POSTAL STAMPS UPU Forum NYC June 2016

Table of contents

1. UPM and UPM Raflatac in Brief 2. Postal Stamp overview 3. Selection Guide for Postal Laminates 4. Significant Resources for Tailoring and Innovation 5. Summary

2 | © UPM 28/6/16 UPM – The Biofore Company

When we at UPM look into the forest, this is what we see: • A future where wood is used innovatively and efficiently.

• A world where bio and forest industries are integrated to create new high quality alternatives to non- renewable materials.

• Profitably and responsibly.

3 | © UPM 4 | © UPM UPM today

UPM Biorefinig UPM Energy UPM Raflatac UPM Paper Asia • Pulp • Hydro-, nuclear- and • Label materials • Fine papers • Plantations condensing power for product and in China and APAC (incl. shares in energy information • Labelling materials globally • Biofuels companies) labelling • Sawmills • Electricity production • Wood Sourcing and trading and Forestry

Sales 2015: EUR 10.1 billion Personnel: UPM Paper ENA UPM Plywood UPM Biocomposites 19,600 • Magazine papers, • Plywood and • UPM ProFi newsprint and veneer products • UPM Formi Shareholders: fine papers for various end-uses UPM Biochemicals approx. 86,000 • Chemical building blocks • Lignin products • Biofibrils • Biomedical products 5 | © UPM UPM RAFLATAC Company presentation 2016 UPM Raflatac

Self-adhesive label materials for product and information labelling

Key figures 2015 Sales (€) 1.4 billion Number 2 in the world Personnel 2,900 Operations in 40 countries

11 factories

24 terminals

7 | © UPM Our operations worldwide

Tampere, Finland Wroclaw, Poland Nowa Wies, Poland

Scarborough, UK Nancy, France

Dixon, IL Changshu, China Fletcher, NC Johor, Malaysia Mills River, NC

São Paulo, Brazil Factory Terminal

8 | © UPM Wide product portfolio for various end-uses

A4 & Home & Oil & Cut-size Beverage Food Durables Personal care Industrial chemicals

Pharmaceutical & Retail Postal Application Transport & Tyre Wine & Spirits Health care Security & Logistics Brand protection

9 | © UPM Self-adhesive label stock

Release liner Adhesive Release coating

Face material Matrix Self-adhesive label

10 | © UPM Postal Labelling Overview Main trends affecting the postal labelling industry

• Postal labelling is generally a decreasing market but with strong development in special editions for philatelists, with high value products • Pressure sensitive adhesive’s (PSA) market share compared to the gummed stamp market is increasing slowly but regularly • Tenders are often for longer (2-5) years contracts with postal customers - homologation by state postal offices • The use of security features in postal stamps is increasing • Sensitivity to environmental issues throughout the whole value chain • In Europe we have seen a transfer from gummed paper to PSA

11 | © UPM 28/6/16 Postal Labelling Overview Estimated postal stamp market shares in 2015 is 153Mm2

Postal Stamp Markets Postal Stamp Volume in Mm²

22% China Japan 10% 40 USA 14% France USA 7% Germany Northern Europe UK 79 Central Europe 5% 7 Italy Southern Europe 5% Rest of the World Netherland 15 26% 5% India 12 4% Canada 2%

12 | © UPM 28/6/16 Postal Labelling Overview Postal stamp collector share in 2015

120

100

0 Market size [Mio. m²] Market value [Mio. €]

Collector share Stamp volume without collector share

13 | © UPM 28/6/16

Postal Labelling Overview Postal labelling is split between private and public printers

PRIVATE PRINTERS PUBLIC PRINTERS

Characteristics • Specialized on one technology • State monopoly (mainly and/or mainly focused on printing for their own several geographical areas country)

Trends & Expectations • More price driven business with • Privatization high expectations on quality • General tender and service

14 | © UPM 28/6/16 CoC - Chain of Custody links sustainable raw materials to products and brands

CoC CERTIFIED CoC CERTIFIED FOREST PAPER MILL

LABEL MATERIAL MANUFACTURE CoC CERTIFIED

BRAND OWNER CoC CERTIFIED

15 | © UPM PRINTER 28/6/16 Postal Labelling Overview Selection of postal stamp product formats and different type of liners

• Booklets backside coated kraft liners • Sheetlets kraft liners • Retail rolls glassine liners • Bulk rolls glassine liners • ATM thin glassine liners • Double face glassine liners

16 | © UPM 28/6/16 Selection Guide for Postal Laminates Gummed Stamps – Self-adhesive Stamps

Tropimatic - Gummed Stamps Unik - Self-Adhesive Stamps

Base Face material material OPTION: soak-off Papers: Silk, barrier (PERS) OBA free, Fluorescent Adhesive Permanent for Reel and Sheet (PERM) Water- activated Backing (release Glue liner) GUM : standard Coils: PVA adhesive, Glassine 62 Temperature Booklets: resistance Stampcoat 85, 100, 120, 135 Sheets: White Kraft , Stampcoat 17 | © UPM 28 June, 2016 Selection Guide for Postal Laminates UPM Raflatac – self-adhesive stamp materials

FACE MATERIAL SALES ADHESIVE BACKING MATERIAL CODE (SALES CODE) Unik Stampcoat 85 FSC BQS PERM=Permanent White Glassine 65 Stamp Kraft Special Coated 100

Unik OBAF 97 FSC ETP White Glassine 65 Kraft Special Coated 100 Kraft Special Coated 130 Unik Silk 100 FSC BYH Kraft Special 85

Unik Stampcoat 85 FSC BQS PERS= White Glassine 65 Permanent Stamp Unik Silk 100 FSC BYH Soak-off Kraft Special Coated 100 Kraft Special 85 Unik OBAF 97 FSC ETP White Glassine 65 Kraft Special Coated 100 Kraft Special Coated 130 Kraft Special 85

18 | © UPM 28/6/16 Significant Resources for Tailoring and Innovation Be Innovative and Creative

SUSTAINABILITY Increased sensitivity to environmental issues along the value chain

TROPIMATIC Cotton Recycled Paper TROPIMATIC Bamboo

PROTOTYPE CONCEPT Pro Eco Pro Touch Pro Look Pro Function

NEW IDEAS Innovation is the key success of tomorrow stamps

19 | © UPM 28/6/16 Our promise to keep

First -class technical expertise and products complemented with the most attentive service in the business. Every day.

20 | © UPM

BACKUP SLIDES

22 | © UPM INNOVATION

New idea will drive the Future of Postal Stamps

Bi-color Paper

23 | © UPM Internal Selection Guide for Postal Laminates These security features can be added for postal laminates

VISIBLE SECURITY INVISIBLE FEATURES SECURITY FEATURES

Watermark Coloured Visible Invisible Chemical Covert (real or centre fibres and fibres and treatment taggants simulated) paper planchettes planchettes

24 | © UPM 28/6/16 SUSTAINABILITY

Postal Labelling Overview UPM Raflatac’s role in the value chain

3rd party PRIVATE Contractor PRINTER

Adhesive Raw Coater material Suppliers UPM Raflatac

STATES GOVERNMENT + PUBLIC POSTAL PRINTERS AUTHORITIES

26 | © UPM 28/6/16 UPM named among the world’s sustainability leaders

• UPM retained its position in both the Dow Jones European and World Sustainability Indices (DJSI) for 2014-2015 • The total score of UPM has gradually improved and is substantially ahead of the average industry • UPM also achieved a top position with the highest possible score, 100, on The A List in the CDP Climate Performance Leadership Index 2014. UPM was the only paper and forest products company in the world with A100 level.

27 | © UPM 28/6/16

UPM Raflatac Sustainability Approach

Sustainability Frontrunner

Performance Products Solutions Partners

factory

Responsible Sourcing

UPM Biofore & UPM Raflatac Strategy

Forest certification promotes sustainable forest practices

• Two major international Forest Certification schemes: – FSC® (Forest Stewardship Council) – PEFC™ (Programme for the Endorsement of Forest Certification Schemes) • FSC and PEFC have developed criteria for: Forest Certification by scheme – Sustainably managed forests – Chain of Custody for product traceability to 37% 63% verify the FSC PEF sustainable origin of a paper product C

By purchasing FSC & PEFC certified paper and fiber based materials companies have a third party verification of sustainable origin.

UPM Raflatac is

• a strong global supplier in the world of stamps, with a comprehensive delivery network and postal stamp industry connections • a solution for all your postal stamps needs, offering a comprehensive range of products in rolls and in sheets, in Gummed and PSA • a place for Innovation, offering special solutions to our customers (e.g. special issues for philatelists) with UPM Raflatac’s world- class material expertise and proprietary production technology • a sustainability frontrunner • convinced, already now, that innovation is the future of stamps • interested in all joint development possibilities and partnerships

Water -18%

Energy -8%

Waste to landfill -87%

Certified papers in 2014 40%

Water -30%

Energy -6%

Waste to landfill -100%

Certified papers in 2014 6%

32 | © UPM 28/6/16 Product’s environmental profile Delivering the environmental information to your Customers through simple and reliable values

• Energy consumption – Energy demand from non-renewable and renewable resources

• Water consumption – Net intake of fresh water (=blue water) across the life of the product

• Greenhouse gases (kg CO2-e.) = Carbon Footprint

– A measure of greenhouse gas emissions, such as CO2 and methane…

NOTE: LCA results are always indicative and we should compare results that have been calculated using the same LCA scope.

We also improve our LCA model constantly and update Label Life data, so don’t be surprised if you get new, updated results.

Laminate Label printers Brand-owners & producers packaging

PP Paper PET Waste from Matrix- and liner liner liner laminating & start-up slitting waste (Trial phase)

UPM ProFi®

UPM Energy

UPM Paper

External partners *PET RafCycle solution under development

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