December 1, 1995

Announcement of joint venture agreement between Nippon Paper Industries Co.,Ltd., and Japan Pulp and Paper Co., Ltd., in PEOPLE'S REPUBLIC OF CHINA

Nippon Paper Industries Co., Ltd.

The Nippon Paper Industries Co., Ltd., and the Japan Pulp and Paper Co., Ltd., have jointly signed the agreement of joint venture with the Shouguang Yongli Paper to produce the high grade Carbonless Base Paper for sales in China and other countries. The mill site is located in Shouguang city, Shandong about 180 kilometer west of Qingdao city.
1. Details of agreement
The joint venture company will take over the existing fine paper machine of wire width of 1760mm owned by the Shouguang Yongli, and rebuild to produce 10,000 tons of high grade carbonless base paper per year under the technical leadership and cooperation by the Nippon Paper Industries.
The Japan Pulp and Paper will be responsible for sales of product in China as well as export to other countries.
The basic strategy is to produce the base paper for the time being, however the mill may eventually look for an opportunity to install a converting machine to produce the Carbonless paper itself in future.
2. The status of joint venture
The total amount of investment will be 1,320 million yen with the initial capital amount of 829 million yen, to be held by the Nippon Paper 61.5 %, and the Japan Pulp and Paper 12.1 % and remaining balance of 26.4 % by the Shouguang Yongil, who will contribute a property for the mill site, the existing paper machine and building.
The Japanese partners will contribute with cash investment to renovate the machine and other equipments and also provide with the technical guidance.
A chairman of the board will be from the Chinese side and a president and CEO will be selected from the Japanese side.
3. Time schedule
The joint venture company obtained an approval to operate the mill under the joint venture status from the Shandong Provincial government, and the start up operation of a new machine is scheduled to be around the end of 1996.
4. Market condition
The annual demand for Carbonless paper in China is estimated to be 100,000 tons at present, and it is expected that the annual growth rate will be 15% per year.
China is presently suffering from acute shortage of this particular grade paper.
There are only a few producers of carbonless paper in China, however, the quality of Chinese made paper is not quite satisfactory, and consequently a substantial volume has to be imported from Japan and other countries.
The Nippon Paper has been a continuous supplier, and it is therefore appropriate and timely for the joint venture to take care of increasing demand by upgrading the existing machine to produce the carbonless paper by the joint venture company through an excellent Nippon Paper's technical leadership.