UPM annual report 2014

10 Depreciation, amortisation and impairment charges

For the President and CEO, the target pension is 60% of average indexed earnings calculated according to the Finnish statutory pension scheme from the last ten years of employment. The costs of lowering the retire- ment age to 60 years is covered by supplementing statutory pension with a voluntary defined benefit pension plan. Should the President and CEO leave the company prior to the age of 60, immediate vesting right corre- sponding to 100% of earned pension (pro rata) will be applied. The retirement age of the other members of the Group Executive Team is 63 years. The expenses of the President and CEO's defined benefit pension plan in 2014 were EUR 0.5 million (0.5 million), and the plan assets amounted to EUR 6.6 million (4.6 million) and obligation to EUR 5.1 million (3.8 million). Other Group Executive Team members are under defined contribution plans. In case the notice of termination is given to the President and CEO, a severance pay of 24 months' fixed salary will be paid in addition to the salary for six months' notice period. Should the President and CEO give a notice of termination to the company, no severance pay will be paid in addition to the salary for the notice period. For other members of the Group Executive Team, the period for additional severance compensa- tion 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 employee. If there is a change in the control over the company, as defined in the employment or service contracts, the President and CEO may termi- nate his service contract within three months and each member of the Group Executive Team may terminate his/her service contract within one month, from the date of the event that triggered the change of con- trol and shall receive compensation equivalent to 24 months' base salary.

Shareholdings (no. of shares) and fees of the Board of Directors Shareholdings Fees (EUR 1,000) 31 Dec. 2014 1) 2014 2013 Board members Björn Wahlroos, Chair 250,249 175 175 Berndt Brunow, Deputy Chair 300,703 120 120 Matti Alahuhta 58,991 95 95 Piia-Noora Kauppi 8,981 120 95 Wendy E. Lane 30,649 95 95 Ari Puheloinen 2,025 63 – Veli-Matti Reinikkala 33,821 95 95 Kim Wahl 11,799 95 95 Jussi Pesonen, President and CEO 195,280 – –

Year ended 31 December

2014 2013

EURm

Personnel expenses Salaries and fees

Year ended 31 December

1,020 1,047

2014 2013

EURm

Share-based payments (Note 37)

10

8

Amortisation of intangible assets Intangible rights

16 30 46

17 28 45

Indirect employee costs Pension costs-defined benefit plans (Note 29) Pension costs-defined contribution plans Other post-employment benefits (Note 29)

Other tangible assets

16

27

116

119

Depreciation of property, plant and equipment Buildings

2

2

81

81

Other indirect employee costs 2)

126 123 260 271

Machinery and equipment

373 390 19 471 490 17

Other tangible assets

Former Board members Karl Grotenfelt

Other operating costs and expenses Rents and lease expenses

Depreciation of investment property Buildings

– –

120

52 15

59

3 1 4

3 – 3

Ursula Ranin

95

Emission expenses (Note 6)

9 2

Other assets

Total

892,498

858 985

Losses on sale of non-current assets

4

Other operating expenses 3)

846 951 917 1,021

Impairment charges of intangible assets Emission allowances

1) The above shareholdings include shares held by the Board members' closely as- sociated persons and controlled entities.

–1 –1

4 4

Costs and expenses, total

8,708 9,091

Impairment charges of property, plant and equipment Land areas

Salaries, fees and other benefits of the Group Executive Team Year ended 31 December EUR 1,000 2014 2013 President and CEO Jussi Pesonen Salaries and benefits Salaries 1,052 1,059 Incentives 627 553 Benefits 27 26 Total 1,706 1,638 In 2014, costs under the Finnish statutory pension scheme for the Presi- dent and CEO amounted to EUR 303,000 (282,000) and costs under the voluntary pension plan were EUR 682,000 (677,000). In addition, a single premium of EUR 268,000 was paid into to the President and CEO's voluntary group pension plan (EUR 1.1 million) to cover past service pension liabilities. Year ended 31 December EUR 1,000 2014 2013 Group Executive Team (excluding the President and CEO) 1) Salaries and benefits Salaries 3,457 3,396 Incentives 869 1,067 Benefits 249 137 Total 4,575 4,600 1) 11 members in 2014 and in 2013. In 2014, costs under the Finnish and German statutory pension schemes for Group Executive Team members (excluding the President and CEO) amounted to EUR 752,000 (740,000) and costs under the voluntary pension plan were EUR 686,000 (531,000). The total remuneration of the President and CEO and the members of the Group Executive Team consists of base salary and benefits, short- term incentives and share-based long-term incentive schemes. The short-term incentive plan for the President and CEO and the members of the Group Executive Team has been linked with achieve- ment of the predetermined financial targets of the Group or Business Areas and individual targets. The incentives amount to a total maximum of 100% of annual base salary to the Business Area Executives and to a total maximum of 70% 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 2.8 million (1.4 million). In accordance with the service contract of the President and CEO the retirement age of the President and CEO, Jussi Pesonen, is 60 years.

1) External services and charges mainly comprise delivery costs of products sold.

1

– – 3 – 3

2) Other indirect employee expenses primarily include other statutory social expenses, excluding pension expenses. 3) Other operating expenses include, among others, energy and maintenance expenses as well as expenses relating to services and the Group’s administration.

Buildings

42 93

Machinery and equipment

Other tangible assets

2

138

The research and development costs included in costs and expenses were EUR 35 million (38 million).

Total

658 545

Auditor's fees

Year ended 31 December

In November 2014, UPM announced that it is planning to permanently reduce its publication paper capacity in Europe by approximately 800,000 tonnes, including newsprint machine 3 at UPM Chapelle in France, newsprint machine 1 at UPM Shotton in UK, SC paper machine Jämsänkoski 5 at UPM Jämsänkoski in Finland and coated mechanical paper machine 2 at UPM Kaukas in Finland. Based on the plan, UPM recognised impairment charges of EUR 135 million related to property, plant and equipment in the UPM Paper ENA segment. In addition, impairment charges of EUR 3 million related to restructuring in the UPM Raflatac segment were recognised in property, plant and equip- ment. In July 2013, UPM Raflatac announced that it will reduce labelstock production capacity in Europe, South-Africa and Australia. Impairment charges EUR 3 million were recognised in the UPM Raflatac segment´s property, plant and equipment. 11 Gains on available-for-sale investments, net Year ended 31 December EURm 2014 2013 Net gains and losses on disposals 1) 59 1 Total 59 1 1) In 2014, includes a gain of EUR 59 million related to the sale of Metsä Fibre Oy shares in 2012.

2014 2013

EURm Audit

Government grants In 2014, the Group recognised government grants of EUR 3 million (1 million) as reduction of non-current assets. In 2014, government grants relate to environmental investments in Austria. Government grants recognised as deduction of costs and expenses totalled to EUR 7 million (11 million) in 2014. In addition, the Group received emission rights from governments, Note 17. Remuneration paid to members of the Board of Directors and the Group Executive Team The Annual General Meeting 2014 resolved that the annual fee to the Board Chair is EUR 175,000, to the Board Deputy Chair and Chair of the Audit Committee EUR 120,000 and to other members of the Board EUR 95,000. Of the annual fee, 60% was paid in cash to cover taxes and 40% in company shares purchased on the Board members’ behalf. Since General Ari Puheloinen was able to participate in the Board work only from the start of August, the Annual General Meeting decided that he was entitled to two-thirds of the Board member’s annual fee. No annual fee was paid to the President and CEO for his role as a member of the Board. In 2014, 5,595 (8,925) company shares were paid to the Chair, 3,836 (6,120) shares to the Deputy Chair and the Chair of the Audit Commit- tee respectively and 3,037 (4,845) shares to each of the other members of the Board, except for Ari Puheloinen 2,025 shares.

2.0

2.6 0.1 0.9 0.1 3.7

Audit-related Tax consulting Other services

–

0.6 0.5 3.1

Total

8 Change in fair value of biological assets and wood harvested

Year ended 31 December

2014 2013 –91 –88 169 156

EURm

Wood harvested

Change in fair value

Total

78

68

9 Share of results of associated companies and joint ventures

Year ended 31 December

2014 2013

EURm

Associated companies

3 – 3

3

Joint ventures

–1

Total

2

CONTENTS

ACCOUNTS

UPM Annual Report 2014 99

UPM Annual Report 2014 100