Nippon Paper Industries · 2 NIPPON PAPER INDUSTRIES In fiscal 2000, ended March 31, 2000, Nippon Paper Industries Co., Ltd. (NPI), strengthened operations and announced its new management

Nippon Paper IndustriesAnnual Report 2000

For the Fiscal Year Ended March 31, 2000

NIPPON PAPER INDUSTRIES CO., LTD.

Nippon Paper Industries Co., Ltd. (NPI), is a leading manufacturer of newsprint,

printing and publishing paper, business communication paper, wood pulp, liquid-

packaging cartons, and functional film products. The NPI Group has powerful

businesses spanning the manufacture and sale of paperboard, household tissue,

paper packaging, and lumber as well as transportation and the leisure business.

C O N T E N T S

Consolidated Financial Highlights ............................................................ 1

To Our Shareholders—A Message from the President............................. 2

A Conversation with President Masao Kobayashi .................................... 4

Review of Operations ................................................................................ 10

Business Structure of the Nippon Paper Group ....................................... 12

Financial Section........................................................................................ 13

Corporate Data.......................................................................................... 35

Board of Directors ..................................................................................... 35

Directory .................................................................................................... 36

P R O F I L E

1NIPPON PAPER INDUSTRIES

C O N S O L I D A T E D F I N A N C I A L H I G H L I G H T SNippon Paper Industries Co., Ltd. and Consolidated Subsidiaries Years ended March 31 (Note 2)

Thousands of U.S. dollars

Millions of yen (Note 1)

2000 1999 2000

For the year:

Net sales........................................................................................................................ ¥ 906,041 ¥ 906,513 $ 8,547,557

Gross profit .................................................................................................................... 202,258 179,319 1,908,094

Operating income .......................................................................................................... 30,127 12,166 284,217

Income before income taxes and minority interests ..................................................... 21,626 7,437 204,019

Net income .................................................................................................................... 10,106 1,067 95,340

At year-end:

Total assets.................................................................................................................... ¥1,130,037 ¥1,155,147 $10,660,726

Property, plant and equipment–net ............................................................................... 550,185 554,877 5,190,425

Total investments and other assets............................................................................... 127,838 142,944 1,206,019

Total shareholders’ equity.............................................................................................. 342,367 335,012 3,229,877

Notes: 1. U.S. dollar amounts here and elsewhere in this annual report are translated, for convenience only, at the rate of ¥106=US$1.2. The years stated in the text and graphs are fiscal years, which begin on April 1 of the previous year and end on March 31 of the year indicated.

906.0

’00’99’98’97’96

Net Sales(Billions of Yen)

10.1

’00’99’98’97’96

Net Income(Billions of Yen)

1,130.0

’00’99’98’97’96

Total Assets(Billions of Yen)

2 NIPPON PAPER INDUSTRIES

In fiscal 2000, ended March 31, 2000, Nippon Paper Industries

Co., Ltd. (NPI), strengthened operations and announced its new

management strategy for raising corporate value, making fiscal

2000 an extremely important year for the Company.

Selective and Focused Investment—

Creating a Solid Corporate Structure

From 1998 to 1999, Japan faced its worst recession since World

War II, resulting in a harsh business environment for NPI. To avoid

the risks of such an environment and create a firm corporate struc-

ture that will withstand the cycles of the market, in the spring of

1999 we formulated our second Medium-Term Business Plan for

our Enhanced Emergency Measures Policy (Emergency Measures

Policy), which focuses on restructuring and the efficient use of

assets under the theme “Selective and Focused Investment.”

The main points of the policy include:

(1) the closing of the Miyakojima Mill (Osaka) and the disposal of

six inefficient paper machines by the end of March 2000,

(2) a reduction of 1,300 NPI employees (a total Group reduction

of 2,150) by the end of March 2002,

(3) the implementation of ¥15 billion in cost reductions by the

end of March 2001, and

(4) the reduction of Groupwide interest-bearing liabilities, includ-

ing a ¥50 billion reduction in NPI’s existing ¥400 billion in

interest-bearing liabilities, by the end of March 2001.

Success of the Emergency Measures Policy

With the cooperation of management and employees, we were

able to carry out the closing of the Miyakojima Mill and the dis-

posal of six inefficient paper machines. We are now pursuing activ-

ities to complete the remaining policy measures and expect to

achieve our goals one year early. As a result, during the fiscal year

under review consolidated net sales were approximately the same

as last year’s figure, at ¥906,041 million. Net income also made a

significant jump from the previous fiscal year, increasing 947%, to

¥10,106 million. Due to these favorable conditions, in the period

under review NPI recorded the highest profits in the industry, both

as an independent company and as a group (the Company’s four

competitors in Japan had an average consolidated net income of

¥4.0 billion for the fiscal year). Through continued efforts, we plan

to maintain our hold on the top position in the industry.

The IT Revolution—A New Business Opportunity

In addition to the management changes undertaken by NPI, it is

necessary to outline the major changes that have taken place in the

business environment surrounding the paper industry. In addition

to demand from businesses that print leaflets and catalogs, there

was also strong demand from computer- and mobile phone-related

companies for manuals and books, enabling much stronger growth

than we initially expected. Further, with the growing popularity of

the Internet, the volume of information that people can obtain will

increase significantly, resulting in rapid growth in demand for

paper as an easy and economic recording medium. These changes

are a result of the IT revolution, which is reforming the fundamen-

tal structure of demand patterns in the paper industry, making for

dynamic growth. Since autumn 1999, NPI has been operating at

almost full capacity to deal with the increase in demand generated

by the IT revolution.

Collaboration with Daishowa Paper Manufacturing Co., Ltd.

Responding to increased demand in NPI’s core business—paper—

posed a challenge for the Company in deciding the best method

of expansion. In the past, we have undertaken scrap-and-build

measures to handle increases in demand. However, aiming to

make strategic use of existing facilities, we felt that increasing the

Company’s value was necessary and considered M&A or the inte-

gration of operations with various outside companies.

Daishowa Paper Manufacturing Co., Ltd., is Japan’s fourth

largest pulp and paper manufacturer. The integration of operations

with Daishowa is extremely advantageous for us, as it will enlarge

our retail business and the number of production sites available to

us. Further, Daishowa and NPI manufacture many similar products,

and integrating the operations of the two companies will maximize

productivity through the use of existing equipment, optimize man-

ufacturing and sales operations, and accelerate synergies.

For these reasons, NPI announced plans to integrate business

operations with Daishowa on March 27, 2000, an agreement that

was approved at a meeting of shareholders on June 29, 2000. The

A M e s s a g e f r o m t h e P r e s i d e n t

T o O u r S h a r e h o l d e r s


integration will be accomplished through a cashless stock transfer

in which all the shares of NPI and Daishowa will be replaced by the

shares of a newly established holding company at the rate of 1000

NPI shares and 1666 Daishowa shares, respectively (together with

certain cash adjustments), for one share of the new holding com-

pany. We now lead Japan’s papermaking industry in sales and

rank sixth in the world in paper sales.

A Holding Company System on the Path to Success

To pursue efficiency in operations of both companies, NPI and

Daishowa will carry out business as an integrated corporation—a

groundbreaking move in Japan’s paper manufacturing industry.

Such corporations are common overseas, but have not been rec-

ognized in Japan in the past. However, in June 1997 the Japanese

government passed Article 9 of the Antimonopoly Act, which

allows the formation of such corporations, which can react quickly

to a changing business environment.

Plans to establish a controlling parent company, Nippon Unipac

Holding, are set for March 2001. We took the name United Paper

Companies to reflect our position in the global market for paper

manufacturing and will promote our goal to promptly increase the

Company’s value and international competitiveness.

We will discuss a concrete plan of action for the merger and

make efforts to implement any measures that can be carried

out beforehand.

Our Responsibility to Our Shareholders

While fulfilling its function of governance, as a corporation the

parent company will serve to centralize and accelerate the estab-

lishment and implementation of strategies that place the highest

priority on raising the value of our stock. We aim to consolidate

the management of our subsidiaries to make them as efficient

and highly competitive as possible.

In the new millennium, we will continue to aim for strategic

operations while making every effort to fulfill the expectations

of our shareholders.

June 2000

Masao Kobayashi

President, Nippon Paper Industries Co., Ltd.


1What have been some concrete results of the Emergency

Measures Policy that NPI announced in the spring of 1999?

Because the paper industry has felt the effects

of a worsening business environment, NPI has

had to respond accordingly.

• First, we shut down our Miyakojima Mill

located in the center of Osaka. This mill had

an 85-year history, but we decided to close

it due to the inefficient operations of its

small-scale papermaking machines. We are

discussing alternative uses for the approxi-

mately 98,000 m2 lot, including carrying

out sales.

• As planned, we disposed of six inefficient

papermaking machines (three at the Miyako-

jima Mill and one each at the Yatsushiro,

Iwakuni, and Asahikawa mills). Although the

disposal of these machines translates into a

4.7%, or 167,000 metric ton, loss in produc-

tivity, we plan to greatly improve profitability

by shifting to high-output machines.

• We reduced the number of regular employ-

ees at NPI from 6,800 to 6,009. This resulted

in cost cuts of ¥3.1 billion. The Group overall

reduced its number of employees 463 people

(OTAKE PAPER MFG. CO., LTD., and Kitagami Paper Co., Ltd.,

increased their numbers of employees 530 people; even with the

increase from these two companies included).

Looking at reductions in manufacturing costs, we were able to

make a dramatic cut of ¥15.4 billion by the end of March 2000,

reaching our goal one year early. We plan to make further cuts

in the current term to increase the effectiveness of this goal.

• By the end of March 2000, we had reduced interest-bearing liabili-

ties to ¥352.5 billion. Moreover, we will exceed our goal of ¥350.0

billion by the end of March 2001, one year ahead of schedule.

With selective and focused fundamental policies, we intend to

continue to strive for a firm corporate structure that will withstand

changing market conditions.

2What kind of influence do you think

the IT revolution will have on the

papermaking industry as a whole and NPI

in particular?

• I think that the IT revolution will have an

incredible effect on the demand for paper.

• In IT-related businesses, fiscal 2000 was an

excellent year—with growth in the markets

for such high-tech information tools as per-

sonal computers, digital cameras, and color

printers. Specifically, shipments of comput-

ers reached 10 million units and shipments

of printers increased approximately 20%

compared with the previous fiscal year,

about double that for fiscal 1996.

Miyakojima Mill

A C o n v e r s a t i o n

Reduction of the Number of EmployeesPlanned number of full-time employees

9,000

7,1756,800

6,009

5,500

93.4 98.3 99.2 00.3 02.3(estimated)

0

2,000

4,000

6,000

8,000

10,000

(number)


• In mid-1999, as a direct

result of the IT revolution,

we experienced significant

growth in demand for paper,

our main market, particularly

for printing and coated

paper. The primary reason for

this jump was an increase in

demand for paper for manuals for IT-related devices. With the

progress of Internet-related businesses and technological advances

in IT equipment, such as i-mode mobile phones, demand in this

industry is expected to continue expanding dramatically.

• The popularity of the Internet will be a primary factor in increased

demand for paper. The information available to people in the past

is almost insignificant compared to the wealth of information one

can obtain today, and we believe that the use of paper as a medium

for recording information will contribute to a rise in paper demand.

• Moreover, NPI will strengthen itself further with such high-value-

added products as ink-jet

and thermal paper that are

directly related to informa-

tion machines.

• The growth in demand

spurred by the IT revolution

is not just a Japanese phe-

nomenon, but something

that is being experienced by

the entire world, and our

competitors recognize this

as well. By making ourselves

internationally competitive,

I think that our main busi-

ness—the paper business—

can evolve to reap the

rewards of continued

IT-related demand.

3Why did you choose to

integrate operations

with Daishowa Paper

Manufacturing Co., Ltd.?

• Integrating our business

operations is extremely

advantageous because we

believe that Daishowa’s management resources are essential to

our strategy for future growth. Through our previous conventional

strategy of selective and focused investment, we have been able

to obtain extensive know-how related to the efficient use of assets,

but to continue our progress in the paper industry, obtaining man-

agement resources that will add value to our Company will be both

integral and necessary. Integrating operations with Daishowa satis-

fies all of our requirements for future growth.

• With integration, the first order of business will be the optimiza-

tion of the manufacture and sale of similar products.

• Also, Daishowa’s plant loca-

tions perfectly complement

our own. With both maritime

and Tokyo area locations, we

will boast the largest produc-

tion network nationwide, and

our locations throughout the

country will contribute to

improved efficiency in the

procurement of materials,

production, sales, and distri-

bution, making us more cost-

competitive than ever.

• Furthermore, I think that

with the cashless stock trans-

fer, NPI shareholders will

benefit greatly.

w i t h P r e s i d e n t M a s a o K o b a y a s h i

Business Integration with Daishowa Paper—Domestic Mills

Asahikawa Mill

Kushiro Mill

Shiraoi Mill

Yufutsu Mill

Ishinomaki Mill

Nakoso Mill

Higashimatsuyama Mill

Fushiki Mill

Komatsushima Mill

Gotsu Mill

Iwakuni MillYatsushiro Mill

Yoshinaga MillSuzukawa MillFuji Mill

Iwanuma Mill

Nippon PaperDaishowa Paper

1999: World’s largest companies in the paper industry by revenue (Consolidated basis)

0 5 10 15 20 25 30

1. International Paper(+Shorewood+Champion)

2. Georgia-Pacific (+Fort James)

3. Stora Enso(+Consolidated Papers)

4. Kimberly-Clark

5. Weyerhaeuser

6. Nippon Paper+Daishowa Paper

(Billions of U.S. Dollars)Source: NPI and company news releases35


4What were some products that NPI

developed in fiscal 2000?

We have developed new products from

which we can expect significant contributions

to profits in the near future. Our advanced

technological abilities will be a major advan-

tage in Asian markets and in mapping our

future strategies.

• We would like to capture such IT-related

markets as those for paper for ink-jet printers

and thermal paper. With the growth in sales

of ink-jet printers, we predicted that printing

needs would become more diverse, especially

with advanced graphics, and we began

developing and selling paper for ink-jet print-

ers early on. To satisfy customer needs, in fiscal

2000 we developed two different kinds of

paper for use with ink-jet printers—high-grade

paper for superior, photo-quality images and

economical plain paper—both of which were

favorably received in the market.

• Regarding thermal paper, we developed a

product that allows high preservation func-

tion. We expect most of the demand for this

paper to come from supermarkets and conve-

nience stores in the printing of receipts as

well as from suppliers of handy terminals,

transport services, ATMs, and tickets.

• We succeeded in developing environmentally sound, extremely

lightweight newsprint using fewer resources while maintaining high

quality by making paper with high recycled wastepaper content.

• In paper, NPI developed a low-density (high-bulk), highly opaque

and soft paper that weighs 30% less than standard woodfree

paper, which has a typical density of 0.85g/cm3. This is well suited

for use as book paper, for which market demand is especially high.

We have developed low-density book paper, low-density matte-

coated paper, and low-density gravure paper to meet the various

demands for low-density papers.

• In paper-related products, we developed a

superior polypropylene resin with high recy-

clability. With the trend toward the complete

recycling of automobile parts, we expect high

growth for this product as a material for use

in automobile bumpers.

• In liquid-packaging cartons, we developed

and launched a 500ml gable-top Pure-Pak®

minicarton. With the recycling of both large

and medium-sized PET bottles becoming

increasingly problematic due to storage

considerations, we anticipate demand in

this market to increase.

In addition, we are making progress in the

broad and rapidly expanding field of electron-

ic displays by improving the quality of our

color LCD transfer film and antiglare film.

5The biotechnological development

of a “Supertree” that will yield twice

as much pulp as a regular tree is advanc-

ing. What is NPI’s strategy regarding

this biotechnology?

Simply put, if we can double the amount of

pulp we can obtain from our plantations, we

will cut our lumber costs dramatically. It

sounds unattainable, but NPI is confident it will realize this goal

through the use of biotechnology.

First, we have already developed the MAT Vector® system, with

which we can choose beneficial genes from different plants—for

example, genes for fast growth, cold resistance, and disease resis-

tance—and introduce these genes into the original gene to make

a heartier, higher-yield plant. This epochal technology enables the

repeated introduction of additional genes into a single recombi-

nant plant. AstraZeneca Pharmaceuticals LP, a major biopharma-

ceuticals company, has been licensed by NPI to use this technology.

Paper for ink-jet printers

High-quality newsprint

Thermal paper


And because these genetically modified plants do not bear marker

genes, they are environmentally safe.

Second, NPI is developing and retains the rights to photo-

autotrophic culture technology, a technology for the mass produc-

tion of high-quality cloned seedlings of superior plants. Third, in

February 2000, we were the first company in the world to develop

a technology for preserving cloned seedlings at low temperatures.

We have developed a cloning system for plants and are one

step closer to creating a “Supertree.”

To advance the latter two technologies,

we are now constructing a cloning research

facility in Western Australia for the mass

production of the high-quality seedlings of

NATURAL ELITE trees. The facility will have

a culture-breeding greenhouse and a four-

hectare test plantation.

Through these activities, we will not only

cut costs related to natural resources; we

will be able to make biotechnology a major

source of profit for the Company.

6What were the circumstances under which NPI

constructed its resource cycle business model?

The paper business is generally called a sustainable resource indus-

try. NPI has constructed a highly sustainable resource cycle busi-

ness model, which is at the forefront of the industry.

NPI obtained ISO 14001 certification in December 1999 at all

mills, and the remaining Group businesses are expected to acquire

certification in the near future.

In addition, we have led the industry

in developing revolutionary technologies.

• We have such resource-conserving tech-

nologies as plant biotechnology, worldwide

plantation technology (the area of which we

plan to increase from 28,000 hectares in

December 1999 to 100,000 hectares by the

end of 2008), and technology for recycling

old magazines.

• We have led the industry in using new tech-

nologies to aid environmental protection efforts; NPI was the first

Japanese company to begin elementary chlorine-free ozone bleach-

ing pulp production.

Preserving cloned seedlings at low temperatures

“Supertree” Project

Standing Tree (m3 basis)

100

� High-bulk density(g/cm3) � High yield

� Rapid growth

155+55%

100

184

100

202

Chip (weight basis) Pulp (weight basis)

Regular tree (as 100)

“Supertree”

+19% +10%


• NPI is developing an environment-friendly

and cost-cutting closed system for BKP

production and is currently carrying out

field tests.

• We will collaborate with Asahi Glass Co.,

Ltd., and Kawasaki Kasei Chemical Ltd., in

the technological development of a closed

system for BKP production and are planning

for joint projects to be carried out in 2001.

• Also, we develop and sell paper with high

recycled wastepaper content.

Our adoption of a resource cycle business

model is based on our 1993 Environmental

Charter, which has made us the most envi-

ronmentally conscious company in the

papermaking industry.

NPI revised the contents of the charter in

March 2000, establishing a goal of reducing

final waste to 0.1% or less of product weight, which moves NPI

closer to its goal of completely eliminating discharge.

7Could you describe the reformation of the Company’s

business structure?

Active reorganization is necessary to make NPI an organization that

can meet the needs of this generation.

• In the year under review, we established two new organizations:

in October 1999 an invester relations office, and in November of

the same year the Recycling Fiber’s Department to deal with the

steady and efficient procurement of wastepaper, which will be an

increasingly important material in papermaking in the 21st century.

• In November 1999, we merged our three Tokyo R&D laborato-

ries and placed them in a central location to accelerate R&D and

create synergies in new technology development.

• Since April 2000, we have been revamping our paper business

with the aim of extending and tightening our relationships with

our customers.

• We have reorganized the departments with-

in our sales divisions so that they are divided

by function rather than product, creating such

departments as the Publishers Sales Depart-

ment, Wholesalers Business Department, and

Direct Sales Department—an organization

that will facilitate stronger sales through

improved response to market demands.

• Furthermore, we established the Marketing

Division to coordinate former sales divisions

as a strategic center for our new business.

This division will oversee such issues as the

planning of business strategies, product

development and quality management, the

promotion of digitization, and the promotion

of customer satisfaction through the central-

ized management of such support activities

as product delivery to enable cohesive busi-

ness activity and bring about an overall increase in Group efficiency.

• Our plans also call for further business restructuring. We will con-

tinue with a project that assesses all stages of the papermaking pro-

cess, from receiving orders through the production, stock, and

supply processes. We will reduce inventories and lower delivery

costs by modernizing our distribution methods. We will also com-

mence supply chain management (SCM), which will include the

restructuring of our computer systems. Through these measures,

and the integration of operations with Daishowa in 2001, we

will achieve optimal results throughout the entire Company.

8Could you brief us on your stance on overseas business?

I would like to regard the overseas business activity as one of

the main contributors to our business portfolio in the future. Our

company has established several joint ventures around the world.

Principal overseas joint ventures are North Pacific Paper Corporation

(North America/newsprint), Jujo Thermal Oy (Europe/thermal paper),

Tree farm in Western Australia


and Shouguang Liben Paper Making Co., Ltd. (China/baseboard

for carbonless copy paper), all of which report satisfactory results.

On the other hand, our exports—mainly in the Asian market—

exceeded 330 thousand metric tons last year, a record high. This

confirms that our strenuous efforts to promote sales activities and

product quality are highly evaluated throughout the world. We

will serve overseas customers by maintaining stable and lasting

relationships with our business partners.

We are currently considering the expansion of local production,

and must consider three things in the pursuit of new customers

and markets: sales power, logistics, and market risk. Therefore,

new business will be set up in the form of joint ventures with exist-

ing partners or through mergers and acquisitions.

Although there is concern that competitiveness and the ease of

technology transfer may pose challenges in expanding into existing

and prospective markets, we are well prepared to face them by

considering a variety of methods suitable for each case.

We will aggressively enter potential markets where we can take

advantage of our advanced technology and business know-how

to become a leading company worldwide.

Overseas Bases and Tree Farms

ChileThe 8th region13,500 hectares

ChinaGuangdong10,000 hectares

Test PlantationMyanmarBago

South AfricaKwaZulu-Natal10,000 hectares

AustraliaVictoriaTotal 14,500 hectares

AustraliaSouth Australia/VictoriaTotal 23,000 hectares

AustraliaWestern AustraliaTotal 22,000 hectares

Branches and officesSubsidiaries and affiliatesTree farms

End of '99: 28,000 hectaresEnd of '08: 100,000 hectares (est.)

Paper-RelatedDivision

Housingand Con-structionMaterialsDivision

OtherDivision

Pulp andPaperDivision


1. Business Structure• NPI and Kitagami Paper Co., Ltd., manufacture and sell paper.

Tohoku Paper Co., Ltd., OTAKE PAPER MFG. CO., LTD., and Koyo

Paper Mfg. Co., Ltd., are engaged in the production of paper for

purchase and sale by NPI.

• Tohoku Paper, Kitagami Paper, Koyo Paper, and Japan Paperboard

Industries Co., Ltd., manufacture and sell paperboard. CRECIA

Corporation manufactures and sells household tissue and sanitary

products. NPI and Tohoku Paper manufacture pulp, which is sold

by NPI.

• San-Mic Chiyoda Corporation, Jujo Shoji Co., Ltd., and Kokuei

1. Business Structure• Jujo Central Co., Ltd., produces and markets cartons, packaging, and

wrapping materials. LINTEC Corporation produces and sells adhesive-

related materials. Liquid-packaging cartons are manufactured by Jujo

Central and purchased and sold by NPI.

• Sakurai Co., Ltd., markets both paper and film products manufac-

tured by the NPI Group.

• Chemical products are manufactured by NPI and are sold by NPI,

San-Mic Chiyoda, and SANFLO CO., LTD.

Pulp and Paper Division

R e v i e w o f O p e r a t i o n s

1. Business Structure• NPI, JUJO LUMBER CO., LTD., and SHINYO CO., LTD., sell wood

materials. PAL Co., Ltd., sells construction materials.

• NPI, SHINYO, Kunimoku House Co., Ltd., and NP Development Co.,

Ltd., offer real estate and leasing services.

• Jujo Con-Tech Co., Ltd., and Kokusaku Kiko Co., Ltd., provide

services in machinery design, manufacturing, and repair as well

as civil engineering and construction planning and implemen-

tation services.

1. Business Structure• Nippon Paper Logistics Co., Ltd., NANKO UNYU CO., LTD.,

Kyokushin Transport Co., Ltd., and HOTOKU UNYU CO., LTD.,

are responsible for the transportation and warehousing of Group

products.

• Shikoku Coca-Cola Bottling Co., Ltd., bottles and markets soft drinks

and other beverages. NP Development manages leisure facilities.

Sanwa Printing Co., Ltd., is a printing business.

Sales(Billions of Yen)

64.5

0

10

20

30

40

50

60

70

’00’99


101.2

0

20

40

60

80

100

120

’00’99


94.1

0

20

40

60

80

100

’00’99


646.3

0

100

200

300

400

500

600

700

’00’99

Starting in fiscal 2000, NPI categorized its business into four divisions instead of three, moving liquid-packaging cartons, industrialprocessed paper, and film products from the pulp and paper category to their own category of paper-related products.

Housing and Construction MaterialsDivision

Other Division

Paper-Related Division


Paper Co., Ltd., market and trade various products supplied by NPI

Group companies.

• Overseas, North Pacific Paper Corporation (NORPAC) manufactures

newsprint and related products, which are imported to and sold in

Japan by NPI.

2. Business Performance in Fiscal 2000• In the Pulp and Paper Division, we maintained our focus on prices,

placing the utmost importance on restoring price levels and reducing

inventories. We were able to increase sales due to higher demand for

the commercial printing of leaflets, catalogs, manuals, and IT-related

printing and informational sheets as well as increased exports to Asia.

• Price levels were partially restored, but the average price level for

the year under review did not approach that of the previous fiscal

year, resulting in a 1.0% decrease in total sales for the division, to

¥646,267 million.

• Looking at profits, however, due to the effect of cost cuts outlined

by our Emergency Measures Policy and the effect of the stronger

yen on the price of resources, operating income rose significantly, to

¥19,138 million.

• Due to a new consolidation policy, in the year under review OTAKE

PAPER and Kitagami Paper became Group subsidiaries.

2. Business Performance in Fiscal 2000• Such products as Pure-Pak® and Fuji Pack® represent NPI’s liquid-

packaging carton business, in which the slump in sales for packag-

ing for milk was offset by the improved market conditions in

packaging for soft drinks, resulting in sales of approximately the

same level as that of the previous fiscal year.

• In functional materials, the growth in demand for liquid crystal-

related materials contributed to the favorable conditions in sales

of electronic materials.

• Although the stronger yen contributed to a decrease in demand

for chemical products, sales increased in this division due to the

expansion of sales of existing products, entry into new markets, and

the development and launch of such new products as chlorinated

resin, a water emulsion product.

• Sales in this division increased 1.3%, to ¥94,060 million, and oper-

ating income amounted to ¥5,480 million.

2. Business Performance in Fiscal 2000• Despite an upturn in housing starts, the failure of the wood materials

market to show improvement makes the outlook for this division unclear.

• Making a drastic reappraisal of its strategies in this division, NPI

intensified efforts to expand sales and streamline its lineup of con-

struction materials as well as carried out cost-cutting measures,

which resulted in an 8.9% increase in sales, to ¥101,167 million,

and operating income of ¥980 million.

2. Business Performance in Fiscal 2000• Sales in this division decreased due to the exclusion from accounting

of Jujo Service Center Co., Ltd., and the poor condition of leisure

business. Sales amounted to ¥64,544 million and operating income

was ¥4,528 million.


B u s i n e s s S t r u c t u r e o f t h e N i p p o n P a p e r G r o u p

Pulp and Paper DivisionPaper-RelatedDivision

Housing andConstructionMaterials Division Other Division

Customers

Sale

Manufactureand Sale

Manufactureand Sale

Sale Sale Sale

Transportation

San-Mic Chiyoda

Kitagami Paper

CRECIA

Japan Paperboard

Manufacture

Tohoku Paper

OTAKE PAPER

Koyo Paper

Manufacture

NORPAC

Manufacture

Machinery Service, Manufacture, and Repair

Jujo Central Jujo Con-Tech

Kokusaku Kiko

Jujo Shoji

Kokuei Paper

Sakurai

SANFLO

JUJO LUMBER

SHINYO

PAL

Kunimoku House

Shikoku Coca-ColaBottling

NP Development

Sanwa Printing

Nippon Paper Logistics

NANKO UNYU

IWAKUNI KAIUN

Kyokushin Transport

HOTOKU UNYU

LINTEC

NPI


C O N S O L I D A T E D F I V E - Y E A R S U M M A R YNippon Paper Industries Co., Ltd. and Consolidated Subsidiaries Years ended March 31

Millions of yen

2000 1999 1998 1997 1996

Pulp and Paper (Note 1)Total sales of division ................................................... ¥ 647,853 ¥ 654,486 ¥ 851,836 ¥ 885,498 ¥ 879,931Intragroup sales ............................................................ (1,585) (1,678) (216) (254) (556)Total sales—third parties .............................................. 646,267 652,808 851,620 885,243 879,375

Paper-Related (Note 1)Total sales of division ................................................... 102,371 100,405 — — —Intragroup sales ............................................................ (8,310) (7,547) — — —Total sales—third parties .............................................. 94,060 92,858 — — —

Housing and Construction MaterialsTotal sales of division ................................................... 114,688 106,519 106,164 138,118 118,761Intragroup sales ............................................................ (13,521) (13,660) (5,893) (4,537) (4,471)Total sales—third parties .............................................. 101,167 92,859 100,270 133,580 114,289

OtherTotal sales of division ................................................... 81,606 83,152 124,371 97,782 90,738Intragroup sales ............................................................ (17,061) (15,164) (38,199) (23,262) (18,572)Total sales—third parties .............................................. 64,544 67,987 86,172 74,519 72,165

Total salesTotal sales of division ................................................... 946,519 944,564 1,082,372 1,121,399 1,089,431Intragroup sales ............................................................ (40,478) (38,051) (44,308) (28,055) (23,601)Total sales—third parties .............................................. 906,041 906,513 1,038,063 1,093,344 1,065,830

Operating income (Note 2) ............................................... 30,127 12,166 47,517 63,501 76,285Income before income taxes (Notes 2 and 3) .................. 21,626 7,437 38,331 49,074 58,091Net income....................................................................... 10,106 1,067 18,414 28,628 24,105

Total assets ...................................................................... 1,130,037 1,155,147 1,225,910 1,278,316 1,247,858Total current assets .......................................................... 444,081 451,645 513,073 568,048 575,443Property, plant and equipment–net (Note 4) .................... 550,185 554,877 564,621 573,534 541,365Total investments and other assets (Note 5).................... 135,769 148,623 148,215 136,733 131,049Liabilities and others (Note 6) .......................................... 787,669 820,133 881,569 946,434 937,708Total shareholders’ equity ................................................ 342,367 335,012 344,340 331,881 310,149

Amounts per share (yen):Net income

Basic ............................................................................. ¥ 10.65 ¥ 1.13 ¥ 19.41 ¥ 30.18 ¥ 25.41Diluted .......................................................................... 10.61 — 18.62 28.57 24.16

Stockholders’ equity ......................................................... 360.91 353.19 363.02 349.88 326.98

Ratios (%):Operating income to net sales (Note 2)............................ 3.33% 1.34% 4.58% 5.81% 7.16%Net income to net sales ................................................... 1.12% 0.12% 1.77% 2.62% 2.26%Net income to shareholders’ equity ................................. 2.98% 0.31% 5.45% 8.92% 8.00%Equity ratio........................................................................ 30.30% 29.00% 28.09% 25.96% 24.85%

Notes: 1. From 1999, the Pulp and Paper Division was split into the Pulp and Paper Division and the Paper-Related Division.2. Enterprise tax does not include selling, general and administrative expenses.3. Income before income taxes, minority interests, amortisation, and equity in earnings4. Property, plant and equipment–net excludes intangible fixed assets.5. Investments and other assets includes intangible fixed assets and foreign currency translation adjustments.6. Liabilities and others includes minority interests in consolidated subsidiaries.

F I N A N C I A L S E C T I O N


C O N S O L I D A T E D F I N A N C I A L R E V I E W

906.0

’00’99’98’97’96

Net Sales(Billions of Yen)

30.1

’00’99’98’97’96

Operating Income(Billions of Yen)

10.1

’00’99’98’97’96

Net Income(Billions of Yen)

SUMMARY OF OPERATIONS

During fiscal 2000, ended March 31, 2000, the Japanese econ-

omy continued to show signs of recovery as a result of govern-

ment efforts to stabilize the financial system and stimulate

economic growth. Although positive economic indicators multi-

plied in the second half of the fiscal year, private consumption

and corporate capital investment remained sluggish, reflecting

continued harsh business conditions.

In the paper industry, sales increased from the previous

fiscal year due primarily to higher computer- and IT-related

demand, which is changing the fundamental structure of

demand patterns in the paper industry. Against this back-

ground, NPI integrated operations with Daishowa Paper

Manufacturing Co., Ltd., Japan’s fourth-largest pulp and paper

manufacturer, enlarging NPI’s retail business and number of

production sites. The Housing and Construction Materials

Division benefited from an increase in housing starts, but the

other areas in this segment failed to show significant growth.

On a consolidated basis, net sales declined 0.1%, to ¥906.0

billion (US$8,547.6 million), and net income jumped ¥9.0 billion,

to ¥10.1 billion (US$95.3 million). Consistent with its policy of

maintaining stable dividends to shareholders, the Company

paid cash dividends of ¥8.00 (US$0.075) per share, the same

level as in the previous fiscal year.

NET SALES

Looking at consolidated performance by operating division,

sales in the Pulp and Paper Division amounted to ¥647.9 billion

(US$6,111.8 million), a 1.0% decrease from the previous fiscal

term. The decline reflects the failure of price levels to approach

those of the previous fiscal term. Sales in the Paper-Related

Division were ¥102.4 billion (US$965.8 million), a 2.0% increase

from the previous fiscal term. Sales in the Housing and Con-

struction Materials Division were ¥114.7 billion (US$1,082.0 mil-

lion), a 7.7% increase compared with the previous fiscal year,

reflecting NPI’s intensified efforts to expand sales while

cutting costs. Sales in the Other Division were down 1.9%,

to ¥81.6 billion (US$769.9 million).

COSTS, EXPENSES AND EARNINGS

Cost of sales declined 3.2%, to ¥703.8 billion (US$6,639.5 mil-

lion), and cost of sales as a percentage of net sales, at 77.7%,

was down 2.5 percentage points from the previous fiscal term.

NPI continued to boost operating efficiency and reduce produc-

tion costs and other expenses in various business divisions.

During the year under review, selling, general and adminis-

trative (SG&A) expenses rose 3.0%, to ¥172.1 billion

(US$1,623.9 million). SG&A expenses as a percentage of net

sales increased 0.6 percentage point from the previous fiscal

year, to 19.0%. Operating income was up ¥18.0 billion, to


¥30.1 billion (US$284.2 million), and operating income as a per-

centage of net sales rose from 1.3% to 3.3%.

Net other expense increased ¥3.8 billion from the previous

fiscal year, to ¥8.5 billion (US$80.2 million). This change is

attributable primarily to a net loss on devaluation of marketable

securities of ¥2.6 billion (US$24.7 million), compared with no

loss in the previous fiscal year.

As a result of the factors mentioned above, income before

income taxes and minority interests rose ¥14.2 billion, to

¥21.6 billion (US$204.0 million). Net income was up ¥9.0 bil-

lion, to ¥10.1 billion (US$95.3 million). Basic net income per

share increased from ¥1.13 in fiscal 1999 to ¥10.65 (US$0.100)

per share.

FINANCIAL POSITION

Total assets at March 31, 2000 amounted to ¥1,130.0 billion

(US$10,660.7 million), a 2.2% decrease from the previous fis-

cal year-end. Total current assets fell 1.7%, to ¥444.1 billion

(US$4,189.4 million). This decline was due primarily to declines

in marketable securities, other notes and accounts receivable,

loans receivable from unconsolidated subsidiaries and affiliates

as well as inventories, which offset increases in cash and time

deposits and trade notes and accounts receivable.

Higher accumulated depreciation led to a 0.8% decrease

in property, plant and equipment–net, to ¥550.2 billion

(US$5,190.4 million). Total investments and other assets fell

10.6%, to ¥127.8 billion (US$1,206.0 million), reflecting primar-

ily a decrease in investments in and advances to unconsolidat-

ed subsidiaries and affiliates.

On the other side of the balance sheet, total current lia-

bilities fell 3.4%, to ¥459.2 billion (US$4,331.9 million), due

mainly to a ¥40.6 billion decrease in short-term borrowings.

Total long-term liabilities slipped 6.2%, to ¥302.8 billion

(US$2,856.4 million), with long-term debt falling 6.7%, to

¥277.4 billion (US$2,616.8 million).

Total shareholders’ equity expanded 2.2%, to ¥342.4 bil-

lion (US$3,229.9 million), mainly as a result of a ¥7.3 billion

increase in retained earnings. The shareholders’ equity ratio

improved 1.3 percentage points, to 30.3%, and the current

ratio climbed from 0.95 to 0.97.

1,130.0

’00’99’98’97’96

Total Assets(Billions of Yen)

342.4

’00’99’98’97’96

Total Shareholders’Equity(Billions of Yen)


C O N S O L I D A T E D B A L A N C E S H E E T SNippon Paper Industries Co., Ltd. and Consolidated Subsidiaries As of March 31, 2000 and 1999

Thousands ofU.S. dollars


ASSETS 2000 1999 2000

Current assets:

Cash and time deposits .................................................................................................... ¥ 20,891 ¥ 18,291 $ 197,085

Marketable securities (Notes 3 and 5) .............................................................................. 70,398 78,271 664,132

Receivables:

Notes and accounts receivable:

Trade......................................................................................................................... 206,274 194,049 1,945,981

Unconsolidated subsidiaries and affiliates ................................................................ 13,318 16,793 125,642

Other......................................................................................................................... 2,900 8,432 27,358

Loans receivable from unconsolidated subsidiaries and affiliates ................................ 15,354 15,896 144,849

Allowance for doubtful receivables............................................................................... (1,083) (1,281) (10,217)

Inventories (Notes 4 and 5)............................................................................................... 105,770 114,010 997,830

Deferred tax assets (Note 7)............................................................................................. 3,503 — 33,047

Other current assets......................................................................................................... 6,753 7,181 63,708

Total current assets .............................................................................................. 444,081 451,645 4,189,443

Property, plant and equipment (Note 5):

Land .................................................................................................................................. 93,073 85,416 878,047

Buildings and structures ................................................................................................... 273,285 261,649 2,578,160

Machinery and equipment ................................................................................................ 1,085,780 1,034,269 10,243,208

Forests and afforestation.................................................................................................. 12,714 12,887 119,943

Construction in progress................................................................................................... 16,930 21,431 159,717

.......................................................................................................................................... 1,481,784 1,415,655 13,979,094

Less accumulated depreciation ........................................................................................ (931,599) (860,778) (8,788,670)

Property, plant and equipment–net ...................................................................... 550,185 554,877 5,190,425

Investments and other assets:

Investments in and advances to unconsolidated subsidiaries

and affiliates (Notes 3 and 5) .......................................................................................... 65,145 85,315 614,575

Investments in other securities (Notes 3 and 5) ............................................................... 36,276 32,436 342,226


Other assets ..................................................................................................................... 25,866 26,320 244,019

Allowance for doubtful receivables................................................................................... (1,292) (1,128) (12,189)

Total investments and other assets...................................................................... 127,838 142,944 1,206,019

Foreign currency translation adjustments ................................................................... 7,931 5,679 74,821

Total assets (Note 11) ..................................................................................................... ¥1,130,037 ¥1,155,147 $10,660,726

See notes to consolidated financial statements.




LIABILITIES AND SHAREHOLDERS’ EQUITY 2000 1999 2000

Current liabilities:

Short-term borrowings (Note 5) ........................................................................................ ¥ 224,034 ¥ 264,675 $ 2,113,528

Current portion of long-term debt (Note 5) ....................................................................... 30,187 23,577 284,783

Notes and accounts payable:

Trade............................................................................................................................. 104,647 104,920 987,236

Unconsolidated subsidiaries and affiliates .................................................................... 34,074 30,259 321,453

Other............................................................................................................................. 35,210 30,685 332,170

Accrued income taxes (Note 7) ........................................................................................ 10,808 2,357 101,962

Other current liabilities...................................................................................................... 20,222 18,989 190,774

Total current liabilities ........................................................................................... 459,186 475,464 4,331,943

Long-term liabilities:

Long-term debt (Note 5) ................................................................................................... 277,386 297,262 2,616,849

Accrued severance indemnities........................................................................................ 23,923 23,615 225,689

Deferred tax liabilities (Note 7) ......................................................................................... 128 — 1,208

Other long-term liabilities.................................................................................................. 1,343 1,892 12,670

Total long-term liabilities ....................................................................................... 302,780 322,769 2,856,415

Minority interests in consolidated subsidiaries........................................................... 25,703 21,900 242,481

Contingent liabilities (Note 10)

Shareholders’ equity (Notes 8 and 14):

Common stock ................................................................................................................. 104,846 104,830 989,113

Capital surplus .................................................................................................................. 97,375 97,359 918,632

Retained earnings ............................................................................................................. 140,150 132,836 1,322,170

.......................................................................................................................................... 342,372 335,026 3,229,925

Less treasury common stock, at cost............................................................................... (5) (13) (47)

Total shareholders’ equity..................................................................................... 342,367 335,012 3,229,877

Total liabilities and shareholders’ equity ..................................................................... ¥1,130,037 ¥1,155,147 $10,660,726


C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E A N D R E T A I N E D E A R N I N G SNippon Paper Industries Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2000 and 1999



2000 1999 2000

Net sales (Note 11) .................................................................................................................. ¥906,041 ¥906,513 $8,547,557

Cost of sales (Note 11) ............................................................................................................ 703,782 727,193 6,639,453

Gross profit ............................................................................................................................. 202,258 179,319 1,908,094

Selling, general and administrative expenses (Note 11) ..................................................... 172,131 167,153 1,623,877

Operating income (Note 11) ................................................................................................... 30,127 12,166 284,217

Other (expense) income:

Interest expense ...................................................................................................................... (11,426) (13,621) (107,792)

Interest and dividend income ................................................................................................... 2,754 2,725 25,981

Gain on sale of securities ......................................................................................................... 5,323 7,261 50,217

Special retirement benefits ...................................................................................................... (2,704) (1,082) (25,509)

Gain on sales of property, plant and equipment, net of disposals ........................................... 1,625 276 15,330

Amortisation of difference between cost and underlying net equity in consolidated subsidiaries.................................................................................................... 118 123 1,113

Equity in earnings of unconsolidated subsidiaries and affiliates............................................... 567 869 5,349

Loss on devaluation of marketable securities .......................................................................... (2,615) — (24,670)

Other, net ................................................................................................................................. (2,142) (1,279) (20,208)

................................................................................................................................................. (8,500) (4,728) (80,189)

Income before income taxes and minority interests .......................................................... 21,626 7,437 204,019

Income taxes:

Current ................................................................................................................................. (11,791) (5,487) (111,236)

Deferred ............................................................................................................................... 1,520 — 14,340

Minority interests in earnings of consolidated subsidiaries .............................................. (1,249) (883) (11,783)

Net income.............................................................................................................................. 10,106 1,067 95,340

Retained earnings at beginning of year ............................................................................... 132,836 142,166 1,253,170

Adjustments for inclusion or exclusion of certain subsidiaries

in the consolidation ............................................................................................................. 790 3,264 7,453

Adjustment for inclusion or exclusion of subsidiaries and affiliates

in the equity method of accounting, net ........................................................................... — (5,811) —

Cumulative effect of adopting deferred tax accounting..................................................... 4,206 — 39,679

Appropriations:

Cash dividends paid.................................................................................................................. (7,588) (7,588) (71,585)

Bonuses to directors and corporate auditors ........................................................................... (200) (261) (1,887)

Retained earnings at end of year .......................................................................................... ¥140,150 ¥132,836 $1,322,170

U.S. dollarsYen (Note 2)

Amounts per share:

Net income:Basic ......................................................................................................................................... ¥10.65 ¥1.13 $0.100

Diluted ...................................................................................................................................... 10.61 — 0.100

Cash dividends.............................................................................................................................. 8.00 8.00 0.075



C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W SNippon Paper Industries Co., Ltd. and Consolidated Subsidiaries Year ended March 31, 2000



2000 2000

Operating actionsIncome before income taxes and minority interests.................................................................................... ¥ 21,626 $204,019Adjustments to reconcile income before income taxes, minority intereststo net cash provided by operating activities

Depreciation ............................................................................................................................................. 63,035 594,670Amortisation of difference between cost and underlying net equity in consolidated subsidiaries .......... (118) (1,113)Decrease in allowance for doubtful receivables....................................................................................... (45) (425)Decrease in accrued severance indemnities............................................................................................ (467) (4,406)Interest and dividend income ................................................................................................................... (2,754) (25,981)Interest expense ...................................................................................................................................... 11,426 107,792Equity in earnings of unconsolidated subsidiaries and affiliates............................................................... (567) (5,349)Gain on sale of securities ......................................................................................................................... (5,323) (50,217)Gain on sale of property, plant and equipment, net of disposals ............................................................. (1,625) (15,330)Loss on devaluation of marketable securities .......................................................................................... 2,615 24,670Gain on sale of investments in other securities ....................................................................................... (245) (2,311)Special retirement benefits ...................................................................................................................... 2,704 25,509Changes in operating assets and liabilities:

Receivables .......................................................................................................................................... (11,458) (108,094)Inventories............................................................................................................................................ 10,733 101,255Payables ............................................................................................................................................... 4,931 46,519Accrued consumption taxes................................................................................................................. (621) (5,858)Other current assets ............................................................................................................................ 7,111 67,085Other liabilities...................................................................................................................................... 1,317 12,425Appropriation of bonuses to directors and statutory auditors .............................................................. (220) (2,075)Other .................................................................................................................................................... 1,360 12,830

..................................................................................................................................................................... 103,414 975,604Interest and dividend received ................................................................................................................. 3,055 28,821Interest paid ............................................................................................................................................. (10,321) (97,368)Special retirement benefits paid............................................................................................................... (2,704) (25,509)Income taxes paid .................................................................................................................................... (3,628) (34,226)

Net cash provided by operating activities..................................................................................................... 89,815 847,311

Investing activitiesAcquisitions of time deposits ....................................................................................................................... (2,663) (25,123)Withdrawal of time deposits ........................................................................................................................ 3,147 29,689Acquisitions of marketable securities........................................................................................................... (5,624) (53,057)Proceeds from sale of marketable securities ............................................................................................... 19,876 187,509Acquisitions of property, plant and equipment............................................................................................. (42,674) (402,285)Proceeds from sale of property, plant and equipment ................................................................................. 6,113 57,670Extension of long-term loans........................................................................................................................ (7,074) (66,736)Collection of long-term loans........................................................................................................................ 8,700 82,075Other, net ..................................................................................................................................................... 1,839 17,349

Net cash used in investing activities ............................................................................................................ (18,359) (173,198)

Financing activitiesDecrease in short-term borrowings.............................................................................................................. (42,065) (396,840)Proceeds from issuance of long-term debt .................................................................................................. 27,036 255,057Reduction of long-term debt ........................................................................................................................ (42,146) (397,604)Sales of treasury common stock.................................................................................................................. 271 2,557Purchases of treasury common stock.......................................................................................................... (274) (2,585)Cash dividends to shareholders ................................................................................................................... (7,885) (74,387)

Net cash used in financing activities ............................................................................................................ (65,064) (613,811)Effect of exchange rate changes on cash and cash equivalents.................................................................. (59) (557)

Net increase in cash and cash equivalents................................................................................................... 6,332 59,736Cash and cash equivalents at beginning of year .......................................................................................... 17,956 169,396

Cash and cash equivalents at end of year .................................................................................................... ¥ 24,289 $229,142



N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SNippon Paper Industries Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2000 and 1999

1. Summary of Significant Accounting Policies

(a) Basis of Preparation

The accompanying consolidated financial statements have been pre-pared from the accounts maintained by Nippon Paper Industries Co.,Ltd. (the “Company”) in accordance with the provisions set forth in theJapanese Commercial Code and in conformity with accounting princi-ples and practises generally accepted in Japan, which may differ insome material respects from accounting principles and practises gener-ally accepted in countries and jurisdictions other than Japan.

In addition, the notes to the consolidated financial statements includeinformation which is not required under accounting principles generallyaccepted in Japan but is presented herein as additional information.

Certain amounts in the prior year’s financial statements have beenreclassified to conform to the current year’s presentation.

As permitted, amounts of less than ¥1 million have been omitted. Asa result, the totals shown in the accompanying consolidated financialstatements (both in yen and U.S. dollars) do not necessarily agree withthe sums of the individual amounts.

(b) Consolidation

In accordance with the accounting standards for consolidation issuedby the Business Accounting Deliberation Council of Japan, effectiveApril 1, 1999, the accompanying consolidated financial statementsinclude the accounts of the Company and all its subsidiaries over whichsubstantial control is exerted through either majority ownership of vot-ing stock and/or by other means. All significant intercompany balancesand transactions have been eliminated in consolidation.

Certain foreign subsidiaries are consolidated on the basis of fiscalperiods ending December 31, which differ from that of the Company;however, the necessary adjustments have been made if the effect ofthe difference is material.

Investments in affiliates (companies over which the Company has theability to exercise significant influence) are stated at cost plus equity intheir undistributed earnings or losses. Consolidated net income includesthe Company’s equity in the current net income or loss of such compa-nies, after the elimination of unrealized intercompany profits.

All assets and liabilities of the subsidiaries are revaluated on acquisi-tion, if applicable, and the excess of cost over underlying net assets atthe date of acquisition is amortised over a period of five years on astraight-line basis if such excess is material or charged to income whenincurred if immaterial.

Before the adoption of the new accounting standards, subsidiariesand affiliates included only companies in which the Company held themajority ownership and companies owned 20% to 50% by theCompany, respectively.

(c) Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments, general-ly with original maturities of three months or less, that are readily con-vertible to known amounts of cash and are so near maturity that theypresent insignificant risk of changes in value because of changes ininterest rates.

(d) Marketable Securities

Marketable securities are principally stated at cost determined by themoving average method.

(e) Inventories

Inventories are stated at cost principally determined by the movingaverage method or the average method.

(f) Property, Plant and Equipment

Property, plant and equipment is stated at cost. Depreciation is gener-ally computed by the declining-balance method over the estimated use-ful lives of the respective assets, except for new buildings acquired afterMarch 31, 1998, on which depreciation is computed by the straight-linemethod. Significant renewals and betterments are capitalised at cost.Maintenance and repairs are charged to income as incurred.

(g) Leases

Noncancelable lease transactions are accounted for as operating leases(whether such leases are classified as operating leases or finance leas-es) except that lease agreements which stipulate the transfer of owner-ship of the leased assets to the lessee are accounted for as financeleases.

(h) Foreign Currency Translation

All assets and liabilities denominated in foreign currencies other thanthose hedged by forward exchange contracts are translated into yen athistorical rates. All revenues and expenses associated with foreign cur-rencies are translated at the rates of exchange prevailing when suchtransactions were made. Translation gains and losses are credited orcharged to income currently.

(i) Bond Issuance Costs

Bond issuance costs are charged to income as incurred.

(j) Severance Indemnities and Pension Plans

Under the severance indemnities plan of the Company, an employeewhose employment is terminated is entitled in most cases to a lump-sum severance payment, the amount of which is determined by refer-ence to the current basic rate of pay, length of service and certain otherfactors. The accrued severance indemnities are stated at 40 per cent.(the maximum rate allowable for income tax purposes) of the amountwhich would be required to be paid if all employees covered bythe plan voluntarily terminated their employment as of the balancesheet date.

Costs with respect to the Nippon Paper Welfare Pension Fund,which covers a certain portion of the benefits under the severanceindemnities plan, are funded as accrued at an amount determined actu-arially. Prior service cost at the inception of the plan is being fundedover a period of 20 years.

The consolidated subsidiaries also have similar severance indemnitiesplans and/or pension plans which cover substantially all their employees.

In addition, directors and corporate auditors of the Company are cus-tomarily entitled to lump-sum payments under an unfunded retirementplan. Provisions for retirement allowances for these officers are madeat estimated amounts.


(k) Research and Development Costs

Research and development costs are charged to operations as incurred.

(l) Income Taxes

Effective April 1, 1999, the Company adopted deferred tax accountingfor income taxes in accordance with new accounting standards issuedby the Business Accounting Deliberation Council. These standardsrequire recognition of income taxes by the liability method. Under theliability method, deferred tax assets and liabilities are determined basedon the difference between financial reporting and the tax basis of theassets and liabilities and are measured using the enacted tax rates andlaws which will be in effect when the differences are expected toreverse. The cumulative effect of this change is reported as “cumula-tive effect of adopting deferred tax accounting” in the non-consolidatedstatements of income and retained earnings.

Prior to the adoption of deferred tax accounting, income taxes werecalculated on taxable income and charged to income. The effect of thischange was to increase net income ¥11,249 million ($11,783 thousand)and increase retained earnings ¥5,458 million ($51,491 thousand) forthe year ended March 31, 2000.

(m) Appropriations of Retained Earnings

Under the Commercial Code of Japan, the appropriation of retainedearnings with respect to a financial period is made by resolution of the shareholders at a general meeting held subsequent to the close of the financial period, and the accounts for such period, therefore, do not reflect such appropriations. See Note 14.

(n) Amounts per Share

The computation of basic net income per share is based on theweighted average number of shares of common stock outstandingduring each year. Diluted net income per share is computed based onthe weighted average number of shares of common stock outstandingeach year after giving effect to the dilutive potential of common sharesto be issued upon the conversion of convertible bonds.

Cash dividends per share represent the cash dividends declared asapplicable to the respective years.

2. U.S. Dollar Amounts

Amounts in U.S. dollars are included solely for the convenience of thereader. The rate of ¥106=US$1, the approximate rate of exchange onMarch 31, 2000, has been used. The translations should not be con-strued as representations that yen have been, could have been or couldin the future be converted into U.S. dollars at the above or any other rate.

3. Marketable and Investment Securities

The book values and related aggregate market values at March 31,2000 of current and noncurrent marketable securities included in marketable securities, investments in and advances to unconsoli-dated subsidiaries and affiliates and investments in other securities are summarised as follows:

Thousands ofMillions of yen U.S. dollars

Book Market Book Marketvalue value value value

Marketable securities ........ ¥65,302 ¥113,443 $616,057 $1,070,217

Investments in securities, including investments in unconsolidated subsidiaries and affiliates..................... 40,931 40,687 386,142 383,840

4. Inventories

Inventories at March 31, 2000 and 1999 consisted of the following:

Thousands of Millions of yen U.S. dollars

2000 1999 2000

Merchandise and finished products .................................... ¥ 63,512 ¥ 69,139 $599,170

Work in process .......................... 12,889 12,422 121,594

Raw materials and supplies ........ 29,367 32,448 277,047

.................................................... ¥105,770 ¥114,010 $997,830

5. Pledged Assets

Assets pledged as collateral for notes and accounts payable, trade of¥54 million ($509 thousand), other current liabilities of ¥1,461 million($13,783 thousand), short-term borrowings of ¥4,856 million ($45,811 thou-sand), current portion of long-term debt of ¥2,358 million ($22,245 thousand)and long-term debt of ¥41,994 million ($396,170 thousand) at March 31,2000 were as follows:


Property, plant and equipment,at net book value......................................... ¥246,563 $2,326,066

Marketable securities at net book value ....... 2,378 22,434Investments in other securities .................... 3,781 35,670Other assets ................................................. 533 5,028...................................................................... ¥253,257 $2,389,217

6. Pension Plans

The pension fund assets of the Company and certain consolidated sub-sidiaries, in general, at March 31, 1999, the most recent valuation date,were ¥82,827 million ($781,387 thousand) in the aggregate.

7. Income Taxes

The Company and its domestic consolidated subsidiaries are subject toa number of taxes based on earnings, including corporation tax, inhabi-tants’ taxes and enterprise tax, which, in the aggregate, resulted in


statutory tax rates of approximately 49 per cent. and 41.7 per cent. forfiscal 2000 and fiscal 1999, respectively. The effective tax rates reflectedin the accompanying consolidated statements of income and retainedearnings differ from the statutory tax rate primarily due to the effect oftiming differences in the recognition of certain income and expensesfor tax and financial reporting purposes and the effect of permanentnondeductible expenses.

The effective tax rate reflected in the consolidated statements ofincome and retained earnings for the year ended March 31, 2000 dif-fers from the statutory tax rate for the following reasons:

Statutory tax rate .......................................................................... 41.7%Effect of:

Permanent difference—entertainment expense ...................... 4.0Permanent difference—divided income ................................... (1.3)Equity in earnings of affiliated companies ................................ (1.1)Provision for valuation allowance ............................................. 3.6Other, net ................................................................................. 0.7

Effective tax rate .......................................................................... 47.6%

Significant components of the deferred tax assets and liabilities held bythe Company and its consolidated subsidiaries as of March 31, 2000were as follows:


Deferred tax assets:Accrued bonuses ......................................... ¥ 1,570 $ 14,811Accrued enterprise tax ................................. 901 8,500Accrued severance indemnities ................... 2,759 26,028Accrued officers’ retirement benefits .......... 1,019 9,613Tax loss carryforwards ................................. 6,095 57,500Others .......................................................... 4,628 43,660

......................................................................... 16,975 160,142Valuation allowance......................................... (6,724) (63,434)......................................................................... 10,250 96,698Deferred tax liabilities:

Tax reserves................................................. (4,612) (43,509)Other ............................................................ (420) (3,962)

......................................................................... (5,032) (47,472)Net deferred tax assets.................................... ¥ 5,217 $ 49,217

8. Common Stock

During the years ended March 31, 2000 and 1999, the Company issued1,623 shares and 54,747 shares, respectively, upon conversion of con-vertible bonds.

At March 31, 2000, the authorised and issued shares of commonstock (¥50 par value) of the Company numbered 2,200,000,000 and948,643,152 shares, respectively.

9. Leases

Lessees’ Accounting

a) The following pro forma amounts represent the acquisition costs,accumulated depreciation and net book value of leased property asof March 31, 2000 and 1999 which would have been reflected in thebalance sheet if finance lease accounting had been applied to thefinance lease transactions currently accounted for as operating leases:


2000 1999 2000

Acquisition costs:Machinery and equipment................ ¥5,525 ¥5,428 $52,123

Accumulated depreciation:Machinery and equipment................ 3,124 2,980 29,472

Net book value:Machinery and equipment................ ¥2,400 ¥2,448 $22,642

The pro forma depreciation portion of lease payments relating tofinance lease transactions accounted for as operating leases for theyears ended March 31, 2000 and 1999 amounted to ¥1,148 million($10,830 thousand) and ¥1,126 million, respectively, which was com-puted assuming the straight-line method over the respective leaseterms of the leased assets.

Future minimum lease payments (including the interest portionthereon) subsequent to March 31, 2000 for finance lease transactionsaccounted for as operating leases are summarised as follows:


Years ending March 31:2001 ........................................................... ¥ 984 $ 9,2832002 and thereafter.................................... 1,415 13,349

Total ............................................................... ¥2,400 $22,642

b) Future minimum lease payments subsequent to March 31, 2000 fornoncancelable operating leases are summarised as follows:


Years ending March 31:2001 ........................................................... ¥529 $4,9912002 and thereafter.................................... 343 3,236

Total ............................................................... ¥873 $8,236

Lessors’ Accounting

Future minimum lease income subsequent to March 31, 2000 for non-cancelable operating leases is summarised as follows:


Years ending March 31:2001 ........................................................... ¥55 $5192002 and thereafter.................................... — —

Total ............................................................... ¥55 $519

10. Contingent Liabilities

The Company and its consolidated subsidiaries had the following con-tingent liabilities at March 31, 2000:


As endorsers of trade notes discounted with banks.................................................... ¥ 2,364 $ 22,302

As guarantors of indebtedness ofunconsolidated subsidiaries, affiliatesand other companies.................................... 49,453 466,538

......................................................................... ¥51,818 $488,849


11. Segment Information

The Company and its consolidated subsidiaries are primarily engaged in the manufacture and sale of products in two major industry segments: pulp and paper and building materials.

Business segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2000 and 1999 is as follows:

Millions of yen

Housing and Pulp and Paper- construction Eliminations

2000 paper related materials Other Total or corporate Consolidated

I. Sales and operating income:Sales to third parties .................................................... ¥646,267 ¥ 94,060 ¥101,167 ¥64,544 ¥906,041 — ¥ 906,041

Intragroup sales and transfers ..................................... 1,585 8,310 13,521 17,061 40,478 ¥ (40,478) —

Total sales ............................................................ 647,853 102,371 114,688 81,606 946,519 (40,478) 906,041

Operating expenses..................................................... 628,714 96,891 113,708 77,077 916,392 (40,478) 875,913

Operating income ........................................................ ¥ 19,138 ¥ 5,480 ¥ 980 ¥ 4,528 ¥ 30,127 ¥ — ¥ 30,127

II. Assets, depreciation and capital expenditures:Total assets.................................................................. ¥756,679 ¥ 79,483 ¥ 68,508 ¥66,886 ¥971,558 ¥158,479 ¥1,130,037

Depreciation................................................................. 52,664 4,408 645 5,317 663,035 — 63,035

Capital expenditures .................................................... 34,084 3,630 370 5,060 46,146 — 43,146

Thousands of U.S. dollars

I. Sales and operating income:Sales to third parties ................................................. $6,096,858 $887,358 $ 954,406 $608,906 $8,547,557 — $ 8,547,557

Intragroup sales and transfers .................................. 14,953 78,396 127,557 160,953 381,868 $ (381,868) —

Total sales......................................................... 6,111,821 965,764 1,081,962 769,868 8,929,425 (381,868) 8,547,557

Operating expenses.................................................. 5,931,264 914,066 1,072,717 727,142 8,645,208 (381,868) 8,263,330

Operating income ..................................................... $ 180,547 $ 51,698 $ 9,245 $ 42,717 $ 284,217 $ — $ 284,217

II. Assets, depreciation and capital expenditures:Total assets............................................................... $7,138,481 $749,840 $ 646,302 $631,000 $9,165,642 $1,495,085 $10,660,726

Depreciation.............................................................. 496,830 41,585 6,085 50,160 594,670 — 594,670

Capital expenditures ................................................. 321,547 34,245 3,491 47,736 407,038 — 407,038

Millions of yen

Housing andPulp and Paper- construction Eliminations

1999 paper related materials Other Total or corporate Consolidated

I. Sales and operating income:Sales to third parties ..................................................... ¥652,808 ¥ 92,858 ¥ 92,859 ¥67,987 ¥906,513 — ¥ 906,513Intragroup sales and transfers ....................................... 1,678 7,547 13,660 15,164 38,051 ¥ (38,051) —

Total sales............................................................. 654,486 100,405 106,519 83,152 944,564 (38,051) 906,513Operating expenses ...................................................... 650,301 97,245 107,149 77,702 932,398 (38,051) 894,346

Operating income (loss)................................................. ¥ 4,184 ¥ 3,160 ¥ (629) ¥ 5,450 ¥ 12,166 ¥ — ¥ 12,166

II. Assets, depreciation and capital expenditures:Total assets .................................................................. ¥722,393 ¥ 82,661 ¥ 69,197 ¥65,761 ¥990,014 ¥165,132 ¥1,155,147Depreciation.................................................................. 51,032 4,589 803 4,995 61,421 — 61,421Capital expenditures ..................................................... 36,969 4,750 426 9,327 51,474 — 51,474


12. Derivative Transactions

The Company and certain subsidiaries have entered into foreignexchange contracts to reduce exposure to adverse fluctuations in for-eign exchange rates relating to receivables and payables denominatedin foreign currencies.

In addition, the Company and certain subsidiaries have entered intointerest rate swap agreements to reduce interest expenses or reduceexposure to adverse fluctuations in interest rates relating to loans and

bonds payable. The total notional principal amounts of these interestrate swap agreements at March 31, 2000 were ¥17,525 million($165,330 thousand), which included the notional principal amounts of¥16,225 million ($153,066 thousand) relating to swap positions whoseterms extend more than one year after the balance sheet date.

Summarised below are the contract amounts and estimated fairvalue of the Company’s financial instruments at March 31, 2000.

Thousands of MIllions of yen U.S. dollars

Contract Estimated Contract Estimatedamount fair value amount fair value

Forward exchange contracts:To buy U.S. dollars..................................................................................................................................... ¥1,940 ¥1,950 $18,302 $18,396To sell U.S. dollars ..................................................................................................................................... 156 156 1,472 1,472To buy euros .............................................................................................................................................. 12 12 113 113

Interest rate swaps:Receive—variable, pay—fixed ................................................................................................................... 4,500 (40) 42,453 (377)Receive—fixed, pay—variable ................................................................................................................... 8,500 85 80,189 802Receive—variable, pay—variable............................................................................................................... 2,800 (46) 26,415 (434)Receive—fixed, pay—fixed........................................................................................................................ 1,725 (23) 16,274 (217)

Interest rate cap:To buy ........................................................................................................................................................ 8,000 169 75,472 1,594

The following methodologies and assumptions were used by theCompany in estimating the fair value of its financial instruments:

Forward exchange contracts: Forward rates for contracts with similar terms

Coupon and interest rate swaps: Estimated fair value provided by financial institutions

The above contract amounts of the forward exchange contractsexcluded contracts entered into to hedge receivables and payablesdenominated in foreign currencies which have been translated andreflected at the corresponding contracted rates in the accompanyingbalance sheets.

13. Research and Development Costs

Included in cost of sales and selling, general and administrative expens-es was ¥6,163 million ($58,142 thousand) of research and developmentcosts for the year ended March 31, 2000.

14. Subsequent Event

The following appropriations of retained earnings of the Company,which have not been reflected in the accompanying consolidated finan-cial statements for the year ended March 31, 2000, were approved at ashareholders’ meeting held on June 29, 2000:


Year-end cash dividends (¥4.5/$0.04 per share).................................... ¥4,268 $40,264

Bonuses to directors ....................................... 170 1,604......................................................................... ¥4,438 $41,868


R E P O R T O F I N D E P E N D E N T C E R T I F I E D P U B L I C A C C O U N T A N T S

The Board of Directors

Nippon Paper Industries Co., Ltd.

We have audited the consolidated balance sheets of Nippon Paper Industries Co., Ltd. and consolidated subsidiaries as of March

31, 2000 and 1999, and the related consolidated statements of income and retained earnings for the years then ended, and their

consolidated statement of cash flows for the year ended March 31, 2000, all expressed in yen. Our audits were made in accor-

dance with auditing standards, procedures and practices generally accepted and applied in Japan and, accordingly, included such

tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the accompanying consolidated financial statements, expressed in yen, present fairly the consolidated financial posi-

tion of Nippon Paper Industries Co., Ltd. and consolidated subsidiaries at March 31, 2000 and 1999, and the consolidated results of

their operations for the years then ended and their cash flows for the year ended March 31, 2000 in conformity with accounting prin-

ciples and practices generally accepted in Japan applied on a consistent basis.

As described in Note 1 to the consolidated financial statements, Nippon Paper Industries Co., Ltd. and consolidated subsidiaries

have adopted new accounting standards for consolidation and deferred tax accounting in the preparation of their consolidated finan-

cial statements for the year ended March 31, 2000.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2000 are

presented solely for convenience. Our examinations also included the translation of yen amounts into U.S. dollar amounts and, in

our opinion, such translation has been made on the basis described in Note 2 to the consolidated financial statements.

June 29, 2000

See Note 1 to consolidated financial statements, which explains the basis of preparing the consolidated financial statements of

Nippon Paper Industries Co., Ltd. under Japanese accounting principles and practices.


N O N - C O N S O L I D A T E D B A L A N C E S H E E T SNippon Paper Industries Co., Ltd. As of March 31, 2000 and 1999



ASSETS 2000 1999 2000

Current assets:

Cash and time deposits .................................................................................................... ¥ 2,610 ¥ 2,219 $ 24,623

Marketable securities (Notes 3 and 6) .............................................................................. 56,477 64,666 532,802

Receivables:

Notes and accounts receivable:

Trade......................................................................................................................... 94,359 86,329 890,179

Subsidiaries and affiliates ......................................................................................... 40,316 36,151 380,340

Other......................................................................................................................... 450 5,606 4,245

Loans receivable from subsidiaries and affiliates ......................................................... 26,910 28,000 253,868

Allowance for doubtful receivables............................................................................... (695) (841) (6,557)

Inventories (Note 4) .......................................................................................................... 62,221 69,652 586,991


Other current assets......................................................................................................... 4,433 4,800 41,821

Total current assets .............................................................................................. 288,645 296,584 2,723,066

Property, plant and equipment (Notes 6 and 11):

Land .................................................................................................................................. 48,382 45,559 456,434

Buildings and structures ................................................................................................... 190,406 184,306 1,796,283

Machinery and equipment ................................................................................................ 814,345 806,126 7,682,500

Forests and afforestation.................................................................................................. 12,554 12,727 118,434

Construction in progress................................................................................................... 15,065 19,444 142,123

.......................................................................................................................................... 1,080,754 1,068,164 10,195,792

Less accumulated depreciation ........................................................................................ (721,261) (694,490) (6,804,349)

Property, plant and equipment–net ...................................................................... 359,493 373,673 3,391,443

Investments and other assets:

Investments in and advances to subsidiaries and affiliates (Notes 3, 5 and 6).................... 138,146 135,365 1,303,264

Investments in other securities (Note 3) ............................................................................ 26,322 26,339 248,321

Other assets ..................................................................................................................... 15,396 17,353 145,245

Allowance for doubtful receivables................................................................................... (94) (130) (887)

Total investments and other assets...................................................................... 179,771 178,927 1,695,953

Total assets ..................................................................................................................... ¥ 827,909 ¥ 849,185 $ 7,810,462

See notes to non-consolidated financial statements.




LIABILITIES AND SHAREHOLDERS’ EQUITY 2000 1999 2000

Current liabilities:

Short-term borrowings (Note 6) ............................................................................................... ¥108,962 ¥135,027 $1,027,943

Current portion of long-term debt (Note 6)............................................................................... 15,997 12,224 150,915

Notes and accounts payable:Trade .................................................................................................................................... 41,957 48,951 395,821

Subsidiaries and affiliates ..................................................................................................... 45,645 32,905 430,613

Construction ......................................................................................................................... 11,105 9,393 104,764

Other .................................................................................................................................... 12,207 12,273 115,160

Accrued expenses.................................................................................................................... 7,783 7,983 73,425

Accrued income taxes (Note 8) ................................................................................................ 7,394 472 69,755

Other current liabilities ............................................................................................................. 734 492 6,925

Total current liabilities................................................................................................... 251,787 259,725 2,375,349

Long-term liabilities:

Long-term debt (Note 6) ........................................................................................................... 227,586 242,904 2,147,038

Accrued severance indemnities (Note 7) ................................................................................. 17,565 18,189 165,708

Deferred tax liabilities (Note 8) ................................................................................................. 1,617 — 15,255

Other long-term liabilities ......................................................................................................... 515 955 4,858

Total long-term liabilities............................................................................................... 247,284 262,048 2,332,868

Contingent liabilities (Note 14)

Shareholders’ equity (Notes 9, 10 and 16):

Common stock ......................................................................................................................... 104,846 104,830 989,113

Capital surplus .......................................................................................................................... 97,375 97,359 918,632

Legal reserve............................................................................................................................ 26,208 26,207 247,245

Retained earnings..................................................................................................................... 100,408 99,014 947,245

Total shareholders’ equity ............................................................................................ 328,838 327,411 3,102,245

Total liabilities and shareholders’ equity ............................................................................. ¥827,909 ¥849,185 $7,810,462


N O N - C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E A N D R E T A I N E D E A R N I N G SNippon Paper Industries Co., Ltd. Years ended March 31, 2000 and 1999



2000 1999 2000

Net sales.................................................................................................................................. ¥559,801 ¥561,310 $5,281,142

Cost of sales............................................................................................................................ 434,045 447,371 4,094,764

Gross profit ............................................................................................................................. 125,756 113,938 1,186,377

Selling, general and administrative expenses..................................................................... 109,502 109,271 1,033,038

Operating income................................................................................................................... 16,254 4,667 153,340

Other (expense) income:

Interest expense ...................................................................................................................... (6,977) (8,578) (65,821)

Interest and dividend income ................................................................................................... 3,896 3,738 36,755

Other, net (Note 12) ................................................................................................................. 2,625 7,114 24,764

................................................................................................................................................. (455) 2,274 (4,292)

Income before income taxes ................................................................................................. 15,798 6,941 149,038

Income taxes (Note 8):

Current ................................................................................................................................. 6,600 1,800 62,264

Deferred ............................................................................................................................... (682) — (6,434)

................................................................................................................................................. 5,918 1,800 55,830

Net income.............................................................................................................................. 9,880 5,141 93,208

Retained earnings at beginning of year ............................................................................... 99,014 101,661 934,094

Cumulative effect of adopting deferred tax accounting..................................................... (737) — (6,953)

Appropriations:

Cash dividends paid.................................................................................................................. (7,588) (7,588) (71,585)

Bonuses to directors and corporate auditors ........................................................................... (160) (200) (1,509)

Retained earnings at end of year .......................................................................................... ¥100,408 ¥ 99,014 $ 947,245

U.S. dollarsYen (Note 2)

Amounts per share:

Net income:Basic ......................................................................................................................................... ¥10.42 ¥5.42 $0.098

Diluted ...................................................................................................................................... 10.38 5.42 0.098

Cash dividends.............................................................................................................................. 8.00 8.00 0.075

See notes to non-consolidated financial statements.


N O T E S T O N O N - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SNippon Paper Industries Co., Ltd. Years ended March 31, 2000 and 1999

1. Summary of Significant Accounting Policies

(a) Basis of Preparation

Nippon Paper Industries Co., Ltd. (the “Company”) maintains itsaccounting records and prepares its financial statements in accordancewith accounting principles and practices generally accepted in Japan.

The accompanying non-consolidated financial statements have beenprepared from the accounts maintained by Nippon Paper Industries Co.,Ltd. in accordance with the provisions set forth in the JapaneseCommercial Code and in conformity with accounting principles andpractices generally accepted in Japan, which may differ in some materi-al respects from accounting principles and practices generally acceptedin countries and jurisdictions other than Japan.

In addition, the notes to the non-consolidated financial statementsinclude information which is not required under accounting principlesgenerally accepted in Japan but is presented herein as additional infor-mation.

Certain amounts in the prior year’s financial statements have beenreclassified to conform to the current year’s presentation.

The accompanying non-consolidated financial statements relateto the Company only, with investments in subsidiaries and affiliates(companies owned 20 per cent. to 50 per cent.) being substantiallystated at cost.

As permitted, amounts of less than ¥1 million have been omitted. Asa result, the totals shown in the accompanying non-consolidated finan-cial statements (both in yen and U.S. dollars) do not necessarily agreewith the sums of the individual amounts.

(b) Marketable Securities

Marketable securities are stated at cost determined by the movingaverage method.

(c) Inventories

Inventories are stated at cost determined by the moving average method.

(d) Property, Plant and Equipment

Property, plant and equipment is stated at cost. Depreciation is com-puted by the declining-balance method over the estimated useful livesof the respective assets, except for new buildings acquired after March31, 1998, on which depreciation is computed by the straight-linemethod. Significant renewals and betterments are capitalised at cost.Maintenance and repairs are charged to income as incurred.

(e) Research and Development Costs

Research and development costs are charged to operations as incurred.

(f) Leases

Noncancelable lease transactions are accounted for as operating leases(whether such leases are classified as operating leases or finance leas-es) except that lease agreements which stipulate the transfer of owner-ship of the leased assets are accounted for as finance leases.

(g) Investments in Other Securities

Investments in other securities are substantially stated at cost.

(h) Foreign Currency Translation

All assets and liabilities denominated in foreign currencies other thanthose hedged by forward exchange contracts are translated into yen

at historical rates. All revenues and expenses associated with foreigncurrencies are translated at the rates of exchange prevailing when suchtransactions were made. Translation gains and losses are credited orcharged to income currently.

(i) Bond Issuance Costs

Bond issuance costs are charged to income as incurred.

(j) Severance Indemnities and Pension Plans

Under the severance indemnities plan of the Company, an employeewhose employment is terminated is entitled in most cases to a lump-sum severance payment, the amount of which is determined by refer-ence to the current basic rate of pay, length of service and certain otherfactors. The accrued severance indemnities are stated at 40 per cent.(the maximum rate allowable for income tax purposes) of the amountwhich would be required to be paid if all employees covered bythe plan voluntarily terminated their employment as of the balancesheet date.

Costs with respect to the Nippon Paper Welfare Pension Fund, whichcovers a certain portion of the benefits under the severance indemni-ties plan, are funded as accrued in an amount determined actuarially.Prior service cost of the plan is being funded over a period of 20 years.

In addition, directors and corporate auditors are customarily entitledto lump-sum payments under an unfunded retirement plan. Provisionsfor retirement allowances for these officers are made at estimatedamounts.

(k) Income Taxes

Effective April 1, 1999, the Company adopted deferred tax accountingfor income taxes in accordance with new accounting standards issuedby the Business Accounting Deliberation Council. These standardsrequire recognition of income taxes by the liability method. Under theliability method, deferred tax assets and liabilities are determined basedon the difference between financial reporting and the tax basis of theassets and liabilities and are measured using the enacted tax rates andlaws which will be in effect when the differences are expected toreverse. The cumulative effect of this change is reported as “cumula-tive effect of adopting deferred tax accounting” in the non-consolidatedstatements of income and retained earnings.

Prior to the adoption of deferred tax accounting, income taxes werecalculated on taxable income and charged to income. The effect of thischange was to increase net income ¥682 million ($6,434 thousand) andincrease retained earnings ¥2,851 million ($26,896 thousand) for theyear ended March 31, 2000.

(l) Appropriations of Retained Earnings

Under the Commercial Code of Japan, the appropriation of retainedearnings with respect to a financial period is made by resolution of theshareholders at a general meeting held subsequent to the close of thefinancial period, and the accounts for such period, therefore, do notreflect such appropriations. See Note 17.

(m) Amounts per Share

The computation of basic net income per share is based on the weight-ed average number of shares of common stock outstanding duringeach year. Diluted net income per share is computed based on theweighted average number of shares of common stock outstanding


5. Investments in and Advances to Subsidiaries and Affiliates

Investments in and advances to subsidiaries and affiliates at March 31,2000 and 1999 were as follows:


2000 1999 2000

Investments............................... ¥116,651 ¥113,526 $1,100,481

Advances ................................... 21,494 21,838 202,774

................................................... ¥138,146 ¥135,365 $1,303,264

6. Short-Term Borrowings and Long-Term Debt

At March 31, 2000 and 1999, short-term borrowings consisted of the following:


2000 1999 2000

Loans from banks ...................... ¥ 87,962 ¥102,527 $ 829,830

Commercial paper ..................... 21,000 32,500 198,113

................................................... ¥108,962 ¥135,027 $1,027,943

Loans from banks are unsecured and represented generally by 365-day notes. The weighted average interest rates of short-term bank loansoutstanding at March 31, 2000 and 1999 were 1.15 per cent. and 0.56per cent., respectively.

Long-term debt at March 31, 2000 and 1999 is summarised as fol-lows:


2000 1999 2000

Loans from banks, insurancecompanies and others at ratesranging from 1.32 per cent. to 7.2 per cent. due through 2034:

With collateral...................... ¥ 21,855 ¥ 28,515 $ 206,179

Without collateral................. 62,390 67,243 588,585

2.5 per cent. unsecurednotes in yen due 2003 ............. 30,000 30,000 283,019



1.675 per cent. unsecured notes in yen due 2002 ............. 15,000 15,000 141,509



1.8 per cent. unsecured convertible bonds in yen due 2002 ....................... 695 724 6,557

2.3 per cent. convertible mortgage bonds due 2002 ...... 23 26 217

1.8 per cent. unsecured convertible bonds due 2003 .... 28,620 28,620 270,000

................................................... 243,583 255,129 2,297,953

Less current portion .................. (15,997) (12,224) (150,915)

................................................... ¥227,586 ¥242,904 $2,147,038

each year after giving effect to the dilutive potential of common sharesto be issued upon the conversion of convertible bonds.

Cash dividends per share represent the cash dividends declaredas applicable to the respective years.

2. U.S. Dollar Amounts

Amounts in U.S. dollars are included solely for the convenience of thereader. The rate of ¥106=US$1, the approximate rate of exchange onMarch 31, 2000, has been used. The translations should not be con-strued as representations that yen have been, could have been or couldin the future be converted into U.S. dollars at the above or any other rate.

3. Marketable and Investment Securities

Marketable securities at March 31, 2000 and 1999 were as follows:


2000 1999 2000

Equity securities ............................. ¥56,177 ¥64,559 $529,972

Bonds and other securities ............. 300 106 2,830

........................................................ ¥56,477 ¥64,666 $532,802

Investments in other securities at March 31, 2000 and 1999 were asfollows:


2000 1999 2000

Unlisted stocks ............................... ¥25,302 ¥25,319 $238,698

Bonds.............................................. 9 9 85

Other............................................... 1,010 1,010 9,528

........................................................ ¥26,322 ¥26,339 $248,321

The book values and related aggregate market values at March 31,1999 of current and noncurrent marketable securities included in mar-ketable securities, investments in and advances to subsidiaries and affili-ates and investments in other securities are summarised as follows:

Millions of yen

1999

Book Marketvalue value

Marketable securities.............................................. ¥64,666 ¥107,686Investments in securities,

including investments in subsidiaries and affiliates ...................................... 28,267 62,413

4. Inventories

Inventories at March 31, 2000 and 1999 consisted of the following:


2000 1999 2000

Merchandise and finished products........................................ ¥35,661 ¥40,531 $336,425

Work in process.............................. 7,910 7,993 74,623

Raw materials and supplies ............ 18,650 21,126 175,943

........................................................ ¥62,221 ¥69,652 $586,991


Convertible bonds, unless previously redeemed, are convertible intoshares of common stock of the Company as follows:

Current conversion

price Conversion periodper share (up to and including)

1.8 per cent. convertible bonds due 2002 ........................... ¥615.80 September 27, 2002

2.3 per cent. convertible bonds due 2002 ........................... 391.60 March 28, 2002

1.8 per cent. convertible bonds due 2003 ........................... 872.70 September 29, 2003

At March 31, 2000, if all the outstanding convertible bonds had beenconverted, approximately 33,982 thousand new shares would havebeen issuable.

Under the provisions of these issues, the conversion prices are subject to adjustment in certain cases which include stock splits.

Long-term debt maturities subsequent to March 31, 2000 aresummarised as follows:

Thousands of Years ending March 31 Millions of yen U.S. dollars

2001.............................................................. ¥ 15,997 $ 150,9152002.............................................................. 12,403 117,0092003.............................................................. 30,051 283,5002004 ............................................................. 94,157 888,2742005 and thereafter ...................................... 90,973 858,236...................................................................... ¥243,583 $2,297,953

The assets pledged as collateral for long-term debt at March 31,2000 were as follows:


Property, plant and equipment,at net book value......................................... ¥167,139 $1,576,783

Marketable securities at net book value ....... 2,370 22,358Investments in and advances to

subsidiaries and affiliates ............................ 436 4,113...................................................................... ¥169,946 $1,603,264

7. Severance Indemnities and Pension Plans

Charges to income for the severance indemnities and pension plans forthe years ended March 31, 2000 and 1999 were as follows:


2000 1999 2000

Provision for severance indemnities ..................................... ¥ 3,638 ¥3,182 $ 34,321

Pension cost .................................... 7,426 6,496 70,057

.......................................................... ¥11,064 ¥9,678 $104,377

The pension fund assets of the Company at March 31, 1999, themost recent valuation date, were ¥67,679 million ($638,481 thousand).

8. Income Taxes

The Company is subject to a number of taxes based on earnings, includ-ing corporation tax, inhabitants’ taxes and enterprise tax, which, in theaggregate, resulted in statutory tax rates of approximately 49 per cent.and 41.7 per cent. for 2000 and 1999, respectively. The effective taxrates reflected in the accompanying non-consolidated statements ofincome and retained earnings differ from the statutory tax rate primarilydue to the effect of timing differences in the recognition of certainincome and expenses for tax and financial reporting purposes and theeffect of permanent nondeductible expenses.

The effective tax rate reflected in the non-consolidated statement ofincome for the year ended March 31, 2000 differs from the statutorytax rate for the following reasons:

Statutory tax rate .......................................................................... 41.7%Effect of:

Permanent difference—entertainment expense ...................... 2.4Permanent difference—divided income ................................... (5.2)Provision for valuation allowance ............................................. 0.6Other, net ................................................................................. (2.0)

Effective tax rate .......................................................................... 37.5%

Significant components of the Company’s deferred tax assets andliabilities as of March 31, 2000 were as follows:


Deferred tax assets:Accrued bonuses ........................................... ¥ 937 $ 8,840Accrued enterprise tax................................... 625 5,896Accrued severance indemnities..................... 1,743 16,443Accrued officers’ retirement benefits ............ 783 7,387Others............................................................ 117 1,104

Deferred tax assets ........................................... 4,205 39,670

Deferred tax liabilities ........................................ (4,260) (40,189)

Net deferred tax liabilities .................................. ¥ (55) $ (519)

9. Common Stock

During the years ended March 31, 2000 and 1999, the Company issued1,623 shares and 54,747 shares, respectively, upon conversion of con-vertible bonds.

At March 31, 2000, the authorised and issued shares of commonstock (¥50 par value) of the Company numbered 2,200,000,000 and948,643,152 shares, respectively.

10. Legal Reserve

In accordance with the provisions of the Commercial Code of Japan,the Company has provided a legal reserve by appropriating retainedearnings. The legal reserve may be used to reduce or eliminate a deficit ormay be transferred to stated capital (common stock) through suitableshareholders’ or directors’ action, but is not available for dividends.


11. Depreciation

Depreciation of property, plant and equipment for the years endedMarch 31, 2000 and 1999 was as follows:


2000 1999 2000

........................................................ ¥41,093 ¥43,760 $387,670

12. Other (Expense) Income–Other, Net

The components of “Other income (expense)–Other, net” for the yearsended March 31, 2000 and 1999 were as follows:


2000 1999 2000

Gain on sales of securities .................. ¥4,848 ¥7,223 $45,736

Gain on providing technical support .... — 6 —

Rental income, net .............................. 871 993 8,217

Gain on sales of property,plant and equipment ......................... 4,543 2,739 42,858

Special retirement benefits ................. (2,264) — (21,358)

Loss on disposal of property, plant and equipment ......................... (1,918) (617) (18,094)

Loss on devaluation of marketable securities ........................ (802) — (7,566)

Loss on liquidation of certain subsidiaries............................ (1,030) (1,701) (9,717)

Other, net............................................ (1,621) (1,529) (15,292)

............................................................ ¥2,625 ¥7,114 $24,764

13. Leases

Lessees’ Accounting

(a) The following pro forma amounts represent the acquisition costs,accumulated depreciation and net book value of leased property as ofMarch 31, 2000 and 1999 which would have been reflected in the bal-ance sheet if finance lease accounting had been applied to the financelease transactions currently accounted for as operating leases:


2000 1999 2000

Acquisition costs:Machinery and equipment ................ ¥1,769 ¥1,949 $16,689

Accumulated depreciation:Machinery and equipment ................ 969 1,144 9,142

Net book value:Machinery and equipment ................ 800 805 7,547

The pro forma depreciation portion of lease payments relating tofinance lease transactions accounted for as operating leases for theyears ended March 31, 2000 and 1999 amounted to ¥414 million($3,906 thousand) and ¥396 million, respectively, which were comput-ed assuming the straight-line method over the respective lease termsof the leased assets.

Future minimum lease payments (including the interest portion there-on) subsequent to March 31, 2000 for finance lease transactionsaccounted for as operating leases are summarised as follows:


2001 ..................................................................... ¥312 $2,9432002 and thereafter.............................................. 487 4,594

Total.................................................................. ¥800 $7,547

(b) Future minimum lease payments subsequent to March 31, 2000 fornoncancelable operating leases are summarised as follows:


2001 ..................................................................... ¥508 $4,7922002 and thereafter.............................................. 308 2,906

Total.................................................................. ¥817 $7,708

Lessors’ Accounting

Future minimum lease income subsequent to March 31, 2000 for non-cancelable operating leases is summarised as follows:


2001 ...................................................................... ¥55 $5192002 and thereafter............................................... — —

Total .................................................................. ¥55 $519

14. Contingent Liabilities

The Company was contingently liable at March 31, 2000 as guarantorof indebtedness of subsidiaries and affiliates and others in the amountof ¥98,445 million ($928,726 thousand).


15. Derivative Transactions

The Company has entered into foreign exchange contracts to reduce itsexposure to adverse fluctuations in foreign exchange rates relating toreceivables and payables denominated in foreign currencies.

In addition, the Company has entered into interest rate swap agree-ments to reduce its interest expense or reduce its exposure to adversefluctuations in interest rates relating to loans and bonds payable. Thetotal notional principal amount of these interest rate swap agreementsat March 31, 1999 was ¥11,000 million, which included the notionalprincipal amounts of ¥8,000 million relating to swap positions whoseterms extend more than one year after the balance sheet date.

Summarised below are the contract amounts and estimated fair value of the Company’s financial instruments at March 31, 1999:

Millions of yen

1999

Carrying Estimatedamount fair value

Forward exchange contracts:To buy U.S. dollars...................................................... ¥ 985 ¥1,005To sell U.S. dollars ...................................................... 10 11

Interest rate swaps:Receive fixed; Pay-variable .......................................... 9,000 45Pay variable;

Receive variable ....................................................... 2,000 (24)

The following methodologies and assumptions were used by theCompany in estimating the fair value of its financial instruments:

Forward exchange contracts: Forward rates for contracts with similar terms

Interest rate swaps: Estimated fair value provided by financial institutions

The above contract amounts of the forward exchange contractsexcluded contracts entered into to hedge receivables and payablesdenominated in foreign currencies which have been translated andreflected at the corresponding contracted rates in the accompanyingbalance sheets.

16. Research and Development Costs

Included in selling, general and administrative expenses was ¥5,622million ($53,038 thousand) of research and development costs for theyear ended March 31, 2000.

17. Subsequent Event

The following appropriations of retained earnings, which have not beenreflected in the accompanying non-consolidated financial statementsfor the year ended March 31, 2000, were approved at a shareholders’meeting held on June 29, 2000:


Year-end cash dividends (¥4.5/$0.04 per share)....................................... ¥4,268 $40,264

Bonuses to directors .......................................... 170 1,604............................................................................ ¥4,438 $41,868


R E P O R T O F I N D E P E N D E N T C E R T I F I E D P U B L I C A C C O U N T A N T S

The Board of Directors

Nippon Paper Industries Co., Ltd.

We have audited the non-consolidated balance sheets of Nippon Paper Industries Co., Ltd. as of March 31, 2000 and 1999, and

the related non-consolidated statements of income and retained earnings for the years then ended, all expressed in yen. Our

audits were made in accordance with auditing standards, procedures and practices generally accepted and applied in Japan

and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary

in the circumstances.

In our opinion, the accompanying non-consolidated financial statements, expressed in yen, present fairly the financial position

of Nippon Paper Industries Co., Ltd. at March 31, 2000 and 1999, and the results of its operations for the years then ended in

conformity with accounting principles and practices generally accepted in Japan applied on a consistent basis.

As described in Note 1 to the non-consolidated financial statements, Nippon Paper Industries Co., Ltd. has adopted new accounting

standards for deferred tax accounting in the preparation of their non-consolidated financial statements for the year ended March 31,

2000.

The U.S. dollar amounts in the accompanying non-consolidated financial statements with respect to the year ended March 31, 2000

are presented solely for convenience. Our examinations also included the translation of yen amounts into U.S. dollar amounts and,

in our opinion, such translation has been made on the basis described in Note 2 to the non-consolidated financial statements.

June 29, 2000

See Note 1 to the non-consolidated financial statements, which explains the basis of preparing the non-consolidated financial

statements of Nippon Paper Industries Co., Ltd. under Japanese accounting principles and practices.


B O A R D O F D I R E C T O R S(As of June 29, 2000)

C O R P O R A T E D A T A(As of March 31, 2000)

HEADQUARTERS

Shin Yurakucho Building, 1-12-1 Yurakucho, Chiyoda-ku, Tokyo 100-0006, JapanPhone: +81-(0)3-3218-8000 Fax: +81-(0)3-3216-4753

DATE OF ESTABLISHMENT

August 1, 1949(Jujo Paper Co., Ltd.)

PAID-IN CAPITAL

¥104,846 million

COMMON STOCK

Issued and outstanding: 948,643,152 shares

NUMBER OF SHAREHOLDERS

50,982

MAJOR SHAREHOLDERS % of totalshares issued

Nippon Life Insurance Company 4.2The Industrial Bank of Japan, Ltd. 4.2The Sakura Bank, Ltd. 4.2Mitsui Mutual Life Insurance Co. 3.1The Fuji Bank, Ltd. 2.7The Dai-Ichi Mutual Life Insurance Company 2.1

NUMBER OF EMPLOYEES

6,009

SECURITIES TRADED

Tokyo Stock Exchange and other major Japanese stock exchanges

TRANSFER AGENT AND REGISTRAR

The Mitsui Trust & Banking Co., Ltd.2-1-1 Nihonbashi-Muromachi, Chuo-ku, Tokyo 103-0022, Japan

AUDITOR

Century Ota Showa & Co.

CHAIRMAN

Takeshiro Miyashita

PRESIDENT

Masao Kobayashi

EXECUTIVE VICE PRESIDENTS

Yasuhiko KurosawaKiichiro Sakai

SENIOR MANAGING DIRECTORS

Souji BanTakahiko MiyoshiMasahiro SawasakiAkira Machihara

MANAGING DIRECTORS

Sachio MaruchiIkuo KuwajimaAkira YokoyamaIwao NakajimaKatsuo Kobayashi

DIRECTORS

Yoshinari InoueHirofumi OobaMasatomo NakamuraKazuaki WatanabeNobuyuki OotsukiToshio YamamotoTakaji ItasakaFumio TogouNoboru HasegawaTsunemasa WakamatsuTakeo Hashimoto

CORPORATE AUDITORS

Hiroe MisawaKeiji IwamotoHideo Yamada


MILLS

Kushiro Mill

2-1-47 Tottori-Minami, Kushiro, Hokkaido 084-0905Phone: 0154-52-7605 Fax: 0154-51-3525

Asahikawa Mill

505-01 Pulp-cho, Asahikawa, Hokkaido 070-8611Phone: 0166-25-9730 Fax: 0166-25-9775

Yufutsu Mill

143 Yufutsu, Tomakomai, Hokkaido 059-1395Phone: 0144-56-0111 Fax: 0144-56-0485

Ishinomaki Mill

2-2-1 Nanko-cho, Ishinomaki, Miyagi 986-8555Phone: 0225-95-0111 Fax: 0225-93-6060

Nakoso Mill

1 Kubota-jujo, Nakoso-machi, Iwaki,Fukushima 979-0192Phone: 0246-65-3111 Fax: 0246-65-6375

Fushiki Mill

1-1-1 Fushiki, Takaoka, Toyama 933-0193Phone: 0766-44-8100 Fax: 0766-44-6380

Iwakuni Mill

2-8-1 Iida-machi, Iwakuni, Yamaguchi 740-0003Phone: 0827-24-6222 Fax: 0827-24-6390

Komatsushima Mill

1 Toyoura-cho, Komatsushima, Tokushima 773-0019Phone: 08853-7-2121 Fax: 08853-8-2017

Yatsushiro Mill

1-1 Jujo-machi, Yatsushiro, Kumamoto 866-8602Phone: 0965-33-2111 Fax: 0965-35-1227

Higashimatsuyama Mill

1551 Higashidaira, Higashimatsuyama, Saitama 355-0002Phone: 0493-22-0960 Fax: 0493-22-5130

Gotsu Mill

1280 Gotsu-cho, Gotsu, Shimane 695-0011Phone: 0855-52-6003 Fax: 0855-52-6029

OVERSEAS OFFICES/BRANCHES

Concepción Office

(Forestry Dept.)

Ejército 399, Concepción, ChilePhone: +56-41-244-300

Pietermaritzburg Office

(Forestry Dept.)

c/o The Central Timber Cooperative Ltd.,P.O. Box 495, 171 Burger Street 3200,Pietermaritzburg 3200, Republic of South AfricaPhone: +27-33-3451-388

Seattle Office

(International Dept.)

Two Union Square,601 Union Street, Suite 5535,Seattle, WA 98101, U.S.A.Phone: +1-206-622-8724

Atlanta Branch

3700 Mansell Road, Suite 220, Alpharetta, GA 30022, U.S.A.Phone: +1-770-625-5177

Longview Branch

(NORPAC)

3001 Industrial Way, Longview, WA 98632, U.S.A.Phone: +1-360-414-3526

Shanghai Office

(International Dept.)

Room 707, C Seats, Orient International Plaza No. 85,Lou Shan Guan Road,Shanghai 200336, ChinaPhone: +86-21-6278-7581

Vancouver Office

(Foreign Lumber Marketing Dept.)

Suite #820-999, West Broadway,Vancouver, B.C., V5Z 1K5 Canada Phone: +1-604-873-5358

Seattle Branch

Two Union Square,601 Union Street, Suite 5535,Seattle, WA 98101, U.S.A.Phone: +1-206-682-4698

Jakarta Office

(Barito Project Office)

14th Floor, Nusantara Bldg. JL.M.H.,Thamrin No. 59, Jakarta, IndonesiaPhone: +62-21-337-993

OVERSEAS SUBSIDIARIES

AND AFFILIATES

Jujo Thermal Oy

P.O. Box 92, FIN27501 Kauttua, FinlandPhone: +358-28-3932900

North Pacific Paper Corporation

(NORPAC)

Box 2069, Longview, WA 98632, U.S.A.Phone: +1-360-636-6400

Pan Pac Forest Products Limited

1161 S.H.2, Wairo-a Road, Whirinaki,Napier, New ZealandPhone: +64-6-831-0100

Volterra S.A.

Ejército 399, Concepción, ChilePhone: +56-41-244-300

FRR Fax Roll

3, Zaytseva St.,198096, St. Petersburg, RussiaPhone: +7-812-183-21-56

Nippon Paper Treefarm Australia

Pty. Ltd.

Level 24, Bourke Place, 600 Bourke Street,Melbourne, Victoria 3000, AustraliaPhone: +61-3-9605-8891

Shouguang Liben Paper Making

Co., Ltd.

No. 403, Shengchend Road, Shouguang City, Shandong Pro, ChinaPhone: +86-536-523-6112

Shanghai JP Co., Ltd.

No. 173, Hongcao Road, Shanghai, ChinaPhone: +86-21-6408-9900

D I R E C T O R Y

Investor Relations Corporate Planning Div.Shin Yurakucho Building, 1-12-1 Yurakucho, Chiyoda-ku, Tokyo 100-0006, JapanPhone: +81-(0)3-3218-8831 Fax: +81-(0)3-3213-6762

URL: http://www.npaper.co.jp/

Printed in Japan

Cover: NPi Premium Dull 125.0 g/m2

Text: NPi Coat Land 100 (M) 76.5 g/m2

NIPPON PAPER INDUSTRIES CO., LTD.

Documents

Nippon Paper Industries · 2 NIPPON PAPER INDUSTRIES In fiscal 2000, ended March 31, 2000, Nippon Paper Industries Co., Ltd. (NPI), strengthened operations and announced its new management