UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

Salaries and benefits paid to the President and CEO and the Group Executive Team President and CEO Jussi Pesonen

The performance measures for the PSP 2022–2024 and PSP 2023– 2025 comprise the total shareholder return (80% weighting) and selected environmental, social and governance related (ESG) measures. In all plans, the earned shares are delivered after the earning period has ended .

Other members of Group Executive Team 1)

EUR 1,000

2023 1,161 1,473 2,902

2022 1,153 1,309 2,997

2023 3,950 2,973 9,242

2022 4,140 2,739 9,347

Salaries

Short-term incentives

PERFORMANCE SHARE PLANS No. of participants at 31 December 2023

PSP 2020-2022 PSP 2021-2023 PSP 2022-2024 PSP 2023-2025

Share rewards

25

22

24

24

Benefits

24

28

139

135

Actual achievement

100 %

34.62 %

—

—

Total

5,561

5,486

16,304

16,361

Max no. of shares to be delivered 1) to the President and CEO Jussi Pesonen

1) 11 members in 2023 and 2022.

85,589 272,500 160,200 518,289

28,829 89,562 42,272 160,663

80,870 279,000 138,500 498,370

75,802 265,000 125,500 466,302

to other members of GET

to other selected members of management Total max no. of shares to be delivered

In 2023, costs under the Finnish statutory pension scheme for the President and CEO amounted to EUR 469,000 (458,000) and payments under the voluntary pension plan amounted to EUR 911,000 (1,000,000). In 2023, costs under the Finnish and German statutory pension schemes for Group Executive Team (GET) members (excluding the President and CEO) amounted to EUR 881,000 (941,000) and payments under the voluntary pension plan amounted to EUR 994,000 (987,000). The remuneration of the President and CEO and other members of the Group Executive Team consists of the base salary and benefits, short-term incentives and long-term share-based incentives. In 2023 and 2022, the short-term incentives were based on the company's Short-Term Incentive Plan and they are paid annually in cash. The amount of the incentive is linked to the executive's position and achievement of annually set targets. The maximum incentives amount to a total of 110% of the annual base salary to the Business Area Executives and to a total of 90% of annual base salary to the other members of the Group Executive Team. For the President and CEO, the maximum annual incentive amounts to 150% of the annual base salary. The expenses recognised in income statement in respect of share based payments for the Group Executive Team were EUR 4.3 million (3.6 million). According to the service agreement, the UPM’s President and CEO Jussi Pesonen would have been entitled to retire in November 2020 at the age of 60 but at the request of the company's Board of Directors, the President and CEO decided to continue in his position longer. In accordance with the terms of his service contract, President and CEO Jussi Pesonen announced that he will exercise his right to retire from UPM in during 2024. In October 2023, Massimo Reynaudo was appointed to President and CEO of UPM-Kymmene Corporation as of 1 January 2024. Jussi Pesonen continued as the President and CEO until 31 December 2023, after which he will work as an advisor to the Company and its management until he will retire from UPM on 30 April, 2024. The President and CEO Jussi Pesonen has a voluntary pension benefit in addition to the Finnish statutory pension scheme. The 3.3 Share-based payments UPM offers rewards and recognition with an emphasis on high performance. All UPM’s employees belong to a unified annual Short Term Incentive (STI) scheme. In addition, in 2023 and 2022 UPM had two long-term incentive schemes: the Performance Share Plan (PSP) for senior executives and the Deferred Bonus Plan (DBP) for other key employees.

voluntary pension benefit was arranged through a defined benefit plan until the end of November 2020. The last contribution to the defined benefit plan was made in 2020. Under the defined benefit plan, the target pension was 60% of the average indexed earnings from the last ten full calendar years of employment calculated according to the Finnish statutory pension scheme. The income of the President and CEO Jussi Pesonen’s defined benefit pension plan in 2023 was EUR 0.7 million (0.5 million in 2022). The plan assets amounted to EUR 10.4 million (10.8 million) and the obligation amounted to EUR 9.7 million (9.6 million). As of December 2020, the voluntary pension benefit is arranged through a defined contribution plan. First contribution to the defined contribution plan took place in 2021. The retirement age of other members of the Group Executive Team is 65 or 63 for executives who have become Group Executive Team members before December 2023. They are covered by the statutory pension plan in the country of residence, supplemented by voluntary defined contribution pension plans. For other GET members, the period for severance pay is 12 months, in addition to the six months’ salary for the notice period, unless notice is given for reasons that are solely attributable to the executive. Should a GET member give notice of termination to the company, no severance pay will be paid in addition to the salary for the notice period. The UPM’s new President and CEO Massimo Reynaudo's retirement age is 65 years. He has a voluntary pension benefit to supplement the Finnish statutory pension scheme (TyEL). The voluntary pension benefit is arranged through a defined contribution plan. Should the company give notice of termination of the President and CEO Massimo Reynaudo's service agreement, severance pay of 12 months base salary will be paid in addition to the salary for the 12-month notice period. Should the President and CEO give notice of termination to the company, no severance pay will be paid in addition to the salary for the notice period. If there is a change of control in the company, the President and CEO may terminate his service agreement within three months and each GET member within one month from closing the takeover and shall receive compensation equivalent to 24 months' base salary.

Share delivery (year)

2023

2024

2025

2026

Total shareholder return (80%) ESG (20%) 2)

Total shareholder return (80%) ESG (20%) 3)

Total shareholder return (100%)

Total shareholder return (100%)

Earning criteria (weighting)

1) For PSP 2020–2022 and PSP 2021–2023, the gross number of shares actually earned. 2) ESG measures are reduction of fossil CO 2 emissions from UPM’s own combustion and purchased electricity by 65% by 2030 from 2015 level (10% weighting), achievement of a net positive impact on biodiversity in the company’s own forests in Finland (5% weighting) and achievement of gender pay equity (5% weighting). 3) ESG measures are reduction of fossil CO 2 emissions from UPM’s on-site combustion and purchased energy by 65% by 2030 from 2015 level (10% weighting), achievement of a net positive impact on biodiversity in the company’s own forests in Finland (5% weighting) and achievement of gender pay equity (5% weighting).

Deferred Bonus Plan The Deferred Bonus Plan (DBP) is targeted at other selected key employees and it consists of annually commencing plans. Each plan consists of a one-year earning period and a two-year restriction period.

UPM shares are awarded based on achievement of group or group and business area EBITDA targets. Prior to share delivery, the share rewards earned are adjusted with dividends and other capital distributions, if any, paid to all shareholders during the restriction period.

DEFERRED BONUS PLANS No. of participants (at grant)

DBP 2020

DBP 2021

DBP 2022

DBP 2023

393 330

428 350

451 398

446 431

No. of participants (at 31 December 2023) Max no. of shares to be delivered (at grant)

429,558 141,642

459,912 355,032

487,130 388,173

477,052 48,806

Estimated no. of shares to be delivered at 31 December 2023 1)

Share delivery (year)

2023

2024

2025

2026

Group/Business Area EBITDA

Group/Business Area EBITDA

Group/Business Area EBITDA

Group/Business Area EBITDA

Earning criteria

1) For DBP 2020 and DBP 2021, the gross number of shares actually earned

The indicated actuals and estimates of the share rewards under the Performance Share Plan and the Deferred Bonus Plan represent the gross amount of the rewards of which the applicable taxes will be deducted before the shares are delivered to the participants. Accounting policies The group’s long-term share incentive plans are recognised as equity settled or cash-settled share-based payment transactions depending on the settlement. The group classifies the transactions with net settlement features for tax obligations as equity-settled in its entirety. Shares are valued using the market rate on the grant date. The settlement is a

combination of shares and cash. The group may obtain the necessary shares by using its treasury shares or may purchase shares from the market. PSP and DBP share deliveries are executed by using already existing shares and the plans, therefore, have no dilutive effect.

Performance Share Plan The Performance Share Plan (PSP) is targeted at the President and CEO and other Group Executive Team (GET) members as well as other selected members of the management. Under the PSP 2020–2022 and PSP 2021–2023 UPM shares are awarded based on total shareholder return during a three-year earning period. Total shareholder return takes into account share price appreciation and paid dividends.

182

183

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023

UPM FINANCIAL REPORT 2023

182

UPM FINANCIAL REPORT 2023

183