PRELIMINARY SUMMARY OF THE EFFECTS OF AD

M-real Corporation Stock Exchange Bulletin 18.8.2004 at 3.00 p.m.

PRELIMINARY SUMMARY OF THE EFFECTS OF ADOPTING IFRS ON M-REAL’S
BALANCE SHEET

From January 1, 2005, M-real is required to convert from Finnish
Accounting Standards (“FASö) to International Financial Reporting
Standards (“IFRSö) in its financial reporting. The transition date is
January 1, 2004 and on that date the Company is required to prepare
its opening IFRS balance sheet. Based on preliminary investigations,
the conversion in accounting standards is estimated to have a
considerable effect on the Company’s consolidated shareholders’
equity compared to the financial statement prepared in accordance
with FAS.

M-real will publish an announcement regarding the effects of the
implementation of IFRS on the Company’s financial reporting as well
as a reconciliation between the Company’s financial statements for
the fiscal year 2004 prepared according to FAS and the same financial
statements prepared according to IFRS. This announcement will be
released during the first quarter of 2005.
                  
In the following summary, the significant estimated effects of the
adoption of IFRS on the opening balance sheet are explained.
                  
I EFFECTS ON SHAREHOLDERS´ EQUITY

1.       Accounting of retirement benefits (pensions)

  Under FAS, pension expenses and obligations are recorded and
  included in the consolidated financial statements in accordance
  with local accounting practices in the countries in which
  employees are provided with pension benefits. IFRS requires that
  pension plans are classified as either defined contribution plans
  or defined benefit plans. In the case of the latter, the plans’
  assets and obligations are calculated using actuarial methods and
  the difference between them should be recorded in the company’s
  opening IFRS balance sheet as an asset or a liability. M-real
  estimates that certain subsidiaries outside Finland have pension
  liabilities amounting to a total of Eur 101 million (net of
  deferred tax assets), which must be recognised in the Company’s
  opening IFRS balance sheet. This recognition has a corresponding
  negative effect on shareholders´ equity. In addition, according to
  current estimates, the disability element of the Company’s Finnish
  pension plan (TEL) will be calculated as a defined benefit plan
  under IFRS (under FAS it has been calculated as a defined
  contribution plan). This will result in an estimated additional
  Eur 40 million pension liability in the Company’s balance sheet
  (net of deferred tax assets).
                  
2.       Revaluations and fair valuations of M-real’s forest holdings

  Under FAS, the Company’s forest holdings are recorded at
  acquisition cost, added with revaluations. IFRS requires the
  recording of biological assets (e.g. living trees) at their fair
  value. Accordingly, the current carrying value (including
  revaluations) is required to be reversed and replaced with the
  fair value. M-real estimates that the carrying value of its forest
  holdings was equal to fair value as at January 1, 2004.
                  
  3.       Deferred tax liabilities and assets
  
  Finnish accounting practice allows alternative methods in
  recognition of income tax assets and liabilities. According to the
  method applied by M-real, deferred taxes have not been recorded on
  all temporary differences between the Company’s financial
  statements and tax bases of assets and liabilities. The most
  significant difference between M-real’s practice and IFRS is that
  deferred tax liability has not been recorded on the difference
  between the carrying value and the tax base (acquisition cost) of
  the forest holdings. The tax liability to be recorded on this
  difference is approximately Eur 40 million. The change of
  corporate tax rate in Finland reduces deferred tax liabilities.
  This is estimated to have a positive effect on equity of Eur 23
  million. M-real recorded this change in its FAS accounts in the
  second quarter of 2004.
                  
4.       Derivative financial instruments

  IFRS requires recognition of derivative financial instruments at
  their fair value. Hedge accounting (on accrual basis) is
  applicable only in situations in which derivatives (e.g. currency
  derivatives) are linked to a specific asset, liability or firm
  commitment. In addition, under IFRS, the effectiveness of hedging
  transactions must be verified. M-real has made a decision to
  discontinue the application of hedge accounting, which means that
  the accruals in the balance sheet as of December 31, 2003 related
  to derivative instruments must now be recorded as a reduction in
  equity. The negative effect on equity is estimated to be Eur 24
  million.
          
5.       Provisions

 Under FAS, provisions for future obligations and charges are, in
 some situations, permissible at an earlier stage than under IFRS.
 In its opening IFRS balance sheet, M-real will reverse the
 provisions which under IFRS are not yet recognisable as of December
 31, 2003. This reversion is estimated to have a positive effect on
 equity of Eur 20 million in the Company’s opening IFRS balance
 sheet.
                    
6.       Impairment of assets

  As a result of asset impairment tests required under IFRS, M-real
  has recognised certain assets which should be impaired. The total
  amount to be recorded as impairment of assets is estimated to be
  approximately Eur 115 million. This is attributable to goodwill
  associated with the acquisition of Modo Paper (Eur 60 million) and
  with the fixed assets of Savon Sellu and Speciality Papers
  business (Eur 55 million). The negative effect of these asset
  impairments on equity is estimated to be approximately Eur 110
  million after deferred taxes. The impairment attributable to fixed
  assets will be recorded also under FAS in the third quarter of
  2004.
                  
7.       Finance leases and other financial arrangements
  M-real has a sale and lease back contract concerning the real
  estate of the Tako board mill, which the Company is required to
  reverse under IFRS. The reversion of capital gains recorded from
  this contract will reduce equity by Eur 45 million. In addition, M-
  real has certain agreements and arrangements which under FAS have
  been considered as off-balance sheet arrangements, but which under
  IFRS should be included in the consolidated balance sheet. These
  agreements concern certain power and other plants and also finance
  leases related to mill equipment. The negative effect of these
  agreements on equity is estimated to be Eur 5 million.
                  
8.       Other items effecting shareholders´ equity

  Other effects on equity resulting from the implementation of IFRS
  are estimated to have a positive effect of Eur 2 million. This
  amount is net of all other positive and negative IFRS effects.

II CHANGES TO INTEREST-BEARING NET LIABILITIES AND TO TOTAL ASSETS

Certain pension provisions, which have already been included in the
consolidated balance sheet as of December 31, 2003 are recorded in
interest-bearing liabilities under FAS. Under IFRS, they should be
transferred into interest-free liabilities. After this change, the
increase in interest-bearing net liabilities is estimated to be
approximately Eur 60 million in M-real’s opening IFRS balance sheet.
The increase in total assets is estimated to be approximately Eur 70
million after asset impairments.

M-REAL CORPORATION

Board of Directors

Further information:
Hannu Anttila, President and CEO (as of 1 January 2005), tel. + 358
10 469 4611
Juhani Pöhö, CFO, tel. +358 10 469 5283

Media contacts: Jyrki Antikainen, tel. +358 10 469 4940, mobile +358
50 357 4292
IR contacts: Antti Nummi, tel.+358 10 469 4432, mobile +358 50 598
9629


EnclosurePreliminary estimates of the effects of IFRS implementation


Enclosure

PRELIMINARY ESTIMATES OF THE EFFECTS OF IMPLEMENTATION OF IFRS
STANDARDS TO THE M-REAL´S OPENING IFRS BALANCE SHEET AS OF JANUARY 1,
2004

Assets                                    MEUR
                                              
Assets total as of December 31,          7 106
2003
  IFRS increases                           186
  Amorization of goodwill and             -115
fixed assets
Assets according to IFRS as of           7 177
January 1, 2004
                                              
Shareholders´ equity and                      
liabilities
                                              
Shareholders´ equity as of               2 245
December 31, 2003
  Amortization of goodwill and            -110
fixed assets
  Other IFRS effects to the equity        -210
Shareholders´ equity according to        1 925
IFRS
                                              
  Minority interest                         19
  IFRS effects to the minority              10
interest
                                            29
                                              
Liabilities as of December 31,           4 842
2003
  IFRS increases in liabilities            381
Liabilities according to IFRS as         5 223
of January 1, 2004
                                              
Shareholders´equity and                  7 177
liabilities according to IFRS as
of January 1, 2004
                                              
Interest-bearing net liabilities         3 109
as of December 31, 2003
Interest-bearing net liabilities         3 168
according to IFRS 1)

1) Some pension provisions already included into the balance sheet
are according to Finnish Accounting Standards included in the
interest-bearing liabilities. According to IFRS they will be moved to
the interest free liabilities. This reduces the interest-bearing
liabilities with approximately 122 Meur.