Head Office Daniel Archambault Executive Vice President and Chief Operating Officer Ind 8 Kruger Inc. 3285 chemin Bedford Montreal (Quebec) H38 1G5 May 26, 2015 Dear Pension Plan Member: As you know, we are putting every effort into making Corner Brook Pulp and Paper one of the most competitive operations in the global newsprint market. One of the challenges we face is the enormous discrepancy between pension funding regulations that apply to CBPP versus those that apply to our main competitors. With your support, we would like to appeal to the Newfoundland and Labrador Government to modify those regulations so that we can compete on better terms with other newsprint producers and therefore ensure the Mill?s long-term viability. Unlike our competitors, Corner Brook Pulp and Paper is bound by a fixed 10?year amortization schedule. Despite the major improvement of our solvency ratios since 2012, we have to continue making sizeable payments into our pension plans, which is putting tremendous pressure on the Mill's finances. Because we are committed to invest in the Mill's sustainability plan, we want to ask the NL Government to make the necessary adjustments so that CBPP can bene?t from the full 10-year amortization period that was granted in 2012. While these measures would immediately improve the Mill's competiveness and enable us to carry out our Capital investment Plan, they would have no impact on current and future benefits. To mitigate any risk to pension fund participants, the Company commits to provide additional protection to secure the solvency ratio, and to inject in the pension plan one-third of residual free cash flow from Mill operations. In other words, all the money generated by CBPP will stay within Newfoundland and will be used to improve the Mill?s competitiveness and strategic advantage. The enclosed information package provides ample details about the current situation of your pension plan, as well as projections that demonstrate how our proposal would be highly beneficial to sustainability. Once you have reviewed this information, if you agree with our proposal, you don't need to take action. On the other hand, if you wish to object to it, you will have until July 8, 2015 to send in the attached notice of objection. Before you make your decision, you may want to learn more about the proposal by attending one of the information sessions listed in the information Statement. In the meantime, you may direct your questions to our pension plan administrators, either by email at or by phone at 1-866?599-9024. Sincerely, I ?3 . If wan"! Daniel Archambault Encl. (2) INFORMATION STATEMENT May 26, 2015 Pension Plan for Unionized Employees of Corner Brook Pulp and Paper Limited (the "Plan") Registration Number: 075311 The purpose of this Information Statement is to update members on the financial position of the Plan, to present a proposal for temporary modified funding relief measures to be applicable over a three- year period, and to seek your consent for said proposal. Overview of the Situation and Current Relief Measures In 2012, the Newfoundland and Labrador Government adopted temporary funding relief measures to help pension funds get through the temporary period of weakened economic conditions that began in 2008, by limiting the increased financial burden on sponsors. These temporary funding relief measures provided a five-year extension to the usual five?year amortization period that applied to the solvency deficiency established as at December 315?, 2011, therefore allowing the deficit to be amortized over a 10-year period. After seeking the agreement of the Plan Members as required by law, the Company was allowed to take advantage of a 10-year amortization period with a fixed payment schedule. In 2014, our main competitors were granted additional temporary measures representing a substantial reduction of their past service payments. Meanwhile, CBPP's past service payments remained the same and now amount to which is up to three times what our competitors pay. Because we are committed to invest in the Mill?s future, we want to ask the NL government to make the necessary adjustments so that CBPP can benefit from the original 10-year amortization period that was granted in 2012. Please note that these adjustments would have no impact on current and future benefits; however they would immediately improve the Mill's competitiveness and enable us to carry out our Capital Investment Plan. We hereby request your support to appeal to the Newfoundland and Labrador Government to modify pension funding regulations so that CBPP can compete on better terms with other newsprint producers. These modified temporary relief measures would reduce the annual funding requirements for the years 2014, 2015 and 2016, while keeping the complete deficit amortization period within the original 10-year that was agreed to in 2012. Pension Plan?s Financial Situation Update Actuarial valuations provide a snapshot of the financial position of the Plan as of valuation date. Following the application of the relief measures in 2012, annual valuations of the Plan are now required. Another purpose of an actuarial valuation is to determine the contributions that must be made to the Plan by the Company. There are generally two types of contributions made annually: - those made by the Company and members in respect of benefits earned in a year (called the current service cost); and Page 1 Information Statement The Pension Plan for Unionized Employees of Corner Brook Pulp and Paper Limitei - special payments made by the Company to reduce deficits in a plan. The initial actuarial valuation report outlining the application of the relief measures was prepared as of December 31 St, 2011 and followed by annual valuations. The most recent results available are those prepared as of December 315?, 2013. Results of the finmcial position of the Plan on a solvency valuation basis as of December 315?, 2013, are summarized below. December 31, 2011 December 31, 201 3 Market value of assets 167,895,000 192,822,000 Accrued contributions due 23,646,000 33,791,000 Provision for wind-up expenses (1 00,000) (200,000) Solvency assets 191,441,000 226,413,000 Solvency liability 280,476,000 271,837,000 Solvency surplus (deficiency) (89,035,000) (45,424,000) Solvency ratio 68.3% 83.3% A few definitions: - Market value of assets corresponds to the value of all assets of the Plan, adjusted for contributions receivable and benefits payable as of the valuation date. - Provision for wind-up expenses this is an estimate of the expenses that would be incurred should the pension plan be terminated and all benefits earned by plan members settled. - Solvency liability this is the value of all benefits earned by Plan members at valuation date assuming the Plan is terminated. The rules as to how this value is determined are prescribed by law and actuarial standards of practice. - Solvency ratio this is the ratio determined by dividing the market value of assets by the solvency liability. It is one measure of how well the pension plan is funded on a solvency basis. Estimated position as of December 315?, 2014 Complete actuarial valuation results are not yet available. However based on projections, the plan?s actuary estimates the solvency ratio of the plan to be 81% as of December 315?, 2014. Please note that the Canadian median pension plan solvency ratio was reduced by nearly 3% during the same period. 2014 pension func returns reached 10.4%. Despite this good performance, the Plan underwent a slight decrease in the solvency ratio which is due mainly to a substantial decline in the prescribed interest rate used to determine the solvency liability of the plan. Prescribed interest rates are at a historical low. Temporary Modi?ed Relief Measures Due to the significant improvement in the financial position of the plan since 2011 and assuming that results in year 2015 onward are aligned with the actuarial assumptions, we can expect reaching full solvency in 2019, that is, two years earlier than the end of the original 10-year amortization period Page 2 Information Statement The Pension Plan for Unionized Employees of Pulp and Paper Ei'mjted agreed upon. This means that Company special payments will no longer be required at that point in time. As stated earlier, our main competitors were granted temporary additional relief measures resulting in substantial reductions in their past service payment requirements. In order to be on a level ground with our main competitors, CBPP would like to approach the NL government with the following proposal to modify pension funding regulations so as to reduce the enormous discrepancies in pension funding regulations across Canada. 0 Original 10-year amortization period of the relief measures remains unchanged. 0 Special payments for years 2014, 2015 and 2016 would be determined based on the December 315?, 2013 solvency position of the plan and amortizing such deficit over 10 years. The payments would be fixed for the three?year period; however there will be no adjustments to the 2014 contributions already remitted. As of December 313*, 2016, any remaining solvency deficit would be amortized over five years. Solvency position of the plan will be determined as of December 315?, 2014 and 2015 If solvency ratio is 75% or higher, the past service payment is not changed 0 If solvency ratio is below 75%, - Past service payment for the year is increased by an amount equivalent to the amount that would be required to reach 75% solvency ratio. - This adjustment cannot exceed In other words, the total past service payment for that year cannot exceed $13.1 M. The following graph illustrates the expected evolution of the solvency ratio along with the Company?s required annual special payments, comparing results with and without the modified solvency relief measures. This projection does not account for a possible change in mortality table that might occur in 2015. Such change would reduce the solvency ratio by roughly Pension Plan for Unionized Employees of Corner Brook Pulp and Paper Limited Miilions 5 20 - 1m 100% 10 i A %1 1 g/mm 11g5}: gsSolvency ratio with actual funding rules ?Solvency ratio with proposed funding rules Page 3 Information Statement The Pension Plan for Unionizecl Employees of Corner Brook Pulp?and Paper Limited Notice of Objection In order to present such proposal to the Newfoundland and Labrador government, the Company requires the support of pension plan participants. This support will be measured using the same standards that applied to the 2012 process. Accordingly, the Company will present a formal request to the government if no more than one- third of Eligible Members or one-third of Eligible Former Members objects. We believe that these modified three-year relief measures will reduce the pension funding discrepancy between CBPP and its main competitors. It will allow CBPP to realize its Capital Plan in order to improve its competitiveness, which will be beneficial for the long-term operations of the Company. For more information: If you have any questions, please send your request: By email at By mail at Pension Plan Administrator Corner Brook Pulp and Paper limited 1 Mill Road Corner Brook, NL A2H 6J4 By phone at 1-866-599-9024 (between 10 am. and 6:30 pm.) Information meetings: You can also attend of the following meetings (for Plan members only): Active employees: June 8, 3 Greenwood Inn Suites Corner Brook (Ballroom) June 9, 7:30 Greenwood Inn Suites Corner Brook (Ballroom) June 10, 1 Deer Lake Power Retirees and beneficiaries: June 8, 6 pm. Greenwood Inn Suites? Corner Brook (Ballroom) June 9, 1 Greenwood Inn Suites Corner Brook (Ballroom) June 10, 1 Deer Lake Power Page 4