Restatement of Prior Year Results: Finnish TEL System Note 1 Accounting Principles Note 2 Financial Risk Management Note 3 Segment Information Note 4 Acquisitions and Disposals Note 5 Other Operating Income & Expense Note 6 Staff Costs Note 7 Net Financial Items Note 8 Income Taxes Note 9 Valuation Provisions Note 10 Depreciation, Amortisation and Fixed Asset Impa Note 11 Fixed Assets Note 12 Biological Assets Note 13 Associated Companies Note 14 Available-for-Sale Investments Note 15 Other Non-Current Assets Note 16 Inventories Note 17 Receivables Note 18 Shareholders' Equity Note 19 Minority Interests Note 20 Post-Employment Benefits Note 21 Borrowings Note 22 Other Provisions Note 23 Operative Liabilities Note 24 Financial Instruments Note 25 Cumulative Translation Adjustment Note 26 Commitments and Contingencies Note 27 Principal Subsidiaries as at 31 December 2004 Note 28 Employee Bonus and Equity Incentive Schemes Note 29 Related Party Transactions Note 30 Earnings per Share and Equity per Share Note 31 Post-Balance Sheet Events Note 1 Accounting Principles Note 2 Other Operating Income Note 3 Materials and Services Note 4 Personnel Expenses Note 5 Other Operating Expenses Note 6 Net Financial Items Note 7 Depreciation According to Plan Note 8 Extraordinary Items Note 9 Fixed Assets Note 10 Depreciation Reserve Note 11 Receivables from Management Note 12 Long-term Investments and Loan Receivables Note 13 Inventories Note 14 Short-term Receivables Note 15 Interest-bearing Receivables Note 16 Shareholders' Equity Note 17 Long-term Liabilities Note 18 Short-term Borrowings Note 19 Other Current Liabilities Note 20 Commitments and Contingent Liabilities Note 21 Fair Value of Open Financial Instruments

Notes to the Consolidated Financial Statements

There have been no major changes to the Group since the substantial acquisition of Consolidated Papers, Inc. in 2000. Since then the Group has concentrated on restructuring its existing assets consistent with the strategy to release capital and enhance financial flexibility in order to develop its core business, along with an emphasis on asset quality see Note 11 – Fixed Assets.

Acquisitions

In December 2004 Stora Enso closed its acquisition of 65.5% of the Polish packaging producer Intercell S.A. from private shareholders and the International Finance Corporation, the total acquisition price of EUR 131.8 million including net cash and costs of EUR 37.9 million.The fair value of the net assets acquired amounted to EUR 201.2 million and although there was no goodwill, intangibles amounted to EUR 16.7 million. The acquisition is part of the Group strategy of expanding its packaging board operations and will strengthen its presence in the fast growing Polish market. Intercell is one of Poland’s biggest corrugated packaging companies, with integrated operations from waste paper collection to corrugated packaging production, having three corrugated packaging plants in Poland, as well as one sack factory in Poland and one in Serbia. In 2004 its net sales were EUR 147 million and at 31 December 2004 it had about 1 900 employees.

In September 2004 Stora Enso completed its 100% acquisition of the Dutch paper merchant Scaldia Papier BV from International Paper Corp in order to strengthen its presence in the rapidly changing European paper merchant market and to achieve synergies with its existing Dutch merchant operations. Scaldia had net sales in 2004 of EUR 104.0 million and at 31 December employed 152 people. The total purchase price may be subject to small final adjustments, but to date has been EUR 31.1 million, of which goodwill accounted for EUR 6.8 million.

Stora Enso also made various small acquisitions in Russia in 2004 as part of its Wood Supply Europe programme to reduce supply risk by securing sources of fibre; EUR 12.2 million was invested in Russian acquisitions during the year, the fair value of the acquired net assets approximating their cost. As a result of these acquisitions, fibre procurement from Wood Supply Russia increased substantially in 2004, employees increasing from 90 at 31 December 2003 to 1 674 in 2004.

In February 2003 Stora Enso completed the acquisition of AS Sylvester, Estonia’s largest sawmilling and wood procurement company, for EUR 122.7 million, of which EUR 72.0 million represented goodwill; the Group previously had a 34% associated interest worth EUR 7.1 million in Sylvester’s largest Estonian mill at Imavere. Letters of Intent had been signed in 2002 and the deal was subsequently finalised in February 2003 after the competition authorities had accepted Stora Enso Timber’s 66% ownership of Sylvester’s sawmilling operations and Stora Enso Mets’ 100% ownership of Sylvester’s wood procurement operations in the Baltic States. Sylvester sawmilling operations then became Stora Enso Timber AS and at 31 December 2004 had a workforce of 1 248. The original purchase agreement included an option to buy out the remaining shares for a consideration to be determined by performance targets; this option has been exercised and the purchase is expected to be completed in early 2005 upon which, subject to a small minority of 3.8% in the Imavere operation, Stora Enso Timber’s Baltic operations will become 100% owned. The value of the existing Minority at 31 December 2004 amounted to EUR 29.0 (EUR 27.5) million (see Note 19).

Acquisition of Group Companies

	Year Ended 31 December
EUR million	2002	2003	2004
Acquired Net Assets
Cash and cash equivalents	-	3.0	45.9
Other operating working capital	-8.9	31.2	44.0
Tangible fixed assets	126.8	132.2	160.8
Intangible fixed assets	0.3	0.4	22.5
Interest-bearing assets less cash and cash equivalents	5.6	5.7	0.7
Tax liabilities	-0.8	-0.2	-19.2
Interest-bearing liabilities	-79.8	-94.1	-11.4
Minority interests	17.4	-23.8	-69.9
Fair Value of Net Assets in Acquired Companies	60.6	54.4	173.4
Goodwill	23.3	73.8	6.9
Total Purchase Consideration	83.9	128.2	180.3

Disposals

In October 2004 Stora Enso divested its majority shareholding in PT Finnantara Intiga, its Borneo eucalyptus plantation company. The book value of the plantation at sale was EUR 21.8 million and the disposal resulted in a small overall profit of EUR 2.4 million.

Stora Enso launched its forest restructuring programme in 2002 and this culminated in March 2004 with the divestment of the Group’s Swedish forest interests. In December 2003 the Group announced plans to restructure its forestlands in Sweden in conjunction with Korsnäs AB, a Swedish forest industry company controlled by the Kinnevik Group. The Swedish forests of both companies were transferred to a new entity, Bergvik Skog AB, in which the two partners retained minority shareholdings of 43.3% and 5% respectively; the Group’s forest interest at 31 December 2003 had a book value of EUR 1 598.0 million. Although the capital gain on disposal amounted to EUR 113.9 million, the sale also triggered the release of deferred tax provisions of a further EUR 240.5 million that had been provided in the event of an asset sale as opposed to the company divestment that ultimately occurred. Stora Enso’s on-going stake in Bergvik Skog AB, amounting to SEK 1 515 (EUR 167.9) million, is now accounted for as an Associate whereby the Group includes in its Balance Sheet its share of Bergvik Skog’s net assets (see Note 13). An unrealised gain of EUR 75.6 million, in excess of the reported profit, was generated on this transaction and is shown in Balance Sheet liabilities as an unrealised gain (see Note 23).

There were no disposals in 2003, though steps were being taken to divest most of Stora Enso’s Swedish forestry interests. The rest of the Group’s forest restructuring programme took place in 2002:

1. In September 2002 Stora Enso North America Corp. signed an agreement to sell some 125 000 hectares of its forestland to Plum Creek Timber Company, Inc; the sale was finalised on 3 December 2002 in the sum of USD 141.0 (EUR 149.1) million and realised a capital gain of USD 46.8 (EUR 49.5) million.

2. In December 2002 the Group completed the disposal of the greater part of its Finnish forest holdings to a new company, Tornator Timberland Oy, established by Finnish institutional investors. The sale of shares amounted to EUR 364.5 million and a capital gain of EUR 25.9 million was credited to Income; a further capital gain of EUR 44.2 million resulted from this transaction, but this has not been released to Income yet and is shown on the Balance Sheet as an unrealised gain (see Note 23). Stora Enso owns 41% of the shares in the new company following the sale and this is shown as an Associate Company on the Balance Sheet (see Note 13). Stora Enso Forest, the Group’s Finnish wood procurement arm, has entered into a longterm wood procurement agreement at market rates with Tornator Timberland Oy.

Also in 2002, Stora Enso closed its UK merchant arm, Papyrus GB Ltd, as it had not proved possible to reach a satisfactory level of profitability in recent years despite extensive rationalisation. A charge of EUR 24.8 million was made to cover closure costs.

In March 2002 the Group divested its Mölndal mill in Sweden to Klippan AB, a speciality paper maker. The total transaction price approximated book value and amounted to SEK 254.3 (EUR 27.8) million.

Disposal of Group Companies

	Year Ended 31 December
EUR million	2002	2003	2004
Net Assets Sold
Cash and cash equivalents	-	-	29.5
Other operating working capital	42.3	-	62.2
Fixed assets	441.0	-	94.1
Biological assets	-	-	1 541.2
Interest-bearing assets less cash and cash equivalents	5.3	-	23.1
Tax liabilities	-0.2	-	-222.9
Interest-bearing liabilities	-161.1	-	-1 518.8
Net Assets in Divested Companies	327.3	-	8.4
Income Statement capital gain (goodwill realised)	25.9	-	113.0
Provision for unrealised gain	44.2	-	76.5
Total Disposal Consideration	397.4	-	197.9
Received as to
Cash	360.6	-	197.9
Associated Company shares	36.8	-	-
Total Disposal Consideration	397.4	-	197.9