UPM Annual Report 2022

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ACCOUNTS FOR 2022

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

8.3 Related party transactions The Board of Directors and the Group Executive Team There have not been any material transactions between UPM and its members of the Board of Directors or the Group Executive Team (key management personnel) or persons closely associated with these members or organisations in which these individuals have control or significant influence. There are no loans granted to any members of the Board of Directors or the Group Executive Team at 31 December 2022 or 2021. For information concerning shares held by members of the Board of Directors as well as remuneration to members of the Board of Directors and the Group Executive Team are disclosed in » Note 3.2. Key management personnel. Associates and joint ventures Austria Papier Recycling GmbH purchases recovered paper in Austria and L.C.I s.r.l. in Italy. ASD Altpapier Sortierung Dachau GmbH is a German recovered paper sorting company. In Finland, the group has organised its producer’s responsibility of recovered paper collection through Encore Ympäristöpalvelut Oy. In October 2022, UPM has sold its ownership in Encore Ympäristöpalvelut Oy. Transactions with associates and joint ventures are presented in the table below. The group has no individually material associates or joint ventures.

8.4 Assets held for sale No assets were classified as held for sale at the end of 2022 or 2021.

anticompetitive practices, and the fact that the Commission carries out such inspections does not mean that the companies are guilty of anti competitive behaviour nor does it prejudge the outcome of the investigation itself. UPM takes any suspected violation of antitrust rules very seriously and has a compliance programme in place to mitigate the risk of such violations. For example, all employees and executives are required to take training on the UPM Code of Conduct, which includes a section regarding antitrust compliance. In addition, UPM has also in place a specific training programme regarding antitrust rules which covers approximately 3,000 employees and executives. 9.3 Events after the balance sheet date On 2 February 2023, UPM’s Board of Directors revised the company’s dividend policy to be based on earnings instead of cash flow. This aligns the dividend policy with the company’s transformative growth strategy. According to the new policy, UPM aims to pay attractive dividends, targeting at least half of the comparable earnings per share over time. 10. Other notes 10.1 Forthcoming new standards, amendments and accounting policy changes Certain new accounting standard amendments and interpretations have been published that come into effect only after the reporting period started on 1 January 2022. These standards and amendments are not expected to have a material impact on the group in the current or future reporting periods and on foreseeable future transactions and have not been early adopted.

Accounting policies Non-current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell, if UPM will recover their carrying amount through a sale transaction which is considered highly probable. Non-current assets classified as held for sale, or included within a disposal group that is classified as held for sale, are not depreciated after the classification. 9. Unrecognised items 9.1 Commitments and contingencies In the normal course of business, UPM enters into various agreements providing financial or performance assurance to third parties. The maximum amounts of future payments for which UPM is liable is disclosed in the table below under “Other commitments”. Property under mortgages given as collateral for own commitments include property, plant and equipment, industrial estates and forest land.

EURm

2022 2021

EURm

2022 2021

On behalf of others Guarantees

Dividends received

Purchases of raw materials and services

Other own commitments Leasing commitments for the next 12 months in accordance with IFRS 16

Loan receivables

5 1 7

5 2 9

Trade and other receivables Trade and other payables

Other commitments

219 223

213 220

Total

Subsidiaries and joint operations » Refer Note 8.2 Principal subsidiaries and joint operations.

The lease commitments for leases not commenced at the end of 2022 totals approximately EUR 245 million, which are mostly related to long term charter agreements, railway service agreement in Uruguay and service agreements related to waste water treatment and other utilities in Leuna, Germany. Such lease commitments at the end of 2021 amounted to EUR 409 million.

Pension Funds In the UK, the single UPM Pension Scheme operates under a Trust which is independent from the group. The Trust consists of various defined benefit sections, all of which are closed to future accrual and one common defined contribution section which is open to all UPM employees in the UK. The group made contributions of EUR 6 million (6 million) to the defined benefit sections of the Scheme in 2022. The fair value of the UK defined benefit fund assets at 31 December 2022 was EUR 300 million (565 million), of which 5% was invested in equity instruments, 26% in debt instruments, 20% in property, 44% money market and 5% in other investments. At the end of 2021, pensions for about 21% of the group's Finnish employees were arranged through the TyEL foundation, UPM Sellutehtaiden eläkesäätiö, which is a separate legal entity. In 2022, the foundation was replaced with defined contribution arrangement and the assets and liabilities of the plan were transferred to the insurance company. In 2022, the contributions paid by UPM to the TyEL foundation amounted to EUR 0 (18) million. Cash received from settlements amounted to EUR 128 million. The fair value of foundation assets at 31 December 2022 was EUR 0 (597) million.

9.2 Litigation Contingent liabilities

The group is defendant or plaintiff in a number of legal proceedings incidental to its operations. These lawsuits primarily involve claims arising from commercial law issues. Group companies The Group’s management is not aware of any significant litigation at the end of 2022. In October 2021, the European Commission conducted an unannounced inspection at UPM’s premises. According to the Commission’s press release on 12 October, the Commission has concerns that the inspected companies in the wood pulp sector may have violated EU antitrust rules that prohibit cartels and restrictive business practices. The Commission states that the unannounced inspections are a preliminary step in an investigation into suspected