Name: GOLD EAST PAPER (JIANGSU) CO., LTD.

Address: No.8 Xinggang Dong Road., Dagang, Zhenjiang,

Jiangsu Province, P.R. China, 212132

Company Type: Joint-venture

Date of Establishment: May 18, 1997

Product Range:C2S art paper/Gloss, C2S art paper/Matt,

C2S art paper HWSO, C1S art paper, etc.

Annual Production Capacity(2005): 1.488 Million Metric

Tons

Annual Sales Amount(2005): RMB 6.88 Billion

Staff Number(2005): 4,976

Company Belief: Challenging limits, pursuing perfection.

Business Philosoliphy: Continuous improvement for re-

vivification of China’s papermaking industry; Cherish

humanity’s future and, utmost, uphold to realize sus-

tainable development.

Core Values: Customer comes first, People-oriented,

Integrity, Harmony, Effectiveness, Subtle.

Statistics from Jan 1st, 2005 to Dec 31st, 2005

Brief Introduction

Contents

1.Message from the President

2.Environmental Management

3.Procurement of Raw Materials of Paper

4.Energy Saving & Consumption Reduction

5.Reducing the Environmental Load

6.People-Oriented

7.Social Charities & Awards

8.Appendix: Glossary

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1.Message from the PresidentSince its establishment, Gold East Paper has been firmly following theconcept of sustainable development. With the aim of low consumption,low emission, and high efficiency, we actively carry out the strategy ofefficient and recyclable use of energy, insisting on sustainabledevelopment.At present, our company has made impressive progress on environ-mental protection. Our low consumption, low emission as well as highefficiency have already become the benchmark in China’s papermak-ing industry. To our great pleasure, more and more paper manufacturersare following Gold East’s lead and becoming part of a growing teamconcerned with environmental protection. I believe that our companyhas turned the traditional image of the polluting paper mill into a moderngreenfield mill by adopting new technologies and fostering sustainabledevelopment.In the future, while continuing to develop ourselves, we will also be com-mitted to the continuous activities of environmental protection with theglobal residents’s mission on our shoulders. The following pointsillustrate how we are willing to devote ourselves to building a more beau-tiful and cleaner world:

To achieve sustainable development, as a member of the Global Village, we make the followingcommitments:● To be in compliance with state laws, regulations and corresponding international norms● To continue programmes to reduce the production of waste materials and minimize the impact onenvironment.● We insist on using environment-friendly raw materials; mainly adapting to ECF (Elemental ChlorineFree) and TCF (Totally Chlorine Free) pulp.● Gold East Paper strictly requires that the wood used in its pulp originated from plantation trees.● The Company will not use pulp made from wood harvested illegally or in a manner that leads toenvironmental destruction.● To implement a recycling economy with full endeavours, save resources and foster sustainabledevelopment with a view to creating a better life and a beautiful world.

Gold East persistently implements the concept of sustainable development. It has become part of thecompany culture. Harmony is one of our core values. The harmonious development of nature andsociety has become the shared belief of all the staffs. From my observation, our employees are selfmotivated to try their best to reduce the consumption of paper, drops of water and watts of electricity inthe workplace. This self disciplined energy saving and reduced consumption of natural resources oftentouches my heart. I would like to take this opportunity to express my sincere thanks to them. Throughpublishing this environmental report, we hope to share with you what we have done for sustainabledevelopment. In addition, we hope more and more people can pay attention to environmental protection.Your comments and kind suggestions are always welcome.Thank you!

President of Gold East Paper

President: Mr. Wu Sengfong

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Wu Sengfong

Presently, people’s demands for paper are increasing. Gold East has taken its responsibility to protect theenvironment under careful consideration. We have made environmental protection a vital issue in our management.In order to carry out environmental management effectively, our company has enforced environmental guidelines,restructured our environmental management organization in 2005, optimized the relative management mea-sures and put forward many improvement measures. We are trying our best to realize green paper making, andwe are pursuing human beings’harmonious development with nature.

2.Environmental Management

2-1 Environmental Management Organizations

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2-2 Environmental Guidelines & Targets

With the concept of sustainable business, Gold East hasalways been paying attention to the harmonious devel-opment between the economy and the environment, ful-filling its responsibility to protect the environment. In or-der to realize the integrity of “forestry, pulp, and paper”, atthe end of 2005, Gold East signed an agreement with thelocal governments of Bunan County, Anhui Province toinvest in establishing a 40,000 hectare plantation base.It also plans to increase another 2,000 hectares of plan-tations and purchase 2,000 hectares of saplings in thatarea in 2006.

Plantations In Bunan

2-3 Promoting National Afforestation Industries

Forest certification is a good means for promoting & recognizing sustainable forest management. In June 2006,Gold East successfully earned the certification of FSC-CoC (Forest Stewardship Council — Chain of Custody).With such accreditation, Gold East is certified to manufacture and sell FSC-mixed fine paper. This achievementdemonstrates the commitment of our company to uphold the environmental and social responsibilities of forestmanagement.

2-4 We support sustainable forest management

Gold East Paper really cares a great deal about the green chain of custody management. The purchase of rawmaterials is one of the most important factors in the supply chain. Following the principle of “Long-time cooperation,joint improvement and mutual benefit” Gold East Paper strictly requires that all raw material suppliers ensure theappropriate source of their raw materials (pulp or chemicals). In addition, the supplier must also meet theenvironmental and industrial safety requirements and the prohibition of the utilization of toxic substances in thepapermaking industry.

3. Paper Raw Material Procurement

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3-1 Purchase of PulpWe insist on purchasing ECF (Elemental Chlorine Free) and TCF (Totally Chlorine Free) pulp, and we prefer to buypulp which is certified by FSC-CoC, PEFC, etc. The origins of the wood are mainly in Brazil and North America. Thecompany is committed to sustainable forestry operations.

3-2 Measures for the Stability of Chemical MaterialsThe prerequisite for the stability of a product is the stability of its component materials. In 1999, Gold East Paperformulated the “New Raw Materials R&D Manual”, which will be updated in accordance with changes incircumstances. This manual clearly requires that all suppliers provide a MSDS (Material Safety Data Sheet).Furthermore, we also have “The Guideline on the Testing of the Safety of New Chemicals”.

Gold East Paper fully understands that the papermaking industry consumes energy intensively. While we areexpanding our production scale and output every year, the world is subject to a tightening supply of energy relatedresources. On such basis, we established the Energy Saving Commission with the aim of promoting energysaving measures. We also plan and implement energy saving measures. We hope that this will help to optimizethe energy consumption structure and, on the whole, build an energy-saving corporation.

4. Energy saving and Consumption Reduction

4-1.Structure of Energy Saving Commission

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Besides importing equipment with the latest technology to facilitate our improvement plan, Gold East Paper hasdevoted great efforts to promoting cleaner production and recyclable material usage. By optimizing the productionprocess via technological improvements, the mill has made some significant progress in further reducing whitewater concentration, increasing the amount of effluent recycled in the system and hence reducing the overall levelof effluent generated. In 2005, the level of water consumption was reduced to below 9.63 M3 of water in producingone ton of paper. This key figure reflects that our water consumption level is well below the international benchmark:

4-2.Efficient Use of Resources and Reduction of Energy Consumption◆ Ensure Efficient Use of Water Resources

In the operational process, the equipment used in pa-permaking requires a large amount of electricity. As aresult, the reduction of electrical consumption is an im-portant part of the energy saving program. In the produc-tion process, Gold East Paper takes a series of mea-sures to reduce the consumption of electricity, such asthe utilization of light-reflecting board, the improvementof the walls and roof of the workshop, and the perfection

of the manage-ment of electricalc o n s u m p t i o n ,and it publicizesthe catch phrase“ O n w h e nnecessary, andoff when not ” aswell.

◆ Reduction of Electricity Consumption

Increasing the power plant’s efficiency has always beenour company’s concern. Through the adaptation of theexisting equipment such as the adjustment of thecondenser, we’ve greatly increased the power plant’sefficiency and reduced the consumption of coal.

◆ Raising Power Plant Efficiency

The Natural Lighting Workshop

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◆ Saving Raw Materials and Reducing theConsumption of Packaging

Saving raw materials and reducing cost has alwaysbeen our goal. We have made some achievements inthe innovation of technologies and in the perfection ofour work procedures. For example, the unit pulp con-sumption has been decreasing year by year. In 2005,our company improved its Kraft paper packaging pro-cedure which reduced packaging consumption andsaved about 800 tons of Kraft paper.

4-3Energy Saving Plans and Measures

5. Reducing the Environmental LoadHow to reduce the environmental pollution levied by effluent, emission and waste residue is a problem that mustbe considered by the paper industry. With the introduction of advanced environmental protection equipment, GoldEast is continuously developing waste reduction technology in its production process. Thanks to the enduringefforts, the effluent and emission discharge indexes are controlled to a level much lower than the NationalDischarge Standard. Also, the solid waste generated during the paper manufacturing process has been decreasing.The comprehensive rate of utilization of raw material and energy has been increasing year by year.

Effluent Treatment Plant

5-1 Effluent Treatment and Emission ReductionThe current effluent treatment plant has a daily treatment ca-pacity of 50,000 tons. In order to facilitate the operation ofpaper machine 3, in 2005, we added an effluent treatment linewith a daily capacity of 25,000 tons. Currently, every pollutantdischarge index is performing far better than the respectivebenchmark in the global paper industry.

Flow chart of the disposal of wastewater and resource utilization

Environmental statistics concerning water in 2005

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Clean Air Emission

Gold East uses environmentally friendly equipment. For the powerplant, we have invested in a Circulating Fluidized Bed Boiler (CFB) forthe purpose of environmental protection. This kind of boiler has adesulphurization efficiency of over 85%. The temperature inside theboiler is closely monitored and controlled so as to restrain the gen-eration of NOx. In addition to this, an Electrostatic Precipitator (ESP)has been installed for smoke and dust precipitation. As a result, thedust removal precipitation rate is over 99.75%. The Mill has also in-vested in different projects to collect approximately 15% of the totalamount of smoke and different air emission produced in the manu-facturing process. The collection is recycled to produce calcium carbonate, which is a raw material in paperproduction. In 2005, we extended and improved our equipment, thus reducing the dust emission rate.In 2005, the self-assimilation rate of smoke and dust was 4.14 × 108Nm3, the recycled amount of CO2 was 92,000tons, and the reduction amounts of SO2 and dust were 188 and 32.5 tons respectively.The level of air emission discharged was far lower than that of other leading benchmarks in the world. In 2005, thedischarged amount of SO2, smoke and dust, and NOx produced per ton of paper was respectively 2.13, 0.41 and0.93Kg. The total discharged amount of CO2 was 1.55 tons per ton of paper.

5-2 Air Emission Treatment

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Environmental statistics concerning air emission in 2005

The Mill commits to controlling the production process, the aim of which is reducing the level of solid waste. Thesolid waste is transformed into recyclable materials through internal and external channels to avoid pollution. In2005, a total of 348,000 tons of solid waste was generated, while the overall recycling rate was 99.76%.

5-3 Solid Waste Reduction and Comprehensive Application

◆ Residue TreatmentIn order to reduce the ultimate amount of residue discharged and the adverse effect on the environment, the millreengineered the fuel transition system of the power station in 2002 so that the residue from the production linescould be used as fuel in power generation. The sewage blocks, together with marble residue, were used as fuelalong with coal. As a result, this not only reduced the solid waste discharge, but also helped in the desulphurizationof the emission. It also reduced the cost of limestone procurement. Currently, residue that does not contain a highlevel of moisture is contracted out for further processing, while the solid waste is recycled to be used as fuel for theboilers of the power station. The amount of burnt residue in 2005 was 12,410 tons, and the amount of limestonesaved was 2,200 tons.

◆Disposal of The Fly AshThe boiler of the power plant can generate as much as 0.29 million tons of fly ash every year. In order to make astable and comprehensive use of the fly ash, in 2004, Gold East renewed its contract with Zhenjiang ShenghuaFly Ash Application Corporation whose job is to dispose the ash. In order to make full use of the fly ash, aftercareful research, Shenghua Corporation decided to start 3 brick-production lines with a capacity of 50 millionblocks. The standard bricks made of fly ash can replace those made of clay. It is estimated that after the threelines have been put into production, about 0.36 million M3 of clay can be saved every year. It is equal to 300 acresof land. The economic and social benefits are considerably large. At present, one line has been put into production.

BricksProductionFly Dust

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◆ Disposal of Waste Lubricating OilIn order to avoid the harmful effects brought about by waste lubricating oil, and with the principle of the immediatedisposal of this waste, Gold East has been advised by the local government to put the waste lubricating oil underTongqing Solid Waste Center’s disposal for recycling. The recycled amount in 2005 was 204.85 tons. Theprocessing procedure is as follows:

Solid Waste Comprehensive Application

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6. People–Oriented

Conference For Promotion

Engineering Master’s Class

Being people-oriented is one of our core values. The Company recognizes the contribution of every employee.Intensive training has been arranged in order to face the challenges and opportunities ahead.

Every year, our company provides special training toemployees from different posts, including professionaltraining, management knowledge training, environ-mental protection training, etc. Meanwhile, we havecooperated with nearby vocational schools and trained45 basic technicians in the “Gold East Class”; openedan engineering master’s class with Nanjing ForestryUniversity and trained 20 high level skilled persons;opened an MBA class with Jiangsu University andtrained 28 high level managerial talents. Our com-pany has also established a study community on ourinternal website.

6-1 Respect Employees and Their Career DevelopmentGold East Paper acts in accordance with all the re-quirements stated in the State Law and regulation.This would include those laws & regulations relatedto freedom to form social groups, the strict prohibitionagainst child labor, respecting the individual’s right toprivacy, acknowledging the employees’ right in par-ticipating in collective negotiations with the employer,and strictly forbidding any kind of discrimination in re-cruitment process,.Meanwhile, the Company also takes a series of mea-sures to help employees develop their career with thecompany, as well as career path planning scheme.

●●●●● Dual-level Promotional SystemWe have established a promotional system of vertical and cross-departmental promotion, with a horizontalpromotional system as its supplement. In order to be fair, just, and open, we have adopted a competitive systemto select our leaders among the employees. As a result, talented individuals have been able to show themselves;young talent can be employed early and the sense of responsibility and self-improvement among the employeescan be encouraged. In 2005, there were as many as 1,365 people promoted, 82 of whom were promoted to therank of mid-level managers, such as general manager/deputy general manager and manager/ deputy manager.

●●●●● The Internal Human Resource Transfer System

●●●●● Training System for Employee Development

Not only through the internal hiring, but also through the application for positional adjustment can the employeesadjust their position, so that human resources can be optimized. In 2005, 339 people transferred to new positionsthrough internal hiring and job rotation.

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Major Management Measures based on our core value: “People-Oriented”

6-2 Occupational Health and Industrial SafetyGold East fully complies with the “Safe Production Law” and “Law of Prevention and Cure of Occupational Dis-eases” in the People’s Republic of China as well as other laws and regulations. In 2004, The Company earnedthe certification of OHSAS18001. Internally, we have an Occupational Health Safety Commission and an IndustrialSafety Department. An occupational health guideline with a goal of fostering “No Injuries” has been implemented.

Occupational Health Safety PolicyPrevention is a priority; control the risks while workingIntensify supervision in compliance with relative laws and regulationsPeople-oriented; improve the quality of health and safetyScientific management; continuous improvement for high performance

Targets● Deaths: Zero●Heavy injury: Zero● Light injury : Less than 8 among 1,000 accidents● Occupational illness: Zero●Property loss: Less than 9 instances - Cases of loss under RMB 5,000 should not occur more than 8 times, and● Severe cases (loss in excess of RMB 5,000) no more than once.● Fire accidents: No severe fires, and no more than 5 instances of minor fires.The Company is committed to increasing employee alertness towards the hidden possibilities of danger. In orderto achieve the above targets, Gold East has enacted the following measures:

●Give various lectures on safety (from 2004 to 2005,lecture attendance reached 11,600)

● The public security department is responsible for theexamination of safety in the workplace and evacuation ma-neuvers (evacuation drills were held 34 times from 2004to 2005).

Industrial Safety TrainingFire Drill

Medical Clinic

Gold East has a medical clinic with qualified doctors. Itmakes health documents for the employees, provides healthconsulting services and medical care, prevents diseasesin the workplace, cures sick workers, and is responsible forthe health checkups of the staff. The company teaches employees about healthy livingand advises them to change any unhealthy habits. The pro-hibition on smoking was launched on July 1st, 2003 to guar-antee the staff a sound and comfortable workingenvironment.

6-3 Care for Employees’ Health

● The temperature in summer can be as high as 40degrees in the workshop. The company thereforehas cooling equipment installed for the staff.

● In order to reduce the stress of the workers, theFinishing Div. organizes the staff to do routine exer-cises at 9 am.

6-4 Enriching Spare time ActivitiesIn order to enrich employees’ spare time, our companyorganizes 12 interest groups, such as badminton, arts,dancing, and music groups. The company sponsors sportscompetitions in badminton, football, basketball and tabletennis, which are regularly held. Since 2004, we have heldan annual sports day for all staff members.

Cooling Room Staff Doing Exercises

Sports Meeting

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7. Social Charities and Awards

Main Donations in 2005● Donated RMB 1 million to the construction of a Hope Project primary school in Qinzhou of Guangxi Province.● Donated RMB 3 million to Zhenjiang General Charity;● Donated RMB 0.8 million to Zhenjiang Fire Fighting Station to buy fire engines and equipment.

This is another enterprise of Gold East’s which displays our desire to provide public benefits. Gold East voluntarilyfulfills its social responsibilities and obligations as a citizen in the community. Our company loves and supportssociety, and has created a good public image.

7-1 Donations to SocietyGold East Paper actively supports the projects of education and local public affairs. In 2005, it donated RMB 5million to social charities, schools, and institutional organizations.

7-2 Awards

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CO2 Carbon Dioxide-A gas formed during combus-

tion and certain natural processes. Trees utilize car-bon dioxide as they grow, through photosynthesis.Increasing amounts of carbon dioxide in the atmo-sphere are widely believed to contribute to climatechange.

COD Chemical Oxygen Demand-A measure of theamount of oxygen required for the total chemicalbreakdown of organic substances in water by chemi-cal oxygen-consuming substances.

Ecobalance The material and energy balance of acompany’s environmental operations, i.e. a record ofthe material and energy flows entering and leavingthe site.

Dioxins Dioxins are organochlorines, unwanted andtoxic by-products formed in papermaking when chlo-rine from bleaching combines with molecules inwood. They are also formed during the manufactureof PVC. Dioxins have been linked with hormone dis-ruption and an increased risk of cancer. Both the pa-per and plastics industries have made major reduc-tions to the release of dioxins in recent years.

ECF Elemental Chlorine Free - Paper pulp bleachedwithout the use of elemental chlorine but instead us-ing some chlorine dioxide, along with non-chlorineagents such as oxygen. Pulps using ECF methodscontain up to 0.5kg of AOX per ton of air-dried pulp.

EMAS Eco-Management and Audit Scheme - The Eu-ropean Union’s regulated environmental manage-ment system; similar to ISO14001 but also requirespublic reporting.

ESP Electrostatic Precipitator - An electronic pollution-control device that removes particles of fly ash from apower plant’s waste gases.

Filler Materials like clay, added to pulp before it isformed into paper to improve the paper’s smoothness,brightness and printability.

Forest Certification A procedure whereby an inde-pendent third party inspects forest management and

AOX Absorbable Organic Halogens – A collective termfor the halogen compounds (chlorine, fluorine, bro-mine and iodine) bound to organic substances, forexample in wastewater from the mill. The compoundsarise when bleaching with chlorine-containing chemi-cals although they can also occur naturally and arepotentially detrimental to water quality. The lower theAOX level the better.

Audit An inspection of operations along the lines ofan environmental or quality management system.

Biofuels Fuels from renewable raw materials suchas bark, black liquor, logging residues and effluentsludge.

BOD Biological Oxygen Demand expresses theamount of oxygen consumed by readily degradableorganic compounds in effluents within 7 days whendecomposing in water.

Chain of Custody The means of tracking a productalong the supply chain, for instance: being able totrace paper from the forest of origin, through pulp andpaper mill, paper merchant and printer to the end user.Often a third party audits the Chain of Custody system,as with the FSC and PEFC schemes.

CHP Combined Heat and Power - A power-generat-ing unit that provides heat and electricity on site ratherthan drawing energy from the grid. CHP units canhave the benefit of proportionally lower emissions toair than power stations. Many paper mills use CHP.

CFB A Circulating Fluidized Bed is a relatively newand evolving technology that has become a very effi-cient method of generating low-cost electricity whilegenerating very low emissions and environmentalimpacts.

CSR Corporate Social Responsibility - The continu-ing commitment by business to behave ethically andcontribute to economic development while improvingthe quality of life of the workforce and their families aswell as of the local community and society at large,including the environment.

Appendix: Glossary

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utilization practices to assess compliance with a setof ecological, economic and social standards for sus-tainable forestry. Commonly used forest certificationsystems include FSC and PEFC.

Fossil Fuels Solid, liquid or gaseous fuels formed inthe ground over millions of years by chemical andphysical changes in plant and animal residues un-der high temperature and pressure, e.g. oil, naturalgas and coal.

FSC Forest Stewardship Council - An international or-g a n i z a t i o n p r o m o t i n g r e s p o n s i b l e f o r e s tmanagement. FSC has developed principles for for-est management which may be used for certifying themanagement of forest holdings, and a system oftracing, verifying and labeling timber and wood prod-ucts which originate from FSC-certified forests.

GMO Genetically Modified Organisms.

Greenhouse Gases The major greenhouse gasesconsidered to be responsible for causing climatechange are carbon dioxide (CO2), methane (CH4), andnitrous oxide (N2O). The Kyoto Protocol on climatechange also addresses hydrofluorocarbons (HFCs),perfluorocarbons (PFCs), and sulphur hexafluoride(SF6 ).

ISO14001 The standard published by the InternationalStandards Organization specifying the requirementsof an environmental management system.

ISO 9001 2000 The international standard for qualitymanagement system which emphasizes processingand customer driven operations.

Nitrogen An element common as a gas in theatmosphere. Excessive concentrations of nitrogencompounds in water can lead to increased biologicalactivity in water, through eutrophication.

NOx A collective term for the nitrogen oxides formedduring combustion, which can contribute to the acidi-fication of soil and water.

OHS Occupational Health and Safety.

OHSAS 18001 A global standard created for occupa-tional health and safety management.

PEFC Program for the Endorsement of Forest Certifi-cation - A scheme for auditing forestry operations, tak-ing into account the effects on the environment

Post-consumer Waste Waste that has reached theend user, typically homes and offices

Pre-consumer Waste Waste that has left the mill buthas not reached the end user; typically: trimmingsand rejected material from printers, envelope con-verters etc.

Pigment An ingredient added to pulp to increase thebrightness and opacity of paper. Pigment dyes arealso used in some coloured paper grades.

SFI Sustainable Forestry Initiative program of theAmerican Forest & Paper Association.

SFM Canadian Standards Association Program forSustainable Forest Management.

SO2 Sulphur Dioxide - A gas formed when fuels thatcontain sulphur, such as oil and coal, are burned.Sulphur dioxide contributes to the acidification of soiland water.

Solids The solid matter, such as the fibers, fillers andcoating pigments in effluents.

Sustainable Development Development which meetsthe needs of the present without compromising theability of future generations to meet their own needs.

TCF Totally Chlorine Free - Paper pulp that is bleachedwithout using chlorine in any form, thus giving an AOXlevel of zero; the alternative bleaching agents usedmight be liquid oxygen, hydrogen peroxide or sodiumhydroxide.

Woodfree A description of pulp and paper meaningthat they contain little or no mechanically ground fibers.It implies that fibers are chemically treated, therebyeliminating lignin (the substance that binds wood fi-bers together in the tree) and making the product purer,whiter and stronger. Woodfree is an historical paper-making term shortened from ‘groundwood-free’ anddoes not denote a paper or pulp made from materi-als other than wood.

Business Inquiry:inquiry@goldeastpaper.com.cnWebsite:www.goldeastpaper.com.Tel:86-511-8998888 Fax:86-511-8997000Add:No.8 Xinggang Dong Road., Dagang, Zhenjiang,Jiangsu Province,P.R. China, 212132

GOLD EAST PAPER (JIANGSU) CO., LTD.