Board of Directors' proposals to the Annual General Meeting

The Board of Directors of UPM-Kymmene proposes to the Annual General Meeting to be held on 23 March, 1999 to reduce the company's share capital by invalidating own shares held by the company and to decide on the purchase of new own shares and of their disposal, and to decide on abolishing the nominal value of the UPM-Kymmene share and to amend the company's share capital into euro currency.
According to the proposal of the Board of Directors, the share capital of the company, FIM 2,776,060,690 would be reduced by FIM 127,620,820 by invalidating the company's own shares held by the company. This would reduce the number of shares by 12,762,082 shares, i.e. 4,6%.
The Board of Directors furthermore proposes that the Annual General Meeting would decide on the purchase of new own shares to be used as payment when the company acquires property pertaining to its business operations, and as payment in any possible corporate acquisitions and in eventual listing on foreign Stock Exchanges. No less than 200 shares and no more than 13,200,000 shares shall be purchased. In addition, the Board of Directors proposes that the Annual General Meeting would authorise the Board of Directors to decide on the disposal of the company's own shares purchased on the basis of the aforementioned decision.
The Board of Directors furthermore proposes that the Annual General Meeting would decide to abolish the nominal value of the UPM-Kymmene share and to amend the company's share capital into euro currency.
The Board of Directors decided on the following proposals:
NOMINAL VALUE
The Board of Directors' proposal to convert the Company's shares into no par value shares, to redenominate the Company's share capital into the euro currency, and to amend Article 3 of the Articles of Association to read as follows:
"The minimum share capital of the Company shall be 250,000,000 euros and its maximum share capital 1,000,000,000 euros, within the limits of which the share capital may be raised or lowered without amending these Articles of Association.
The mimimum number of the Company's shares shall be 150,000,000 and the maximum number of the shares 600,000,000, within which limits the number of shares may be increased or decreased without amending the share capital and the Articles of Association.
The Company's shares shall be included within the book-entry system for securities.
The right to receive monies distributed by the Company and the subscription right in conjunction with an increase of the Company's share capital shall be restricted to:
1) persons who, at the record date, are entered as shareholders in the list of registered shareholders;
2) persons whose right to receive payment is, at the record date, entered into the book-entry account given in the list of registered shareholders and also entered separately in the list of registered shareholders; or
3) if the share is registered in the name of a nominee, the person in whose book-entry account the share is entered at the record date and whose nominee is entered in the list of registered shareholders as the nominee at the record date."
REDUCTION OF THE SHARE CAPITAL
The Board of Directors' proposal to reduce the share capital:
The aim of reducing the share capital is to invalidate the Company's own shares held by the Company.
The share capital of the Company, FIM 2,776,060,690, will be reduced by FIM127,620,820.
The share capital will be reduced by invalidating the Company's own shares held by the Company without payment.
The number of shares will be reduced by 12,762,082.
The invalidation will concern only the Company's own shares held by the Company.
The purchase price of the shares will be deducted from the distributable shareholders' equity. The restricted shareholders' equity of the Company will not be reduced, since the nominal value of the invalidated shares will be transferred from the share capital into a premium fund.
The reduction of the share capital will not affect the distribution of share ownership and voting power in the Company, since the shares to be invalidated are in the possession of the Company.
PURCHASE OF THE COMPANY'S OWN SHARES
The Board of Directors' proposal that the Annual General Meeting decide to purchase the Company's own shares using distributable funds on the following terms:
The Company's own shares shall be purchased for use as payment when the Company acquires property pertaining to its business operations, and as payment in any possible corporate acquisitions and in eventual listing on foreign Stock Exchanges in the manner and to the extent decided by the Board of Directors.
No less than 200 shares and no more than 13,200,000 shares shall be purchased.
The shares shall be purchased other than in proportion to existing shareholdings through public trading on the Helsinki Stock Exchange.
The shares shall be purchased at the market price quoted for them in public trading at the moment of purchase. The purchase price of the shares shall be paid to the sellers within the payment time specified in the rules of the Helsinki Stock Exchange and Finnish Central Securities Depository Ltd.
The shares shall be purchased other than in proportion to existing shareholdings, since the Company's shares are publicly traded on the Helsinki Stock Exchange and since it is intended that the shares will be purchased through public trading.
The purchase of the shares will reduce the distributable unrestricted shareholders' equity of the Company.
Since the maximum number of shares to be purchased will be less than 5% of the total number of the Company's shares and less than 5% of the total voting power carried by the shares, the purchase of the shares will not have a notable impact on the distribution of share ownership and voting power within the Company.
On 10th February, 1999 the total number of the Company's shares held by persons regarded as company insiders according the Companies Act was 52,128,724 shares out of a total number of 264,843,987 shares, representing 19.68% of the Company's share capital. Prior to the purchase of the Company's own shares, insiders hold 19.68% of the total voting rights conferred by the shares. Since it is intended that the own shares will be purchased through public trading on the Helsinki Stock Exchange without knowledge of the sellers, the insiders' portion of the Company's share capital and voting power after the purchase of own shares cannot be predetermined.
DISPOSAL OF THE COMPANY'S OWN SHARES
The Board of Directors' proposal that the Annual General Meeting authorise the Board of Directors to decide on the disposal of the Company's own shares purchased on the basis of the aforementioned decision on the following conditions:
The authorisation is limited to a maximum of 13,200,000 of the Company's own shares.
The Board of Directors is authorised to decide to whom and in which order the own shares will be disposed of. The Board of Directors may decide on the disposal of own shares otherwise than in proportion to the existing pre-emptive right of shareholders to purchase the Company's own shares.
The shares shall be used as payment when the Company acquires property pertaining to its business activities and as payment in any possible corporate acquisitions and in eventual listing on foreign Stock Exchanges in the manner and to the extent decided by the Board of Directors.
The shares shall be disposed of at the market price quoted for them in public trading on the Helsinki Stock Exchange at the moment of their disposal.
This authorisation shall remain in effect for a period of one year from the date of the decision of the Annual General Meeting at which it was given.