UPM Annual Report 2019

The Board members visited Uruguay in March 2019. From left to right: Veli-Matti Reinikkala, Piia-Noora Kauppi, Kim Wahl, Jussi Pesonen, Björn Wahlroos, Berndt Brunow, Ari Puheloinen, Marjan Oudeman, Markus Skrabb, Tapio Korpeinen, Henrik Ehrnrooth, Kari Ståhlberg and Juha Mäkelä.

SIGNIFICANT DECISIONS We also aim higher in our governance. Our decision making, management and operations are guided by our values and our Code of Conduct. Our governance structure supports good management, responsible business operations and compliance at all levels, with clear responsibilities and reporting lines.

Governance framework The illustration on the left summarises the basic regulatory framework for our governance. Several changes took place within the governance framework during the year: • The UPMCode of Conduct was updated • The Finnish Corporate Governance Code was amended and came into force on 1 January 2020 • The board and committee charters were updated

UPM Code of Conduct

Finnish Corporate Governance Code

Articles of Association

UPM

• The UPMApproval Policy was updated • The UPM Insider Policy was revised • The Anti-Corruption Rules were updated • The Confidentiality Rules were updated • The Supplier and Third-Party Code was updated

Laws, regulations, guidelines and standards

Board and committee charters

Corporate policies, rules, guidelines and instructions

• The Rules for Financial Information Recipients were approved • The Rules for Global Legal Entity Governance were approved

UPM-Kymmene Corporation (UPM or the company) complies with all recommendations of the Finnish Corporate Governance Code (CG Code) for listed companies issued by the Finnish Securities Market Association. In accordance with the CG Code, we have published our Corporate Governance Statement (CG Statement) for the financial year 2019. It is available on the corporate website at upm.com/ governance. We refer to the CG Statement for information on: • Our governance structure and management system • Duties and responsibilities of the Board of Directors and its committees • Duties and responsibilities of our management bodies and • Our management and control procedures related to internal control,

risk management, internal audit, insider administration and related party transactions. General meeting of shareholders Our Annual General Meeting (AGM) took place in Helsinki, Finland on 4 April 2019. A total of 3,561 (2018: 3,386) shareholders were present or represented at the meeting, representing 50.2% of the company’s registered shares and votes. We were pleased to see a record number of shareholders present or represented at the meeting. The AGM adopted the company’s Financial Statements and decided to distribute a dividend of EUR 1.30 (2017: EUR 1.15) per share and discharged the members of the Board of Directors and the

President and CEO from liability for the financial year 2018. The dividends, totalling EUR 693 million, were paid on 17 April 2019 to shareholders who were registered in our shareholders’ register on 8 April 2019. The year 2018 marked the fifth consecutive year of increased dividend (read more on page 31). For the year 2019, the Board of Directors has proposed a dividend of EUR 1.30 per share. Information on other decisions taken at the AGM can be found later in this section and on the corporate website at upm.com/ agm2019. The AGM approved all Board proposals and all decisions were taken without voting. Our AGM 2020 will be held on 31 March at Finlandia Hall in Helsinki. Instructions for shareholders wishing to attend the meeting are available on the corporate website at upm.com/agm2020.

CASE

UPM BOARD IN URUGUAY In July 2019, the UPM Board of Directors made its biggest investment decision ever when it decided that the company would construct a 2.1-million tonne greenfield eucalyptus pulp mill in central Uruguay. Developing and securing competitive fundamentals for such a major investment and mitigating any significant risks associated with the project or the long-term operations requires careful planning and preparation. The Board has been monitoring the preparations and reviewing the status and the feasibility of this project since 2016. In addition to the mill, the total investment of USD 3 billion also includes a pulp terminal in the port of Montevideo and investments in local facilities, such as a new residential area in Paso de los Toros, where the mill will be constructed. The mill is scheduled to begin production in the second half of 2022.

The Board members visited Uruguay in March 2019 as part of the Board’s preparation for the investment decision. During their three-day stay, they took a tour at the intended mill site and visited the port of Montevideo. They also received local experts’ extensive reviews on several topics, including Uruguayan cultural and historical background, economics and political agenda as well as UPM’s exposure to and mitigation of short- and long-term risks. The relevant areas for the preparation of an investment were also covered, from wood supply and environmental permits to inbound roads and outbound logistics. The importance and impact of this investment to Uruguayan society became clearly visible during this visit.

Uruguay pulp mill investment on page 38–39 and upm.uy/growth

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UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

GOVERNANCE

GOVERNANCE

CONTENTS