UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Auditor’s report (Translation from the Finnish Original)

Calculation of key indicators

Formulae for calculation of financial indicators

Formulae for calculation of adjusted share-related indicators

To the Annual General Meeting of UPM-Kymmene Corporation

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the enti- ty’s preparation of financial statements and report of the Board of Directors that give a true and fair view in order to design audit proce- dures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting esti- mates made by management, as well as evaluating the overall presen- tation of the financial statements and the report of the Board of Direc- tors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on the Consolidated Financial Statements In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. Opinion on the Company’s Financial Statements and the Report of the Board of Directors In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements. Other Opinions We support that the financial statements and the consolidated financial statements should be adopted. The proposal by the Board of Directors regarding the use of the profit shown in the balance sheet is in compli- ance with the Limited Liability Companies Act. We support that the Members of the Board of Directors and the Managing Director of the parent company should be discharged from liability for the financial period audited by us.

We have audited the accounting records, the financial statements, the report of the Board of Directors and the administration of UPM- Kymmene Corporation for the year ended 31 December, 2015. The financial statements comprise the consolidated statement of financial position, income statement, statement of comprehensive income, state- ment of changes in equity and statement of cash flows, and notes to the consolidated financial statements, as well as the parent company’s balance sheet, income statement, cash flow statement and notes to the financial statements. Responsibility of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of financial statements and the report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company’s ac- counts and finances, and the Managing Director shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner. Auditor’s Responsibility Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the report of the Board of Directors are free from material misstatement, and whether the members of the Board of Directors of the parent com- pany or the Managing Director are guilty of an act or negligence which may result in liability in damages towards the company or whether they have violated the Limited Liability Companies Act or the articles of association of the company.

Return on equity, %: Profit before tax – income taxes

Earnings per share: Profit for the period attributable to owners of the parent company Adjusted average number of shares during the period excluding treasury shares

x 100

Total equity (average)

Return on capital employed, %: Profit before tax + interest expenses and other financial expenses Total equity + interest-bearing liabilities (average)

Equity per share: Equity attributable to owners of the parent company Adjusted number of shares at end of period Dividend per share: Dividend distribution Adjusted number of shares at end of period

x 100

Equity to assets ratio, %: Total equity

x 100

Balance sheet total – advances received

Net interest-bearing liabilities: Interest-bearing liabilities – interest-bearing assets

Dividend to earnings ratio, %: Dividend per share

x 100

Earnings per share

Gearing ratio, %: Net interest-bearing liabilities

x 100

Effective dividend yield, %: Adjusted dividend per share Adjusted share price at 31.12. P/E ratio: Adjusted share price at 31.12. Earnings per share

Total equity

x 100

EBITDA 2012-2015: Operating profit + depreciation + impairment charges +/– change in fair value of biological assets and wood harvested +/– change in fair value of unrealised cash flow and commodity hedges +/– share of results of associated companies and joint ventures +/– special items EBITDA 2006–2011: Operating profit + depreciation + impairment charges +/– change in fair value of biological assets and wood harvested +/– share of results of associated companies and joint ventures +/– special items

Market capitalisation: Total number of shares x share price at end of at period Adjusted share price at end of period: Share price at end of period Share issue coefficient

Adjusted average share price: Total value of shares traded Adjusted number of shares traded during period Operating cash flow per share: Cash from operating activities Adjusted average number of shares during the period excluding treasury shares

Return on capital employed (ROCE) for the segments (operating capital), %: Operating profit – special items Non-current assets + inventories + trade receivables – trade payables (average)

x 100

Helsinki 18 February 2016

PricewaterhouseCoopers Oy Authorised Public Accountants

Key exchange rates for the euro at end of period

31.12.2015 30.9.2015 30.6.2015 31.3.2015 31.12.2014 30.9.2014 30.6.2014 31.3.2014

Merja Lindh Authorised Public Accountant

USD CAD

1.0887 1.5116 131.07 0.7340 9.1895

1.1203 1.5034 134.69 0.7385 9.4083

1.1189 1.3839 137.01 0.7114 9.2150

1.0759 1.3738 128.95 0.7273 9.2901

1.2141 1.4063 145.23 0.7789 9.3930

1.2583 1.4058 138.11 0.7773 9.1465

1.3658 1.4589 138.44 0.8015 9.1762

1.3788 1.5225 142.42 0.8282 8.9483

JPY

GBP SEK

contents

accounts

143

144

UPM Annual Report 2015

UPM Annual Report 2015