We are confident that ONP is a fraud. Its purpose is to raise and misappropriate tens of millions of dollars. Approximately $30 million has been misappropriated since October 2009. ONP overstated 2008 revenue by 27x. ONP overstated 2009 revenue by 40x. ONP’s claims about its top 10 customers support our fraud conclusion. ONP overvalues its assets by at least 10x. The value of ONP’s Production Lines is greatly overstated. ONP’s inventory is overstated by millions of dollars. ONP’s claim of inventory turnover of 32.5x and 16.8x in 2008 and 2009 (respectively) are without credibility when compared to those of China’s industry leaders, which range from 4.3x to 7.7x. ONP overstates its gross profit margin by hundreds of basis points.

We have read June 30, 2010 press release response to our report initiating coverage on ONP with a Strong Sell. Despite ONP’s response, our thesis that ONP is a fraud remains unchanged, and we reiterate our “Strong Sell” rating on ONP’s shares. Our view is that the report we issued is a compilation of open secrets in both Chinese and English. There are significant amounts of conflicting information available in both languages. The crux of ONP’s press release is that we identified the wrong company as ONP’s operating subsidiary in China (“HBOP”). Our review of our files confirms that we previously studied the correct entity, and thus all of our conclusions in the report are valid.

Yesterday we released a response to ONP’s press release stating that we had analyzed the wrong operating subsidiary. An article on TheStreet.com unethically reiterated this claim after we had already disproven it. The English name used to identify the entity is irrelevant in China – the Chinese name is the name that one by which documents are filed at AIC and other PRC government organs. The Chinese name of the entity that we analyzed is 河北省保定 市东方造纸有限公司.

As the battle over ONP continues this week, and investors continue to evaluate the two opposed views (e.g. ONP is worth less than $1 vs. ONP is worth $15+), Muddy Waters LLC suggests returning to two points that we raised in our initial report. These facts upon which we make these points are indisputable – the information is in ONP’s own filings, thus it is part of our “open secret” theme about this company.

Since Muddy Waters, LLC published its initial Strong Sell report on ONP on June 28th, 2010, in which we charge that ONP is a fraud, ONP has engaged in a rushed effort to cover up evidence that would prove our allegations to be true.

Page 1 from the 21st Century Business Herald investigative article on Orient Paper, Inc. (ONP).

Page 2 from the 21st Century Business Herald investigative article on Orient Paper, Inc. (ONP).

As of the time of publication, 90.7% of respondents to an online poll conducted by Sina.com. (Nasdaq: SINA) believe that ONP is committing fraud. (http://survey.finance.sina.com.cn/result/48540.html) The poll follows the publication of an article by the 21st Century Business Herald (“21CBH”), which is one of China’s most respected business publications. The article details 21CBH’s own investigation into the claims Muddy Waters, LLC raised. The article, which has been republished on Sina.com and Sohu.com (Nasdaq: SOHU), appears here in Chinese on Sina.com: http://finance.sina.com.cn/chanjing/gsnews/20100722/04168341604.shtml We provide an in‐house translation of the article herein.