World Outlook for Book Publishing Papers

1. World Outlook for Book Publishing Papers John Maine Vice President April 2007

2. U.S. Economy in the Middle of a 5 Quarter Slowdown that Began in Q2 2006 • U.S. Economy Responding to • Rise in Interest Rates • Energy Price Shock • Weak Housing and a Decline in Mortgage Cash-Outs • So Far, No Recession in Sight • GDP Growth Below Average, but Remaining Around 2%-2.5% • Business Investment Strong • Economic Growth to Remain Below Trend Through Mid-2007

3. The U.S. Economy Holding Up Well to Negative Influences so Far in 2007Real GDP Growth, Annualized Percent Change Potential GDP Growth

4. Potential Recession?…Risk Assessment • Inverted Yield Curve Persists • Housing/Mortgage Collapse? • Fixing Global Imbalances May Require Much Weaker Dollar • Chinese Hard Landing?

5. U.S. Interest Rates 10-Year Bond Yield Inverted Yield Curve Federal Funds Rate

6. Overvalued U.S. Home Prices Beget Risky LoansType of Mortgage Loan for Purchase, % of Total

7. U.S. Foreclosures Have Spiked in Recent MonthsForeclosures Started During the Quarter – Mortgage Bankers Assn.

8. Overinvestment Makes China Vulnerable Investment as Percent of GDP

9. Euro Will Remain Strong

10. Falling Energy Prices Hold Canadian Dollar Below 90 Cents (WTI Oil Price per Barrel and $U.S./$CN Exchange Rate)

11. World Printing & Writing Paper Demand Took Off Without North America in 2006 % Change in Apparent Consumption

12. World Demand Growth from 2000 to 2006 Shows Decreasing Importance of North America Million Tonnes N Amer. Europe L Amer. Asia Other World

13. World P&W Demand Growth Stuck in Low Gear by Stagnant North American Market % Change in World Demand for P&W Paper

14. World P&W Demand by GradeMillion Tonnes, % Change 2005 2006 2007 2008 Ctd. Woodfree 28.7 29.7 30.5 31.8 %ch 3% 4% 2% 4% Ctd. Mechanical 17.2 17.8 18.0 18.6 %ch 0% 3% 1% 4% Unc. Woodfree 51.5 52.5 53.1 54.5 %ch 1% 2% 1% 3% Unc. Mechanical 14.3 14.6 14.9 15.5 %ch -1% 2% 2% 4% Total 111.8 114.6 116.4 120.4 %ch 0.8% 2.5% 1.6% 3.4% World GDP %ch 4.7% 5.7% 4.6% 5.1%

15. North American Market • Demand in Third Year of Stagnation or Decline • Started in 2005 • Despite strong economy • Will Remain Weak in 2007 • High Cost Domestic Capacity Shutting Down • Modest Demand Growth May Return in 2008 • Stronger economy

16. Printer Inventories of Paper (Days of Supply, seasonally adjusted) Days Data Source: Calculated by RISI from IDEAlliance data

17. North America Grade Trends • Uncoated Freesheet Declining Since 1999 • Further reductions expected • Coated Paper • Growth trend is close to 2% per year • But not in 2007 where demand will be down 1%-2% • Uncoated Mechanical Demand Is Robust • Competition with independent Telco directories • Switch to cheaper papers • Success of offset substitutes

18. North American P&W Demand by GradeMillion Tonnes, % Change 2005 2006 2007 2008 Ctd. Woodfree * 6.1 6.3 6.3 6.6 %ch -2% 3% 0% 4% Ctd. Mechanical 5.8 6.0 5.9 6.1 %ch -3% 3% -2% 4% Unc. Woodfree * 13.0 12.8 12.6 12.7 %ch -5% -1% -1% 1% Unc. Mechanical 6.2 6.1 6.3 6.6 %ch 2% -1% 2% 5% Total 31.1 31.2 31.1 32.0 %ch -3% 0% -1% 3% U.S. GDP %ch 3.2% 3.3% 2.5% 3.1% *Includes bristols and cotton

19. Paper Purchased for Use in U.S. Books in Tons and as a % of U.S. Printing & Writing Demand 000 tons % of P&W Demand

20. Paper Purchased for Usage in U.S. Books by Grade (000 tons)

21. Update on U.S. Imports of Books Printed in Asia • China Sales of Books to the US jumped another 11% in 2006 • 550 Million Books per Year Now Imported From China • Dominated by Children’s Books • Asia Exported $1.4 billion in Books to the U.S. in 2006 • Equal to Nearly 5% of U.S. Publisher Net Sales of Books

22. Asia Now Exports $1.4 Billion in Books to the U.S. Market Compared With $0.6 Bill. in 1996 Value of Books Imported into the U.S., Million $

23. China Becomes Dominant Exporter of Printed Books to the U.S. U.S. imports of printed books, millions of books

24. U.S. Imports of Printed Products from China Million Real 2006 Dollars

25. CVD Duty Announced on Asian CFS Paper at the End of March • CVD (Countervailing Duty) • Due to Asian Governments Subsidizing Paper mills • Principal subsidy is income tax abatement for investment in new mills, free from income tax for 2 Years, followed by 3 Years of 50% abatement • Resulted in Duties of 10%-20% on Chinese and Indonesia CFS • But less than 2% of Korean CFS • APP hit hard with some of the top duties • All producers affected • Applies to both sheets and rolls of CFS, but not coated board • Importer of record now has to put up bond that will be escrowed until the fall when a final determination on the duty is made • At that time, funds could be distributed to New Page and other affected parties

26. Antidumping Duty (ADD) Ruling Due at The End of May • Could Result In Additional Tariffs • Must prove the mills are selling below costs or below prices in their home market • Prices are cheap in China,so this is not an issue, but the US has declared China prices irrelevant because China is not a market economy • DOC has chosen India as a substitute home market and prices in India are higher than in China • Korea could get hit with ADD if DOC considers freight and mill net prices

27. Implications of CVD on Asian CFS Paper • Affects About 350,000 tons of Coated Freesheet (mostly sheets) Coming from China (300,000 tons) and Indonesia (50,000 tons) • Korea Basically Wiggled off the Hook (450,000 tons) • Up to 90% of Some Western CFS Sheet Markets are Supplied by Asia, so the Impact Will be Very Regional • When ADD is Announced in Late May, Korea Could Come Back into the Picture • What Will Change • Prices Will Likely go up Again by About 5% • Korean and European Suppliers Will Fill in for Lost Chinese and Indonesian Tonnage • U.S. Producers to Increase Sheeter Utilization

28. Coated Freesheet + Coated Bristol Imports Into the U.S. by Month (tonnes)

29. Coated Freesheet + Coated Bristol Imports Into the U.S. by Month (tonnes)

30. Coated Freesheet + Coated Bristol Imports Into the U.S. by Month (tonnes)

31. N.A. Paper Mill/Machine Closures (tonnes)

32. European Paper Mill/Machine Closures (tonnes)

33. European Paper Mill/Machine Closures (tonnes)

34. Major Capacity Changes in Asia, 2006–2009 Thousand Tonnes Woodfree Paper Hankuk, Ohsan S. Korea 200 Q1 2006 UWF Gold Huasheng, China 120 Q1 2006 UWF, CWF Tjiwi Kimia, Indonesia 120 Q1 2006 UWF, CWF Siam Paper, Thailand 100 2006 UWF, CWF Henan Xinxiang, China 100 Q4 2006 UWF Shandong Tralin (#22) China 100 Q1 2007 CWF Shandong Tralin (#23) China 100 Q2 2007 CWF Shandong Tralin (#24) China 100 Q4 2007 CWF April, Kerinci, Indonesia 415 Q1 2007 UWF Packages, Pakistan 120 Q1 2007 UWF Sun Paper, Shandong China 250 Q1 2007 UWF, CWF Hubei Maxleaf Xiangfan China 100 Q2 2007 CWF Nippon, Japan -340 Q4 2007 CWF, UWF Abhishek, India 100 2007 UWF

35. Major Capacity Changes in Asia, 2006–2009 Thousand Tonnes Woodfree Paper (continued) Siam Paper, Thailand 200 Q1 2008 UWF Ballapur Bhigwan PM 2, India 140 Q2 2008 CWF ITC, India 200 Q4 2008 CWF Hokuetsu, Niigata, Japan 350 End 2008 CWF ITC, India 100 Q2 2008 UWF West Coast Paper, India 100 Q4 2008 UWF Whitefield Paper, India 200 Q4 2008 CWF, UWF Shandong Chenming, China 150 Q3 2008 CWF Ballapur Bhigwan PM 3, India 160 08/09 CWF Tamil Nadu, Kagithapuram India 150 Q1 2009 CWF/UWF Oji/Nantong Jiangsu China 400 End 2009 CWF Tatau Pulp, Bintulu Malaysia 750 Q3 2009 CWF/UWF

36. Major Capacity Changes in Asia, 2006–2009 Thousand Tonnes Coated Mechanical Henan Xinxiang, China 200 Q1 2007 LWC Daio Paper, Japan 290 Q3 2007 LWC Nippon, Ishinomaki, Japan 350 Q4 2007 LWC Puyang Longfeng, China 275 H1 2008 LWC Oji Tomioka, Japan 350 End 2008 LWC Uncoated Mechanical Stora Enso/Huatai, China 200 Q4 2007 SC Yueyang Paper, Hunan China 400 2008 SC

37. Asian Net Export Growth Shifting Back to Emphasis on UWF in 2007–2008 Net Imports (exports) 000 Tonnes

38. CWF Operating Rates Finally Move Above 90% in Europe Due to Closures in 2007 Operating Rates

39. Ctd. Mechanical Markets Very Weak in Early 2007, But Will Get Tighter as Europe Closes Capacity Operating Rates (adjusted in 2005 for lockouts in Finland and Miramichi)

40. Capacity Closures Keep Uncoated Freesheet Operating Rates Above 90% Operating Rates

41. U.S. Publishing Paper Pricing by Quarter ($/short ton)

42. Average Profitability for U.S. Printing and Writing Paper Producers by Grade LWC Uncoated Freesheet Coated Freesheet Profitability defined as (price-cost)/cost. Costs are total costs including depreciation, interest, SG&A, and delivery.