UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Independent Practitioner’s Assurance Report To theManagement ofUPM-KymmeneCorporation We have been engaged by the Management of UPM-Kymmene Corporation (hereinafter also the Company) to perform a limited assurance engagement on selected corporate responsibility information for the reporting period 1 January 2015 to 31 December 2015, disclosed in UPM- Kymmene Corporation’s Annual Report 2015 and on its website in section “Responsibility” (here- inafter CR Reporting). The assured information is indicated in the Company’s GRI Content Index 2015 on the Company’s website. dures to obtain evidence about the amounts and other disclosures in the CR Reporting, and about the Company’s adherence to the AA1000 AccountAbility Principles. The procedures selected depend on the practitioner’s judge- ment, including an assessment of the risks of material misstatement of the CR Reporting and an assessment of the risks of the Com- pany’s material nonadherence to the AA1000 AccountAbility Principles. Our work consisted of, amongst others, the following procedures: • Interviewing senior management of the Company.

Accounts for 2015

the following observations and recommendations in relation to UPM-Kymmene Corporation’s adherence to the AA1000 AccountAbility Princi- ples. These observations and recommendations do not affect the conclusions presented earlier. • Regarding Inclusivity: UPM-Kymmene Corpo- ration has processes in place for stakeholder inclusivity and engagement. Stakeholder Rela- tions coordinates stakeholder engagement at the group level, while businesses are responsible for local activity. Diverse stakeholder engagement activities have been undertaken both at the group level and at the local level in 2015. We recommend that the Company continues to develop the coordination of stakeholder engage- ment activities by ensuring Stakeholder Func- tions’ awareness of the local issues as well as the related action plans. • Regarding Materiality: UPM-Kymmene Corporation has a systematic process in place to evaluate and determine the materiality of corpo- rate responsibility topics. In 2015, the Company conducted a materiality analysis in association with the update of its responsibility focus areas, targets and performance indicators. We recom- mend that the Company pays particular atten- tion to business area specific characteristics in implementing the responsibility activities in the responsibility focus areas. • Regarding Responsiveness: UPM-Kymmene Corporation has processes in place for respond- ing to stakeholder needs and concerns. In future, we recommend that the Company considers the possibility to increase the disclosures onmaterial sustainability topics at the business area level. This would provide stakeholders further opportu- nities to assess the Company’s performance in the responsibility focus areas. Practitioner’s independence, qualifications and quality control We have compliedwith the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Interna- tional Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Our multi-disciplinary team of corporate responsibility and assurance specialists possesses the requisite skills and experience within financial and non-financial assurance, corporate responsi- bility strategy and management, social and envi- ronmental issues, as well as the relevant industry knowledge, to undertake this assurance engage- ment. PricewaterhouseCoopers Oy applies Interna- tional Standard on Quality Control 1 and accord- ingly maintains a comprehensive system of quality control including documented policies and proce- dures regarding compliance with ethical require- ments, professional standards and applicable legal and regulatory requirements. Helsinki, 19 February 2016 PricewaterhouseCoopers Oy Merja Lindh Maj-Lis Steiner Authorised Public Authorised Public Accountant Accountant

79 Report of the Board of Directors 89 Board of Directors’ proposal for the distribution of profits

90 Consolidated financial statements, IFRS

Furthermore, the assurance engagement has covered UPM-Kymmene Corporation’s adher- ence to the AA1000 AccountAbility Principles with moderate (limited) level of assurance. Management’s responsibility TheManagement of UPM-Kymmene Corporation is responsible for preparing the CRReporting in accordance with the Reporting criteria as set out in the Company’s reporting instructions and the G4 Sustainability Reporting Guidelines of the Global Reporting Initiative. TheManagement of UPM- Kymmene Corporation is also responsible for such internal control as themanagement determines is necessary to enable the preparation of CRReport- ing that is free frommaterial misstatement, wheth- er due to fraud or error. The Management of UPM-Kymmene Corpo- ration is also responsible for the Company’s adherence to the AA1000 AccountAbility Princi- ples of inclusivity, materiality and responsiveness as set out in AccountAbility’s AA1000 Account- Our responsibility is to express a limited assur- ance conclusion on the CR Reporting and on the Company’s adherence to the AA1000 Account- Ability Principles based on the procedures we have performed and the evidence we have obtained. We conducted our limited assurance engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised) “Assurance Engagements Other than Audits or Reviews of Historical Financial Information”. That Standard requires that we plan and perform the engagement to obtain limited assurance about whether the CR Report- ing is free frommaterial misstatement. In addition, we have conducted our work in accordance with the AA1000 Assurance Standard 2008. For conducting a Type 2 assurance engage- ment as agreed with the Company, the AA1000AS (2008) requires planning and performing of the assurance engagement to obtain moderate (lim- ited) assurance on whether any matters come to our attention that cause us to believe that UPM- Kymmene Corporation does not adhere, in all material respects, to the AA1000 AccountAbility Principles and that the CR Reporting is not reli- able, in all material respects, based on the Report- ing criteria. In a limited assurance engagement the evi- dence-gathering procedures are more limited than for a reasonable assurance engagement, and therefore less assurance is obtained than in a reasonable assurance engagement. An assur- ance engagement involves performing proce- Ability Principles Standard 2008. Practitioner’s responsibility

• Interviewing employees from various organi- sational levels of the Company with regards to materiality, stakeholder expectations, meeting of those expectations, as well as stakeholder engagement. • Assessing stakeholder inclusivity and respon- siveness based on the Company’s documenta- tion and internal communication. • Assessing the Company’s defined material corporate responsibility topics as well as assessing the CR Reporting based on these topics. • Visiting the Company’s Head Office as well as two sites in the United Kingdom. • Interviewing employees responsible for collecting and reporting the information presented in the CR Reporting at the Group level and at the different sites where our visits took place. • Assessing how Group employees apply the reporting instructions and procedures of the Company. • Testing the accuracy and completeness of the information from original documents and systems on a sample basis. • Testing the consolidation of information and performing recalculations on a sample basis. Limited assurance conclusion Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that UPM-Kymmene Corporation does not adhere, in all material respects, to the AA1000 AccountAbility Principles. Furthermore nothing has come to our atten- tion that causes us to believe that UPM- Kymmene Corporation’s CR Reporting for the reporting period ended 31 December 2015 is not properly prepared, in all material respects, in accordance with the Reporting criteria, or that the CR Reporting is not reliable, in all material respects, based on the Reporting criteria. When reading our assurance report, the inherent limitations to the accuracy and com- pleteness of sustainability information should be taken into consideration. Our assurance report has been prepared in accordance with the terms of our engagement. We do not accept, or assume responsibility to anyone else, except to UPM-Kymmene Corpo- ration for our work, for this report, or for the conclusions that we have reached. Observations and recommendations Based on the procedures we have performed and the evidence we have obtained, we provide

90 Consolidated income statement and statement of comprehensive income 91 Consolidated balance sheet 92 Consolidated statement of changes in equity 93 Consolidated cash flow statement 94 Notes to the consolidated financial statements

1 Accounting policies 2 Critical judgements in applying accounting policies and key sources of estimation uncertainty 3 Financial risk management 4 Segment information 5 Acquisitions and disposals and notes to the cash flow statement 6 Other operating income 7 Costs and expenses 8 Change in fair value of biological assets and wood harvested 9 Share of results of associated companies and joint ventures 10 Depreciation, amortisation and impairment charges 11 Gains on available-for-sale investments, net

20 Biological assets 21 Investments in associated companies and joint ventures 22 Available-for-sale investments 23 Other non-current financial assets 24 Other non-current assets 25 Inventories 26 Trade and other receivables 27 Equity and reserves 28 Deferred income taxes 29 Retirement benefit obligations 30 Provisions 31 Interest-bearing liabilities 32 Other liabilities 33 Trade and other payables 34 Financial instruments by category 35 Derivative financial instruments 36 Principal subsidiaries and joint operations 37 Share-based payments 38 Related party transactions 39 Commitments and contingencies 40 Events after the balance sheet date

12 Finance costs 13 Income taxes

14 Earnings per share 15 Dividend per share 16 Goodwill 17 Other intangible assets 18 Property, plant and equipment 19 Investment property

130 Parent company accounts 136 Information on shares 140 Key figures 2006–2015 142 Quarterly figures 2014–2015 144 Auditor’s report

contents

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UPM Annual Report 2015

UPM Annual Report 2015