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

2. 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. 3 The U.S. Economy Holding Up Well to Negative Influences so Far in 2007 Real GDP Growth, Annualized Percent Change Potential GDP Growth

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

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

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

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

8. 8 Overinvestment Makes China Vulnerable Investment as Percent of GDP

9. 9 Euro Will Remain Strong

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

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

12. 12 World Demand Growth from 2000 to 2006 Shows Decreasing Importance of North America Million Tonnes N Amer.EuropeL Amer.AsiaOtherWorld

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

14. 14 World P&W Demand by Grade Million Tonnes, % Change 2005200620072008 Ctd. Woodfree 28.729.730.531.8 %ch3%4%2%4% Ctd. Mechanical17.217.818.018.6 %ch0%3%1%4% Unc. Woodfree 51.552.553.154.5 %ch1%2%1%3% Unc. Mechanical14.314.614.915.5 %ch-1%2%2%4% Total111.8114.6116.4120.4 %ch0.8%2.5%1.6%3.4% World GDP %ch4.7%5.7%4.6%5.1%

15. 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. 16 Printer Inventories of Paper (Days of Supply, seasonally adjusted) Data Source: Calculated by RISI from IDEAlliance data Days

17. 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. 18 North American P&W Demand by Grade Million Tonnes, % Change 2005200620072008 Ctd. Woodfree * 6.16.36.36.6 %ch-2%3%0%4% Ctd. Mechanical5.86.05.96.1 %ch-3%3%-2%4% Unc. Woodfree *13.012.812.612.7 %ch-5%-1%-1%1% Unc. Mechanical6.26.16.36.6 %ch2%-1%2%5% Total31.131.231.132.0 %ch-3%0%-1%3% U.S. GDP %ch3.2%3.3%2.5%3.1% *Includes bristols and cotton

19. 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. 20 Paper Purchased for Usage in U.S. Books by Grade (000 tons)

21. 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. 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. 23 China Becomes Dominant Exporter of Printed Books to the U.S. U.S. imports of printed books, millions of books

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

25. 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. 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. 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. 28 Coated Freesheet + Coated Bristol Imports Into the U.S. by Month (tonnes)

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

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

31. 31 N.A. Paper Mill/Machine Closures (tonnes) CFSCGWUFS 2006CascadesThunder Bay28,000135,000 St. Jerome9,000 DomtarOttawa27,00031,000 Cornwall114,000124,000 New West.120,000 GlatfelterNeenah112,000 WeycoPrince Alb.250,000 BowaterDryden140,000 Benton Harbor77,000 IPPensacola318,000 NewPageLuke90,000 GPWauna100,000 BoiseWallula220,000 2007Totals379,000212,0001,304,000

32. 32 European Paper Mill/Machine Closures (tonnes) CFSCGWSC 2006BurgoMarzabotto70,000 UPMVoikka400,000 Kymi150,000 Stora EnsoCorbeham250,000 Varkaus100,000 Scheufelen 15,000 KlippanMolndal45,000 2007UPMJamsankoski110,000 M-RealSittingbourne210,000 Gohrsmuhle100,000 MyllykoskiDachau230,000 Stora EnsoReizholz215,000 Totals620,0001,060,000215,000

33. 33 European Paper Mill/Machine Closures (tonnes) UFS 2006SAPPINash35,000 CranCran-Gervrier35,000 PaperaliaLegorreta90,000 IPMaresquel70,000 2007M-RealWifsta175,000 Stora EnsoBerghuizer235,000 Totals640,000

34. 34 Major Capacity Changes in Asia, 2006–2009 Thousand Tonnes Woodfree Paper Hankuk, Ohsan S. Korea200Q1 2006UWF Gold Huasheng, China120Q1 2006UWF, CWF Tjiwi Kimia, Indonesia120Q1 2006UWF, CWF Siam Paper, Thailand1002006UWF, CWF Henan Xinxiang, China100Q4 2006UWF Shandong Tralin (#22) China100Q1 2007CWF Shandong Tralin (#23) China100Q2 2007CWF Shandong Tralin (#24) China100Q4 2007CWF April, Kerinci, Indonesia415Q1 2007UWF Packages, Pakistan120Q1 2007UWF Sun Paper, Shandong China250Q1 2007UWF, CWF Hubei Maxleaf Xiangfan China100Q2 2007CWF Nippon, Japan-340Q4 2007CWF, UWF Abhishek, India1002007UWF

35. 35 Major Capacity Changes in Asia, 2006–2009 Thousand Tonnes Woodfree Paper (continued) Siam Paper, Thailand200Q1 2008UWF Ballapur Bhigwan PM 2, India140Q2 2008CWF ITC, India200Q4 2008CWF Hokuetsu, Niigata, Japan350End 2008CWF ITC, India100Q2 2008UWF West Coast Paper, India100Q4 2008UWF Whitefield Paper, India200Q4 2008CWF, UWF Shandong Chenming, China150Q3 2008CWF Ballapur Bhigwan PM 3, India16008/09CWF Tamil Nadu, Kagithapuram India 150Q1 2009CWF/UWF Oji/Nantong Jiangsu China400End 2009CWF Tatau Pulp, Bintulu Malaysia750Q3 2009CWF/UWF

36. 36 Major Capacity Changes in Asia, 2006–2009 Thousand Tonnes Coated Mechanical Henan Xinxiang, China 200Q1 2007LWC Daio Paper, Japan 290Q3 2007LWC Nippon, Ishinomaki, Japan 350Q4 2007LWC Puyang Longfeng, China 275H1 2008LWC Oji Tomioka, Japan 350End 2008LWC Uncoated Mechanical Stora Enso/Huatai, China 200Q4 2007SC Yueyang Paper, Hunan China 4002008SC

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

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

39. 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. 40 Capacity Closures Keep Uncoated Freesheet Operating Rates Above 90% Operating Rates

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

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