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Three analysts and top management from nine sector firms examine the paper & forest products sector in this special 42-page Paper & Forest Products issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info507.htm.

TWST: Are there any sections of the paper and forest group that are doing well, even though we haven’t seen the bottom yet?

Mr. Wilde: There are segments of the industry where, even while demand has been weak, pricing is in pretty good shape. These would include businesses like containerboard, as well as uncoated white paper. In these markets, demand has been just as bad as it has been everywhere else, but, unlike prior downturns, we haven’t seen a pricing collapse.

TWST: When do you anticipate seeing the bottom?

Mr. Wilde: I’m hoping that by mid-year we’re starting to see clear evidence of a pickup in the US economy. If that’s the case, I would expect to see it first in the packaging side of the paper businesses. These businesses tend to be among the first places you usually start to see evidence of an economic pickup in the paper markets.

TWST: How are investors reacting to the group right now? How would you rate investor interest?

Mr. Wilde: Investor interest has picked up over the last six or eight weeks. If you look over the last 15 or 16 months, investors have pretty consistently been anticipating a recovery in the economy and in this sector. Paper stocks bottomed back in October 2000, and the big move in this group took place coming off of those lows in the fourth quarter of 2000. All through 2001, even as we kept pushing the turnaround further and further out, these stocks held up remarkably well. I was surprised during 2001 that we didn’t see a couple of opportunities to buy these stocks lower. They really were, I thought, remarkably durable through most of 2001.

TWST: How would you advise investors to approach the group today?

Mr. Wilde: I think we are still in a period of relative outperformance for the sector. The sector is up about 55% off of its lows in October 2000, and I expect that relative outperformance to continue for another two or three quarters. Typically, these stocks tend to do very well into the early stages of an economic turnaround. What I would do now, however, is take a more selective approach within the group. Recently, I have been looking at some of the later-cycle plays or some special situations in the group.

TWST: Are there any names that you believe could prove to be a positive surprise for investors long term?

Mr. Wilde: I cover a couple of small cap companies that have both gone through pretty rough periods and appear to have started to do a very nice job of turning themselves around. One such company is Rock-Tenn (NYSE:RKT). It’s more of a packaging company than a paper company. They’re a big producer of recycled-based paperboard packaging. Rock-Tenn has gotten new management — a new CEO and CFO — a little over two years ago. These managers came from outside the paper industry. Harking back to my comments about Domtar, they’re executives who came into this company with a fresh perspective. I think this is a managerial team that is very shareholder-focused. The stock has already had a great move off of its lows here. It’s gone from about 6.75 all the way up to 19.25, so it’s had a very nice run. I really like this management team and believe that if you’re patient, this stock has even further to go.

This special issue includes:

1) Paper & Forest Products - In an in-depth (5,900 words) Analyst Interview, Matthew Berler, Managing Director at Morgan Stanley, examines the outlook for the sector including and shares specific stock recommendations.

2) Paper & Forest Products - In an in-depth (3,100 words) Analyst Interview, Anna E. Torma, North American Paper & Forest Products Analyst at Merrill Lynch Global Securities, examines the outlook for the sector including and shares specific stock recommendations.

3) Paper & Forest Products - In an in-depth (3,500 words) Analyst Interview, Mark Wilde, Managing Director at Deutsche Banc Alex. Brown, examines the outlook for the sector including and shares specific stock recommendations.

4) CEO interviews (average 2,500 words). Top management of nine sector firms examine the outlook for their firm and the sector.