the Board members, consisting of annual remuneration and meeting fees, is to be sufficiently competitive to ensure that sufficiently qualified persons can be obtained to perform the responsibilities of the Board of Directors. The tasks of the Board of Directors include deciding on the Company's strategy and setting and monitoring the implementation of long-term objectives. Thus, the principles for Board remuneration contribute to Teleste's long-term financial performance and success.

The CEO's remuneration is based on Teleste's remuneration principles. The key objective of the remuneration for the CEO of Teleste is to encourage him in increasing the shareholder value by aligning his interests with the interests of Teleste's shareholders. Both fixed and variable salary components are tied to the market situation, strategy and the Company's success. A comparison of the development of the fees of the Board of Directors and the remuneration of the CEO to the development of the average remuneration of the employees and to the Company's net sales and adjusted EBIT is illustrated and compared in the table below.

The Remuneration Report for 2021 was presented to the AGM in 2022 and approved in an advisory advance vote on 6 April 2022. Adoption of the report was supported by 99.99% of the votes cast and objected to by 0.01% of the votes cast.

Development of remuneration and financial (EUR) development over the past five years

EUR	2022	2021	2020	2019	2018
Board of Directors^{1}	247,000	247,000	247,000	256,000	224,000
President and CEO^{2}	310,260	457,530	396,908	534,516	489,996
Employees' average remuneration^{3}	48,250	46,591	44,808	45,331	44,924
Financial development:
Net sales, continuing operations, EUR million	165.0	144.0	4	235.5	250.3
Adjusted EBIT, continuing operations, EUR million	2.0	5.5	5.1	7.7	9.7

1. Values exclude meeting fees.
2. Values are excluding additional pension payments. The 2018–2021 data comprises the remuneration of CEO Jukka Rinnevaara. The 2022 data comprises the remuneration of CEO Esa Harju, who started on 1 January 2022.
3. Average employee: total personnel expenses without social and pension costs divided by the average number of personnel during the year.
4. Teleste divested its services business in Germany in 2020. Sold operations are excluded from continuing operations 2020.

2. Fees of the Board of Directors

Teleste's AGM 2022 decided on the annual remunerations to be paid to the members of the Board of Directors as follows: EUR 66,000 per year for the Chairman and EUR 33,000 per year for each member.

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The annual remuneration of the Board member who acts as the Chair of the Audit Committee is to be EUR 49,000 per year. Out of the annual remuneration to be paid to the Board members, 40 per cent of the total gross remuneration amount will be used to purchase Teleste Corporation's shares for the Board members through trading on the regulated market organized by Nasdaq Helsinki Ltd, and the rest will be paid in cash. In addition, EUR 400 per meeting is to be paid to the members of the Board of Directors' Audit Committee as a meeting fee. However, a separate meeting fee will not be paid to the chairman of the Audit Committee.

In addition, reasonable travel expenses shall be reimbursed to the members of the Board of Directors in accordance with the Company practice applicable at the time, excluding daily allowance. The members of the Board of Directors are not employed by the Company and are not covered by the company's incentive or pension schemes.

Remuneration and meeting fees of the Board of Directors paid in 2022 and in 2021

EUR	2022				2021
	Annual remuneration				Annual remuneration
	Share portion	Cash portion	Meeting fees¹	Total	Share portion	Cash portion	Meeting fees¹	Total
Timo Luukkainen, Chairman of the Board	26,400	39,600		66,000	26,400	39,600	0	66,000
Jussi Himanen	13,200	19,800	3,600	36,600	13,200	19,800	2,400	35,400
Vesa Kor-pimies	13,200	19,800	3,600	36,600	13,200	19,800	2,400	35,400
Heikki Mäkijärvi	13,200	19,800		33,000	13,200	19,800	0	33,000
Kai Telanne	13,200	19,800		33,000	13,200	19,800	0	33,000
Mirel Leino-Haltia	19,600	29,400		49,000	19,600	29,400	0	49,000
Total	98,800	148,200	7,200	254,200	98,800	148,200	4,800	251,800

¹ Meeting fees have been entered in the table in the year in which they were paid.

There is no remuneration due to be paid to the Board members based on the year 2022.

3. Remuneration of the CEO

The remuneration of the CEO consists of fixed and variable salary components: base salary, fringe benefits, short-term incentives, long-term incentives and additional pension.

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Remuneration of the CEO paid in 2022 and 2021¹

EUR	2022	2021
Base salary	279,983	398,013
Fringe benefits	11,833	17,557
Short-term incentives²	7,587	17,256
Long-term incentives (share-based)³	10,857	24,704
Total⁴	310,260	457,530
Share of fixed pay of total remuneration	94%	91%
Share of variable pay of total remuneration	6%	9%
Additional pension payment	72,450⁵	174,392⁶

¹ The 2021 data comprises the remuneration of CEO Jukka Rinnevaara. The 2022 data comprises the remuneration of CEO Esa Harju, who started on 1 January 2022.
² Amounts have been entered in the table in the year in which they were paid and are based on the performance from the previous year
³ Paid on 21st March 2022 with a share price of EUR 4.94. Paid on 19th March 2021 with a share price of EUR 4.83.
⁴ Values are excluding additional pension payments.
⁵ Group pension insurance contribution of EUR 72,450.
⁶ Group pension insurance contribution of EUR 32,189 and capital redemption payment of EUR 142,203.

A contributory additional pension is included in the CEO's contract. The payment level of the group pension is 25 per cent of base pay, excluding bonuses, until the age of 65 or termination of the service relationship.

CEO's variable remuneration earning opportunity and performance measures

The CEO is included in the Company's short-term incentive scheme, which is part of the elements of Teleste's variable salary component. The objective of the short-term incentive scheme is to encourage the CEO to execute the business plan and to reward in accordance with that. The Board of Directors decides on the structure, objectives, target levels and prospects of earning of the CEO's scheme:

• In 2021 (Jukka Rinnevaara), the earnings were based on the Group's EBIT (80% weight) and net sales development in the North American market (20% weight). The Board of Directors evaluates the fulfilment of the targets at the end of the earnings period. The CEO's maximum earning opportunity was 58.3% of annual base salary (seven months base salary) excluding bonuses. In 2021, the minimum performance threshold was exceeded and the CEO's STI payout was EUR 13,269, or 6.1% of the maximum earning opportunity of the incentive scheme (3.3% of annual base salary). The STI bonus was paid in spring 2022.
• In 2022 (Esa Harju), the earnings were based on the Group's EBIT (75% weight) and strategy-linked personal objectives (20% weight) and the launch of the Group's ESG programme (5% weight). The Board of Directors evaluates the fulfilment of the targets at the end of the earnings period. The CEO's maximum earning opportunity was 78.8% of annual base salary (ten months base salary) excluding bonuses. In 2022, the minimum performance threshold was exceeded and the CEO's STI payout is EUR 27,255, or 11.9% of the maximum earning opportunity of the incentive scheme (9.3% of annual base salary). The STI bonus will be paid in spring 2023.

The CEO is included in the Company's long-term incentive scheme, which is part of the elements of Teleste's variable salary component. The objective of the long-term incentive scheme is to encourage the CEO to execute the long-term strategy and to increase shareholder value and to reward in accordance with that.

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• The share-based incentive payment for the CEO during the year 2022 was based on LTI 2018 (plan period 2019-2021). CEO Esa Harju participated in this programme in his role as an SVP at Teleste at the time. The elements in this programme were the matching share plan (ratio 1:1) and the performance share plan. Performance measure for the performance share plan was Absolute Total Shareholder Return in the measurement period of 2019-2021. The maximum combined earning opportunity for these two elements was 103.8% (EUR 174,746) of Esa Harju's 2019 annual base salary excluding bonuses. The CEO's payout based on a fixed matching element was 6.4% (EUR 10,857) of his 2019 annual SVP base salary. There was no payout based on the performance matching element as the minimum performance threshold was not met.

The CEO is included in the following ongoing long-term incentive schemes

	Performance Matching Share Plan 2020-2022^{1}	Performance Matching Share Plan 2021-2023^{1}	Performance Matching Share Plan 2022-2024
Earning opportunity: fixed matching shares (matching ratio 2:1)	1,800 shares	1,750 shares	4,125 shares
Earning opportunity: performance shares	21,600 shares	21,000 shares	66,000 shares
Max earning opportunity (% of base pay)	60.0%	60.0%	110.3%
Performance measure (for performance shares)	Absolute Total Shareholder Return	Absolute Total Shareholder Return	Absolute Total Shareholder Return and cumulative adjusted EBIT
Pay-out year	2023	2024	2025

1 CEO Esa Harju participated in this programme in his role as an SVP at Teleste

Teleste adheres to a shareholding recommendation for the CEO as described in the Teleste Remuneration Policy.

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