Stora Enso OYJ’s (Stora Enso) European R stock has depreciated 22.7% since our 4Q 07 and FY 2007 update, reflecting investor concerns over rising wood costs and declining paper prices in the European market and the 18 June 2008 profit warning issued by the company. Although high cost pressure concerns continue, we believe the company’s restructuring activities to safeguard its profitability and development of its presence in developing nations will eventually pay dividends, and, at current levels, we maintain our BUY rating for the European R stock until we fully reassess the company in the coming weeks. In our next update report, we will revert to a 6-24 month horizon for this stock as we no longer anticipate a significant currency impact on the European stock over a 6-12 month horizon1. Although we now anticipate a negative currency impact on the ADR, which would significantly reduce our existing ADR target price, we maintain our BUY rating on the ADR at current levels, until we fully reassess the company in the coming weeks.

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