Annual report 2010 (pdf) - Metsä Board

ANNUAL REPORT
2010

M-real is Europe’s leading primary fibre paperboard
producer and a major paper supplier. M-real offers
its customers innovative high-performance
paperboards and papers for consumer packaging,
communications and advertising end-uses.
M-REAL’s sTRATEgy ANd wAy Of wORkiNg ............................................................................... 2
CEO’s REviEw .................................................................................................................................... 4
OPERATiNg ENviRONMENT ............................................................................................................ 6
CONsUMER PACkAgiNg ................................................................................................................ 10
OffiCE PAPERs ............................................................................................................................... 12
sPECiALiTy PAPERs ....................................................................................................................... 14
MARkET PULP ANd ENERgy ........................................................................................................ 16
sUsTAiNAbLE PREMiUM PROdUCTs .......................................................................................... 20
MiNiMisiNg ThE ENviRONMENTAL iMPACTs Of PROdUCTiON ............................................. 22
ENERgy EffiCiENCy ...................................................................................................................... 24
fROM REsTRUCTURiNg TO CONTiNUOUs dEvELOPMENT Of ThE PERsONNEL ............... 26
fiNANCiAL sTATEMENTs .............................................................................................................. 29
CORPORATE gOvERNANCE sTATEMENT .................................................................................. 104
sALARy ANd REMUNERATiON REPORT .................................................................................... 110
bOARd Of diRECTORs ................................................................................................................. 112
MANAgEMENT TEAM .................................................................................................................... 114
shAREs ANd shAREhOLdERs................................................................................................... 116
fiNANCiAL REPORTiNg ............................................................................................................... 126
CONTACT iNfORMATiON .............................................................................................................. 128

M-real
2010
2010 2009 Change %
sales, EUR million 2,605 2,432 7.1
Operating result excl. non-recurring items, EUR million 173 -150
- % of sales 6.6 -6.2
Operating result, EUR million 146 -267
- % of sales 5.6 -11.0
Result from continuing operations -
before tax, EUR million 48 -358
- % of sales 1.8 -14.7
Result for the period, EUR million 27 -354
Return on capital employed, % 5.7 -8.9
Return on equity, % 2.8 -28.9
interest-bearing net liabilities, EUR million 827 777 6.4
Net gearing ratio, % 83 84
Equity ratio, % 32.1 29.6
Earnings per share, euros 0.09 -1.09
Earnings per share, from continuing operations, EUR 0.09 -1.02
Equity per share, EUR 3.03 2.79
dividend per share, EUR *) 0.00 0.00
Market capitalization 31 dec, EUR million 845 517 63.4
gross capital expenditure, EUR million
gross capital expenditure, from continuing operations
66 73 -9.6
EUR million 66 73 -9.6
Cash flow arising from operating activities, EUR million -69 81
Personnel 31 dec. 4,538 4,903 -7.4
sales
EUR million
key figures year 2010 in brief
4,000
3,000
2,000
1,000
Operating result
EUR million
EUR 26 million investment at the
simpele mill to increase the annual folding
boxboard capacity by about 80,000
tonnes and expand the sheeting capacity.
EUR 16 million investment at the
kemiart Liners mill to modernize the
coating section.
EUR 6 million investment in sheeting
operations at the Äänekoski paper mill.
The integration of production capacity
in the Reflex mill in germany and personnel
reduction by 220.
The partial divestment of the Reflex
mill to Metsä Tissue Corporation for
approximately EUR 10 million.
The permanent closure of the Alizay
pulp mill.
The centralisation of speciality paper
production to the gohrsmühle mill in
germany and the closure of the simpele
paper machine.
return on capital employed
%
0
-300
06 07 08 09 10 06 07 08 09 10 06 07 08 09 10
200
100
0
-100
-200
6
3
0
-3
-6
-9

Deliveries per business area
(1,000 tonnes)
1,390
909
246
690
share Of M-real’s
Deliveries (%)
43%
28%
8%
21%
key figures
2010 2009 Change %
sales, EUR million 1,175 968 21.4
Operating result, EUR million 135 51 164.7
Operating result, % 11.5 5.3
deliveries, 1,000 tonnes 1,390 1,212 14.7
Production, 1,000 tonnes 1,420 1.232 15.3
Personnel, average 1,512 1,517 -0.3
2010 2009 Change %
sales, EUR million 658 543 21.2
Operating result, EUR million 14 -104
Operating result, % 2.1 -19.2
deliveries, 1,000 tonnes 909 790 15.1
Production, 1,000 tonnes 910 795 14.5
Personnel, average 1,264 1,424 -11.2
2010 2009 Change %
sales, EUR million 303 352 -13.9
Operating result, EUR million -54 -151
Operating result, % -17.8 -42.9
deliveries, 1,000 tonnes 246 342 -28.1
Production, 1,000 tonnes 235 297 -20.9
Personnel, average 1,138 1,550 -26.6
2010 2009 Change %
sales, EUR million 434 508 -14.6
Operating result, EUR million 36 -91
Operating result, % 8.3 -17.9
deliveries, 1,000 tonnes 690 1,155 -40.3
Production, 1,000 tonnes 652 863 -24.5
Personnel, average 301 271 11.1

M-real’s
business areas
Consumer Packaging
Office Papers
BUsiness area
Consumer Packaging is the Europe’s leading producer of innovative premium
folding boxboard, coated white top liners and wallpaper base. The
products are excellent for the packaging of cosmetics, food products and
confectioneries, for example. The business area also offers versatile
packaging services in Asia.
Office Papers produces, markets and sells premium uncoated fine papers
to companies in the office supplies industry, office machine manufacturers
and paper wholesalers. Office Papers’ products are excellent for
printing, copying, forms and envelopes.
speciality Papers
Speciality Papers is a leading producer of speciality papers in Europe. Its
product range includes cast coated papers and boards, label and packaging
papers, carbonless papers, graphic speciality papers, digital papers,
bookbinding materials and uncoated fine papers.
Market Pulp and energy
Market Pulp and Energy is responsible for selling M-real’s market pulp to
external parties and coordinating measures that aim at improving the
energy efficiency of all M-real production plants. The business area coordinates
contract manufacturing issues between M-real and Sappi and is
also responsible for the parties’ cooperation related to pulp and energy.
10
12
14
16
business areas
1

2
M-real’s strategy
and way of working
MISSIOn
M-real is Europe’s leading
primary fibre paperboard
producer and a major paper
supplier. M-real provides highperformance,
premium quality
paperboards and papers for its
customers in consumer
packaging, communications
and advertising end-uses.
strategy and way Of wOrking
FInAnCIAl TARgETS
Return on capital employed
(ROCE) target set at a minimum
of 10% on average
over the business cycle
gearing ratio not to exceed
100%
VISIOn
M-real will grow profitably,
reaching an even stronger
position as the world’s
leading supplier of highquality
consumer
packaging boards.
STRATEgy
VAluES
Responsible profitability
Reliability
Cooperation
Renewal
The cartonboard business will be emphasised even
further in M-real’s business portfolio. In the first
phase, M-real will further strenghten its market
leadership in Europe and increase the capacity of the
existing machines. During the second phase, the focus
will be on expanding production activity more and
more to developing markets, either alone or in
cooperation with the strongest local players. With
regard to the paper business, the aim is to improve
operating conditions and profitability by taking
measures to enhance M-real’s efficiency and by
participating in the Europe-wide restructuring of the
paper industry. High self-sufficiency in pulp and energy
are significant competitive advantages for M-real.

STAkEHOlDERS
Committed and competent employees
are at the core of M-real’s operations;
HR development focuses on securing
resources and ensuring competence and
well-being at work. M-real provides its
customers with added value through
high-quality, ecological products tailored
to each application. M-real’s aim is to
continuously improve its performance
and increase shareholder value. M-real’s
business is based on responsible performance,
which provides the prerequisites
for continuous development of the
operations in a way that benefits its
customers, shareholders, employees
and partners.
SAlES AnD SuPPly CHAIn
M-real has a global sales network and professional
customer service. M-real aims for fast
and efficient deliveries by utilising various transport
methods and selecting the most appropriate
means of transport. M-real’s lightweight
products provide savings throughout the value
chain by decreasing the volumes transported,
emissions in the logistics chain and waste.
PRODuCTS
M-real’s lightweight products are produced using resource-saving methods
where impact from the entire product life cycle is minimised. They are safe
for people and the environment. In spite of being lightweight, the products
have excellent performance and printing properties. M-real’s simplified
product range makes it easier to choose the best possible product for each
application. The carbon footprint of M-real’s products is smaller than heavier
products throughout the value chain.
PRODuCTIOn
M-real uses the best available techniques at its production plants. Continuous
improvement of operations, the minimisation of environmental impacts as
well ass improving energy efficiency are key principles in production. Certified
ISO 9001 Quality Systems and ISO 14001 Environmental Systems are in use at
all production units. M-real is completely self-sufficient in pulp, and its energy
self-sufficiency is approximately 62 per cent. The share of wood-based fuels
was approximately 50 per cent in 2010.
RAW MATERIAlS
M-real is committed to using raw materials in its production
in a sustainable and economical manner. M-real’s primary
raw material is wood, which is sourced from sustainably
managed forests in compliance with local legislation. The
aim is to continuously increase the share of certified wood.
In 2010, 55 per cent of the wood raw material was certified.
strategy and way Of wOrking
3

4
CeO’s
review
SuStainability is at the core of all our
operations. Our innovative, lightweight cartonboard
and paper production uses less raw
materials, energy and water, have lower
transport weights and produce less waste
thereby decreasing environmental impacts
and costs at all stages of the product’s life
cycle. The lightweight concept has been a
great success and we will continue the work
to create new lightweight products. By using
virgin fibre raw material from sustainably
managed forests we manage hygiene and
product safety risks throughout the entire
supply chain. Our pulp mills are also major
bioenergy producers. We have succeeded in
reducing our emissions and we are committed
to open and transparent reporting.
Simplicity enables us to focus on the
essentials. We offer a simpler choice of innovative
products with optimised quality for
consistent performance in our customers’
processes. With streamlined production, we
can guarantee faster availability and shorter
lead times. Our customers now have access
to greater reliability, flexibility and efficiency.
By simplifying our processes and ways of
working, we have significantly improved our
own profitability
Our reStructuring actions have been
very successful. M-real is a totally different
company today than a couple of years ago.
We are further focusing our product portfolio
on packaging end uses. Thanks to our own
actions we have, since 2006, improved our
productivity significantly, reduced costs materially
across the company and lowered the
net debt to one third. We are continuing the
strategic review of our paper business to take
part in the Europe-wide consolidation.
CeO’s review
Our profitability has clearly improved
and reached the peer group level. Since summer
2009, we have achieved one of the most
impressive profitability turnarounds ever in
our industry. An exciting fact is that there is
still great profit improvement potential for
the years to come, especially by eliminating
the losses generated by our paper businesses
and among others by reducing our
variable costs. A new EuR 70 million internal
profit improvement programme is currently
being implemented. Through our own measures,
we have a good possibility to mostly
offset the accelerating cost inflation in 2011.
In addition to internal efficiency actions, profitability
in 2011 will be supported by clearly
higher cartonboard prices.
We are seeking growth in our cartonboard
business. We are strengthening our market
leadership in Europe by expanding our folding
boxboard capacity in Finland to satisfy
the growing demand for lightweight, ecological
boards. Fibre-based packaging solutions
are substituting plastic, metal and glass
packaging. Virgin fibre board is also gradually
replacing recycled fibre-based board, especially
in food packaging thanks to superior
safety features for excample. To accelerate
profitable growth, further additions to our
cartonboard capacity are needed. In the short
term, it means opening up the bottlenecks
at the existing mills and, possibly in the
longer term, new capacity in emerging markets.
We have a firm commitment to create value
for our stakeholders. We are dedicated to
excellent service by producing high-quality
products and services in a reliable and efficient
way. Our employees have done great
work and showed a firm commitment in
2010. We highly appreciate the well functioning
cooperation with our owners, customers
and partners. Thank you all for 2010.
Together, we will continue to build on our
strengths.
Mikko Helander

mikko helander
CeO’s review 5

6
Operating environment
environmental concerns favour the use
of cartonboard over other packaging
materials, as it comes from sustainable
resources and is fully recyclable.
OPerating envirOnMent
paperboarD
Demand for packaging materials is primarily
driven by the state of the economy and, in the
case of cartonboard, industrial production of
packaged consumer goods in particular. In
addition, various global megatrends have an
effect on the way in which packaged consumer
goods are regulated, and where, how
and how much they are purchased and consumed.
Such megatrends include globalisation,
urbanisation, smaller households, more
women working out of home, a rise in average
available income, health awareness, the
ageing population in developed economies,
a growth in the number of children and young
adults in developing countries as well as
environmental and social concerns.
The main end-uses for M-real’s paperboards
are high quality food, beauty care,
healthcare, tobacco, consumer electronics
and other retail packaging as well as graphical
end-uses such as advertising, postcards
and book covers. Each of these end-uses has
their own specific characteristics.
The basic need for packaged foodstuffs
makes this industry a relatively stable one.
Although at an economic downturn consumers
tend to shift to cheaper products, they
can still afford themselves small luxuries like
high quality confectionery instead of travelling
abroad, for excample. The recent concern
particularly in germany, on detrimental mineral
oil migration from recycled fibre-based
cartonboard into dried foodstuffs like breakfast
cereal, rice and biscuits has increased
demand for virgin fibre-based cartonboard
in food packaging.
The ageing population in Western economies
spends more medication; at the same
time generic drugs make pharmaceuticals
more affordable to people living in developing
countries. Regulation on the detailed information
to be given on the drug and efforts to
fight counterfeiting have an effect on the way
pharmaceuticals are packaged.
The everyday usage of beauty care products
in developed economies, and the fast
growing demand for them in other world
regions make this industry an attractive one.
usage of luxury cosmetics decrease during
an economic downturn, good quality mass
market products and professional line beauty
care products marketed to consumers are
doing very well.
Tobacco consumption in Western economies
is declining due to health awareness
and heavy regulation, but consumption in
developing economies is still growing. The
trend away from soft packs to hard packs,
and increased regulation concerning health
warnings and advertising are driving demand
for folding cartons.
There seems to be no end to the development
of new consumer electronic gadgets
like mobile phones, palm computers, e-readers
and the combination of these. Consumer
electronics, among other consumer goods,
are ever more frequently purchased through
the internet, which increased the need for
sturdy but representative packaging that protects
the fragile product on its way to the
consumer.
Environmental concerns favour the use
of cartonboard over other packaging materials,
as it comes from sustainable resources
and is fully recyclable. In particular, the lightweight
virgin fibre-based cartonboards produced
by M-real promote sustainability by
Production capacities in europe
Million tonnes/year
Europe M-real M-real’s share (%)
Folding boxboard 2.4 0.8 33
uncoated fine paper 11.2 0.9 8
Source: Pöyry Management Consulting, M-real

consuming fewer resources, reducing transport
volumes and producing less waste at
the end of the packaging’s life.
paper
Medium-term demand for cut-size paper is
affected by computer and internet based
technologies, double side printing and waste
reduction programmes. Colour printing
seems to be growing.
In Europe, the demand for paper
increased in 2010 on the previous year, but
nevertheless falls somewhat short of the
level of 2008. Cuts in paper production capacity
and production curtailments have continued
in Europe, which has improved utilisation
rates, but there is still excess capacity in the
paper market.
The production capacity of uncoated fine
paper has been declining for several years,
but it is expected to stabilise in Europe. Due
to the improved overall economic situation
and higher fibre costs, prices increased in
2010, but the need for price increases to
improve profitability still exists. The demand
and prices of speciality prices also improved
in 2010.
Even though the European paper industry
has suffered due to overcapacity and
decreased demend, its future is nevertheless
solid. Electronic archiving and invoicing and
e-books are among the challenges facing
the paper industry. The increasing number
of small and home offices, urbanisation and
development of printing technology in Eastern
Europe, on the other hand, are considered
to be key drivers of the demand for office
papers.
The main raw material of paper is renewable
and procured from sustainably managed
forests. The products are manufactured using
energy-efficient technology, and the final
products can be recycled several times. At
the end of their life cycle, they can also be
utilised as a source of energy.
Folding boxboard market price in europe
EuR/tonne
700
06 07 08 09 10 06 07 08 09 10
Largest folding boxboard producers in
europe
Capacity, 1,000 tonnes
M-real
stora enso
Mayr-Melnhof
Careo
international Paper
Holmen/iggesund
Paperboard
1,100
1,000
900
800
Uncoated fine paper market price in
europe
EuR/tonne
1,100
1,000
Source: Pöyry Management Consulting Source: FOEX
0 200 400 600 800 1,000
Source: Pöyry Management Consulting
Largest uncoated fine paper producers in
europe
Capacity, 1,000 tonnes
Portucel soporcel
stora enso
Mondi
uPM
international Paper
M-real
900
800
700
0 400 800 1,200 1,600 2,000
Source: Pöyry Management Consulting
OPerating envirOnMent
7

8
innOvatiOns

InnOVATIOnS
M-real’s lightweight products are produced using resource-saving methods where impact from the entire product
life cycle is minimised. They are safe for people and the environment. In spite of being lightweight, the products
have excellent performance and printing properties.
innOvatiOns
9

10
Consumer
Packaging
consumer packaging is the europe’s leading
producer of innovative premium folding
boxboard, coated white top liners and
wallpaper base. the products are excellent
for the packaging of cosmetics, food
products and confectioneries, for example.
the business area also offers versatile
packaging services in asia.
innOvatiOns
2010
Deliveries of folding boxboard and linerboard
reached a record level in 2010.
2011
capacity will be expanded especially in
food packaging cartonboards.
The demand for folding boxboard and linerboard
reached a record level in 2010, and in
order to answer the continuous strong
demand, M-real decided on investments to
expand and enhance its capacity during the
year under review.
A decision to invest in increasing the
capacity of the Simpele folding boxboard mill
and expand sheeting capacity was made in
October. The value of the investments is EuR
26 million, and they will be realised in summer
2011. In addition, it was decided to invest
EuR 16 million in modernising the coating
section of the kemiart liners mill during
2011.
The sheeting capacity of the Äänekoski
paper mill was increased, which improved
the fluency of the sheeting, quality of packaging
and profitability of the mill. The value of
the investment was EuR 6 million, and it will
be finalised during 2011.
The speciality paper machine at the Simpele
mill was closed down in December 2010.
M-real’s speciality paper production continues
in the gohrsmühle mill in germany.
M-real Corporation, Pohjolan Voima Oy
and leppäkosken Sähkö Oy decided in
november on the construction of a new EuR
50 million biopower plant at the kyro’s board
mill in Hämeenkyrö. The aim is to start the
construction of the power plant in spring
2011, and the new plant will enter production
use in autumn 2012.
marketS
Consumer Packaging further reinforced its
position as Europe’s leading producer of folding
boxboard, coated white top liners and
wallpaper base. The business area’s main
market area is Europe.
The demand for folding boxboard and linerboard
was at a record level throughout the
year under review, but the demand for wallpaper
base remained favourable as well.
Price increases were made in all product
categories. At the end of 2010, the prices of
folding boxboard and linerboard were over
10 per cent higher compared to the previous
year.
Delivery volumes were at a record level
in all main categories.
Consumer Packaging aims to reinforce
its market leadership mainly by opening up
the bottlenecks of existing production; all
folding boxboard and linerboard mills have

Case
Consumption of virgin fibre-based cartonboard
with a packaging material will
increase gobally. The existing trend is to
replace non-renewable packaging materials
as virgin fibre-based cartonboard. In
this competition, M-real has a good
chance to succeed; the company’s market
potential for a moderate expansion of capacity.
M-real is also investigating opportunities
to expand to emerging markets in cooperation
with the strongest local players.
profitability trenDS
The most significant factors improving the
result in 2010 were the implemented price
increases and the higher delivery volume
resulting from the recovery in demand. Production
and delivery volume records were
made in 2010 for folding boxboard as well as
liners.
outlook
Demand is expected to remain strong across
all product categories. The demand for lightweight
primary fibre-based paperboard
packaging made of renewable fibre raw
material is expected to increase, especially
in food packaging.
Price increases will also continue in 2011,
provided that the demand and cost inflation
remain high.
Cost inflation is expected to continue with
regard to raw material, energy and transportation
costs in 2011.
share has increased steadily, thanks to
the lightweight and sustainable products.
According to the latest market view,
virgin fibre-based cartonboard will
increase its market share especially in
food packaging due to its product safety
and lightweight properties. Virgin fibre-
key figures
2010 2009 Change-%
Sales, EuR million 1,175 968 21
EBITDA, EuR million 200 140 43
EBITDA, excl. non-recurring items, EuR million 203 146 39
Operating result, EuR million 135 51 165
Operating result, %
Operating result,
11.5 5.3
excl. non-recurring items EuR million 149 69 116
Operating result, exc. non-recurring items, % 12.7 7.1
Return on capital employed, %
Return on capital employed,
19.4 6.9
excl. non-recurring items, % 21.5 9.4
Deliveries, 1,000 tonnes 1,390 1,212 15
Production, 1,000 tonnes 1,420 1,232 15
Personnel, average 1,512 1,517 0
proDuctS anD ServiceS
cartonboards
Carta integra
Carta elega
Carta solida
avanta Prima
simcote
tako product group
graphic boards
Carta integra
Carta elega
Carta solida
coated and uncoated white-top liners
kemiart product group
flexible packaging and labeling
simcastor product group
wallpaper base
Cresta product group
integrated brand packaging services (ibp)
based cartonboard does not include any
contaminants, such as printing ink.
Demand of virgin fibre cartonboard is estimated
to increase approximately three
per cent per annum in Europe.
DiD yoU know?
Lightweight
products need
less water, raw
materials and
energy, generate
less waste and
decrease logistics
costs.
innOvatiOns
11

12
Office
Papers
office papers produces, markets and sells
premium uncoated fine papers to companies
in the office supplies industry, office
machine manufacturers and paper wholesalers.
office papers’ products are excellent
for printing, copying, forms and
envelopes.
innOvatiOns
2010
profitability was improved by several
actions and the most significant of which
was closing down the alizay pulp mill.
2011
profit improvement actions will be continued;
profit improvement potential is seen
especially in variable costs.
The Office Papers business area continued
measures to improve profitability in 2010, the
most important of which was closing down
the Alizay pulp mill. The closure of the pulp
mill also stabilised the operation of the Alizay
paper mill.
First customer deliveries of the new SAVE!
paper produced at the Alizay paper mill took
place in September. SAVE! is a new, lighterthan-normal
office paper, weighing only
65 g/m 2 . The production of lightweight office
paper consumes less fibre, water and energy,
reduces the environmental load of the logistics
chain and lowers printing costs. Customer
feedback has been extremely positive.
SAVE! is part of M-real’s concept of lightweight
products with a sustainable value
chain that benefits customers, the environment
as well as M-real.
The renewal of the Husum mill recovery
boiler was completed during the second
quarter of the year under review. The renewal
of the recovery boiler increases the efficiency
of production, lowers emissions and makes
it possible to increase electricity production.
The new recovery boiler has also had a significant
impact on reducing oil consumption.
Husum’s turbine investment is expected
to be complete during the second half of
2011. The investment will further increase
electricity production, and the energy selfsufficiency
of the mill will increase from
approximately 30 per cent to approximately
50 per cent.
Thanks to the profit improvement actions,
the production efficiency of the Husum mill
improved according to expectations.
marketS
Office Papers is the sixth largest producer of
uncoated fine paper in Europe – its main
market area.
The demand for uncoated fine paper
improved during the first two quarters as the
economic recession eased, driven by low pulp
prices. Several price increases were carried
out during the year under review. All in all,
the prices of uncoated fine paper were
approximately 15 per cent higher at the end
of 2010 compared to the previous year. Rapidly
increased prices led to higher inventory
levels of the customers in the third quarter
that temporarily lowered order inflow in the
fourth quarter.

Case DiD yoU know?
The logistics arrangements of the Husum
mill have improved considerably with the
Botnia line stretching along the coast of
northern Sweden. In particular, the mill’s
railroad transportation of raw materials
has increased significantly. In the future,
key figures
2010 2009 Change-%
Sales, EuR million 658 543 21
EBITDA, EuR million 43 1
EBITDA, excl. non-recurring items, EuR million 44 8
Operating result, EuR million 14 -104
Operating result, % 2.1 -19.2
Operating result,
excl. non-recurring items EuR million 5 -48
Operating result, exc. non-recurring items, % 0.8 -8.8
Return on capital employed, % 2.8 -21.1
Return on capital employed,
excl. non-recurring items, % 1.1 -9.8
Deliveries, 1,000 tonnes 909 790 15
Production, 1,000 tonnes 910 795 14
Personnel, average 1,264 1,424 -11
profitability trenDS
The 2010 result improved thanks to a higher
average price as a result of implemented
price increases and higher delivery volumes
resulting from the recovery in demand.
Increased fibre costs and the strengthening
of the SEk against the EuR, in turn, weakened
the result.
The profitability of the Husum mill was
very good, but the Alizay mill’s profitability
remained weak.
outlook
The need for price increases will remain in
2011, as the margin between selling price
and pulp price is historically small. Cost inflation
is expected to continue.
The European industry structure in
uncoated fine paper is very fragmented. The
industry is burdened with overcapacity, and
the need for structural changes is apparent.
new internal profit improvement measures
have been started. The emphasis is on
improving the profitability of the Alizay mill.
the railway will also facilitate new logistics
solutions of end products in Europe. In
addition, the railway both improves the
reliability of logistics and provides flexibility
in the planning of transports through
alternative transport possibilities.
proDuctS
Data copy
evolve
logic
modo papers
Save!
electronic
communications
is not always
environmental
friendly. Paper is.
innOvatiOns
13

14
speciality
Papers
Speciality papers is a leading producer of
speciality papers in europe. its product
range includes cast coated papers and
boards, label and packaging papers,
carbonless papers, graphic speciality
papers, digital papers, bookbinding
materials and uncoated fine papers.
innOvatiOns
2010
the focus for the year under review was
on implementing the significant profit
improvement programme announced
at the end of 2009.
2011
Speciality papers will continue to focus on
the manufacture of packaging products,
such as label and flexible packaging
papers.
The focus for the year under review was on
implementing the significant profit improvement
programme announced at the end of
2009, which included integration of production
capacity at Reflex, cutting fixed costs and
the reorganisation of the Reflex and
gohrsmühle organisations. Despite the
changes, the product offering remains
unchanged.
The partial divestment of the Reflex mill
to Metsä Tissue was realised in October. The
agreement covered paper machine 5 and
related real estate, as well as certain infrastructure
assets. M-real will continue to
develop the Paper Park concept of the Reflex
mill; the purpose is to find more industrial
partners for the mill site.
The gohrsmühle mill continued to invest
in one-side coated products by launching the
Zanflex flexible packaging papers. The new
products support Speciality Papers’ strategy
to focus further on packaging materials in
its portfolio. M-real’s label and packaging
paper operations have been centralised at
the gohrsmühle mill.
marketS
M-real Zanders, which comprises the Speciality
Papers business area, is one of
Europe’s leading producers of speciality
papers.
Efforts were made to increase prices of
products in several phases. On average, speciality
paper prices were, in fact, approximately
five percent higher at the end of 2010
compared to the end of 2009.
The demand for cast-coated products was
strong throughout the year, and their prices
were also increased.
The market situation in label and flexible
packaging papers remained stable during
the year under review, and demand improved
on the previous year. The prices of label and
flexible packaging papers were increased
during the year.
The demand for graphical uncoated fine
paper was good during the first two quarters,
but decreased slightly during the second half
of the year. The prices of graphical uncoated
fine paper increased by up to 30 per cent
based on the implemented price increases
and improved sales mix during the year
under review.

Case
During 2010, Speciality Papers continued
to focus further on the manufacture of
packaging products, such as label and
flexible packaging papers. After the shutdown
of the Simpele speciality paper
machine, M-real’s label and packaging
paper operations have been centralised
The demand for carbonless papers
decreased further due to continuously
decreasing consumption. In spite of the
decreased demand, the prices of carbonless
papers could be increased by approximately
10 per cent during the year under review.
profitability trenDS
The 2010 result was improved by the implemented
price increases and cost savings.
The result was weakened by considerably
increased pulp prices.
outlook
The need for price increases in all product
types remains in 2011.
The demand for speciality papers is
expected to remain at the 2010 level. The
need for structural change in the industry
continues to exist. new profit improvement
measures are underway to improve profitability.
at the gohrsmühle mill, which has the
widest cast coated, one-side coated and
uncoated speciality paper product offering
in Europe.
M-real Zanders offers the most extensive
portfolio of label and speciality packaging
papers in the market. In 2010, the
key figures
2010 2009 Change-%
Sales, EuR million 303 352 -14
EBITDA, EuR million -17 -65
EBITDA, excl. non-recurring items, EuR million -16 -31
Operating result, EuR million -54 -151
Operating result, %
Operating result,
-17.8 -42.9
excl. non-recurring items EuR million -26 -51
Operating result, excl. non-recurring items, % -8.6 -14.5
Return on capital employed, %
Return on capital employed,
-49.1 -55.8
excl. non-recurring items, % -23.6 -18.7
Deliveries, 1,000 tonnes 246 342 -28
Production, 1,000 tonnes 235 297 -21
Personnel, average 1,138 1,550 -27
proDuctS
packaging and labelling papers
CHrOMOLuX
Zanflex
Zanlabel
graphic papers and boards
CHrOMOLuX
Zanders efalin
Zanders elephanthide
Zanders estralin
Zanders medley
Zanders spectral
Zanders t2000
Zanders Zeta
ZantO
office communications
Zanders autocopy
Zanders bankpost
Zanders Classic
Zanders gohrsmühle
Zanders medley
Zanders reflex special
Zanders Zeta
Digital printing
silver digital
silver image laser
Zanders refLeXiOn
portfolio was complemented with a new
flexible packaging paper, Zanflex, used in
the packaging of dry soup, for example.
Zanflex is a state-of-the-art product; for
example, its printing properties compete
with fine art papers.
DiD yoU know?
Paper operates
as carbon
storage and
therefore it has
a positive
climate impact.
innOvatiOns
15

16
Market Pulp
and energy
market pulp and energy is responsible for
selling m-real’s market pulp to external
parties and coordinating measures that
aim at improving the energy efficiency of
all m-real production plants. the business
area coordinates contract manufacturing
issues between m-real and Sappi and is
also responsible for the parties’ cooperation
related to pulp and energy.
innOvatiOns
2010
energy efficiency projects continued
through the review year. for example
energy efficiency of the husum pulp mill
improved significantly.
2011
the renewal of the recovery boiler in
husum will increase the efficiency of production,
lower emissions and make it possible
to increase electricity production.
The Market Pulp and Energy business area
continued the cooperation associated with
the sales of market pulp initiated the previous
year with Metsä-Botnia. The cooperation was
increased further with regard to technical
sales support, for example. Through Metsä-
Botnia, M-real has access to one of the most
extensive market pulp sales networks in the
world. Together with M-real, Metsä-Botnia
can provide a wide product range to its customers.
During the year under review, the business
area initiated several technical cooperation
projects with market pulp customers.
The projects allowed customers to obtain
additional benefits through M-real’s expertise
for the suitability of pulp, in particular
BCTMP, in the final products and improving
their quality. Strengthening the technical
cooperation aims at long-term customer
relationships that benefit both parties.
During the year, Market Pulp and Energy
has invested in increasing to efficiency of the
units.
The debarking and chipping investment
at the Hallein pulp mill started in november
2010. This will improve the availability of
wood at the pulp mill. The investment will
add the consumption of roundwood, as the
wood will be debarked and chipped at the
mill.
The condensing steam turbine of the Hallein
pulp mill uses steam to generate green
electricity that is sold to the market. During
2010, the energy produced by the condensing
steam turbine could be utilised in full. The
sales of green electricity increased considerably
compared to 2009, amounting to 49 gWh
during the year under review.
Since Metsä-Botnia’s kaskinen pulp mill
was closed down in early 2009, the infrastructure
of the kaskinen BCTMP mill, such
as the water treatment plant, debarking plant
and concentrate recovery, were downsized
according to M-real’s needs. At kaskinen, the
transition phase has been successful and
managed with regard to infrastructure, creating
conditions in which M-real is able to
operate alone in the plant area.
Energy efficiency projects in the business
area continued during the year under review.
At Husum, for example, energy efficiency was
improved through boiler and turbine investments.
One of the business area’s focus areas in
2010 was improving the coordination of pulp

Pulp market price in europe
EuR/tonne
06 07 08 09 10
short fibre pulp
Long fibre pulp
900
800
700
600
500
400
300
and wood raw material flows, which had a
favourable impact on the profitability of the
business area, as well as on M-real as a
whole.
marketS
The price of market pulp increased strongly
until August 2010. Prices decreased slightly
from the record level towards the end of the
year.
Pulp stocks were at a record low level
early in the year, which was due, for example,
to the good demand for paper and board ,and
the availability of market pulp after an earthquake
in Chile closed down local pulp capacity.
profitability trenDS
The 2010 result improved thanks to higher
pulp prices. Moreover, the comparable delivery
volume increased considerably.
outlook
Source: FOEX
The pulp price outlook depends particularly
on paper and board demand trends. The
demand for both short-fibre and long-fibre
pulp is expected to remain good. The market
balance is also expected to remain stable in
2011.
proDuctS
Short fibre pulp
long fibre pulp
bctmp
DiD yoU know?
Pulp mills are
major
bioenergy
producers.
key figures
2010 2009 Change-%
Sales, EuR million 434 508 -15
EBITDA, EuR million 75 -21
EBITDA, excl. non-recurring items, EuR million 79 -17
Operating result, EuR million 36 -91
Operating result, %
Operating result, excl. non-recurring items,
8.3 -17.9
EuR million 53 -54
Operating result, excl. non-recurring items, % 12.2 -10.6
Return on capital employed, %
Return on capital employed,
6.0 -12.2
excl. non-recurring items, % 8.9 -7.2
Deliveries, 1,000 tonnes 690 1,155 -40
Personnel, average 301 271 11
innOvatiOns
17

18
sustainabiLity
SuSTAInABIlITy
M-real is committed to using raw materials in its production in a sustainable and economical manner. M-real’s
lightweight products are produced using resource-saving methods where impact from the entire product
life cycle is minimised. Continuous improvement of operations, minimisation of environmental impacts and
improving energy efficiency are key principles in production.

sustainabiLity 19

20
sustainable premium
products
the most important raw material for
m-real’s high quality products is wood:
a renewable, recyclable and energy-
efficient raw material that originates
and is procured from sustainably
managed forests.
sustainabiLity
Thanks to special fibre properties, M-real’s
lighter-than-normal boards and papers feature
excellent performance. lightweight
products consume fewer raw materials, have
fewer environmental effects in production
and transport and generate less waste than
the average.
M-real is committed to using sustainable
raw materials in its production. The most
important raw material for its products is
wood: a renewable, recyclable and energyefficient
raw material that originates and is
procured from sustainably managed forests.
M-real’s parent company Metsäliitto Cooperative
is responsible for M-real’s wood supply.
The bulk of the wood raw material used
by M-real in Finland comes from the forests
of the owner-members of Metsäliitto Cooperative.
Other wood supply countries include
Austria, latvia, lithuania, France, Sweden,
germany, Russia and Estonia. During the
year under review, Metsäliitto supplied a total
of 5.7 million cubic metres of wood to M-real
mills.
M-real is committed to promoting responsible
forest management. All wood purchase
agreements include precise environmental
criteria; also, forest regeneration measures
are implemented in a habitat-sensitive manner
after timber harvesting is completed.
Wood procurement is governed by an
environmental policy regarding wood supply
and forestry, as well as the group’s principles
of corporate responsibility. These are implemented
using certified quality and environmental
systems and an annually updated
environmental programme. Wood procurement
complies with local legislation and
regulations issued by the authorities.
Contractual partners are also required to
operate in a responsible way, and they are
trained on a regular basis. During the year
under review, labour and nature management
training were provided for harvesting
contractors and their machine operators.
Wood procurement operations are under
continuous development and best practices
are always applied.
In wood procurement, valuable plant and
animal habitats and other sites of importance
in terms of the biodiversity of nature or landscape
values are protected. Wood suppliers
and M-real’s logging sites as well as the logging
sites of subcontractors are inspected
more systematically and extensively in order
to protect valuable habitats to ensure that
harvesting is conducted in compliance with
environmental permit conditions. At the
same time, attention is paid to the quality of
the management of the forest environment
and social dimensions such as the training
and occupational safety of employees.
Certified quality and environmental systems
include a wood origin management
system, ensuring that the origin of all procured
wood is known. In procuring wood raw
material, M-real supports forest certification
that is verified by a third party. Some 55 per
cent of the wood raw material used by M-real
came from certified forests during the year
under review. Further, the PEFC forest certification
criteria were revised in Finland, and
an agreement was made on the FSC forest
certification criteria, which will set conditions
for FSC forest certification also in the future.
All M-real mills employ a certified Chain
of Custody system, which enables them to
verify the share of certified wood in their
products. M-real strives to launch more forest
certification labelled products on the
market.
During the year under review, M-real used
approximately 1.8 million tonnes of various
types of pulp, of which approximately 1.3
million tonnes were produced at M-real’s
own mills. M-real had 0.7 million tonnes of
chemical pulp available through the share of
ownership in Metsä-Botnia. Approximately
0.3 million tonnes was purchased from external
suppliers and 0.5 million tonnes was sold
externally. M-real requires that its pulp suppliers
operate in strict compliance with the
law, and report annually on the origin of
wood, forest certification and environmental
data.

proDuct Safety
Raw materials used in M-real products are
selected on the basis of the end use of the
products. For example, in boards used for
food packages, only raw materials approved
for this end use may be used. As a minimum
requirement, all raw materials must be
approved by the german Federal Institute for
Risk Assessment (BfR) and the u.S. Food and
Drug Administration (FDA).
M-real products have been tested as
required by the relevant laws and recommendations;
for example, the suitability of
boards as toy materials is tested in accordance
with the European En 71–3 and En 71–9
standards.
A database is maintained on the key production
chemicals. The database contains
environmental, health and safety information
and, for example, information on the regis-
Deliveries of certified wood to M-real’s mills in 2010
trations of the substances in compliance with
the REACH chemical regulation. Registration
of substances in accordance with the REACH
regulation (1907/2006/EC) was completed
during the year under review. The registered
substances were typically by-products of the
process, such as ash generated from the
incineration of bark. The REACH registration
obligation is not directly applicable to board
and paper, as they are classified as ”products.”
reSearch anD Development
M-real’s R&D activity during the year under
review focused on the development of highquality
lightweight packaging boards. With
regard to the paper business operations, the
focus was on the development and launch of
new products.
PeFC (%) FsC (%)
Finland 64 8
Sweden 22 20
Austria 62 2
wood supply to M-real’s mills by procurement area
1,000 m3 2010 2009 *)
Sweden 2,210 2,272
Finland 1,243 3,488
Austria 792 524
Russia 573 563
latvia 443 228
Estonia 236 204
lithuania 109 47
South Africa 113 0
5,719 7,459
*) including 30 per cent of wood delivered to Metsä-botnia mills until 8 december 2009.
The Efficient Packaging research programme
assesses the impact of lightweight
yet high-performance boards on the efficiency
of the entire packaging chain. The
research programme yielded promising
results that can be used in the development
of the board business.
A project to improve the print surface of
cigarette packaging boards was implemented.
The revised product was launched
during the first quarter, and it has been
received extremely positively in this demanding
market.
During 2011, Consumer Packaging will
implement investments at the Simpele, kyro
and kemi board mills. Development activity
is an essential part of these investments. The
kemi mill has particularly focused on the
development of coating, while Simpele and
kyro has engaged in work to improve production
techniques.
The development of non-woven type products
continued in wallpaper base papers.
A new, lighter-than-normal SAVE! office
paper was developed in the Office Papers
business area. The lightness is partly based
on BCTMP pulp. The deliveries to the markets
were started during autumn 2010. Speciality
Papers, on the other hand, has developed
several new types of one-side coated
flexible packaging and label papers.
During the year under review, M-real was
actively involved in the activity of Forest Cluster
ltd. Forest Cluster’s research programmes
provide resources for renewing
business operations over the long term.
M-real’s R&D expenditure for 2010
amounted to approximately EuR 5 million,
or some 0.2 per cent of sales. The decrease
compared to the previous year is due to the
end of the joint kCl research programme.
sustainabiLity
21

22
Minimising the environmental
impacts of production
m-real is committed to conducting its
business in a responsible manner and
promoting sustainable development
through its business activities as well as
to continuously improving its operations.
sustainabiLity
Minimising the environmental impacts of
operations and maintaining open communications
are the key principles of M-real’s
environmental policy. All of M-real’s mills
operate certified ISO 9001 and ISO 14001
quality and environmental management systems
that support the systematic improvement
and follow-up of operations. Several
mills also have a certified occupational and
product safety system.
M-real’s mills also utilise a certified
Energy Efficient System, which systematically
manages the reduction of energy consumption
and carbon dioxide emissions. M-real
reports openly on its environmental impacts
through, for example, mill-specific EMAS
(Eco-Management and Audit Scheme)
reports. The Äänekoski paper mill and the
Hallein mill published their EMAS reports
during the year under review.
The climate impact of individual products
is reported on a customer-specific basis
through carbon footprint calculations. Product-specific
Paper Profile environmental
product descriptions can be found for all
M-real products on the company’s website
at www.m-real.com. The emissions and
amounts of waste produced by M-real mills
are reported on page 124–125 of this Annual
Report.
Several improvements that reduce environmental
loads and risks were implemented
at M-real’s mills during the year under
review. Improvements at the Husum mill cut
particle emissions and aimed to reduce air
emissions of nitrogen oxides. The Alizay mill
began to divert part of the bark boiler flue
gases to a pigment plant located at the mill
site for utilising the carbon dioxide in the flue
gases. The use of thermal energy was made
more efficient at the Joutseno chemi-thermomechanical
pulp mill. The Simpele mill
began to expand its landfill. In Äänekoski,
the noise generated by the vacuum blower
and waste water treatment plant was dampened
at the board mill, and the mill’s noise
pollution report was updated.
The management of environmental matters
at M-real and Metsä-Botnia was developed
by appointing five joint regional environmental
managers to the production
plants. Work to combine the operational systems
of five board mills under one certificate
was started in M-real’s Consumer Packaging
business area.
emiSSionS anD waSte
Industrial air, water and noise emissions have
decreased continuously due to the consistent
application of Best Available Techniques
(BAT).
M-real has systematically reduced the
water consumption of its production. Water
is recycled in the production processes, and
it is thoroughly treated before being discharged
into water systems.
The amounts of harmful substances in
wastewater from board and paper production
have been reduced by more effective treatment
processes, reduced water consumption
and personnel training. Thanks to highly
effective treatment processes, wastewater
emissions cause eutrophication only within
a limited area at the immediate point of discharge.
M-real’s production units are located
in areas of plentiful water supply and therefore
do not compete for water with households,
agriculture or other water users.
M-real has joined the un’s global Compact
CEO Water Mandate initiative to make
water consumption and open reporting on it
more efficient. M-real keeps a close eye on
the development of international reporting
policies on water consumption.
M-real has reduced its emissions into the
air by introducing low-sulphur fuels and by
replacing fossil fuels with wood-based fuels.
The most significant atmospheric emissions
include: fuel-derived sulphur and nitrogen
oxides, which can cause water and soil acidification;
carbon dioxide, the main driver of
climate change; and particle emissions,
which have a negative impact on air quality.

Mill waste levels have also been reduced
through the efficient re-use of by-products
and co-products. In addition, on-site sorting
of mill waste for use as raw material or for
energy production has reduced the need for
landfill disposal. For example, primary fibre,
high-quality recycled fibre or both are used
as raw materials for office paper, depending
on its type. Packaging plastics, metals, paper
and board are recycled. Process sludge and
wood-based waste are used as fuels if they
cannot be otherwise utilised. The fibre sludge
generated during the recovered fibre deinking
process is used in the building products
industry and for energy production. Ash from
the mill power plant is used in earthworks
construction as an alternative to gravel and
other soil resources. Wood ash can also be
used as a fertiliser.
Developing reporting on the
environmental performance of
logiSticS
Environmental impacts are mitigated by
making logistics more efficient. The products
are transported in the largest units possible,
with the transport vehicles loaded as full as
possible. In selecting warehouses, those with
a rail connection are preferred. However, the
March stevedore strike in Finland resulted
in deviations from the established routes.
Transport and warehouse functions are
largely outsourced to partners, and valid
environmental indicators
environmental certificates and policies play
an essential role in their selection. logisticsrelated
indicators and reporting, especially
with regard to environmental performance,
are continuously improved. M-real reports
on the environmental impacts of the transport
of its products in the Paper Profile environmental
declarations.
The International Maritime Organisation
IMO adopted emission limits for sulphur and
nitrogen oxides gradually, which results in
challenges, particularly for maritime transport
in the Baltic region and fuels. The biggest
change concerning sulphur emission
standards is scheduled for 2015, when the
reduction from the current level of 1.0 per
cent to 0.1 per cent comes into force. Estimates
forecast the cost impact of the change
on the forest industry to be very considerable,
and, in Finland, higher than in other competing
countries.
reSponSible buSineSS practice
M-real is committed to conducting its business
in a responsible manner and promoting
sustainable development through its business
activities as well as to continuously
improving its operations. The key values of
the company – responsible profitability, reliability,
cooperation and renewal – lay the
foundation for all operations. M-real measures
the financial, social and environmental
impacts of its operations. The results are
Tonnes
emissions to air
2010 2009 2008
greenhouse effect, CO -eqv 2 789,347 952,462 1,199,262
Acidification, SO -eqv 2
Discharges to water
3,468 5,002 7,245
COD 18,414 26,095 35,004
Eutrophication, P-eqv
waste
44 150 210
landfill waste 15,829 25,433 76,229
reported on a regular basis to the group’s
shareholders in, for instance, the Annual
Report.
M-real has endorsed Metsäliitto group’s
Commitment to Corporate Responsibility,
which it implements through its principles
of corporate responsibility. The statement is
based in part on the un’s global Compact.
Through Metsäliitto group, M-real is also an
active member of the World Business Council
for Sustainable Development (WBCSD).
The themes of sustainable development
central to M-real’s customers and other
stakeholders include the legality of the wood
raw material, wood origin management and
forest certification, climate-related matters,
such as carbon footprints, questions related
to water consumption and matters of social
responsibility and product safety. The management
of environmental issues is based
on M-real’s environmental policy which, in
turn, is based on the continuous development
of operations. The HR policy is managed
systematically so that employees’ working
conditions and competence are improved and
well-being at work and occupational safety
are developed in a proactive and targetoriented
way.
M-real follows Metsäliitto group’s Code
of Conduct, which is designed to ensure
group-wide adherence to approved practices
and common ethical principles. The leading
principles of the Code of Conduct include
compliance with the principles of corporate
responsibility, performing one’s duties in the
best possible manner, anti-corruption, open
communications, appropriate action in case
of conflicting interests, and fair competition.
sustainabiLity
23

24
energy
efficiency
M-real aims to continuously improve the
efficiency of energy consumption and production
in its operations and increase the share
of wood-based, carbon dioxide-neutral
energy, which is already high, in its energy
procurement.
The energy efficiency of M-real’s operations
improved significantly during the year
under review compared to the previous year.
The improvement was particularly due to the
higher utilisation rates of the mills. In addition,
several energy efficiency development
projects were carried out during the year.
The annual energy-saving impact of the
projects is some 180,000 MWh of heat and
50,000 MWh of electricity. The projects cut
carbon dioxide emissions by approximately
34,000 tonnes per year, or some four per cent
of the total annual emissions.
new minor projects that improve energy
efficiency are continuously analysed and
evaluated. Energy efficiency is also improved
as part of the daily optimisation of production.
This development work was continued in
2010 by utilising the Energy Efficiency Sys-
Development of energy usage 2008–2010
gWh
Wood
based
fuels
sustainabiLity
Fossil
fuels
2008 2009 2010
Purchaced
energy
Purchased
heat
16,000
12,000
8,000
4,000
0
tem, which is part of the Metsäliitto group’s
climate programme. For example, new
measurements and automation tools were
built and commissioned during the year
under review.
uSe of biofuelS
Wood is M-real’s main source of energy (50
per cent), of which by-products account for
the majority. The aim is to increase the share
of wood-based fuels, thereby reducing carbon
dioxide emissions.
The fossil carbon dioxide emissions of
M-real’s energy procurement decreased by
some 17 percent during the year under
review compared to 2009. The emissions
decreased as a result of increased use of
wood energy in Hallein, Husum and kaskinen.
The emissions were reduced further by
the change in Metsä-Botnia’s consolidation
method and changes in M-real’s production
structure carried out in 2009 and 2010,
mainly the shutdown of the Hallein paper
mill and Alizay pulp mill and the production
cuts of the gohrsmühle mill.
The Olkiluoto nuclear power plant, which
is run by Teollisuuden Voima Oy, a subsidiary
of Pohjolan Voima Oy, provides a significant
share of the electricity needed by M-real. In
addition, the share of electricity produced
with hydro power of electricity purchase is
carbon dioxide-neutral fuel, and combined
with nuclear power they account for 25 per
cent of energy purchase. Bio-based and car-
Development of energy usage 2008–2010
bon dioxide-neutral energy accounted for a
total of 75 per cent of all energy consumption
in 2010.
At some M-real mills, the processes generate
wood-based by-products for utilisation
in energy consumption in excess of the mills’
own energy needs. The surplus is sold as
carbon dioxide-neutral wood fuel and/or heat
to partners in the region.
energy proDuction aSSetS
DevelopeD
During the year under review, the capacity
of the recovery boiler at the Husum mill in
Sweden was increased, and bio-based heat
production increased with the need for oil
decreasing considerably as a result. Husum’s
turbine investment is expected to be complete
during the second half of 2011. The
investment will increase the mill’s electricity
self-sufficiency from approximately 30 per
cent to 50 per cent. Additional electricity will
be produced using wood-based fuels.
A decision was made towards the end of
2010 to build a new bio power plant at the
kyröskoski mill, replacing the existing natural
gas power plant. The bio power plant is
planned to be complete toward the end of
2012. This will reduce the mill’s carbon dioxide
emissions by approximately 100,000
tonnes per year. The bio power plant investment
is being implemented by a specific
company, Hämeenkyrön Voima Oy, with Pohjolan
Voima as the majority shareholder and
gWh 2010 2009 2008
use of wood-based fuels 6,924 11,216 14,096
use of fossil fuels 3,153 3,702 4,701
Purchased energy 2,284 1,841 2,205
Purchased heat 412 54 228
sources of total energy
gWh Gwh 2010 (%) 2009 (%) 2008 (%)
Wood-based 8,239 50 60 60
nuclear power 3,453 21 14 14
natural gas 2,284 14 11 13
Coal 1,150 7 6 6
Hydro power 730 4 3 3
Oil 271 2 4 4
Peal 212 1 1 1

the local energy company leppäkosken
Sähkö Oy as a minority shareholder.
finlanD’S energy policy
The Finnish State decided on considerable
increases in energy and waste taxes in 2010,
and, as a result, the taxes paid by M-real will
increase in 2011. The Finnish burden of
energy taxation is among the highest in
Europe. In Sweden, the taxes, which have
already been very low, are being decreased
further.
During the year under review, Finland also
increased so-called feed-in tariff subsidies
for electricity produced using wood fuel. At
the same time, it was decided to start taxing
peat burning. As a result of all this, it is more
profitable than before for the energy industry
to burn wood, which might reduce the availability
of wood for the forest industry, thereby
impairing the competitiveness and viability
of the export industry. The forest industry has
wood-based raw materials
Wood (1,000 m3 ) 5,288
Pulp (1,000 t) 263
Recovered paper (1,000 t) 96
other raw materials (1,000 t)
Pigments 568
Adhesives 110
energy (Gwh)
Fuel purchased outside the
group 4,973
Electricity (purchased) 2,284
Heat (purchased) 412
Process water (1,000 m 3 ) 101,900
proposed that a monitoring system be established
for following up on the effect of input
tariff subsidies on the availability and price
of wood. State subsidies for the use of wood
for energy paid from overall taxation funds
should be reduced if they cause problems to
the non-subsidised export industry.
The decision of the Finnish parliament on
granting permits for two new nuclear power
plants made in 2010 in Finland was a positive
signal for the forest industry. One of the two
permits was granted to Teollisuuden Voima,
which provides the majority of electricity procured
by M-real from outside its mills. However,
soon after this permit decision, the
government initiated surveys into the possibility
of a uranium tax on the producers of
nuclear electricity. Carbon dioxide-neutral
energy production should not be burdened.
Investments in new nuclear power capacity
will become more uncertain than before if
its profitability is weakened through political
decisions.
emissions to air (t)
Particles 353
Carbon dioxide CO (fossil fuels) 2 789,347
Sulphur (as SO ) 2 1,271
nitrogen oxides (as nO ) 2 6,276
M-real
Discharges to water systems (t)
Biological oxygen demand (BOD ) 7 1,889
Chemical oxygen demand (COD) 18,414
Phosphorus (P) 44
nitrogen (n) 286
Total suspended solids 1,755
waste (t)
landfill waste 15,829
Hazardous waste 355
emiSSionS traDing
During the year under review, the Commission
of the European union specified its proposal
for the distribution of free emission
rights to the so-called carbon leakage industries
during 2013–2020. According to the
Commission’s proposal, free emission rights
will be distributed in line with the energy
efficiency of the producers. less efficient
producers will need to buy a larger share of
their emissions rights. According to a preliminary
estimate, M-real will probably need
to purchase part of the emissions rights it
needs beginning in 2013. The differences
between the mills in need for purchases are
high, depending particularly on the type of
fuel they use. The Eu will make final decisions
on the distribution rules in 2011.
Production
Chemical (1,000t)
Paper 1,459
Paperboard 1,105
Pulp and CTMP 1,295
sustainabiLity
25

26
from restructuring to continuous
development of the personnel
m-real considers well-being at work and
occupational safety as important parts of
profitable operations and the building of
success.
sustainabiLity
M-real’s personnel-related development
measures were based on three focal areas,
on the basis of which operations will also be
developed and continued in 2011: securing
future resources, ensuring the competences
of existing personnel and developing wellbeing
at work.
On 31 December 2010, the number of
M-real personnel amounted to 4,538. This
was approximately 365 lower than the year
before, mainly due to the actions after social
plan negotiations due to the closure of the
Alizay pulp mill, and the operating model
changes and personnel reductions carried
out at the gohrsmühle, Reflex and Husum
mills.
The ”Sharing Best Practices within
M-real” programme shares best practices
related to the working areas, content of work
and operating models. During the year under
review, the programme was continued at the
gohrsmühle and Husum mills by implementing
new operating and organisation models
occupational safety and well-being 2008–2010, M-real
in connection with the changes implemented.
The changes in operating models result in
extended and more diverse job descriptions,
making work more varied and motivating.
Statutory labour negotiations were conducted
in Finland during the year under
review at the Äänekoski mill in connection
with the investment to improve production
efficiency and at the Simpele mill in connection
with the investment in production to
increase production capacity. Employees
made redundant or facing redundancy were
supported by training and seeking new
employment as well as re-employment at
the company’s other sites. The support was
provided in accordance with the agreed social
plan in close cooperation with representatives
of the personnel and employment
authorities.
The employer and personnel are holding
continuous discussions in regular meetings
arranged at the offices and mills. In addition,
representatives of the management regularly
2010 2009 2008
Sickness absenteeism (%) 4.7 4.8 4.7
Work injury absenteeism (%)
lost time accident frequency rate
0.3 0.3 0.2
(per million worked hours) 15.8 14.6 18.8
Reported near misses (per 100 employees) 38.0 16.9 15.8
Personnel by country
Personnel
31.12.2010
Personnel at
31.12.2009
net employment
change 2010
Average age
of employees 2010
Finland 1,783 1,824 -41 44.3
germany 1,073 1,228 -155 46.0
Sweden 891 980 -89 46.2
France 353 396 -43 41.2
Austria 197 203 -6 43.4
Other Countries 241 272 -31 38.9
Total 4,538 4,903 -365 44.5

take part in the personnel groups’ meetings.
During the year under review, the close cooperation
between the previously merged
M-real and Metsä-Botnia HR organisations
and their integration with the business
organisations continued.
An extensive personnel survey was initiated
at M-real which included all M-real units
except for the Hallein, gohrsmühle and Alizay
mills. In 2011, the survey will cover all units.
The need for improving internal communications,
utilising internal development ideas
better and making the Performance and
Development Appraisal policy more efficient
were identified on the basis of the results.
The information obtained from the personnel
survey has been integrated into the annual
plans, and its results have been reviewed
during the annual planning process in
autumn 2010. The implementation of the
development measures agreed on the basis
of the personnel survey is followed on a quarterly
basis.
Development of well-being at
work
M-real considers well-being at work and
occupational safety as important parts of
profitable operations and the building of success.
The aim is to identify risks associated
with the personnel’s well-being in a systematic
and proactive way. Superiors are supported
by the local HR organisations, and
M-real reduces the amount of sick leave and
occupational accidents through programmes
monitored on a monthly basis as part of the
reporting of the HR organisation.
Securing future reSourceS
M-real participated considerably in Metsäliitto
group’s trainee programme, with 13 out
of the selected 26 participants training to
work for M-real. In addition, the planning of
the production personnel recruitment programme
that is due to commence in 2012
was also started during the year under
review.
M-real has implemented semi-annually
updated retirement forecasts where the
employees who are about to retire and the
competence leaving the company with them
will be identified. The information obtained
in this way will be combined with the results
of the personnel competence surveys, and
recruitment training will be developed
accordingly to correspond to future competence
and personnel needs. M-real also
developed cooperation with schools and educational
institutions in 2010.
The Simplifier development programme
for middle-management was started during
the year under review and will be continued
in 2011. In addition, M-real employees participated
in Metsäliitto group’s management
Challenger development programme.
enSuring the competence of
exiSting perSonnel
The reduction in personnel training resources
during 2007–2009 due to the stringent financial
position has been a special challenge in
the immediate past. During the year under
review, M-real has invested strongly in identifying
the training needs of personnel,
improving the quality of training and developing
the training system.
Personnel training needs were identified
with the help of an extensive analysis tool,
competence surveys, and Performance and
Development Appraisals. During the year
under review, M-real updated the Performance
and Development Appraisal operating
model, which includes support materials
distributed to the employees and their superiors.
Extensive competence surveys identify
the areas in which the personnel require
more efficient and higher-quality training.
The kyro mill was the pilot site during the
year under review, and the implementation
has been continued at the Äänekoski paper
mill. During 2011, the surveys will be
extended to other mills and offices. The competence
surveys provide valuable information
for the development of the training system.
The training system was updated during
the year under review and launched on the
intranet, allowing employees to enrol in the
training. The implementation of supplementary
training and degree-based training and
production multi-skill training has been continued
in joint groups with Metsä-Botnia in
order to ensure an extensive participant base.
sustainabiLity
27

28
sustainabiLity

FINANCIAL STATEMENTS
REpoRT oF ThE BoARd oF dIRECToRS 2010 30
CoNSoLIdATEd STATEMENT oF CoMpREhENSIvE INCoME 38
CoNSoLIdATEd BALANCE ShEET 39
STATEMENT oF ChANgES IN ShAREhoLdERS’ EquITy 40
2010
CoNSoLIdATEd CASh FLow STATEMENT 41
NoTES To ThE FINANCIAL STATEMENT 42
CALCuLATIoN oF kEy RATIoS 92
pARENT CoMpANy ACCouNTS – INCoME STATEMENT 93
STaTeMeNTS
pARENT CoMpANy ACCouNTS – BALANCE ShEET 94
pARENT CoMpANy ACCouNTS – CASh FLow STATEMENT 95
pARENT CoMpANy ACCouNTINg poLICIES 96
FINaNCIal
NoTES To ThE pARENT CoMpANy FINANCIAL STATEMENT 97
ThE BoARd’S pRopoSAL FoR ThE dISTRIBuTIoN oF pRoFITS 102
AudIToR’S REpoRT 103 M-Real
29

Report of the Board of directors 2010
Market situation in 2010
demand for all main products increased clearly in 2010. demand
for board products was very strong throughout the year, especially
with regard to food packaging. Backed up by the solid demand outlook,
M-real announced that it will increase its folding boxboard
production capacity. demand for office paper deteriorated slightly
towards the end of the year after a very solid first half of the year.
Total deliveries of european folding boxboard producers increased
by 9 percent and total deliveries of uncoated fine paper producers
by 7 percent in 2010 compared with 2009.
The price of folding boxboard was increased, and the prices of
annual agreements for 2011 made at the end of the year were more
than 10 percent better than the annual agreements for 2010. office
paper prices were increased by approximately 15 percent and speciality
papers by approximately 5 percent on average. The pulp
market price increased considerably during the year, reaching its
peak during the second quarter. however, the average pulp price
was the highest during the third quarter.
There were no significant changes in production costs as a whole
in 2010.
The average exchange rate of the euro against the US dollar, the
British pound and, in particular, the Swedish krona weakened in
2010.
Result for the review period
M-real’s sales totalled eUR 2,605 million (2009: 2,432 and 2008:
3,236). Comparable sales were up 19.2 per cent. The operating result
was eUR 146 million (2009: -267 and 2008: -61), and the operating
result excluding non-recurring items was eUR 173 million (2009:
-150 and 2008: -35). The result from continuing operations before
taxes excluding non-recurring items was eUR 92 million (2009: -230
and 2008:-178), and including non-recurring items eUR 48 million
(2009: -358 and 2008: -204).
The operating results was eUR 146 million (2009:-267 and 2008:
-61). The non-recurring items recognised in the operating result
Sales
EuR million
30 RepoRT oF The BoaRd oF dIReCToRS 2010
4,000
3,000
2,000
1,000
Operating result
EuR million
amounted to eUR -27 million net (2009: -117 and 2008: -26), the
most significant being:
• eUR 28 million impairment of fixed assets in the Speciality papers
business area
• eUR 15 million impairment of fixed assets in the Market pulp and
energy business area
• eUR 15 million impairment of fixed assets and cost provisions in
the Consumer packaging business area related to the closure of
the Simpele paper machine
• eUR 9 million reversal of impairment of fixed assets in the office
papers business area
• eUR 10 million gain and reversal of impairment loss in the Speciality
papers business area connected with the partial divestment
of the Reflex mill to Metsä Tissue
• eUR 8 million net cost provision in the Speciality papers business
area connected with the restructuring of M-real Zanders and
partial divestment of the Reflex mill to Metsä Tissue
• eUR 10 million income was recognised in the operating profit
under other operations in connection with IT arrangements. In
addition, eUR 2 million was allocated to the result for discontinued
operations due to the arrangement.
• eUR 8 million reversal of impairment loss under other operations
associated with the sale of paper machine 2 in Kangas
• eUR 6 million gain from patents sold to Sappi under other operations
• eUR 4 million additional cost provision in the Market pulp and
energy business area relating to the closure of the alizay pulp mill
The non-recurring items recognised in the operating result for 2009
amounted to eUR -117 million net, the most significant being:
• eUR 134 million profit related to the Metsä-Botnia arrangement,
of which eUR 18 million is allocated to Market pulp and energy
and eUR 116 million to other operations.
• an impairment loss of eUR 113 million according to IaS 36, of
which eUR 66 million is allocated to Speciality papers and eUR
Operating result, excluding
non-recurring items
EuR million
0
-300
06 07 08 09 10 06 07 08 09 10 06 07 08 09 10
200
100
0
-100
-200
200
100
0
-100
-200

47 million to office papers. of these, eUR 33 million was recognised
in goodwill.
• eUR 48 million in write-downs and cost provisions in the Market
pulp and energy business area connected to the plan to permanently
close down the alizay pulp mill.
• eUR 28 million in cost provisions and write-downs in the Speciality
papers business area connected to the closure of the hallein
paper mill.
• eUR 22 million cost provisions and write-downs associated with
the closure of the Metsä-Botnia Kaskinen mill. This total consists
of eUR 16 million related to the Consumer packaging business
area and eUR 6 million to the Market pulp and energy business
area.
• eUR 12 million cost provision in other operations associated with
the terminated IT contract.
• eUR 11 million cost provision related to profit improvement measures
at the husum mill, of which eUR 9 million in the office papers
business area and eUR 2 million in the Market pulp and energy
business area.
• eUR 5 million cost provision associated with the profit improvement
programme of the Speciality papers business area.
• eUR 12 million net in other non-recurring items, of which eUR 2
million was in Consumer packaging, eUR 1 million in Speciality
papers and eUR 9 million in other operations.
The operating result excluding non-recurring items compared with
the previous year was improved by the implemented price increases
in board and paper, increased delivery volumes, cost savings and
higher pulp price. The result was weakened by the strengthening of
the Swedish crown against the euro, the investment shutdown at
the husum mill and the Finnish stevedore strike. The operating result
of the review period includes a capital gain of eUR 8 million from
sold Sappi shares booked in other operating income.
The total delivery volume of paper businesses in 2010 was
1,155,000 tonnes (2009: 1,132,000 and 2008: 1,761,000). deliveries
Return on capital employed
%
06 07 08 09 10
6
3
0
-3
-6
-9
Earnings per share
EuR
by Consumer packaging totalled 1,390,000 tonnes (2009: 1,212,000
and 2008: 1,345,000).
Financial income and expenses totalled eUR -74 million (-75).
Foreign exchange gains and losses from accounts receivable,
accounts payable, financial income and expenses and the valuation
of currency hedging were eUR -9 million (5). Net interest and other
financial income and expenses amounted to eUR -65 million (-80).
other financial income and expenses included eUR 2 million of
valuation loss on interest rate derivatives (valuation gain of 10). The
financial income of 2009 also included a gain of approximately eUR
31 million related to repurchases of M-real’s own bonds and financial
expenses included a loss of eUR 30 million related to early
repayment of the vendor note by Sappi.
In the year under review, the result from continuing operations
before taxes was eUR 48 million (2009: -358 and 2008: -204). In addition
to the non-recurring items booked in the operating result, the
result includes an impairment loss of eUR -16 million, related to
M-real’s holding in Myllykoski paper oy, reported as a non-recurring
item in Share of results in associated companies after the operating
result. The result for year 2009 included a non-recurring item of
eUR -11 million in the line Share of results in associated companies
from the Sunila pulp mill divested by Myllykoski paper during the
second quarter. The result from continuing operations before taxes,
excluding non-recurring items, was eUR 92 million (2009: -230 and
2008: -178). Income taxes, including the change in deferred tax
liabilities, were eUR -21 million (2009: positive 27 and 2008: positive
34).
earnings per share were eUR 0.09 (2009:-1.09 and 2008: -1.58).
earnings per share from continuing operations excluding nonrecurring
items were eUR 0.23 (2009:-0.66 and 2008: -0.48). The
return on equity was 2.8 per cent (2009: -28.6 and 2008: -10.4), and
7.6 per cent (2009: -18.3 and 2008: -9.0) excluding non-recurring
items. The return on capital employed was 5.7 per cent (2009: -8.9
and 2008: -1.3); 7.6 per cent (2009: -4.5 and 2008: -0.5) excluding
non-recurring items.
0.5
0
-0.5
-1.0
-1.5
Result from continuing
operations before tax
EuR million
-2.0
06 07 08 09 10 06 07 08 09 10
100
RepoRT oF The BoaRd oF dIReCToRS 2010
0
-100
-200
-300
-400
31

Personnel
The number of personnel was 4,538 on 31 december (31 december
2009: 4,903 and 31 december 2008: 6,546), of which 1,783 (2009:
1,824 and 2008: 2,258) worked in Finland. In 2010, M-real employed
an average of 4,772 people (2009: 5,913 and 2008: 9,087). The figures
for the end of 2009 no longer includes the share of Metsä-Botnia
personnel due to change in the consolidation method. The figures
for 2008 included 30 per cent of Metsä-Botnia personnel (2008: 553).
In 2010 salaries and wages totalled eUR 209 million (2009: 254 and
2008: 293). Metsä-Botnia’s wages are included until 8.12.2009.
Investments
Gross investments in January-december totalled eUR 66 million
(2009: 73 and 2008: 128). The investments in 2009 included a eUR
16 million share of Metsä-Botnia’s investments based on M-real’s
30 per cent share of ownership and the consolidation method of
Metsä-Botnia until 8 december 2009.
M-real has announced that it will invest eUR 26 million in the
Simpele mill to increase its folding boxboard capacity by approximately
80,000 tonnes. The sheeting capacity will also be expanded
at the same time. The investments will be carried out in summer
2011.
M-real has also announced that it will invest in the modernisation
of the coating section at the Kemiart liners mill. The total value of
the investment is approximately eUR 16 million. This investment will
also be carried out in 2011.
Structural change
M-real’s structural change from a paper company to become more
clearly a packaging material producer has proceeded according to
the strategy. The focus has increasingly shifted from restructuring
to development, as is demonstrated by the Simpele and Kemiart
liners investments scheduled for 2011. efforts to solve the problems
of loss-making paper units will continue, and success in this area
Assets and capital employed
EuR million
06 07 08 09 10
32 RepoRT oF The BoaRd oF dIReCToRS 2010
8,000
6,000
4,000
2,000
0
Non-current assets
Inventories
other current assets
average
would further clearly improve M-real’s profitability. The strategic
review of the paper business continues.
M-real’s eUR 80 million profit improvement programme for 2010
announced in december 2010 was realised according to plans. The
most significant measures were:
• permanent closure of the alizay pulp mill in France
• Closure of the speciality paper capacity of the Reflex mill in
Germany
• Streamlining of the organisation and management model in
Zanders
• a new eUR 20 million internal profit improvement programme
covering all business areas
In addition, the profit improvement programme includes a eUR 22
million investment at the husum mill to improve its energy efficiency.
The investment is proceeding according to plan.
The combined profit impact of these measures and the previous
years’ profit improvement programmes is expected to have been an
improvement of approximately eUR 100 million in 2010, divided as
follows:
• The profit improvement programme of 2010: eUR 40 million
• earlier implemented profit improvement programmes: eUR 60
million
The Reflex mill in Germany is developed according to the paper park
concept, the target being to find industrial partners for the mill site.
In october 2010, M-real announced the first phase of the development:
partial divestment of the Reflex mill to Metsä Tissue for
approximately eUR 10 million. The agreement with Metsä Tissue
covered paper machine 5 and related real estate, as well as certain
infrastructure assets. The negotiations to reduce the headcount at
the M-real Zanders mills concluded in June.
In July, M-real exercised its option to purchase former Kangas
paper mill real estate and land area from Sappi for a price of eUR
13 million. The deal was part of an agreement in which M-real and

Sappi settled the issues still open related to the divestment of M-real’s
Graphic papers business area in 2008. In September, the city of
Jyväskylä decided to use its right of pre-emption based on law to
purchase the Kangas mill real estate from M-real for an equivalent
price of eUR 13 million.
M-real discontinued Simpele’s speciality paper production at the
end of the year. The production of corresponding products will continue
at the Gohrsmühle mill in Germany. The transfer of production
is expected to improve M-real’s annual operating result by approximately
eUR 4 million.
Research and development
M-real’s R&d activity during the year under review focused on the
development of high-quality lightweight packaging boards. With
regard to the paper business operations, the focus was on the development
and launch of new products.
The efficient packaging research programme assesses the impact
of lightweight yet high-performance boards on the efficiency of the
entire packaging chain. The research programme yielded promising
results that can be used in the development of the board business.
a project to improve the print surface of cigarette packaging
boards was implemented. The revised product was launched during
the first quarter, and it has been received extremely positively in this
demanding market.
during 2011, Consumer packaging will implement investments
at the Simpele and Kemi board mills and is planning to invest in
Äänekoski and Kyröskoski board mills. development activity is an
essential part of these investments. The Kemi mill has particularly
focused on the development of coating, while Simpele has engaged
in work to improve production techniques. The development of nonwoven
type papers continued in wallpaper base papers.
a new, lighter-than-normal SaVe! office paper was developed in
the office papers business area. The lightness is partly based on
BCTMp pulp. The deliveries to the markets were started during
autumn 2010. Speciality papers, on the other hand, has developed
Equity ratio
%
06 07 08 09 10
40
30
20
10
0
Gearing ratio
%
several new types of double-coated flexible packaging and label
papers.
during the year under review, M-real was actively involved in the
activity of Forest Cluster ltd. Forest Cluster’s research programmes
provide resources for renewing business operations over the long
term.
M-real’s R&d expenditure for 2010 amounted to approximately
eUR 5 million, or some 0.2 percent of sales (2009: 7 and 0.3 per cent,
2008: 10 and 0.3 per cent). The decrease compared to the previous
year is due to the end of the joint KCl research programme.
Environmental factors
Minimising the environmental impacts of operations and maintaining
open communications are the key principles of M-real’s environmental
policy. all of M-real’s mills operate certified ISo 9001 and
ISo 14001 quality and environmental management systems that
support the systematic improvement and follow-up of operations.
Several mills also have a certified occupational and product safety
system.
M-real’s mills also utilise a certified energy efficient System,
which systematically manages the reduction of energy consumption
and carbon dioxide emissions. M-real reports openly on its environmental
impacts through, for example, mill-specific eMaS (eco-
Management and audit Scheme) reports. The Äänekoski paper mill
and the hallein mill published their eMaS reports during the year
under review.
The climate impact of individual products is reported on a customer-specific
basis through carbon footprint calculations. productspecific
paper profile environmental product descriptions can be
found for all M-real products on the company’s website at
www.m-real.com. The emissions and amounts of waste produced
by M-real mills are reported on page 124–125 of this annual Report.
Several improvements that reduce environmental load and risks
were implemented at M-real’s mills during the year under review.
Improvements at the husum mill cut particle emissions and aimed
160
120
80
40
Net gearing ratio
%
0
06 07 08 09 10 06 07 08 09 10
120
100
80
60
40
20
0
RepoRT oF The BoaRd oF dIReCToRS 2010
33

to reduce air emissions of nitrogen oxides. The alizay mill began to
divert part of the bark boiler flue gases to a pigment plant located
at the mill site for utilising the carbon dioxide in the flue gases. The
use of thermal energy was made more efficient at the Joutseno
chemi-thermomechanical pulp mill. The Simpele mill began to
expand its landfill. In Äänekoski the noise generated by the vacuum
blower and waste water treatment plant was dampened at the carton
mill, and the mill’s noise pollution report was updated.
Industrial air, water and noise emissions have decreased continuously
due to the consistent application of Best available Techniques
(BaT). M-real has systematically reduced the water consumption
of its production. Water is recycled in the production processes,
and it is thoroughly treated before it is discharged into water systems.
The amounts of harmful substances in wastewater from board and
paper production have been reduced by more effective treatment
processes, reduced water consumption and personnel training.
Thanks to highly effective treatment processes, wastewater emissions
cause eutrophication only within a limited area at the immediate
point of discharge. M-real’s production units are located in areas
of plentiful water supply and therefore do not compete for water with
households, agriculture or other water users. M-real has joined the
UN’s Global Compact Ceo Water Mandate initiative to make water
consumption and open reporting on it more efficient. M-real keeps
a close eye on the development of international reporting policies
on water consumption.
M-real has reduced its emissions into the air by introducing lowsulphur
fuels and by replacing fossil fuels with wood-based fuels.
The most significant atmospheric emissions include: fuel-derived
sulphur and nitrogen oxides which can cause water and soil acidification;
carbon dioxide, the main driver of climate change; and
particle emissions, which have a negative impact on air quality.
Mill waste levels have also been reduced through efficient re-use
of by-products and co-products. In addition, on-site sorting of mill
waste for use as raw material or for energy production has reduced
the need for landfill disposal. For example, primary fibre, highquality
recycled fibre or both are used as raw materials for office
paper, depending on its type. packaging plastics, metals, paper and
Repayment of non-current loans
(2011–2016)
EuR million
11 12 13 14 15 16
34 RepoRT oF The BoaRd oF dIReCToRS 2010
700
600
500
400
300
200
100
0
Investments, continuing operations
% sales
06 07 08 09 10
board are recycled. process sludge and wood-based waste are used
as fuels if they cannot be otherwise utilised. The fibre sludge generated
during the recovered fibre deinking process is used in the building
products industry and for energy production. ash from the mill
power plant is used in earthworks construction as an alternative to
gravel and other soil resources. Wood ash can also be used as a
fertiliser.
environmental liabilities relating to past activities have decreased
in recent years following the rehabilitation measures of contaminated
land areas and landfill sites. during the year under review, the rehabilitation
of the old landfill sites of the Niemi sawmill and lielahti
chemi-thermomechanical pulp mill was completed in Tampere.
Currently, the only significant environmental liabilities relating to
past activities that M-real is aware of relate to the area of the closed
Wifsta mill in Sweden. provisions for environmental management
were approximately eUR 2 million at the end of the year. M-real’s
environmental costs totalled eUR 25 million (38) in 2010. The environmental
costs are mainly comprised of operating and maintenance
expenses from environmental protection equipment, expenses relating
to waste management and environmental insurance policies and
depreciation of capitalised environmental costs.
Wood Supply
M-real is committed to using sustainable raw materials in its production.
The most important raw material for its products is wood:
a renewable, recyclable and energy-efficient raw material that
originates from sustainably managed forests and is procured sustainably.
M-real’s parent company Metsäliitto Cooperative is responsible
for M-real’s wood supply. The bulk of the wood raw material
used by M-real in Finland comes from the forests of the ownermembers
of Metsäliitto Cooperative. other wood supply countries
include austria, latvia, lithuania, France, Sweden, Germany, Russia
and estonia. during the year under review, Metsäliitto supplied a
total of 5.7 million cubic metres of wood to M-real mills.
Wood procurement is governed by an environmental policy regarding
wood supply and forestry, as well as the Group’s principles of
corporate responsibility. These are implemented using certified
10
8
6
4
2
0

quality and environmental systems and an annually updated environmental
programme. Wood procurement complies with local
legislation and regulations issued by the authorities.
Certified quality and environmental systems include a wood origin
management system, ensuring that the origin of all procured
wood is known. In procuring wood raw material, M-real supports
forest certification that is verified by a third party. Some 55 percent
of the wood raw material used by M-real came from certified forests
during the year under review. during the year under review, the peFC
forest certification criteria were revised in Finland, and an agreement
was made on the FSC forest certification criteria, which will set
conditions for FSC forest certification as well in the future.
all M-real mills employ a certified Chain of Custody system, which
enables them to verify the share of certified wood in their products.
M-real strives to launch more forest certification labelled products
on the market.
Financing
at the end of 2010, M-real’s equity ratio was 32.1 per cent (31 december
2009: 29.6 and 31 december 2008: 30,8) and the gearing ratio
was 135 per cent (2009: 153 and 2008 152). The net gearing ratio was
83 per cent (2009: 84 and 2008: 90). Some of M-real’s loan agreements
set a 120 per cent limit on the company’s net gearing ratio
and a 30 per cent limit on the equity ratio. Calculated as defined in
the loan agreements, the gearing ratio at the end of the year was
approximately 64 per cent (63) and the equity ratio some 38 per cent
(35).
The change in the fair value of investments available for sale was
approximately eUR +28 million, based mainly on the increase in the
value of the pohjolan Voima shares.
at the end of the year, net interest-bearing liabilities totalled eUR
827 million (31 december 2009: 777 and 31 december 2008: 1,254).
Foreign-currency-denominated loans accounted for 9 per cent; 83
per cent were floating-rate and the rest were fixed-rate. at the end
of 2009, the average interest rate on loans was 5.1 per cent and the
average maturity of long-term loans 2.7 years. The interest rate
maturity of loans was 9.4 months at the end of the year. during the
period, the interest rate maturity has varied between six and ten
months.
Cash flow from operations amounted to eUR 49 million (Q1-
Q4/2009: 110). Working capital was up by eUR 86 million (down 140),
mainly as a result of the increase in delivery volumes and prices.
Turnover of operating net working capital remained on 2009 level.
at the end of december, an average of 4.8 months of the net
foreign currency exposure was hedged. The degree of hedging varied
between four and six months during the period. approximately
70 per cent of the non-euro-denominated equity was hedged at the
end of december.
liquidity continues at a good level. at the end of december, liquidity
was eUR 415 million, of which eUR 7 million consisted of undrawn
pension premium (Tyel) loans and eUR 408 million of liquid assets
and investments. eUR 218 million of the liquid assets and investments
are assets deposited by other Metsäliitto Group companies
in M-real’s subsidiary Metsä Finance. To meet its short-term financ-
ing needs, the Group also had at its disposal uncommitted domestic
and foreign commercial paper programmes and credit facilities
amounting to eUR 519 million.
In January, M-real redeemed early a eUR 250 million item of its
own bond at a 100 per cent redemption price, according to the terms
of the bond, and the remaining eUR 90.05 million of the same bond
in July. In June 2010, M-real raised pension loans worth a total of
eUR 135 million with a maturity of ten years. In december, the company
raised pension loans worth a total of eUR 31 million. With these
measures, M-real has extended the maturity profile of its loans and
strengthened its liquidity.
In august, Standard & poor’s upgraded M-real’s CCC+ credit rating
to B-. The rating outlook remains stable. The upgrade has a
positive impact of approximately eUR 1 million on M-real’s annual
financing costs.
In September, Moody’s Investors Service upgraded M-real’s Caa1
rating to B3. The rating outlook was changed to positive. The upgrade
has a positive impact of approximately eUR 1 million on M-real’s
annual financing costs.
Significant risks and uncertainty factors
M-real estimates its strategic, operative, financial and insurable
risks twice a year. The risk assessments carried out during 2010
identified the following risks and uncertainties with a possible impact
on M-real’s financial performance and ability to operate.
Uncertainty of the general economy development
In the main markets, paper and board demand mainly follows the
general economic development. demand improved clearly in 2010
as the result of the recovery of the world economy. There are still
significant uncertainties connected with the development of the
general economy. In particular, the development of the euro area
influences the demand for and profitability of M-real’s main products.
Competitive environment
The balance between demand and supply has a significant impact
on the prices of paper and paperboard products. In 2010, the market
balance was mainly normal for M-real’s main products. The demand
for folding boxboard exceeded the supply in europe in 2010. any
decrease in demand or increase in supply in the future may have
unfavourable effects on the market balance. Business cycles unfavourable
to M-real or capacity increases by competitors may decrease
the prices of M-real’s products. on the other hand, potential capacity
closures in the industry or consolidation of the industry structure
may lead to an increase in prices. The strengthening of the euro
versus the US dollar in particular may result in increased imports
to europe, which would further weaken the market balance in europe.
Credit and other counterparty risks
The management of the credit risks involved in commercial activities
is the responsibility of M-real’s centralised credit control and business
areas. The credit control function together with the business
areas defines the internal credit limits and terms of payment for
different customers. a significant part of the credit risks are trans-
RepoRT oF The BoaRd oF dIReCToRS 2010
35

ferred further to credit insurance companies by means of credit
insurance contracts. M-real’s customer credit risk was at a normal
level in 2010. Measures are taken to reduce the risk further by intensifying
internal credit control and its processes.
The main principles for the company’s credit control are defined
in the credit policy approved by the company’s Board of directors.
Counterparty-specific, approved maximum amounts are also applied
to money market investments, derivatives and borrowings in order
to ensure creditworthiness and to reduce risk concentrations.
Changes in consumer habits
In the future, changes in new electronic communications technology,
marketing channels and other consumer habits may change the
demand for M-real’s paper and paperboard products.
Price risks of production input costs
a radical and unforeseen rise in the price and transport costs of
production inputs important for M-real’s operations, such as wood,
energy and chemicals, or problems with their availability may reduce
profitability and threaten the continuity of operations. M-real endeavours
to hedge against this risk by entering into long-term delivery
agreements and related derivative contracts. depending on the eU’s
decisions and emission right prices, significant additional costs may
be entailed for M-real as from 2013 due to the need to purchase
emission rights for its operations. Cost inflation will accelerate clearly
in 2011 compared to 2010, mainly due to increased prices of wood,
energy and chemicals.
Liability risks
M-real’s business operations involve various types of liability risks,
the most central of which are general operational liability risks,
environmental risks and product liability risks. Measures are taken
to manage these risks by improving business processes, practices,
quality requirements and the transparency of operations. Some of
the above-mentioned risks have been transferred to insurance companies
by means of insurance contracts.
Business interruption risks
different kinds of large losses, major accidents, natural disasters,
serious malfunctions in the key information systems, labour disputes
and delivery problems of the most important raw materials may, in
extreme cases, interrupt M-real’s business operations and even
cause loss of customers. Continuity and recovery plans have been
drawn up in the business areas and plants to mitigate these risks.
In addition, some of the mill operation interruption risks have been
selectively transferred to insurance companies by way of insurance
contracts.
Personnel
M-real has paid special attention to ensuring the availability and
retention of personnel by means of various development programmes
and special measures. M-real endeavours to prepare for a generational
shift and other risks related to personnel by means of career
planning and job rotation.
36 RepoRT oF The BoaRd oF dIReCToRS 2010
Financial risks
M-real’s profitability improved considerably during 2010. M-real
launched new profit improvement measures in January 2011, the
positive effect of which on the result for 2011 with the programmes
implemented during the preceding years will total approximately
eUR 90 million compared to 2010. M-real has good opportunities for
covering the accelerating cost inflation by means of its own measures
in 2011. There are uncertainties and the risk of not achieving the
desired profit improvement in full associated with the implementation
of the internal profit improvement measures.
The main financial risks involved in business operations relate
mainly to currencies, interest rates, liquidity and counterparty risks
and the use of derivative instruments. The financial risks are managed
in accordance with the treasury policy approved by M-real’s
Board of directors. The aim is to hedge against significant financial
risks, balance the cash flow and give the business units time to adjust
their operations to changing conditions. M-real’s financial risks and
their management are described in more detail on pages 53–57 of
this annual report.
Preparing for and transferring risks
Identified risks are prepared for to the best of the company’s knowledge
and as most appropriate for the company. M-real cooperates
actively with insurance companies related to risk management; for
example, by regularly executing risk evaluations in different business
areas. The production plants have prepared for potential disturbances
of operation by drawing up crisis management, continuity and recovery
plans, for example. Some of the risks are borne by the company
itself and some are selectively transferred by means of, for example,
insurance contracts, derivative contracts and terms and conditions
otherwise included in contracts, to be borne by insurance companies,
banks and other counterparties.
The most common loss risks are mainly covered by comprehensive
global insurance contracts, such as:
– property and business interruption insurance
– general third-party and product liability insurance
– liability insurance for directors and officers
– credit insurance
– cargo insurance.
Shares
In 2010, the highest price for M-real’s a shares on the NaSdaQ oMX
helsinki was eUR 3.64, the lowest eUR 1.93, and the average price
eUR 2.85. at the end of the year, the price of the a shares was eUR
2.85. at the end of 2009, the price of the a shares was eUR 1.94,
while the average price in 2009 was eUR 1.52.
The highest price for M-real’s B shares in 2010 was eUR 3.26, the
lowest eUR 1.46, and the average price eUR 2.44. at the end of the
year, the price of the B shares was eUR 2.54. at the end of 2009, the
price of the B shares was eUR 1.53, while the average price in 2009
was eUR 0.66.
The trading volume of a shares was eUR 6 million, 5 per cent of
the share capital. The trading volume of B shares was eUR 894 mil-

lion, 125 per cent of the share capital. The market value of a and B
shares totalled eUR 845 million at the end of the year.
at the end of the year, Metsäliitto Cooperative owned 38.8 per
cent of the shares, and the voting rights conferred by these shares
amounted to 60.5 per cent. International investors held 14 per cent
of the shares.
on 8 april 2010, the holdings of Norway’s Central Bank (Norges
Bank) in M-real dropped to 4.4 per cent of the share capital and 1.4
per cent of the voting rights.
The company does not hold any of its own shares.
Distributable funds and dividend
The distributable funds of the parent company as of 31 december
2010 were eUR -382,932,705.40 of which the result for the financial
year is eUR -40,145,050.84. The company therefore has no distributable
funds. In its meeting on 10 February 2011, the Board of directors
decided to propose to the annual General Meeting in the spring 2011,
to be held on 23 March 2011, that no dividend is paid for the financial
year 2010. No dividend was paid for 2009.
Board of Directors and Auditors
The annual General Meeting of March confirmed the number of
members of the M-real Board of directors as nine (9). The annual
General Meeting elected the following as members of the Board of
directors: Mikael aminoff, M.Sc. (Forestry); Martti asunta, M. Sc.
(Forestry); Kari Jordan, honorary Counsellor; Kirsi Komi, ll.M.; Kai
Korhonen, M.Sc. (eng); liisa leino, Ma (education); Juha Niemelä,
honorary Counsellor; antti Tanskanen, Minister; and erkki Varis,
M.Sc. (eng). The term of office of the Board members expires at the
end of the next annual General Meeting. at its organising meeting,
the Board of directors elected Kari Jordan as its Chairman and Martti
asunta as its Vice Chairman. The Board further resolved to organise
the Board committees. The members of the audit Committee are
Kirsi Komi, Kai Korhonen, antti Tanskanen and erkki Varis. The
members of the Nomination and Compensation Committee are
Mikael aminoff, Martti asunta, Kari Jordan, liisa leino and Juha
Niemelä.
The annual General Meeting elected authorised public accountants
pricewaterhouseCoopers oy as M-real’s auditor. The term of
office of the auditor expires at the end of the next annual General
Meeting.
a Corporate Governance Statement has been published as a
separate report at the same time with the financial statements and
this report.
Events after the period
M-real started a new eUR 70 million profit improvement programme.
The programme focuses on improving profitability of the paper business,
as well as decreasing the variable costs of all businesses. The
earlier-announced profit improvement impact of the Simpele and
Kemi board investments and the closure of speciality paper production
at Simpele are included in the new profit improvement programme.
The full effect of the programme on operating profit, eUR
70 million, is estimated to be reached from 2012 onwards. The
positive result impact in 2011 is expected to be approximately eUR
30 million. Cost inflation is expected to accelerate in 2011. The combined
result impact of M-real’s new profit improvement programme
and the previous years’ programmes is in 2011 estimated to be eUR
90 million positive, which is expected to mostly offset the cost inflation.
The annual folding boxboard capacity of the Äänekoski and
Kyröskoski mills is planned to be increased by a total of approximately
70,000 tonnes. The total value of the planned investments is some
eUR 30 million. The Kyroskoski investment is planned to be completed
in late 2011 and the Äänekoski investment in spring 2012.
Related to the planned investment M-real will start statutory negotiations
at the Äänekoski board mill on 18 February 2011 covering
the mill workers in total of about 130 people. The maximum personnel
reduction need is estimated to be 10 people. Kyröskoski investment
is expected to have no personnel impact. Following the planned
investments, the annual production capacity is to increase to 190,000
tonnes at Kyröskoski and to 240,000 tonnes at Äänekoski. production
is planned to be directed to food packaging. even after these planned
investments, M-real has good potential to further increase the production
capacity of the Kyröskoski and Äänekoski mills should the
market situation so require.
Sari pajari was appointed as SVp, Business development and a
member of the Corporate Management Team. her education is
Master of Science, engineering. her main responsibilities are business
development and Total Quality Management. pajari starts in
the new position on 1 april 2011 and reports to Ceo Mikko helander.
pajari is moving to M-real from the position of SVp, CIo of Metsäliitto
Group which she held since 2009. prior to joining Metsäliitto Group
in 2007 pajari has worked as a managing strategy consultant in pöyry,
pwC Consulting and IBM.
Near-term outlook
The demand for board is expected to remain good during the next
few months. M-real’s folding boxboard and liner prices are in excess
of 10 per cent higher than at the beginning of the previous year as a
result of increases implemented in europe.
The demand for uncoated fine paper seems to continue stable.
M-real has announced a price increase of 6–8 per cent, effective in
March. The demand for speciality papers is also expected to remain
stable and the price level unchanged.
The average price of pulp is expected to be slightly lower in the
first quarter compared with the fourth quarter of the previous year.
a significant decrease in the price of pulp is not foreseen, however.
Cost inflation is expected to accelerate in 2011. M-real started a
new eUR 70 million profit improvement programme in January 2011.
The combined result impact of the new programme and the previous
years’ profit improvement programmes is in 2011 estimated to be
eUR 90 million positive, which is expected to mostly offset the accelerated
cost inflation.
In the first quarter of 2011 M-real’s operating result, excluding
non-recurring items, is expected to improve from the fourth quarter
of 2010.
RepoRT oF The BoaRd oF dIReCToRS 2010
37

Consolidated statement of
comprehensive income
eUR million
Continuing operations
Note 1.1. – 31.12.2010 1.1. – 31.12.2009
Sales 4 2,605 2,432
Change in stocks of finished goods and work in progress 7 34 -71
other operating income 6 108 252
Materials and services 7 -2,022 -1,801
employee costs 7 -312 -406
Share of profit from associated companies 15 78 2
depreciation, amortization and impairment charges 4, 8 -166 -356
other operating expenses 7 -179 -319
Operating result 146 -267
Share of profit from associated companies 15 -24 -16
Net exchange gains/losses 9 -9 5
other financial income 9 12 25
Interest and other financial expenses 9 -77 -105
Result from continuing operations before tax 48 -358
Income taxes 10 -21 27
Result for the period from continuing operations
Discontinued operations
27 -331
Result for the period from discontinued operations 5 0 -23
Result for the period 27 -354
Other comprehensive income
Cash flow hedges 11 10 26
available for sale investments 11 28 -115
Translation differences 11 12 5
Share of profit from associated companies 11 2
Income tax relating to components of other comprehensive income 11 -2 27
other comprehensive income, net of tax 50 -57
Total comprehensive income for the period 77 -411
Attributable to:
Shareholders of parent company 28 -358
Non-controlling interest -1 4
27 -354
Total comprehensive income for the period attributable to:
Shareholders of parent company 78 -412
Non-controlling interest -1 1
77 -411
Basic and diluted earnings per share for result attributable to the shareholders
of parent company, EUR 12
From continuing operations 0.09 -1.02
From discontinued operations 0.00 -0.07
Total 0.09 -1.09
The notes are an integral part of these financial statements.
38 CoNSolIdaTed STaTeMeNT oF CoMpReheNSIVe INCoMe

Consolidated balance sheet
eUR million Note 31.12.2010 31.12.2009
ASSETS
Non-current assets
Goodwill 13 13 13
other intangible assets 13 26 32
Tangible assets 13, 37 1,063 1,130
Investments in associated companies 15 265 210
available for sale investments 16, 28 314 317
other non-current financial assets 17, 25, 28 59 58
deferred tax receivables 18 3 3
derivative financial instruments 28, 29 8 5
Current assets
1,751 1,768
Inventories 19 391 313
accounts receivables and other receivables 20, 25, 28 516 497
Current income tax receivables 38 38
derivative financial instruments 28, 29 13 19
Cash and cash equivalent 21, 25, 28 408 497
1,366 1,364
Total assets 3,117 3,132
SHAREHOLDERS´ EQUITY AND LIABILITIES
Equity attributable to shareholders of parent company 22
Share capital 558 558
Share premium account 667 667
Translation differences 23 2
Fair value and other reserves 223 194
Retained earnings -477 -505
994 916
Non-controlling interest 5 8
Total shareholders´ equity 999 924
Non-current liabilities
deferred tax liabilities 18 179 162
post employment benefit obligations 23 85 89
provisions 24, 37 35 60
Borrowings 25, 28 1,016 943
other liabilities 26, 28 8 12
derivative financial instruments 28, 29 18 18
Current liabilities
1,341 1,284
provisions 24, 37 7 44
Current borrowings 25, 28 334 467
accounts payable and other liabilities 27, 28 415 381
Current income tax liabilities 3 6
derivative financial instruments 28, 29 18 26
777 924
Total liabilities 2,118 2,208
Total shareholders' equity and liabilities 3,117 3,132
The notes are an integral part of these financial statements.
CoNSolIdaTed BalaNCe SheeT
39

Statement of changes in shareholders’ equity
equity attributable to shareholders of parent company
Fair value
Share
and
Share premium Translation other Retained
Non-control-
eUR million Note capital account differences reserves earnings Total ling interest Total
Shareholders’ equity, 1 January 2009 558 667 -9 259 -146 1,329 57 1,386
Result for the period -358 -358 4 -354
other comprehensive income 11
Cash flow hedges 26 26 26
available for sale investments -115 -115 -115
Translation differences 8 8 -3 5
Share of other comprehensive income
of associated companies
Income tax relating to components of
other comprehensive income 3 24 27 0 27
other comprehensive income total 11 -65 -54 -3 -57
Comprehensive income total 11 -65 -358 -412 1 -411
Related party transaction
Metsä Botnia restructuring in Uruguay -50 -50
Shareholders’ equity, 31 December 2009 558 667 2 194 -504 916 8 924
Shareholders’ equity, 1 January 2010 558 667 2 194 -504 916 8 924
Result for the period 28 28 -1 27
other comprehensive income 11
Cash flow hedges 10 10 10
available for sale investments 28 28 28
Translation differences 12 12 12
Share of other comprehensive income
of associated companies 1 1 2 2
Income tax relating to components of
other comprehensive income 8 -10 -2 -2
other comprehensive income total 21 29 50 50
Comprehensive income total 21 29 28 78 -1 77
Related party transaction
dividends relating to 2009 -2 -2
Shareholders' equity, 31 December 2010 558 667 23 223 -476 994 5 999
The notes are an integral part of these financial statements.
40 STaTeMeNT oF ChaNGeS IN ShaReholdeRS’ eQUITy

Consolidated cash flow statement
eUR million Note 2010 2009
Cash flow from operating activities
Result for the period 27 -354
adjustments to the result, total 31 108 324
Interest received 12 20
Interest paid -76 -114
dividends received 1 1
other financial items, net -39 55
Income taxes paid -16 9
Change in working capital 31 -86 140
Net cash flow from operating activities -69 81
Cash flow arising from investing activities
acquisition of other shares -2 -3
Capital expenditure -64 -70
proceeds from disposal of joint venture, net of cash 5 0 274
proceeds from disposal of shares in associated companies 33 0 46
proceeds from disposal of other shares 41 3
proceeds from sale of fixed assets 45 9
proceeds from long-term receivables 0 1
Increase in long-term receivables 0 -49
Net cash flow arising from investing activities 20 211
Cash flow arising from financing activities
proceeds from non-current liabilities 167 71
payment of non-current liabilities -389 -483
proceeds from current liabilities, net 162 -134
Change in current interest-bearing receivables, net 21 202
dividends paid -2 0
Net cash flow arising from financing activities -41 -344
Change in cash and cash equivalents -90 -52
Cash and cash equivalents at beginning of period 497 550
Translation adjustments 1 -1
Changes in cash and cash equivalents -90 -52
Cash and cash equivalents at end of period 21 408 497
The notes are an integral part of these financial statements.
CoNSolIdaTed CaSh FloW STaTeMeNT
41

Notes to the financial statement
1 accounting policies
The principal accounting policies to be adopted in the preparation
of the consolidated financial statements are as follows.
Main operations
M-real Corporation and its subsidiaries comprise a forest industry
group, which operations are organized into four business segments:
Consumer packaging, office papers, Speciality papers and Market
pulp and energy. The Group has manufacturing operations in five
countries in europe. europe is also the company’s main market area,
but its products are sold worldwide. The Group’s other operations
are the head office along with ancillary functions that support business
operations. Group’s main product areas are folding boxboard,
office papers and special papers.
M-real Corporation is Group’s parent company that is domiciled
in helsinki. The registered address of the company is Revontulentie
6, 02100 espoo Finland,
The copy of the annual report can be obtained in M-real’s website
www.m-real.com or parent company’s head office Revontulentie 6,
02100 espoo Finland.
The Group consolidated financial statements were authorized for
issue by the Board of directors on 10 February 2011.
according to Finnish Companies act shareholders have possibility
to accept or reject the financial statements in General Meeting
of shareholders after date of publication. General Meeting of shareholders
also have possibility to decide to change financial statements.
Accounting policies and measurement bases
M-real Corporation’s consolidated financial statements have been
prepared in accordance with the International Financial Reporting
Standards (IFRS), applying the IaS and IFRS standards and SIC and
IFRIC interpretations that were effective and approved by the eU at
the date of the financial statements 31 december 2009. International
Financial Reporting Standards refer to the standards and their interpretations
approved for use in the eU by the Finnish accounting act
and the regulations set out pursuant to it in accordance with the
procedure defined in the eU decree (eC) no. 1606/2002. The notes
to the consolidated financial statements also comply with the requirements
of Finnish accounting and Community legislation supplementing
the IFRS regulations.
The consolidated financial statements are presented in millions
of euros.
The financial statements have been prepared based on historical
costs, except for biological assets, derivative contracts and certain
other financial assets and liabilities that have been measured at fair
value.
Management assesses that in foreseeable future group has enough
resources to continue as a going concern. The group has prepared
the financial statements on a going concern basis.
42 NoTeS To The FINaNCIal STaTeMeNT
In preparing these interim financial statements, the group has followed
the same accounting policies as in the annual financial statements
for 2009 except for the effect of changes required by the
adoption of the following new standards, interpretations and amendments
to existing standards and interpretations on 1 January 2010:
IFRS 3 (Revised) Business Combinations. The revised standard continues
to apply the acquisition method to business combinations,
with some significant changes. For example, all payments to purchase
a business are to be recorded at fair value at the acquisition
date, with contingent payments classified as debt subsequently remeasured
through the income statement. There is a choice on an
acquisition-by-acquisition basis to measure the non-controlling
interest in the acquiree at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets. all acquisitionrelated
costs should be expensed. The revised standard will affect
the accounting of all business combinations from 1 January 2010.
IaS 27 (Revised) Consolidated and Separate Financial Statements.
The revised standard requires the effects of all transactions with
non-controlling interests to be recorded in equity if there is no change
in control and these transactions will no longer result in goodwill or
gains and losses. The standard also specifies the accounting when
control is lost. any remaining interest in the entity is remeasured to
fair value, and a gain or loss is recognised in profit or loss. The group
will apply IaS 27 (revised) prospectively to transactions with noncontrolling
interests from 1 January 2010.
IFRIC 16 Net Investment in a Foreign operation. IFRIC 16 clarifies
the accounting for the hedge of a net investment in a foreign operation
in an entity’s consolidated financial statements. It eliminates
the possibility of an entity applying hedge accounting for a hedge of
the foreign exchange differences between the functional currency
of a foreign operation and the presentation currency of the parent’s
consolidated financial statements. The requirements of IaS 21, ‘The
effects of changes in foreign exchange rates’, do apply to the hedged
item. The interpretation does not have an impact on the consolidated
financial statements.
IFRIC 17 distribution of non-cash assets to owners. The interpretation
is part of the IaSB’s annual improvements project published in
april 2009. This interpretation provides guidance on accounting for
arrangements, whereby an entity distributes non-cash assets to
shareholders either as a distribution of reserves or as dividends.
IFRS 5 has also been amended to require that assets are classified
as held for distribution only when they are available for distribution
in their present condition and the distribution is highly probable. The
interpretation does not have an impact on the consolidated financial
statements.
IFRS 2 (amendment) Share-based payment – Group Cash-settled
Share-based payment Transactions. The amendment to IFRS 2
clarifies that an entity that receives goods or services from its suppliers
must apply IFRS 2 even though the entity has no obligation to

make the required share-based cash payments. The interpretation
does not have an impact on the consolidated financial statements.
IaS 39 (amendment) Financial instruments: Recognition and measurement
– eligible hedged Items’. The amendment prohibits designating
inflation as a hedgeable component of a fixed rate debt. It
also prohibits including time value in the one-sided hedged risk
when designating options as hedges. The amendment does not have
a material impact on the consolidated financial statements.
IFRIC 9 and IaS 39 (amendment) Reassessment of embedded derivatives
on reclassification. The amendments to IFRIC 9 and IaS 39
clarify that on reclassification of a financial asset out of the ‘at fair
value through profit or loss’ category all embedded derivatives have
to be assessed and, if necessary, separately accounted for in financial
statements. The amendments do not have an impact on the
consolidated financial statements.
IaSB published changes to 12 standards or interpretations in april
2009 as part of the annual Improvements to IFRSs project, which
were adopted by the group in 2010. The following presentation
includes the most relevant changes to the group.
IFRS 5 (amendment) Non-current assets held for Sale and discontinued
operations. The amendment clarifies that IFRS 5, ‘Noncurrent
assets held for sale and discontinued operations’, specifies
the disclosures required in respect of non-current assets (or disposal
groups) classified as held for sale or discontinued operations. It also
clarifies that the general requirements of IaS 1 still apply, particularly
paragraph 15 (to achieve a fair presentation) and paragraph 125
(sources of estimation uncertainty) of IaS 1. The amendments do
not have a material impact on the consolidated financial statements.
IaS 1 (amendment) presentation of Financial Statements. The
amendment clarifies that the potential settlement of a liability by
the issue of equity is not relevant to its classification as current or
non-current. By amending the definition of current liability, the
amendment permits a liability to be classified as non-current (provided
that the entity has an unconditional right to defer settlement
by transfer of cash or other assets for at least 12 months after the
accounting period) notwithstanding the fact that the entity could be
required by the counterparty to settle in shares at any time. The
amendments do not have a material impact on the consolidated
financial statements.
IaS 17 (amendment) leases. The amendment deletes specific guidance
regarding classification of leases of land, so as to eliminate
inconsistency with the general guidance on lease classification. as
a result, leases of land should be classified as either finance or
operating using the general principles of IaS 17. The amendments
do not have a material impact on the consolidated financial statements.
IaS 36 (amendment) Impairment of assets. The amendment clarifies
that the largest cash-generating unit (or group of units) to which
goodwill should be allocated for the purposes of impairment testing
is an operating segment as defined in IFRS 8, ‘operating segments’
(that is, before the aggregation of segments with similar economic
characteristics permitted by IFRS 8). The amendments do not have
a material impact on the consolidated financial statements.
IFRIC 16 (amendment) hedges of a net investment in a foreign
operation. The amendment states that, in a hedge of a net investment
in a foreign operation, qualifying hedging instruments may be
held by any entity or entities within the group, including the foreign
operation itself, as long as the designation, documentation and
effectiveness requirements of IaS 39 that relate to a net investment
hedge are satisfied. Management is assessing the impact of these
changes on the financial statements of the group.
New standards, interpretations and
amendments to existing standards
The following new standards, interpretations and amendments to
existing standards and interpretations issued during the year 2010
will be adopted by the group in 2011:
IaS 24 (Revised) Related party disclosures. The revised standard
simplifies the disclosure requirements for government-related entities
and clarifies the definition of a related party. The revised standard
still requires disclosures that are important to users of financial
statements but eliminates requirements to disclose information that
is costly to gather and of less value to users. It achieves this balance
by requiring disclosure about these transactions only if they are
individually or collectively significant. The interpretation does not
have an impact on the consolidated financial statements.
IaS 32 (amendment) Financial Instruments: presentation – Classification
of Rights Issues. The amendment addresses the accounting
for rights issues (rights, options or warrants) that are denominated
in a currency other than the functional currency of the issuer.
previously such rights issues were accounted for as derivative liabilities.
however, the amendment requires that, provided certain
conditions are met, such rights issues are classified as equity regardless
of the currency in which the exercise price is denominated. The
amendment does not have an impact on the consolidated financial
statements.
IFRIC 19 extinguishing Financial liabilities with equity Instruments.
The interpretation clarifies the accounting when an entity renegotiates
the terms of its debt with the result that the liability is extinguished
by the debtor issuing its own equity instruments to the
creditor. IFRIC 19 requires a gain or loss to be recognised in profit
or loss when a liability is settled through the issuance of the entity’s
own equity instruments. The amount of the gain or loss recognised
in profit or loss will be the difference between the carrying value of
the financial liability and the fair value of the equity instruments
NoTeS To The FINaNCIal STaTeMeNT
43

issued. The interpretation does not have an impact on the consolidated
financial statements.
IFRIC 14 (amendment) prepayments of a Minimum Funding Requirement.
The amendment is aimed at correcting an unintended consequence
of IFRIC 14. as a result of the interpretation, entities are in
some circumstances not permitted to recognise some prepayments
for minimum funding contributions as an asset. The amendment
remedies this unintended consequence by requiring prepayments
in appropriate circumstances to be recognised as assets. The interpretation
does not have an impact on the consolidated financial
statements.
IaSB published changes to 7 standards or interpretations in July
2010 as part of the annual Improvements to IFRSs project, which
will be adopted by the group in 2011. The following presentation
includes the most relevant changes to the group. The changes are
still subject to endorsement by the european Union.
IFRS 3 (amendments)
a) Transition requirements for contingent consideration from a business
combination that occurred before the effective date of the
revised IFRS
b) Measurement of non-controlling interests
c) Un-replaced and voluntarily replaced share-based payment awards
a) Clarifies that the amendments to IFRS 7, ‘Financial instruments:
disclosures’, IaS 32, ‘Financial instruments: presentation’, and
IaS 39, ‘Financial instruments: Recognition and measurement’,
that eliminate the exemption for contingent consideration, do not
apply to contingent consideration that arose from business combinations
whose acquisition dates precede the application of IFRS 3.
b) The choice of measuring non-controlling interests at fair value or
at the proportionate share of the acquiree’s net assets applies only
to instruments that represent present ownership interests and
entitle their holders to a proportionate share of the net assets in
the event of liquidation. all other components of non-controlling
interest are measured at fair value unless another measurement
basis is required by IFRS.
c) The application guidance in IFRS 3 applies to all share-based payment
transactions that are part of a business combination, including
unreplaced and voluntarily replaced share-based payment
awards.The amendment does not have an impact on the consolidated
financial statements.
IFRS 7 (amendment) Financial instruments: Financial statement
disclosures. The amendment emphasizes the interaction between
quantitative and qualitative disclosures about the nature and extent
of risks associated with financial instruments. Management is
assessing the impact of these changes on the financial statements
of the Group.
44 NoTeS To The FINaNCIal STaTeMeNT
IaS 34 (amendment) Interim financial reporting. The change provides
guidance to illustrate how to apply disclosure principles in IaS 34
and add disclosure requirements around:
The circumstances likely to affect fair values of financial instruments
and their classification; Transfers of financial instruments between
different levels of the fair value hierarchy; Changes in classification
of financial assets; and Changes in contingent liabilities and assets.
Management is assessing the impact of these changes on the financial
statements of the Group.
The following standards, interpretations and amendments will be
adopted in 2012 or later:
IFRS 9 Financial assets – Classification and Measurement. The
standard represents the first milestone in the IaSB’s planned replacement
of IaS 39. It addresses classification and measurement of
financial assets. The next steps involve reconsideration and reexposure
of the classification and measurement requirements for
financial liabilities, impairment testing methods for financial assets,
and development of enhanced guidance on hedge accounting. Management
is currently assessing the impact of the standard on the
financial statements of the Group.
IFRS 9 Financial liabilities – Classification and Measurement. The
second part of IFRS 9 was published in october 2010. It complements
previously issued IFRS 9, ‘Financial instruments’ to include guidance
on financial liabilities. The accounting and presentation for financial
liabilities shall remain the same except for those financial liabilities
for which fair value option is applied. Management is currently
assessing the impact of the standard on the financial statements of
the Group.
IFRS 7 (amendment) disclosures – Transfers of financial assets. The
amendment adds disclosure requirements related to risk exposures
derived from transferred assets. additional disclosures, where
financial assets have been derecognised but the entity is still exposed
to certain risks and rewards associated with the transferred asset,
are required. The amendment can increase the disclosures in the
notes to financial statements in the future. Management is currently
assessing the impact of the standard on the financial statements of
the Group.
Principles of consolidation
Subsidiaries
Subsidiaries include all companies (including units established for
a specific purpose) in which the Group has the right to control the
principles of finances and operations. This is usually based on holding
shares conferring more than one half of the votes. When evaluating
whether the Group has control over another company, the
existence and impact of potential voting power that can be realised
at the time of the review by exercising the right or performing an
exchange. Subsidiaries are consolidated in the consolidated financial

statements in their entirety starting on the day on which the Group
obtains control in them. The consolidation stops when the control
ceases.
Mergers of business operations are processed using the acquisition
method. Consideration paid for the purchase of a subsidiary is
determined as the fair value of paid assets, assumed liabilities and
equity shares issued by the Group. The assigned consideration
includes the fair value of an asset or liability arising as the result of
a conditional consideration arrangement. acquisition-related costs
are recognised as expenses as they materialise. Identifiable assets
obtained in a business merger and assumed liabilities and conditional
liabilities are valued at fair value at the date of acquisition. The holding
of non-controlling shareholders in the target of the acquisition
is recognised on an acquisition-specific basis either at fair value or
an amount corresponding to the proportion of the net assets of the
target of the acquisition held by non-controlling shareholders.
The amount by which the sum of paid consideration, proportion
of non-controlling shareholders in the target and previously owned
proportion exceed the Group’s proportion of the fair value of the
acquired net assets is reported on the balance sheet as goodwill. If
the total amount of consideration, proportion of non-controlling
shareholders and previously owned portion is lower than the fair
value of the net assets and the transaction is a beneficial one, the
difference is recognised in the income statement.
Business transactions, receivables and liabilities between the
Group companies and unrealised profits are eliminated. Unrealised
losses are also eliminated. The accounting principles followed by
subsidiaries have been amended to correspond to the principles
followed by the Group as necessary.
Transactions with non-controlling shareholders
Business transactions with non-controlling shareholders are processed
in the same way as those with Group shareholders. When
shares are purchased from non-controlling shareholders, the difference
between the consideration paid and the proportion of the
net assets in the subsidiary purchased is recognised in equity. also,
profit or loss from sale of shares to non-controlling shareholders is
recognised in equity.
The non-controlling interest in the accumulated losses is recognised
in the consolidated financial statements up to the amount of
the investment.
Associated companies
associated companies include all companies in which the Group has
considerable influence but no control. Usually, significant influence
is based on a shareholding conferring 20–50 per cent of the votes.
Investments in associated companies are processed using the equity
method, and they are initially entered at cost. The Group’s shares in
associated companies also include the goodwill measured at the
time of acquisition less any impairment.
The Group’s share of profits or losses of associated companies
following the acquisition is recognised in the income statement, and
its proportion of changes in equity after the acquisition is recognised
in equity. The book value of the investment is adjusted for changes
accumulated after the acquisition. If the Group’s share of associated
companies’ losses is as large or larger than its share of the associated
company including any other unsecured receivables, the Group
will not recognise additional losses unless it has commitments concerning
the associated companies and it has not made payments on
behalf of it.
a proportion corresponding to the Group’s shareholding is eliminated
from unrealised profits between the Group and its associated
companies. Unrealised losses are also eliminated unless the transaction
indicates an impairment of the value of the asset. The accounting
principles followed by associated companies have been amended
to correspond to the principles followed by the Group as necessary.
profits or losses from investments in associated companies due to
the dilution effect are recognised in the income statement.
Joint ventures
The Group’s holdings in jointly controlled units are processed in the
consolidated financial statements using proportional consolidation.
The Group’s proportion of the joint venture’s individual income items,
expenses, assets and liabilities and cash flows are consolidated in
the corresponding items of the consolidated financial statements.
For assets sold to a joint venture, the proportion of profits of losses
belonging to third parties is recognised. The Group does not recognise
its share of a joint venture’s profits or losses arising from assets
purchased from it by the Group before the assets have been sold
further to an independent party. however, a loss incurred by business
transactions will be recognised immediately if it indicates a decrease
in the net realisation value or impairment of current assets.
oy Metsä-Botnia ab, Äänevoima oy and Ääneverkko oy have been
consolidated on a proportionate basis line by line. after Metsä Botnia
transaction in december 2009 Metsä-Botnia is handled as an associated
company from 8 december 2009 on.
Transactions in foreign currency
The figures concerning the profit and financial position of the Group
units are presented in the currency that is used in the primary operating
environment of the unit in question. The consolidated financial
statements are presented in euros, which is the parent company’s
operating and reporting currency. Business transactions denominated
in foreign currencies are recognised in the operating currency
using the rate of the transaction date. Monetary items denominated
in foreign currencies are translated into the operating currency using
the rate of the closing date. Non-monetary items in foreign currencies
recognised at fair value have been translated into the operating
currency using the rate of the date on which the value was determined.
otherwise, non-monetary items have been recognised using
the rate of the transaction date.
any gains or losses resulting from transactions in foreign currencies,
and from the translation of monetary items, are recognised
under financial income and expenses with the exception of liabilities
classified as hedges for net investment in a foreign entity, for which
the currency gains and losses are entered for the part of hedge
proven effective in the translation differences in other comprehensive
income.
NoTeS To The FINaNCIal STaTeMeNT
45

The income statements of Group companies whose reporting
currencies are other than euro are translated into euros using average
exchange rates for the reporting period, and their balance sheets
at the exchange rates prevailing at the balance sheet date. Translation
differences arising on translation and on applying the purchase
method of consolidation are entered in other comprehensive income.
In conjunction with divestments of subsidiaries, either by selling or
by dissolving, translation differences accumulated by the time of
divestment are entered in the income statement as part of the gain
or loss from the divestment.
Financial assets
Financial assets have been classified according to the IaS standards
as follows: 1) Financial assets at fair value through profit or loss, 2)
held-to-maturity investments, 3) loans and other receivables and
4) available-for-sale financial assets. Categorisation depends on the
purpose for which the assets were acquired and is made at the time
they were originally recorded. Financial assets are initially recognised
at fair value. Transaction costs are included in the fair value unless
the item is measured at fair value through profit and loss. Financial
assets are derecognised when the Group has lost the contractual
right to receive cash flows or it has transferred substantially risks
and rewards of ownership to outside the Group. Financial asset
purchases and sales are recorded at the settlement date.
Investments acquired for trading have been classified as financial
assets at fair value through profit or loss. These may include, for
example, short-term and long-term money market deposits, commercial
papers and bonds. Financial assets held for trading have
been recognized at fair value based on price quotations in the market.
Unrealised and realised gains and losses due to changes in fair
value are recognized immediately in the income statement during
the financial period in which they are incurred.
derivatives not included in hedge accounting are also classified
as financial assets held for trading. Their accounting principles and
principles of determining their fair value are described below.
held-to-maturity investments include those investments with a
specific date of maturity which the Group has full intention and ability
to retain until the date of their maturity. The Group has no heldto-maturity
investments. loans and other receivables are nonderivative
financial assets with fixed or determinable payments that
are not quoted in an active market.
held-to-maturity investments include those investments which
the Group has full intention and ability to retain until the date of their
maturity. loans and other receivables comprise external and
Metsäliitto Group’s internal accounts, loan and other receivables.
Financial assets designated in these categories are carried at amortised
cost using the effective interest method.
available-for-sale financial assets are publicly quoted and
unquoted shares. They are valued at fair value, or if fair value cannot
be reliably determined, at cost less impairment. The fair values of
publicly quoted shares are based on the share price at the date of
the financial statements. If there are no quoted prices for availablefor-sale
financial assets, the Group applies different types of valuation
in their valuation, such as recent transactions and discounted
46 NoTeS To The FINaNCIal STaTeMeNT
cash flow. In this valuation, information received from the market is
usually used, and factors specified by the Group itself are used as
little as possible. Changes in fair value are recognised under other
comprehensive income and presented in the fair value reserve, taking
the tax effect into account. accumulated changes in fair value
are transferred from equity to profit and loss as a correction of classification
when the investment is divested or its value has impaired
so that an impairment loss is to be recognised for the investment.
an impairment of financial assets must be charged, if the book
value of the financial asset exceeds the amount of money obtainable
for it, the assessment of which is based on, for example, the debtor’s
financial difficulties, neglect of payment or disappearance of an
active market for the item in question.
Cash and cash equivalents comprise cash in hand, deposits held
at call with banks and other short-term highly liquid investments.
Cash and cash equivalents include items with original maturities of
three months or less from the date of acquisition.
The Group assesses at each balance sheet date whether there is
objective evidence of impairment of a financial asset or group of
financial assets. objective evidence of impairment of available-forsale
financial assets includes a significant or long-term decrease of
the value of the investment under the acquisition cost. If the fair
value of investments has substantially gone under acquisition cost
and exceeded the period of time defined by the Group, it shall indicate
that the value of the investment may be impaired. If there is evidence
of impairment, the accumulated losses recognised in fair value
reserve shall be transferred to profit and loss. Impairment losses of
equity instruments classified as available for sale financial assets
shall not be reversed through profit and loss.
The criteria for determining whether there is objective evidence
of impairment of loans and other receivables include:
- significant financial problems of the issuer or debtor;
- breach of contractual terms and conditions, such as defaults on
interest or capital payments;
- concessions given by the Group to the debtor due to its financial
or legal reasons related to its financial problems that it would not
otherwise contemplate giving
- probability of the debtor’s bankruptcy
- the financial asset in question no longer having an active market
due to financial problems.
Impairment testing of trade receivables is described below in more
detail with regard to the relevant accounting principles.
The amount of the impairment loss is determined as the difference
between the carrying amount of the financial asset and the
current value of the estimated cash flows of the financial asset discounted
using the original effective interest rate (excluding any nonrealised
future credit losses). Impairment of financial assets has to
be recorded if the carrying amount of the financial asset exceeds its
recoverable amount. The carrying amount of the asset is decreased
and the loss is entered in the consolidated income statement. If the
amount of the impairment loss decreases during a subsequent period
and the decrease can be objectively linked to an event realised after

the recording of the impairment (such as the debtor’s credit rating
improving), the impairment loss is reversed in the income statement.
Financial liabilities
The Group has classified all financial liabilities under “other liabilities”.
When a financial liability is entered in the accounts, it is measured
at cost, which is equal to the fair value of the consideration
received for it. Transaction costs are included in the original carrying
amount of all financial liabilities. Subsequently, all financial liabilities
are measured at amortized cost using the effective interest method.
derivative contracts for which hedge accounting is not applied are
classified as ”Financial liabilities at fair value through profit or loss”.
Financial assets and liabilities are classified according to IaS 39 and
fair values are presented in the Note 28.
Derivative financial instruments and hedge accounting
derivative financial instruments are initially recognized in the balance
sheet as fair value, which equals to it’s cost and thereafter
during their term-to-maturity are revalued at their fair value. Gains
and losses resulting from recognition at fair value are treated in
accounting as required with regard to the intended use of the derivative
in question. derivatives are initially classified either as 1) hedges
of the exposure to changes in fair value of receivables, liabilities or
firm commitments, 2) hedges of the cash flow from a highly probable
forecast transaction, 3) hedges of a net investment in a foreign
entity, 4) derivatives to which it has been decided not to apply hedge
accounting or 5) derivatives used for trading. derivatives that do not
qualify for hedge accounting are classified as financial assets or
financial liabilities at fair value through profit or loss.
When applying hedge accounting, at the inception of a hedging
relationship the Group has documented the relationship between
the hedged item and the hedging instruments as well as the hedging
strategy observed. To meet the requirements of hedge accounting,
the Group has also continuously carried out effectiveness testing
to verify that changes in the fair value of the hedging instrument
for each hedging relationship cover effectively enough, with respect
to the hedged risk, any changes in the fair value of the hedged item.
Changes in the fair value of derivatives that meet the criteria for
fair value hedging are recognised through profit and loss. Changes
in the fair value of a hedged asset or liability item are presented
similarly in terms of the hedged risk. Changes in the fair value of
the effective portion of derivative instruments that meet the criteria
for cash flow hedging are recognised directly in a hedging reserve
in equity. The gains and losses recognised in equity are transferred
to the income statement in the period in which the hedged item is
entered in the income statement. When the criteria for hedge
accounting are no longer fulfilled, a hedging instrument matures or
is sold or when the gain or loss accrued from hedging the cash flow
remain in equity until the forecast transaction takes place. however,
if the forecast hedged transaction is no longer expected to occur, the
gain or loss accrued in equity is recognised immediately in the income
statement. The fair value of derivatives is disclosed in current noninterest-bearing
receivables or liabilities. The fair values of derivatives
classified in accordance with the applied accounting practice
are presented in Notes to the accounts no. 29. The maturity analysis
of cash flow hedge accounting is presented in Notes to the accounts
no. 30.
Currency hedging
To hedge its foreign currency exposure, the Group has partly applied
hedge accounting in accordance with IaS 39 as so-called cash flow
hedge. a separately defined portion of the highly probable forecast
cash flow of sales in USd, GBp and SeK is the object of hedge
accounting. a change in the fair value of a derivative hedge (currency
forward contracts) proven effective is entered directly in shareholders’
equity in the fair value reserve, and only after the realisation of
the forecasted sales transaction it is entered in the income statement
as an adjustment of the hedged sales. Changes in the fair value of
other currency derivatives to hedge foreign currency exposure are
recognized under financial items in the income statement. The fair
values of forward foreign exchange contracts are based on forward
prices prevailing at the balance sheet date, and currency options are
stated at market rates in accordance with the Black&Scholes model’s
fair value.
The hedging of a net investment in a foreign entity is dealt with
in the books like cash flow hedge. Changes in the fair value of a
derivative and loan hedge proven effective are recognized directly
against the translation differences accumulated in shareholders’
equity. The ineffective portion of the hedge as well as the effect of
the interest rate element of forward exchange contracts are recorded
in financial income and expenses in the income statement.
Interest hedging
To hedge the fair value of separately defined loans with derivatives
contracts (interest rate swaps and currency swaps), the Group has
applied hedge accounting in accordance with IaS 39 as so-called fair
value hedge. Changes in the fair value of both defined loans and
derivative contracts that meet the criteria for effective hedge accounting
are recognized in financial income and expenses through profit
and loss. The fair value of loans is calculated in respect of interest
rate risk and currency risk elements, but any changes in the company’s
credit risk premium have not been taken into account.
Moreover, to hedge its interest rate exposure, the Group has partly
applied hedge accounting in accordance with IaS 39 to hedging of
contractual cash flows of floating interest rates of loans as so-called
cash flow hedge. a change in the fair value of derivative contracts
(interest rate swaps) is entered directly in shareholders’ equity in
fair value reserve.
all other interest rate derivatives, to which hedge accounting is
not applied, are stated at their fair value, and changes in fair value
are recognized under financial items in the income statement. The
fair values of forward rate agreements, interest rate futures and
options are based on quoted market rates at the balance sheet date,
and interest rate swaps and currency swaps are measured at the
present value of future cash flows, with the calculation based on
market interest rate yield curve.
NoTeS To The FINaNCIal STaTeMeNT
47

Commodity risk hedging
To hedge its electricity price risk exposure, the Group has partly
applied hedge accounting in accordance with IaS 39 as so-called
cash flow hedge. a separately defined portion of the highly probable
forecast cash flow of electricity purchases in Finland and Sweden is
the object of hedge accounting. a change in the fair value of a derivative
hedge (forward electricity contracts) proven effective is entered
directly in shareholders’ equity in fair value reserve, and only after
the realisation of the forecast electricity purchases sales it is entered
in the income statement as an adjustment of the hedged purchases
or sales. The ineffective part of electricity derivatives classified to
hedge accounting and other commodity derivatives hedging commodity
price risk are recognized at market rates at the balance sheet
date, and changes in fair value are entered in the income statement
under ”other income and expenses”.
embedded derivatives are valued at fair value, and changes in
fair value are entered under financial items in the income statement.
The amount of embedded derivatives at the M-real Group is insignificant.
Segment reporting
The Group’s operating segments are comprised of the Group’s business
areas. The business areas produce different products and
services, and they are managed as separate units.
The operating segments are reported uniformly with internal
reporting submitted to the chief operational decision-maker. The
Corporate Management Team has been appointed as the chief
operational decision-maker in charge of allocating resources to the
operating segments and evaluating their performance.
The same accounting policies are applied in segment reporting
as for the Group as a whole. Transactions between segments are
based on market prices. all sales and other transactions between
segments are eliminated on consolidation.
Non-current assets held for sale and discontinued
operations
an asset item/operation is classified as held for sale when the amount
corresponding to its carrying value will be generated primarily from
sale of the asset item.
asset items classified as held for sale are measured at the lower
of their carrying amount and fair value less costs to sell. asset items
classified as held for sale are not depreciated or amortized.
a discontinued operation is one which the Group has disposed of
or that is classified as held for sale and represents a separate major
line of business or geographical area of operations. The profit or
loss from discontinued operations after tax is shown as a separate
item in the consolidated income statement.
Recognition of income
Sales include income from the sale of products and services as well
as raw materials and supplies corrected for indirect taxes, discounts
and other sales adjustment items. Income from the sale of goods is
recognised as income when the risks and benefits associated with
the ownership of the product are transferred to the buyer and the
48 NoTeS To The FINaNCIal STaTeMeNT
Group no longer has rights of possession or control on the product.
Usually, this refers to the moment on which the product has been
delivered to the customer in accordance with the agreed terms of
delivery.
The Group’s terms of delivery are based on the Incoterms 2000
delivery terms, a compilation of definitions of delivery terms published
by the International Chamber of Commerce. The Group’s most
common delivery terms concerning sales are:
- d terms, according to which the Group has to deliver the products
to the agreed destination. The sale is concluded at the moment of
delivery to the buyer at the agreed destination at the agreed time.
- C terms, according to which the seller arranges and pays for
transport to the agreed destination and certain other expenses.
however, the Group’s responsibility for the products ends after the
products have been handed over to the carrier in accordance with
the term used. The sale is concluded at the moment when the
seller hands the goods over to the carrier for transport to the
agreed destination.
- F terms, according to which the buyer arranges for the transport
and is responsible for it. The sale is concluded when the products
have been delivered to the buyer’s carrier.
If local rules result in invoicing that deviates from the rules specified
above, the impact of such income has been calculated and adjusted.
Revenue from the sale of services is recorded when the services
have been rendered. dividend income is recognised when the right
to receive a payment is established. Interest income is recognised
by applying the effective interest rate method.
Delivery and handling costs
Costs arising from the delivery and handling of goods are recorded
in materials and services in the income statement.
Research and development expenditure
Research and development expenditure is recognized as an expense
at the time it is incurred. development expenditure is capitalized if
it is probable that a development project will generate future economic
benefit and the costs can be measured reliable. Capitalized
development costs are amortised over their expected useful future
lives. To date, M-real does not have capitalized development expenditure.
Borrowing costs
Borrowing costs are generally recognized as an expense in the period
in which they are incurred. When an item of property, plant and
equipment is involved in a major and long-term investment project,
the borrowing costs directly due to the acquisition and construction
of the asset are included in the asset’s cost.
Income taxes
Tax expense in the income statement is comprised of the current
tax and deferred taxes. Current tax and deferred tax that relates to
items that are recognised in comprehensive income shall be recog-

nised in comprehensive income. Income taxes are recorded on an
accrual basis for the taxable income of each reporting unit, applying
the tax rate in force in each country at that time. Taxes are adjusted
for any taxes for previous periods.
deferred taxes and tax assets are calculated on all the temporary
differences between the accounting value and the tax base. deferred
tax liabilities are not recognised when the asset or liability in question
is one that is originally entered at the carrying amount and does
not concern the merging of business operations, and the recognition
of such an asset or liability does not have an impact on the accounting
result or taxable income at the date of the transaction. No deferred
taxes are recognised for non-deductible goodwill, and no deferred
taxes are recognised for undistributed profits of subsidiaries to the
extent that the difference will not likely realise in the predictable
future.
The greatest temporary differences result from impairment on
property, plant and equipment, fair value of available-for-sale financial
assets and derivative instruments, defined benefit plans, unused
tax losses and measurement at fair value in connection with acquisitions.
deferred taxes have been calculated by applying the tax rates in
force by the balance sheet date. Tax assets are recognized to the
extent that it is probable that taxable profit will be available against
which a deductible temporary difference can be utilized.
Intangible assets
Goodwill
Goodwill is the amount by which the cost exceeds the Group’s share
of the identifiable net assets of the acquired subsidiary at the date
of acquisition. Goodwill arising from the acquisition of subsidiaries
is included in intangible assets. Goodwill is tested annually for impairment
and recognised on the balance sheet at cost less accumulated
impairment losses. Impairment losses from goodwill are not cancelled.
The book value of goodwill associated with a divested company
influences the capital gain or loss.
Goodwill is allocated to cash-generating units for impairment
testing. Goodwill is allocated to those units or groups of units which
are expected to benefit from the merger of business operations
where the goodwill has emerged, specified by reporting segments.
Other intangible assets
Computer software
expenditure on developing and building significant new computer
software programs are recognized in the balance sheet as an intangible
asset and amortized over its useful life, which is not to exceed
five years. direct expenses to be capitalized include consultancy and
expert advisory fees paid to outside parties, software licences
obtained for the application, staff costs to the extent that they can
be allocated directly to the project as well as other direct costs.
Maintenance and operating expenditure related to computer software
and edp applications is recorded as an expense in the reporting
period in which it has been incurred.
Emission rights
allowances received by the governments free of charge have initially
been recognised as intangible assets and the corresponding government
grant as advance payment in liabilities based on fair value at
the date of initial recognition. allowances are measured at its cost
or at their fair value if less. allowances are not amortized. The emissions
produced are recognised as cost and as liability together with
the corresponding government grant as income both based on the
value at the date of initial recognition. So rights consumed that are
within the original range have no positive or negative effect on profit
for the period. The costs of purchasing additional rights to cover
excess emissions or the sale of unused rights have effect on profit.
Other intangible assets
The cost of patents, licences and trademarks having a finite useful
life is capitalized in the balance sheet under intangible assets and
amortized on a straight-line basis over their useful lives in 5–10
years.
The estimated economic lives of intangible assets are reviewed
at each balance sheet date and if they differ significantly from previous
estimates, the depreciation periods are altered accordingly.
Property, plant and equipment
property, plant and equipment is measured at original cost. The
property, plant and equipment of acquired subsidiaries is measured
at fair value at the time of the purchase. property, plant and equipment
is presented in the balance sheet at cost less accumulated
depreciation and impairment losses. For investments in property,
plant and equipment requiring a long construction time, the interest
incurred during construction is capitalized in the balance sheet as
part of the asset for the time that is necessary for bringing the asset
to working condition for its intended use.
property, plant and equipment is depreciated on a straight-line
basis over the following expected useful lives:
Buildings and constructions 20–40 years
Machinery and equipment
heavy power plant machinery 20–40 years
other heavy machinery 15–20 years
lightweight machinery and equipment 5–15 years
other tangible assets 5–20 years
land and water areas are not depreciated. If the significant parts of
an item of property, plant and equipment have useful lives of differing
length, each part is depreciated separately.
The estimated economic lives are reviewed at each balance sheet
date and if they differ significantly from previous estimates, the
depreciation periods are altered accordingly.
Subsequent costs of an item of property, plant and equipment
shall be recognised as an asset if and only if it is probable that future
economic benefits associated with the item will flow to the entity
and the cost of the item can be measured reliably. The carrying
amount of a component which has been replaced with new a com-
NoTeS To The FINaNCIal STaTeMeNT
49

ponent shall be derecognised. all other repair and maintenance
expenditures are recognised in profit and loss as incurred.
Gains and losses arising on the sale and decommissioning of
items of property, plant and equipment are calculated as the difference
between the net revenue obtained and the carrying amount.
Capital gains and losses are included in operating profit in the income
statement.
When a non-current item of property, plant and equipment is
classified as held for sale, the recording of depreciation on said asset
is discontinued. a non-current asset held for sale is measured at
the lower of the carrying amount or the fair value less the expenses
necessary to make the sale.
Government grants
Government grants received for the purpose of purchasing property,
plant and equipment and similar are entered as deferred income in
balance sheet liabilities and recognized in other operating income
during the actual useful life of the asset. other grants are recorded
as other operating income in the income statement for the financial
periods during which they are matched with the corresponding
expenses.
Leases
leases on property, plant and equipment for which the Group
assumes substantially all the risks and rewards incident to ownership
of the asset are classified as finance lease agreements. a finance
lease agreement is recognized in the balance sheet at an amount
equal at the inception of the lease to the fair value of the leased
property or, if lower, at the present value of the minimum lease payments.
The corresponding lease payment liability is recorded in
interest-bearing liabilities under other non-current liabilities. an
asset obtained on a finance lease is depreciated over the useful life
of the asset or, if shorter, the lease term. lease payments are split
between financial expenses and a reduction in the lease liabilities.
lease agreements in which the risks and rewards incident to
ownership remain with the lessor are treated as other lease agreements
(operating leases). lease payments under an operating lease
are recognized as an expense in the income statement on a straightline
basis over the lease term.
Impairment of assets not included in financial assets
No depreciation is recognised for assets with an unlimited useful
life, such as goodwill; they are annually tested for impairment.
depreciated assets are always tested for impairment when events
or changes in conditions indicate that it is possible that the monetary
amount corresponding to the book value of the assets might not be
recoverable. The amount by which the book value of the asset exceeds
the recoverable amount is recognised as an impairment loss. The
recoverable amount is the higher of the fair value of the asset less
expenses arising from its sale or its service value. assets are classified
for testing for impairment to the lowest levels at which the
cash flows can be separately identified (cash-generating units).
assets not included in financial assets, apart from goodwill, for which
impairment losses are recognised, are reviewed at the end of each
50 NoTeS To The FINaNCIal STaTeMeNT
financial period with regard to any reasons for cancelling the impairment.
Biological assets
Biological assets (living trees) are measured at fair value less the
estimated expenses of making a sale. The fair value of a stand of
trees, excluding young seedlings, is based on the present value of
expected cash flows (revenue and expenses). The calculations take
into account the future growth of the stand as well as the environmental
protection-related limits on the forests. The calculation of
income from fellings and silvicultural costs is based on the prevailing
price level as well as the company’s view of the future trend in
prices and costs. Changes in the fair value of a stand of trees are
included in operating profit during the financial period. at 31 december
M-real has no biological assets any more.
Inventories
Inventories are measured at the lower of cost and net realizable
value. The cost of finished and semi-finished products comprises
raw materials, direct labour expenses, other direct expenses as well
as an appropriate share of fixed and variable production overheads.
The normal capacity of the production facilities is used as the divisor
in allocating overheads to the different production units.
The value of inventories is determined using the FIFo (first-in,
first-out) method or, alternatively, the weighted average cost method
depending on the nature of the inventories. Net realizable value is
the estimated selling price that is obtainable less the costs of completion
and the costs necessary to make the sale.
Accounts receivables
accounts receivables are measured at the expected net realizable
value, which is the original invoicing value less estimated impairment
provisions on the receivables. Impairment test is carried for all
receivables at bankruptcy or overdue over 180 days, when there is
a justifiable reason to assume that the Group will not receive payment
for the invoiced amount according to the original terms.
Provisions
a provision is recognized in the balance sheet when the Group has
a legal or constructive obligation as a result of a past event and it is
probable that settlement of the obligation will require a financial
payment or cause a financial loss, and a reliable estimate can be
made of the amount of the obligation. Where the effect of the time
value of money is material, the amount of a provision is the present
value of the expenditures expected to be required to settle the obligation.
If some or all of the expenditure required to settle a provision
is expected to be reimbursed by another party, the reimbursement
is recorded in the balance sheet as a separate asset, but only if it is
virtually certain that reimbursement will be received.
Restructuring
a restructuring provision is recorded for the financial period when
the Group has incurred a legal or constructive obligation to make a
payment. Termination payments are recorded when a detailed plan

has been made of the restructuring and the main points of the plan
have been communicated to the employees who are affected by the
arrangement.
Onerous contracts
a provision is recognised for an onerous contract, when the unavoidable
costs of meeting the obligations under the contract exceed the
economic benefits expected to be received under it.
Environmental obligations
Costs arising from environmental remediation which do not increase
present or future revenue are recorded as annual expenses. environmental
liabilities are recorded in accordance with present environmental
protection laws and regulations when it is probable that
the obligation which has arisen and its amount can be estimated
reasonably.
Employee benefits
Pension benefits
pension plans are classified as either defined benefit or defined
contribution plans. Under a defined contribution plan, the Group
pays fixed contributions to a separate unit. The Group has no legal
or constructive obligation to pay further contributions if the recipient
of the payments is not able to pay the pension benefits in question.
all plans that do not meet these requirements are considered defined
contribution plans. Contributions paid to defined contribution pension
plans are expensed in the period to which they relate.
The Group’s obligations associated with defined benefit pension
plans have been calculated separately for each plan using the projected
Unit Credit Method. pension expenditure is expensed for the
employees’ period of service based on calculations made by authorised
actuaries. In calculating the current value of the pension obligation,
the market return of high-quality bonds issued by the company
is used as the discount rate. The maturity of the bonds and treasury
bills essentially corresponds to the maturity of the calculated pension
obligation. The pension plan assets measured at fair value at
the balance sheet date, unrecognised actuarial gains and losses and
retroactive work performance are deducted from the present value
of the pension obligation to be recognised in the balance sheet.
actuarial gains and losses are recognised in the income statement
over the expected average remaining working lives of the
employees to the extent that such gains and losses exceed the greater
of 10 per cent of the present value of the benefit obligation and 10
per cent of the fair value of any plan assets.
expenditure based on retroactive work performance is charged
to the income statement in fixed instalments over the period during
which they are paid-up. If the benefits are paid-up immediately, they
are immediately charged to the income statement.
Gains and losses resulting from the restriction of a defined benefit
plan or performance of the obligation are recognised at the time
of the restriction or fulfilment.
Share-based payment
a share-based incentive programme in which the payments are
made either with equity instruments or cash has been established
for the company’s top executives. The benefits issued in connection
with the scheme are measured at fair value at the date of granting
them and charged to the income statement evenly during the vesting
period. In schemes where the payments are made in cash, the
entered liability and change in its fair value is correspondingly scheduled
as expenses. The effect of the schemes on profit is presented
under employee costs.
Earnings per share
Undiluted earnings per share are calculated using the weighted
average number of shares during the reporting period. In calculating
earnings per share adjusted for the effect of dilution, the average
number of shares is adjusted for the dilution effect of any equity
instruments that have been issued. In calculating earnings per share,
earnings are taken to be the reported earnings attributable to the
parent company’s shareholders. earnings, both undiluted and
adjusted for the effect of dilution, are calculated separately for continuing
and discontinued operations.
Dividends payable
dividends payable by the company are recorded as a decrease in
equity in the period during which shareholders, in a general meeting,
have approved the dividend for payment.
Comparative figures
Where necessary, comparative figures have been classified to conform
to changes in presentation in the current year.
NoTeS To The FINaNCIal STaTeMeNT
51

2 Key accounting estimates applied in the financial
statements and discretion used in the accounting
principles
preparing IRFS-compliant financial statements requires the use of
certain key accounting estimates. In addition, it requires the management
to use its discretion in applying the accounting principles.
The estimates made and discretion-based decisions are continuously
evaluated, and they are based on prior experience and other factors,
such as expectations concerning future events. The expectations are
considered to be reasonable, taking the circumstances into account.
The topics that are associated with key assumptions and estimates
in terms of consolidated financial statements and areas that require
significant discretion are described below.
Key accounting estimates
Impairment testing
TThe Group annually tests the goodwill and intangible assets not yet
ready for impairment. Testing for impairment is carried out for other
long-term assets if there are indications that the value of the assets
might be impaired. The recoverable amounts of cash-generating
units are based on calculations of value in use. These calculations
require that estimates are made. The Zanders cash-generating unit
that is included in the Speciality papers operating segment generated
an impairment loss of eUR 28 million in 2010. The carrying
amount of the units were reduced to correspond to their recoverable
amount. In office papers’ husum papermill some eUR 9 million
impairment loss made earlier was reversed. a sensitivity analysis
of the substantial assumptions used in the impairment testing and
the impact of changes in them on the amount of impairment is presented
in Note 8.
Pension plans
The current value of the pension obligations depends on various
factors that are determined using various actuarial assumptions.
The discount rate is also included in the assumptions used in determining
the net expenditure (or income) arising from pension plans.
Changes in these assumptions have an effect on the carrying amount
of the pension obligations.
The appropriate discount rate is determined at the end of each
year. This is a rate that should be used in determining the current
value of the future cash flows estimated to be required to fulfil the
pension obligations. In determining the appropriate discount rate,
the interest rates of long-term treasury notes or similar instruments
are taken into consideration. other key assumptions concerning
pension obligations are based on the current market conditions.
Share-based reward scheme
The share-based incentive arrangements granted to the Group’s
key employees are measured at fair value at the time of granting.
The fair value is charged to the income statement over the vesting
period during which all the requirements for the right to arise must
52 NoTeS To The FINaNCIal STaTeMeNT
be fulfilled. The expense measured at the time of granting the shares
is based on an estimate of the number of shares to which a right is
believed to arise at the end of the vesting period. Changes in the
estimates are recognised in the income statement. a total of eUR
0.2 million was recognised as an expense on the financial period
ended on 31 december 2010.
Financial instruments at fair value
a fair value is determined for financial instruments not traded on an
open market using valuation methods. discretion is used in selecting
the various methods and making assumptions based primarily
on the market conditions prevailing at the end date of each reporting
period. The greatest item at fair value not traded on an open market
is the investment in pohjolan Voima shares, reported under available-for-sale
financial assets. Their price is determined based on
realised transactions and an analysis of discounted cash flows. The
carrying amount of available-for-sale financial assets would be
estimated to be eUR 11 million lower or eUR 8 million higher should
the rate used for discounting the cash flows differ by 10 per cent
from the rate estimated by the management. The carrying amount
of available-for-sale financial assets would be estimated to be eUR
37 million higher or eUR 38 million lower, if energy prices used for
calculating the fair value differ by 10 per cent from prices estimated
by the management.
Provisions
a provision is recorded when the Group has a legal or constructive
obligation as a result of a previous event and it is probable that the
liability for payment will realise. The provisions are determined based
on previous experience. a provision for restructuring is made when
M-real has composed a detailed restructuring plan and communicated
about the matter. a recorded provision illustrates the management’s
best estimate of the current value of future expenses, but
actual expenditure may differ from the estimate. provisions amounted
to eUR 42 million on M-real’s balance sheet on 31 december 2010.
Income taxes
The management’s discretion is required for determining the taxes
based on the result for the period, deferred tax assets and liabilities
and the extent to which deferred tax assets are recorded. The Group’s
balance sheet at 31 december 2010 did not include any deferred tax
assets recognised for confirmed losses. The Group is subject to
income taxation in several countries. estimating the total amount
of income taxes at the level of the entire Group requires significant
discretion. The final amount of tax is uncertain in terms of several
business operations and calculations. The Group forecasts future
tax audits and recognises liabilities based on estimates on whether
further taxes will need to be paid. If the associated final tax differs
from the originally recorded amounts, the difference has an effect
on both the tax assets and liabilities based on the taxable income
for the period and deferred tax assets and liabilities in the period
during which they are observed.

Key discretion-based decisions in applying the accounting
policies
Inventories
The Group regularly reviews its inventories for situations where the
inventories exceed their real value, contain downgraded items or
their market value falls below the acquisition cost, and records a
deduction item that reduces the carrying amount of the inventories
in the case of such deductions. The management must make estimates
of the future demand for the products for the purpose of such
review. any changes in these estimates might lead to an adjustment
in the carrying amount of the inventories in future periods. M-real’s
balance sheet included inventories amounting to eUR 391 million
on 31 december 2010.
Accounts receivables
accounts receivables are recognised according to the original invoiced
amount less impairment losses and refunds due to returns. Impairment
losses are recognised on a case-by-case basis and based on
previous experience when there is objective proof that the receivable
cannot be collected in full. If the customers’ financial position weakens
so that it affects their solvency, further impairment losses might
need to be recognised for future periods. M-real’s balance sheet at
31 december 2010 included trade receivables amounting to eUR
360 million and impairment losses recorded for trade receivables
amounting to eUR 2 million.
Impairment of equity investments classified as
available-for-sale financial assets
The question when the value of available-for-sale equity investments
is impaired is solved according to the guidelines of IaS 39. This
requires the use of significant discretion, e.g., in terms of for how
long and to what extent the fair value of the investment has been
lower than the acquisition cost. In addition, it is necessary to estimate
the financial position of the investment object regarding the nearfuture
outlook of the business operations, such as the profitability
of the industry and sector, to find out whether there is objective proof
of impairment. Should it be considered that the reduction of the fair
value to below the acquisition cost is entirely or partially significant
and prolonged, an additional after tax loss of eUR 209 million would
be recognised in the financial statements for 2010 when the changes
in fair value associated with impaired available-for-sale financial
assets recognised under equity are charged to the income statement.
3 Management of financial risks
The financial risks associated with business operations are managed
in accordance with the financial policy endorsed by the Board of
directors and the senior management of the company. The policy
defines focal instructions on the management of foreign currency,
interest rate, liquidity and counterparty risks, and for the use of
derivative financial instruments. Correspondingly, commodity risks
are managed according to the company’s commodity risk policy. The
purpose is to protect the company against major financial and commodity
risks, to balance the cash flow and to allow the business units
time to adjust their operations to changing conditions.
Metsä Group Financial Services oy (Metsä Finance) is specialized
in finance and functions as the Group’s internal bank. M-real’s holding
in Metsä Finance is 51 per cent and Metsäliitto Cooperative’s
holding is 49 per cent. Financial operations have been centralised
to Metsä Finance, which is in charge of managing the Group companies’
financial positions according to the strategy and financial
policy, providing necessary financial services and acting as an advisor
in financial matters.
Foreign currency risk
The Group’s foreign currency exposure consists of the risks associated
with foreign currency flows, translation risk of net investments
in foreign entities and economic currency exposure. Most of the
Group’s costs are incurred in the euro zone and to some extent in
Sweden, but a significant part of the sales is in other currencies.
Sales revenue may therefore vary because of changes in exchange
rates, while production costs remain unchanged. product prices are
also often quoted in currencies other than the home currency. The
foreign currency transaction exposure is consisting of foreign currency
denominated sales revenue and costs. The exposure is including
foreign currency denominated balance sheet exposure consisting
of sales receivables and accounts payable and a quarter share
of the annual contracted or estimated net currency cash flow.
The main currencies of the Group’s foreign currency transaction
exposure are the US dollar, the British pound and the Swedish korma.
a strengthening of the dollar and the pound has a positive impact
on the financial result and a weakening a negative impact. a weakening
of the Swedish krona has a positive impact on the result. other
significant currencies are aUd, Cad, ChF, dKK and NoK. The hedging
policy is to keep an amount corresponding to three months’ cash
flows of all contractual or estimated currency flows consistently
hedged. The hedging policy is to keep the balance sheet exposure
and a quarter of annual cash flow of contracted or estimated currency
flows consistently hedged. The hedging level can, however
vary between 0–12 months as the financial policy has defined separate
risk mandates for deviating from the norm hedging. The Board
of directors decides on significant changes in the hedging level if
they see a reason to deviate from the norm set out in the financial
policy. The amount of currency-specific hedging depends on current
exchange rates and market expectations, on the interest rate differences
between the currencies and the significance of the exchange
NoTeS To The FINaNCIal STaTeMeNT
53

ate risk for the financial result. The transaction exposure is mainly
hedged by forward transactions but also by the use of foreign currency
loans and currency options.
hedge accounting in accordance with IaS 39 is applied partially
to the hedging of the currency transaction exposure, which allows
fair value changes of hedges designated to hedge accounting to be
entered directly in shareholders’ equity in fair value reserve. at the
end of the reporting period, the foreign exchange transaction exposure
had been hedged 4.8 months on average (2009 4.9). during the
reporting period, the hedging level has varied between 4 and 6 months
(3–5). The dollar’s hedging level was 4.5 months (7.2), of which the
portion of hedge accounting was 1.4 months (1.8). The Swedish
krona’s hedging level was 5.5 months (4.7), of which the portion of
hedge accounting was 3.2 months (3.6). The pound’s hedging level
was 4.9 months (2.5), of which the portion of hedge accounting was
3.0 months (1.4). hedges allocated to hedge accounting have been
used to hedge the portion of highly probable forecast sales of the
currency transaction exposure.
The translation risk of a net investment in a foreign entity is generated
from the consolidation of the equity of subsidiaries and associated
companies outside the euro area into euros in the consolidated
financial statements. according to the updated financial policy, 0–100
per cent (50–100) of equity should be hedged. The translation risk
of equity has been hedged through the use of forward transactions
and foreign currency loans and major exposures have been mostly
kept hedged. during the reporting period, on average 79 per cent
(93) of the equity position was hedged and at the end of the reporting
period 70 per cent (96). hedge accounting in accordance with IaS is
applied to the hedging of the equity exposure. This allows the
exchange gains and losses of effective hedging to be entered into
the equity offsetting translation differences.
The Group applies the Value-at-Risk method to assess the risk
of its open foreign currency positions. The VaR is calculated on the
deviation from the balance sheet exposure plus the quarter of annual
foreign currency exposure hedge norm defined in the financial
policy. a 99 per cent confidence level on one month period is applied
to the VaR risk figure, i.e., the VaR indicates that with a 1 per cent
probability the market value of the open foreign currency position
Exchange rate trends Interes rate trends
%
54 NoTeS To The FINaNCIal STaTeMeNT
1.6
1.4
1.2
1.0
0.8
depreciates more than the amount of the risk figure in a month. The
risk mandates regarding hedging decisions have been defined by
restricting the company management’s powers by linking them to
maximum currency-specific hedging level changes and to a VaR
limit. possible strategic decisions which exceed the policy risk limits
are made by the Board of directors. The limit set for the M-real
Group’s foreign currency risk is eUR 12 million (25) and the VaR is
at the end of the reporting period eUR 1.9 million (7.9). average during
the period has been eUR 2.9 million (8.8). The Value-at-Risk
method has also been used to assess the market risk of Metsä
Finance’s trading operations. Trading volume has been relatively low
during the reporting year: Metsä Finance’s average VaR (of one day
at 99%) was only eUR 0.07 million in 2010 (0.34). The volumes and
fair values of derivatives used in the management of foreign currency
risks are presented in Notes no. 29.
Interest rate risks
The interest rate risk is related mainly in the interest bearing receivables
and loans and currency hedging. Interest bearing receivables
and loans are presented in Notes no. 25. The most significant currencies
in risk management are the euro, the US dollar, the British
pound and the Swedish krona. The objective of the interest rate risk
policy is to minimise the negative impact of interest rate changes on
the result and the financial position, and to optimise financing costs
within the framework of risk limits. The effect of interest rate changes
on financial costs depends on the average interest fixing time of
interest bearing assets and liabilities, which is measured in the Group
by duration. as duration diminishes the rise of interest rates affects
more quickly the interest expenses of financial liabilities. The maturity
of the loan portfolio can be influenced, e.g., by adjusting between
floating-rate and fixed-rate loans and by using interest rate derivatives.
The Group uses in its interest rate risk management interest
rate swaps, interest rate futures and interest rate options.
The average interest duration norm based on the Group’s financial
policy is 6 months. The duration can, however, deviate from the
hedging policy norm so that the decision of a deviation exceeding
four months has to be made by the Board of directors. The average
duration of loans was 9.4 (6.4) months at the end of the year. during
0.6
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
eUR/USd eUR/GBp euribor 3 months USd 3 months GBp 3 months
7
6
5
4
3
2
1
0

the reporting period duration has varied between 6 and 10 months
(2–7). at the end of 2010, an increase of one per cent in interest rates
would increase interest rate costs of the next 12 months by eUR 3.7
million (3.4).
The Group is exposed to a risk of change in the value of derivatives
due to a change in market prices when using interest rate
derivatives, since according to IaS 39 derivatives must be valued to
their fair value in the balance sheet. however, the partial application
of hedge accounting will balance the effects of changes in the market
value of derivatives on the financial result. The Group is applying
fair value hedge accounting in accordance with IaS 39 to fixed-rate
loans which have been converted by interest rate and currency swaps
to floating-rate financing. In addition, the Group is applying cash flow
hedge accounting in accordance with IaS 39 to the major part of the
interest rate swaps by which floating-rate financing has been converted
to fixed-rate financing. The gross nominal volume of interest
rate derivatives at the time of financial statements (including currency
swap contracts) is eUR 1,304 million (1,033), of which the
portion of reversed contracts is eUR 490 million (300). of the derivatives
portfolio, eUR 637 million (534) is allocated to hedge accounting,
and the portion of derivatives recognized in the balance sheet
through profit or loss is eUR 177 million (199). The maturity of interest
rate swap and currency swap contracts varies between 1–10
years (1–5).
Commodity risk
In the hedging of commodity risks the Group applies risk management
policies defined separately for each selected commodity.
according to the policy, the management of commodity risks with
regard to financial hedges is accomplished by Metsä Finance based
on the strategy approved by Board of directors of M-real. So far the
commodity hedging policy has been applied to the management of
the price risks of electricity and natural gas and also transactions
related to emission rights have been managed by Metsä Finance.
The pulp price risk hedging policy has been adopted during 2010.
M-real’s target in managing the electricity price risk is to balance
the effect of changes in the price of electricity on the Group’s result
and financial position. The main principle is to hedge the electricity
purchase exposure, which consists of the difference of factoryspecific
electricity consumption estimates and power plant production
shares in the possession of the Group. With regard to the Finnish
and Swedish electricity procurement, the hedge strategy is
implemented in cooperation with Metsäliitto energy service unit
centralized through Metsä Finance. The hedges of electricity price
risk in Central europe are implemented according to instructions
and by Metsäliitto energy in co-operation with local production units
either by physical contracts or by financial contracts through Metsä
Finance. M-real hedges the electricity price risk actively by setting
the hedging norm at 80 per cent-, 40 per cent-, 20 per cent- and
0 per cent- share of the estimated net position (80%, 50%, 30% and
20%) during the first, second, third and fourth successive 12-month
periods. hedge accounting in accordance with IaS 39 has been applied
partially to electricity hedging. Consequently the fair value of hedges
allocated to hedge accounting is entered in equity in fair value reserve
and only after the realisation of electricity purchases in the income
statement as an adjustment of the purchases.
approximately a quarter of M-real’s mills’ purchase of fuel is
based on natural gas. The hedging of natural gas price risks has
been done with physical, fixed-price contracts. In Finland only the
oil-related portion of the contract has been fixed. The prices of
natural gas have typically been fixed to Fuel-oil and/or Gas-oil prices.
In addition, the prices of gas supply to Finland have been fixed to the
development of coal import price and the energy price index. The
premise of natural gas price risk hedging is, however, to hedge only
the oil-related part of the contract by using oil derivatives and fixedpriced
physical supply contracts. The hedging strategy is based on
a risk policy according to which Metsäliitto energy makes the hedging
decisions with the support of Metsä Finance, and the Group Board
of directors makes significant strategic decisions.
approximately 70 per cent of electricity hedges (70) have been
carried out by using physical supply contracts and 30 per cent (30)
as so-called financial hedges by using electricity derivatives. at the
end of the year, about 90 per cent (90) of financial hedges have been
designated to hedge accounting. all natural gas price risk hedges
have so far been implemented by using physical supply contracts.
according to the pulp price risk hedging policy a Group company
may selectively hedge its price risk either by financial hedges through
Metsä Finance or fixed-price physical contracts. hedge accounting
in accordance with IaS is applied within the pulp price risk management.
There are no valid price risk hedges at the end of 2010 within
M-real Group.
The volumes and fair values of derivatives used in the management
of commodity risks are presented in Notes no. 29.
Liquidity risk
liquidity risk is defined as the risk that funds and available funding
become insufficient to meet business needs, or that extra costs are
incurred in arranging the necessary financing. liquidity risk is
monitored by estimating the need for liquidity needs 12–24 months
ahead and ensuring that the total liquidity available will cover a main
part of this need. according to the financial policy, the liquidity reserve
must at all times cover 80–100 per cent of the Group´s liquidity
requirement for the first 12 months and 50–100 per cent of the following
12–24 months liquidity requirement. The objective is that at
the most 20 per cent of the Group’s loans, including committed credit
facilities, are allowed to mature within the next 12 months and at
least 35 per cent of the total debt must have a maturity in excess of
four years. When the financial markets are functioning normally
from the company’s point of view, the target is to avoid keeping extra
liquidity as liquid funds and instead maintain a liquidity reserve as
committed credit facilities outside the balance sheet.
The cornerstone of liquidity risk management is to manage the
Group’s operative decisions in such a way that targets concerning
indebtedness and sufficient liquidity reserve can be secured in all
economic conditions. liquidity risk is also managed by diversifying
the use of capital and money markets to decrease dependency on
any single financing source. The optimisation of the maturity structure
of loans is also emphasized in financial decisions. during the
NoTeS To The FINaNCIal STaTeMeNT
55

last years liquidity and especially the capital structure of the Group
has been strengthened through the change in the ownership structure
of Metsä-Botnia and other divestments.
liquidity continues at a good level. The available liquidity was eUR
415 million (776) at the end of the reporting period, of which eUR 7
million (279) was committed credit facilities and eUR 408 million
(497) liquid funds and investments. eUR 218 million of liquid assets
and investments are assets deposited by other Metsäliitto Group’s
businesses in M-real’s subsidiary Metsä Finance. The raising of
pension loans and pension insurance arrangements have reduced
the amount of committed credit facilities. In addition the Group had
other interest-bearing receivables eUR 116 million (136). The Group
had also at its disposal short-term, uncommitted commercial paper
programmes and credit lines amounting to eUR 519 million (529).
at the end of 2010, the liquidity reserve covers fully the forecasted
financing need of 2010 and also the major part of financing need of
2011 and 2012. on the longer term the re-financing need is crucially
affected by the cash flow development, investments and possible
future divestments. 10 per cent (25) of long-term loans and committed
facilities fall due in a 12 month period and 13 per cent (24) have
a maturity of over four years. The average maturity of long-term
loans is 2.7 years (2.4). The share of short-term financing of the
Group’s interest bearing liabilities is 16 per cent (4).
Counterparty risk
Financial instruments carry the risk that the Group may incur losses
should the counterparty be unable to meet its commitments. Such
risk is managed by entering into financial transactions only with
most creditworthy counterparties and within pre-determined limits.
during the reporting period, credit risks of financial instruments did
not result in any losses. Cash at bank and in hand, and other investments
have been spread to several banks and commercial papers
of several institutions. Counterparty limits have been revised during
the year by taking into account the needs of the company and the
view on the financial position of the used counterparties. derivatives
trading is regulated by the standardised ISda contracts made with
the counterparties.
The Group’s sales receivables carry a counterparty risk that the
Group may incur losses should the counterparty be unable to meet
its commitments. Credit risk attached to sales receivables is managed
on the basis of the credit risk management policies approved
by operative management. accounts receivable performance is followed
monthly by Corporate Risk Management Team and Corporate
Credit Committee. Credit quality of customers is assessed at regular
intervals based on the customers’ financial statements, payment
behaviour, credit agencies and credit ratings agencies. Individual
credit limits are reviewed at least annually. From time to time, as
deemed necessary by management, letters of Credits, bank and
parent company guarantees and Credit insurance are used to mitigate
credit risk. Credit limits are approved according to credit risk
management policy with approval limits of varying values across the
Group. due to the ongoing challenging economic environment, credit
limits have been reviewed on a more regular basis than in previous
years. Customers have generally been cooperating by providing
56 NoTeS To The FINaNCIal STaTeMeNT
interim financial statements. The Corporate Credit Committee
reviews and sets all major credit limits which are not supported by
credit insurance and/ or other security.
M-real implements regular impairment tests for customer
accounts receivables. Credit loss impairment is booked when a customer
enters legal bankruptcy, or becomes past due for more than
6 months (180 days) without a valid payment plan or other valid
reasons. Credit loss provisions for the year were eUR 1.6 million
(2009 5.8), below the historical annual average from 2000 to 2009 of
eUR 3.6 million (excluding discontinued business in Graphics, eUR
1.4 million). approximately eUR 1 million of credit loss provisions
made in 2009 were reversed due to payments made or dividends
received from bankruptcies. The portion of overdue client receivables
of all sales receivables is at the time of financial statements 8.2 per
cent (8.3), of which 0.4 per cent (0.6) is overdue between 90–180 days
and 0.1 per cent (0.4) over 180 days. The specification of doubtful
receivables is in Notes no. 20.
The geographical structure of the accounts receivable is diversified
and is reflecting the external sales structure presented in the
Segment information. largest sources of credit risk exist in Great
Britain, Belgium, Germany, Italy and France (54 per cent of total
receivables). The share of largest individual customer (individual
companies or groups of companies under common ownership) credit
risk exposure of M-real at the end of 2010 represented 19 per cent
(15) of total accounts receivable. 41 per cent (42) of accounts receivable
was owed by ten largest customer groups (individual companies
or groups of companies under common ownership).
The improvement in customer payment behaviour that begun in
the 4th quarter of 2009, continued in 2010 and was at an acceptable
level throughout the year. The decline in credit insurance credit
limits first reported in 2008 and which continued to worsen in 2009
was reversed from the second quarter of 2010 as the insurers recognised
that many of their earlier assessments in forest products
related manufacturing and distribution had been incorrect. at the
end of 2010, more than 95 per cent of M-real’s trade receivables (64)
were again covered by credit insurance limits (excluding energy).
M-real’s internal analysis of the real risk of customer solvency continued
to support the reinstatement of credit insurance to allow sales
while controlling credit risk where credit insurance was not granted.
Managing the capital
Terms capital and capital structure are used to describe investments
made in the company by its owners and retained earnings (together
equity) and debt capital (liabilities) as well as the relation between
them. In managing its capital structure, the Group aims at maintaining
an efficient capital structure that ensures the Group’s operational
conditions in financial and capital markets in all circumstances
despite the fluctuations typical to the sector. The company has a
credit rating for its long-term financing. Certain central target values,
which correspond to standard requirements set by financing and
capital markets, have been defined for the capital structure. No
target level has been defined for the credit rating. The Group’s
capital structure is regularly assessed by the Group’s Board of directors
and its audit Committee. The Group monitors the development

of its capital structure through a key ratio that describes net gearing.
The objective of the Group is to maintain its net gearing ratio below
the level of 100 per cent on average over the trade cycle.
The key ratios describing the capital structure and the capital
amounts used for the calculation of the key ratio were on 31.12.2010
and 31.12.2009 the following:
2010 2009
Net gearing ratio, % 83 84
Interest-bearing borrowings 1,350 1,410
./. liquid funds 408 497
./. Interest-bearing current receivables 115 136
827 777
equity attributable to shareholders of parent company
994 916
+ Non-controlling interest 5 8
999 924
In the company’s certain loan contracts a minimum limit of 30 per
cent has been set for the Group’s equity ratio and a maximum limit
of 120 per cent for the Group’s net gearing ratio. With regard to
defining the equity, the calculation formula of key ratios as defined
in the loan contracts deviates from the calculation formulas presented
in the annual Report. This is due to the fact that in loan contracts
business value and deferred tax liabilities are taken into account
when calculating the key ratio. also the formula for calculating net
gearing in the loan contracts deviates from the formula presented
in the annual report. This is caused by a eUR 300 million nonrecurring
write-off exclusion in the calculation of the key ratio. other
covenants in the Group’s loan agreements are customary terms and
conditions including for example a negative pledge, restrictions on
major asset disposals, limitations on subsidiary indebtedness, restrictions
on changes of business and mandatory prepayment obligations
upon a change of control of the Group. The Group has been in compliance
with its covenants during the accounting periods 2010 and
2009.
The capital structure’s key ratios calculated according to what is
specified in the loan contracts were on 31.12.2010 and 31.12.2009
approximately the following:
2010 2009
equity ratio, % 38 35
Net gearing ratio, % 64 63
In case the company could not meet its obligations as defined by the
above mentioned key ratios and in order to avoid a breach of contract
that could have and adverse effect on the company’s financial position,
it would need to renegotiate its financial arrangements, payback
its loans or get its debtors to give up their claims to meet these
obligations.
NoTeS To The FINaNCIal STaTeMeNT
57

Hedging of foreign exchange transaction exposure 31 Dec. 2010
Currency breakdown for loans Foreign currency breakdown
for currency exposure
58 NoTeS To The FINaNCIal STaTeMeNT
eUR 91%
USd 8%
others 1%
annual transaction exposure
USd GBp SeK NoK dKK aUd
Transaction exposure, net (mill. currency units) 567 239 -3,237 183 195 51
Transaction exposure,net (eUR million) 427 278 -359 23 26 39 16 -1 1,170 952
Transaction exposure hedging (eUR million) -162 -113 164 -6 -6 -14 -4 0 -469 -388
hedging at the end of the year (months) 4.5 4.9 5.5 2.8 2.9 4.3 3.2 2.2 4.8 4.9
average hedging in 2010 (months) 5.2 4.6 5.4 3.8 2.7 4.1 3.2 2.4 4.9 4.3
Hedging of net investments in a foreign entity 31 Dec. 2010
USd 37%
GBp 24%
SeK 31%
aUd 3%
NoK 2%
others 3%
equity exposure
other
long
other
short
GBp SeK other
equity exposure (mill. currency units) 7 2,931
equity exposure (eUR million) 8 327 13 348 263
equity hedging (eUR million) -8 -236 0 -244 -259
hedging at the end of the year, (%) 100 72 0 70 99
average hedging in 2010, (%) 97 79 34 79 93
Interest rate risk/duration and re-pricing structure of loans (incl. Interest rate derivatives)
31.12.2010 31.12.2009
Re-pricing structure of interest rates of loans
loan amount
(eUR million)
duration
(months)
average
interest rate
(%)
Interest rate
sensitivity *)
(eUR million)
1–4/2011 5–8/2011 9–12/2011 2012 2013 2014 –>2014
loan amount
(eUR million)
duration
(months)
2010
Total
2010
Total
average
interest rate
(%)
1,350 9.4 5.1 3.7 850 204 60 27 31 130 48 1,410 6.4 6.0 3.4
*) Interest rate sensitivity is an estimate of the effect of an interest rate change of one percent in one direction on net interest cost based on year end exposure
2009
Total
2009
Total
Interest rate
sensitivity *)
(eUR million)
Hedging of electricity price risk exposure
31.12.2010 31.12.2009
GWh GWh
electricity exposure, net 2011 1,160 1,110
electricity hedging 2011 985 991
hedging at the end of the year (%) 85 89
electricity price risk is hedged based on defined risk management policy on a time horizon of four years either by physical contracts or by financial contracts.
The table is applying only to the hedging of electricity price risk of the following year. The net electricity exposure has been calculated by taking into account
the own and associated companies´ electricity production.

Market risk sensitivity at 31 Dec. 2010 31.12.2010 Impact on equity exposure and annual transaction exposure 31.12.2010
eUR million
Impact on
financial
assets and
liabilities
Impact on
net equity
of foreign entities
Impact on
net equity of
foreign entities
incl. hedging
Impact on
annual
transaction
exposure
(cash flow)
Impact on annual
transaction
exposure
(cash flow)
incl. hedging
Interest rate risk (100 bp rise in interest rates)
effect on profit 1.1 -3.7 -2.5
effect on other change in equity 0.2
Commodity risk (electricity price + 20%)
effect on profit 0.4 -6.0 1.6
effect on other change in equity 7.2
FX risk (USD - 10%)
effect on profit 5.2 -42.4 -26.3
effect on other change in equity 4.7
FX risk (GBP - 10%)
effect on profit -0.4 -27.8 -16.5
effect on other change in equity 7.7 -0.8
FX risk (SEK - 10%)
effect on profit -1.8 36.1 19.7
effect on other change in equity 14.2 -32.7 -9.1
Market risk sensitivity at 31 Dec. 2009 31.12.2009 Impact on equity exposure and annual transaction exposure 31.12.2009
eUR million
Impact on
financial
assets and
liabilities
Impact on
net equity
of foreign entities
Impact on
net equity of
foreign entities
incl. hedging
Impact on
annual
transaction
exposure
(cash flow)
Impact on annual
transaction
exposure
(cash flow)
incl. hedging
Interest rate risk (100 bp rise in interest rates)
effect on profit 1.1 -3.4 -1.9
effect on other change in equity
Commodity risk (electricity price + 20%)
0.5
effect on profit 0.3 -3.6 3.8
effect on other change in equity
FX risk (USD - 10%)
7.1
effect on profit 9.0 -31.0 -12.4
effect on other change in equity
FX risk (GBP - 10%)
4.5
effect on profit -3.5 -22.0 -17.5
effect on other change in equity
FX risk (SEK - 10%)
3.6 -1.0
effect on profit 2.6 31.9 19.5
effect on other change in equity 15.3 -24.8
Items with + sign = positive effect = increase of assets / decrease of liabilities / increase of cash flow
Items with – sign = negative effect = decrease of assets / increase of liabilities / decrease of cash flow
IFRS 7 requires an entity to disclose a sensitivity analysis for each type of
market risk to which the entity is exposed at the reporting date, showing how
profit or loss and equity would have been affected by changes in the relevant
risk variable that were reasonably possible at that date. The Group has recognized
interest rates, electricity prices and foreign exchange rates as its
key market risks and has set 1 per cent interest rate rise, 20 per cent rise in
electricity price and 10 per cent weakening of USd, GBp and SeK as reasonably
possible risk variables. These currencies represent about 80 per cent
of Group’s annual transaction exposure. The nature of the market price risk
is relatively linear so that the size of effects of opposite market price changes
do not essentially differ from the presented figures.
The scenarios have been calculated by using regular principles of calculating
market values of financial instruments described in the Group accounting
policies. Figures at the reporting date reflect quite well the average
market risk conditions throughout the reporting period. additionally, the
Group is presenting figures describing the effects of the risk variables to its
equity exposure and annual transaction exposure (cash flow) to present a
broader picture about market risks of interest rates, electricity prices and
foreign exchange rates. annual cash flows are based on estimates, but not
existing commercial contracts. The impact on net equity has reduced due to
sale of Botnia´s operations in Uruguay. Including equity hedging the impact
is minor. The weakening of USd and GBp has a negative impact on annual
cash flow and the weakening of SeK has a positive impact. hedges reduce
this impact depending on hedging strategy. The rise of electricity price has
a negative impact on cash flow. as according to hedging policy the electricity
price risk of the nearest year has mostly been hedged, the impact including
hedges remains minor. When the cash flow of the nearest year and all electricity
hedges have been taken into account, the calculatory impact is slightly
positive.
NoTeS To The FINaNCIal STaTeMeNT
59

4 Segment information
The Corporate Management Team is the chief operational decisionmaker.
The Corporate Management Team has determined that the
operating segments are based on the reports used by the management
team in strategic decision-making. The Corporate Management
Team monitors the business operations based on the operating segments.
The sales of the reporting segments are mainly generated
by sales of board and paper, but the sales of the Market pulp and
energy operating segment includes sales of pulp to external customers
and sales of energy from the pulp mills and through energy
companies owned by M-real.
The accounting principles for the segment information are equal
to those of the Group. all inter-segment sales are based on market
prices and eliminated in consolidation.
The reporting result is operating result. Segment assets and
liabilities are capital items directly used by the segments in their
business operations or items that based on reasonable ground can
be allocated to the segments. The goodwill arising from business
combination have been allocated to the operating segments based
on matching principle. Unallocated capital items consist of tax and
financial items and other common group items. Investments consist
of additions of tangible and intangible assets used over a longer
period than one year and acquisition of shares.
Reportable segments
Consumer packaging
office papers
Speciality papers
Market pulp and energy
other operation
The Group has not aggregated segments when identifying the reportable
segments.
Segment sales from external customers by geographical area
are based on the geographical location of the customer and segment
assets and capital expenditure by geographical location of the assets.
60 NoTeS To The FINaNCIal STaTeMeNT
Consumer Packaging business area is an innovative supplier of
high-performance primary fibre-based paperboards, speciality
papers and related packaging services. It serves carton printers,
converters, brand owners and merchants for end-uses such as
beautycare, cigarettes, consumer durables, foods, healthcare, graphics
and wallcoverings.
Office Papers business area is one of the european leading office
paper producers. It produces, markets and sells a range of high
quality uncoated fine papers for use in offices and homes. office
papers’ products are used for printing and copying, as well as for
forms, envelopes, manuals and various business communications.
Speciality Papers business area is a leading european speciality
paper producer. The core of the business is formed by the Zanders
mills, Reflex and Gohrmühle, in Germany. M-real’s speciality papers
are used e.g. for brochures, direct mail, annual reports, catalogues,
art books, posters, calendars and labels. The costumers are printers,
publishers, advertising agencies and paper merchants.
Market Pulp and Energy reporting unit includes mainly pulp sales
to external parties. additionally, a minor part of the entity consists
of energy sales from the pulp mills or through M-real energy holdings.
Other operation includes head office, Sales net-operation, Group
IT services and hedge accounting of sales revenue.
Sales by operating segment
2010 2009
eUR million external Internal Total external Internal Total
Consumer packaging 1,174 1 1,175 968 0 968
office papers 658 0 658 542 1 543
Speciality papers 302 1 303 352 0 352
Market pulp and energy 434 0 434 508 0 508
other operations 37 161 198 62 127 189
elimination -163 -163 -128 -128
Continuing operations 2,605 2,605 2,432 2,432

Operating result and return on capital employed by operating segment
2010 2009
Return on
Return on
operating
capital operating
capital
eUR million
result
employed, % result
employed, %
Consumer packaging 135 19.4 51 6.9
office papers 14 2.8 -104 -21.1
Speciality papers -54 -49.1 -151 -55.8
Market pulp and energy 36 6.0 -91 -12.2
other operations 15 28
Continuing operations, total 146 5.7 -267 -8.9
Share of results from associated companies -24 -16
Finance costs, net -74 -75
Income taxes -21 27
discontinued operations 0 -23
Result for the period 27 -354
other operations include in 2010 gain of disposal of Sappi ltd’s shares eUR
8 million and eUR 6 million gain from patents sold to Sappi ltd. Speciality
papers include eUR 7 million gain related to partial divestment of Reflex mill
to Metsä Tissue and office papers include some eUR 7 million gain related
to electricity cerficates disposed.
Speciality papers include eUR 8 million cost provision connected with the
restructuring of M-real Zanders and partial divestment of the Reflex mill to
Metsä Tissue. Market pulp and energy include eUR 4 million additional cost
provision relating to the closure of alizay pulp. other operations include eUR
10 million gain related to reversal of provision in connection with IT arrangement.
M-real’s joint venture Metsä-Botnia sold in december 2009 its Uruguay
business to UpM-Kymmene oyj. M-real’s share (30%) of the gain on sale was
Assets, liabilities and goodwill by operating segment
assets liabilities Goodwill
eUR million 2010 2009 2010 2009 2010 2009
Consumer packaging 911 833 200 157 5 5
office papers 679 552 122 121 8 8
Speciality papers 183 255 119 121
Market pulp and energy 691 644 61 77
other operations 342 546 185 252
elimination -46 -119 -46 -119
Unallocated 357 421 1,477 1,599
Total 3,117 3,132 2,118 2,208 13 13
Capital expenditure, depreciation and impairment charges by operating segment
Capital expenditure depreciation Impairment charges
eUR million 2010 2009 2010 2009 2010 2009
Consumer packaging 25 11 54 77 11 12
office papers 20 22 38 58 -9 47
Speciality papers 6 11 11 20 25 66
Market pulp and energy 14 19 26 38 15 32
other operations 1 10 3 6 -8 0
Total 66 73 132 199 34 157
assets and liabilities of segments have been changed according to the renewed allocation of Metsä-Botnia.
Segment assets include goodwill, other intangible assets, tangible assets,
biological assets, investments in associated companies, inventories, accounts
receivables and prepayments and accrued income (excl. interest and income
tax items) Segment liabilities include non-interest-bearing liabilities (excl.
interest and income tax items).
some eUR 76 million, which was recorded in other operations´operating
result. eUR 7 million of hedging gain was also recognised as income. at the
same time Metsä-Botnia disposed 77 per cent of its shares in pohjolan Voima
oy. Market pulp and energy´s 2009 operating profit includes M-real’s share
(30%) of realised fair value and capital gain of the deal, eUR 18 million.
Market pulp and energy included in 2009 eUR 14 million connected to
the plan to permanently close down the alizay pulp mill and eUR 4 million
associated with the closure of the Metsä-Botnia Kaskinen mill. office papers
include eUR 9 million related to profit improvement measures at the husum
mill. Speciality papers include eUR 8 million related to profit improvement
programme at the Zanders’ Reflex mill. other oparations include eUR 12
million cost provision associated with the terminated IT contract.
Capital employed is segment assets less segment liabilities. The formula
for calculation of return on capital employed: Segment: operating profit/
Capital employed (average) *100. Group: profit from continuing operations
before tax + interest expenses, net exchange gains/losses and other financial
expenses/Total assets ./. non-interest-bearing liabilities (average)*100.
NoTeS To The FINaNCIal STaTeMeNT
61

In the following tables are presentented information of sales, assets and investments by geographical areas.
Geographical segments
external sales by
Total non-current
Capital expenditure
destination
assets by country
by country
eUR million 2010 2009 2010 2009 2010 2009
Germany 445 410 71 103 4 5
Belgium 264 226 0 0
Great Britain 233 218 0 0 1
Finland 212 263 1,212 1,218 31 23
France 146 153 20 21 4 11
Italy 132 99 0 0
Russia 90 94 0 0
Switzerland 88 70 0 0
austria 77 55 69 91 4 5
The Netherlands 73 90 0 0
Sweden 69 63 366 326 23 15
Spain 65 56 0 0
poland 52 35 0 0
other europe 191 197 1 0
USa 114 103 0 0
Uruguay 0 4 0 0 13
asia 255 152 0 0
other countries 99 144 0 0
Total 2,605 2,432 1,739 1,759 66 73
Non-current assets include other assets but derivatives, deferred tax receivables and assets related to defined benefit pension plans.
Personnel at year end by country
2010 2009
Finland 1,783 1,824
Germany 1,073 1,228
Sweden 891 980
France 353 396
austria 197 203
Great Britain 45 44
The Netherlands 22 45
other countries 174 380
Group total 4,538 4,903
62 NoTeS To The FINaNCIal STaTeMeNT
Personnel by business segment, average
2010 2009
Consumer packaging 1,512 1,517
office papers 1,264 1,424
Speciality papers 1,138 1,550
Market pulp and energy 301 271
Metsä-Botnia - 501
other operations 557 650
Group total 4,772 5,913
Market pulp and energy’s personnel include in 2010 personnel at hallein
pulp mill and personnel at Kaskinen pulp mill. 2009’s figures have been
restated respectively. personnel average in 2009 include M-real’s share 30
per cent of Metsä-Botnia’s personnel.
Group’s income from one customer exceeded to some eUR 540 (536)
million or some 21 (22 ) per cent of total sales. The sales included in Market
pulp and energy, office paper, Consumer packaging, Speciality paper segments
and other operations.

5 disposed and discontinued operations
There were no acquisitions or disposals during 2010. M-real disposed in
december 2008 the Graphic papers businesses for eUR 750 million. Graphic
papers business has been accounted as a discontinued operations and it´s
post-tax profit and loss on disposal have been recognised as a separate item
after continued operations. during 2010 the net costs in discontinued operations
related sold Graphic papers-business were eUR 0 million, some eUR
+ 2 million related to IT arrangements and some eUR - 2 million related to
logistics arrangements.
In 2009 the adjustment on the selling price and other items had a negative
effect of eUR 26 million on the result of discontinued operations.
Discontinued operations, result
2010 2009
Graphic papers
adjustment on the selling price and other items 0 -23
Income statement, total 0 -23
6 other operating income
eUR million 2010 2009
Gains on disposal 32 143
Rental income 3 3
Service revenue 26 37
Government grants 17 22
other allowances and subsidies 2 2
other operating income 28 45
Total 108 252
The most signifigant gains on disposals were the gain of eUR 8 million of
shares in Sappi ltd, some eUR 6 million gain related to patents sold to Sappi,
eUR 7 million profit on sale in Speciality papers related to partial divestment
of Reflex mill and some 7 million in office papers in husum related to electricity
cerficates disposed.
In 2009 M-real’s joint venture Metsä-Botnia disposed its Uruguay business.
M-real’s share of gain on sale was eUR 83 million. at the same time
Metsä-Botnia’s ownership was restructured, in which M-real’s ownership
rose from 30 percent to 33 per cent. M-real sold three per cent to its parent
company Metsäliitto and recorded some eUR 33 million profit on sale. In
addition Metsä-Botnia sold 77 per cent of its shares in pohjolan Voima oy.
M-real recorded 30 per cent share of the profit or eUR 18 million.
7 operating expenses
eUR million 2010 2009
Change in stocks of finished goods and
work in progress 34 -71
Materials and services
purchases during the financial period 1,685 1,377
Change in inventories -18 24
logistics expenses 278 299
external services 77 101
2,022 1,801
Employee costs
Wages and salaries 209 254
Social security costs
pension costs
defined contribution plans 4 0
defined benefit plans 20 23
other employee costs 79 129
103 152
employee costs, total 312 406
Share of profit from associated companies
Share of Metsä-Botnia’s net result 78 2
Other operating expenses
Rents 12 17
purchased services 96 107
other operating expenses 71 195
Total 179 319
external services include production related services and logistics expenses
of sold products. In 2009 logistics expenses of sold products were partly
showed in other operating expenses. 2009’s figures have been restated to
match new grouping. other operatin expenses include among others other
than production related services, energy costs, real estate costs and administration
costs.
The research and development costs in continuing operations during the
financial period 2010 were eUR 5 million and in 2009 eUR 7 million.
Main auditors fees
The fees paid to pricewaterhouseCoopers are shown in the table below. The
audit fees are paid for the audit of the annual and quarterly financial statements
for the group reporting purposes as well as the audit of the local
statutory financial statements. Tax consultancy fees are the fees paid for tax
consultancy services and the like.
eUR million 2010 2009
audit fees 1 1
Tax consultancy 0 0
other fees 0 1
Total 1 2
NoTeS To The FINaNCIal STaTeMeNT
63

The remuneration paid to the members of the Board of Directors and
the Corporate Management Team
The remuneration paid to the members of the Board of directors and shareholding.
64 NoTeS To The FINaNCIal STaTeMeNT
Shareholding
2010
eUR
2009
eUR
Kari Jordan
Chairman - 86,616.49 32,125
Martti asunta
Vice chairman 23,900 73,514.04 28,625
Mikael aminoff 22,095 55,299.34 -
Kirsi Komi 9,400 56,299.34 -
Kai Korhonen 126,860 59,799.34 75,905
liisa leino 96,715 59,299.34 56,305
Juha Niemelä 96,715 59,799.34 79,405
antti Tanskanen 96,715 58,799.34 76,905
erkki Varis 54,800 59,299.34 57,805
Total 527,200 568,725.91 407,075
Former members of the Board
heikki asunmaa - 18,100
erkki Karmila 3,000.00 77,905
Rainer lillandt 3,500.00 25,100
arimo Uusitalo - 1,500
6,500.00 122,605
Total 575,225.91 529,680
M-real’s annual General Meeting held on 12 March 2009 decided that one
half of the remuneration will be paid in cash while the other half is paid in
the company’s B-series shares to be acquired from the stock exchange
between 16 and 20 March 2009. Board members Kari Jordan, Martti asunta
and Runar lillandt, who all receive remuneration from largest shareholder
Metsäliitto Cooperative, renounced their right to the annual remuneration.
Salaries and emoluments paid to The Corporate Management Team were
eUR 3,406,419.41 (2009 eUR 2,655,301.27). Ceo Mikko helander’s salary
including benefits was 1,429,370.95 (eUR 756,261.28).
according to the M-real’s pay scheme, executives can be paid a performance-related
reward amounting to not more than 6 months’ salary. In addition
to salaries and bonuses they are also entitled to participate in the
company´s share based incentive program. Currently 9 executives are
included in the program. The expenses recognised for share based payments
were eUR 0.2 million (2009 none) (note 35).
Chairman of the Board Kari Jordan and Ceo Mikko helander are taking
part in the shareholding system of Metsäliitto Group’s executive Management
via Metsäliitto Management oy (Note 35). The number of M-real’s B-shares
allocated via Metsäliitto Management oy to Chairman of the Board Kari
Jordan is 1,763,867 and to Ceo Mikko helander is 881,933. other members
of The Corporate Management Team own 62,959 M-real’s shares.
Pension commitments to management
The Ceo of the parent company has the right to retire on a pension at the
age of 62 years. The cost of lowering the retirement age or supplementing
statutory pension security are generally covered by voluntary pension insurance.
The expenses of the Management Team member´s defined pension
plans were eUR 0.3 million (2009 eUR 0.1 million) and the expenses of their
defined contribution plans were eUR 0.6 million (eUR 0.6 million). The Group
has no off balance sheet pension liabilities on behalf of management.
When the service contract of the Ceo is terminated by the Board, the Ceo
is entitled to receive discharge compensation equal to his 18-month salary.
In addition, in case the Company or its business is divested, the Ceo is entitled
to resign from his assignment against discharge compensation equal to
his 24-month salary. The period of notice is six months. The period of notice
for other members of The Corporate Management Team is six months. For
other members of The Corporate Management Team, the period of additional
severance compensation varies from six to eighteen months in case of severance
due to other reasons than member related
The parent company has no commitments on behalf of persons belonging
to the above-mentioned bodies or those who have previously belonged
to them. at 31 december 2010, the Company´s Ceo, the deputy Ceo or the
members of the Board had no loans outstanding from the Company or its
subsidiares.

8 depreciation, amortization and
impairment charges
eUR million 2010 2009
Depreciation
other intangible assets 7 10
Buildings 22 31
Machinery and equipment 100 155
other tangible assets 3 3
Total 132 199
Impairment charges
Goodwill 33
other intagible assets 1
Buildings 36 36
Machinery and equipment -3 85
other tangible assets 1 2
Total 34 157
depreciation and impairment charges, total 166 356
Goodwill impairments by segment
Speciality papers 33
Total 33
Other Impairments by segment
Consumer packaging 11 12
office papers -9 47
Speciality papers 25 33
Market pulp and energy 15 32
other operations -8
Total 34 124
Impairment charges made at closure of Kangas’ paper machine 2 were partly
reversed (eUR 8 million) in June based on sales agreement of paper machine
2. Impairment charges made in M-real Zanders’ Reflex paper mill were
reversed (eUR 3 million) based on agreement to sell the mill partly to Metsä
Tissue in September.
In december some eUR 9 million reversal of impairment charge in office
papers and some eUR 28 million impairment charge in Speciality papers
were recognised because of impairment test. In addition in december an
impairment charge of eUR 15 million was recognised in Market pulp and
energy due to fact that some buildings were retired from active use permanently
and an impairment charge of some eUR 11 was recognised in Consumer
packaging related to closure of paper machine in Simpele.
due to impairment test in 2009 impairment charges of eUR 113 million
were recognised, eUR 33 million on goodwill in Speciality papers and eUR
80 million other impairment, of which eUR 33 million in Speciality papers’
Zanders paper mill in Germany and eUR eUR 47 million in office papers’
alizay paper mill in France. In 2009 testing all accumulated utility values are
based on the cash flow against the asset or CGU.
In 2009 in alizay pulp mill an impairment of eUR 28 million was recognised
related to the planned permanent closure of alizay pulp mill. In Metsä-
Botnia’s Kaskinen mill an impairment of eUR 16 million was recognised
related to the closure of the mill based on M-real’s 30 per cent share. of
these, eUR 12 million was recognised in Consumer packaging and eUR 32
million in Market pulp and energy.
Impairment of Assets
M-real carries out a full impairment test at least once a year, during the last
quarter based on the situation of 30 September. In addition, a sensitivity
analysis is made each quarter. Should the sensitivity analysis indicate impairment,
a full test will be initiated. The audit Committee reviews the sensitivity
analyses or impairment testing results quarterly.
Testing principles
The accounting values of asset items or cash generating units are evaluated
for possible value depreciation. Cash generating units are reporting segments
or smaller units to which a utility value can be defined to. In 2010 the cash
generating units are the same as in 2009 testing, except for Simpele paper.
The paper machine in Simpele was closed down in december 2010. If there
are indications of value depreciation of an asset item or cash-generating
unit, or if the unit’s accounting value includes or it has been allocated goodwill,
it is evaluated how much money the asset item or CGU can accumulate.
The sum that can be accumulated is the utility value based on the cash flow
against the asset item or CGU, or its net sales price. In 2010 testing all accumulated
utility values are based on the cash flow against the asset or CGU,
except for Myllykoski paper, which is tested based on its net sales price.
The cash flow that the CGUs under testing can accumulate is based on
five-year forecasts and the evenly-growing cash flows that follows them.
The essential testing assumptions are M-real management’s estimates
and projections as well as 3rd party forecasts.The key factors affecting the
projections are development of average paper and board prices, delivery
volumes, foreign exchange rates, and capacity utilisation rates, cost development
of key raw materials such as wood, pulp,chemicals and energy, the
development of personnel costs and other fixed costs as well as the discount
rate. The key factors are similar to those used in 2009 testing. Furthermore
the realisation of savings and efficiency improvement measures as well as
decided renewal investments have a significant impact on projected cash
flows.
M-real’s share of the cash flow and accounting value of Metsä-Botnia are
allocated to CGUs in the proportion of their pulp purchases.
For the situation on 30 September 2010 and for previous goodwill impairment
tests the cash flows consequent to the 5-year projected cash flows are
based on a 2 per cent fixed annual growth rate. average values for the key
assumptions (price, volume, variable costs) during the projection period have
been used as initial point for the cash flows following the forecast period.
The fixed costs are based on the projected costs for the fifth year.
The discount rate used is M-real’s Weighted average Cost of Capital
(WaCC). When calculating WaCC the cost of debt takes into account market
based view on M-real’s risk premium. Both the cash flows and the discount
rate are calculated after tax, which means that the established discounted
cash flows and utility values are before tax as set out in IaS 36. For testing
carried out concerning situation 30 September 2010, the WaCC after taxes
was 6.25 per cent (2009: 7.83%) and for Botnia 6.08 per cent (6.67%). Management’s
view is that the risk factors regarding future cash flows do not
differ materially from one CGU to another.
NoTeS To The FINaNCIal STaTeMeNT
65

The goodwill impairment test results are evaluated by comparing the
recoverable amount (V) with the carrying amount of the CGU (B) as follows:
Ratio
V < B
V 0–5% > B
V 5–10% > B
V 10–15% > B
V 15–20% > B
V 20–50% > B
V 50% > B
The most important CGUs of M-real Group, the goodwill allocated to them
as of 31 december 2010 as well as their testing result as of 30 September
2010:
Cash Generating Unit
Goodwill
(eUR million) Test result (V-B)/B
Folding boxboard mills 1) 15 over 50%
Kemiart liners 1) 11 over 50%
Kyro paper 1) 1 20–50%
husum pM6 & pM7 8 over 50%
alizay 1) 1 0–5%,
husum pM8 & Äänekoski paper 1) 3 over 50%
Zanders 0

9 Financial income and expenses
eUR million 2010 2009
Exchange differences
Commercial items 2 1
hedging/hedge accounting not applied -7 3
The ineffectiveness from hedges of
net investment in foreign operations -3 0
other items -1 1
Total -9 5
Other financial income
Interest income on loans, other receivables
and cash and cash equivalents 12 25
dividend income 0 0
12 25
Valuation of financial assets and liabilities
Gains and losses on financial assets or liabilities at
fair value through profit or loss (held for trading) 0 1
Impairment charges from financial assets 0 -30
Impairment charges from financial liabilities 0 31
Gains and losses on derivatives/hedge accounting
not applied -2 3
Gains and losses on hedging instrument in fair
value hedges 6 13
Fair value adjustments of hedged item in fair value
hedges -5 -6
Total -1 12
Interest expenses from financial liabilities carried at
amortized cost using the effective interest method -74 -109
other financial expenses -2 -8
Interest and other financial expenses, total -76 -80
Valuation of financial assets and liabilities and
interest and other financial expenses, total -77 -105
M-real repurchased in 2009 from the market its own senior floating rate
notes in the total par value of eUR 60 million. a gain of approximately eUR
31 million was booked in financial income in 2009.
In connection with divestment of Graphic papers in december 2008, M-real
received eUR 220 million in interest-bearing vendor notes from Sappi. In
august 2009 M-real agreed with Sappi that Sappi will repay the vendor notes
at the price of 86.5 per cent of their nominal value. This early repayment
resulted in an approximately eUR 30 million loss that was booked in financial
expenses in 2009.
10 Income taxes
eUR million 2010 2009
Income taxes for the financial period 14 3
Income taxes for previous periods 0 -2
Change in deferred taxes 7 -27
other 0 -1
Total 21 -27
Income tax reconciliation
Result before taxes 48 -358
Computed tax at Finnish statutory rate of 26% 13 -93
difference between Finnish and foreign rates 0 0
Tax exempt income 0 -33
Non-deductible expenses 3 2
Impairment of goodwill 0 8
previous years tax losses used during the period -8 0
Tax losses with no tax benefit 27 88
Share of profit from associated companies -14 4
Income taxes for previous periods 0 -2
other 0 -1
Income tax expense 21 -27
effective tax rate, % 43.8 7.5
NoTeS To The FINaNCIal STaTeMeNT
67

11 other items of comprehensive income
eUR million
68 NoTeS To The FINaNCIal STaTeMeNT
Recorded in
other items of
Comprehensive
income
2010
Reclassification
Total
Cash flow hedges
Currency flow hedges
recorded in equity 6
transferred to income statement's
sales -6
Interest flow hedges
recorded in equity 0
transferred to income statement's
financial items 0
Commodity hedges
recorded in equity 10
transferred to income statement's
purchases 0
Total 16 -6 10
available for sale investments
recorded in equity
Share of result in associated
companies
transferred to income statement’s
other operating income -7
Total 36 -7 29
Translation differences 42
Share of result in associated
companies 1
Net invest hedge -30
Total 13 13
Total 65 -13 52
Income tax relating to components
of other comprehensive income 2010
eUR million Before taxes Taxes after taxes
Cash flow hedges 10 -3 7
available for sale investments 29 -7 22
Translation differences 13 8 21
Total 52 -2 50
In 2010 available for sale investments after taxes (22) include share of profit
from associated companies eUR 1 million and translation differences after
taxes (21) eUR 1 million.
35
1
eUR million
Recorded in
other items of
Comprehensive
income
2009
Reclassification
Total
Cash flow hedges
Currency flow hedges
recorded in equity 7
transferred to income statement's
sales 15
Interest flow hedges
recorded in equity -1
transferred to income statement's
financial items 0
Commodity hedges
recorded in equity 3
transferred to income statement's
purchases 2
Total 9 17 26
available for sale investments
recorded in equity -97
transferred to income statement’s
other operating income -18
Total -97 -18 -115
Translation differences 17
Net invest hedge -12
Total 5 5
Total -83 -1 -84
Income tax relating to components
of other comprehensive income 2009
eUR million Before taxes Taxes after taxes
Cash flow hedges 26 -7 19
available for sale investments -115 30 -85
Translation differences 5 4 9
Total -84 27 -57
12 earnings per share
Result for the period, eUR million 2010 2009
from continuing operations 28 -335
from discontinued operations 0 -23
Total 28 -358
adjusted number of shares (average) in thousands 328,166 328,166
Basic and diluted earnings per share, eUR
from continuing operations 0.09 -1.02
from discontinued operations 0.00 -0.07
Total 0.09 -1.09

13 Intangible and tangible assets
Intangible assets
other Intangible Construction in
eUR million Goodwill
assets
progress Total
acquisition costs, 1 Jan. 2010 13 180 193
Translation differences
Increase
1 1
decrease -8 -8
Transfers between items 1 1
acquisition costs, 31 dec. 2010 13 174 187
accumulated depreciation and impairment charges, 1 Jan. 2010 -148 -148
Translation differences -1 -1
accumulated depreciation on deduction and transfers 8 8
depreciation for the period -7 -7
accumulated depreciation and impairment charges, 31 dec. 2010 -148 -148
Book value, 1 Jan. 2010 13 32 45
Book value, 31 dec. 2010 13 26 39
acquisition costs, 1 Jan. 2009 51 197 0 248
Translation differences 0 0 0 0
Increase 0 10 0 10
decrease -5 -27 -32
Transfers between items 0 0 0 0
acquisition costs, 31 dec. 2009 46 180 0 226
accumulated depreciation and impairment charges, 1 Jan. 2009 -146 -146
Translation differences 0 0 0
accumulated depreciation on deduction and transfers 0 9 9
depreciation for the period 0 -10 -10
Impairment charges -33 -1 -34
accumulated depreciation and impairment charges, 31 dec. 2009 -33 -148 -181
Book value, 1 Jan. 2009 51 51 0 102
Book value, 31 dec. 2009 13 32 0 45
In 2009 goodwill in Speciality papers was impaired by eUR 33 million.
The carrying value and the fair value of emission rights included in intangible assets was on 31 december eUR 11 million (10). In addition intangible assets
include among others computer software, patents and licenses.
NoTeS To The FINaNCIal STaTeMeNT
69

Tangible assets
land and
Machinery and other tangible Construction in
eUR million
water areas Buildings equipment assets progress Total
acquisition costs, 1 Jan. 2010 60 859 3,730 75 9 4,733
Translation differences 17 143 4 1 165
Increase 2 28 0 33 63
decrease -10 -66 0 0 -76
Transfers between items -3 1 0 -8 -10
acquisition costs, 31 dec. 2010 60 865 3,836 79 35 4,875
accumulated depreciation and impairment charges,
1 Jan. 2010 -34 -593 -2,929 -47 -3,603
Translation differences -14 -104 -3 -121
accumulated depreciation on deduction and transfers 19 51 1 71
depreciation for the period -22 -100 -3 -125
Impairment charges and reversed impairment charges -36 3 -1 -34
accumulated depreciation and impairment charges,
31 dec. 2010 -34 -646 -3,079 -53 3,812
Book value, 1 Jan. 2010 26 266 801 28 9 1,130
Book value, 31 dec. 2010 26 219 757 26 35 1,063
land and
Machinery and other tangible Construction in
eUR million
water areas Buildings equipment assets progress Total
acquisition costs, 1 Jan. 2009 113 1,048 4,158 87 28 5,434
Translation differences 7 57 2 0 66
Increase 7 3 47 1 11 69
decrease -60 -194 -547 -15 -15 -831
Transfers between items -5 15 0 -15 -5
acquisition costs, 31 dec. 2009 60 859 3,730 75 9 4,733
accumulated depreciation and impairment charges,
1 Jan. 2009 -34 -601 -2,941 -50 -3,626
Translation differences -6 -41 -1 -48
accumulated depreciation on deduction and transfers 81 293 9 383
depreciation for the period -31 -155 -3 -189
Impairment charges and reversed impairment charges -36 -85 -2 -123
accumulated depreciation and impairment charges,
31 dec. 2009 -34 -593 -2,929 -47 -3,603
Book value, 1 Jan. 2009 79 447 1,217 37 28 1,808
Book value, 31 dec. 2009 26 266 801 28 9 1,130
Impairment charges made at closure of Kangas’ paper machine 2 were partly
reversed (eUR 8 million) in June based on sales agreement of paper machine
2. Impairment charges made in M-real Zanders’ Reflex paper mill were
reversed (eUR 3 million) based on agreement to sell the mill partly to Metsä
Tissue in September.
In december some eUR 9 million reversal of impairment charge in office
papers and some eUR 28 million impairment charge in Speciality papers
were recognised because of impairment test. In addition in december an
impairment charge of eUR 15 million was recognised in Market pulp and
energy due to fact that some buildings were retired from active use permanently
in hallein and an impairment charge of some eUR 11 was recognised
in Consumer packaging related to closure of papermachine in Simpele.
70 NoTeS To The FINaNCIal STaTeMeNT
due to impairment test in 2009 impairment charges of eUR 113 million
were recognised, eUR 33 million on goodwill in Speciality papers and eUR
80 million other impairment, of which eUR 33 million in Speciality papers’
Zanders paper mill in Germany and eUR eUR 47 million in office papers’
alizay paper mill in France. In 2009 testing all accumulated utility values are
based on the cash flow against the asset or CGU.
In 2009 in alizay pulp mill an impairment of eUR 28 million was recognised
related to the planned permanent closure of alizay pulp mill. In Metsä-
Botnia’s Kaskinen mill an impairment of eUR 16 million was recognised
related to the closure of the mill based on M-real’s 30 per cent share. of
these, eUR 12 million was recognised in Consumer packaging and eUR 32
million in Market pulp and energy.
pledges and real estate mortgages for loans from financial institutions,
pension loans and other lliabilities amounted to eUR 135 million (109).
The capitalization of interest expenses in 2010 was eUR 0 million (0).

at 31 december 2010 tangible assets include assets acquired under finance
lease agreements
eUR million
Machinery
and
equipment Total
acquisition costs 39 39
accumulated depreciation -21 -21
Book value, 1 Jan. 2010 21 21
Book value, 31 dec. 2010 18 18
at 31 december 2009 tangible assets include assets acquired under finance
lease agreements
eUR million
Machinery
and
equipment Total
acquisition costs 39 39
accumulated depreciation -18 -18
Book value, 1 Jan. 2009 24 24
Book value, 31 dec. 2009 21 21
additions include assets of eUR 0 million (eUR 1 million) acquired under
finance lease agreements.
14 Biological assets
Biological assets, forest assets, have been recognised at fair value. The
change in fair value will be recognised yearly as income/cost in income statement.
due the restructuring of M-real’s joint venture Metsä-Botnia in december,
M-real changed Metsä-Botnia’s consolidation method from IaS 31
(Interests in Joint Ventures) to IaS 28 (Investments in associated). From
8.12.2009 on M-real has not anymore biological assets. M-real had forest
assets in Finland and in Uruguay.
eUR million 2010 2009
at 1 Jan. 57
purchases during the period 8
Sales during the period -1
harvested during the period -5
Gains and losses arising from changes in fair values -1
disposal -54
decrease 0
Translation differences -4
at 31 dec. 0
15 Investments in associated
eUR million 2010 2009
at 1 Jan. 210 63
Share of results in associated companies 54 -14
dividend received -1 0
Increases 0 162
decreases 0 -1
Translation differences 1 0
at 31 dec. 265 210
Share of results from associated companies includes an impairment loss of
eUR -16 million related to M-real’s holding on Myllykoski paper oy. In 2009
the result included a loss of eUR -11 million from the Sunila pulp mill divested
by Myllykoski paper.
due the restructuring of M-real’s joint venture Metsä-Botnia in december
2009, M-real changed Metsä-Botnia’s consolidation method from IaS 31
(Interests in Joint Ventures) to IaS 28 (Investments in associated). line
increases includes the effect of Metsä-Botnia’s changed consolidation method
in 2009.
Unamortized amount of goodwill for associated companies at 31 dec 2010
was eUR 32 million (45). The decrease of goodwill comes from impairment
of Myllykoski paper.
Biggest associated companies
liabil- Gain/ owner-
Country assets ities Sales loss ship, %
Metsä-Botnia Group
Kirkniemen Kartano
Finland 996 325 1,365 272 30
oy Finland 7 2 0 0 48
Myllykoski paper oy Finland 137 141 275 -24 35
plastirol oy Finland 22 6 26 2 39
other 2 0 4 0
Total 1,164 474 1,670 250
None of the associated companies were listed.
Transaction and balances with associated companies
eUR million 2010 2009
Sales 0 1
purchases 2 4
Interest income 0 0
Interest expenses 0 0
Receivables
Current receivables 8 7
liabilities
Current liabilities 2 2
Transactions with Metsä-Botnia include in transactions with sister companies
(Note 36).
NoTeS To The FINaNCIal STaTeMeNT
71

16 available for sale investments
eUR million 2010 2009
available for sale financial assets
Shares in other companies
listed companies 0 39
other companies 314 278
314 317
Total 314 317
Fair value hierarchy of financial assets and liabilities 2010
Note level1 level2 level3 Total
Financial assets at fair value through profit or loss, non-current 16
available for sale financial assets 16 0 314 314
Financial assets at fair value through profit or loss, current 20 1 1
derivative financial assets 29 8 13 21
derivative financial liabilities 29 0 36 36
2009
Note level1 level2 level3 Total
Financial assets at fair value through profit or loss, non-current 16
available for sale financial assets 16 39 278 317
Financial assets at fair value through profit or loss, current 20 1 1
derivative financial assets 29 2 22 24
derivative financial liabilities 29 3 41 44
Financial assets and liabilities measured at fair value based on Level 3
eUR million 2010 2009
opening balance 278 408
Total gains and losses in profit or loss 0 18
Total gains and losses in other comprehensive
income 35 -121
purchases 1
Settlements 0 -27
Closing balance 314 278
72 NoTeS To The FINaNCIal STaTeMeNT
assets have been categorised according to IFRS 7 paragraph 27 a and 27 B.
level 1 is including assets valued based on quoted prices in active markets
level 2 is including assets valued based on inputs that are observable for the
asset either directly or undirectly
level 3 is including inputs that are not based on observable market data
available for sale financial assets consist of listed companies and other
companies. The fair value of listed companies are based on public quotation
for shares at the Balance sheet date. The most significant ownership of listed
companies was some two percentage stake of South african company Sappi
limited, which M-real received as a part of the Graphic papers business
disposal in 2008. These shares were disposed in 2010. The realised fair value
and capital gain was some eUR 8 million. The fair value of these shares in
previous year was eUR 38 million.

The most important shareholding of not quoted companies (level 3)
consists of 2.5 per cent stake in Finnish energy company pohjolan Voima oy.
pohjolan Voima oy produces electricity and heat for its shareholders in Finland.
pohjolan Voima trades with its shareholders and the prices paid to
pohjolan Voima oy for energy are based on production costs, which generally
are lower than the market prices. The Group has right for some 6.4 per cent
proportion in olkiluoto nuclear power plant (pohjolan Voima´s B shares),
some 6.4 percentage proportion in Meripori coal-fired power plant (C2 shares).
Group has some 1.8 per cent proportion in new nuclear power plant under
construction at olkiluoto. The group also have some 88 per cent right to use
energy produced by hämeenkyron Voima oy (pohjolan Voima’s G10 shares).
The ownership in pohjolan Voima oy is measured (by series of shares) at fair
value quarterly by using the weighted average of discounted cash flow method
and the valuation based on earlier transactions. The fair value of the comparative
year was measured based on discounted cash flow method. The
WaCC used was 4.66 (4.67) percentage. 12 months rolling averages have
been used for the energy price estimates, which evens out the short-term
energy price fluctuations. The changes in fair value less deferred tax calculated
with Finnish tax rate are recorded in fair value reserve in equity. The
acquisition value of shares in pohjolan Voima oy is eUR 28 million (26) and
the fair value eUR 310 million (273). The fair value of nuclear power shares
(B and B2 shares) was some eUR 312 (277) million, of which eUR 283 (255)
million B shares and eUR 29 (22) million B2 shares and coal-fired power
shares (C2 shares) some eUR -4 (-4) million and G shares some eUR 2 million
(0).
The shareholder agreement prevents free selling of shares with others
than shareholders.
M-real’s joint venture Metsä-Botnia disposed in december 2009 77 per
cent of its pohjolan Voima Shares as part of restructuring of Metsä-Botnia.
a realised fair value and capital gain from the sale of eUR 18 million (30
percent share) was recorded.
other shares in not quoted companies, where the fair value cannot be
measured reliably are carried at cost less any impairment losses.
17 Non-current financial assets
eUR million 2010 2009
Interest-bearing receivables
loans from Group companies 49 49
loans from associated companies 0
other loan receivables 5 4
54 53
Non-interest bearing receivables
loans from Group companies 4 4
loans from associated companies 0 0
other loan receivables 0 0
defined benefit pension plans (Note 23) 1 1
5 5
Total 59 58
In connection with divestment of Graphic papers in december 2008, M-real
received eUR 220 million in interest-bearing vendor notes from Sappi. In
august 2009 M-real agreed with Sappi that Sappi will repay the vendor notes
at the price of 86.5 per cent of their nominal value. This early repayment
resulted in an approximately eUR 30 million loss that was booked in financial
expenses in 2009.
loans from Group companies are loans granted to parent company
Metsäliitto and to other subsidiaries of Metsäliitto.
NoTeS To The FINaNCIal STaTeMeNT
73

18 deferred taxes
Reconciliation of deferred tax assets and liabilities during the period in 2010
Charged in
income
eUR million As at 1 Jan. 2010 statement
74 NoTeS To The FINaNCIal STaTeMeNT
Translation
differences
Charged in
other items of
comprehensive income
As at 31 Dec.
2010
deferred tax assets
pension obligation and other provisions 1 0 1
Intercompany margins 2 0 2
Unused tax losses and tax credit 10 -10 0
other temporary differences 5 0 5
deferred tax assets, total 18 -10 8
Netting against liabilities -15 10 -5
deferred tax assets in Balance sheet 3 0 3
deferred tax liabilities
appropriations 102 -5 7 104
available for sale financial assets recorded at
fair value 66 7 73
equity hedging 8 -8
other temporary differences 9 -6 1 3 7
deferred tax liabilities, total 177 -3 8 2 184
Netting against assets -15 10 0 -5
deferred tax liabilities in Balance sheet 162 7 8 2 179
deferred tax liabilities, net -159 -7 -8 -2 -176
other temporary differences in deferred tax assets comes mostly from finance lease arrangements.
Reconciliation of deferred tax assets and liabilities during the period in 2009
Charged in
income
eUR million As at 1 Jan. 2009 statement disposals
Translation
differences
Charged in
other items of
comprehensive income
As at 31 Dec.
2009
deferred tax assets
pension obligation and other provisions 2 -1 1
Intercompany margins 3 -1 2
Unused tax losses and tax credit 10 10
other temporary differences 14 0 -3 0 -6 5
deferred tax assets, total 29 -1 -4 0 -6 18
Netting against liabilities -24 3 0 6 -15
deferred tax assets in Balance sheet 5 2 -4 0 0 3
deferred tax liabilities
appropriations 150 -30 -21 3 102
available for sale financial assets recorded at
fair value 97 -1 -30 66
equity hedging 3 -3
other temporary differences 9 -1 1 0 0 9
deferred tax liabilities, total 256 -28 -21 3 -33 177
Netting against assets -24 3 0 6 -15
deferred tax liabilities in Balance sheet 232 -25 -21 3 -27 162
deferred tax liabilities, net -227 27 17 -3 27 -159
deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and
when the deferred income tax relates to the same taxation authority on either the same taxable entity or different taxable entity, which intend to settle current
tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously. on 31 december 2010 the net operating loss carryforwards
amounted to eUR 0 (35) million, for which tax assets have been recognised. In 2009 some eUR 10 million tax asset has been recognised. The operating
loss carry-forwards mainly in Germany, France, austria and Finland for which deferred tax assets have not been recognised due to uncertainty of the
utilization of these loss carry-forwards amounted to appr. eUR 1,060 (1,040) million. These loss carry-forwards do not expire. The deferred tax assets for
these non recognised loss carry-forwards amounted to appr. eUR 300 (290) million. other temporary differences in deferred tax assets comes mostly from
finance lease arrangements. Some eUR 46 million of the losses will expire in 2019–20. The rest do not expire.

19 Inventories
eUR million 2010 2009
Raw materials and consumables 144 114
Work in progress 16 15
Finished goods and goods for sale 223 181
advance payments 8 3
391 313
The cost of inventories recognised as expense and included in materials and
services was eUR 1 million (0).
20 accounts receivables and other receivables
eUR million 2010 2009
Financial assets at fair value through profit or loss
(current)
at 1 Jan. 1 16
Increses 1 0
Changes in fair values 0 0
decrease -1 -15
at 31. dec. 1 1
Financial assets at fair value through profit or loss are mainly bonds, classified
entirely as held for trading.
Interest-bearing loan receivables
loans from Group companies 54 75
loans from associated companies 7 7
other loan receivables 1 1
62 83
Accounts receivables and other non-interestbearing
receivables
From Group companies
accounts receivables 12 3
other receivables 0 26
prepayment and accrued income 16 3
28 32
From associated companies
accounts receivables 0 0
0 0
From others
accounts receivables 360 300
other receivables 50 57
prepayment and accrued income 15 24
425 381
accounts receivables and other receivables 516 497
Receivables from the Group companies are receivables from parent company
Metsäliitto and from other subsidiaries of Metsäliitto.
There are no loan receivables from the managing directors of the Group
companies, members of the Board of directors and their deputies as well as
persons belonging to similar bodies. Metsäliitto Management oy has been
established for the shareholding programme of the members of Metsäliitto
Group’s executive Management (The note 35).
Metsäliitto Management oy has been established for the shareholding
programme of the members of Metsäliitto Group’s executive Management
(see note 35).
Doubtful accounts receivables
accounts receivables are recorded net of the following allowances for doubtful
accounts:
eUR million 2010 2009
at 1 Jan. 7 5
Increases 1 9
decreases -2 -7
at 31 dec. 6 7
Accounts receivables, overdue
No overdue 329 275
overue
less than 90 days 30 22
between 90–180 days 1 2
more than 180 days 0 1
Total 360 300
Prepayment and accrued income
Current
employee costs 1 0
Interest 4 2
Insurance 0 0
others 10 22
Total 15 24
21 Cash and cash equivalents
eUR million 2010 2009
Current investments 259 256
Cash at bank and in hand 149 241
Total 408 497
Current investments are certificates of deposits and time deposits with
original maturities less than three months.
NoTeS To The FINaNCIal STaTeMeNT
75

22 Shareholders´ equity
Changes in share capital
Share capital Share premium account Total
eUR million Series a Series B
at 1 Jan. 2009
2009 no changes
62 496 667 1,225
at 31 dec. 2009
2010 no changes
62 496 667 1,225
at 31 dec. 2010 62 496 667 1,225
each series a share entitles its holder to twenty (20) votes at a General Meeting of Shareholders, and each series B share entitles the holder to one (1) vote.
all shares carry the same right to receive a dividend. M-real’s a shares can be converted to B shares if shareholder or representative of the nominee registered
shares makes a written request of the conversion to the company. The conversion does not include additional consideration.
Number of shares
Series a Series B Total
at 1 Jan. 2009
2009 no changes
36,339,550 291,826,062 328,165,612
at 31 dec. 2009
2010 no changes
36,339,550 291,826,062 328,165,612
at 31 dec. 2010 36,339,550 291,826,062 328,165,612
The annual General Meeting on 13 March 2008 resolved to delete from the company’s articles of association the section concerning the par value of the company’s
shares. all shares are paid-in.
Fair value and other reserves
eUR million 2010 2009
Fair value reserve 221 192
legal reserve and reserves stipulated by the articles
of association 2 2
Total 223 194
Share premium account
The amount exceeding the par value of shares received by the company in
connection with share issue are recognised in share premium account.
Legal reserve and reserves stipulated by the Articles of Association
legal reserve and reserves stipulated by the articles of association have
been created and accumulated as a result of resolution by the General Meeting
of Shareholders.
Fair value reserve
The reserve include the effective portion of fair value based on hedge accounting
applied to interest, currency and commodity derivatives and the fair value
change of available for sale financial assets less deferred tax.
Translation differences
Translation differences include translation differences arising on translation
of subsidiaries in other currencies than euro and gains and losses arising
on hedging of net investments in these subsidiaries less deferred tax, when
requirements of hedgeaccounting have been fulfilled.
Dividends
after Balance sheet day The Board of directors has not proposed any dividend
to pay.
76 NoTeS To The FINaNCIal STaTeMeNT
23 post-employment benefits
M-real operates a number of defined benefit pension plans and defined
contribution plans in different countries, which are arranged in accordance
with local regulations and practices. Most of them are defined contribution
plans.
The most significant pension plan in Finland is the statutory Finnish
employee pension scheme (Tyel) according to which benefits are linked
directly to the employee´s earnings.
In Finland there are pension schemes which are funded by contributors
to insured schemes or to Metsäliitto employees’ pension Foundation. The
Metsäliitto employees’ pension Foundation scheme is a defined benefit plan.
There are other defined contribution pension plans in Finland, too.
Pension and other post-employment benefits
eUR million 2010 2009
defined benefit pension plans 73 74
defined contribution pension plans 11 14
Net liability 84 88
overfunded plan shown as asset 1 1
Total liability in balance sheet 85 89

Defined benefit pension plans
eUR million 2010 2009
The amounts recognised in the balance sheet
present value of funded obligations 45 42
present value of unfunded obligations 67 67
112 109
Fair value of plan assets -40 -36
Unrecognised actuarial gains and losses 2 1
Net liability in balance sheet 74 74
The amounts recognised in the income statement
Current service cost 3 3
Interest cost 5 6
expected return on plan assets -2 -2
Net actuarial losses (gains) recognised in year -2 -7
profit/loss curtailment 0 0
Total included in employee costs 4 0
The actual return on plan assets was eUR 4 million in 2010 (2009 eUR 6 million)
Changes in the present value of defined benefit obligations
defined benefit obligation as at 1 Jan. 109 112
Current service cost 3 3
Interest cost 5 6
Contribution by plan participations 1 0
actuarial losses (gains) recognised in year 1 0
disposals 0 0
Curtailments and settlements 0 0
Benefits paid -7 -11
other adjustments -1 0
Translation differences 1 -1
defined benefit obligation as at 31 dec. 112 109
Changes in the fair value of plan assets
Fair value of plan assets as at 1 Jan. 36 31
expected return on plan assets 2 2
actuarial losses (gains) recognised in year 2 4
Contribution by plan participants 1 1
Contribution by the employer 0 1
disposals 0 0
Settlements 0 0
Benefits paid -2 -2
Translation differences 1 -1
Fair value of plan assets as at 31 dec. 40 36
Group expects to contribute eUR 2 million to its defined benefit pension plans
in 2011.
Major categories of plan assets as a percentage of total plan assets, %
equity securities 38 38
debt securities 21 20
Real estate 14 15
Bonds 17 18
others 10 9
Total 100 100
Amounts for the current and previous periods
present value of defined benefit obligations -112 -109
Fair value of plan assets 40 36
Funded status -72 -73
experience adjustments on plan liabilities 1 0
experience adjustments on plan assets 2 -2
The principal actuarial assumptions used:
2009 2009
Finland
discount rate % 4.25 4.75
expected return on plan assets % 5.7 3.5
Future salary increases % 0.0 0.0
Future pension increases % 1.4 2.1
expected average remaining working years of staff 0 0
UK
discount rate % 5.4 5.7
expected return on plan assets % 6.84 6.80
Future salary increases % 4.5 4.3
Future pension increases % 3.5 3.3
expected average remaining working years of staff 12 13
Germany
discount rate % 5.3 5.8
expected return on plan assets % n/a n/a
Future salary increases % 2.5 2.5
Future pension increases % 2.0 2.0
expected average remaining working years of staff 12 12
Austria
discount rate % 5.1 5.0
expected return on plan assets % n/a n/a
Future salary increases % 2.02 0
Future pension increases % 2 2.11
expected average remaining working years of staff 19 20
Switzerland
discount rate % 3.0 3.3
expected return on plan assets % 3.5 3.5
Future salary increases % 1.5 1.5
Future pension increases % 0.5 0.5
expected average remaining working years of staff 6 7
NoTeS To The FINaNCIal STaTeMeNT
77

24 provisions
environmental
other
eUR million Restructuring
obligations
provisions Total
at 1 Jan. 2010 87 1 16 104
Translation differences 2 0 0 2
Increases 21 1 4 26
decreases -67 0 -4 -71
Unused amounts reversed -20 0 0 -20
effect of discounting 1 0 0 1
at 31 dec. 2010 24 2 16 42
The most significant increase in provision was eUR 16 million cost provision
in the Speciality papers business area related to the planned closure of two
machines at the Reflex mill and to the reorganisation of the Reflex and
Gohrsmühle organisations. eUR 8 million release of the provision was recognised
in September as a result of partial divestment of the Reflex mill to
Metsä Tissue and lower reorganisation expenses at Gohrsmühle. eUR 12
million release of cost provision related to IT arrangements made earlier
was recognised in March. eUR 4 million additional cost provision in Market
pulp and energy business area relating to the closure of the alizay pulp mill
was recognised in July.
other provisions include provisions related leases, taxes, guarantees and
legal action. The non-current portion of total provision was some eUR 35
million and current portion some eUR 7 million. The non-current portion will
mostly be paid during year 2012.
78 NoTeS To The FINaNCIal STaTeMeNT
25 Borrowings
eUR million 2010 2009
Non-current interest-bearing financial liabilities
Bonds 687 729
loans from financial institutions 47 73
pension loans 204 61
Finance lease liabilities 25 27
other liabilities 53 53
Total 1,016 943
Current interest-bearing financial liabilities
Current portion of long-term debt 111 406
Short-term loans 3 3
Bill of exchange payable 2 2
other liabilities 218 56
Total 334 467
Interest-bearing financial liabilities, total 1,350 1,410
Interest-bearing financial assets
Non-current
loan receivables 53 53
53 53
Current
Financial assets at fair value through profit or loss 1 1
loan receivables and other receivables 62 83
Current investments at amortized cost 259 256
Cash at bank and in hand 149 241
470 580
Interest-bearing financial assets, total 523 633
Interest-bearing net liabilities, total 827 777

Maturity of repayment and interest payment of financial liabilities 31.12.2010
eUR million Book value 2011 2012 2013 2014 2015 2016-
Bonds and debentures 739
Repayment -51 -103 -494 -91 0 0
Interest payment -61 -56 -30 -4 0 0
loans from financial institutions 74
Repayment -28 -24 -20 -2 0 0
Interest payment -1 -1 0 0 0 0
pension loans 233
Repayment -29 -28 -39 -29 -20 -88
Interest payment -14 -12 -10 -7 -6 -12
Finance lease liabilities 28
Repayment -3 -2 -2 -1 -1 -19
Interest payment 0 0 0 0 0 0
other non-current interest-bearing liabilities 53
Repayment 0 0 -49 0 0 -4
Interest payment -1 -1 -1 0 0 0
Non-current interest-bearing liabilities, total 1,127
Repayments in 2011 -111
Non-current interest-bearing liabilities in
balance sheet 1,016
Total
Repayment -111 -157 -604 -123 -21 -111
Interest payment -77 -70 -41 -11 -6 -12
Current interest-bearing liabilities 223
Repayment -223
Interest payment
accounts payables and other liabilities 426
Repayment -418 -3 -2 -1 -2
Total liabilities 1,776
Repayment -752 -160 -606 -124 -21 -113
Interest payment -77 -70 -41 -11 -6 -12
Guarantees agreements
derivative financial instrument liabilities 36
Interest rate swaps, interest payment 13 13 7 1 1 1
Currency derivatives, interest payment -2,095 -1 0 0 0 0
Commodity derivatives, interest payment 0 0 0 0 0 0
Derivative financial instrument liabilities total -2,082 12 7 1 1 1
derivative financial instrument assets 20
Interest rate swaps, interest payment 0 0 0 0 0 0
Currency derivatives, interest payment 2,087 2 0 0 0 0
Commodity derivatives, interest payment 5 3 0 0 0 0
Derivative financial instrument assets total 2,092 5 0 0 0 0
derivative financial instrument net of cash 10 17 7 1 1 1
NoTeS To The FINaNCIal STaTeMeNT
79

Maturity of repayment and interest payment of financial liabilities 31.12.2009
eUR million Book value 2010 2011 2012 2013 2014 2015-
Bonds and debentures 1,068
Repayment -339 -52 -101 -492 -84 0
Interest payment -70 -62 -57 -31 -4 0
loans from financial institutions 98
Repayment -25 -28 -25 -20 0 0
Interest payment -1 -1 0 0 0 0
pension loans 99
Repayment -39 -11 -20 -20 -10 0
Interest payment -7 -5 -4 -2 0 0
Finance lease liabilities 31
Repayment -3 -3 -2 -1 -1 -20
Interest payment -1 -1 -1 0 0 -1
other non-current interest-bearing liabilities 53
Repayment 0 0 0 -49 0 -4
Interest payment 0 -1 -1 -1 0 0
Non-current interest-bearing liabilities, total 1,349
Repayments in 2010 -406
Non-current interest-bearing liabilities in
balance sheet 943
Total
Repayment -406 -94 -148 -582 -95 -24
Interest payment -79 -70 -63 -34 -4 -1
Current interest-bearing liabilities 61
Repayment -61
Interest payment 0
accounts payables and other liabilities 399
Repayment -387 -9 0 0 -1 -2
Total liabilities 1,809
Repayment -854 -103 -148 -582 -96 -26
Interest payment -79 -70 -63 -34 -4 -1
Guarantees agreements
derivative financial instrument liabilities 44
Interest rate swaps, interest payment 10 11 12 6 0 0
Currency derivatives, interest payment -2,652 -3 -1 0 0 0
Commodity derivatives, interest payment -1 -3 1 0 0 0
Derivative financial instrument liabilities total -2,643 5 12 6 0 0
derivative financial instrument assets 24
Interest rate swaps, interest payment 0 0 0 0 0 0
Currency derivatives, interest payment 2,639 4 2 0 0 0
Commodity derivatives, interest payment 1 0 0 0 0 0
Derivative financial instrument assets total 2,640 4 2 0 0 0
derivative financial instrument net of cash -3 9 14 6 0 0
80 NoTeS To The FINaNCIal STaTeMeNT

Bonds
eUR million Interest % 2010 2009
2002–2012 9.20 103 101
2002–2014 9.40 90 84
2004–2011 3.325 30 30
2004–2011 3.506 10 10
2004–2011 3.58 12 12
2006–2010 5.59 0 339
2006–2013 8.75 494 492
739 1,068
Maturity of finance lease liabilities
Minimum
The present value
of minimum
lease payments lease payments
eUR million 2010 2009 2010 2009
Not later than 1 year 3 4 3 3
1–2 years 2 3 2 3
2–3 years 2 2 2 2
3–4 years 2 2 1 1
4–5 years 1 2 1 1
later than 5 years 19 21 19 21
29 34 28 31
Future finance charges 1 3
The present value of
minimum lease payments
28 31
The most significant finance lease agreements are power plant Äänevoima
oy´s power plants. Äänevoima´s contract periods vary between 10 and 15
years. all finance lease liabilities will be due in 2017 at the latest. These
leases contain renewal and purchase options.
26 other non-current liabilities
eUR million 2010 2009
Non-current liabilities to Group companies 0 0
Non-current liabilities to others
accruals and deferred income 1 0
other liabilities 7 12
Total non-interest-bearing non-current liabilities 8 12
liabilities to Group companies are liabilities to parent company Metsäliitto and
other subsidiaries of Metsäliitto.
Non-current accruals and deferred income
others 1 0
Total 1 0
27 accounts payable and other liabilities
eUR million 2010 2009
Current liabilities to Group companies
accounts payable 58 36
other liabilities 1 15
Current liabilities to associated companies
accounts payable 2 2
other liabilities 0 0
Current liabilities to others
advance payments 6 6
accounts payable 137 115
other liabilities 68 115
accruals and deferred income 143 92
Total 415 381
liabilities to Group companies are liabilities to parent company Metsäliitto and
other subsidiaries of Metsäliitto.
Current accruals and deferred income
periodizations of employee costs 46 42
Interests 14 15
accruals of purchases 46 30
others 37 5
Total 143 92
NoTeS To The FINaNCIal STaTeMeNT
81

28 Financial assets and liabilities classified according to IaS 39 and fair values
Financial assets 31.12.2010
eUR million Note
82 NoTeS To The FINaNCIal STaTeMeNT
Fair value
through
profit & loss
available
for sale
fin. assets
loans and
receivables
derivatives
at hedge
accounting
amortised
cost
Total book
value Fair value
Non-current investments 16 314 314 314
other non-current financial assets 17 59 59 61
accounts receivables and other
receivables 20 1 515 516 516
Cash and cash equivalent 21 408 408 408
derivative financial instruments 29 14 7 21 21
Total 15 314 982 7 1,317 1,320
Financial liabilities
Non-current interest-bearing
financial liabilities 25 1,016 1,016 1,072
other non-current financial liabilities
26 8 8 8
Current interest-bearing financial
liabilities 25 334 334 336
accounts payable and other financial
liabilities 27 363 363 363
derivative financial instruments 29 12 24 36 36
Total 12 24 1,722 1,758 1,816
Financial assets 31.12.2009
Fair value
through
profit & loss
available
for sale
fin. assets
derivatives
at hedge
accounting
loans and
amortised Total book
eUR million Note
receivables
cost value Fair value
Non-current investments 16 317 317 317
other non-current financial assets
accounts receivables and other
17 58 58 58
receivables 20 1 496 497 497
Cash and cash equivalent 21 497 497 497
derivative financial instruments 29 24 24 24
Total 25 317 1,051 1,393 1,393
Financial liabilities
Non-current interest-bearing
financial liabilities 25 943 943 830
other non-current financial liabilities
26 12 12 12
Current interest-bearing financial
liabilities 25 467 467 458
accounts payable and other financial
liabilities 27 333 333 333
derivative financial instruments 29 18 26 44 44
Total 18 26 1,755 1,799 1,677
accounts receivables and other receivables do not include advance payments,
deferred tax assets and periodizations of employee costs (note 20). accounts
payable and other financial liabilities do not include advance payments,
deferred tax liabilities and periodizations of employee costs (note 27).
In M-real Group all interest-bearing liabilities are valued in the balance
sheet at amortised cost based on effective interest method. Fair values in
the table are based on present value of cash flow of each liability or assets
calculated by market rate. The discount rates applied are between 0.8–6.6
per cent (2009 0.4–21.2). of interest bearing liabilities 83 per cent (84) is
subject to variable rates and the rest to fixed rates. The average interest rate
of interest-bearing liabilities at the end of 2010 was 5.1 per cent (2009: 6.0
per cent). The fair values of accounts and other receivables and accounts
payables and other liabilities are not essentially deviating from the carrying
amounts in ther balance sheet.

29 derivatives
Derivatives
Nominal
value Fair value
eUR million
2010
assets liabilities Total
Fair value
hedges
Cash flow
hedges
equity
hedges
derivatives/
hedge
accounting
not applied
derivatives
held for
trading
Interest forward agreements 8.5 0.1 -0.1 -0.1
Interest rate options
Interest rate swaps 1,239.7 4.8 9.0 -4.2 -4.3 -0.6 1.1 -0.3
Interest rate derivatives 1,248.2 4.8 9.1 -4.3 -4.3 -0.6 1.1 -0.4
Currency forward agreements 2,074.9 8.1 17.4 -9.3 5.1 -15.7 1.2
Currency option agreements 17.5 0.1 -0.1 -0.1
Currency swap agreements 56.1 8.9 -8.9 -8.9
Currency derivatives 2,148.5 8.1 26.4 -18.3 -8.9 5.1 -15.7 1.1
electricity derivatives. 76.1 7.4 7.4 6.6 0.8
pulp derivatives
other commodity derivatives 7.1 0.1 0.3 -0.2 -0.2
Commodity derivatives 83.2 7.5 0.3 7.2 6.6 0.6
Derivates total 3,479.9 20.4 35.8 -15.4 -13.2 11.1 -15.7 2.8 -0.4
Nominal value also includes closed contracts to a total amount of eUR 1,787 million.
2009
Interest forward agreements 4.0 -0.1 0.1 0.1
Interest rate options
Interest rate swaps 976.5 3.9 7.3 -3.4 -5.0 -1.2 2.8
Interest rate derivatives 980.5 3.9 7.2 -3.3 -5.0 -1.2 0.0 2.9
Currency forward agreements 2,634.9 18.6 24.0 -5.4 5.5 -12.6 1.7
Currency option agreements 118.5 0.1 -0.1 -0.1 -0.1
Currency swap agreements 52.1 9.3 -9.3 -9.3
Currency derivatives 2,805.5 18.6 33.4 -14.8 -9.3 5.5 -12.6 1.6 -0.1
electricity commodity egreements 174.9 1.6 2.8 -1.2 -3.3 2.1
pulp commodity agreements.
other commodity agreements 7.9 0.3 -0.3 -0.3
Commodity derivativesl 182.8 1.6 3.1 -1.5 -3.3 1.8
Derivates total 3,968.8 24.1 43.7 -19.6 -14.3 1.0 -12.6 6.3
Nominal value also includes closed contracts to a total amount of eUR 2,159 million.
NoTeS To The FINaNCIal STaTeMeNT
83

30 Maturity analysis of cash flow hedge accounting
Result of the hedging instrument is booked to the income statement at the
realization of the cash flow. Contractual maturities of hedging instruments
equals to the hedged cash flow.
eUR million 31.12.2010
periods when the forecasted
cash flow are expected to occur
highly probable
foreign currency
cash flows
84 NoTeS To The FINaNCIal STaTeMeNT
Contractual
interest
cash flows
highly probable
commodity
cash flows
Q 1 98.9 -0.1 -4.8
Q 2 75.6 -0.1 -4.8
Q 3 36.0 0.0 -4.8
Q 4 0.0 0.0 -4.8
Total in 2011 210.5 -0.2 -19.2
2012 -1.9
2013 -0.8
2014
Cash flows total 210.5 -0.2 -29.7
Total nominal values of
derivatives directed to
hedge accounting 210.5 30.0 29.7
31 Notes to Consolidated cash flow statement
eUR million 2010 2009
Adjustments to the profit
Taxes 21 26
depreciation, amortization and impairment charges 166 356
Share of results in associated companies -54 14
Gains and losses on sale of fixed assets -32 -148
Finance costs, net 73 74
provisions -66 2
108 324
Change in working capital
Inventories -78 122
accounts receivables and other receivables -33 116
accounts payable and other liabilities 25 -98
-86 140
Disposals of subsidiaries
M-real did not dispose any subsidiaries in 2010 or 2009.
eUR million 31.12.2009
periods when the forecasted
cash flow are expected to occur
highly probable
foreign currency
cash flows
Contractual
interest
cash flows
highly probable
commodity
cash flows
Q 1 63.8 -0,1 -1.9
Q 2 59.9 -0,1 -5.0
Q 3 26.6 -0,1 -5.0
Q 4 16.3 0,0 -1.9
Total in 2010 166.5 -0,3 -13.8
2011 -0,2 -18.3
2012 -7.3
2013
Cash flows total 166.5 -0,4 -39.5
Total nominal values of
derivatives directed to
hedge accounting 166.5 30.0 39.5

32 The principal Subsidiaries 31 december 2010
Country Group’s holding, % Number of shares
Shares and participations owned by the Group
Metsäliitto Cooperative Finland 179,171
Shares in subsidiaries
In Finland
alrec Boiler oy *) Finland 24.92 899
oy hangö Stevedoring ab Finland 100.00 150
Kemiart liners oy Finland 100.00 2,000,000
logisware oy Finland 100.00 4,500
ooo peterbox Russia 100.00
M-real International oy Finland 100.00 10,000
Metsä Group Financial Services oy Finland 51.00 25,500
In other countries
M-real deutsche holding Gmbh Germany 100.00
M-real Fine B.V. The Netherlands 100.00 1,000
M-real holding France SaS France 100.00 520,000
M-real IBp deals americas ltd USa 100.00 50
M-real IBp deals europe S.a. Belgium 100.00 1,000
M-real Nl holding B.V. The Netherlands 100.00 15,350
M-real Reinsurance aG Switzerland 100.00 19,997
M-real Sverige ab Sweden 100.00 10,000,000
M-real UK holdings ltd Great Britain 100.00 146,750,000
* Consolidation as a subsidiary under shareholders’ agreement.
NoTeS To The FINaNCIal STaTeMeNT
85

Subgroups in Finland
86 NoTeS To The FINaNCIal STaTeMeNT
Country Group’s holding, % Number of shares
M–real International Oy
M-real Benelux B.V. The Netherlands 100.00 2,000
M-real Benelux n.v./s.a Belgium 100.00 2,921
M-real Board and paper ooo Russia 100.00 100
M-real CZ, s.r.o. Czech Republic 100.00
M-real deutschland Gmbh Germany 100.00 1
M-real France SaS France 100.00 8,211
M-real hellas ltd Greece 51.00 306
M-real hong Kong ltd hong Kong 100.00 100
M-real Shanghai ltd China 100.00
M-real Ibéria S.a. Spain 100.00 147,871
M-real Ireland ltd Ireland 100.00 5,000
M-real Italia s.r.l. Italy 100.00 100,000
M-real Kft hungary 100.00 30
M-real ( Middle east & North africa) ltd Cyprus 100.00 742,105
M-real polska Sp. Z o.o. poland 100.00 232
M-real Nordic a/S denmark 100.00 36
M-real Nordic aB Sweden 100.00 1,000
M-real Singapore pte ltd Singapore 100.00 10,000
M-real Schweiz aG Switzerland 100.00 100
M-real UK ltd Great Britain 100.00 2,400
M-real USa Corporation USa 100.00 180
Subgroups in other countries
M-real holding France SaS
M-real alizay SaS France 100.00 3,203,210
M-real alizay SNC France 100.00 40,000,000
M-real deutsche holding Gmbh
M-real Zanders Gmbh Germany 100.00 2,800,000
M-real New Jersey Service Co. USa 100.00
BGe eisenbahn Verkehr Gmbh 1) Germany 40.00
Metsäliitto energie Gmbh Germany 80.00
M-real hallein aG austria 98.60 69
M-real Nl holding B.V
M-real IBp deals (China) ltd China 100.00
M-real IBp hK ltd hong Kong 100.00 7,009,900
M-real UK holdings ltd
M-real UK Services ltd Great Britain 100.00 115,800,001
1) Consolidation as a subsidiary according to agreement

33 Joint ventures
Joint ventures have been consolidated using line-by-line method proportionate
to the M-real Group’s holding. Group’s consolidated Income statement
and Balance sheet included assets, liabilities, income and costs as follows:
eUR million 2010 2009
Non-current assets 22 24
Current assets 5 4
assets total 27 28
Non-current liabilities 25 26
Current liabilities 4 3
liabilities total 29 29
Sales 15 345
expenses 16 293
The profit for the period -1 55
Significant joint ventures: Group’s holding, %
oy Metsä-Botnia ab 30.0
Äänevoima oy 56.25 56.25
In december 2009 Metsä-Botnia’s ownership was restructured. Metsä-
Botnia acquired some 9.2 per cent of its own shares. M-real’s ownership rose
by three per cent to 33 per cent.
M-real sold three per cent to its parent company Metsäliitto and recorded
some eUR 33 million profit on sale.
at balance sheet day M-real owns 30 per cent of Metsä-Botnia. M-real
changed the whole Metsä-Botnia’s consolidation method from IaS 31 (Interests
in Joint Ventures) to IaS 28 (Investments in associated) from 8 december
2009 on.
NoTeS To The FINaNCIal STaTeMeNT
87

34 Contingent liabilities
eUR million 2010 2009
For own liabilities
liabilities secured by pledges
pension loans 100 0
pledges granted 52 0
liabilities secured by mortgages
loans from financial institutions 0 31
pension loans 126 75
other liabilities 6 0
Real estate mortgages 132 106
liabilities secured by chattel mortgages
loans from financial institutions 3 3
Chattel mortgages 3 3
on behalf of Group companies
pledged assets 13 0
on behalf of associated companies
Guarantee liabilities 0 0
on behalf of others
Guarantee liabilities 1 2
other liabilities
as security for other commitments 0 0
leasing liabilities
payments due in following 12 months 2 2
payments later than the following 12 months 3 2
Total
pledges 65 0
Real estate mortgages 135 109
Guarantees 1 2
promissory notes 0 0
other liabilities 0 0
leasing liabilities 5 4
Total 206 115
pledges granted are sister company’s shares (Metsä-Botnia)
other lease commitments
M-real leases various offices and warehouses under non-cancellabe operating
lease agreements. Some contracts are renewable at the end of the lease
period.
88 NoTeS To The FINaNCIal STaTeMeNT
eUR million 2010 2009
Unconditional purchase agreement
Tangible assets
payments due in following 12 months 0 0
payments due later 2 1
2 1
other purchases
payments due in following 12 months 1 1
payments due later 0 0
1 1
Joint ventures
proportionate interest in joint ventures unconditional purchase agreement,
tangible assets, was eUR 0 million (0).
35 Share based payment
Share incentive scheme 2008–2010
on 16 January 2008, M-real’s Board of directors decided to adopt a share
incentive scheme for 2008–2010. The scheme offers target groups the possibility
to be awarded M-real Corporation’s B-shares for achieving the goals
set for three incentive periods, each of one calendar year. The size of the
bonus awarded under the share incentive scheme is linked to the Group’s
operating profit (eBIT, 50 per cent weight) and the return on capital employed
(RoCe, 50 per cent weight). The size of the bonus awarded for vesting period
2009 is linked to adjusted cashflow (cashflow 2) and for 2010 to eBIT and
adjusted cashflow (cashflow 2). The bonus payable under the share incentive
scheme is paid in the form of M-real Corporation’s B-shares. In addition, an
amount corresponding at maximum to the value of the shares is paid in cash
to cover taxes. The achievement of the target set for the period involved
determines how large a share of the maximum bonus is paid to key personnel.
The bonus is not paid if the person concerned ceases to be employed
before the award is paid. The person concerned must also continue to own
the shares at least two years after the date of the award payment.
on 16 of december 2010 the Board of directors of M-real Corporation has
resolved on a new share-based incentive plan directed to the M-real Corporation
executives. The plan includes three three-year earning periods, calendar
years 2011—2013, 2012—2014 and 2013—2015. The Board of directors
will decide on the earnings criteria and on targets to be established for them
at the beginning of each earning period. The potential reward from the plan
for the earning period 2011—2013 will be based on the M-real Corporation’s
equity Ratio and the development of Return on Capital employed (RoCe) and
earnings before Interest and Taxes (eBIT). each earning period is followed
by subsequent two-year restriction period during which the participant is not
entitled to transfer or dispose of the shares. The potential reward from the
earning period 2011—2013 will be paid partly in M-real Corporation series
B shares and partly in cash in 2014. The proportion to be paid in cash will
cover taxes and tax-related costs arising from the reward. In the starting
point the plan concerns 9 people including the members of the M-real Corporate
Management Team. The rewards to be paid on the basis of the plan
for the first earning period are in total maximum of approximately 1,000,000
M-real Corporation series B shares.

date of issue
Instrument
Share incentive scheme 2008–2010
Issued by Board’s decision
16.1.2008
equity-based reward scheme
2008 *) 2009 *) 2010 *) Total
Maximum number of shares 90,000 70,000 82,500 242,500
Maximum number of shares in cash 90,000 70,000 82,500 242,500
exercise date 16.1.2008 5.2.2009 3.2.2010
Vesting period starts 1.1.2008 1.1.2009 1.1.2010
Vesting period ends 31.12.2008 31.12.2009 31.12.2010
obligation to hold shares, years 2 2 2
Conditions of vesting requirements obligation to work obligation to work obligation to work
Criteria eBIT,RoCe Cashflow2 eBIT,Cashflow2
date of vesting requirement 1.1.2011 1.1.2012 1.1.2013
Maximum validity, years 3 3 3
payment shares and cash
Binding time left, years 0 1 2
Number of key personnel (31.12.2010) 0 7 6
Realisationprice, eur 0 0 0
Fair value measuring**)
Share price at grant date, eUR 2.54 0.45 1.80
Fair value of share at grant date*) eUR 2.42 0.45 1.80
assumed dividends 0.12 0.00 0.00
Share price at the end of financial period**), eUR 0.69 2.38 2.54
Fair value at end of financial period 0 142,588 124,775 267,363
Effect on result and financial position
expense for 2010, share based payment 69,757 38,970 108,727
expense for 2010, share based payment, settled as equity 9,967 16,163 26,130
at the end 38,970 38,970
amounts 1.1.2010
outstanding at the beginning of period 70,000 0 70,000
Changes during the period
Shares granted 82,500 82,500
Shares forfeited 25,000 25,000
Shares exercised 52,061 52,061
Shares expired 17,939 17,939
amounts 31.12.2010
outstanding at the end of period 52,061 57,500 109,561
exercisable at the end of the period 0 57,500 57,500
*) The amounts in the table reflect the numbers of shares to be given on the
base of sharebased payment. M-real has also committed not to pay more
than the value of shares in cash (tax-portion).
**) The fair value of the share-settled part at exercise date was the market
price of M-real’s B-share less any dividend paid before the payment of the
reward. Correspodningly, the fair value of the cash-settled part is estimated
on every balance sheet date until the end of incentive period. The fair value
of share-based payment is recognised to the amount based on best possible
estimate of the reward, which is believed to be granted. The expense recognised
for share based payments was eUR 0.1 million (0).
Metsäliitto Management Oy
Metsäliitto Management oy has been established for the shareholding programme
of the members of Metsäliitto Group’s executive Management. The
members of the executive Management own the entire stock of the company.
The company is consolidated in Metsäliitto Group (not M-real Group) as a
unit established for a special purpose. The purpose of Metsäliitto Management
oy is to acquire M-real Corporation B shares from the market or
members of the executive Management at market prices. The share acquisitions
have been financed using capital inputs of a total of eUR 3,850,000,
of which the capital input of Kari Jordan, Chairman of the Board of M-real is
NoTeS To The FINaNCIal STaTeMeNT
89

eUR 1 million and president and Ceo Mikko helander’s eUR 500,000, and a
loan of eUR 15,400,000 granted by Metsäliitto Cooperative. Shares have been
purchased for Kari Jordan for approximately eUR 5 million and for Mikko
helander for approximately eUR 2.5 million.
The loan granted by Metsäliitto Cooperative will be repaid in its entirety
by 31 March 2014. If the validity of the arrangement is continued one year at
a time in 2013, 2014, 2015 or 2016, the loan period will be extended correspondingly.
Metsäliitto Management oy has the right to repay the loan prematurely
at any time. Metsäliitto Management oy is obligated to repay the
loan prematurely by selling the M-real Corporation B shares it holds if the
stock exchange price of M-real Corporation B share exceeds a certain level
defined in the arrangement for an extended period of time.
The arrangement will remain in force until the end of 2013 and beginning
of 2014, at which time the intention is to dismantle the arrangement in a
manner to be decided later. The arrangement can be dismantled by merging
the company with M-real Corporation or selling the M-real Corporation B
shares held by the company to Metsäliitto, a party designated by Metsäliitto
or a third party and liquidating the company or by selling the shares of the
company to Metsäliitto. The arrangement will be extended one year at a time
if, in october–November 2013, 2014, 2015 or 2016, the stock exchange price
of the M-real Corporation B share is lower than the average price at which
Metsäliitto Management oy acquired the M-real Corporation B shares it
owns.
The assignment of the M-real Corporation B shares owned by Metsäliitto
Management oy is restricted during the validity of the arrangement. as a
rule, the ownership of members of the executive Management in Metsäliitto
Management oy will remain in force until the dismantling of the arrangement.
In the M-real Group, the arrangement is processed as a share incentive
scheme. Valuation is performed once after the essential terms and conditions
of the arrangement have been agreed upon.
In 2010, eUR 0.1 million was recognised as expense in the Group’s income
statement in connection with Metsäliitto Management oy’s share ownership
programme.
90 NoTeS To The FINaNCIal STaTeMeNT
36 Related party transactions
M-real´s ultimate parent company is Finnish Metsäliitto Cooperative. at 31
december 2010 Metsäliitto owned 38.8 per cent of M-real´s shares and 60.5
per cent of the voting rights.
The significant other subsidiaries of Metsäliitto with whom M-real had business
activities are as follows:
Metsä Tissue Group
Metsä-Botnia Group
Metsäliitto Sverige ab
Metsäliitto France
The principal subsidiaries of M-real are listed in the Note 32.
In december 2009 Metsä-Botnia’s ownership was restructured. Metsä-
Botnia acquired some 9.2 per cent of its own shares. M-real’s ownership rose
by three per cent to 33 per cent. M-real sold three per cent to its parent
company Metsäliitto for eUR 49 million and recorded some eUR 33 million
profit on sale in other operating income.
at balance sheet day M-real owns 30 per cent (30 per cent) and Metsäliitto
53 per cent (53 per cent) of the shares in Metsä-Botnia. Metsä-Botnia has
been consolidated using line-by-line method proportionate to the M-real´s
and Metsäliitto´s holding according to IaS 31, Interests in Joint Ventures,
(income statement till 8 december 2009. From 8 december 2009 on M-real
consolidates Metsä-Botnia according to IaS 28 (Investments in associated).
Related party transactions with Metsä-Botnia include from 8 december 2009
on in transactions with sister companies.
The total wood purchases from Metsäliitto were eUR 101 million in 2010
(192). The price used was market price.
M-real Zanders partly disposed Rexlex mill to Metsä Tissue. The capital
gain was some eUR 7 million and was recognised in other operating income.
Metsä Group Financial Services oy owned by M-real (51 per cent) and
Metsäliitto (49 per cent) is Group’s internal bank. The interest rates are
market based.
Transactions with Transactions with
eUR million
parent company sister companies
2010 2009 2010 2009
Sales 3 14 36 8
other operating income 4 35 10 2
purchases 126 192 713 136
Interest income 7 -1 2 2
Interest expenses 0 2 1 0
Receivables
Non-current receivables 49 49 4 4
Current receivables 26 29 56 78
liabilities
Non-current liabilities 0 0 0 0
Current liabilities 5 16 272 90
There are no doubtful receivables in the receivables from group companies.
and no bad debt was recognised during the period. No security has been
given for group liabilities.
The compensations paid to management are presented in the Note 7 and
35. The new shareholding system of members of Metsäliitto Group’s executive
Management, Metsäliitto Management oy (see Note 35). The parent
company has no commitments on behalf of management nor receivables
from management. Transactions with associated companies are presented
in the Note 15. Joint ventures are presented in the Note 33.

37 environmental affairs
eUR million 2010 2009
Income statement
Materials and services 10 18
employee costs
Wages and fees 2 4
other employee costs 1 1
depreciation 9 13
other operating expenses 3 2
25 38
Balance sheet
Tangible assets
acquisition costs, 1 Jan. 320 406
Increases 7 5
decreases -91
depreciation -239 -223
Book value, 31 dec. 88 97
Provisions
environmental obligations 2 1
CO 2 emission allowances, continuing operations
possession of emission allowances, 1,000 tonnes 819 836
emission produced (2009 verified), 1,000 tonnes 778 867
The sales of emission allowances (eUR million) 6.5 7.0
only additional identifiable costs that are primarily intended to prevent, reduce
or repair damage to the environment are included environmental costs.
environmental expenditures are capitalised if they have been incurred to
prevent or reduce future damage or conserve resources and bring future
economic benefits.
2009 figures include M-real’s share (30%) of Metsä-Botnia’s emission
allowances till 8 december only.
38 events after the Balance sheet date
M-real started a new eUR 70 million profit improvement programme. The
programme focuses on improving profitability of the paper business, as well
as decreasing the variable costs of all businesses. The earlier-announced
profit improvement impact of the Simpele and Kemi board investments and
the closure of speciality paper production at Simpele are included in the new
profit improvement programme. The full effect of the programme on operating
profit, eUR 70 million, is estimated to be reached from 2012 onwards.
The positive result impact in 2011 is expected to be approximately eUR 30
million. Cost inflation is expected to accelerate in 2011. The combined result
impact of M-real’s new profit improvement programme and the previous
years’ programmes is in 2011 estimated to be eUR 90 million positive, which
is expected to mostly offset the cost inflation.
The annual folding boxboard capacity of the Äänekoski and Kyröskoski
mills is planned to be increased by a total of approximately 70,000 tonnes.
The total value of the planned investments is some eUR 30 million. The
Kyroskoski investment is planned to be completed in late 2011 and the Äänekoski
investment in spring 2012. Related to the planned investment M-real
will start statutory negotiations at the Äänekoski board mill on 18 February
2011 covering the mill workers in total of about 130 people. The maximum
personnel reduction need is estimated to be 10 people. Kyröskoski investment
is expected to have no personnel impact. Following the planned investments,
the annual production capacity is to increase to 190,000 tonnes at
Kyröskoski and to 240,000 tonnes at Äänekoski. production is planned to be
directed to food packaging. even after these planned investments, M-real
has good potential to further increase the production capacity of the Kyröskoski
and Äänekoski mills should the market situation so require.
NoTeS To The FINaNCIal STaTeMeNT
91

Calculation of key ratios
profitability
Return on equity (%) =
Return on capital employed (%) =
Financial position
equity ratio (%) =
Gearing ratio (%) =
Net gearing ratio (%) =
Covenant equity ratio (%) =
Covenant gearing ratio (%) =
Share performace indicators
earnings per share =
Shareholders´equity per share =
dividend per share =
dividend per profit (%) =
dividend yield (%) =
price/earnings ratio (p/e ratio) (%) =
p/BV (%) =
adjusted average share price =
92 CalCUlaTIoN oF Key RaTIoS
profit from continuing operations before tax – direct taxes
Shareholders’ equity (average)
profit from continuing operations before tax + interest expenses, net exchange gains/losses and
other financial expenses
Total equity + interest-bearing borrowings (average)
Shareholders’ equity
Total assets – advance payments received
Interest-bearing borrowings
Shareholders’ equity
Interest-bearing borrowings – liquid funds – interest-bearing receivables
Shareholders’ equity
Shareholders’ equity + deferred tax liabilities
Total assets – advance payments received
Interest-bearing borrowings – liquid funds – interest-bearing receivables
Shareholders’ equity + cumulative impairment losses (max eUR 300 million)
profit attributable to shareholders of parent company
adjusted number of shares (average)
equity attributable to shareholders of parent company
adjusted number of shares at 31 december
dividends
adjusted number of shares at 31 december
dividend per share
earnings per share
dividend per share
Share price at 31 december
adjusted share price at 31 december
earnings per share
adjusted share price at 31 december
Shareholders’ equity per share
Total traded volume per share (eUR)
average adjusted number of shares traded during the financial year
Market capitalization = Number of shares x market price at 31 december
other key figures
Internal financing of capital
expenditure (%)
Interest cover =
Net cash flow arising from operating
activities
=
Net cash flow arising from operating activities
Gross capital expenditure
Net cash flow arising from operating activities + net interest expenses
Net interest expenses
= Net cash flow arising from operating activities in the cash flow statement

parent company accounts (Finnish accounting standards, FAS)
Income statement
eUR million Note 1.1–31.12 .2010 1.1–31.12 .2009
Sales (1) 1,181 942
Change in stocks of finished goods
and in work 21 -3
other operating income (2) 61 95
Materials and services
Raw materials and consumables
purchases during the financial period -743 -584
Change in inventories 3 -3
external services (3) -162 -125
-902 -712
employee costs (4)
Wages and salaries -58 -54
Social security expenses
pension expenses -15 -16
other social security expenses -32 -31
-105 -101
depreciation, amortisation and impairment charges (5)
depreciation according to plan -61 -66
Impairment charges -11
-72 -66
other operating expenses -94 -137
Operating result 90 18
Financial income and expenses (6, 7)
Interest income from non-current investments
Income from Group companies 7 2
Income from associated companies 225
other interest and similar income
other interest and similar income 29 43
Net exchange gains/losses -36 -15
Write-downs on non-current investments -119 -332
other interest and similar expenses -86 -112
-205 -189
Loss before extraordinary items -115 -171
extraordinary income and expenses (8)
extraordinary income 13
13
Loss before appropriations and taxes -102 -171
appropriations
Change in depreciation differences 62 50
Income taxes (9)
Loss for the financial period -40 -121
paReNT CoMpaNy aCCoUNTS (FINNISh aCCoUNTING STaNdaRdS, FaS)
93

parent company accounts
Balance sheet
eUR million Note 31.12.2010 31.12.2009
ASSETS
Non-current assets
Intangible assets (10)
Intangible rights 13 18
other capitalized expenditure 4 5
17 23
Tangible assets (11)
land and water areas 12 13
Buildings 124 135
Machinery and equipment 333 378
other tangible assets 4 4
advance payment and construction in
progress 15 2
488 532
Investments (12)
Shares in Group companies 626 626
Receivables from Group companies 84 84
Shares in associated companies 98 158
other shares and holdings 30 60
838 928
1,343 1,483
Current assets
Inventories
Raw materials and consumables 36 32
Work in progress 2 2
Finished goods and goods for resale 92 72
advance payment 4 2
134 108
Receivables (13, 14, 15, 16)
Current
accounts receivables 157 123
Receivables from Group companies 596 879
Receivables from associated companies 7 7
other receivables 18 21
prepayment and accrued income 41 41
819 1,071
Cash and cash equivalents 7 2
Total assets 2,303 2,664
94 paReNT CoMpaNy aCCoUNTS
eUR million Note 31.12.2010 31.12.2009
EQUITY AND LIABILITIES
Shareholders´equity (17)
Share capital 558 558
Share premium account 664 664
Retained earnings -343 -222
loss for the financial period -40 -121
839 879
Appropriations
accumulated depreciation difference 139 200
Provisions (18)
provisions for pensions 9 10
other provisions 17 50
26 60
Liabilities
Non-current (19, 20, 21)
Bond loans 691 736
loans from financial institutions 41 63
pension loans 198 61
other liabilities 2 4
932 864
Current (19, 20, 22, 23)
Bond loans 52 339
loans from financial institutions 22 22
pension loans 29 39
advance payments 4 3
accounts payable 57 49
payables to Group companies 131 148
payables to associated companies 1 1
other liabilities 10 9
accruals and deferred income 61 51
367 661
1,299 1,525
Total equity and liabilities 2,303 2,664

parent company accounts
Cash flow statement
eUR million 2010 2009
Cash flow from Operating Activities
operating profit 90 18
adjustments to operating profit a) 11 16
Change in net working capital b) -40 4
Interest -56 -66
dividends received 7 227
other financial items -104 -22
Taxes 0
Net cash flow from operations -92 177
Investments
purchase of shares -2 -365
purchase of other fixed assets -26 -16
Sale of shares 41 142
Sale of other fixed assets 28 8
Increase in other non-current investments
decrease in other non-current investments 255
Total cash used in investments 41 24
Cash flow before financing -51 201
Financing
Increase in non-current liabilities 160 60
decrease in non-current liabilities -386 -423
Increase (-) or decrease (+) in interest-bearing non-current receivables 299 -341
Increase (-) or decrease (+) in interest-bearing current receivables -30 90
dividends paid
Group contribution 13 16
Total financing 56 -598
Change in liquid funds 5 -397
liquid funds at 1 Jan. 2 399
Liquid funds at 31 Dec. 7 2
a) adjustments to operating profit
depreciation 72 66
Gains (+) or losses (-) on sale of fixed assets -26 -43
Change in provisions -35 -7
Total 11 16
b) Change in net working capital
Increase (-) or decrease (+) in stocks -27 15
Increase (-) or decrease (+) in non-interest bearing receivables -46 64
Increase (+) or decrease (-) in non-interest bearing current liabilities 33 -75
Total -40 4
paReNT CoMpaNy aCCoUNTS
95

parent company accounting policies
M-real Corporation’s financial statements have been prepared in
accordance with Finnish accounting standards (FaS).
Sales
Sales are calculated after deduction of indirect sales taxes, trade
discounts and other items adjusting sales.
Exchange rate differences
Foreign exchange gains and losses have been booked to net exchange
gains/losses under financial income and expense. open and actual
foreign exchange differences hedging sales are recorded immediately
to financial income and expenses in the income statement.
Transactions in foreign currency
Transactions in foreign currency have been booked at the exchange
rate on the day of the transaction.
at the balance sheet date, receivables and liabilities denominated
in foreign currency have been translated into euros at the exchange
rate quoted by the european Central Bank at the balance sheet date.
Pensions and pension funding
Statutory pension security is handled by pension insurance companies
outside the Group. In addition to statutory pension security,
some salaried employees have supplementary pension arrangements
which are either insured, arranged through the Metsäliitto
employees’ pension Foundation or are an unfunded liability of the
company. The Metsäliitto employees’ pension Foundation is fully
funded based on the current value of its assets.
pension insurance premiums have been periodized to correspond
to the accrual-based wages and salaries given in the financial statements.
Research and development expenditure
Research and development expenditure is recorded as an expense
in the relevant financial period.
Inventories
Inventories are measured at the lower of cost or net realizable value.
In measuring inventories, the FIFo principle is observed or, alternatively,
the weighted average price method.
96 paReNT CoMpaNy aCCoUNTING polICIeS
Property, plant and equipment and depreciation
The carrying values of property, plant and equipment are based on
original acquisition costs less depreciation according to plan and
impairment losses.
Straight-line depreciation according to plan is based on the estimated
useful life of the asset as follows:
Buildings and constructions 20–40 years
heavy power plant machinery 20–40 years
other heavy machinery 15–20 years
lightweight machinery and equipment 5–15 years
other items 5–10 years
depreciation is not recorded on the purchase cost of land and water
areas.
Leasing
lease payments are treated as rental expenses.
Environmental expenditure
environmental expenditure comprises the specifiable expenses of
environmental protection measures aiming primarily at combating,
remedying or alleviating environmental damage.
Extraordinary income and expenses
Group contribution, paid and received, are presented in the income
statement as extraordinary items, only. The tax effect of extraordinary
items is presented in the notes to the financial statements.
Appropriations
Finnish tax legislation offers the possibility to deduct expenses prematurely
from the profit for the financial year and to transfer them
to the balance sheet as provisions. The items are taken into account
in tax filings only if they have been entered in the accounts. These
items are presented in the appropriations in the income statement.
among such items are depreciation on property, plant and equipment
in excess of plan, which is stated as a depreciation difference in the
balance sheet and as a change in the depreciation difference in the
income statement.
Provisions
Future costs and losses to which the Group is committed and which
are likely to be realized are included in the income statement under
the appropriate expense heading and in the balance sheet under
provisions for future costs whenever the precise amount and the
time of occurrence are not known and in other cases they are included
in accrued liabilities. These can be, for example, the pension liability
or costs of discontinued operations and restructuring costs.

Notes to the parent company
financial statements
eUR million 2010 2009
1. Sales
owing to the Group structure, the sales of the parent company
has not been broken down by segments and market.
2. Other operating income
Rental income 2 2
Gains on disposal of fixed assets 26 43
Service revenue 6 7
Government grants 1 2
other allowances and subsidies 16 21
other 10 20
61 95
3. External services
logistics expenses 111 82
other external services 51 43
162 125
external services include production related services and logistics
expenses of sold products. In 2009 logistics expenses of sold
products were partly showed in other operating expenses. 2009’s
figures have been restated to match new grouping. other operating
expenses include among others other than production related
services, energy costs, real estate costs and administration costs.
4. Empoyee costs
Wages and salaries for working hours 58 54
pension expenses 15 16
other social security expenses 32 31
105 101
Salaries and emoluments paid to management
Managing director and their alternates 1.4 0.8
Members of the Board and deputies 0.6 0.5
2.0 1.3
Main auditors fees
Fees paid to pricewaterhouse Coopers were as
follows:
audit fees 0.3 0.2
Tax consultancy
other fees 0.0 0.2
0.3 0.4
The audit fees are paid for the audit of the annual and quarterly financial
statements. Tax consultancy fees are the fees paid for the consultancy
services and the like.
5. Depreciation according to plan and impairment charges
depreciation according to plan
Intangible rights 4 6
Goodwill
other capitalized expenditure 1 1
Buildings and constructions 9 9
Machinery and equipment 46 49
other tangible assets 1 1
Total depreciation according to plan 61 66
Impairment changes
Machinery 11
depreciation difference -56 -50
Total depreciation 16 16
eUR million 2010 2009
6. Financial income and expenses
dividend income 7 227
Interest income from non-current investments 11 17
other interest income 18 26
Write-downs on non-current investments -119 -332
Interest expenses -84 -106
other financial expenses -2 -6
-169 -174
Net exchange differences -36 -15
Financial income and expenses, total -205 -189
7. Exchange differences in Income statement
exchange differences on sales 4 1
exchange differences on purchases 0
exchange differences on financing -40 -16
Exchange differences, total -36 -15
8. Extraordinary income and expenses
extraordinary income 0
Group contribution received 13 0
13
9. Income taxes
Income taxes for the financial period 0 0
Income taxes for previous periods
0 0
Income taxes on ordinary operations 0 0
Income taxes on extraordinary items 0 0
10. Intangible assets
Intangible rights
acquisition costs, 1 Jan. 109 111
Increases 5 5
Transfers between items
decreases -10 -7
acquisition costs, 31 dec. 104 109
accumulated depreciation, 1 Jan. -91 -85
accumulated depreciation on deduction and
transfers 4
depreciation for the period -4 -6
accumulated depreciation, 31 dec. -91 -91
Book value, 31 dec. 13 18
Goodwill
acquisition costs, 1 Jan. 20 20
acquisition costs, 31 dec. 20 20
accumulated depreciation, 1 Jan. -20 -20
depreciation for the period
accumulated depreciation, 31 dec. -20 -20
Book value, 31 dec.
NoTeS To The paReNT CoMpaNy FINaNCIal STaTeMeNTS
97

eUR million 2010 2009
Other capitalized expenditure
acquisition costs, 1 Jan. 15 15
Increases
decreases
acquisition costs, 31 dec. 15 15
accumulated depreciation, 1 Jan. -10 -9
accumulated depreciation on
deduction and transfers
depreciation for the period -1 -1
accumulated depreciation, 31 dec. -11 -10
Book value, 31 dec. 4 5
11. Tangible assets
Land and water areas
acquisition costs, 1 Jan. 13 12
Increases 1
decreases -1
acquisition costs, 31 dec. 12 13
Book value, 31 dec. 12 13
Buildings
acquisition costs, 1 Jan. 262 261
Increases 1 1
Transfers between items
decreases
acquisition costs, 31 dec. 263 262
accumulated depreciation, 1 Jan. -127 -117
accumulated depreciation on
deduction and transfers
depreciation for the period -12 -10
accumulated depreciation, 31 dec. -139 -127
Book value, 31 dec. 124 135
Machinery and equipment
acquisition costs, 1 Jan. 1,201 1,190
Increases 11 8
Transfers between items 1 3
decreases -6
acquisition costs, 31 dec. 1,207 1,201
accumulated depreciation, 1 Jan. -823 -773
accumulated depreciation on
deduction and transfers
depreciation for the period -51 -50
accumulated depreciation, 31 dec. -874 -823
Book value, 31 dec. 333 378
production machinery and equipment, 31 dec. 324 370
98 paReNT CoMpaNy aCCoUNTING polICIeS
eUR million 2010 2009
Other tangible assets
acquisition costs, 1 Jan. 9 9
Increases
decreases 0
acquisition costs, 31 dec. 9 9
accumulated depreciation, 1 Jan. -5 -5
accumulated depreciation on
deduction and transfers
depreciation for the period 0
accumulated depreciation, 31 dec. -5 -5
Book value, 31 dec. 4 4
Construction in progress
acquisition costs, 1 Jan. 2 3
Increases 15 3
Transfers between items -2 -3
decreases -1
acquisition costs, 31 dec. 15 2
Book value, 31 dec. 15 2
The undepreciated portion of capitalized interest expenses under the
balance sheet item ”Buildings and constructions” at 31 dec. 2010 was
eUR 0.0 million (2009: eUR 0.0 million) and under the balance sheet item
”Machinery and equipment” it was eUR 1.7 million (2009: eUR 2,1 million).
There were no capitalized interest expenses during the 2010 financial year
(2009 eUR 0,0 million).
12. Investments
Shares in Group companies
acquisition costs, 1 Jan. 626 590
Increases 362
decreases -1
Write-down -325
acquisition costs, 31 dec. 626 626
Book value, 31 dec. 626 626
Shares in associated companies
acquisition costs, 1 Jan. 158 255
Write-down -60
decreases -97
acquisition costs, 31 dec. 98 158
Book value, 31 dec. 98 158
Other shares and holdings
acquisition costs, 1 Jan. 60 60
Increases 2 3
decreases -32 -3
acquisition costs, 31 dec. 30 60
Book value, 31 dec. 30 60

eUR million 2010 2009
Receivables from group companies
acquisition costs, 1 Jan. 84 119
Increases 988
decreases -1,023
Transfers between items
acquisition costs, 31 dec. 84 84
Book value, 31 dec. 84 84
Receivables from associated companies
acquisition costs, 1 Jan.
Increases
decreases
Transfers between items
acquisition costs, 31 dec.
Book value, 31 dec.
Other receivables
acquisition costs, 1 Jan. 220
Increases
Transfers between items -220
acquisition costs, 31 dec.
Book value, 31 dec.
Investment, total
acquisition costs, 1 Jan. 928 1,244
Increases 2 1,353
decreases -32 -1,344
Transfers between items
Write-down -60 -325
acquisition costs, 31 dec. 838 928
Book value, 31 dec. 838 928
13. Loan receivables from management
There are no loan receivables from the managing directors, members of the
Board of directors and their deputies as well as persons belonging to
similar bodies.
eUR million 2010 2009
14. Current receivables
Receivables from Group companies
accounts receivables 15 5
loan receivables 553 333
other receivables 18 524
prepayment and accrued income 10 17
Receivables from associated companies
accounts receivables
loan receivables 7 7
accrued income
other receivables
accounts receivables 157 123
loan receivables
other receivables 18 21
prepayment and accrued income 41 41
819 1,071
15. Prepayment and accrued income
Insurance
Taxes 37 37
others 4 4
41 41
16. Interest-bearing receivables
loan receivables and other non-current assets 84 84
liquid funds and other current assets 567 861
651 945
17. Shareholders’ equity
Share capital, 1 Jan.
Series a shares 62 62
Series B shares 496 496
Share capital, 31 dec. 558 558
Share premium account, 1 Jan./31 dec. 664 664
Restricted equity, total 1,222 1,222
Retained earnings, 1 Jan. -343 -222
dividends paid
loss for the period -40 -121
Retained earnings, 31 dec. -383 -343
Unrestricted equity, total -383 -343
Shareholders’ equity, total 839 879
paReNT CoMpaNy aCCoUNTING polICIeS
99

eUR million 1.1. Increase decrease 31.12.
18. Provisions
provisions for pension 2 1 3
provisions for unemployment
pension costs 8 3 -5 6
Restructuring 32 2 -24 10
provision for rental costs 5 1 -1 5
other provisions 13 1 -12 2
60 8 -42 26
eUR million 2010 2009
19. Liabilities
Non-current
Non-interest-bearing 2 4
Interest-bearing 930 860
932 864
Current
Non-interest-bearing 188 155
Interest-bearing 179 506
367 661
Bonds Interest-% eUR million
2002–2012 9.20 103 101
2002–2014 9.40 91 85
2004–2011 3.33 30 30
2004–2011 3.51 10 10
2004–2011 3.58 12 13
2006–2010 5.59 339
2006–2013 9.25 497 497
Total 743 1,075
100 paReNT CoMpaNy aCCoUNTING polICIeS
eUR million 2010
20. Non-current debts with amortization plan
Bonds
2011 52
2012 103
2013 497
2014 91
2015
2016
Total, at the end of the financial period 743
loans from financial institutions
2011 22
2012 23
2013 18
2014
2015
2016
Total, at the end of the financial period 63
pension loans
2011 29
2012 28
2013 39
2014 28
2015 18
2016 84
Total, at the end of the financial period 226
Total
2011 103
2012 154
2013 555
2014 119
2015 18
2016 84
Total, at the end of the financial period 1,033
21. Non-current liabilities 2010 2009
other liabilities
Bonds 691 736
loans from financial institutions 41 63
pension loans 198 61
other liabilities 2 4
932 864
22. Current liabilities
liabilities from Group companies 131 148
liabilities from associated companies 1 1
other liabilities
Bonds 52 339
loans from financial institutions 22 22
pension loans 29 39
advance payment 4 3
accounts payable 57 49
other liabilities 10 9
accruals and deferred income 61 51
367 661

eUR million 2010 2009
23. Accruals and deferred income
Current
Insurance 4 4
personnel expenses 16 15
Interests 12 13
accruals of purchases 4 11
Freight costs 1 1
discounts 15 13
others 9 -6
61 51
24. Contingent liabilities
For own liabilities
liabilities secured by pledges
pension loans 100
pledges granted 52
liabilities secured by mortgages
loans from financial institutions 31
pension loans 126 75
other liabilities 6
Real estate mortgages 132 106
on behalf of Group companies
pledges 13
Guarantees 1,338 1,557
on behalf of others
Guarantees 1
leasing commitments
payments due in the following year 1 1
payments due in subsequent years 2 1
Total
Real estate mortgages 132 106
pledges 65
Guarantees 1,338 1,559
leasing liabilities 3 2
1,538 1,666
eUR million 2010 2009
25. Environmental items
Income statement
Materials and consumables 4 3
employees costs
Wages and salaries 1 1
Social security costs
depreciation 3 3
other operating charges 2 2
10 9
Balance sheet
Intangible and tangible assets
acquisition costs, 1 Jan. 69 69
Increases 1 1
decreases -1
depreciation -33 -29
Book value, 31 dec. 37 40
provisions
other provisions 2 1
only additional identifiable costs that are primarily intended to prevent, reduce
or repair damage to the environment are included environmental costs.
environmental expenditures are capitalised if they have been incurred to
prevent or reduce future damage or conserve resources and bring future
economic benefits.
paReNT CoMpaNy aCCoUNTING polICIeS
101

The Board´s proposal for
the distribution of profits
The distributable funds of the parent company are eUR -382,932,705.40 of which the result for the period is eUR -40,145,050.84. The Board
of directors proposes to the annual General Meeting that no dividend to be paid and the result for the period to be transferred to the retained
earnings account.
No material changes have been taken place in respect of the company´s financial position after the balance sheet date. The liquidity of the
company is good.
102 The BoaRd´S pRopoSal FoR The dISTRIBUTIoN oF pRoFITS
espoo, 10 February 2011
Kari Jordan Martti asunta Mikael aminoff
Kirsi Komi Kai Korhonen liisa leino
Juha Niemelä antti Tanskanen erkki Varis
Mikko helander
Ceo

Auditor’s Report (Translation from the Finnish original)
To the Annual General Meeting of
M-real Corporation
We have audited the accounting records, the
financial statements, the report of the Board
of directors and the administration of M-real
Corporation for the year ended 31 december,
2010. The financial statements comprise the
consolidated statement of financial position,
statement of comprehensive income, statement
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 accounts 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 company 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.
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 entity’s preparation of
financial statements and report of the Board
of directors that give a true and fair view in
order to design audit procedures 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 estimates
made by management, as well as
evaluating the overall presentation of the
financial statements and the report of the
Board of directors.
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 consideration of the
annual result and the payment of dividend is
in compliance 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.
espoo, 28 February 2011
pricewaterhouseCoopers oy
authorised public accountants
Johan Kronberg
authorised public accountant
aUdIToR’S RepoRT (TRaNSlaTIoN FRoM The FINNISh oRIGINal)
103

Corporate Governance statement
this statement describing the corporate governance
of m-real Corporation (m-real or
Company) has been issued as a separate
statement pursuant to section 6 of Chapter
2 of the securities markets act and is published
concurrently with the Company’s
financial statements and report of the Board
of Directors.
m-real is a Finnish public limited company
whose a and B series shares are subject to
public trading on the mid Cap list of nasDaQ
omX Helsinki Ltd. (Helsinki stock exchange).
m-real’s administration is governed by Finnish
laws and the regulations and rules set
out pursuant to such laws. m-real also follows
the rules and recommendations of the
Helsinki stock exchange as applicable to
listed companies.
m-real prepares its financial statements
and interim reports according to the International
Financial reporting standards
(IFrs). the financial statement documents
are prepared and published in Finnish and
english.
m-real’s headquarters are located in
espoo, Finland. the Company’s registered
domicile is Helsinki.
M-real’s administration and
governance structure
the Company’s statutory bodies include the
General meeting of shareholders, the Board
Corporate Governance in M-real
INSIDER GUIDELINES
104 Corporate GovernanCe statement
Financial and
Audit Committee
SHAREHOLDERS’ MEETING
DEPUTY TO CEO
BOARD OF DIRECTORS
BOARD COMMITTEES
Nomination and
Compensation Committee
CEO
of Directors, the Ceo and the Deputy Ceo.
In addition, a Corporate management team
assists the Ceo in the operative management
of the Company and coordinating its operations.
the tasks and responsibilities of the
different bodies are specified pursuant to the
Finnish Companies act.
In m-real’s existing organisation, business
areas are defined such that each business
area is responsible for its own sales as well
as production, and thus has a clear profit
responsibility. m-real’s business areas are
Consumer packaging, office papers, speciality
papers, and market pulp and energy.
Application of the Finnish Corporate
Governance Code
as a Finnish listed company, m-real applies
the Finnish Corporate Governance Code
(www.cgfinland.fi). this statement is compliant
with recommendation 51 of the code.
m-real deviates from recommendation 26 of
the code as follows: erkki varis, member of
the audit Committee, is the former managing
Director of the Company’s associated company
oy metsä-Botnia ab (until 2008) and is
thus not independent of the Company in
terms of an overall evaluation. the Board of
Directors considers it important for the audit
Committee to have specific know-how and
competence in the Company’s industry in the
prevailing circumstances.
CORPORATE
MANAGEMENT
TEAM
INTERNAL AUDITING | AUDITING
General Meeting
the General meeting of shareholders is the
Company’s highest decision-making body
where shareholders use their decision-making
power. each shareholder is entitled to
participate in a General meeting by following
the procedure described in the notice to the
General meeting.
according to the Finnish Companies act, the
General meeting decides on the following
matters, among others:
• amending the articles of association
• approving the financial statements
• profit distribution
• mergers and demergers
• acquisition and transfer of own shares
• appointing the members of the Board and
specifying their compensation and the
compensation for Board committee members
• appointing the auditor and specifying its
compensation.
shareholders are entitled to put forward a
matter pertaining to the General meeting to
be addressed when the shareholder delivers
a written request to this effect so well in
advance that the matter can be included in
the notice to the meeting. In addition, the
shareholder has a right to present questions

on the items on the agenda of the General
meeting.
a shareholder is entitled to participate in
a General meeting when he/she is included
in the register of shareholders eight (8) working
days before the General meeting. an
annual General meeting takes place each
year in June at the latest.
an extraordinary General meeting will
convene if the Board finds it necessary, or if
the auditor or shareholders representing at
least 10 per cent of all shares deliver a written
request to this effect in order to process
a specified matter.
Board of Directors
the Board of Directors is responsible for the
Company’s administration and arranging the
Company’s operations properly according to
applicable laws, the articles of association
and good corporate governance. taking into
account the scope and quality of the Company’s
operations, the Board takes care of
matters that are far-reaching and unusual,
and do not belong to the Company’s day-today
business operations. the Board supervises
m-real’s operations and management
and decides on the corporate strategy, major
investments, the Company’s organisation
structure and significant financing matters.
the Board supervises the proper arrangement
of the Company’s operations, and it
ensures that accounting and asset management
control, financial reporting and risk
management have been organised in an
appropriate manner.
For its operations, the Board of m-real has
a written working order. In accordance with
its working order, the Board’s functions
include:
• appointing the Ceo and accepting the
appointment of Corporate management
team members, and ensuring that the
Ceo takes care of the company’s day-today
administration according to the regulations
and guidelines given by the Board
• appointing members to the audit, nomination
and Compensation Committees and
accepting their working orders
• processing and accepting the corporate
strategy and its main policies
• accepting the annual operational plan
• monitoring how company accounting,
asset management and risk control are
arranged
• deciding on significant investments, business
acquisitions, divestments and closures
of operations
• deciding on considerable investments and
financing arrangements
• deciding on the transfer and pledging of
the Company’s significant real property
• deciding on the granting of donations, or
on the Ceo’s authority concerning them
• granting and cancelling the right to represent
the Company and the authority to
sign on behalf of the Company
• monitoring that the company’s articles of
association are complied with; convening
the General meeting and monitoring that
the decisions made by the General meeting
are implemented
• signing and presenting the annual financial
statements to the annual General
meeting for approval, and preparing a proposal
for the use of profits
• approving the essential policies, regulations
and guidelines governing the business
operations
• deciding on who are permanent insiders
in the company and accepting the Company’s
insider rules
• publishing or authorizing the Ceo to publish
all such information that is likely to
have an impact on the Company’s share
value, or which otherwise has to be made
public according to the Finnish securities
markets act.
the working order of the Board of Directors
is presented in full on the m-real website
(www.m-real.com/lnvestor relations/Corporate
Governance). the Board can delegate
matters in its general responsibility to the
Ceo and correspondingly take charge of
decision-making regarding a task of the Ceo.
on an annual basis, the Board assesses
its own operations and the Company’s administration
principles and decides on necessary
changes (if any).
the Board convenes on a regular basis.
In the financial year 2010, the Board held a
total of 15 meetings, four of which were
phone meetings. the attendance rate of the
members was 93 per cent (97 in 2009).
Composition and independence of the
Board of Directors
the composition and number of members
of the Board of Directors must facilitate effective
fulfilment of the Board’s tasks. the composition
of the Board of Directors takes into
account the development phase of the Company,
the special requirements of the industry
and the needs of the Company’s operations.
Both sexes are represented in the
Board of Directors. a member of the Board
must possess the competence required by
the task and the opportunity to allocate sufficient
time for the task.
according to the articles of association,
a minimum of five and a maximum of ten
regular members shall be appointed to the
Board of Directors by the shareholders by
the annual General meeting for a one-year
period at a time. the number of consecutive
terms is not limited. at present, the Board
has nine regular members. the Board
appoints a Chairman and a vice Chairman
from among its members. the annual General
meeting of 2010 appointed the following
persons as members of the Board of Directors:
mr Kari Jordan, born 1956, Chairman, m.sc.
(econ.)
mr martti asunta, born 1955, vice Chairman,
m.sc. (For.)
mr mikael aminoff, born 1951, m.sc. (For.)
ms Kirsi Komi, born 1963, independent member,
L.L.m.
mr Kai Korhonen, born 1951, independent
member, m.sc. (eng.)
ms Liisa Leino, born 1960, independent
member, m.sc. (nutrition)
mr Juha niemelä, born 1946, independent
member, m.sc. (econ.)
mr antti tanskanen, born 1946, independent
member, ph.D. (econ.)
mr erkki varis, born 1948, independent of
significant shareholders, m.sc. (eng.)
the nomination and Compensation Committee
has proposed to the annual General
meeting of 2011 that all current Board members
be re-elected.
Corporate GovernanCe statement
105

a majority of the members of the Board
of Directors are independent of both the
Company and its significant shareholders.
Board member antti tanskanen has acted
as member (independent of operative management)
continuously for more than 12
years. tanskanen is a known Board professional
who enjoys a reputation of trust
throughout the society and has several other
positions of trust outside the Company.
therefore, the Board of Directors has deemed
tanskanen independent of the Company and
its significant shareholders based on an overall
evaluation.
to assess the independence and impartiality
of the members of the Board of Directors,
the members shall notify the Company
of circumstances that may have an impact
on the member’s ability to act without conflict
of interest. In situations where the Board of
Directors processes a business or other contractual
relationship or connection with
metsäliitto Cooperative or its other subsidiary,
the Board of Directors acts, if necessary,
without those of its members who are
dependent of metsäliitto Cooperative.
Board committees
Board committees provide assistance to the
Board of Directors, preparing matters for
which the Board is responsible. the Board
of Directors appoints an audit Committee
and a nomination and Compensation Committee
from among its members. every year
after the annual General meeting, the Board
of Directors appoints each committee’s chairman
and members. the Board of Directors
and its committees can also seek assistance
from external advisors.
Final decisions concerning matters
related to the tasks of the committees are
made by the Board of Directors on the basis
of committee proposals, excluding proposals
made directly to the General meeting by the
nomination and Compensation Committee.
Audit Committee
the audit Committee is responsible for
assisting the Board of Directors in ensuring
that the Company’s financial reporting, calculation
methods, annual financial statements
and other financial information made
public by the Company are correct, balanced,
transparent and clear. on a regular basis,
106 Corporate GovernanCe statement
the audit Committee reviews the internal
control and management systems and monitors
the progress of financial risk reporting
and the auditing of the accounts. the audit
Committee assesses the efficiency and scope
of internal auditing, the company’s risk management,
key risk areas and compliance with
applicable laws and regulations. the committee
gives a recommendation to the Board
concerning the appointment of auditors to
the Company. the audit Committee also
processes the annual plan for internal auditing
and the reports prepared on significant
auditing.
the audit Committee consists of four
Board members of whom three are independent
of the Company and its significant
shareholders. since the annual General
meeting of 2010, Kai Korhonen has been
chairman of the audit Committee, with Kirsi
Komi, antti tanskanen and erkki varis as
members.
the committee members must have adequate
expertise in accounting and financial
statement policies. the audit Committee
convenes on a regular basis, at least four
times a year, including a meeting with the
Company’s auditor. the committee chairman
provides the Board with a report on every
meeting of the audit Committee. the tasks
and responsibility areas have been specified
in the committee’s working order which the
Board has approved.
When necessary, the following persons
are also represented in the audit Committee
meetings as summoned by the Committee:
the auditor, Chief executive officer and Chief
Financial officer as well as other management
representatives and external advisors.
the audit Committee convened five times
during 2010 and the attendance rate of the
members was on average 95 per cent (100
per cent in 2009).
Nomination and Compensation
Committee
the task of the nomination and Compensation
Committee is to assist the Board of
Directors in matters related to the appointment
and compensation of the Company’s
Ceo, the Deputy Ceo and the senior management
and prepare matters related to the
reward schemes for employees. In addition,
the Committee prepares for the annual Gen-
eral meeting a proposal on the number of
Board members, Board composition and
Board member compensation. the Committee
also recommends, prepares and proposes
to the Board the Ceo’s (and the Deputy
Ceo’s) nomination, salary and compensation,
and further evaluates and provides the Board
and the Ceo with recommendations concerning
management rewards and compensation
systems.
the Committee consists of five Board
members. It convenes on a regular basis at
least once a year. the Committee chairman
provides the Board with the proposals issued
by the Committee. the tasks and responsibilities
of the nomination and Compensation
committee have been specified in the committee’s
working order, which the Board
approves.
since the annual General meeting of 2010,
Kari Jordan has been chairman of the nomination
and Compensation Committee, with
mikael aminoff, martti asunta, Liisa Leino
and Juha niemelä as members.
the nomination and Compensation Committee
convened five times during 2010 and
the attendance rate of the members was on
average 83 per cent (90 per cent in 2009).
CEO
Ceo mikko Helander, born 1960, m.sc.(eng.),
is responsible for the daily management of
the Company’s administration according to
the guidelines and instructions given by the
Board. In addition, the Ceo is responsible for
ensuring that the Company’s accounting has
been carried out according to applicable laws
and that asset management has been organised
in a reliable manner. the Ceo manages
the Company’s daily business and is responsible
for controlling and steering the business
areas.
the Ceo has a written Ceo contract
approved by the Board. the Board monitors
the Ceo’s performance and provides a performance
evaluation once a year.
the contractual retirement age of the Ceo
is 62 years. the Company has commissioned
an additional pension insurance policy for
the Ceo, covering the period between the
contractual retirement and the statutory
retirement age of 63 years and entitling the
Ceo to receive a pension compensation equal
to 60 per cent of his salary at the time of

etirement. according to Finnish pension
legislation, a person has the option to retire
between the ages of 63 to 68.
the Board appoints and discharges the
Ceo. the Board can discharge the Ceo without
a specific reason. the Ceo can also
resign from his assignment. the mutual term
of notice is six months. the Board may, however,
decide to discharge the Ceo without a
period of notice.
When the service contract of the Ceo is
terminated by the Board, the Ceo is entitled
to receive discharge compensation equal to
his 18-month salary. In addition, in case the
Company is divested, the Ceo is entitled to
resign from his assignment against a discharge
compensation equal to his 24-month
salary.
Deputy to the CEO
mika Joukio, executive vice president of the
Consumer packaging business area, also
acts as Deputy to the Ceo. the Deputy to the
Ceo is responsible for carrying out the Ceo’s
tasks when the Ceo is unable to perform his
duties.
Corporate Management Team
In the operative management of m-real, the
Ceo is assisted by the Corporate manage-
Corporate
Management Team
Mika Joukio
svp
Consumer packaging
Deputy to the Ceo
Sari Pajari
senior vice president,
Business Development*
Mika Paljakka
Hr
Seppo Puotinen
svp
office papers
Mikko Helander
Ceo
ment team, which consists of mikko
Helander, Ceo, together with business area
executives mika Joukio (Consumer packaging),
seppo puotinen (office papers), Heikki
Husso (speciality papers) and soili Hietanen
(market pulp and energy) who report to
Helander. In addition, the Corporate management
team includes matti mörsky, CFo, and
mika paljakka, svp, Hr. mikko Helander acts
as Chairman to the Corporate management
team. ms sari pajari, m.sc. (eng.) has been
appointed as member of the Corporate management
team as of april 1, 2011 with
responsibility for business development.
each Corporate management team member
has a written employment or service
contract. With the exception of the Ceo,
members of the Corporate management
team have no special pension arrangements
which would deviate from applicable pension
legislation. With the exception of the Ceo,
the term of notice of Corporate management
team members is six months.
the Corporate management team’s tasks
and responsibilities include planning investments,
specifying and preparing the Company’s
strategic guidelines, allocating
resources, controlling routine functions and
preparing matters to be reviewed by the
Board.
Matti Mörsky
CFo
Heikki Husso
svp
specialty papers
Soili Hietanen
svp
market pulp and energy
the Corporate management team convenes
at the Chairman’s invitation once a
month, as a rule, and also otherwise when
necessary.
on 31 December 2010, neither Board
members nor the Ceo or the Deputy to the
Ceo had monetary loans from the Company
or its subsidiaries, and no security arrangements
existed between them.
Internal control, internal auditing and
risk management
profitable business requires that operations
are monitored continuously and with adequate
efficiency. m-real’s internal management
and control procedure is based on the
Finnish Companies act, regulations and recommendations
for listed companies, the
articles of association and the company’s
own approved principles and policies. the
functionality of the company’s internal control
is evaluated by the company’s internal
auditing. Internal control is carried out
throughout the organisation. Internal control
methods include internal guidelines and
reporting systems.
the following describes the principles,
objectives and responsibilities of m-real’s
internal control, risk management and internal
auditing.
*as of 1.4.2011
Corporate GovernanCe statement
107

Internal control
Being a listed company, m-real’s internal
control is steered by the Finnish Companies
act and securities market act, other laws
and regulations applicable to the operations
and the rules and recommendations of the
Helsinki stock exchange, including the Corporate
Governance Code. external control is
carried out by m-real’s auditor and the
authorities.
In m-real, internal control covers financial
reporting and other monitoring. Internal control
is implemented by the Board and operative
management as well as the entire personnel.
Internal control aims to ensure
achieving the goals and objectives set for the
company; economical, appropriate and efficient
use of resources; correct and reliable
financial information and other management
information; adherence to external regulations
and internal policies; security of operations,
information and property in an adequate
manner; and the arrangement of
adequate and suitable manual and It systems
to support operations.
Internal control is divided into (i) proactive
control, such as the specification of corporate
values, general operational and business
principles; (ii) daily control, such as operational
systems and work instructions related
to operational steering and monitoring; and
(iii) subsequent control, such as management
evaluations and inspections, comparisons
and verifications with the aim of ensuring
that the goals are met and that the agreed
operational and control principles are followed.
the corporate culture, governance
and the approach to control together create
the basis for the entire process of internal
control.
Monitoring of the financial reporting
process, credit control and
authorisation rights
the financial organisations of the business
areas and the central administration are
responsible for financial reporting. the units
and business areas report the financial figures
each month. the business areas’ control
functions check their units’ monthly performance
and report them further to central
administration. Business area profitability
development and business risks and opportunities
are discussed in monthly meetings
108 Corporate GovernanCe statement
attended by senior management of the Company
and of the business area in question.
the result will be reported to the Board and
the Corporate management team each
month. the Company’s internal guidelines
provide detailed descriptions on the reporting
and control rules and the reporting procedure.
Credit control in m-real has been centralised
under a Credit Committee, which convenes
at least each quarter. the development
of trade receivables is monitored in each
sales company by credit controllers under
the supervision of the Group vp of Credits.
Counterparty-specific credit limits are set
within the boundaries of the credit policy
confirmed by the Board in cooperation with
centralised credit control and business area
management.
authorisation rights concerning expenses,
significant contracts and investments have
been specified continuously for different
organisation levels according to the decisionmaking
authority policy confirmed by the
Board and the authority separately granted
by the Ceo and other management personnel.
Investment follow-up is carried out by
the Group’s financial administration according
to the investment policy confirmed by the
Board. after pre-approval, investments are
taken to the management teams of the business
areas and the Corporate management
team within the framework of the annual
investment plan. most significant investments
are separately submitted for Board
approval. Investment follow-up reports are
compiled each quarter.
Internal auditing
Internal auditing assists the Board and Ceo
with their control tasks by evaluating the
quality of internal control maintained in order
to achieve the Company’s objectives. In addition,
internal auditing supports the organisation
by evaluating and ensuring the functionality
of business processes, risk management
and the management and administration
systems.
the key task of internal auditing is to
assess the efficiency and suitability of internal
control concerning the company’s functions
and units. In its assignment, internal
auditing evaluates how well the operational
principles, guidelines and reporting systems
are adhered to, how property is protected
and how efficiently resources are used. Internal
auditing also acts as an expert in development
projects related to its task area and
prepares special reports at the request of
the audit Committee or operative management.
Internal auditing operates under the
supervision of the audit Committee and the
Ceo. audit observations, recommendations
and the progress of measures are reported
to the management of the target audited, the
company management and the auditor. every
six months, internal auditing reports its
auditing measures, plans and operations to
the audit Committee.
the action plan of internal auditing is prepared
for one calendar year at a time. the
aim is to allocate the auditing to all functions
and units at certain intervals. auditing is
annually allocated to areas that are in a key
position regarding the evaluated risk and the
company’s objectives at the time. the topicality
and appropriateness of the action plan are
processed with the Company’s management
every six months.
the scope and coordination of the auditing
operations are ensured through regular communication
and information exchange with
other internal assurance functions and the
auditor. When necessary, internal auditing
uses external service providers for temporary
additional resourcing or special expertise for
carrying out demanding evaluation tasks.
Risk management
risk management is an essential part of
m-real’s standard business planning and
leadership. risk management belongs to
daily decision-making, operations follow-up
and internal control, and it promotes and
ensures that the objectives set by the Company
are met.
Linking business management efficiently
with risk management is based on the operational
principles confirmed by the Board;
the aim of the principles is to maintain risk
management as a process that is well
defined, understandable and sufficiently
practical. risks and their development are
reported on a regular basis to the Board’s
audit Committee. Centralised risk management
also takes care of the coordination and

competitive bidding of m-real’s insurance
coverage.
the most crucial objective of risk management
is to identify and evaluate those risks,
threats and opportunities which may have
an impact on the implementation of the strategy
and on how short-term and long-term
objectives are met. a separate risk review is
also included in the most significant investment
proposals.
the business areas regularly evaluate and
monitor the risk environment and related
changes as part of their normal operational
planning. the risks identified and their control
is reported to the company’s management,
audit Committee and the Board at least
twice a year. Business risks also involve
opportunities, and they can be utilised within
the boundaries of the agreed risk limits.
Conscious risk-taking decisions must always
be based on an adequate evaluation of the
risk-bearing capacity and the profit/loss
potential, among other things.
risk management responsibilities in
m-real are divided among different functions.
the Board is responsible for the Company’s
risk management and confirms the Company’s
risk management policy; the audit
Committee evaluates the adequacy of the
Company’s risk management and the essential
risk areas and provides the Board with
related proposals. the Ceo and the management
team are responsible for the specification
and adoption of the risk management
principles. they are also responsible for
ensuring that the risks are taken into account
in the company’s planning processes and
that risk reporting is adequate and appropriate.
the vice president of risk management
reports to the CFo and is responsible for the
Company’s risk management process development,
coordination, the implementation
of risk evaluation and the essential insurance
decisions. Business areas and support functions
identify and evaluate the essential risks
related to their own areas of responsibility
in their planning processes, prepare for
them, take necessary preventive action and
report on the risks as agreed.
m-real’s essential risk management elements
include implementing a comprehensive
corporate risk management process that
supports the entire business, protecting
property and ensuring business continuity,
corporate security and its continuous development,
as well as crisis management and
continuity and recovery plans. according to
the risk management policy and principles,
adequate risk management forms a necessary
part of the preliminary review and implementation
stages of projects which are financially
or otherwise significant.
the tasks of m-real’s risk management are to
• ensure that all identified risks with an
impact on personnel, customers, products,
property, information assets, corporate
image, corporate responsibility and operational
capacity are controlled according
to applicable laws and on the basis of best
available information and financial aspects
• ensure that the company’s objectives are
met
• fulfil the expectations of stakeholders
• protect property and ensure disruptionfree
business continuity
• optimise the profit/loss possibility ratio
• ensure the management of the company’s
overall risk exposure and minimise the
overall risks.
the most significant risks and uncertainties
that the company is aware of are described
in the report of the Board of Directors.
Audit
according to m-real’s articles of association,
the Company has one auditor who shall be
an auditing firm authorised by the Central
Chamber of Commerce of Finland. the General
meeting appoints the auditor each year.
according to the decision made by the annual
General meeting in spring 2009, the Company’s
auditor is pricewaterhouseCoopers
oy which appointed Johan Kronberg, apa,
as the auditor with main responsibility. the
audit committee controls the appointment
procedure of the auditors and provides the
Board and the General meeting with a recommendation
for the appointment of the
auditor.
In 2010, pricewaterhouseCoopers oy
received eUr 359,000 (eUr 279,000 in 2009)
in auditing compensation, pricewaterhouse-
Coopers internationally altogether eUr
876,000 (eUr 1.1 million) and other auditing
firms outside Finland were paid eUr 117,000
(eUr 46,000). In addition, pricewaterhouse-
Coopers has received eUr 350,000 (eUr 1.1
million) for services not related to the actual
auditing of the accounts.
Corporate GovernanCe statement
109

Salary and remuneration report
this salary and remuneration report of
m-real Corporation (m-real or the Company)
has been issued pursuant to recommendation
47 of the Finnish Corporate Governance
Code of June 15, 2010 and it has been published
on the Company’s website on march
1, 2011. In accordance with the Company’s
practice the salary and remuneration report
is updated two times every calendar year as
a starting point, however, always in march in
connection with the annual Corporate Governance
statement.
Decision-making and principles of
remuneration
the purpose of the management’s compensation
system is to compensate the management
in a fair and competitive way for a successful
and profitable implementation of the
Company’s strategy. the objective of remuneration
is also to encourage management
in the development of the Company’s strategy
and business to thereby act for the benefit
the Company.
the Board approves the salary and compensation
of the Ceo and the principles
applied in the compensation of other Corporate
management team members. the Board
further approves the structures and basis for
the Company’s remuneration and incentive
schemes. the nomination and Compensation
Committee assists the Board in matters
relating to management remuneration, conditions
of employment and engagement of
management members as well as prepares
Board decisions relating to management
remuneration.
the Ceo decides on matters related to
the compensation of other senior management
members in accordance with the principles
approved and guidance issued by the
Board.
Financial benefits
Board of Directors
the annual General meeting 2010 resolved
to maintain the remuneration of the members
of the Board of Directors unchanged.
thus, the Chairman receives an annual
remuneration of eUr 76,500, the vice Chairman
eUr 64,500 and members eUr 50,400.
one half of the remuneration was decided to
be paid in cash while the other half was to
110 saLary anD remUneratIon report
be paid in the Company’s B series shares to
be acquired from the stock exchange between
1 and 30 april 2010. as a result, the Chairman
received 14,300, the vice Chairman 12,100
and each Board member 9,400 B-series
shares. the amount of the cash consideration
corresponds to the estimated withholding
tax. In addition, the annual General meeting
resolved to pay to the members a fee of eUr
500 per each attended Board and committee
meeting. the nomination and Compensation
Committee of the Board of Directors has
proposed to the annual General meeting
convening on march 23, 2011 that the Board
remuneration be kept unchanged and also
that the practice of paying the remuneration
in shares and in cash be continued. Board
remuneration has been paid in shares and
cash since 2009.
Managing Director
the Ceo has a written service contract
approved by the Board. the Board monitors
the Ceo’s performance and provides a performance
evaluation once a year. the Board
appoints and discharges the Ceo. the Board
can discharge the Ceo without a specific
reason. the Ceo can also resign from his
assignment. the mutual term of notice is six
months. the Board may, however, decide to
discharge the Ceo without a period of notice.
When the service contract of the Ceo is terminated
by the Board, the Ceo is entitled to
receive discharge compensation equal to his
18-month salary. In addition, in case the
Company or its business is divested, the Ceo
is entitled to resign from his assignment
against discharge compensation equal to his
24-month salary.
the contractual retirement age of the Ceo
is 62 years. the Company has commissioned
an extra pension insurance policy for the
Ceo, covering the period between the contractual
and statutory retirement age of 63
years and entitling the Ceo to receive pension
compensation equal to 60 per cent of his
salary at the time of retirement (calculated
in accordance with Finnish pension laws).
the cost to the Company of the Ceo’s pension
insurance policy amounted in 2010 to approximately
eUr 255,000 (eUr 130,000 in 2009).
In case the service relationship of the Ceo is
terminated prior to retirement, the Ceo is
entitled to a free policy.
Short-term compensation
the monthly salary of Ceo mikko Helander
is eUr 39,793. the salary includes car and
mobile phone benefits. In addition, the Board
may, in accordance with the managing director’s
service contract, decide that the Ceo
receives bonus pay based on his overall performance
and corresponding to his six-month
salary. In 2010, the Ceo received a total of
eUr 1,429,371 in salary, bonuses and other
benefits, of which eUr 497,849 was fixed
compensation and eUr 931,522 was bonus
pay, including bonus pay in accordance with
the Ceo’s service contract as well as a separate
compensation approved by the Board
of Directors in august 2010 and relating to
the Ceo’s withdrawal from the Company’s
2010 share bonus system and the simultaneous
joining to metsäliitto Group’s management
share ownership scheme.
Long-term compensation
the Ceo takes part in the management ownership
scheme of metsäliitto Group’s executive
management, through which he indirectly
owns shares in the Company. as a consequence,
Helander is not entitled to the share
bonus for the 2010 financial period under the
Company’s own share bonus system.
Helander has in august 2010 invested
approximately eUr 500,000 of his own funds
in metsäliito’s new management holding
company, in which he is a co-owner together
with other metsäliitto Group’s executive management
members. the holding company
entitled metsäliitto management Ltd. has in
august 2010 purchased m-real’s B series
shares using its own capital and additional
debt capital obtained from metsäliitto Cooperative.
altogether 881,933 B shares purchased
for the aggregate purchase price of
approximately eUr 2.5 million have been
indirectly allocated to the Ceo. Helander is
tied to the holding company and, as a result,
to an indirect ownership of m-real’s shares
until the end of 2013, at which time the management
ownership system is planned to be
terminated and dismantled. the system will,
however, be extended for one year at a time
if, in october–november 2013, 2014, 2015 or
2016, the price of m-real’s B shares is lower
than the average price at which metsäliitto
management Ltd. originally acquired such
shares. Upon dismantling of the system, the

loan granted by metsäliitto Cooperative to
the management holding company becomes
due. the remaining funds will be distributed
to the participating shareholders in accordance
with the shareholdings. the management
holding company also has the right to
prematurely repay the loan.
should Helander prior to the above point
in time either resign or his service relationship
with the Company is terminated by the
Board of Directors, he is entitled to receive
from the management holding company the
funds he has personally invested in such
company, however, no possible value
increase. the transfer of m-real’s B shares
owned by metsäliitto management Ltd. is
restricted during the entire validity of the
system.
Corporate Management Team
also other Corporate management team
members have written employment contracts.
the term of notice of Corporate
management team members is six months.
termination of employment without cause
entitles members of the Corporate management
team to receive discharge compensation
equal to their 6 to 18-month salary.
excluding the Ceo, Corporate management
team members have no extraordinary
pension arrangements which would deviate
from applicable pension legislation. according
to Finnish pension legislation, a person
has the option to retire between the ages of
63 to 68. the Finnish tyeL pension system
provides for a retirement benefit based on
years of service and earnings according to
the prescribed statutory system. For purposes
of the Finnish pension system earnings
include salary, bonuses and fringe benefits
but exclude share or stock option based
income.
Short-term compensation
In 2010, other Corporate management team
members received a total of eUr 1,977,048
(eUr 1,899,040 in 2009) in salary and bonuses
of which eUr 1,469,132 (eUr 1,544,139) were
fixed salaries and benefits (car and mobile
phone) and eUr 507,917 (eUr 354,901)
bonuses. the members of the Corporate
management team are entitled to bonus pay
corresponding to a maximum of their respec-
tive 6-month salaries. the bonus pay is
defined and decided by the Board and was in
the financial year 2019 based on the Company’s
and its business areas’ (business area
heads) operating results (eBIt) and cash flow
development. the 2011 bonus pay will be
determined on the basis of the Company’s
and its business areas’ operating results
(eBIt), as determined by the Board of Directors.
Long-term compensation
m-real has implemented a share-based
reward system for its senior management
for the years 2008–2010. the possible annual
reward produced by the system has been
based on m-real’s operating results (eBIt)
and cash flow development as decided by the
Board of Directors. the possible reward is
partially paid in m-real’s B-shares and partially
in cash. the amount of cash compensation
corresponds to the amount of withholding
tax. the maximum amount of shares
available for 2010 was 165,000 B-shares
(140,000 in 2009). In 2010, the targets defined
by the Board materialized in the level of 100
per cent (73 per cent in 2009 and zero in 2008)
entitling a full share based remuneration in
the same proportion. the shares include a
lock-up condition restricting their transfer
for two years following the end of the earning
period. the system covered in 2010 the Company’s
management team members excluding
the managing director.
In December 2010, the Board of Directors
resolved on a new share-based incentive
plan. the aim of the plan is to combine the
objectives of shareholders and executives in
order to increase the value of the Company,
to commit the executives to perform the
mutual strategy, and to offer them a competitive
reward plan based on share ownership.
the plan consists of three three-year
earning periods, calendar years 2011–2013,
2012–2014 and 2013–2015. at the beginning
of each period, the Board of Directors will
decide on the earnings criteria and define
targets. the potential reward from the plan
for the earning period 2011–2013 will be
based on m-real Group’s equity ratio and the
development of return on capital employed
(roCe) and earnings before interest and
taxes (eBIt). each earning period is followed
by a two-year restriction period during which
a participant is not entitled to transfer or
dispose of the shares.
the potential reward from the earning
period 2011–2013 will be paid in 2014 partly
in the company’s B series shares and partly
in cash. the proportion to be paid in cash will
cover taxes and tax-related costs. at the
beginning the plan concerns 9 people, including
members of the Corporate management
team. the maximum reward to be paid for
the first earning period corresponds to the
purchase price of approximately 1,000,000
B series shares.
saLary anD remUneratIon report
111

Board of directors
Kari Jordan
b. 1956
M.Sc. (Econ)
Chairman of the Board (2005–)
• president and Ceo of the Metsäliitto
Group (2006–)
• Ceo of Metsäliitto Cooperative (2004–)
• Vice Chairman of the Board of Metsäliitto
Cooperative (2006–)
• Chairman of the Board of Metsä Tissue
Corporation (2004–)
• Member of the Board of oy
Metsä-Botnia ab (2004–) and Chairman
of the Board (2006–)
• Member of the Board of Confederation
of Finnish Industries eK (2005–) and
Vice Chairman of the Board (2009–)
• Vice Chairman of the Board of Finnish
Forest Industries Federation and
member of Federation’s Working Group
(2005–) and Chairman of the Board
(2009–)
• Member of the Supervisory Board
of Varma Mutual pension Insurance
Company (2006–)
holds several positions of trust in foundations
and non-profit associations.
112 BoaRd oF dIReCToRS
Kari
Jordan
Shares owned in M-real Corporation
31.12.2010: directly 0, through Metsäliitto
Management oy 1,763,867 B shares
Martti Asunta
b. 1955
M.Sc. (Forestry)
Member of the Board and Vice Chairman of
the Board (2008–)
• Chairman of the Board of Metsäliitto
Cooperative (2008–)
• Member of the Board of Vapo oy (2008–
2009)
• Member of the Board of oy Metsä-
Botnia ab (2008–)
• Member of the Board of Metsä Tissue
Corporation (2008–)
• Member of the Board of pellervo-Seura
(2008–), Chairman of the Board (2010–)
Shares owned in M-real Corporation
31.12.2010: 23,900 B shares
Mikael
aminof
Mikael Aminoff
b. 1951
M.Sc. (Forestry)
Agriculture and Forestry entrepreneur
Member of the Board (2010–)
• Member of the Supervisory Board of
Metsäliitto Cooperative (2001–)
• Member of the Board of directors of
Metsäliitto Cooperative (2008–)
• Member of the delegation of pellervo-
Seura (2009–)
• Vice Chairman of the Board of Rannikko
Forestry Centre
Shares owned in M-real Corporation
31.12.2010: 22,095 B shares
Kirsi Komi
b. 1963
LL.M, Master of Laws
Member of the Board (2010–)
Independent Board member
• Finnish Red Cross Blood Service,
member of the Board (2010–)
Martti
asunta
• Nokia Siemens Networks, General
Counsel, member of the executive
Board (2007–2010)
Nokia Corporation:
• Vice president, legal & member of
Networks Business Group (”NeT”)
leadership Team and other NeT senior
management forums (1999–2007)
• Senior legal Counsel & head of european
practice Group (1998)
• Vice president, Contracts (dallas, USa)
(1995–1996)
• legal Counsel (1992–1995, 1997)
Shares owned in M-real Corporation
31.12.2010: 9,400 B shares
Kai Korhonen
b. 1951
M.Sc. (Eng), eMBA
Member of the Board (2008–)
Independent Board Member
• Senior executive Vice president, Stora
enso (1998–2007)
• Member of the Supervisory Board of
Ilmarinen Mutual pension Insurance
Company (2006–2008)
Kirsi
Komi

• Vice Chairman of the Board of Finnish
Forest Industries Federation (2006–
2007)
• Member of the Board of american
Forest & paper association (2000–2003)
• Member of the Board of German pulp
and paper association (1995–2000)
Shares owned in M-real Corporation
31.12.2010: 126,860 B shares
Liisa Leino
b. 1960
M.Sc. (Nutrition)
Member of the Board (2009–)
• Full-time Chairwoman of the Board of
directors of leinovalu oy (2006–
• Member of the Board of Confederation
of Finnish Industries eK (2011–)
• Member of the Board of the Federation
of Finnish Technology Industries (2011–)
• deputy member of the Board of Varma
Mutual pension Insurance Company
(2011–)
• Member of the Board of Rautaruukki oyj
(2007–)
• Member of the Board of alko oy (2009–)
antti
Tanskanen
• Member of the Supervisory Board of
Varma Mutual pension Insurance
Company (2007–)
• Member of the Board of Juho leino
Foundation (2008–)
• Managing director of Nurmi Group &
perkko oy (2003–2004)
• Business director of Sitra (2002–2003)
• Business director of Gillette Central
east europe (1999–2002)
• Managing director of Gillette/Braun
(1996–1999)
• Various positions in marketing of Nestlé
Finland oy (1989–1996)
Shares owned in M-real Corporation
31.12.2010: 96,715 B shares
Juha Niemelä
b. 1946
M.Sc. (Econ)
Doctor of Sciences in Economics and
Technology h.c.
Member of the Board (2007–)
Independent Board member
• Chairman, Confederation of european
paper Industries (CepI) (2000–2002)
Juha
Niemelä
Kai
Korhonen
• Ceo, UpM-Kymmene Corporation
(1994–2004)
• Chairman of the Board of Veikkaus oy
(2001–)
• Member of the Board of powerflute oyj
(2005–)
• Member of the Board of Green
Resources aS (2008–), Chairman of the
Board (2009–)
Shares owned in M-real Corporation
31.12.2010: 96,715 B shares
Antti Tanskanen
b. 1946
Ph.D. (Econ)
Minister
Member of the Board (1992–)
Independent Board member
• Chairman and Ceo, op Bank Group
(1997–2006)
• Chairman of the Board of the State
pension Fund (2009–)
• Chairman of the Board of the University
of helsinki (2010–)
Shares owned in M-real Corporation
31.12.2010: 96,715 B shares
liisa
leino
Erkki Varis
b. 1948
M.Sc. (Eng)
Member of the Board (2009–)
Independent of significant shareholders
• Member of the Board of pohjolan Voima
oy (2000–2009)
• president and Ceo of oy Metsä-Botnia
ab (1997–2008)
• Member of the Metsäliitto Group
executive Management Team (2002–
2008)
• Managing director of oy Metsä-Rauma
ab (1994–1996)
• deputy to Ceo of oy Metsä-Botnia ab
(1990–1994)
• Managing director of oy Metsä-Botnia
ab, Kaskinen mill (1984–1990)
• Member of a/S Baltic pulp Supervisory
Board (2004–2008)
• Member of the Competitiveness Committee
of the Finnish Forest Industries
Federation (2007–2008)
• Chairman of the Board of Suomen
laatukeskus ry (2005–2007)
• Chairman of the Board of Botnia S.a.
(2003–2008)
Shares owned in M-real Corporation
31.12.2010: 54,800 B shares
erkki
Varis
BoaRd oF dIReCToRS
113

Management team of M-real Corporation
Mikko Helander
b. 1960
M.Sc. (Eng)
Chief Executive Officer
Joined the Metsäliitto Group in 2003 and
M-real in 2006. Chairman of the M-real
Corporate Management Team as of 2006.
• project engineer and production
Manager, Valmet (1984–1990)
• Managing director, Kasten hövik
(1990–1993)
• head of projects, Coaters and
Calanders, Valmet (1993)
• head the operations, Valmet Rotomec
S.p.a., Italy (1994–1997)
• Vice president and Chief executive,
Calander business, Valmet Corporation
(1997–1999)
• president, Valmet Converting Group, UK
(1999–2003)
• Chief executive officer, Metsä Tissue
Corporation (2003–2006)
• Chief executive officer and chairman of
the corporate management team,
M-real (2006–).
Shares 31.12.2010: directly 0, through
Metsäliitto Management oy 881,933
B shares
Mikko
helander
114 MaNaGeMeNT TeaM oF M-Real CoRpoRaTIoN
Matti Mörsky
b. 1952
M.Sc. (Eng)
Chief Financial Officer
Joined M-real in 1981. Corporate management
team member as of 2006.
• product development and sales positions,
oy Fiskars ab’s plastic industry
(1978–1980)
• duties in corporate planning, G.a.
Serlachius oy (1981–1982)
• project manager, Stuart edgar ltd
(1982–1986)
• General Manager, T-drill Inc. (1986–1987)
• various positions in business
development and in M&a projects in
Metsä-Serla, i.e. Vice president,
Business development (1987)
• General Manager, hygiene division of
holmen hygiene aB (1989)
• General Manager, Kitchen Furniture
division, Metsä-Serla (1992)
• General Manager, Rantasalmi
loghouses (1994)
• Senior Vice president, Business
development, M-real (1999–2009)
• Chief Financial officer, M-real
(May 2009–).
Mika
paljakka
Shares 31.12.2010: 3,540 B shares.
Mika Joukio
b. 1964
MSc (Tech), MBA
Senior Vice President,
Head of Consumer Packaging
Deputy to CEO
Joined M-real in 1990. Corporate management
team member as of 2006.
• Various positions in management and
development tasks at Metsä-Serla and
M-real since 1990: assistant production
Manager (1990–1996), production
Manager (1996–2001), Metsä-Serla Tako
Board Mill
• Vice president and Mill Manager, M-real
Äänekoski Board Mill (2001–2004)
• Senior Vice president, Corporate
logistics and Supply Chain (2004–2005)
• Vice president and Mill Manager, M-real
Kyro Board and paper Mill (2005–2006)
• Vice president and Mill Manager, M-real
Kyro Board and paper Mill and M-real
Tako Board Mill (2006)
• Senior Vice president, head of Consumer
packaging business area (2006–) and
deputy to Ceo (2009–).
Shares 31.12.2010: 20,395 B shares.
Sari
pajari
Seppo Puotinen
b. 1955
Lic Tech
Senior Vice President, Head of Office Papers
Worked in Metsä-Serla in 1986–2000 and
joined M-real again in 2004. Corporate
management team member as of 2005.
• assistant in applied mechanics,
University of oulu (1981–1985)
• researcher, KCl, Finland (1985–1986)
• various positions in business development,
marketing and operational
responsibility in Metsä-Serla: i.e. Vice
president, Cartons division, Corrugated
and Folding Carton operations (1999)
• Managing director, SCa packaging,
Finland, Russia and the Baltic countries
(2000–2002)
• president, SCa’s Containerboard
division, Brussels (2002–2004)
• executive Vice president, Corporate
Strategy & Sales Services, M-real
(2004–2005)
• Senior Vice president, head of office
papers business area (2005–) and Vice
president and Mill Manager, M-real
husum, Sweden (2009–).
Shares 31.12.2010: 1,000 a shares, 13,882
B shares.
Matti
Mörsky

Heikki Husso
b. 1961
M.Sc. (Eng)
Senior Vice President, Head of Speciality
Papers
Joined M-real in 1989. Corporate management
team member as of 2009.
• production and development engineer,
Technical Customer Service engineer,
Metsä-Serla Kangas paper Mill, Finland
(1989–1991)
• Quality Manager, Metsä-Serla Kangas
paper Mill (1991–1992)
• Sales and Marketing Manager, Speciality
papers, Metsä-Serla Kangas paper Mill
(1992–1997)
• Sales and Marketing director, Speciality
papers, Md papier, Germany (1997–
2000)
• Marketing director, digital printing
papers, Metsä-Serla, Germany (2000)
• Business development director,
Zanders Feinpapiere aG, Germany
(2001)
• Vice president, Mill Manager,
M-real Zanders Reflex mill, Germany
(2001–2008)
• Managing director, M-real Zanders
Gmbh, Managing director, M-real
deutsche holding Gmbh (2004–)
• labour Relations director, M-real
deutsche holding Gmbh (2004–2008)
• Vice president, Mill Manager, M-real
Zanders, Gohrsmühle mill (2005–2008)
Mika
Joukio
• Senior Vice president, Zanders Speciality
papers (January–June 2009)
• Senior Vice president, head of Speciality
papers business area (June 2009–).
Shares 31.12.2010: 4,565 B shares.
Soili Hietanen
b. 1954
Ph.D. (Tech)
Senior Vice President,
Head of Market Pulp and Energy
Joined M-real in 1986. Corporate management
team member as of 2009.
• post graduate studies, research and
lecturing (1979–1984)
• project engineer, pI Consulting, Finland
(1984–1986)
• laboratory engineer, laboratory of
paper Chemistry, Äänekoski, Finland,
(1986–1989)
• Research and development Manager,
Äänekoski paper Mill (1989–1994)
• production Manger, M-real Äänekoski
paper Mill (1994–1997)
• Research and development Coordinator,
M-real paper Group, Äänekoski (1997–
2001)
• Research and development Coordinator,
M-real paper Group, espoo, Finland
(2000–2002)
heikki
husso
• Vice president, Technology Manager,
Coated Fine paper Mills (2001–2004)
• Vice president, production and
Technology, Commercial printing (2005)
• Senior Vice president production and
Technology, M-real Commercial printing
(2005–2007)
• Senior Vice president, production and
Technology, M-real Graphic papers
(2007–2009)
• Senior Vice president, head of Market
pulp and energy business area (2009–).
Shares 31.12.2010: no ownership.
Sari Pajari
b. 1968
M.Sc. (Tech)
Senior Vice President,
Business Development (as of 1.4.2011)
Joined M-real in 2011. Corporate management
team member as of 2011.
• Various positions (Consultant, Senior
Consultant, Vice president ) at Jaakko
pöyry Consulting in Finland and USa
(1990–2000)
• principal Consultant, pwC Management
Consulting (2000–2002)
• principal Consultant and Business
development executive, IBM Corporation
(2002–2007)
• director, Group ICT, Metsäliitto Group
(2007–2009)
Soili
hietanen
• CIo, Senior Vice president, Metsäliitto
Group (2009–2011).
Shares 31.12.2010: no ownership.
Mika Paljakka
b. 1968
Lic Econ and BA, MSc (Educ)
Senior Vice President, Human Resources and
Total Quality Management
Joined the Metsäliitto Group in 2000.
Corporate management team member as
of 2008.
• human Resources development Manager,
perlos Corporation (1994–2000)
• human Resources development Manager
and Senior Vice president, human
Resources, oy Metsä-Botnia ab (2000–
2002)
• Vice president, Business development,
M-real (2002–2003)
• Senior Vice president, human
Resources & Management, Finnforest
Corporation (2003–2008)
• Senior Vice president, human Resources
and Total Quality Management, M-real
(2008–) and Metsä-Botnia (2009–).
Shares 31.12.2010: 19,577 B shares.
Seppo
puotinen
MaNaGeMeNT TeaM oF M-Real CoRpoRaTIoN
115

Shares and shareholders
Share capital and shares
at 31 December 2010
The company’s paid-in share capital on the
balance sheet date was eUR 557,881,540.40
and consisted of 328,165,612 shares. The
company has two series of shares. The
number of series a shares was 36,339,550
and the number of series B shares
291,826,062. each series a share entitles its
holder to twenty (20) votes at a General Meeting
of Shareholders, and each series B share
entitles the holder to one (1) vote. all shares
carry the same right to receive a dividend.
M-real’s a shares can be converted to B
shares if shareholder or representative of
the nominee registered shares makes a written
request of the conversion to the company.
The conversion does not include additional
consideration.
Stock Exchange listings and share
price development
In 2010, the highest price of M-real’s B shares
on the NaSdaQ oMX helsinki ltd was eUR
3.26, the lowest eUR 1.46, and the average
price eUR 2.44. at year-end, the price of the
B share was eUR 2.54. In 2009, the average
price was 0.66, and at year-end 1.53. The
trading volume of B shares in 2010 was eUR
894 million, or 125 per cent of the share
capital.
116 ShaReS aNd ShaReholdeRS
The market value of the a and B shares
totaled eUR 845 million at the year-end.
at year-end, Metsäliitto Cooperative
owned 38.8 per cent of M-real Corporation’s
shares, and the voting rights conferred by
these shares was 60.5 per cent. International
investors’ holdings were 14 per cent.
Flaggings in 2010
on 8 april 2010, the holdings of Norway’s
Central Bank (Norges Bank) in M-real
dropped to 4.4 per cent of the share capital
and 1.4 per cent of the voting rights.
Impact of change in control
Many of M-real’s financing agreements
include a clause under which its loans will
mature before their stated maturity if any
new party will acquire control of M-real. In
addition, shareholders agreements include
a provision under which M-real must offer
its shares in such companies for sale to the
other shareholders in such companies in
case of M-real’s change of control. according
to the shareholders agreement for oy Metsä-
Botnia ab, the shareholders must offer their
shares for sale to the other shareholders in
case of their change of control. a possible
decrease of the voting rights of Metsäliitto
Cooperative in M-real below 50 per cent
would not alone, however, obligate M-real to
offer its shares in oy Metsä-Botnia ab.
Changes in share capital and numbers of shares 1.1.2000– 31.12.2010
Numbers
of shares
Share capital,
eUR million
1999 Share capital, 31 dec.1999 138,999,425 233.8
2000 Change in nominal value
5 May 2000, from share premium
funds 2.5
Share capital, 31 dec. 2000 138,999,425 236.3
2001 Rights issue 35,000,000 59.5
Rights issue 5,000,000 8.5
Share capital, 31 dec. 2001 178,999,425 304.3
2002–2003 No changes
Share capital, 31 dec. 2003 178,999,425 304.3
2004 Rights issue 148,633,415 252.7
Rights issue 532,772 0.9
Share capital, 31 dec. 2004 328,165,612 557.9
2005–2010 No changes
Share capital, 31 dec. 2010 328,165,612 557.9
Directors’ interest
Shareholdings of the Board of directors and
the Corporate Management Team are presented
on pages 112–115.
Board of Directors’ authority to issue
shares
The Board of directors has authority to
increase the share capital through one or
more rights issues and/or more issues of
convertible bonds such that in the rights
issue or issue of convertible bonds, according
to Finnish Companies act, Chapter 10 a
total maximum of 58,365,212 M-real Corporation
B shares can be subscribed for, and
that the company’s share capital can be
increased by a total maximum of eUR
99,220,860.40
The authorization will confer the right to
disapply shareholders’ pre-emptive right to
subscribe for new share and/or issues of
convertible bonds and to decide on the subscription
prices and other terms and conditions.
Shareholder’s preemptive subscription
rights can be disapplied providing that there
is a significant financial reason for the company
to do so, such as strengthening of the
company’s balance sheet, making possible
business structuring arrangements or taking
other measures for developing the company’s
business operations.
Dividend policy
M-real’s dividend policy is stable and rewarding
to shareholders, and aims at paying a
dividend of at least 1/3 of the Company’s
earnings per share on average over the business
cycle, nonetheless taking into account
the Company’s gearing target.

Major shareholders * 12/31/2010 A-series B-series Total Shares Votes
Shareholders No. of shares No. of shares No. of shares % %
1 Metsäliitto Cooperative 25,751,535 101,677,045 127,428,580 38.83% 60.54%
2 Varma Mutual pension Insurance Company 2,203,544 12,015,451 14,218,995 4.33% 5.51%
3 etola erkki olavi 0 7,000,000 7,000,000 2.13% 0.69%
4 Metsäliitto Management oy 0 6,790,887 6,790,887 2.07% 0.67%
5 Ilmarinen Mutual pension Insurance Company 3,534,330 3,028,211 6,562,541 2.00% 7.24%
6 Maa- Ja Metsätaloustuottajain Keskusliitto Mtk Ry 1,704,249 1,437,230 3,141,479 0.96% 3.49%
7 Fim Forte Mutual Fund 0 2,525,040 2,525,040 0.77% 0.25%
8 The State pension Fund 0 2,503,560 2,503,560 0.76% 0.25%
9 Nordea Fennia Fund 0 2,018,126 2,018,126 0.62% 0.20%
10 op-Focus Fund 0 2,000,000 2,000,000 0.61% 0.20%
11 alfred Berg Mutual Fund 0 1,927,045 1,927,045 0.59% 0.19%
12 Mutual Fund Fim Fenno 0 1,800,773 1,800,773 0.55% 0.18%
13 op-Suomi pienyhtiöt 0 1,300,000 1,300,000 0.40% 0.13%
14 Mutual Insurance Company pension-Fennia 0 1,205,000 1,205,000 0.37% 0.12%
15 erikoissijoitusrahasto Nordea Suomi 130/30 0 1,000,000 1,000,000 0.30% 0.10%
16 Gyllenberg Finlandia Fund 0 1,000,000 1,000,000 0.30% 0.10%
17 Veikko laine oy 0 928,485 928,485 0.28% 0.09%
18 aBN amro Small Cap Mutual Fund 0 850,000 850,000 0.26% 0.08%
19 hämäläinen pertti ensio 0 712,365 712,365 0.22% 0.07%
20 Gyllenberg Small Firm Fund 0 700,000 700,000 0.21% 0.07%
* Shareholders in the book-entry system. does not include nominee registered shareholders
M-real A-share
Number of shares Number of shareholders %
Number of
shares % Number of votes %
1–100 949 26.90 55,928 0.15 1,118,560 0.15
101–500 1,462 41.44 428,845 1.18 8,576,900 1.18
501–1000 567 16.07 475,057 1.31 9,501,140 1.31
1001–5000 479 13.58 1,005,523 2.77 20,110,460 2.77
5001–10000 35 0.99 252,590 0.70 5,051,800 0.70
10001–50000 29 0.82 611,294 1.68 12,225,880 1.68
50001–100000 2 0.06 190,585 0.52 3,811,700 0.52
100001–500000 1 0.03 126,070 0.35 2,521,400 0.35
500001– 4 0.11 33,193,658 91.34 663,873,160 91.34
Total 3,528 100 36,339,550 100 726,791,000 100
of which nominee registered 7 63,964 0.18 1,279,280 0.18
on waiting list, total 0 0 0
In joint accounts 0 0
Total in special accounts 0 0
Number issued 36,339,550 100 726,791,000 100
M-real B-share
Number of shares Number of shareholders %
Number of
shares % Number of votes %
1–100 13,982 33.02 614,669 0.21 614,669 0.21
101–500 12,194 28.80 3,241,167 1.11 3,241,167 1.11
501–1000 5,483 12.95 4,487,434 1.54 4,487,434 1.54
1001–5000 7,681 18.14 18,814,105 6.45 18,814,105 6.45
5001–10000 1,523 3.60 11,422,279 3.91 11,422,279 3.91
10001–50000 1,238 2.92 25,286,060 8.67 25,286,060 8.67
50001–100000 121 0.29 8,627,414 2.96 8,627,414 2.96
100001–500000 90 0.21 18,907,521 6.48 18,907,521 6.48
500001– 30 0.07 200,425,413 68.68 200,425,413 68.68
Total 42,342 100 291,826,062 100 291,826,062 100
of which nominee registered 12 45,444,245 15.57 45,444,245 15.57
on waiting list, total 0 0 0
In joint accounts 0 0
Total in special accounts 0 0
Number issued 291,826,062 100 291,826,062 100
ShaReS aNd ShaReholdeRS
117

M-real Shareholders
31122010
Share Price Development 2008–2010
index
M-real a M-real B Nasdaq oMX helsinki Forest industry index
118 ShaReS aNd ShaReholdeRS
Non-profitmaking organizations 3%
Financial and insurance institutions 5%
public communities 8%
households 25%
Metsäliitto 39%
other companies 6%
Non-Finnish nationals 14%
2008 2009 2010
Earnings per share
EuR
06 07 08 09 10
0.5
0
-0.5
-1.0
-1.5
-2.0
120
90
60
30
Shareholder’s equity per share
EuR
06 07 08 09 10
0
M-real Voting Rights
31122010
Traded volume 2009–2010
millions
a-share B-share
6
5
4
3
2
1
0
Dividend yield
%
Non-profitmaking organizations 4%
Financial and insurance institutions 2%
public communities 14%
households 12%
Metsäliitto 61%
other companies 2%
other companies 5%
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
06 07 08 09 10*
* Board’s proposal to the Annual general Meeting
80
60
40
20
0
2.0
1.5
1.0
0.5
0

Share performance
2010 2009 2008 2007 2006
adjusted prices, eUR
a share high 3.64 2.40 3.40 5.80 5.67
low 1.93 0.54 0.77 3.00 3.66
at year end 2.85 1.94 0.83 3.40 4.81
average 2.85 1.52 1.88 4.42 4.61
B share high 3.26 1.57 3.28 5.94 5.62
low 1.46 0.19 0.67 2.96 3.26
at year end 2.54 1.53 0.69 3.25 4.79
average 2.44 0.66 1.59 4.56 4.41
Trading in shares, units of NaSdaQ oMX helsinki
a share 1,968,018 1,513,161 1,757,960 3,060,113 1,910,151
% of total no. of a shares 5.4% 4.2% 4.8 8.4 5.3
B share 365,284,851 497,931,005 634,548,405 511,653,806 522,205,654
% of total no. of B shares 125.2% 170.6% 217.4 175.3 178.9
Number of shares at the year end
a share 36,339,550 36,339,550 36,339,550 36,339,550 36,339,550
B share 291,826,062 291,826,062 291,826,062 291,826,062 291,826,062
Total 328,165,612 328,165,612 328,165,612 328,165,612 328,165,612
adjusted number of shares at year end 328,165,612 328,165,612 328,165,612 328,165,612 328,165,612
Market capitalization of shares at year end, eUR million 844.8 517.0 231.5 1,070.0 1,572.6
Number of shareholders* 43,937 42,766 40,555 38,067 39,984
* Shareholders in the book entry system. does not include nominee registeres shareholders
Figures per share
eUR million 2010 2009 2008 2007 2006
Calculation of earnings per share
Result from continuing operations before tax 48 -358 -204 -191 -280
– non-controlling interest 1 -4 -9 1 3
– taxation -21 27 34 23 11
+ Result from discontinued operations 0 -23 -338 -27 -130
= earnings 28 -358 -517 -194 -396
– adjusted number of shares (average) 328,165,612 328,165,612 328,165,612 328,165,612 328,165,612
earnings per share, eUR
from continuing operations 0,09 -1.02 -0.55 -0.51 -0.81
from discontinuing operations 0,00 -0.07 -1.03 -0.08 -0.40
earnings per share total, eUR 0,09 -1.09 -1.58 -0.59 -1.21
Shareholders’ equity per share, eUR 3,03 2.79 4.05 4.93 5.62
divident per share, eUR 0,00 1) 0.00 1) 0.00 1) 0.06 0.06
dividend per profit, % 0,0 0.0 0.0 -10.2 -5.0
Nominal value per share, eUR . - - 1.70 1.70
dividend yield, %
Series a 0,0 1) 0.0 1) 0.0 1) 1.8 1.2
Series B 0,0 1) 0.0 1) 0.0 1) 1.8 1.3
price/earning ratio (p/e ratio)
Series a 31,7 -1.8 -0.5 -5.8 -4.0
Series B 28,2 -1.4 -0.4 -5.5 -4.0
(p/BV), %
Series a 94,1 69.5 20.5 60.9 76.8
Series B 83,8 54.8 17.0 58.2 76.5
1) Board of directors proposes that no dividend is paid for 2010.
ShaReS aNd ShaReholdeRS
119

quaterly data
eUR million Total year Quarterly
Sales 2010 2009 IV/2010 III/2010 II/2010 I/2010 IV/2009 III/2009 II/2009 I/2009
Consumer packaging 1,175 968 303 305 310 257 255 250 237 226
office papers 658 543 181 164 153 160 132 133 131 147
Speciality papers 303 352 66 75 80 82 73 80 82 117
Market pulp and energy 434 508 106 107 126 95 126 132 116 134
other operations 198 189 55 53 44 46 59 56 40 34
Internal sales -163 -128 -46 -42 -37 -38 -39 -33 -21 -35
Sales 2,605 2,432 665 662 676 602 606 618 585 623
Operating result. excluding
non-recurring items 2010 2009 IV/2010 III/2010 II/2010 I/2010 IV/2009 III/2009 II/2009 I/2009
Consumer packaging 149 69 38 34 38 39 34 31 5 -1
office papers 5 -48 0 9 -4 0 0 -13 -18 -17
Speciality papers -26 -51 -8 -7 -5 -6 -6 -11 -22 -12
Market pulp and energy 53 -54 12 16 16 9 -9 -14 -19 -12
other operations -8 -66 -5 2 -2 -3 -12 -15 -16 -23
EBIT 173 -150 37 54 43 39 7 -22 -70 -65
Operating result and result before taxes 2010 2009 IV/2010 III/2010 II/2010 I/2010 IV/2009 III/2009 II/2009 I/2009
Consumer packaging 135 51 24 34 38 39 33 31 4 -17
office papers 14 -104 9 9 -4 0 -54 -15 -18 -17
Speciality papers -54 -151 -31 4 -21 -6 -78 -10 -23 -40
Market pulp and energy 36 -91 -1 12 16 9 -39 -15 -19 -18
other operations 15 28 -5 7 6 7 86 -15 -17 -26
Operating result 1) 146 -267 -4 66 35 49 -52 -24 -73 -118
Share of results in associated companies
-24 -16 -3 -1 -18 -2 -2 -1 -12 -1
exchange gains/losses -9 5 -2 -1 0 -6 1 2 2 0
other financial income and expences -65 -80 -13 -19 -17 -16 -21 -49 -14 4
Result before taxes 48 -358 -22 45 0 25 -74 -72 -97 -115
Operating result. (% of sales) 2010 2009 IV/2010 III/2010 II/2010 I/2010 IV/2009 III/2009 II/2009 I/2009
Consumer packaging 11.5 5.3 7.9 11.1 12.3 15.2 12.9 12.4 1.7 -7.5
office papers 2.1 -19.2 5.0 5.5 -2.6 0.0 -40.9 -11.3 -13.7 -11.6
Speciality papers -17.8 -42.9 -47.0 5.3 -26.3 -7.3 -106.8 -12.5 -28.0 -34.2
Market pulp and energy 8.3 -17.9 -0.9 11.2 12.7 9.5 -31.0 -11.4 -16.4 -13.4
M-real 5.6 -11.0 -0.6 10.0 5.2 8.1 -8.6 -3.9 -12.5 -18.9
1) Metsä-Botnia’s net result is included in operating result starting from 8 december 2009
120 QUaTeRly daTa

1,000 tonnes Full year Quarterly
Deliveries 2010 2009 IV/2010 III/2010 II/2010 I/2010 IV/2009 III/2009 II/2009 I/2009
Consumer packaging 1,390 1,212 344 353 372 321 327 315 296 274
office papers 909 790 248 212 212 237 198 199 190 203
Speciality papers 246 342 49 57 66 74 68 76 80 118
paper businesses total 1,155 1,132 297 269 278 311 266 275 270 321
Market pulp and energy 690 1,155 168 167 194 161 246 295 327 287
Production 2010 2009 IV/2010 III/2010 II/2010 I/2010 IV/2009 III/2009 II/2009 I/2009
Consumer packaging 1,420 1,232 362 353 363 342 342 323 275 292
office papers 910 795 238 228 209 235 213 181 202 199
Speciality papers 235 297 46 52 67 70 63 69 69 96
paper mills total 1,145 1,092 284 280 276 305 276 250 271 295
Metsä-Botnia's pulp 1) 652 863 164 160 164 164 203 219 210 231
M-real's pulp 1,295 1,120 327 331 308 329 316 263 264 277
1) Corresponds to M-real’s ownership share of 30% in Metsä-Botnia
QUaTeRly daTa
121

production capacities
BOARD MILLS
1,000 tonnes Country Machines Folding boxboard linerboard Total
Tampere Finland 2 205 205
Kyröskoski Finland 1 150 150
Äänekoski Finland 1 210 210
Simpele *) Finland 1 220 220
Kemi Finland 1 375 375
Total 6 785 375 1,160
*) The investment, to be finalised in the summer of 2011 will increase the annual folding boxboard capacity of the mill by approximately 80,000 tonnes.
PAPER MILLS
Coated Coated Uncoated Speciality
1,000 tonnes Country Machines magazine paper fine paper fine paper papers Total
Äänekoski Finland 1 190 190
Kyröskoski Finland 1 105 105
Bergisch Gladbach Germany 2 120 120 240
düren Germany 3 20 20
husum Sweden 3 275 435 710
alizay France 1 310 310
Total 11 275 190 865 245 1,575
PULP MILLS
1,000 tonnes Country
Chemical
pulp BCTMp Total
husum Sweden 690 690
hallein austria 160 160
Joutseno Finland 290 290
Kaskinen Finland 300 300
Total 850 590 1,440
METSÄ-BOTNIA **)
1,000 tonnes Country
Chemical
pulp Total
Äänekoski Finland 500 500
Kemi Finland 590 590
Rauma Finland 630 630
Joutseno Finland 650 650
Total 2,370 2,370
**) M-real’s share of production capacity is 30%.
OTHER SHAREHOLDINGS
Coated magazine paper 230 Myllykoski paper oyj, (share 35%), Finland
Uncoated magazine paper 370 Myllykoski paper oyj, (share 35%), Finland
122 pRodUCTIoN CapaCITIeS

Ten years in figures
2010 2009 2008 2007 2006 2005 2004 2003 2002 2001
Income statement, EUR million
Sales 2,605 2,432 3,236 3,499 3,698 3,342 5,522 6,044 6,564 6,923
- change % 7.1 -24.8 -7.5 -5.4 10.7 n/a -8.6 -7.9 -5.2 14.8
exports from Finland 1,179 1,073 1,216 1,084 1,068 875 1,696 1,653 1,714 1,743
exports and foreign subsidiaries 2,396 2,232 3,068 3,274 3,459 3,160 5,182 5,652 6,173 6,438
operating profit 146 -267 -61 -49 -172 11 28 74 324 389
- % of sales 5.6 -11.0 -1.9 -1.4 -4.6 0.3 0.5 1.2 4.9 5.6
profit from continuing operations before tax 1) 48 -358 -204 -191 -280 -117 -108 -80 134 154
- % of sales 1.8 -14.7 -6.3 -5.5 -7.6 -3.5 -2.0 -1.3 2.0 2.2
Result for the period from continuing operations 2) 27 -331 -170 -168 -270 -130 -125 -95 279 337
- % of sales 1.0 -13.6 -5.3 -4.8 -7.3 -3.9 -2.3 -1.6 4.2 4.9
Balance sheet, EUR million
Balance sheet total 3,117 3,132 4,505 5,481 6,458 6,580 6,486 7,106 7,410 8,005
Shareholders´ equity 994 916 1,329 1,830 2,055 2,459 2,393 2,245 2,461 2,341
Non-controlling interest 5 8 58 52 63 45 37 19 75 60
Interest-bearing net liabilities 827 777 1,254 1,867 2,403 2,205 2,183 3,109 3,019 3,482
Dividends and figures per share
dividends, eUR million 0 3) 0 0 19.7 19.7 39.4 39.4 53.7 107.4 107.4
dividend per share, eUR 0 3) 0 0 0.06 0.06 0.12 0.12 0.25 0.51 0.51
dividend/profit, % 0 3) 0 0 -10.2 -5.0 -48.0 63.2 -58.8 166.7 109.1
earnings per share, eUR 0.09 -1.09 -1.58 -0.59 -1.21 -0.25 0.19 -0.43 0.30 0.46
Shareholders´equity per share, eUR 3.03 2.79 4.05 5.58 6.26 7.49 7.29 10.56 11.57 11.01 4)
Key figures – Profitability
Return on capital employed, total % 5.7 -8.9 -1.3 -0.8 -5.5 0.9 0.9 1.6 5.8 6.9
Return on equity, % 2.8 -28.6 -10.4 -8.5 -14.8 -4.0 -5.7 -3.8 3.0 4.7 4)
Key figures – Financial position
equity ratio, % 32.1 29.6 30.8 34.4 32.8 38.1 37.5 31.9 34.2 30.0 4)
Gearing ratio, % 135 153 152 124 132 101 103 151 133 162 4)
Net gearing ratio, % 83 84 90 99 113 88 89 137 119 145 4)
Net cash flow arising from operating activities -69 81 -97 127 223 136 217 417 521 608
Internal financing on capital expenditure; eUR million -105 111 -76 50 53 31 89 105 168 82
Net interest expenses, eUR million 6) 64 92 156 148 109 81 130 166.9 142.3 194.3
Interest cover 6) -0.1 1.9 0.4 1.9 3.0 2.7 2.7 3.5 4.7 4.1
Other key figures
Gross capital expenditure, eUR million 66 73 128 259 428 452 245 397 310 740
- % of sales 5) 2.5 3.0 3.2 5.9 9.9 11.9 4.4 6.6 4.7 10.7
R&d expenditure, eUR million 6) 5 7 10 14 18 22 28 27 26 27
- % of sales 5) 0.2 0.3 0.3 0.4 0.5 0.6 0.5 0.4 0.4 0.4
personnel, average 6) 4,772 5,913 6,849 8,267 9,849 10,429 16,532 20,372 21,070 22,237
- of whom in Finland 1,842 2,173 2,437 2,824 3,344 3,423 5,263 6,178 6,328 6,406
* The 2004–2010 figures are calculated according to International Financial Reporting Standards (IFRS) and 2001–2003 according to Finnish accounting Standards (FaS),
but 2001–2004 figures have not been restated due to disposal of Map Merchant Group and the Graphic papers Business.
1) The 2001–2003 figures profit before extraordinary items
2) The 2001–2003 figures profit before taxes and minority interest
3) Board of directors proposes that no dividend is paid for 2010
4) The convertible subordinated capital notes are included in liabilities
5) The key ratio for 2005–2010 has been calculated for continuing operations only
6) From continuing operations for 2005–2010
Calculation of key ratios is presented on page 92
TeN yeaRS IN FIGUReS
123

Corporate responsibility data
per production unit
124 CoRpoRaTe ReSpoNSIBIlITy daTa peR pRodUCTIoN UNIT
personnel production 1000 t/a emissions to air t/a
Board
Co2 Sulphur NoX 31.12.2010 lTa FR pulp and paper particulates fossil (So2 ) (No2 )
alizay, France 326 28 240 9.4 4,444 8.3 227
Gohrsmühle, Germany 688 5.5 185 6.1 260,181 541 430
hallein, austria 197 13 133 12 7,547 81 236
husum, Sweden 864 17 655 670 244 69,669 355 1,334
Joutseno BCTMp, Finland 50 49 259 0 20,806 0 10
Kaskinen BCTMp, Finland 80 15 247 73 4,191 32 243
Kemiart liners, Finland 98 13 353 0 1,339 0 0.59
Kyro, Finland 244 17 230 0 154,894 0.075 155
Reflex, Germany 319 8.1 84 0 63,872 0 74
Simpele, Finland 359 23 267 6.3 78,412 234 215
Tako Board, Finland 206 26 188 0 75,595 0.034 74
Äänekoski Board, Finland 167 15 206 1.1 3,501 8.2 46
Äänekoski paper, Finland 248 33 175 1.2 4,853 11 52
lTa FR (lost time accident Frequency Rate): accidents at work/million working hours
* ISo 14001 standard includes the energy efficiency System (eeS)

discharges to water t/a Waste t/a Management system Chain of Custody
Cod Bod1 phos-
Total
suspended landfill hazardous ISo ISo
ISo
phorus Nitrogen solids waste (dry) waste 9001 14001* eMaS ohSaS 22000 peFC FSC
158 16 2.8 32 59 1,396 74 x x x x
156 52 1.9 6.2 53 77 90 x x x x x x
4,519 580 6.4 17 458 626 9 x x x x x
9,866 694 25 170 701 135 900 x x x x
439 5.0 0.28 4.4 7.5 225 16 x x x x x
1,173 65.4 1.09 10.9 74 4,707 0 x x x x x
426 33 1.2 18 73 195 18 x x x x x x
327 0.83 1.0 12 40 14 13 x x x x x x
68 27 1.4 0 27 69 64 x x x x x
349 17 1.6 14 30 8,291 21 x x x x x x
159 73 0.9 1.2 29 92 40 x x x x x x
542 218 0.83 9.9 167 48 4.6 x x x x x x
286 119 0.26 2.7 83 88 4.7 x x x x x x
CoRpoRaTe ReSpoNSIBIlITy daTa peR pRodUCTIoN UNIT
125

Financial reporting
M-real does not comment on its financial
performance or similar issues from the close
of each reporting period up to the publication
of the report for said period, except for information
on a change in the market situation
and the rectification of incorrect information.
Financial Information
Financial reports are published in english
and Finnish. annual reports and other
publications can be ordered from M-real
Corporation by e-mail:
corporate.communications@m-real.com.
M-real’s internet site www.m-real.com material
for investors is collected under the heading
Investor Relations. Stock exchange
releases, interim reports and financial information
on these web pages are updated in
real time. M-real company presentation on
the site is updated when financial reports are
published. Information on subjects such as
M-real’s products, customer cases, sales
network and environmental issues and
organization can be found on the web pages.
also, feedback can be sent through the company
site. M-real’s general e-mail address
is corporate.communications@m-real.com.
Shares
The company has total of 328,165,612 shares.
Information on M-real Corporation’s shares
is given in this report on pages 116–119.
M-real’s shares series a and B are quoted
on the Mid Cap list of NaSdaQ oMX helsinki
ltd. The trading codes of the shares are
MRlaV and MRlBV, respectively.
126 FINaNCIal RepoRTING
Investor relations
M-real is committed to generating shareholder
value. M-real is set to improve its cost
efficiency and profitability and to intensify its
operations and organization. M-real offers
up-to-date and easily utilizable information
on the company regularly and openly. The
company aims to produce reliable and factual
information concerning its operations and
financial position as well as the near-term
outlook. all investors are treated equally.
M-real has described the general guidelines
and defined the responsibilities with reference
to handling material information and
contacts with the financial market in its IR
policy. The policy can be found in M-real’s
web pages www.m-real.com.
For shareholders’ information
M-real Corporation will publish financial
reports in the year 2011 as follows.
Thursday 10 February 2011
Financial results for 2010
Wednesday 4 May 2011
Interim report January–March 2011
Thursday 4 august 2011
Interim report January–June 2011
Wednesday 2 November 2011
Interim report January–September 2011
Closed window Financial report Publication date
1 January to 10 February 2011 Financial results for 2010 Thu 10 February 2011
1 april to 4 May 2011 Interim report January–March Wed 4 May 2011
1 July to 4 august 2011 Interim report January–June Thu 4 august 2011
1 october to 2 November 2011 Interim report January–September Wed 2 November 2011
Annual General Meeting
The annual General Meeting of M-real will
be held at Finlandia-talo, helsinki hall, Mannerheimintie
13e helsinki, on Wednesday 23
March 2011 at 4 p.m. eeT. Shareholders
wishing to take part in the annual General
Meeting and to exercise their right to vote
must be registered on 11 March 2011 on the
shareholders’ register of the company held
by euroclear Finland ltd. a shareholder has
to give prior notice to the company not later
than by 10 a.m. on 18 March 2011 on the
company’s website at www.m-real.com; by
e-mail to aGM2011@m-real.com; by telephone
to +358 10 4654190 on weekdays
between 1 p.m. and 3 p.m.; or by mail to
M-real Corporation, legal Services/
Kansanen, p.o. Box 20, FI-02020 Metsä.
possible proxy documents should be
delivered in originals to the above address
before the last date of registration. The Board
of directors presents that no divident is paid
for the year 2010.

Share register
Shareholder’s address, name and ownership
changes are requested to be informed to that
book-entry register which holds their book
entry account.
Contact information
eQUITy INVeSToRS
Matti Mörsky
Tel. +358 10 465 4913
Fax +358 10 465 5232
matti.morsky@m-real.com
eQUITy INVeSToRS aNd CoMMUNICaTIoNS
Juha laine
Tel. +358 10 465 4335
Fax +358 10 465 5232
juha.laine@m-real.com
corporate.communications@m-real.com
deBT INVeSToRS aNd BaNKeR
RelaTIoNShIpS
ari-pekka latti
Tel. +358 10 465 4255
Fax +35810 465 4695
ari-pekka.latti@metsafinance.com
Ilkka punkari
Tel. +358 10 465 5226
Fax +358 10 456 4695
ilkka.punkari@metsafinance.com
General questions and comments on investor
relations can be e-mailed to investor.
relations@m-real.com
www.m-real.com
FINaNCIal RepoRTING
127

Contact information
M-real Corporation
head office
po Box 20
02020 Metsä, Finland
Revontulentie 6
02100 espoo, Finland
Tel. +358 10 4611
Telefax +358 10 465 5232
Business Id 0635366–7
www.m-real.com
128 CoNTaCT INFoRMaTIoN
BUSINESS AREAS
Consumer Packaging
hallituskatu 1
33200 Tampere
Finland
Tel. +358 10 4611
Fax +358 10 463 3158
Mills (in Finland)
Joutseno
Kaskinen
Kemiart liners
Kyro
Simpele
Tako
Äänekoski
Office Papers
Van Boshuizenstraat 12
1083 Ba amsterdam
Netherlands
Tel. +31 20 572 7500
Fax +31 20 572 7570
Mills (Country)
alizay (France)
husum (Sweden)
Speciality Papers
an der Gohrsmühle
51465 Bergisch Gladbach
Germany
Tel. +49 2202 15 0
Fax +49 2202 15 2806
Mills (Country)
Gohrsmühle (Germany)
Reflex (Germany)
Market Pulp and Energy
Revontulentie 6
02100 espoo
Finland
Tel. +358 1046 11
Fax +358 1046 54148
Mills (Country)
hallein (austria)
Kaskinen (Finland)
Sales network (Country, city)
argentina and Uruguay (Buenos aires)
australia (Melbourne)
Belgium (Brussels)
Brazil (São paulo)
Bulgaria (Sofia)
Chile (Santiago)
China (hong Kong, Shanghai)
Costa Rica (San José)
Cyprus (paphos)
Czech Republic (prague)
Finland (espoo, Tampere)
France (paris)
Germany (Bergisch Gladbach, Frankfurt)
Greece (athens)
Iceland (Reykjavik)
India (Mumbai)
Ireland (dublin)
Israel (Tel aviv)
Italy (Milan)
Japan (Tokyo)
Jordan (amman)
lebanon (Beirut)
Malta (San Gwann)
Mexico (México)
Netherlands (amsterdam)
peru (lima)
poland (Warsaw)
Romania (Bucharest)
Serbia (Belgrad)
Singapore (Singapore)
South africa (Cape Town, durban)
Spain (Madrid, Badajoz)
Syria (damascus)
Turkey (Istanbul)
United Kingdom (Chatham, Maidenhead)
Ukraine (Kiev)
hungary (Budapest)
Russia (Moscow)
United States (Norwalk, CT)
To locate contact details of local M-real sales
offices, please visit company website
www.m-real.com

Publication information
Papers
Cover: galerie Art silk 300 g/m 2
Annual Report: galerie Art silk 130 g/m 2
financial statements:
galerie Art silk 115 g/m 2
graphic design and layout:
Zeeland branding Oy
Photos: Jari Riihimäki
3d visualization: 3d Render Ltd
Printer: Lönnberg Print
Additional copies:
M-real Corporation
Communications
P.O. box 20
02020 METsÄ
finland
E-mail:
corporate.communications@m-real.com
Also available as Pdf: www.m-real.com
The Annual Report is available in English
and finnish.